Holding

A stigmatic order of compulsory retirement is bad in law, and non‑compliance with the prescribed guidelines amounts to malice in law, rendering the order illegal and unsustainable.

Summary

The appellant, Swaran Singh Chand, was compulsorily retired by the Punjab State Electricity Board under a circular dated 14‑08‑1981 that laid down guidelines for premature retirement. He challenged the order, contending that it was based on stigmatic remarks about his integrity, that the guidelines were not properly complied with, and that the order amounted to a punitive measure without a disciplinary proceeding. The Supreme Court examined the nature of stigmatic orders, the requirement to follow the prescribed guidelines scrupulously, and the concept of malice in law when such guidelines are ignored. It held that an order of compulsory retirement that carries a stigma is bad in law and, because the State failed to observe the circular’s provisions, the order was tainted with malice in law. Consequently, the order was declared illegal and set aside.

Issues considered

Whether an order of compulsory retirement that is stigmatic is valid under law
Whether the guidelines dated 14‑08‑1981 were complied with in the appellant's case
Whether non‑compliance with the guidelines amounts to malice in law
Whether principles of natural justice are required in a compulsory retirement proceeding
Whether adverse entries in confidential records can be used without a disciplinary enquiry

Subjects

compulsory retirementstigmatic ordermalice in lawservice lawnatural justiceadministrative lawArticle 311confidential recordadverse entry

Judgment

[2009] 7 S.C.R. 1084

A SWARAN SINGH CHAND i
V. -
PUNJAB STATE ELECTRICITY BOARD & ORS.
Civil Appeal No. 3298 of 2009
MAY 6, 2009
B.
[S. B. SINHA AND DR. MUKUNDAKAM SHARMA, JJ]
Service Law - Compulsory retirement - Order of
compulsory retirement when stigmatic in nature - Held: Is bad ..;
•
in law - On facts, order of compulsory retirement passed ...
c against employee -A/legation that he lacked integrity was also
unfit to be retained in service, are stigmatic in nature - Also, it
is not a case where there had been steady decline in the
performance of employee - There was non-compliance of ~
necessary directions in the circular laying down guidelines for
D compulsory retirement, thus amounted to malice in law- Thus,
order of compulsory retirement being illegal, is not sustainable
and is set aside - Circular letter dated 14.08.1981. "
The question which arose for consideration in this
appeal is as to whether an order of compulsory retirement
E being a stigmatic one would be valid in law.

Allowing the appeal, the Court
HELD :1.1 An order of compulsory retirement inter
alia can be passed when the officer concerned is found >'
F to be a dead wood. Although for the said purpose, the
principles of natural justice are not required to be
complied with and even adverse entries made in the
confidential record including uncommunicated entries
may be taken into consideration but the same should not
G be passed in place of or in lieu of a disciplinary procee-
dings. If an order of compulsory retirement is stigmatic in ....

nature, the same would be bad in law. Furthermore when
the State lays down the rule for taking any action against

H 1084
SWARAN SINGH CHAND V. PUt-JJAB STATE 1085
ELECTRICITY BOARD & ORS.

an employee which would cause civil or evil consequence, A
it is imperative on its part to scrupulously follow the same.
[Paras 8, 9 and 1OJ [1092-A-D]
M.P State Co-op. Dairy Fedn. Ltd. & Anr. v. Rajnesh
Kumar Jamindar & Ors. 2009(6) SCALE 16; H. V Nirmala v.
Karnataka State Financial Corporation (2008) 7 SCC 639 - B
relied on.
Vitarelli v. Seaton 359 US 535 - referred to.
" ... 1.2 The guidelines issued by the State are binding
on it. Appellant had been compulsorily retired with effect c
-;

from 29.9.2003. Salary for three months from the said date
was paid, i.e. upto December, 2003. His actual date of
retirement was 31.10.2004. The impugned order, therefore,
was passed although not strictly within a period of one
.. year preceding the date of superannuation but near about D
the same. Thus, spirit of clause (ii) of the guidelines issued
" by order dated 14.08.1981 should have also been taken
into consideration. So far as clause (iii) of the said
guidelines is concerned, there is a change of post as he
had been promoted to a higher post in 2001. As he had E
been promoted despite recording of the adverse remarks,
the said fact also should have been taken into consi-
deration. If adverse report on integrity relates to a distant
past or more than ten years old, yet again it should not
A
have been considered. [Para 11) [1092-G-H; 1093-A-B] F
Baikuntha Nath Das and Anr. v. Chief District Medical
Officer, Baripada and Anr. (1992) 2 SCC 299 - referred to.
1.3 An order of compulsory retirement would be held
to be stigmatic inter alia, in the event the employer has
G
lost confidence or has concealed his earlier record. He
.... 'I
can, however, be subjected to compulsory retirement inter
alia if he has outlived his utility.[Para 13) [1093-F-G)
Chandu Lal v. Management of Mis. Pan American World
Airways Inc. (1985) 2 SCC 727; Jagdish Parsad v Sachiv, Zila H
1086 SUPREME I COURT REPORTS [2009] 7 S.C.R.

A Ganna Committee, Muzaffarnagar and Another (1986) 2 SCC
338; State of Uttar Pradesh v. Madan Mohan Nagar AIR 1967 r
SC 1260 - relied on.
Baikuntha Nath Das and Another v. Chief District Medical
Officer, Baripada and Another (1992) 2 SCC 299; Allahabad
B Bank Officers' Association and Anr. v. Allahabad Bank and Ors.
(1996) 4 SCC 504; State of Gujarat v. Umedbhai M. Patel
(2001) 3 SCC 314; Jaswantsingh Pratapsingh Jadeja v. Rajkot
Municipal Corporation and Anr.(2007) 10 SCC 71 - referred

-
to. '
c
1.4 Allegation against the delinquent was not only
that he lacked integrity but also unfit to be retained in
~•.,rvice. Those comments are stigmatic in nature. It is also
not a case where there had been a steady decline in the
perfonnance of the employee. [Para 16] (1096-C-D]
0
Purushottam Kumar Jha v. State of Jharkhand and Ors.
(2006) 9 sec 458 - referred to.
1.5 In a case of this nature, the appellant has not
alleged malice of fact. The requirements to comply with
E the directions contained in the said circular letter dated
14.08.1981 were necessary to be complied with in a case
of this nature. Non-compliance whereof would amount to
malice in law. Thus, when an order suffers from malice in
law, neither any averment as such is required to be made
F nor strict proof thereof is insisted upon. Such an order
being illegal would be wholly unsustainable. The impugned
order is set aside. [Paras 18, 19 and 20] [1097-B-E]
Manager, Government Branch Press and Anr. v. D.B.
G Bel/iappa (1979) 1 SCC 477; Smt. S.R. Venkataraman v.
Union of India and Anr. (1979) 2 SCC 491; P Mohanan Pillai
v. State of Kera/a and Ors. (2007) 9 sec 497 - relied on.
Case Law Reference
,,..
-
2009(6) SCALE 16 Relied on. Para 8
H
SWARAN SINGH CHAND V. PUNJAB STATE 1087
ELECTRICITY BOARD & ORS.

359 us 535 Referred to. · Para 10 A
(2008) 7 sec 639 Relied on. Para 10
(1992) 2 sec 299 Referred to. Para 12
1 (1985) 2 sec 121 Relied on. 1 Para 13
B
(1986) 2 sec 338 Relied on. Para 13
AIR 1967 SC 1260 Relied on. Para 13
'I
_..
(1996) 4 sec 504 Referred to. Para13
"!"'
(2001) 3 sec 314 Referred to. Para 14 c
(2007) 1o sec 11 Referred to. Para 15
(2006) 9 sec 458
...j•
Referred to. Para 17
(1979) 1 sec 477 Relied on. Para 18 D
cJ. (1979) 2 sec 491 Relied on. Para 18
(2007) 9 sec 497 ·Relied on. Para 18
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 3298
of 2009 E
From the Judgment and Order dated 17.08.2006 of the
Hon'ble High Court of Punjab & Harya~a at Chandigarh in Civil
~·\. Writ Petition No. 10549 of 2004
Nidesh Gupta, Tarun Gupta (for S. Janani), with him for the F
Appellant(s).
Ajit Kumar (for S.K. Sabharwal), for the Respondent(s).
The Judgment of the Court was delivered by

.., S.B. SINHA, J . G
......
1. Leave granted.
2. The core question, in this appeal, arising out of a
juElgment and order dated 17.08.2006 passed by the High Court
of Punjab and Haryana in CWP No. 10549 of 2.004, is as to H
1088 SUPREME COURT REPORTS [2009] 7 S.C.R.

A whether an order of compulsory retirement being a stigmatic ~
one would be valid in law.

3. Appellant was directed to be compulsorily retired on
attaining the age of 55 years in terms of a circular letter dated
14.08.1981 laying down guidelines for compulsory retirement,
8 the relevant portion whereof reads as under:

"(i) Although the entire service record of an employee
has to be considered, premature retirement should not be

c
ordered if during the last 5 years the work and conduct of
the employee has been good or better than that.
... •
..
(ii) Ordinarily, no retirement should be ordered within a
period of one year preceding the date of superannuation
of the Governrnent employee. '\.-

(iii) If an adverse entry relating to integrity exists in the
D
confidential reports during the 10 years preceding the
review, or if after its recording there has been no change
in the class, status or the post of the officer, that single
entry should be considered sufficient for ordering
premature retirement.
E
(iv) If the adverse report on integrity relates to the distant
past or is more than 10 years old, the subsequent record
of the employee should be scrutinized carefully. If the
subsequent reports vouch-safe the integrity of the employee ~-
F in unambiguous terms, the inference is that he has
improved his conduct and it should not be necessary to
order his premature retirement. A similar view can be taken
if an employee has been promoted after the recording of
the adverse remarks."
G 4. Admittedly, the said order of retirement dated
y
29.09.2003 was based on the aforementioned circular letter. It
reads as under:
"Whereas Shri Swaran Singh Chand, UDC S/o Sh.
Gurbachan Singh presently working in the office of Sr.Xen,
H .
SWARAN SINGH CHAND V. PUNJAB STATE 1089
ELECTRICITY BOARD & ORS. [S.B. SINHA, J.]
·,
"' Focal Point Spl. Division, Ludhiana has attained the age A
• of 55 years on 14.10.01 because his date of birth is 15-
10-1946.
Whereas as per PSEB Services (Premature Retirement)
Regulations, the case of Shri Swarn Singh Chand UDC
was considered on 17.9.2003 by the High Empowered B
Integrity Committee (HEIC) which has been set up to
screen the cases of non-gazetted employees of Central
Zone for retention in service beyond the age of 50/55
., years. The Committee took note of ACRs, disciplinary
f
Cases, personal record and his reputation. c
Report of disciplinary cases of above noted employee
(as derived from his personal file) is as under :-

• CE/Op/Central Zone, Ludhiana stopped one increment
without future effect vide this office order 81 dated 5.2.96 D
in the case of charge sheet No.C-653 dated 30.5.95
issued to him for embezzlement of Board's Cash of
Rs.3069/- from M/s Falcon Industry having A/C No.J537.
The assessment of ACRs of the above official was
scrutinized and observed that the following AC Rs are below E
average with adverse remarks:
(1) 28.10.93 to 31.3.94 below average integrity doubtful
with adverse remarks of the following nature
A i) Trust worthy Not Good F

ii) Habits Not Good
iii) Knowledge of work Not Good
iv) Knowledge of rules/Codes Less knowledge G
v) Relations with Co-employees
and other Sections of the
office and with Public Not Good
vi) Integrity Doubtful
H
1090 SUPREME COURT REPORTS [2009] 7 S.C.R. .

~-

A vii) Overall Assessment Below Average

viii) Capable for next Promotion No
r
(2) 1.4.94 to 20.10.94 Below Average with adverse of
following nature :
B i) Control over subordinate employees No

ii) Relations with employees & Public No

iii) Knowledge of work No

c iv)

v)
Capable of next Promotion

Not Good in Office Work
No i
r

-
-
5. Appellant indisputably preferred an appeal thereagainst.
In the Memorandum of Appeal, he questioned the legality of the
said order inter alia contending:
D
(i) Although a disciplinary proceeding for imposing major
penalty had been initiated, a minor punishment was
imposed without holding a departmental proceeding.

(ii) ACRs of the relevant period had been recorded
E
within a period of 11 Yz months only for the purpose
of upholding the chargesheet.

(iii) He, having been promoted to the post of Upper
Division Clerk by an office order No. 135 dated
6.11.2001, the Appointing Authority could not have J.
F
taken into consideration his ACRs prior to the said
period.
The said appeal was rejected by the appellate authority,
stating:
G
"I have gone through the relevant record/ comments of
field officers and it is found that there is no point in his 1- '.
pleading that he was promoted as UDC recently. in 'll
.promotion cases, different criteria are followed. In
promotion,,s on seniority-cum-merit, incumbent is required
H
SWARAN SINGH CHAND V PUNJAB STATE 1091
ELECTRICITY B.OARD & ORS: [S.B. SINHA, J.]

to qualify only minimum bench marks on the basis of AC Rs A
• of last 5 years and punishment awarded in disciplinary
'• cases. In cases for extension in service, past 1O years'
record of the concerned employee is put to be screened
by the HEIC constituted for the purpose. The appellant
has mostly average record including his ACR for 28.10.93 B
to 31.3.94 as Below Average with Integrity as 'Doubtful'.
Further his ACR for 1.4.94 to 20.10.94 was also below
average. In the disciplinary case relating to embezzlement
~
of Rs.3069/-, his one AG I without future effect, was stopped.
f
Therefore, the decision of the competent authority is found c
to be based on facts and record and there is no justification
to intervene in the recommendations made by HEIC of
..:.-.._ Central Zone, with regard to his extension in service being
not approved on the basis of which, the competent authority,
viz CE/Op. (Central), Ludhiana has ordered his premature
D
retirement.
~. Appeal rejected."
6. Indisputably, therefore, not only a minor punishment
inflicted on him had been taken into consideration while passing
the impugned order, but it was also based inter alia on the E·
premise that his integrity was doubtful.

7. Before the High Court, appellant had inter alia raised a
contention that the appellate authority had not taken into
-·~
consideration the contentions raised by him before it. By reason F
of the impugned judgment, a Division Bench dismissed the said
writ petition opining that the action taken by the respondents
could not be held to be unconscionable, stating:
"An employee who reaches the age of 55 years can only
be permitted to continue in service beyond the aforesaid G
age on the basis of the assessment of the work by the
competent authority. The view taken by the respondent is
neither arbitrary nor contrary to any statutory rules."
8. The law relating to compulsory retirement is no longer
H
1092 SUPREME COURT REPORTS [2009] 7 S.C.R.

A res integra. An order of compulsory retirement inter alia can be
passed when the officer concerned is found to be a dead wood.
[See M.P State Co-op. Dairy Fedn. Ltd. & Anr v. Rajnesh
Kumar Jamindar & Ors., 2009 (6) SCALE 16]
9. Although for the said purpose, the principles of natural
8 justice are not required to be complied with and even adverse
entries made in the confidential record including uncommuni-
cated entires may be taken into consideration but the same
should not be passed in place of or in lieu of a disciplinary
proceedings. If an order of compulsory retirement is stigmatic
C in nature, the same would be bad in law.
10. It is furthermore well-settled that when the State lays
down the rule for taking any action against an employee which
would cause civil or evil consequence, it is imperative on its
part to scrupulously follow the same.
0
Mr. Justice Frankfurter in Vitarelli v. Seaton [359 US 535]
stated:
"An executive agency must be rigorously held to the
standards by which it professes its action to be judged ....
E Accordingly, if dismissal from employment is based on a
defined procedure, even though generous beyond the
requirements that bind such agency, that procedure must
be scrupulously observed .... This judicially evolved rule
.J..
of administrative law is now firmly established and, if I
F may add, rightly so. He that takes the procedural sword
shall perish with that sword."
[See also H. V Nirmala v. Karnataka State Financial
Corporation (2008) 7 SCC 639]
G 11. The guidelines issued by the State are binding on it.
Appellant had been compulsorily retired with effect from +
29.09.2003. Salary for three months from the said date was
paid, i.e., upto December, 2003. His actual date of retirement
was 31.10.2004. The impugned order, therefore, was passed
H although not strictly within a period of one year preceding the
SWARAN SINGH CHAND V. PUNJAB STATE 1093
ELECTRICITY BOARD & ORS. [S.B. SINHA, J.]

date of superannuation but near about the same. Thus, spirit of A
' Clause (ii) of the guidelines issued by order dated 14.08.1981
should have also been taken into consideration. So far as
Clause (iii) of the said guidelines is concerned~ there is a change
of post as he had been promoted to a higher post in 2001. As
he had been promoted despite recording of the adverse B
remarks, the said fact also should have been taken into
consideration. If adverse report on integrity relates to a distant
past or more than ten years old, yet again it should not have
'\ been considered.
·f
12. This Court in Baikuntha Nath Das and Anotherv. Chief c
District Medical Officer, Baripada and Another [(1992) 2 SCC
299] laid down the law inter alia as under:
"(iv) The government (or the Review Committee, as the
case may be) shall have to consider the entire record of
D
service before taking a decision in the matter- of course
attaching more importance to record of and performance
during the later years. The record to be so considered
would naturally include the entries in the confidential
records/character rolls, both favourable and adverse. If a
government servant is promoted to a higher post E
notwithstanding the adverse remarks, such remarks lose
their sting, more so, if the promotion is based upon merit
(selection) and not upon seniority."
__ ,,,
13. It is a well-settled principle of law that an order of F
compulsory retirement would be held to be stigmatic inter alia,
in the event the employer has lost confidence [See Chandu Lal
v. Management of Mis. Pan American World Airways Inc.
(1985) 2 sec 727 at 730, para 8], or he has concealed his
earlier record [See Jagdish Parsad v. Sachiv, Zita Ganna
G
Committee, Muzaffarnagar and Another (1986) 2 SCC 338 at
342-343, para 9].
He can, however, be subjected to compulsory retirement
inter alia if he has outlived his utility (See The State of Uttar
Pradesh v. Madan Mohan Nagar, AIR 1967 SC 1260 at 1262]. H
1094 SUPREME COURT REPORTS [2009] 7 S.C.R.

A In Allahabad Bank Officers' Association and Another v.
Allahabad Bank and Others [(1996) 4 SCC 504], it was held:
"17. The above discussion of case-law makes it clear
that if the order of compulsory retirement casts a stigma
on the government servant in the sense that it contains a
B statement casting aspersion on his conduct or character,
then the court will treat that order as an order of punishment,
attracting provisions of Article 311 (2) of the Constitution.
The reason is that as a charge or imputation is made the ,
condition for passing the order, the court would infer i
c 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 rule, even if it
mentions grounds for compulsory retirement, cannot be
D regarded as sufficient for treating the order of compulsory
retirement as an order of punishment. In such a case, the
order can be said to have been passed in terms of the
rule and, therefore, a different intention cannot be inferred.
So also, if the statement in the order refers only to the
E assessment of his work and does not at the same time
cast an aspersion on the conduct or character of the
government servant, then it will not be proper to hold that
the order of compulsory retirement is in reality an order of
punishment. Whether the statement in the order is stigmatic
F or not will have to be judged by adopting the test of how
a reasonable person would read or understand it."
14. The question came up for consideration before a
Division Bench of this Court in State of Gujarat v. Umedbhai
M. Patel [(2001) 3 SCC 314] wherein Balakrishnan, J. (as the
G 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:
H (i) Whenever the services of a public servant are no longer
SWARAN SINGH CHAND V. PUNJAB STATE 1095
ELECTRICITY BOARD & ORS. [S.B. SINHA, J.)
'
' ~ useful to the general administration, the officer can be A
compulsorily retired for the sake of public interest.
(ii) Ordinarily, the order of compulsory retirement is not to
be treated as a punishment coming under Article 311 of
the Constitution.
8
(iii) For better administration, it is necessary to chop off
dead wood, but the order of compulsory retirement can
.., be passed after having due regard to the entire service
record of the officer.
" c
,. (iv) Any adverse entries made in the confidential record
l shall be taken note of and be given due weightage in
passing such order.
(v) Even uncommunicated entries in the confidential record
can also be taken into consideration.
D
(vi) The order of compulsory retirement shall not be passed
as a short cut to avoid departmental enquiry when such
course is more desirable.
(vii) If the officer was given a promotion despite adverse
E
entries made in the confidential record, that is a fact in
favour of the officer.

,J (viii) Compulsory retirement shall not be imposed as a
, -"" punitive measure."
15. In a slightly different context, viz., in a case of probation, F
this Court in Jaswantsingh Pratapsingh Jadeja v. Rajkot
Municipal Corporation and Another ((2007) 10 SCC 71] opined
as under:
"24. In this case, however, the period of probation as G
provided for under th·e statute had expired and his
misconduct had been taken note of. Such misconduct was
not founded only ·upon absence from duty, but also upon
carelessness, negligence on the part of the appellant and
lack of devotion amongst others.
H
1096 SUPREME COURT REPORTS [2009] 7 S.C.R.

A Upon taking into consideration some precedents operating
in the field, it was concluded:
"28. From the discussions made hereinbefore, it is evident
that termination of services of the appellant purporting to
discharge him simpliciter cannot be accepted, being
B stigmatic in nature. The form of the order terminating the
services coupled with the background facts clearly leads
to the conclusion that the order impugned in the writ petition
by the appellant was punitive." .•
c 16. The learned counsel appearing on behalf of the
respondent would contend that the principles of natural justice
are not required to be complied with in a case of compulsory
retirement, particularly, when no mala fide is alleged. Allegation
against the delinquent was not only that he lacked integrity but
also unfit to be retained in service. Those comments, in our
0
opinion, are stigmatic in nature.
It is also not a case where there had been a steady decline
in the performance of the employee.
17. The learned counsel appearing on behalf of the
E respondent would contend that in this case malice has neither
been alleged nor been proved. In support of his contention
reliance has been placed on Purushottam Kumar Jha v. State
of Jharkhand and Others [(2006) 9 SCC 458] wherein Thakker,
J. speaking for the Bench, stated the law, thus:
F
"23. It is well settled that whenever allegations as to mala
fides have been levelled, sufficient particulars and cogent
materials making out prima facie case must be set out in
the pleadings. Vague allegation or bald assertion that the
G action taken was mala fide and malicious is not enough.
In the absence of material particulars, the court is not
expected to make "fishing" inquiry into the matter. It is
equally well established and needs no authority that the
burden of proving mala tides is on the person making the
allegations and such burden is "very heavy". Malice cannot
H
SWARAN SINGH CHAND V. PUNJAB STATE 1097
ELECTRICITY BOARD & ORS. [S.B. SINHA, J)

t · be inferred or assumed. It has to be remembered that A
such a charge can easily be "made than made out" and
hence it is necessary for the courts to examine it with
extreme care, caution and circumspection. It has been
rightly described as "the last refuge of a losing litigant".
(Vide Gulam Mustafa v. State of Maharashtra; Ajit Kumar B
Nag v. GM (PJ), Indian Oil Corpn. Ltd.)"
18. In a case of this nature the appellant has not alleged .
malice of fact The requirements to comply with the directions
contained in the said circular letter dated 14.08.1981 were
necessary to be complied with in a case of this nature. Non- C
compliance whereof would amount to malice in law. [See
Managaer, Government Branch Press and Another v. D.B.
Belliappa (1979) 1 SCC 477, Smt. S.R. Venkataraman v.
Union of India and Another ( 1979) 2 SCC 491 and P Mohan an
Pillai v. State of Kera/a and Others (2007) 9 SCC 497] D
19. Thus, when an order suffers from malice in law, neither
any averment as such is required to be made nor strict proof
thereof is insisted upon. Such an order being illegal would be
wholly unsustainable.
E
20. For the reasons aforementioned, the impugned order
is set aside. The appeal is allowed. However, in the facts and
circumstances of the case, there shall be no order as to costs.

N.J. Appeal allowed.

'