Holding

The integration of services and equation of posts is an administrative function under s.115 of the States Reorganisation Act, and the State Government's actions, being sanctioned by the Central Government and consistent with the established principles, did not unlawfully alter conditions of service; therefore the appeal succeeds.

Summary

After the reorganisation of states under the States Reorganisation Act, 1956, Assistant Sales Tax Officers (ASTOs) from the former States of Madhya Pradesh and Hyderabad were allocated to the new State of Bombay, where there were no comparable posts. The State Government issued several resolutions altering seniority and promotion rules, including exempting these ASTOs from the departmental examination required for promotion to Sales Tax Officer Grade III, and placing them in an isolated seniority category above the existing Sales Tax Inspectors (STIs). The Central Government directed that the ASTOs not be equated with STIs and approved the seniority arrangement. The Bombay High Court struck down the State's orders as violative of the Act’s provisions. The Supreme Court held that the integration of services and equation of posts is a purely administrative function under s.115 of the Act, that the Central Government has the final authority, and that the State’s actions, being in line with Central Government directives, did not constitute an impermissible change in conditions of service. Consequently, the appeal was allowed and the High Court’s judgment set aside.

Issues considered

Whether the State Government could, by an executive order without framing a rule under Article 309 of the Constitution, alter departmental promotion rules for ASTOs, thereby changing their conditions of service, without prior Central Government approval under the proviso to s.115(7) of the States Reorganisation Act.
Whether the State Government could unilaterally alter the seniority list of allocated ASTOs, placing them above STIs, in violation of the 'fair and equitable treatment' requirement of s.115(5).
Whether the requirement of passing a departmental examination constitutes a condition of service for promotion.
Whether the principles laid down at the Chief Secretaries Conference on the equation of posts were properly applied.

Legislation cited

Bombay Sales Tax Act, 1959
Constitution of Indias. Article 309
C.P. and Berar Sales Tax Act, 1947
Hyderabad General Sales Tax Act, 1950
States Reorganisation Act, 1956s. 115(5), s. 115(7)

Subjects

integration of servicessenioritydepartmental promotionconditions of servicefair and equitable treatmentequation of postssales tax officersadministrative lawStates Reorganisation Act

Judgment

665 A

STATE OF MAHARASHTRA:'.&:'ANR.
v.
CHANDRAKANT ANANT KULKARNI & ORS.
B
September 8, 1981
1 [0. CHINNAPPA REDDY, A.P. SEN AND
BAHARUL !SLAM, JJ.]

Stare Reorganisation Acr 1956, S. 115(5) and (7). c
Reorganisation of State of Bombay-Assistant Sales Tax Officers of Madhya
Pradesh and Hyderabad and Safes Tax Inspectors of Bombay allocated to new
State-Integration of service.

'"" State Government executive order altering departmental promotion ru/e-
ASl'Os of M.P. Hyderabad required to pass departmental examination for pro~ D
motion-Whether alteration of condition of service, permissible, valid.

Seniority list of allocated ASTOS and ST!s-State Government unilaterally
altering the list-ASTOS of M.P., Hyderabad vlaced in isolated category above
SI'ls for Bombay-Validity of.

Integration of services-Equation of posts purely administrative function- E
Chances of promotion-Not condition of service-Fair and equitable treatment-
What is.

Assistant Sales Tax Officers serving in connection with the affairs of the
former States of Madhya Pradesh and Hyderabad, on the appointed date, were
allocated to the new State of Bombay under s. 115 of the States Reorganisation
Act, 1956 (Act No. XXXVII) with effect from November I, 1956. The Assistant
Sales Tax Officers from the former States of Madhya Pradesh and Hyderabad F
were superior to the Sales Tax Inspectors in their respective States and the posts
of Assistant Sales Tax Officer in those States was a promotion post. In the
former State of Bombay, there was no similarly constituted cadre of Assistant
Sales Tax Officers, but there were posts of Sales Tax Inspectors.

On November 16, 1957, the State Government by its resolution directed that G
the ASTOs from Madhya Pradesh and Hyderabad should continue in their res-
pective pay-scales until such of them were not appointed as STOs Grade III, and
Notes 3 and6 appended to the Resolution provided that for purposes of promotion
their inter se seniority be fixed on the basis of their service as STOs and ASTOs.
On February 3, 1960, the State Government substantially modified rule 7 ot the
Allocated Government Servants (Absorption, Seniority, Pay and AIIowances)
Rules, 1957 and a new rule 7 was substituted whi~h provided that the seniority of H
an allocated Government servant in the post or cadre of absorption shall, as on
November 1, 1956 be determined by the length of continu_ous service etc. Since
666 SUPREME COURT REPORTS [1982] J S.C.R.

A there were no con;iparabie posts of ASTOs in the former State of Bombay, the
Central Government directed that the ASTOs from Madhya Pradesh and Hydera-
bad should not be equated with the post of STis but should be continued in an
isolated category and their seniority should be fixed above the persons in the
next lower grade. The State Government by its resolution dated September 10,
1960 modified Notes 3 and 6 and directed that the seniority as on November 11
1956 of ASTOs from Madhya Pradesh and Hyderabad be fixed above all persons
B absorbed as STis and that the inter se seniority of STOs from Madhya Pradesh
and Hyderabad be fixed on the basis of their continuous service as ASTOs, and
that the service rendered by the ASTOs from Madhya Pradesh as Excise Inspec·
tors or Assistant District Excise Officers in the Excise Department be counted
as equivalent service. On August 17J 1962, the State Government prepared a
fresh provisional gradation list of ASTOs and STls and invited objections. None
of the respondents raised any objection.
c Upto and until August 8, 1960, departmental examinations for promotion
to the post of STOs were conducted under the three different sets of rules appli.
cable to the former States of Bombay, Madhya Pradesh and Hyderabad. The
Departmental Examination Rules for Sales Tax Officers 1954 framed by the
former State Government of Bombay were made applicable to the Assistant
Sales Tax Officers allocated from Madhya Pradesh and Hyderabad from August
8, 1960, as the provisions of the Bombay Sales Tax Act, 1959 were extended to
D the whole of the State, the CP and Berar Sales Tax Act 1947 and the Hyderabad
General Sales Tax 1950 having been repealed. The ASTOs from Vidarbha and
Marathwada regions of Madhya Pradesh and Hyderabad were called upon to
appear at the examinations prescribed from the STOs of the old Bombay region,
and some of the ASTOs from Madhya Pradesh and Hyderabad who had been
promoted as STOs Grade III were reverted to the post of ASTOs due to their
failure to pass the said examination.
E
The Government by its Resolution dated June 13, 1964 directed that the
ex Hyderabad ASTOs even though they had not passed the prescribed depart·
--.
mental examination should be confirmed on the basis of confidential records,
efficiency and seniority: and by its Memorandum dated November 21, 1964 order·
ed that all the ASTOs and STls who bad been allocated from the old M.P. and
Hyderabad States should be considered eligible for promotion without passing the
F STOs examination if they are otherwise fit for promotion.

On representation made by the ASTOs from Madhya Pradesh and Hydera~
bad, the Government of India, by its letter dated March 9, 1965 to the State r
Government directed that the Bombay Departmental Examination Rules, 1954,
could not be made applicable to the allocated ASTOs from Madhya Pradesh and
G Hyderabad as it would amount to changing their conditions of service to their
disadvantage. It accordingly directed that all the ASTOs from Madhya Pradesh
and Hyderabad who were compelled to appear for the said examination and who
had failed to pass the same be reinstated as STOs. This directive resulted in
Respondents 1 and 2 who had been promoted to officiate as STO, Grade Ill being
reverted as STis.
H
The State Government in 'view of this change reviewed the cases of all the
ASTOs, and STis from the three regions and those who were otherwise found
MAHARASHTRA v. C.A. 'KULKARNI 667

suitable were according to their seniority promoted to the post of STO. Gr. 111 A
even though they had not passed the STO"s examination. On January 6, 1966
the State Government published a revised gradation list of ASTOs and STis and
invited objections. Only, Respondent 4 filed !objections which was considered
by the Government and rejected.

The writ petition filed by Respondents I to 5 who were STis in the State of
Bombay and had passed the prescribed departmental examination for promotion B
as STOs Gr. Ill was allowed by the High Court which struck down the varions
resolutions and orders passed by the State Government from time to time rela-
ting to integration of service under sub-section (7) of S. 115 of the Act.

In the appeals by the State to this Court on the questions whether (I) the
State Government could by an executive order without framing a rule under the
Proviso to Art. 30} of the Constitution alter the rules relating to departmental c
promotion of ASTOs from Madhya Pradesh and Hyderabad which constituted
their conditions of service to the prejudice of the STis of Bombay without the
prior approval of the Central Government under the proviso to sub-section (7)
of section 11S of the Act, and (2) the State Government while integrating the
services could unilaterally alter the seniority list of the allocated ASTOs and
place the ASTOs from Madhya Pradesh and Hyderabad in an isolated category D
over the STis from Bombay while determining their inter se seniority.

Allowing the appeal,

HELD : 1 (i). The matter of equation of posts is purely an administrative
function under s. 115 of the States Re-organisation Act, 1956. Under sub-s. (5) E
of s. 115 the Central Government is the sole repository of the power to effectuate
the integration of services in the new States. It has been left entirely to the
Central Government as to how it has to deal with these questions. The Central
Government established an Advisory Committee for purposes of assisting in
proper consideration of the representations made to it for the work of integration
of services, the Central Government could take all manner of assistance from the
State Government including the preparation of provisional gradation lists, The F
Central Government exercises general control in regard to the integration of
services, and the ultimate integration was done with the sanction and approval
of the Central Government. The provisional gradation lists prepared by the
State Government were not, therefore, open to challenge. [679 A-E]

Union of India and Anr. v. P.K. Rby and Ors. [1968] 2 SCR 186 refetred
to.
G
ln the instant case, not only had the Central Government laid down the
pririciples for integration but also considered the representation made and passed
the final orders thereon. The provisional gradation lists were prepared by the State
Government under the direction and with the sanction of the Central Govern-
ment. The Assistant Sales Tax 'Officers from the former States of Madhya
Pradesh ''.'d Hyderabad allocated to the now State of Bombay, could not be
equated with the Sales Tax Inspectors, In the former State of Bombay, there 8
was no similarly constituted cadre of Assistant Sales Tax Officers, but there were
668 SUPRBME COURT REPORTS [ J982] ] S.C.R,

A posts of Sales Tax Inspectors. The Assistant Sales Tax Officers from Madhya
Pradesh and Hyderabad were superior to Sales Tax Inspectors in their respective
States and the post of Assistant Sales Tax Officer in these States was a promo-
tion post. It would have been inequitable and unfair to equate Assistant Sales
Tax Officers from Madhya Pradesh and Hyderabad with Sales Tax Inspectors
from Bombay having regard to the nature of their posts, the powers and respon-
sibilities, and the pay-scales drawn by them. In addition, Assistant Sales Tax
B Officers in these States were assessing authorities and they enjoyed statutory
powers of their own to assess tax and levy penalties, whereas the Sales Tax
Inspectors in Bombay had no $UCh powers to assess tax or levy penalty but had
merely to scrutinise returns and generalJy act in a subordinate capacity to Sales
Tax Officers. [679 F-680 CJ

c (ii) The principle adopted by the State Government for determining the
relative inter re seniority was obviously wrong, being contrary to the principles
settled at the Chief Secretaries Conference. The Government of India, on re·
presentation by the affected Assistant Sales Tax Officers from Madhya Pradesh
and Hyderabad in consultation with the Central Advisory Committee, directed
that the inter se seniority should be Bxed taking into account continuous service
in the equated grade only subject to the inter se seniority of the officers, coming
from the several integrating regions. Upon that basis, the State Government
D by its Resolution dated September 10, 1960 rightly modified Notes 3 and 6 of its
1957 Resolution and directed that the seniority as on November 1, 1956 of
ASTOs from Madhya Pradesh and Hyderabad be fixed above the persons in the
cadre of STis and that the inter se seniority of ASTOs from Madhya Pradesh
and Hyderabad be fixed on the basis of their continuous service as ASTOS in
their respective States. [680 E-G]

E 2. There was a difference between the Departmental Examination Rules
framed by the former State Governments of Bombay, Madhya Pradesh and
Hyderabad regulating the appointment of STOs. In the forn1er State of Bombay,
eligibility for the promotion of STis to the post of STO Gr. III depended upon
their passing _the departmental examination for the non-gazetted staff of the
Sales Tax Department under rule 1 (b) (ii) of the Recruitment Rules for
the ST Os Gr. Ill, i.e. it was condition precedent. In the former States of
F Madhya Pradesh and Hyderabad there was no such condition attached. Under
the Rules for Departmental examination, the ASTOs who were promoted as
STOs were required to pass the departmental examination within two or three
years from the date of their promotion i.e. it was a condition subsequent. The
Departmental Examination Rules framed by the forn1er State Governments of
Madhya Pradesh and Hyderabad for promotion to the post of STOs formed part r
of the conditions of service of ASTOs from Madhya Pradesh and ·Hyderabad
G and they could not be altered to their disadvantage without the prior approval
of the Central Government under s. 115 (7) of the Act. Since no examination
admittedly had been held there was no question of their reversion as ASTOs.
[685 B-C; E-G; 683 B·F; 685F]

3'(i) The Resolution dated June 13, 1964 and the Memorandum dated
H November 24, 1964 do not have the status of a rule framed under the Proviso to
Article 309 of the Constitution. They merely conveyed the decision of the State
Government that the allocated ASTOs from Madhya Pradesh and Hyderabad
MAHARASHTRA, v. C.A. KULKARNI (Sen, J.) 669

should be considered eligible for promotion to the post of STO, Gr. III without A
passing the departmental examination for STOs Gr. III. The State Government
had not by its Resolution or Memorandum brought about a change in the condi ..
tions of service by an executive order. All that was done was to rectify a mistake
that had been committed in the past in subjecting the ASTOs from Madhya
Pradesh ; and Hyderabad to the Departmental Examination Rules framed
by the former State Goverment of Bombay i.e. to a rule which did not
form part of conditions· of their service and, therefore, was not applicable to 8
them. There is, therefore, no infirmity in these two documents. [681 F-H]

(ii) Mere chances of promotion are not conditions of service and the fact
that there was reduction in the chances of promotion did not tantamount to a
change in the conditions of service. A right to be considered for promotion is a
tenn of service, but mere chances of promotions are·not. l683 C]
c
(iii) The State Government's Resolution dated June 13, 1964 and its
Memorandmn of November 21, 1964 clarifying that the ASTOs from Madhya
Pradesh and Hyderabad were entitled for promotion to the post of STO Gr. III
without passing the departmental examination, placed STI from Bombay at a
disadvantage. To ensure 'fair and equitable treatment' the State Government
rightly dispensed with the requirement of passing the departmental examination D
in the case of STis from the former State of Bombay. The State Government
acted with the best of intentions. It endeavoured to strike a balance between
the competing claims to relative seniority. When sub-section (5) of section 115
of the Act speaks of 'fair and equitable treatment', it envisages a decision which
is fair and equitable to all. [686 A-D]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 420(N) of E
1971

From the Judgment and Order dated 23rd October 1969 of
the Bombay High Court in Special Civil Application No. I 721 of
1966.
F
R.N. Sachthey and Mr. R.N. Poddar for the Appellant

I U. R. La/it, V. N. Ganpule and Mrs. Veena Devi Khanna for
Respondents Nos. I to 5

S. V. Tambewaker for Respondent No. 7
G

A.K. Sanghi for the intervener

M. L. Heble, V. N. Ganpule and Mrs. Veena Devi Khanna for 8
the intervener.
670 SUPREME COURT REPORTS (1982) 1 s.c.R.

A The Judgment of the Court was delivered by
SEN, J. In this appeal, by special leave, the question for
consideration is whether there ·was denial of "fair and equitable
treatment" within the meaning of sub-s. (5) of s. 115 of the States
F eorganisation Act, 1956 (hereinafter called 'the Act') in the matter
of determination of relative seniority and equation of posts as
8 between the Assistant Sales Tax Officers (abbreviated as ASTOs)
from the former States of Madhya Pradesh and Hyderabad and
Sales 'fax Inspectors (abbreviated as STis) from the former State of
Bombay, who were allocated to the new State of Bombay, and their
right to promotion to the posts of Sales Tax Officers (abbreviated as
STOs) Grade III.
c
The High Court by its judgment, on a writ petition filed by
Respondents I to 5, who were STis of the State of Bombay and
passed the prescribed departmental examination for promotion as
STOs Gr. Ill, has struck down the various resolutions and orders
passed by the State Government from time to time relating to
D integration of services of these officers under sub-s. (7) of s. 115 of
the Act, in compliance with the directives of the Central Govern-
ment issued under sub-s. (5) of s. 115 of the Act. The main ques-
tion in the appeal is whether the High Court was right in doing so.
To appreciate the points involved, it is necessary to set out a
E few facts. On November 16, 1957, the State Government by its
Resolution purported to direct that the ASTOs from Madhya
Pradesh and Hyderabad should continue in their respective pay·
scales until such of them were not appointed as STOs Gr. III under
r. 7 of the Allocated Government Servants (Absorption, Seniority,
Pay and Allowances) Rules, 1957. Notes 3 and 6 appended to the
F said Resolution provided that for purposes of promotion, their
inter se seniority shall be fixed on the basis of their service as STls
being counted together with their service as ASTOs in Madhya
Pradesh and service as Accountants, if any, together with their
service as ASTOs in Hyderabad. In accordance therewith, a provi-
sional gradation list of those who were absorbed as STis as on
G November I, 1956 as also of those who continued as ASTOs in their
respective posts with effect from that date was prepared and
published by the State Government under r. 2 of the said Rules,
on January 21, 1960 and objections thereto were invited within two
months from the date of its publication. On February 3, 1960, the
H State Government substantially modified r. 7 and a new r. 7 was
substituted which provided that generally the seniority of an alloca-
ted Government servant in the post or cadre of absorption shall, as
MAHARASHTRA v. C.A. KULKARNI (Sen, J.) 671

on November I, 1956, be determined by the length ofcontinnons A
service etc. On instructions from the Central Government and in
further consultation with it, the State Government clarified that the
provisional gradation list as published would not be finalised until
representations, if any, of the Government servants were decided by
the Government of India in consultation with the Advisory
B
Committee. Since there were no comparable posts of ASTOs in the
• former State of Bombay, the Central Government directed that the
ASTOs 'from Madhya Pradesh and Hyderabad should not be
equated with the post of STis, but should be continued in an
isolated category and their seniority should be fixed above the
persons in the next lower grade.
c
In accordance with the directive of the Central Government
under sub-s. (5) of s. 115 of the Act, the State Government by its
Resolution dated September 10, 1960, modified Notes 3 and 6
referred to above and directed that the seniority as on November I,
1956 of ASTOs from Madhya Pradesh and Hyderabad be fixed D
a hove all persons absorbed as STis and that the inter se seniority
of STOs from Madhya Pradesh and Hyderabad be fixed on the
basis of their continuous service as ASTOs. It was further directed
that the service rendered by the ASTOs from Madhya Pradesh as
Excise Inspectors or Assistant District Excise Officers in the Excise
Department of that S\ate be counted as equivalent to service as E
STOs. On August 17, 1962, the State Government accordingly
prepared a fresh provisional gradation list of ASTOs and STis and
invited objections thereto afresh. It appears that none of the respon-
dents raised any objection.

To resume the narration. Between November I, 1956 and F
August 8, 1960, promotions to the post of STO, Gr. III were made
on the basis of separate departmental examinations held in accord-
ance with the rules framed by the former State Governments
concerned. Upto and until August 8, 1960, departmental examina-
tions for promotion to the post of STOs were conducted under the
three different sets of rules applicable to the former States of G
Born bay, Madhya Pradesh and Hyderabad. From August 8, 1960,
the Bombay Departmedtal Examination Rules for STOs were made
applicable to the ASTOs allocated from Madhya Pradesh and
Hyderabad as well in as much as the Bombay Sales Tax Act, 1959
was made applicable to the whole of the State and the C.P, and H
Berar Sales Tax Act, 1947 and the Hyderabad General Sales Tax
672 SUPREME COURT REPORTS [1982] I s.c.R.

Act, 1950, were repealed. The ASTOs from Vidarbha and Marath·
wada regions of Madhya Pradesh and Hyderabad were called upon
to appear at the examination prescribed for the STOs of the old
Bombay region. Accordingly, promotions to the post of STO Gr.
III were regulated under the Bombay Departmental Examination
Rules and in consequence some of the ASTOs from Madhya Pradesh
8 and Hyderabad who had been promoted as STOs Gr. III were rever- •
ted to the post of ASTO due to their failure to p 1ss the said
examination. In the meanwhile, the State Gqvernment, on January
20, 1961, amended r. l(b) (ii) of the Recruitment Rules for the
Sales Tax Officers Grade Ill by the addition of the words "and also
the Departmental Examination for Sales Tax Officers" after the
c words "time for promotion" which had the effect of making the
passing of such an examination a condition precedent to promo -
tion as STOs Gr. III.

On representations made by the ex-Hyderabad ASTOs, the
Government by its Resolution dated June 13, 1964, directed :
D
Rules 2(d) of the Departmental Examination Rules of
Sales Tax Officers and Assistant Sales Tax Officers issued
by the Finance Department of the former Hyderabad Govt.
under their Notification number II I 8/3 S. T. dated the
24th January, 1956 lays down that Inspecting Officers,
E
Sales Tax Officers (Class I and II) and Assistant Sales Tax
Officers who are not confirmed in their respective posts,
should pass the examination within the period specified in
clause (c) of Rule 2 of the said Rules failing which they
would be reverted to their substantive post. In accordance
F with this Rule Government have reverted some Sales Tax
Officers from the former Hyderabad State for not having
passed the Departmental Examination within the prescribed
time. The Government of Andhra Pradesh has brought to
the notice of this Government the instructions contained r
in Ex-Hyderabad, Finance Department, Letter No. 7851/
G Ailmn. dated the 31st October 1956 according to which
officers and the staff of the Sales Tax Department of the
former Hyderabad State, even though they have not passed
the prescribed Departmental Examination are to be con-
firmed, if they are otherwise found deserving of confirmation
H on the basis of their confidential records. efficiency and
seniorily. The said letter dated 31st October 1955 of the
Hyderabad Finance Department, also laid down that such
'

MAHARASHTRA v. C.A. KULKARNI (Sen, J.) 673

confirmed personnnel should not he promoted to higher A
posts until such times as they complete the prescribed
Departmental Examination.

2. The validity of the instructions issued in Ex-
Hyderabad Finance Department letter No. 7851 / Admn.
dated the 31st October, 1956 was under the consideration of B
• Government for some time and it has now been decided to
observe the instructions contained in the Finance Department
letter of the Ex-Hyderabad State, and is, therefore, pleased
to order that the officers and staff of the Sales Tax Depart-
ment of the former Hyderabad State, who were otherwise
found deserving of confirmation on the basis of their confi- c
dential records, efficiency and seniority may be confirmed
in their respective posts held prior to 1st November 1956
against clear vacancies in terms of General Administration
Department Circular No. 97 G.A.D. 12-SR-55 dated 10th
Se:ptember 1956 issued by the Ex-Hyderabad Government.
Such confirmed personnel should, however, not be promoted to
D
higher posts until such times as they complete the prescribed
Departmental Examination.

(emphasis supplied)
E
Similarly, on representations made by the ex-Madhya !Pradesh
AST Os,. the State Government by its Memorandum dated November
21, I 964, ordered :

Recruitment Rules for the Sales Tax Officers prescri-
bed for the Old Bombay State appearing in Government
F
Resolution Finance Department No. ST0-1654 dated 28th
July 1954 as amended by the Government Resolution,
Finance Department No. STE-1159/0181/61-XIII dated the
29th January 1961 lays down that a Sales Tax Inspector is
not eligible for promotion of Sales Tax Officers without
passing the exanjnation prescribed for the Sales Tax
G
Officers. According to Govt. Circular, Political and
Services Department No. STI-1080-D dated the 29th April
I 960 pending unification of the Recruitment Rules sanc-
tioned by the Government of the former State of Bombay,
M.P. and Hyderabad Recruitment to the post and services
H
in the various component parts of the State is to be regula-
ted according to the rules framed by the former Govern-
674 SUPREME COURT REPORTS (1982] I s.c.R.

A ments concerned and not according to the Bombay Civil
Service Rules. In view of this, the recruitment rules of
old M.P. and the Ex. Hyderabad State will be applicable
to the allocated Government servants coming from those
areas until such time as a unified set of recruitment rules is
prescribed by Government. As there is no condition in the
B recruitment rules of the M.P. State or the Ex. Hyd, rabad
Swte to the effect that persons should pass the Sales Tax •
Officers Examination before he is promoted as a Sales Tax
Officer, it would not be correct to ask the Assistant Sales
Tax Officers and Sales Tax Inspectors allocated from the old
M.P. State and Hyderabad State to pass the Sales Tax Offi-
c cers, ~xamination before being considered for promotion.
Government has, therefore, decided that all Assistant S.T.Os
and S.T.ls who have been allocatedfrom the old M.P. and
Hyderabad States should he considered eligible for promotion
without passing the STOs examination if they are otherwise
fit for'the promotion. Such persons will have to pass STO's
D examination within such period as 'laid down in their respec-
tive departmental examination rules or recruitment rules as
the case may be.

(emphasis added)

E On the representations made by the ASTOs from Madhya Pradesh
and Hyderabad, the Government of India, on March 9, 1965,
addressed a letter to the State Government to the effect:

The specific approval of the Government of India under
the proviso to section 115(7) of tie S.R. Act is necessary
F not only for applying the amended rules to the erstwhile
employees of Vidarbha and Marathwada but also for amend-
ing the rules to the disadvantage of the erstwhile Bombay
employees. The 1954 rules of Bombay only provided that
preference should be given to an Inspector who had passed r
the Departmental Examination of Sales Tax Officers before
G he could be considered for promotion to the post of Sales
Tax Officer. But the amended rules now provide that
passing this examination is a prerequisite for consideration
for promotion to the post of Sales Tax Officer.

H The Government of India have normally been accord-
ing approval under the S. R. Act for prescribing such
departmental tests subject to the following conditions :-
MAHARASHTRA v. c.A. KULKARNI (Sen, J.) 675

I. Additional time, which may be double that of the time A
that is ordinarily permissible for passing such tests be
allowed to the employees from the integrating units in
cases where tests of higher standard are prescribed,
or where tests were not prescribed under the parent
State Governments.
B
2. Employees of the integrating unit should be promoted
subject to their passing the test within the additional
time referred to at item (i) above in other words, promo-
tions should not be wi1hheld merely because the emplo-
yees have not passed a Departmental test, and c
3. Government Servants of the age of 45 years or more
should be exempted from passing departmental test
and when exempted, they should be eligible for pro-
motion equally with one who has passed the tests.
D
I am to request that the State Government may examine
the matter on the above Jines and forward to the Govern-
ment of India for approval their reconsidered proposals
together with a draft of the amendment to the rules which
the State Government may desire to make. I am also to
request that relevant extract of the rules of the erstwhile E
Government of Hyderabad, Madhya Pradesh and Bombay
which are to be affected by the proposed amendment may
also be forwarded to this Ministry.

(emphasis added)
F
As the Central Government was of the opm1on that the Bombay
Departmental Examination Rules should not be made applicable to
the allocated ASTOs from Madhya Pradesh and Hyderabad to
their disadvantage, all the ASTOs from Madhya Pradesh and
Hyderabad who were compelled earlier to appear for the said exa-
G
mination and who had failed to pass it were reinstated as STOs. As
a direct consequence of this, the Respondents l and 2 who had been
promoted to officiate as STO, Gr. III were reverted as STTs by orders
dated April 28, 1965 and June 30, 1965. Since the amendment made
to rule I (bl (ii) on January 20, 1961 operated to the disadvantage of
H
STis from Bombay, the State Government by its orders dated Octo-
ber I, 1965, suspended the said amendment to the Recruitment
676 SUPREME COURT REPORTS [1982) I s.c.R.

Rules until further orders. Ir view of these changes, the State
Government reviewed the cases of all the ASTOs and STis from
the three regions, and those who were otherwise found suitable were
acording to their seniority promoted to the post of STO Gr. III
even though they had not passed the STO examination. On Jan-
uary 6, 1966, the State Government published a revised gradation
B list of ASTOs and STis and invited objections thereto. None of the
respondents except Respondent 4 filed any . objection. That repre-
sentation, on being forwarded by the State Government, was
duly considered by the Government of India, who rejected the
same.
c The decision of the Government of India is contained in the
counter-affidavit of Shri Shukla, Deputy Secretary, Ministry of Home
Affairs, which reads :

I say that the Government of India carefully considered
the representation made inter alia by the 4th petitioner and
D the recommendations of the State Advisory Committee and
rejected the said representations and upheld the said grada-
tion list dated the 6th Jan. 1966 as there was no reason to
alter the principles on which the same had been prepared.
As stated hereinabove the Government of India was of
rhe opinion that the decision of the State Government
E 10 treat Assistant Sales Tax Officers as an isolated
category and to place the same above Sales Tax lmpec-
tors was ju•t and fair. The Government of India also
considered the alterations made by the State Government
in the rules relating to the passing of a Departmental
Examination before a Sales Tax Inspector could be pro-
F moted to the post of a Sales Tax Officer Grade III. I say
that different rules were prevalent in the different inte-
grating areas regulating departmental promotions. The
State Govt. decided that until unified recruitment rules were
framed promotions might be given to all without their
having to pass an examination i.e. without any discrimina-
G tion. The Government of India, who have examined the
matter in consultation with the State Advisory Commmittee
was of the view that the deletion of departmental examination
altogether was fair and just because by doing so all discrimi-
nation between employees coming from different integrating
H areas was removed.
(emphasis added)
MAHARASHTRA v. C.A. KULKARNI (Sen, J.) 677

It would appear that till 1973 there were no unified rules by A
which ASTOs from Madhya Pradesh and Hyderabad and STis
from Bombay were governed. The Maharashtra Sales Tax Officers'
Rules, 1973, framed by the State Government in exercise of the
powers under the Proviso to Art. 309 of the Constitution came into
force on August 4, 1973. Rule 2 provides that the rules shall appiy
to Government servants serving in the Sales Tax Depatment including B
those of the former States of Bombay, Madhya Pradesh and
Hyderabad who were allocated for service to the State of Bombay
and subsequently to the State of Maharashtra. Rule 4 deals with
direct recruits as well as promotees and makes the condition for
passing of the departmental examination within two years
from the date of promotion or two years from the date of c
promulgation of the Rules and by r. 4 (c) it is provided that in the
event of failure to pass the examination in the prescribed time, they
shall be liable to reversion to the posts held by them prior to their
promotion. Looking to the lapse of time in framing the Rules, r. 8
provides that STOs who have already attained the age of 48 yeats
on the date of promulgation of these rules shall be exempted from D
passing the Departmental Examination under the rules. It is neces·
ssary here to mention that the Maharashtra (Bombay Area) Sales
Tax Officers (Grade II and Grade III) Recruitment Rules, 1969
framed by the State Government under the Proviso to Art. 309 of
the Constitution were struck down by the High Court as ultra vires
being per se discriminatory and thus violative of Art. 14 of the E
Constitution. That was because r. 2 provided that nothing therein
shall govern the ASTOs from Madhya Pradesh and Hyderabad.
There is no need for us to enter into the question as to the validity
or otherwise of the rnid Rules. since the Maharashtra Sales Tax
Officers' Rules, 1973 now hold the field.
F
The two questions canvassed in this appeal are : ( l) whether
the State Government could by an executive order without framing
a rule under the Proviso to Art. 309 of the Constitution, alter the
rules relating to departmental promotion of ASTOs from Madhya
Pradesh and Hyderabad which constituted their conditions of
service to the prejudice of the STis of Bombay without the prior
G
approval of the Central Government under the Provison to sub-s. (7)
of s. 115 of the Act, and (2) Whether the State Government while
integrating the services could unilaterally alter the seniority list of
the allocated ASTOs and STis and place the ASTOs from Madhya
Pradesh and Hyderabad in an isolated category over the STis from
e
Bombay while determining their inter se seniority.
678 SUPREME COURT REPORTS [1982] I s.C.R.

A Prior to the reoganisation of the States, a Conference of the
Chief Secretaries of the States that were to be affected by the
reorganisation was held at Delhi on May 18 and 19, 1956 for the
purpose of the formulation of the principles upon which integration
of services was to be effected. The Government of India by their
letter dated April 3, 1957 informed the State Government that the
B work of integration of services should be dealt with by them in the
light of the general principles already settled at the Chief Secretaries
Conference. This has been construed to be a valid delegation
of powers to prepare the preliminary and final gradation lists under
the direction and with the sanction of the Central Government.
The Government of India by its Circular dated May IJ, 1957 to all
c the State Governments stated inter alia that it agreed with the views
expressed on behalf of the States' representatives that it would not
be appropriate to provide any protection in the matter of depart·
mental promotion. This Circular has been interpreted as a prior
approval of the Central Government in terms of the proviso to
sub-s. (7) of s. 115 of the Act in the matter of change in the condi-
D tions of service relating to departmental promotions.

The following principles had been formulated for being
observed as far as may be, in the integration of Government ser·
vants allotted to the services of the new States :
E "In the matter of equation of posts :

(i) Where there were regularly constituted similar cadres
in the different integrating units the cadres will ordina·
rily be integrated on that basis; but

F (ii) Where, however, there were no such similar cadres the
following factors will be taken into consideration in
determining the equation of posts : -

(a) nature and duties of a post ;

G (b) powers exercised by the officers holding a post, the
extent of territorial or other charge held or res·
ponsibilities discharged ;

(c) the minimum qualifications, if any, prescribed
H for recruitment to the post.

(d) the salary of the post.
MAHARASHTRA v. C.A. KULKARNI (Sen, J.) 679

It is well-settled that these principles have a statutory force. A

There is a long line of decisions of this Court starting from the
Union of India and Anr. v. P.K. Roy and Ors(') laying down that the
Central Government has been constituted to be the final authority
in the matter of integration of services under sub-s. (5) of s. 115 of
the Act. The matter of equation of posts is pnrely an administra- B
tive function. It has been left entirely to the Central Govenment as
to how it has to deal with these questions. The Central Govern-
ment had established an Advisory Committee for the purpose of
assisting in the proper consideration of the representations
made to it. There is nothing in ss. 115 to 117 of the Act pro-
hibiting the Central Government in any way from taking the aid c
and assistance of the State Govt, in the matter of effecting the
integration of services. As observed by this Court in Roy's case
the usual procedure followed by the Central Government in the
matter of integration of services generally, is in order. It is not
open to the Court to consider whether the equation of posts made
by the Central Government is right or wrong. This was a matter D
exclusively within the province of the Central Government. Perhaps,
the only question the Court can enquire into is whether the four
principles agreed upon at the Chief Secretaries Conference had been
properly taken into account. This is the narrow and limited field
within which the supervisory jurisdiction of the Court can operate.
But where, as here, in the matter of equation of posts, the Central E
Government had properly taken into account all the four principles
decided upon at the Chief Secretaries Conference, the decision can-
not be assailed at all. In the present case, not only the Central
Government had laid down the principles for integration, but also
considered the representations and passed the final orders and the
provisional gradation lists were prepared and published by the
State Government under the direction and with the sanction of the
Central Government.

In accordance with the principles settled at the Chief Secreta-
ries Conference, the Government of India, in consulati<l:'I with the
G
Central Advisory Committee, directed that the posts of ;\STOs in
the former States of Madhya Pradesh and Hyderabad should be
cohtinued in an isolated category, there being no correspo1."iing
post in the successor State of Bombay with which they could ·be
.,_ equated. There were 19 ASTOs in the pay·scale of Rs. 150·10-20,'
H
(I) (1968] 2 SCR 186.
680 SUPREME COURT REPORTS [1982] l S.C.R.

A EB-15-250 from Madhya Pradesh and 23 ASTOs in the pay-scale
of Rs. 170-8!-225-EB-13-320 from Hyderabad allocated to the new
State of Rombay. In the former State of Bombay there was no
similarly constituted cadre of ASTOs, but there were posts of STis
in the pay-scale of Rs. 120-8-144-EB-8-200-10/2-250. It would
have been inequitable and unfair to equate ASTOs from Madhya
B Pradesh and Hyderabad with STis from Bl1mbay, looking to the
nature of their posts, the powers and responsibilities and the pay-
scales attached to the same. The ASTOs from Madhya Pradesh }

and Hyderabad were, in the first instance, superior to STis in their >-
respective States and the post of ASTO in those States was a promo-
tion post. In addition, ASTOs in those States were assessing authori-
(
ties and they enjoyed statutory powers of their own to assess tax and
levy penalties, whereas the STis in Bombay bad no such powers to
assess tax or levy penalty but had merely to scrutinise returns and
generally act in a subordinate capacity to STOs. Evidently, the
State Government was wrong in directing by its Resolution dated
November 16, 1957 that the seniority of ASTOs from Madhya
D Pradesh and Hyderabad and STls from Bombay be fixed in the
cadre of STis in the reorganised State of Bombay on the basis of
continuous service including that in the lower grade. The principle
adopted by the State Government for determining their relative
inter se seniority was obviously wrong, being contrary to the
principles settled at the Chief Secretaries Conference. As already
E stated, the Government of India, on representation by the affected
ASTOs from Madhya Pradesh and Hyderabad, in consultation with
the Central Advisory Committee, directed that the inter se seniority
should be fixed taking into account continuous service in the equated
grade only subject to the int<r se seniority of the officers coming
from the several integrating regions. Upon that basis, the State
F Government by its Resolution dated September 10, 1960, rightly
modified Notes 3 and 6 of its 1957 Resolution and directed that
the seniority as on November I, 1966 of ASTOs from Madhya
Pradesh and Hyderabad be fixed above the persons in the cadre of
STis and that the inter se seniority of ASTOs from Madhya Pradesh
-
and Hyderab3d be fixed on the basis of their continuous service as
G ASTOs in '.ueir respective States.

, Ile High Court, in dealing with the question of equation of
post' obseved :
H
On merits, if the duties of Assistant Sales Tax Officers
of those two States and those of Inspectors are compared
MAHARASHTRA v. C.A. KULKARNI (Sen, J.) 681

in the light of the minutes contained in Ex.2 (Memorandum A
of the Government of Maharashtra, Finance Department.
dated November 21, 1964) the difference is not much. We
enquired about the nature of work they are doing today and
we are told on instructions by the Stare' s counsel that they
are doing the work that the Sa'es Tax Inspectors are
doing. B

(emphasis added)

All that we need say is that the High Conrt, if we may say so,

- without meaning any disrespect, has viewed the question from
a wrong perspective.

The remaining question whether the State Government by its
c
Resolution dated June 13, 1964 and Memorandum dated November
21, 1964, effected a change of recruitment rules by an executive
order, in the conditions of service of; the ASTOs from Madhya
Pradesh and Hyderabad, contrary to the Proviso to sub-s. (5) of D
s. 115 of the Act; and if so, whether such a change in the conditions
of service could be brought about without framing a rule under the
Proviso to Art. 309 of the Constitution. In our opinion, the question
does not really arise. There can be no dispute with the proposition
that a rule framed under the Proviso to Art. 309 of the Constitution
cannot be modified by an executive order. But the question is E
whether that principle is attracted to the facts and circumstances of
the present case. The Resolution and the Memorandum referred to
above, undoubtedly do not have the status of a rule framed under
the Proviso to Art. 309 of the Constitution. They merely conveyed
the decision of the State Government that the allocated ASTOs from
Madhya Pradesh and Hyderabad should be considered eligible for F
promotion to the post of STO, Gr. III without passing the depart-
mental examination for STO. Gr. III. The State Government had
not by its Resolution dated June 13, 1964, or by its Memorandum
dated Nov. 21, 1964, brought about a change in the conditions of ser-
vice by an executive order. All that was done was to rectify a mistake
that had been committed in the past in subjecting the ASTOs from G
Madhya Pradesh and Hyderabad to the Departmental Examination
Rules framed by the former State Government of Bombay i.e. to a
rule which did not form part of conditions of their servi;:e and,
therefore, was not applicable to them. We find no infirmity in these
H
two documents. The decisions reached by the Government on the
representations made by ASTOs from Madhya Pradesh and
682 SUPREME COURT REPORTS (I 982] I S.C.R.

A Hyderabad were strictly in conformity with the recruitment rules
framed by the former State of Madhya Pradesh and Hyderabad
under the Proviso to Art. 309 of the Constitution. It is quite obvious
that STis from Bombay were not entitled to the above concession,
as the passing of the STOs examination had been made a condition

B
precedent for their promotion as STO Gr. III. ...
There was a marked distinction between the recruitment rules
framed by the former State Governments of Bombay and Madhya
Pradesh and Hyderabad for appointment as STOs. In the former
State of Bombay, eligibility for the promotion of STis to the post
•

c of STO Gr. III depended upon their passing the departmental
examination for the non-gazetted staff of the Sales Tax Department
under r. 1(b) (ii) of the Recruitment Rules for the S.T.Os. Gr. III.
Under r. 3, preference was to be given to an Inspector who had
-
passed the departmental examination prescribed for STOs over those
who had not. By the amendment of January 20, 1961 made by
D the State Government, the words "and also the departmental
examination for STOs" were added after the words "time for
promotion". The effect of this amendment was to make the passing
of the STO examination a condition precedent for promotion of
STis as STO Gr. JII. Further, the amendment deleted r. 3 which
laid down a rule of preference. In the former States of Madhya
E Pradesh and Hyderabad, '.neither such condition nor any rule of
preference was there. Under r. 1 of the Rules for Departmental
Examination framed by the former State Government of Madhya
Pradesh, ASTOs who were promoted as STOs were required to
pass the departmental examination within two years from the date
of such promotion. Rnle 4 provided that they would not be confir-
F med till they pass the said examination and on their failure to do so,
they would be reverted to the substantive post of AST Os. Similarly,
under r. 2(c) of the Rules framed by the former Hyderabad State,
ASTOs who were promoted as STOs were required to pass the
departmental examination within three years from the date of
commencement of the rules failing which their grade increment was ,,
to be withheld till they pass such examination. Rule 2 (d) provided
G
that STOs Cl. I and II who had not been confirmed in their respec-
tive posts, were required to pass the said examination within the
said period failing which they were to be reverted to their substan-
tive posts. According to the general Circular issued by the State
H Government of the reorganised State of Bombay dated April 29,
1960, pending unification of the recruitment rules framed by the
State Government of Bombay. Madhya Pradesh and Hyderabad, the
MAHARASHTR~ v. C.A. KULKARNI (Sen, J.) 683

recruitment to the various posts and services was to be regulated A
according to the rules framed by the State Governments and not
according to the Bombay Civil Service (Classification and Recruit-
ment) Rules. It is not disputed that the Departmental Examination
Rules framed by the former State Governments of Madhya Pradesh
and Hyderabad for promotion to the post of STOs formed part of
the conditions of service of ASTOs from Madhya Pradesh and B
Hyderabad.

Mere chances of promotion are not conditions of service and
the fact that there was reduction in the chances of promotion did
not tantamount to a change in the conditions of service. A right to
be considered for promotion is a term of service, but mere chances
c
of promotion are not. Under the Departmental Examination Rules
for STOs, J 954, framed by the former State Government of Madhya
Pradesh. as amended on January 20, l 960, mere passing of the
departmental examination conferred no right on the STis of
Bombay, to promotion. By passing the examination, they merely
D
became eligible for promotion. They had to be brought on to a
select list not merely on the length of.service, but on the basis of
merit-cum.seniority principle. It was, therefore, nothing but a mere
chance of promotion. In consequence of the impugned orders of
reversion, all that happened is that some of the STis. who had
wrongly been promoted as STOs Gr. III had to be reverted and E
thereby lost a few places. In contrast, the conditions of service of
ASTOs from Madhya Pradesh and Hyderabad, at least so far as
one stage of promotion above the one held by them before the
reorganisation of States, could not be altered without the previous
sanction of the Central Government as laid down in the Proviso to
, sub-s. (7) of s. 115 of the Act. F
We are unable to agree with the High Court in its opinion

---- that ASTOs from Madhya Pradesh and Hyderabad on their alloca-
tion to the new State of Bombay, who had wrongly been put at par
with STis from Bombay, had to pass the departmental examination
prescribed by the former State Government of Bombay, for promo- G
tion to the post of STO Gr. III before they could be actually so
promoted.

It is an incontrovertible fact that the departmental examination
prescribed by the former State Governments of Madhyha Prades
H
and Hyderabad had not been held after August 8, 1960 i.e. for the
last 20 years. Merely because the C.P. and Berar Sales Tax Act, 1947
684 SUPREME COURT IU!PORTS (1982] l s.c.R.

A and the Hyderabad General Sales Tax Act, 1950 stood repealed
with effect from January I, 1960, that hardly furnished a ground
for not holding the examination. The State Government, in their
affida,it before the High Court, tried to justify their action that the
subjects under the ex-Madhya Pradesh and Hyderabad Rules had
become obsolete and, therefore, it was felt that no useful purpose
B would be served in holding these examinations. This was no justi-
fication at all, for even after the Bombay Sales Tax Act, 1959 had
been extended throughout the State with effect from January l, 1960,
all pending assessments pertaining to the Vidarbha and Marathwada
regions of the former States of Madhya Pradesh and Hyderabad
had to be completed in accordance with the repealed Acts. In this
c context, the High Court observed that it examined the subjects
prescribed for the three departmental examinations of Bombay,
Madhya Pradesh and Hyderabad and found that "there was not
much difference". It went on to say that "it could hardly be sugges-
ted by any one that prescribing a subject more or less for an exami-
nation would adversely affect conditions of service. The purpose of
D examination is to prepare the officer to be able to cope up with
different kinds of problems ,that would confront him with reason-
able efficiency." To say the least, the observations made by the
High Court are unwarranted.

Be that as it may, the fact remains that the condition regarding
E the passing of the departmental examination became incapable of
__compliance in the case of ASTOs from Madhya Pradesh and
Hyderabad who had been promoted as STOs Gr. III. They were
entitled to such promotion without passing such examination. Under
the relevant rules which regulated their conditions of service, there
was only a possibility of reversion in the eventuality of their not
F passing the examination within the stipulated time. Since no
examinations admittedly have been held, there is no question of their
reversion as ASTOs. If the decision of the High Court were to be
upheld, it would imply that many of the ASTO from Madhya
Pradesh and Hyderabad who had been promoted as STOs Gr III
and during the past 20 years have reached the higher echelons of
G service, would now have to be put back as AST Os, for no fault" of
their own. Many of them either have retired or are on the verge
of retirement.

There was thus no alternative for the State Government but to
H suspend the operation of the amendment made on January 20, 1961
tor. l(b) (ii) of the recruitment rules, by its order dated October 1,
MAHARASHTRA v. C.A. KULKARNI (Sen, J.) 685

1965, which made the passing of the STO examination a condition A
precedent for prumotion of STis to STO Gr. III. There can be no
doubt that the State Government's Resolution dated June 13, 1964
and its Memorandum of November 21, 1964, clarifying that the
ASTOs from Madhya Pradesh and Hyderabad were entitled for
promotion to the post of STO Gr. III without passiug the depart- B
mental examination, placed ST!s from Bombay at a disadva1tag~.
To ensure 'fair and equitable treatment', the State Government
rightly dispensed with the requirement of passing the departmental
examination in the case of STis from the former State of Bombay.
c
In the end, reverting back to the main question. On an overall
view of things, we are satisfied that the State Government acted
with the best of intentions. It endeavoured to strike a balance
between the competing claims to relative seniority. When sub-s. (5)
of s. 115 of the Act spe,aks of "fair and equitable treatment",
D
obviously it envisages a decision which is fair and equitable
to all.

The result, therefore, is that the appeal succeeds. The judg-
ment of the High Court of Bombay is set aside and the writ petition
filed by Respondents I to 5 is dismissed. There shall be no order
as to costs in the facts and circumstances of the case.
E

N.V.K. Appeal allowed.