Reportable IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.1622 OF 2009 (Arising out of SLP [C] No.21290/2007)

National Aviation Company of India Ltd. … Appellant

Vs.

S.M.K. Khan … Respondent

J U D G M E N T

R.V.RAVEENDRAN, J.

The  appellant  is  the  successor  of  Indian  Airlines  Ltd.  (for  short

‘IAL’). On 12.9.1966 the respondent joined IAL as a Security Assistant. His

work was unsatisfactory and several warnings and minor punishments were

given for insubordination, indiscipline, negligence, sleeping on duty etc. He

was also chargesheeted in regard to the repeated acts of misconduct and was

imposed  the  punishment  of  demotion  to  the  post  of  Chowkidar  on

26.5.1971.  Even  thereafter  his  service  was  unsatisfactory  resulting  in

several  reprimands  and  warnings.  He  was  however  again  appointed  as

Security  Assistant  with  effect  from 17.8.1990,  in  the  normal  process  of

recruitmnent,  under internal selection. He was also given the benefit  of a

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time bound promotion on 6.7.1998. When he attained the age of 55 years his

case  was  reviewed  under  Rule  12  of  Indian  Airlines  Employees  Service

Regulations to consider whether he should be continued in service beyond

the age of 55 years. In view of the unsatisfactory service record, on review,

the  Regional  Director  (South),  IAL,  who  was  the  competent  authority,

issued a notice dated 11.5.1998 proposing to retire him from service with

effect from 10.8.1998 under Regulation 12. The said letter referred to the

poor performance and  unauthorized absence in the years 1994 to 1997.

2. The  respondent  gave  a  representation  dated  18.5.1998  admitting

absenteeism but  offered an explanation  that  it  was  on  account  of  family

reasons.  He  requested  that  he  may  be  continued  in  service  assuring

satisfactory service in future. The competent authority was not satisfied with

the explanation. Therefore by letter dated 15.7.1998 he communicated his

decision to retire the respondent from service as at  the close of work on

10.8.1998. Thereafter the respondent sought a personal interview with the

competent  authority  and  made  a  fervent  appeal  to  reconsider  his  case

assuring that he will not give room for any complaint in future. In view of it,

the competent authority sent a letter dated 8.8.1998 stating that respondent

will be continued in service for a specific period of one year, beyond 55

years, and that retention beyond one year would be subject to the outcome

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of  review  that  will  be  carried  out  after  monitoring  his  attendance  and

performance closely.

3. However, the respondent’s service continued to be unsatisfactory and

his unauthorized absences continued. A show-cause notice dated 27.5.1999

was issued by the competent authority proposing to retire him from service

at the close of work on 26.8.1999. The show cause notice referred to the

unsatisfactory  service  and  unauthorised  absence  for  20  days  during  the

extended  period  of  service.  Respondent  sent  a  reply  dated  14.6.1999

wherein he admitted his unauthorised absence from time to time and again

gave the reason as advanced age and ill health of himself and his wife. He

again assured that he will not give room for any complaint, if continued in

service. After considering the same, the competent authority passed an order

dated 22.6.1999 compulsorily retiring the respondent as at the close of work

on 26.8.1999.

4. Feeling aggrieved the respondent approached the Industrial Tribunal

cum Labour Court, Chennai in ID No.60/2000. The Tribunal by award dated

14.9.2001  held  that  the  IAL  management  was  justified  in  compulsorily

retiring the respondent with effect from 26.8.1999 and respondent was not

entitled to any relief. The respondent challenged the order of the Tribunal in

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W.P. No.23617/2001. A learned Single Judge of the Madras High Court by

order dated 13.11.2003 set aside the award of the Tribunal and the order of

compulsory  retirement  dated  22.6.1999.  As  the  respondent  had  already

reached the age of superannuation (58 years) on 10.5.2001, he directed the

IAL  to  pay  all  terminal  benefits  including  back  wages  by  treating  the

respondent as having worked till attaining the age of superannuation in the

normal  course.  An  intra-court  appeal  filed  by  IAL was  dismissed  by  a

Division  Bench  of  the  High  Court  by  judgment  dated  19.7.2007.  The

Division Bench held that after the decision to continue the respondent in

service  beyond 55  years,  the  only  complaint  against  the  respondent  was

unauthorized absence; that on account of the inconsistency in the evidence

as  to  the  number  of  days  of  absence  without  permission,  the  period  of

unauthorized absence was uncertain; that the respondent was punished by

way of compulsory retirement, for such unauthorized absence; and that in

the  absence  of  a  charge  with  specific  particulars  of  misconduct  or  an

enquiry  into  such  charge  resulting  in  a  definite  finding  in  regard  to  the

misconduct, the compulsory retirement was liable to be set aside.

5. The said judgment is challenged in this appeal by special leave. On

the  contentions  urged  the  only  question  that  arises  for  consideration  is

whether  IAL  was  justified  in  compulsorily  retiring  the  respondent  with

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effect from 26.8.1999, that is 1 year and 3 months after taking a decision to

continue him beyond 55 years.  

6. Regulation 12, under which the respondent was compulsorily retired,

as it stood at the relevant point of time, is extracted below :-

“An employee shall retire from the service of the Corporation on attaining the age of 58 years  provided that  the competent  authority  may ask an employee to retire after he attains the age of 55 years on giving three months’ notice without assigning any reason.  

An employee, (a) on attaining the age of 55 years; or (b) on the completion of 25 years of continuous service,  may, by giving three months notice, voluntarily retire from service.  

Provided that the voluntary retirement under clause (b) shall be subject to approval of the competent authority.”  

[emphasis supplied]

An order of compulsory retirement in pursuance of a rule/regulation which

enables the competent authority to prematurely retire an employee, on the

formation  of  a  bona  fide  opinion  that  continuation  of  the  employee  in

service will not benefit the institution or be in the interest of the institution

(or  will  not  be  in  public  interest  where  the  employee  is  a  government

servant), on review of the performance/service record of the employee, on

the employee attaining the specified age or completing the specified period

of service, is valid and not open to challenge. It is neither a punishment nor

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considered to be stigmatic.  Where the compulsory retirement, is not by way

of punishment for a misconduct,  but is an action taken in pursuance of a

valid condition of service enabling the employer to prepone the retirement,

the action need not be preceded by any enquiry and the principles of natural

justice  have  no  application.  The  unsatisfactory  service  of  the  employee

which may include any persistent misconduct or inefficiency furnishes the

background  for  taking  a  decision  that  the  employee  has  become a  dead

wood  and  that  he  should  be  retired  compulsorily.  Such  ‘compulsory

retirement’  is  different  and  distinct  from imposition  of  a  punishment  of

compulsory  retirement  (or  dismissal/removal)  on  a  specific  charge  of

misconduct,  where  the  misconduct  is  the  basis  for  the  punishment.  The

difference is on account of two factors : Firstly, the employee on account of

completing a particular age or number of years of service falls within the

zone  where  his  performance  calls  for  assessment  as  to  whether  he  is  of

continued utility to the employer or has become a deadwood or liability for

the  employer.  Secondly,  the  record  of  service,  which  may  include  poor

performance,  unsatisfactory  service  or  incidentally  any  recent  conduct

(which  if  separately  considered  may  constitute  a  misconduct  subject  to

punishment) when considered as a whole, leads the Reviewing Authority to

the conclusion that the employee in question is not fit to be continued  in

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service  and  not  of  utility  to  the  employer.  Therefore,  any  incidental

reference  to  unsatisfactory  service,  or  any  remarks  in  the  context  of

explaining the reason for compulsory retirement under the relevant rule, in

the letter of compulsory retirement will not be considered as stigmatic, even

though  read  out  of  context,  they  may be  capable  of  being  construed  as

allegations of misconduct. Any order of compulsory retirement in terms of

the rule/regulation providing for such compulsory retirement is not open to

interference unless shown to be malafide or arbitrary or not based on any

background  material  at  all  relating  unsatisfactory  service  justifying  the

premature retirement. When an order of compulsory retirement purports to

be one under the rule/regulation providing for such premature retirement,

the proper approach of the court would be to consider whether the order is

sustainable  with reference to the requirements of the relevant  rule,  rather

than examining whether the order could also be construed as a punishment

for  misconduct  --  vide  Baikuntha  Nath  Das  v.  Chief  District  Medical

Officer [1992  (2)  SCC  299],  Allahabad  Bank  Officers’  Association  v.

Allahabad Bank [1996 (4) SCC 504],  I.K.Mishra v. Union of India [1997

(6) SCC 228], State of Uttar Pradesh v. Lalsa Ram [2001 (3) SCC 389] and

M. L. Binjolkar vs. State of Madhya Pradesh [2005 (6) SCC 224].  

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7. When the compulsory retirement  of  respondent  is  examined in  the

context of the aforesaid tests and principles, the inescapable conclusion is

that it is valid and not open to challenge.   

8. The respondent  contended that  once on review of performance,  an

employee is allowed to continue beyond 55 years, such employee is entitled

to continue in service until he attains the age of 58 years and the employer

cannot  compulsorily  retire  him  before  58  years,  except  by  way  of

punishment for a proved misconduct.  In support of the said contention, he

relied upon the decisions of this Court in State of Uttar Pradesh v. Chandra

Mohan Nigam [AIR 1977 SC 2411] where this court held that once a review

committee  considered  the  case  of  a  government  servant,  and  the

government,  on  the  report  of  the  committee,  decides  not  to  take  any

prejudicial action against the government servant, there is no warrant for a

second  review  committee  under  the  provisions  relating  to  premature

retirement, to reassess his case on the same material, unless the exceptional

circumstances emerge in the meantime or the next stage for review arrives.

In particular,  the  respondent  relied on  the  following observations  in  that

case:

“Once a review has taken place and no decision to retire on that review has been ordered by the Central Government, the officer gets a lease in the case of 50 years upto the next barrier at 55 and if he is again cleared at that

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point, he is free and untrammeled upto 58 which is his usual span of the service  career.  This  is  the  normal  rule  subject  always  to  exceptional circumstances  such  as  disclosure  of  fresh  objectionable  grounds  with regard to integrity or some other reasonably weighty reason.”

The said decision will not assist the respondent.  The principle laid down

therein is that after a review of the service of an employee for purposes of

extension  of  service  beyond  55  years,  if  it  is  decided  that  he  is  fit  and

suitable for continuation, there is no question of a re-appraisal of the same

material,  for  taking  a  different  decision  in  the  absence  of  exceptional

circumstances. That principle will  apply, where on review, the competent

authority  is  satisfied  that  the  service  of  the employee is  satisfactory and

there is no ground to compulsorily retire the employee. But in this case, the

employee’s  service  was  not  found  to  be  satisfactory  on  review  of

performance  at  the  end  of  55  years,  nor  was  the  employee  cleared  for

retention  in  service  till  58  years.  In  this  case,  on  review,  the  competent

authority decided that the employee was not fit  and suitable for retention

and that he should be compulsorily retired from service with effect  from

10.8.1998. But because of the extreme hardship pleaded by the employee

and assurance of improvement in performance, the respondent’s service was

continued as a special case, for only a period of one year beyond 55 years

making it clear that retention of service beyond one year, that is, 10.5.1999,

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will  be  subject  to  the  outcome  of  review  that  will  be  carried  out  after

monitoring  his  attendance  and  performance  during  that  period.  Thus  the

continuation of respondent beyond 55 years was not because his service was

satisfactory, but out of leniency, for a specific period somewhat on the lines

of probation. During the extension period of one year, his performance was

watched and it was found to be unsatisfactory. Therefore after giving due

opportunity  to  him to  explain  the  unsatisfactory  service,  a  decision  was

taken  by  the  competent  authority  not  to  continue  him  in  service  and

consequently  he  was  compulsorily  retired  from service  with  effect  from

26.8.1999. Thus the compulsory retirement with effect from 26.8.1999 was

merely a  postponement  of  the  compulsory  retirement  which  was  to  take

place on 10.5.1998 and not on account of a second-appraisal of the service

performance upto 55 years.  

9. The learned counsel for the respondent next submitted that recourse

to ‘compulsory retirement’ should be only in ‘public interest’; and that in

this case, as neither the regulations nor the order of compulsory retirement

referred  to  public  interest,  the  compulsory retirement  was  vitiated.   This

contention  has  no  merit.  “Public  interest”  is  used  in  the  context  of

compulsory retirement  of  government  servants  while  considering  service

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under  the  state.  The  concept  of  public  interest  would  get  replaced  by

‘institutional interest’ or ‘utility to the employer’ where the employer is a

statutory  authority  or  a  government  company  and  not  the  government.

When  the  performance  of  an  employee  is  inefficient  or  his  service  is

unsatisfactory, it is prejudicial or detrimental to the interest of the institution

and is of no utility to the employer. Therefore compulsory retirement can be

resorted to (on a review of the service on completion of specified years of

service or reaching a specified age) in terms of relevant rules or regulations,

where retention is not in the interests of the institution or of utility to the

employer.  It is however not necessary to use the words ‘not in the interests

of the institution’ or ‘service not of utility to the employer’ in the order of

compulsory retirement  as  the regulation provides  that  no reason need be

assigned.  

10. The respondent next  drew our attention  to the finding of the High

Court that there was some discrepancy in regard to the number of days of

unauthorized absence during the period of one year after 55 years and such

unauthorized  absence  could  not  be  a  ground  for  compulsory  retirement

without  an  enquiry.  It  is  true  that  the  High  Court  has  referred  to  the

evidence  of  MW-1  and  the  entries  in  the  muster  rolls,  to  point  out  the

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discrepancy. MW1 had stated before the tribunal the period of unauthorized

absence was 27 days whereas the entries in the muster rolls showed such

absence was 32 days and that there was also an admission that out of the

said 32 days, 6 days was availed as sick leave. But that cannot be a ground

to conclude that the order of compulsory retirement was bad. The Tribunal

and  the  High  Court  were  not  examining  ‘unauthorized  absence’  as  a

misconduct  which was subject  matter  of a charge.  When the show cause

notice dated 27.5.1999 referred to the absence for 20 days during the period

of one year beyond 55 years, the respondent did not deny the same in his

reply dated 14.6.1999. On the other  hand,  he admitted such absence and

tried to explain it  as  being on account  of advanced age and ill  health  of

himself and wife. The fact that the unauthorized absence was more than 20

days during a period of one year was never disputed. The discrepancy in the

oral evidence of MW1 and the muster rolls in regard to the total number of

unauthorized absence, even if true, was not material, as the respondent was

not being punished for any specific unauthorized absence. The unauthorized

absence  was  only  the  background  material  to  reach  the  decision  that

respondent’s service was unsatisfactory.  

11.  The  High  Court  also  erred  in  treating  the  show  cause  notice  dated

27.5.1999 as a charge memo and finding fault with it on the ground that it did

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not  contain  necessary particulars  in regard to the  charge of  unauthorized

absence,  and  consequently  holding  that  in  the  absence  of  any  inquiry,

principles of natural justice were violated. The letter dated 27.5.1999 was

not a charge memo but only a notice giving opportunity to the employee

before compulsorily retiring him under Regulation 12. In fact even without

such a notice he could have been compulsorily retired.

12. In view of the above we allow this appeal, set aside the orders of the

learned  Single  Judge  and  Division  Bench  and  restore  the  award  of  the

Industrial Tribunal.

……………………..J. (R V Raveendran)

New Delhi; ……………………..J. March 24, 2009. (Markandey  Katju)    

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