http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 23  

PETITIONER: A.L.KALARA

       Vs.

RESPONDENT: THE PROJECT & EQUIPMENT CORPORATION OF INDIA LIMITED.

DATE OF JUDGMENT01/05/1984

BENCH: DESAI, D.A. BENCH: DESAI, D.A. REDDY, O. CHINNAPPA (J) VARADARAJAN, A. (J)

CITATION:  1984 AIR 1361            1984 SCR  (3) 646  1984 SCC  (3) 316        1984 SCALE  (1)798  CITATOR INFO :  F          1985 SC1046  (6)  RF         1986 SC1571  (60,66,67)  F          1991 SC1010  (35,223)

ACT: A    Writ Jurisdiction  of the  High Court under Article 226      of the  Constitution- Public  sector  undertakings  and      other instrumentalities  of the State, whether amenable      to the writ jurisdiction. B    Effect of  concession in the Supreme Court by the State      as to  the maintainability  or amenability  to the writ      jurisdiction-Though the normal procedure is to remit to      the High  Court, the  Supreme Court,  in order  not  to      protract the  litigation involving  the livelihood of a      party before it can itself hear the appeal on merits. C.   Constitution  of  India,  1950  Art.  14-Whether  there      should  be   any  specific  pleading  in  the  Petition      pointing out  whether anyone  else was either similarly      situated as  the petitioner or dissimilarly treated for      entertaining the  charge of discrimination and granting      relief on that ground D.   Legislative Policy,  whether judicially  reviewable  by      the courts-Constitution of India, 1950 Arts. 226,32 and      13. E.   Constitution of India 1950-Distinction between Part XIV      and Part  III of the Constitution-Whether the employees      of the  Corporation entitled  to the  protection  under      Part XIV of the Constitution. F.   Project  and   Equipment  Corporation   of  India  Ltd.      Employees’  (Conduct,  Discipline  and  Appeal)  Rules,      1975-Rules 4,5 and 25, Scope of-Rule 4 does not specify      any  misconduct  and  Rule  5  does  not  specify  that      violation  of   Rule  4   is   per   se   misconduct-No      disciplinary action,  there. fore will arise under Rule      4 of the 1975 Rules. G.   The Project  and Equipment  Corporation of  India House      Building Advance (Grant and Recovery) Rules Rule 10 (1)      (ii) and  the Profits  and  Equipments  Corporation  of      India Ltd.  conveyance  Advance  (Grant  and  Recovery)      Rules 8  and 10 (1)- Whether the non-utilisation of the      advances within the stipulated time for the purposes of      and no  refund thereof immediately on the expiry of the      period, constitute  "misconduct" within  the meaning of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 23  

    the expression in Rule 4 (i) (iii) of the 1975 647      Rules and  if not  whether the domestic enquiry and the      punishment of the dismissal of service is warranted. H.   Relief for  a declaration  in  cases  of  contract  for      public  employment-whether   cannot   be   specifically      enforced. I.   Domestic Enquiry-Whether  the Inquiry  Officer and  the      Punishing Authority  must give reasons before the major      punishment  is  imposed-  Whether  non  giving  of  the      reasons makes  the decision  of dismissal arbitrary and      against principles of natural justice.

HEADNOTE:      The Project and Equipment Corporation of India Ltd. was formed in 1971 as a wholly owned subsidiary company of State Trading Corporation,  a Government  of India Undertaking. In 1976 it  was separated  and since  then it  functions  as  a separate Government of India Undertaking.      The appellant  who joined  the service  under the State Trading  Corporation  originally  and  later  exercised  his option to  serve the  Project and Equipment Corporation with effect from November 9, 1976. The appellant while working as Deputy Finance Manager Grade II applied for and obtained (a) an advance in the amount of Rs. 16,050 for purchasing a plot of land on April 4, 1979 for which he executed the requisite agreement  as   required  by   ’the  Project   &   Equipment Corporation of India Ltd., House Building Advance (Grant and Recovery) Rules,  and (b)  an advance  in the  amount of Rs. 11,000 for  purchase of a new motor cycle on July 7, 1979 as admissible under  "the  Project  and  Equipment  Corporation conveyance Advance  (Grant and  Recovery) Rules. Under these rules non-utilisation  of the  amounts within the time limit will impose  a liability  of the refund of the entire amount forth  with   together  with  penal  interest  thereon.  The appellant failed  to utilise  the amounts and also to refund the same.  Therefore, coercive  steps were  taken to recover the entire amount of the House Building advance from his pay by stopping  the payment  of his  salary from 16th November, 1979. As  regards the  conveyance advance, the receipts etc. for purchase made in 1980 were accepted.      On July  22, 1980  a memorandum  was  served  upon  the appellant  stating  therein  that  the  competent  authority proposes to  hold an  enquiry against  him under Rules 27 of the Project  and Equipment  Corporation of  India  Employees (Conduct, Discipline & Appeals Rules, 1975 in respect of the aforesaid mis-utilization  of the advances. The committee of Management in  exercise of  the powers conferred by sub-rule (4) of  Rule 27  of the  1975 rules  appointed one  Sri A.S. Nangia, its  Chief Marketing  Manager as the Enquiry Officer to enquire  into the  two charges against the appellant. The appellant submitted  on June  13, 1980  a detailed statement pointing out  that for various reasons therein  mentioned so as to  explain why  there was delay in refunding the advance and specifically  pleaded that  in view of the fact that the first advance  was sought to be recovered by withholding his salary  and  adjusting  the  pay  towards  the  advance  and charging penal  interest and in the second case by accepting the document  evidencing purchase  of scooter  no misconduct could be said to have been committed 648 by the  appellant and  the disciplinary enquiry was uncalled for. The  enquiry officer in his report after recapitulating

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 23  

allegations  and   explanation  simply  concluded  that  the appellant has  contravened Rule  10 (1) (c) (i) of the House Building Advance  Rules, and  also rules 8 and 10 (1) of the Conveyance Advance  Rules and therefore committed misconduct punishable under Rule 4 (1) (iii) of the 1975 Rules.      Pursuant to  the report  of the  Enquiry  Officer,  the Executive Director  for and  on behalf  of the  Committee of Management of the corporation made an order PEC : P 5 (8) 77 dated  February  4,  1981  stating  that  the  Committee  of management agrees  with the  findings of the inquiry officer and imposes  the punishment  of removal  from  service  with effect from  the date  of the order. The appeal preferred to the Appellate  Authority was  rejected as per the Memorandum dated May  21,1981 signed  by one  Anand Krishna claiming to act for and on behalf of the Board of Directors.      The appellant,  therefore approached  the High Court of Delhi under  Art. 226  of the  Constitution questioning  the correctness and  validity of  the findings  of  the  inquiry officer and  the decision  of the  Disciplinary Authority as well as  the appellate  authority inter  alia on  the ground that the  inquiry was held in violation of the principles of natural justice  and the  quasi-judicial authority failed to give reasons  in support  of its  order and the action taken against the  appellant was per se arbitrary and violative of Arts.  14  and  16  of  the  Constitution  inasmuch  as  the allegation contained  in  the  heads  of  charges,  even  if unrebutted,  do  not  constitute  a  misconduct  within  the meaning of the expression in 1975 Rules. In order to sustain the maintainability of the writ petition, the appellant also contended that  the respondent  is an instrumentality of the State  and   is  comprehended   in  the   expression  ’other authority’ in Art. 21 of the Constitution. The writ petition came-up for  admission before a Division Bench of the  Delhi High Court.  It was  dismissed in  limine observing that the writ petition is not maintainable on the facts presently set out in the petition. Hence this appeal by special leave      Allowing the appeal, the Court ^      HELD:  1:  1.  Public  sector  undertakings  and  other instrumentalities of  the  State  are  comprehended  in  the expression  other   authority"  in   Article   12   of   the Constitution. [660A]      1:  2.   Once  it  is  conceded  that  the  respondent- corporation is  an  instrumentality  of  the  State  and  is therefore, comprehended  in the expression ’other authority’ in Art.  12 of  the Constitution, it is indisputable that it is amenable  to the writ jurisdiction under Arts. 32 and 226 of the  Constitution. Apart  from the  concession, the tests collated in  the decision  of the Constitution Bench of this Court in  Ajay Hasia  etc v.  Khalid  Mujib  Sheravardi  and Others etc  [1981] 2  S.C R.  79 for  determining whether  a particular body is an instrumentality of the State are fully satisfied and  therefore on  precedent and  concession it is satisfactorily established  that the  respondent-Corporation is an instrumentality of the State within the 649 meaning of the expression ’other authority’ under Art. 12 of the Constitution  and is  amenable to the writ jurisdiction. The writ  petition filed  by the appellant in the High Court was thus maintainable. [660D-E]      2. When  once it  is conceded  that the  respondent was amenable to  the writ  jurisdiction, the  question that will arise is  whether the  matter should be remitted to the High Court as  the High  Court has  rejected the writ petition in limine on the ground that the respondent was not amenable to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 23  

the writ  jurisdiction of  the High  Court. In  order not to protract the  litigation involving  livelihood of  the party approaching the Supreme Court for justice, the Court can set down the  appeal for final hearing on merits, which they did in the instant case. [660F-H]      3:1 It  cannot be  said  that  executive  action  which results in  denial of  equal protection  of law  or equality before law  cannot be  judicially reviewed nor can be struck down on  the ground  of arbitrariness  as being violative of Art. 14. [661E-F]      3:2 The  scope and  ambit of  Article 14  have been the subject matter  of a catena of decisions. It is well settled that   Article    14    strikes    at    arbitrariness    in executive/administrative action  because any  action that is arbitrary must necessarily involve the negation of equality. One need not confine the denial of equality to a comparative evaluation between  two persons to arrive at a conclusion of discriminatory treatment.  An action per se arbitrary itself denies equal  protection of  law. It is thus too late in the day  to  contend  that  an  executive  action  shown  to  be arbitrary is  not either judicially reviewable or within the reach of Article 14.                                          [662A, F-G, 663A-B]      Ajay Hasaia etc. Khalid Majid Shehravardi and Ors[1981] 2 S.C.R  79; E.P.Royappa  v. State  of Tamil  Nadu and  anr. [1974] 2 S.C.R. 348; D. S. Nakara v. Union of India [1983] I S C.  C. 305 and Maneka Gandhi v. Union of India [1978] 2 S. C. R. 621 followed.      4. Wisdom  of the legislative policy may not be open to judicial review  but when the wisdom takes the concrete form of law,  the same  must stand the test of being in tune with the fundamental  rights and  if it  trenches upon any of the fundamental rights,  it is  void as  ordained  by  Art.  13, Conceding for  the present  purpose that  legislative action follows a  legislative policy  and the legislative policy is not judicially  reviewable, but  while giving concrete shape to the  legislative policy  in the form of a statute, if the law violates  any of  the fundamental  rights including Art. 14, the  same is  void to the extent as provided in Art. 13. If the  law is  void  being  in  violation  of  any  of  the fundamental rights  set out  in Part II of the Constitution, it cannot  be shielded  on  the  ground  that  it  enacts  a legislative policy. [661F-H]      5.  Even   if  the   respondent   Corporation   is   an instrumentality of the State as comprehended in Art. 12, yet the employees  of the  Corporation are  not governed by Part XIV of the Constitution. However it could not be 650 said that the protection conferred by Part III on the public servant  is   comparatively  Less  effective  than  the  one conferred by  Part XIV.  Therefore the distinction sought to be drawn  between protection of part XIV of the Constitution and part III has no-significance. [663B-C, 665A]      Managing   Director.    Uttar    Pradesh    Warehousing Corporation &  Anr. v.  Vinay  Narayan  Vajpayee;  [1980]  2 S.C.R.. 773 at p. 784, relied upon.      6:1. Even  if the facts alleged in two heads of charges are accepted as wholly proved, yet that would not constitute misconduct as  prescribed in  Rule 5  and no  penalty can be imposed for  such conduct, for the reason that while Rule 25 which prescribes penalties specifically provides that any of the  penalties  therein  mentioned  can  be  imposed  on  an employee for  misconduct committed  by him.  Rule 4 does not specify a misconduct. Rule 4 styled as ’General’ specifies a norm of  behaviour but  does not  specify that its violation

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 23  

will constitute  misconduct. In Rule 5, it is nowhere stated that anything  violative  of  Rule  4  would  be  per  se  a misconduct in  any  of  the  sub-clauses  of  Rule  5  which specifies misconduct. [666B-D]      6:2.  A   general  expectation   of  a  certain  decent behaviour in  respect of employees keeping in view corporate culture may  be a  moral or  ethical expectation. Failure to keep to  such high  standard of  moral; ethical  or decorous behaviour befitting  an officer  of the  company  by  itself cannot constitute  misconduct unless  the  specific  conduct falls in  any of  the   enumerated misconduct in Rule 5. Any attempt to  telescope Rule 4 into Rule 5 must be looked upon with apprehension  because Rule  4 is vague and of a general nature and  what is  unbecoming of a public servant may vary with  individuals   and  expose  employees  to  vagaries  of subjective  evaluation.   What  in  a  given  context  would constitute conduct  unbecoming of  a public  servant  to  be treated as  misconduct would expose a grey area not amenable to  objective   evaluation.  Where  misconduct  when  proved entails penal consequences, it is obligatory on the employer to specify  and if  necessary define  it with  precision and accuracy so  that any  ex post  facto interpretation of some incident may not be camouflages as misconduct. [665 D-G]      M/s Glaxo  Laboratories (I)  Ltd v.  Presiding Officer, Labour Court, Meerut & Others; [1984] 1. S.C.C. 1, followed.      7:1.  Seeking  advance  and  granting  the  same  under relevant  rules   is  at   best  a   loan  transaction.  The transaction  may   itself  provide   for  payments  and  the consequences of  failure to  repay or to abide by the rules. If the  rules for  granting the  advance themselves provided the consequence  of the  breach of  conditions, it  would be idle to  go in search of any other consequence by initiating any disciplinary action in that behalf unless the 1975 Rules specifically incorporate  a rule  that the  breach of  House Building Advance  Rules and  the conveyance  advance  rules, would by  themselves constitute  a  "misconduct".  Therefore Rule 4  (1) is  not only,  not attracted but in this case no attempt was made to establish the correction. And 651 as far  as Rule  4 (1)  (iii) is  concerned, an  advance not refunded in  time where  it was recovered by withholding the salary of a highly placed officer may not disclose a conduct unbecoming of a public servant. Therefore, the first head of charge is  an eye-wash,  It does not constitute a misconduct if it  can be  said to be one even if it remains unrebutted. The  inquiry   officer  has   not  said  one  word  how  the uncontroverted facts  constitute a  conduct unbecoming  of a public servant, or he failed to maintain absolute integrity. Regarding the  conveyance advance  the position is the same. The appellant for no fault has been punished sub-silencio.                                    [667F-H, 668A, D-E, 669H]      7:2. Now  if what  is alleged  as misconduct  does  not constitute  misconduct  not  by  analysis  or  appraisal  of evidence, but  per se  under 1975  Rules the  respondent had neither the  authority nor the jurisdiction nor the power to impose  any   penalty  for   the  alleged   misconduct.   An administrative  authority   who  purports   to  act  by  its regulation must  be held  bound by  the  regulation.  [670H, 671A]      8.  In   the  matter   of  public   employment  if  the termination is  held to be dba, a declaration can be granted that the man continues to be in service. [671G, 672A]      Sukhdev  Singh   &  Ors.  v.  Bhagatram  Sardar  Singh. Raghuvanshi &  Anr. [1975] 3 S.C.R. 619 @ 655. Western India Automobile Association  v. Industrial  Tribunal, Bombay  and

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 23  

Ors.[1949] F.C.R. 321 at 340.      9:1. The  duty to  give reasons  would permit the court hearing a  petition for  a writ  of certiorari  to ex  facie ascertain whether there is any error apparent on the record. A speaking  order will  at its best be reasonable and at its worst be  at least  a plausible one. If reasons for an order are given there will be less scopes for arbitrary or partial exercise of  power and  the   order ex  facie will  indicate whether extraneous  matters were taken into consideration by authority passing the order. [672D-E]      M.P. Industries  Ltd. v.  Union  of  India  and  Others [1966] 1  S.C.R. 466  at 472;  Vadacha Mudaliar  v. State of Madras, A.I.R. 1952 Madras 276; Bhagat Raja v Union of India and Others, [1967] 3 S.C.R. 302 @ 320; referred to.      9:2. Here,  the findings  of the  inquiry  officer  are merely his  ipse dixit. No reasons are assigned for reaching the  finding   and  while   recapitulating  evidence   self- contradictory positions  were adopted  that either there was no  misconduct  or  there  was  some  misconduct  or  double punishment was  already  imposed.  Rule  27  (19)  casts  an obligation upon the inquiry officer at the conclusion of the inquiry to  prepare a  report which  must inter alia include the findings  on each  article of  charge  and  the  reasons therefore. The  report is  prepared in  contravention of the aforementioned rule.  The situation is further compounded by the fact that the disciplinary authority which is none other than  Committee  of  Management  of  the  Corporation  while accepting the report of the inquiry officer which itself was defective did not assign any 652 reasons for  accepting the  report of  the inquiry  officer. Further sub  rule (ii)  of Rule  35 provides  amongst others that the  Appellate Authority  shall  consider  whether  the findings are  justified or  whether the penalty is excessive or inadequate  and  pass  appropriate  orders  within  three months of  the date of appeal. In order to ascertain whether the rule  is complied  with,  the  order  of  the  appellate authority must  show that  it took  into  consideration  the findings  the   quantum  of   penalty  and   other  relevant considerations. There  is no  material for  showing that the appellate authority  acted in consonance with its obligation under Rule 35. [672E-H, 673A-D-E]      9:3. Therefore,  the order  of removal  passed  by  the Disciplinary  Authority  is  illegal  and  invalid  for  the reasons (i)  that the  action is thoroughly arbitrary and is violative or  Art. 14; (ii) that the alleged misconduct does not constitute  misconduct within the 1975 Rules; (iii) that the  inquiry  officer  himself  found  that  punishment  was already imposed  for the  alleged misconduct  by withholding the salary  and the appellant could not be exposed to double jeopardy; and  (iv) that the findings of the inquiry officer are unsupported by reasons and the order of the Disciplinary Authority as well as the Appellate Authority suffer from the same vice. [673H. 674A-B]      10:1. Once the order of removal from service is held to be illegal  and invalid  and the  appellant being  in public employment, the  necessary declaration  must follow  that he continues to  be in  service uninterruptedly. Ordinarily, it is well-settled that if termination of service is held to be bad, no  other punishment  in the  guise of  denial of  back wages can  be imposed  and therefore, it must as a necessary corollary follow  that he  will be  entitled to all the back wages on  the footing that he has continued to be in service uninterruptedly.  If   the   appellant   had   procured   an alternative employment he would not be entitled to wages and

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 23  

salary from  the respondent  But it  is equally true that an employee depending  on salary  for his  survival when  he is exposed to  the vagaries of the court litigation cannot hold on to  a slender  distant hope of judicial process coming to his  rescue   and  not   try  to  survive  by  accepting  an alternative employment,  a hope  which may  turn out to be a mirage. Therefore,  the appellant was perfectly justified in procuring an  alternative employment  in order  to keep  his body and  soul together  as also  to bear  the  expenses  of litigation to vindicate his honour, integrity and character. [674B-G]      10:2. However,  in  the  instant  case,  the  appellant should be  paid 50%  of the  back wages  for the rest of the period during  which he  remained  unemployed.  This  is  so because the  conduct of  the appellant  cannot be said to be entirely in  consonance with  corporate culture. As a highly placed officer  he was  bound to  strengthen  the  corporate culture and  he should  have acted  within the spirit of the regulations both  for house  building advance and conveyance advance, which  are devised to help the employees. There has been lapse  in totally  complying with  these regulations by the appellant  though it  neither constitutes  misconduct to attract  a   penalty  nor   substantially  good  enough  for initiation of disciplinary inquiry. [675A-C] 653

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 2703 of 1981.      From the  Judgment and  Order dated the 23rd July, 1981 of the Delhi High Court in C.W. No. 1648 of 1981.      M.K. Ramamurthi,  L.C. Goyal  and Ms. Sumitra Goyal for the Appellant.      Lal Narain  Sinha, M.C. Bhandare and P.P. Singh for the Respondent.      The Judgment of the Court was delivered by      DESAI, J. Failure to adjust the antena to the operative channel and  dipping the head like the proverbial ostrich in the sand  so as not to view the changing kaleidoscope of the law can  alone be  said to  be responsible  for this trivial matter to be brought to this Court.      Respondent is  the Project  & Equipment  Corporation of India Ltd.  (’Corporation’ for short) since its formation in 1971 a  wholly owned  subsidiary company  of  State  Trading Corporation  (’STC’   for  short),  a  Government  of  India Undertaking upto  1976 when  it was separated and since then it functions  as a  Government  of  India  undertaking.  The appellant A.L.  Kalra joined  as Upper Division Clerk in the STC on  August 6,  1963. On  November 1, 1969, he came to be promoted as  Assistant and earned a further promotion on May 22,  1974   as  Accountant.   On  the   setting  up  of  the Corporation, the  appellant exercising his option came to be transferred as  Accountant to the Corporation on November 9, 1976.  Under   the  relevant   conditions  of  transfer,  he continued to  be governed  in the  matter of recruitment and promotion by  the relevant rules of the STC. He was promoted in an  officiating capacity  as Deputy Finance Manager Grade II on  June 29, 1978 and he was put on probation after being promoted as Deputy Finance Manager Grade II on regular basis effective from  February 5,  1979. The appellant applied for and obtained  an advance  in the  amount of  Rs. 16,050  for purchasing a  plot of  land on  April 4,  1979 for  which he executed the requisite agreement on April 4, 1979. The rules

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 23  

under which  advance was obtained are styled as ’The Project and Equipment  Corporation was  India  Ltd.  House  Building Advance (Grant & Recovery) Rules for House Building Advance’ for short)  framed in  exercise of the powers conferred upon the Board of Directors by the Articles of Association of the Corporation. The  appellant also applied for and obtained an advance in the amount of Rs. 11,000/- for purchase of a 654 new motor cycle on July 7, 1979. This advance is governed by what are  styled as  the Projects & Equipment Corporation of India Ltd.  Conveyance  Advance  (Grant  &  Recovery)  Rules (’Conveyance Advance Rules’ for short).      In respect  of the  house building advance according to the respondent-Corporation,  in view  of Rule 10 (1) (c) (i) the appellant  was required  to utilise  the amount drawn by him for the purpose for which advance was granted within two months of  drawal and  submit the  documents evidencing  the purchase of plot within the prescribed time failing which he was liable to refund at once the entire amount together with interest to  the Corporation.  The agreement  dated April 4, 1979 executed by the appellant also obligated him to utilise the  advance   for  the  purpose  for  which  the  same  was sanctioned and  to produce the sale-deed for verification by the Corporation  failing which  the whole of the advance had to be  refunded with  interest.  It  was  alleged  that  the appellant neither  utilised the  advance for the purchase of plot nor  refunded the  amount despite several reminders and ultimately on November 13, 1979 a memorandum was served upon him cautioning  him that  if he  failed to refund the entire amount forthwith, disciplinary proceedings will be initiated against him.  As the  appellant failed  to comply  with  the request made  in the memorandum, his salary from November 7, 1979 as  a whole  was withheld  for adjusting  the amount of advance and  the  interest  payable  thereon.  He  was  also charged penal interest for the default committed by him.      In  respect   of  the  conveyance  advance,  which  was sanctioned on July 7, 1979, the appellant is alleged to have committed a default by not purchasing the motor cycle within a period  of one  month  as  required  by  Rule  10  of  the Conveyance Advance  Rules, and  on November  13, 1979 he was advised to  refund the  amount by  November 14, 1979 failing which he  was threatened  with disciplinary  action. It  is, however, admitted  that the appellant purchased a scooter in April, 1980 and submitted the documents which appear to have been accepted by the Corporation. The balance of advance was also refunded.      A memorandum  dated July  22, 1980  was served upon the appellant  stating  therein  that  the  competent  authority proposes to hold an enquiry against him under Rule 27 of the Project and  Equipment Corporation  of India Ltd. Employees’ (Conduct, Discipline & Appeal) Rules, 1975 (’1975 Rules’ for short). There were 655 two heads  of charges  in the  charge-sheet drawn-up against the appellant  on which disciplinary enquiry was proposed to be held. These two heads of charges read as under :      "Article I           Shri  A.L.   Kalra  while  functioning  as  Deputy      Finance Manager-Grade II in the Finance Division of the      PEC during  April, 1979  applied and drew an advance of      Rs. 16,050 for purchase of a plot of land at Faridabad.      The did  not furnish  the  relevant  documents  in  the      office nor  did he  refund the amount of advance to the      Corporation within  two months of the date of drawal of      the advance  as required  under Rule  10 (1) (c) (i) of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 23  

    PEC House Building Advance (Grant and Recovery) Rules.           Shri Kalra  by his  above act  exhibited  lack  of      integrity and  conduct unbecoming  of a  public servant      and violated  Rule 4  (1) & (iii) and Rule 5 (5) of the      PEC Employees’ (Conduct, Discipline & Appeal) Rules and      Rule 10  (1) (c)  (i) of  PEC  House  Building  Advance      (Grant  &   Recovery  Rules   and   thereby   committed      misconduct punishable under the PEC employees (Conduct,      Discipline and Appeal) Rules. 1975.      Article-II           Shri, A.L.  Kalra drew a conveyance advance of Rs.      11,000 in  July, 1979 for purchasing a motor-cycle, but      did not  utilise the  amount for  the above purpose and      did not  furnish cash  receipt etc. evidencing purchase      of the vehicle within one month as required under Rule-      8 of  the PEC  Conveyance Advance  (Grant  &  Recovery)      Rules. Nor  did he  refund the amount of advance to the      Corporation as required under Rule 10 (1) ibid.           Shri A.L. Kalra by his above act exhibited lack of      integrity and  conduct unbecoming  of a  Public servant      and violated  Rule-4 (1)  (i) & (iii) and Rule 5 (5) of      PEC Employees  (Conduct, Discipline & Appeal) Rules and      also  violated  Rule-8  and  Rule-10  (is  of  the  PEC      Conveyance Advance (Grant & Recovery) Rules and thereby      committed   misconduct   punishable   under   the   PEC      Employees’ (Conduct, 656      Discipline & Appeal) Rules, 1975."      The appellant  was also  asked to  submit  his  defence statement within 10 days from the date of the receipt of the memorandum. The  appellant by  his letter dated February 13, 1980 requested  for extension  of time  to file  the defence statement. It  appears that  he sought  further extension of time by  three weeks  which  request  was  declined  by  the memorandum dated Feb. 23, 1980.      The Committee  of Management  in exercise of the powers conferred by  sub-rule (4)  of Rule  27 of  the  1975  Rules appointed Shri  A.S. Nangia,  Chief Marketing Manager as the Enquiry Officer  to enquire  into the  charges  against  the appellant submitted  on June  13, 1980  a detailed statement pointing out  that the inquiry was the outcome of malice for various reasons  therein mentioned  and also  explaining why there was  delay in  refunding the advances and specifically pleaded that  in view of the fact that the first advance was sought  to  be  recovered  by  withholding  his  salary  and adjusting  the   pay  towards  advance  and  charging  penal interest and  in the  second case  by accepting the document evidencing purchase  of scooter, no misconduct could be said to have been committed by the appellant and the disciplinary enquiry was  uncalled for.  Various other  contentions  were also raised  in the  defence statement.  The inquiry officer conducted the  enquiry in  respect of the aforementioned two charges.  One   U.S.  Aggarwal,   Finance  Manager   of  the Corporation appeared  as Presenting  Officer. The  appellant conducted his own defence.      In Para  4 of  his report,  the Inquiry  officer states that the  ’preliminary hearings  of the  inquiry was held on 3rd and  9th April, 1980 and then inquiry was held regularly on various  dates from 23rd April 1980 to 22nd May, 1980 The appellant was called upon to submit his statement of defence which he had submitted on June 30, 1980.      The findings  purported to  have been  recorded by  the inquiry officer  were the  subject matter of a heated debate between the parties and therefore, the report of the Inquiry Officer may be broadly scanned here. After recapitulating in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 23  

paras 1  to 4  the various  stages through which the enquiry progressed, in para 5, it is stated that at the ’preliminary hearing on  3rd April,  1980, Shri  A.L. Kalra,  (appellant) pleaded guilty  to all  the charges  mentioned in Annexure I and also  agreed to  the  statement  of  imputation  of  his misconduct in  support of  the articles  of  charges  framed against him.’  In part  5 (3), the inquiry officer discussed the first head of charge in respect of the 657 house building  advance. It  was found  as a  fact that  the advance was  taken for  the purchase  of a plot and that the appellant had  negotiated for a purchase of a plot from Shri J.C. Chugh  who was examined as a management witness and who admitted that  he waited  for six  months  to  complete  the transaction but after that he disposed of the plot. Evidence of Shri  J.C. Chugh  revealed  that  the  deal  was  delayed because Haryana  Estate  Officer  demanded  some  additional amount and  there was  dispute between  the  appellant,  the vendee and  J.C. Chugh, the vendor as to who should bear the extra burden.  In paragraph  5.1.4 after  recapitulating the reminders sent to the appellant to refund the advance, it is observed that  it is  not clear from the relevant rule as to which is  the competent authority to grant extension of time for utilisation  of the  amount. And then in paragraph 5.1.5 he recommended  that the sanction of the competent authority should be  taken before  granting any  extension. There ends the discussion  on the  charge in  respect of house building advance.      The inquiry  officer  then  proceeded  to  examine  the second head  of the  charge. After  recapitulating the  fact about sanction  of advance  and drawal  of the  same, it was observed that the appellant drew the advance on July 9, 1979 and on April 7, 1980 he submitted the documents such as cash receipt in  respect of  purchase  of  a  scooter,  insurance certificate, receipt  of balance  amount deposited  with the cashier, original  insurance policy  and  registration  book evidencing the purchase of scooter. It is then observed that under the  relevant rules  motor cycle  had to  be purchased within one  month from the date of the drawal of the advance or else  he should  have obtained  fresh  sanction  for  the purchase of  a scooter  instead of a motor cycle. Then comes the particular observation which may be extracted :           "He (appellant)  did not obtain any fresh sanction      for purchase  of a  scooter but  simply  submitted  the      papers for  regularisation of  the advance and although      no specific  letter for  sanction of  the purchase of a      scooter was  issued by  the Personnel  Division yet the      fact that  he was  asked to  refund the  balance amount      tantamounts  to   agreeing  defacto  sanction  for  the      purchase of the same."      The inquiry  officer then  proceeds to  dispose of  the contention of  the appellant  that in other cases of similar advance and  default, no action was taken but he was singled out for a harsh treatment 658 for the  reasons alleged  by him  but with  which we are not concerned at  this stage.  The inquiry  officer then noticed that the  full salary  payable every  month to the appellant was stopped  by the  Corporation from  November 16,  1979 in addition to  the inquiry under which disciplinary action was proposed to  be taken.  The inquiry  officer  concluded  his report as under :           "While deciding the case, the fact that the salary      was stopped  from 16th  November, 1979  may be  kept in      view  as   this  may,  I  feel,  tantamount  to  double

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 23  

    punishment.  Normally   even  where   an  employee   is      suspended certain  amount of  subsistence allowance  is      granted whereas  in this case the salary was completely      stopped and nothing has been paid since then."      What is  referred to as the report of the enquiry which is minutely scanned in the preceding paragraphs merely seems to  be   the  record   of  inquiry   and  recapitulation  of allegations and  explanation. What  is styled as findings of the inquiry officer are separately filed being Annexure M to the petition.  This is  a bald document of two paragraphs in which the  inquiry officer  records that  the appellant  has contravened Rule  10 (1)  (c) (i)  of House Building Advance Rules and  has thereby committed misconduct punishable under Rule 4 (1) (iii) of 1975 Rules. In paragraph 2, it is stated that the  appellant has  committed breach of Rule 8 and Rule 10 (i)  of the  Conveyance Advance  Rules  and  has  thereby committed misconduct  punishable under  Rule 4  (1) (iii) of 1975 Rules.  By what  process this  conclusion is reached or what evidence  appealed to  him is  left to speculation. The reasons in  support of  the conclusion  are  conspicuous  by their absence.  The findings  are  the  ipse  dixit  of  the inquiry officer.      Pursuant to  this report  of the  inquiry  officer  the Executive Director  for and  on behalf  of the  Committee of Management of  the Corporation  made an  Order No. PEC.P ; 5 (8)/77 dated  February 4,  1981. The  heads of  charges  are reproduced in paragraph 1. Paragraphs 2 and 3 are devoted to the  stages   through  which   the  enquiry  progressed.  In paragraph  4,   the  findings  unsupported  by  reasons  are reproduced. In  paragraph 5, it is stated that the Committee of Management  agrees  with  the  findings  of  the  inquiry officer and imposes the punishment removal from service with effect from the date of the order.      The appellant  preferred an  appeal  to  the  Appellate Authority being the Board of Directors of the Corporation on February 21, 659 1981. One Anand Krishna claiming to act for and on behalf of the  Board   of  Directors,   Appellate   Authority   issued memorandum dated May 21, 1981, Annexure P to the petition in which it  is stated  that the  appeal of  the appellant  was considered  by  the  Appellate  Authority  and  after  going through the records of the case, the Appellate Authority has decided to  uphold the  decision of  the  authority  and  to confirm the penalty of removal imposed upon him.      The salient feature which flies into the face about the findings recorded  by the  inquiry officer  and the order by the  Disciplinary   Authority  as   well  as  the  Appellate Authority is  that none  of them  made a  reasoned order  or speaking order  and their  conclusions are  mere ipse  dixit unsupported by  any analysis  of the  evidence or  reason in support of the conclusions.      The appellant  approached the High Court of Delhi under Art. 226 of the Constitution questioning the correctness and validity of  the findings  of the  inquiry officer  and  the decision of  the  Disciplinary  Authority  as  well  as  the Appellate Authority  inter  alia  on  the  ground  that  the enquiry was  held in  violation of the principles of natural justice and  the quasi-judicial  authority  failed  to  give reasons in support of its order and the action taken against the appellant  was per se arbitrary and in violation of Art. 14  and   Art.  16  of  the  Constitution  inasmuch  as  the allegations contained  in the  heads  of  charges,  even  if unrebutted,  do  not  constitute  a  misconduct  within  the meaning of the expression in 1975 Rules. In order to sustain

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 23  

the maintainability of the writ petition, the appellant also contended that  the respondent  is an instrumentality of the State  and   is  comprehended   in  the   expression  ’other authority’ in Art. 12 of the Constitution.      The  writ  petition  came-up  for  admission  before  a Division Bench  of the Delhi High Court. It was dismissed in limine observing  that the writ petition is not maintainable on the  facts presently  set out in the petition. Hence this appeal by special leave.      In  order   to  obtain  any  decision  on  merits,  the appellant  will  have  to  clear  the  roadblock  about  the maintainability of  the writ  petition in  the  High  Court. Happily this  untenable contention  was not  pursued in this Court. In  para 2 (vi) of the counter-affidavit filed by one Mahanand  Khokher  on  behalf  of  the  respondents  it  was unambiguously stated  that  the  ’respondent-Corporation  is advised  not   to  dispute   the  maintainability   of   the petitioner’s petition as 660 regards applicability  of  Art.  12  of  the  Constitution.’ Further in  para 5.1  of the  same affidavit,  it was stated that as  regards the  assertion of  the appellant  that  the respondent-Corporation is  an instrumentality of the Central Government and hence within Art. 12 of the Constitution, the respondent Corporation  does  not  dispute  the  same.  This admission was reiterated in para 5.2. Further in the written submissions dated  September 30, 1983 filed on behalf of the respondent, it  is conceded  that the  respondent is a State within the  meaning of  Art. 12 for the purposes of Part III of  the   Constitution,  with   this  reservation  that  the employees of  the respondent  are not  members  of  a  civil service of  the Union  or all India civil service or a civil service of  a state or holds the civil posts under the Union or the  State and  therefore, would  not be  entitled to the protection of  Part XIV of the Constitution. This concession absolves us  from the  obligation to  examine the status and character of the respondent-Corporation to determine whether it  is  an  instrumentality  of  the  State  and  therefore, comprehended in  the expression ’other authority’ in Art. 12 of  the   Constitution.  Once   it  is   conceded  that  the respondent-Corporation is  an instrumentality  of the  State and is  therefore, comprehended  in  the  expression  ’other authority’  in   Art.  12   of  the   Constitution,  it   is indisputable that  it is  amenable to  the writ jurisdiction under Arts.  32 and  226 of the Constitution. Apart from the concession, the  tests  collated  in  the  decision  of  the Constitution Bench  of this  Court in  Ajay  Hasia  etc.  v. Khalid Mujib Sehravardi & Ors. etc., for determining whether a particular  body is  an instrumentality  of the  State are fully satisfied and therefore on precedent and concession it is   satisfactorily   established   that   the   respondent- Corporation is  an instrumentality  of the  State within the meaning of the expression ’other authority’ under Art. 12 of the Constitution  and amenable to the writ jurisdiction. The writ petition  filed by  the appellant in the High Court was thus maintainable.      Once when  in this  Court it  was  concluded  that  the respondent was amenable to the writ jurisdiction of the High Court, the  question arose  whether  the  matter  should  be remitted to  the High  Court as  the High Court has rejected the  writ   petition  in  limine  on  the  ground  that  the respondent was  not amenable to the writ jurisdiction of the High  Court.  Ultimately,  in  order  not  to  protract  the litigation involving livelihood of the appellant, the appeal was set  down for  final hearing  on merits. The respondent-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 23  

Corporation was  accordingly directed  to file its affidavit as also  the documents on which it seeks to rely. The appeal was thereafter heard on merits. 661      Before we deal with the contentions raised on behalf of the appellant,  it is  necessary to  dispose of a contention having a  flavour of  a preliminary  objection raised by Mr. Lal Narain Sinha on behalf of the respondent-Corporation. It was urged  that in  the absence  of  any  specific  pleading pointing out  whether any  one  else  was  either  similarly situated as the appellant or dissimilarly treated the charge of discrimination cannot be entertained and no relief can be claimed on  the allegation  of contravention  of Art.  14 or Art. 16  of the  Constitution. It  was  submitted  that  the expression discrimination  imports the concept of comparison between equals  and if  the resultant  inequality is pointed out  in   the  treatment   so  meted   out  the   charge  of discrimination can be entertained and one can say that equal protection of law has been denied. Expanding the submission, it was  urged that  the use  of the expression ’equality’ in Art. 14  imports duality  and comparison which is predicated upon more than one person of situation and in the absence of available   material    for   comparison,    the   plea   of discrimination must  fail. As a corollary, it was urged that in the  absence of  material for  comparative evaluation not only the  charge of  discrimination cannot  be sustained but the executive  action cannot  be struck  down on  the ground that the  action is  per se  arbitrary. Proceeding along, it was urged  that making law is a matter of legislative policy and the  degree of  reasonableness  in  every  such  law  is equally a  matter of policy and policy of the legislature is not judicially  reviewable on  the specious  plea that it is either arbitrary or unreasonable.      It is difficult to accept the submission that executive action which results in denial of equal protection of law or equality before law cannot be judicially reviewed nor can it be struck  down on  the ground  of  arbitrariness  as  being violative of Art. 14. Conceding for the present purpose that legislative action  follows a  legislative  policy  and  the legislative policy  is not  judicially reviewable, but while giving concrete  shape to the legislative policy in the form of a  statute, if  the law  violates any  of the fundamental rights including  Art. 14, the same is void to the extent as provided in  Art. 13.  If the law is void being in violation of any of the fundamental. rights set out in Part III of the Constitution, it  cannot be  shielded on  the ground that it enacts a  legislative  policy.  Wisdom  of  the  legislative policy may  not be  open to  judicial review  but  when  the wisdom takes  the concrete  form of law, the same must stand the test of being in tune with the fundamental rights and if it trenches  upon any  of the fundamental rights, it is void as ordained by Art. 13. 662      The scope  and ambit  of Art.  14 have been the subject matter of  a catena  of decisions. One fact of Art. 14 which has been  noticed in  E.P. Rayappa  v. State of Tamil Nadu & Anr.  deserves  special  mention  because  that  effectively answers the  contention of Mr. Sinha. The Constitution Bench speaking through  Bhagwati, J.  in  concurring  judgment  in Royappa’s case observed as under:           "The basic  principle  which,  therefore,  informs      both Arts. 14 and 16 is equality and inhibition against      discrimination. Now  what is  the content  and reach of      this great  equalising principle  ? It  is  a  founding      faith, to  use the  words of  pedantic or lexicographic

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 23  

    approach.  We   cannot  ’countenance   any  attempt  to      truncate its all-embracing scope and meaning, for to do      so would be to violate its activist magnitude. Equality      is a  dynamic concept  with many aspects and dimensions      and it cannot be "cribbed, cabined and confined" within      traditional and doctrinaire limits. From a positivistic      point of  view equality is antithetic to arbitrariness.      In fact  equality and  arbitrariness are sworn enemies;      one belongs  to the rule of law in a republic while the      other, to  the whim and caprice of an absolute monarch.      Where an  act is arbitrary it is implicit in it that it      is  unequal  both  according  to  political  logic  and      constitutional law  and is  therefore violative of Art.      14, and  if is  affects any  matter relating  to public      employment, it  is also  violative of Art. 16. Arts. 14      and 16  strike at  arbitrariness in  State  action  and      ensure fairness and equality of treatment." This view  was approved  by the  Constitution Bench  in Ajay Hasia case It thus appears well-settled that Art. 14 strikes at arbitrariness  in executive/administrative action because any action  that is  arbitrary must  necessarily involve the negation of  equality. One  need not  confine the  denial of equality to  a comparative evaluation between two persons to arrive at  a  conclusion  of  discriminatory  treatment.  An action per se arbitrary itself denies equal of protection by law. The  Constitution Bench  pertinently observed  in  Ajay Hasia’s case  and put  the matter beyond controversy when it said ’wherever  therefore, there  is arbitrariness  in State action whether  it be of the legislature or of the executive or  of   an  "authority"   under  Article   12,  Article  14 immediately springs  into action and strikes down such State action.’ 663 This view was further elaborated and affirmed in D.S. Nakara v. Union of India. In Maneka Gandhi v. Union of India it was observed that  Art. 14  strikes at  arbitrariness  in  State action and  ensure fairness and equality of treatment. It is thus too late in the day to contend that an executive action shown to be arbitrary is not either judicially reviewable or within the reach of Art. 14. The contention as formulated by Mr. Sinha must accordingly be negatived.      It must be conceded in fairness to Mr. Sinha that he is right in  submitting that even if the respondent-Corporation is an  instrumentality of  the State as comprehended in Art. 12, yet the employees of the Corporation are not governed by Part XIV of the Constitution Could it however be said that a protection conferred  by  Part  III  on  public  servant  is comparatively less  effective than the one conferred by Part XIV ?  This aspect  was examined  by  this Court in Managing Director, Uttar  Pradesh Warehousing  Corporation &  Anr. v. Vinay Narayan  Vajpayee where  O. Chinnappa  Reddy, J.  in a concurring judgment  has spoken  so eloquently about it that it deserves quotation:           "I find  it  very  hard  indeed  to  discover  any      distinction, on  principle, between  a person  directly      under the  employment of  the Government  and a  person      under the employment of an agency or instrumentality of      the Government or a Corporation, set up under a statute      or incorporated  but wholly owned by the Government. It      is self  evident and  trite to say that the function of      the State  has long  since ceased to be confined to the      preservation of the public peace, the exaction of taxes      and the  defence of  its frontiers. It now the function      of the  State to secure ’social, economic and political      justice’, to  preserve ’liberty of thought, expression,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 23  

    belief, faith  and worship’, and to ensure ’equality of      status and of opportunity’. That is the proclamation of      the people  in the  preamble to  the Constitution.  The      desire  to  attain  these  objectives  has  necessarily      resulted in  intense Governmental  activity in manifold      ways. Legislative and executivity have reached very far      and have touched very many aspects of a citizen’s life.      The Government,  directly or  through the Corporations,      set up  by it  or owned  by it,  now owns or manages, a      large number  of industries and institutions. It is the      biggest builder in the country. Mam- 664      moth and  minor irrigation  projects, heavy  and  light      engineering projects,  projects of  various  kinds  are      undertaken by  the Government.  The Government  is also      the biggest  trader in  the country.  The State and the      multitudinous agencies  and Corporations  set up  by it      are the  principal purchasers  of the  produce and  the      products of  our country  and they  control a  vast and      complex machinery  of distribution. The Government, its      agencies and instrumentalities, Corporations, set up by      the  Government   under   statutes   and   Corporations      incorporated under  the Companies  Act but owned by the      Government have  thus become  the biggest  employers in      the country. There is no good reason why, if Government      is  bound  to  observe  the  equality  clauses  of  the      constitution in  the matter  of employment  and in  its      dealings with the employees, the Corporations set up or      owned by the Government should not be equally bound and      why, instead,  such Corporations  could become citadels      of patronage  and arbitrary  action. In  a country like      ours which  teems with population, where the State, its      agencies, its  instrumentalities and  its  Corporations      are the  biggest  employers  and  where  millions  seek      employment and  security, to  confirm the applicability      of  the   equality  clauses  of  the  constitution,  in      relation to  matters of  employment, strictly to direct      employment under  the Government  is perhaps to mock at      the Constitution and the people. Some element of public      employment  is  all  that  is  necessary  to  take  the      employee beyond  the reach of the rule which denies him      access to  a Court  to enforce a contract of employment      and denies him the protection of Arts. 14 and 16 of the      Constitution. After all employment in the public sector      has grown  to vast  dimensions  and  employees  in  the      public sector  often discharge  as  onerous  duties  as      civil servants  and participate  in activities vital to      our country’s  economy. In  growing realization  of the      importance  of   employment  in   the  public   sector,      Parliament and  the Legislatures  of  the  States  have      declared persons  in the  service of local authorities,      Government  companies  and  statutory  corporations  as      public  servants   and  extended  to  them  by  express      enactment the  protection  usually  extended  to  civil      servants from  suits and prosecution. It is, therefore,      but right  that the independence and integrity of those      employed in the public sector should be secured as much      as the independence and integrity of civil servants." 665 There fore  the  distinction  sought  to  be  drawn  between protection of  part XIV of the Constitution and Part III has no significance.      And now  to the facts. The gravamen of the two heads of charges is  that the  appellant is  guilty of  misconduct as prescribed in Rule 4 (1) (i) and (iii).

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 23  

It reads as under:      "4 (1) Every employee shall at all times:         (i) maintain absolute integrity;        (ii) _______  __________  _______       (iii)  do nothing  which is  unbecoming  of  a  public servant." Rule  5 prescribes  various misconducts  for which action can  be taken  against an  employee governed  by  the rules.      Rule 4 bears the heading ’General’. Rule 5 bears in the heading ’misconduct’. The draftsmen of the 1975 Rules made a clear distinction  about what would constitute misconduct. A general expectation of a certain decent behaviour in respect of employees  keeping in  view Corporation  culture may be a moral or  ethical expectation.  Failure to keep to such high standard of moral, ethical or decrous behaviour befitting an officer  of   the  company   by  itself   cannot  constitute misconduct unless  the specific  conduct falls in any of the enumerated misconduct  in Rule 5. Any attempt ’ to telescope Rule 4  into Rule  5 must  be looked  upon with apprehension because Rule  4 is vague and of a general nature and what is unbecoming of a public servant may vary with individuals and expose employees  to vagaries of subjective evaluation. What in a  given context would constitute conduct unbecoming of a public servant  to be  treated as  misconduct would expose a grey  area  hot  amenable  to  objective  evaluation.  Where misconduct when  proved entails  penal consequences,  it  is obligatory on  the employer  to  specify  and  if  necessary define it  with precision  and accuracy  so that any ex post facto interpretation of some incident may not be camouflages as misconduct.  It is  not necessary to dilate on this point in view  of a  recent decision  of this  Court in  M/s Glaxo Laboratories (I)  Ltd. v.  Presiding officer,  Labour Court, Meerut & Others where this Court held that ’everything which is required  to be  prescribed has  to  be  prescribed  with precision and  no argument can be entertained that something not prescribed can yet be taken 666 into account  as varying  what is  prescribed. In  short  it cannot be  left to the vagaries of management to say ex post facto that some acts of omission or commission nowhere found to be  enumerated in the relevant standing or is nonetheless a misconduct  not strictly  falling  within  the  enumerated misconduct  in   the  relevant  standing  order  but  yet  a misconduct for  the purpose  of imposing  a penalty.’ Rule 4 styled as  ’General’ specifies  a norm of behaviour but does not specify  that its  violation will constitute misconduct. In Rule  5, it  is nowhere stated that anything violative of Rule 4  would be  per as  a misconduct in the sub-clauses of Rule 5 which specifies misconduct. It would therefore appear that even  if the  facts alleged in two heads of charges are accepted as  wholly proved,  yet that  would not  constitute misconduct as  prescribed in  Rule 5  and no  penalty can be imposed for  such conduct.  It may as well be mentioned that Rule 25  which prescribes  penalties  specifically  provides that any  of the  penalties therein mentioned can be imposed on an  employee for misconduct committed by him. Rule 4 does not specify a misconduct.      Mr.  Ramamurthi,  learned  counsel  for  the  appellant further  contended   that  the   very  initiation   of   the disciplinary enquiry and imposition of punishment of removal from  service   is  thoroughly  arbitrary  and  discloses  a vindictive  attitude   on  the   part  of   the   respondent Corporation. It  was urged that the two heads of charges per se do  not constitute  any misconduct and they can be styled as trumped-up  which even  if held approved would not render

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 23  

the appellant  liable for  any punishment.  The two heads of charges have  been  extracted  hereinbefore.  Charge  No.  1 refers to the drawal of a House Building Advance and failure to comply  with the  requisite rules  prescribed  for  House Building Advance.  According to  the finding recorded by the inquiry officer,  the failure of the appellant to refund the amount of  advance to  the respondent-Corporation within two months of  the date of the drawal would be violative of Rule 10 (I)  (c) (i)  of the  House Building Advance Rules and it would  constitute  misconduct  within  the  meaning  of  the expression in  Rule 4(1)  (iii) of  1975 Rules.  Rule 10 (I) provides that  the advance  shall be drawn in instalments as prescribed in  various sub-clauses.  The relevant sub-clause in this  case is  sub-cl.  (C)  which  provides  that  "when advance is  required partly  for purchase of land and partly for constructing  a single  storeyed new  house thereon; (i) not more  than 20% of the sanctioned advance on execution by the applicant  employees an  agreement in  the required form for repayment  of the advance. The amount will be payable to the applicant only for purchasing a 667 developed plot  of land  on which  construction can commence immediately and sale deed in respect thereof be produced for the inspection  of CPM/RM  within two  months of the date on which 20%  of the  advance is  drawn or  within such further time as  the CPM/RM  may allow  in this behalf failing which the employee  shall be  liable to  refund at once the entire amount to the Corporation together with interest thereon." A bare reading of the relevant rule will show that in provides for obtaining  advance which  in this  case  was  taken  for purchasing a  plot. The inquiry officer accepts the evidence of Mr.  Chugh that the appellant had negotiated with him for purchase of  a  plot  but  some  dispute  arose  about  some additional expenditure  and the negotiations protracted over a period  of six  months. Now  para 1  sub-cl.(C) confers on CPM/RM power  to extend  the time for finalising the deal or call upon the employee to refund the entire amount and he is liable to pay interest thereon. This is the only consequence of taking  advance and failure to keep to the time-schedule. The relevant  rule is  a self  contained provision providing for the  condition for  grant of  advance,  time  table  for repayment and  consequence of  failure to  keep to  the time schedule. The  House Building  Advance was drawn on April 4, 1979. On November 13, 1979 the appellant was asked to refund the entire  amount. Immediately  on November  16,  1979,  an order  was   made  withholding  the  entire  salary  of  the appellant. Even  the  inquiry  officer  was  constrained  to observe that  the appellant  was exposed  to double jeopardy inasmuch as  his salary  as a  whole was withheld and he was being removed  from service.  It is  also pertinent  to note that the  inquiry officer  is not  clear when  he said ’that once the  power to  extend the  time to repay the advance is conferred  and  penal  interest  is  charged,  is  any  rule violated.’ This  is not an attempt to re-appreciate evidence in the  case but the entire thing is being analysed to point out that  the action apart from being arbitrary is motivated and unjust.      If  the  rules  for  granting  the  advance  themselves provided the  consequence of  the breach  of conditions,  it would be  idle to  go in  search of any other consequence by initiating any disciplinary action in that behalf unless the 1975 Rules  specifically incorporate  a rule that the breach of House Building Advance Rules would by itself constitute a misconduct. That  is not  the case here as will be presently pointed out.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 23  

    Seeking advance  and granting  the same  under relevant rules, is  at best  a loan  transaction. The transaction may itself provide for 668 repayment and  the consequence  of failure  to repay  or  to abide by  the rules.  That has  been done  in this case. Any attempt to  go in  search of a possible other consequence of breach of  contract itself  appears to be arbitrary and even motivated. However,  the more  serious infirmity  in framing this head of charge is that according to the inquiry officer this failure  to refund the advance within the time frame in which it  was sanctioned constitutes violation of Rule 4 (1) (iii). Let  us turn to the charge-sheet drawn-up against the appellant. Under the first head of charge it was stated that the appellant was guilty of misconduct as prescribed in Rule 4 (1)  (i) and  (iii). Rule  4 (1)  (i) provides  that every employee shall at all times maintain absolute integrity. How did the  question of  integrity arise  passes comprehension. The appellant  applied for  House Building  Advance. Inquiry officer says  that the  appellant had  negotiated  with  Mr. Chugh for  purchase of  a plot.  There is  not even negative evidence or  evidence which may permit an inference that the house building advance was utilised for a purpose other than for which  it was  granted. Therefore  Rule 4 (1) (i) is not only attracted  but no attempt was made before us to sustain it. And  as far as Rule 4 (1) (iii) is concerned, we fail to see how  an advance  not  refunded  in  time  where  it  was recovered by  withholding the  salary  of  a  highly  placed officer discloses  a conduct unbecoming of a public servant. Therefore, the  first head of charge is an eye-wash. It does not constitute a misconduct if it can be said to be one even if it  remains unrebutted.  The inquiry officer has not said one word  how the  uncontroverted facts constitute a conduct unbecoming of  a public  servant, or  he failed  to maintain absolute integrity.      Turning to  the second  head of  charge, it  is alleged that the  appellant applied  for and  obtained a  conveyance allowance of  Rs. 11,000  on July 7,1979 but did not utilise the amount  for the purpose for which it was granted and did not furnish  cash receipt  evidencing purchase  of a vehicle within one  month as  required by  Rule 8  of the Conveyance Advance  Rules,   nor  did  he  refund  the  amount  to  the Corporation as required by Rule 10 (I). It is not in dispute that the  respondent applied for a motor-cycle advance which was sanctioned  and on  being sanctioned he drew the same on July 9,  1979. As  required by the respondent, the appellant executed an  agreement on  July 6, 1979, a day preceding the sanction of the advance guaranteeing that if the motor-cycle was not purchased and hypothecated within one month from the date of the drawal of the 669 advance, the whole of the advance together with the interest accrued thereon  would become  refundable. As  the appellant did not  keep to  the time-schedule,  memos dated August 20, September 24,  November 12 and November 13, 1979 were served upon him  calling upon  him to  either furnish the requisite documents or  to refund  the advance  latest by November 14, 1979. The  inquiry officer in this connection, recapitulated the facts  in paragraphs  5.2. 5.2.1,  and  5.2.2.  Then  he proceeded to  record a  finding that the appellant on April, 7, 1980  submitted the  documents  namely  cash  receipt  in respect of  purchase of  a scooter,  insurance  certificate, receipt showing  deposit of  the  balance  of  advance  with cashier, original insurance policy and registration book for purchase of  the scooter.  The report does not show the date

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 23  

of purchase which could have been ascertained with certainty from the  insurance certificate as well as the cash receipt. After recapitulating  these undisputed facts, he stated that the fact  that ’he  (appellant)  was  asked  to  refund  the balance amount  tantamount to agreeing de facto sanction for the purchase  of the same (scooter)’. In the last paragraph, he has  stated that  a stoppage of the salary effective from November 16,  1979 in  the opinion  of the  inquiry  officer tantamounts to  imposition of double punishments and this is compounded by  not paying  even a  subsistence allowance. We scanned the  report minutely with the able assistance of the learned  counsel   for  the   respondent  subjecting  it  to microscopic  analysis   to  ascertain  whether  the  inquiry officer recorded  any finding  in  respect  of  this  charge adverse to  the appellant. We found none. On the contrary, a comprehensive reading  of the  report clearly indicates that the  inquiry   officer  was  satisfied  that  the  delay  in submitting the documents and purchasing a scooter instead of a motor cycle should not have been visited with such drastic punishment  of   stoppage  of   salary  altogether  and  yet compelling the  appellant to render service without quid pro quo. Curiously,  however, in a separate document recorded as finding, the  inquiry officer  has held  that the  appellant contravened Rule  10 (I)  of the  Conveyance  Advance  Rules which would  constitute misconduct within the meaning of the expression in Rule 4 (I) (iii) of the 1975 Rules. The report and the  findings are  wholly  irreconcilable  and  left  us guessing about  the approach  of the  inquiry  officer,  his conclusion  and   his  finding.   This  aspect  considerably troubled us  because we  would presently  point out that the disciplinary Authority  as well  as the  appellate authority have declined  a peep  into the  working of  their minds  by making a reasoned or a speaking order. The appellant appears to us to have been convicted sub silencio. 670      The first question we must pose to ourselves is whether taking the  findings of  facts as  recorded by  the  inquiry officer and  accepting for the present purpose that they are not open to a judicial review, do they constitute misconduct so as  to invite penalty ? According to the inquiry officer, failure either  to produce  the documents  or to  refund the amount within  a period  of one month from the drawal of the conveyance advance  constitutes contravention of Rule 10 (I) of the Conveyance Advance Rules. Rule 10 reads as under:      "10. (1).  Where an  employee after  taking advance  is      unable to purchase the vehicle for any reason, he shall      refund within  one month  of drawal of advance the full      amount with  interest thereon to the Corporation. If he      fails to  do so,  he shall  be liable  to  disciplinary      action for  misconduct in  addition  to  liability  for      payment of  additional interest  in accordance with Sub      Rule (2).           (2) Where  an amount  of advance is retained by an      employee beyond  one month  or where the employee fails      to produce  evidence of  purchase, insurance  policy of      registration book,  the normal  rate of  interest under      Rule 5  will be charged for the first month and for the      period in excess of one month in addition to the normal      rate  of   interest,  additional  interest  at  a  rate      equivalent to  difference between the borrowing rate of      the Corporation  and the  normal rate  chargeable under      Rule 5 will be charged. The additional rate of interest      will be  compound interest  and it  will be merged with      the principal  at monthly  intervals for the purpose of      calculating interest for subsequent periods."

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 23  

    In this connection, our attention was drawn to Circular dated December 11, 1979 issued by the respondent-Corporation which provides  that henceforth  a penal  interest  will  be levied/charged  ’on   the  total   drawn  amount  under  the Conveyance Advance  Rules in  cash vouchers  or receipts are not produced to the Personnel Division within the prescribed period, or  in case  the amount  drawn is  refunded  without utilisation.’ It thus transpires that drawal of the advance, if not  utilised within  the prescribed  period  or  if  not refunded within  the same  time, will expose the drawer to a liability to  penal interest.  And in this case, it has been so charged.      Now  if   what  is   alleged  as  misconduct  does  not constitute  misconduct  not  by  analysis  or  appraisal  of evidence, but per se under 1975 671 Rules the  respondent had  neither  the  authority  nor  the jurisdiction nor  the power  to impose  any penalty  for the alleged misconduct. An administrative authority who purports to  act  by  its  regulation  must  be  held  bound  by  the regulation. ’Even  if these regulations have no force of law the  employment   under   these   corporations   is   public employment, and  therefore an  employee would  get a  status which  would   enable  him   to  obtain  a  declaration  for continuance in  service, if  he was  dismissed or discharged contrary to  the regulations.’  [Sukhdev  Singh  &  Ors.  v. Bhagatram Sardar Singh Raghuvanshi and Anr.]      If thus  it  is  satisfactorily  established  that  the employment under  such Corporation like the respondent which is an  instrumentality of the State, is public employment it is difficult  to entertain the submission of Mr. Sinha which did prevail  for some time in the days gone by that contract of public service cannot be specifically enforced. Mr. Sinha in this  connection relied  upon Sec.  14  of  the  Specific Relief  Act,  1963  and  urged  that  where  the  origin  of employment is  in a  contract the  breach of  it  cannot  be remedied by  directing specific performance of a contract of personal service.  He also  drew our  attention  to  Western India Automobile  Association v. Industrial Tribunal, Bombay and Ors.  Where a  Constitution  Bench  of  this  Court  has observed as under:           "It is  true that  this Tribunal  can do  what  no      Court can,  namely,  add  to  or  alter  the  terms  or      conditions of the contract of service. Express power to      do so  is given  by the  regulation, while there are no      words conferring  a power  to  reinstate  or  revive  a      contract lawfully determined." Reference was  also made  to Dr.  S.B. Dutt v. University of Delhi wherein  it was  held that  an arbitrator appointed by the parties  and functioning under the Arbitration Act, 1940 cannot by  his award  enforce a contract of personal service in contravention  of the  provisions of  the Specific Relief Act and  this discloses an error apparent on the face of the award. But  neither  Sec.  14  nor  the  aforementioned  two decisions  can  render  any  assistance  to  the  respondent because it  is well-settled  that in  the matter  of  public employment if the termina- 672 tion is  held to  be bad, in view of the latest decisions in Sukhdev Singh  and Uttar  Pradesh Warehousing  Corporation’s cases a declaration can be granted that the man continues to be in service.      Mr. Ramamurthi  on  behalf  of  the  appellant  further contended that  the order of removal from service is void as it is  passed in  violation of  the  principles  of  natural

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 21 of 23  

justice and  at any  rate an  order imposing  penalty  by  a quasi-judicial tribunal  must be  supported  by  reasons  in support of  its conclusions.  It was urged that duty to give reasons would permit the court hearing a petition for a writ of certiorari  to ex  facie ascertain  whether there  is any error apparent  on the record.) It was conceded that for the present submission adequacy or sufficiency of reasons is not questioned. What  is contended  is that  the inquiry officer has merely  recorded his  ipse  dixit  and  no  reasons  are assigned in  support of  the findings. The mental process is conspicuously silent.  A speaking  order will at its best be reasonable and  at its  worst be  at least  a plausible  one (M.P. Industries  Ltd. v.  Union of  India &  Others).  What prevents the  authority authorised  to impose  penalty  from giving reasons  ? If  reasons for  an order are given, there will be  less scope  for arbitrary  or partial  exercise  of power  and   the  orders  ex  facie  will  indicate  whether extraneous circumstances  were taken  into consideration  by authority passing the order. This view in Vedachala Mudaliar v. State of Madras was approved by this Court in Bhagat Raja v. Union  of India  and Others.  As pointed out earlier, the findings of  the inquiry  officer are merely his ipse dixit. No reasons  are assigned  for reaching the finding and while recapitulating  evidence  self-contradictory  position  were adopted that  either there  was no  misconduct or  there was some misconduct  or double  punishment was  already imposed. Rule 27 (19) casts an obligation upon the inquiry officer at the conclusion of the inquiry to prepare a report which must inter alia  include the  findings on  each article of charge and  the   reasons  therefor.  The  report  is  prepared  in contravention of the aforementioned rule.      The situation  is further  compounded by  the fact that the  disciplinary   authority  which   is  none  other  than Committee of  Management of  the Corporation while accepting the report of the inquiry officer which itself was defective did not  assign any  reasons for accepting the report of the inquiry officer. After reproducing the findings of the 673 inquiry  officer,   it  is  stated  that  the  Committee  of Management agrees  with the  same. It  is even  difficult to make out  how the  Committee of  Management agreed  with the observations of  the inquiry  officer because  at one  stage while  recapitulating   the  evidence  the  inquiry  officer unmistakably observed that appellant was subjected to double punishment  and  at  other.  place,  it  was  observed  that granting extension  of time  and acceptance of documents and balance advance would tantamount to extending the time which would make  the affair  look wholly  innocuous.  This  shows utter non-application  of mind of the Disciplinary Authority and the order is vitiated.      A detailed appeal was submitted by the appellant to the Board of  Directors running  into about  8 pages.  The  only order while dismissing the appeal brought to our notice is a communication by  a gentleman  Anand Krishna whose authority and designation  are not stated, but who purported to act on behalf  of  the  Board  of  Directors,  that  the  appellate authority, after  going through the records of the case, has decided to uphold the decision of the disciplinary authority and to  confirm the  penalty of removal from service imposed upon the  appellant.  Rule  35  of  1975  Rules  deals  with appeals. Sub-rule  (ii) of  Rule 35  provides amongst others that the  Appellate Authority  shall  consider  whether  the findings are  justified or  whether the penalty is excessive or inadequate  and  pass  appropriate  orders  within  three months of  the date of appeal. In order to ascertain whether

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 22 of 23  

the rule  is complied  with,  the  order  of  the  appellate authority must  show that  it took  into  consideration  the findings  the   quantum  of   penalty  and   other  relevant considerations. There  is no  material for  showing that the appellate authority  acted in consonance with its obligation under Rule  35. However,  in para  5.14 to 17 of the counter affidavit, it  was stated  that ’full  inquiry  report  with annexure can  be shown  to the court at the time of hearing, if desired.’  If the  respondent was  anxious to sustain its action, it  was obligatory  upon it  to  disclose  the  full inquiry report.  Nothing was  shown to us nor any attempt to show the  proceedings of the appellate authority to disabuse our mind  that the  appellate authority  was guilty of utter non-application of  mind and  discharged its duty under Rule 35. No  attempt was  made to urge that the three authorities had ever  assigned reasons  in support of their conclusions. For this  additional reason  also, the  initial order of the Disciplinary Authority  as well  as the  Appellate Authority are liable to quashed and set aside.      To sum  up the  order of removal passed by Disciplinary Authority is  illegal and  invalid for  the reasons:(i) that the action  is thoroughly arbitrary and is violative of Art. 14, (ii) that the alleged 674 misconduct does  not constitute  misconduct within  the 1975 Rules; (iii)  that the  inquiry officer  himself found  that punishment was already imposed for the alleged misconduct by withholding the  salary  and  the  appellant  could  not  be exposed to  double jeopardy;  and (iv)  that the findings of the inquiry officer are unsupported by reasons and the order of the  Disciplinary Authority  as  well  as  the  Appellate Authority suffer from the same vice. Therefore, the order of removal from  service as  well as  the appellate  order  are quashed and set aside.      The last  question then is to what relief the appellant is entitled ? Once the order of removal from service is held to be  illegal and invalid and the appellant being in public employment, the  necessary declaration  must follow  that he continues to  be in  service  uninterruptedly.  This  aspect does, not  present any  difficult  and  the  declaration  is hereby granted.      When removal  from service  is held  to be  illegal and invalid, the  next question  is whether:  the victim of such action is  entitled to  backwages. Ordinarily,  it is  well- settled that if termination of service is held to be bad, no other punishment in the guise of denial of back wages can be imposed and  therefore, it  must as  a  necessary  corollary follow that he will be entitled to all the back wages on the footing  that   he  has   continued   to   be   in   service uninterruptedly. But  it was  pointed out  in this case that the appellant  was employed  as Factory  Manager by  M/s KDR Woollen Mills,  A-90, Wazirpur  Industrial Area,  Delhi from where he  resigned with  effect from  August 8, 1983. It was also submitted  that he was drawing a salary of Rs. 2500 per month. Now  if the  appellant had  procured  an  alternative employment, he  would not  be entitled  to wages  and salary from the respondent. But it is equally true that an employee depending on  salary for his survival when he is exposed. to the vagaries  of the  court litigation  cannot hold  on to a slender distant  hope of  judicial  process  coming  to  his rescue and  not try  to survive  by accepting an alternative employment, a  hope which  may turn  out  to  be  a  mirage. Therefore,  the   appellant  was   perfectly  justified   in procuring an  alternative employment  in order  to keep  his body and  soul together  as also  to bear  the  expenses  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 23 of 23  

litigation to vindicate his honour, integrity and character.      The submission of the respondent that the appellant had accepted employment  with  M/s  KDR  Woollen  Mills  may  be accepted in  view of  the evidence  tendered  in  the  case. Therefore, the appellant would not be entitled to salary for the period he was employed with M/s KDR Woollen Mills. 675      Even for  the rest  of the  period, the  conduct of the appellant cannot  be said  to be entirely in consonance with corporate culture.  As a  highly placed officer he was bound to strengthen the corporate culture and he should have acted within the spirit of the regulations both for house building advance and  conveyance advance,  which are  devised to help the employees.  There has  been lapse  in totally  complying with these  regulations by  the appellant  though it neither constitutes   misconduct    to   attract   a   penalty   nor substantially good  enough for  initiation  of  disciplinary inquiry. Accordingly,  having regard  to all  the aspects of the case, the appellant should be paid 50% of the back wages for the  period since  his removal  from  service  upto  his reinstatement excluding the period for which he had procured an alternative employment. The respondent shall also pay the costs of the appellant quantified at Rs. 3000. S.R.                                         Appeal allowed. 676