24 April 1996
Supreme Court


Bench: AGRAWAL,S.C. (J)
Case number: Appeal Civil 3491 of 1990






DATE OF JUDGMENT:       24/04/1996


CITATION:  1996 SCC  (5) 111        JT 1996 (6)    87  1996 SCALE  (3)761



JUDGMENT: S.C.AGRAWAL, J. :                       J U D G M E N T      This appeal,  by special  leave,  raises  the  question regarding validity  of Rule  27(iv) of the U.P.State Mineral Development Corporation  Limited  Employees  Service  Rules, 1978 (hereinafter  referred to  as ’the  Rules’], as amended wide the  Amendment Rules  of 1988  with effect from May 15, 1988,  which   provides  for  compulsory  retirement  of  an employee of  the U.P.  State Mineral Development Corporation (hereinafter referred to as ’the Corporation’].      The  Corporation,   a  company   registered  under  the Companies Act, 1956, is an undertaking of the Government of Utter Pradesh. The respondent joined the Corporation on January 18, 1977. Initially he was appointed on the post of Marketing Officer. He was redesignated as Marketing Manager on April 16, 1977. He was confirmed on the post of Marketing Manager by  order dated  June 2, 1984 with effect from March 14, 1978.  He started officiating as Chief Marketing Manager under order  dated March 12, 1984. By order dated August 20, 1988, the  respondent was  compulsorily retired from service from the  date of  the issuance  of the  said order.  It was directed that  in lieu  of three  months notice  he would be entitled to  the payment  of a  sum equivalent to the amount salary and allowances, if any, at the rate applicable to him just before  the retirement.  The said  order was  passed in exercise of  the powers  conferred by  Rule  27(iv)  of  the Rules. The respondent filed a writ petition [W.P. No. 66/88] in the  Allahabad High Court, Lucknow Bench, challenging the said order  of compulsory retirement. The said writ petition has been  allowed by the High Court by the impugned judgment dated February  20, 1990.  The High Court has held that Rule 27(iv) of  the Rules  is  violative  of  the  provisions  o’ Articles 14  and 16  of the Constitution inasmuch as it does not prescribe  any minimum  period of  service  and  confers arbitrary power  on the  authority who can pass an order for



compulsory retirement  of an  employee after  1, 2,  5 or 10 years cf  service. Feeling aggrieved by the said judgment of the High Court the appellants have filed this appeal.      Apart from  supporting the  judgment of  the High Court striking down  Rule 27(iv) of the Rules, the learned counsel for the  respondent has  addressed us  on the  merits of the order of  compulsory retirement  and has submitted that even if the  rule is  held to  be valid  the said order cannot be sustained. We  will first examine the question regarding the validity of Rule 27(iv) of the Rules.      Rule 27  of the  Rules, which  was substituted  by  the Amendment Rules  of 1988,  which came  into force on May 15, 1988, provides as follows :      "Retirement : 27      (i) Except as otherwise provided in      this rule  an employee shall retire      from the  service on  the afternoon      of the  last day  of the  month  he      attains the age of 58 years.           An  employee   whose  date  of      birth is  the first  day of a month      shall retire  from service  on  the      afternoon of  the last  day of  the      preceding month  on  attaining  the      age of 58 years:           Provided an  employee of Class      IV who  entered into the service of      the  Corporation   prior  to   this      amendment shall  retire at  the age      of 60 years.      (ii)    Notwithstanding    anything      contained   in   these   rules   an      employee   may    seek    Voluntary      retirement  by   giving  3   months      notice the  appointing authority at      any time after attaining the age of      45 years  or after he has completed      the service of 20 years.      (iii) Provided  that the appointing      authority may  waive the  period of      notice fully  or partially  but the      retirement shall  be effective only      after an  order has  been passed by      the appointing  authority  to  this      effect.  In   his  discretion   the      appointing authority may reject the      offer of  voluntary  retirement  of      the employee.      (iv) The  appointing authority  may      at any  time retire  in the  public      interest or  in the interest of the      Corporation an  employee at the age      of 50  years by giving him 3 months      notice or  pay in  lieu thereof  or      pay for the said period which falls      short  of  the  said  period  of  3      months.      (v) In  order to satisfy whether it      will be  in the  public interest or      in the  interest of the Corporation      to  retire   an  employee   of  the      Corporation under  sub-rule of Rule      27  the  appointing  authority  may      take   into    consideration    any      material relating  to the  employee



    and nothing  herein contained shall      be construed  to exclude  from  the      consideration i.e,           i. any  entry relating  to any      period  before  such  employee  was      allowed to cross any efficiency bar      or before  he was  promoted to  any      post in  officiating or substantive      capacity   or    any    stop    gap      arrangement or any ad hoc post or           ii. any  entry against which a      representation  is  pending  either      before  the   Board  or  any  other      authority   provided    that    the      representation is  also taken  into      consideration along  with the entry      or           iii.     any     report     of      communication  received   from  the      Government or  any report  received      from          the          internal      vigilance/security           set-up      established  by   the   Corporation      under    the    orders    of    the      Board/Chairman/Managing Director or      any   report   of   the   vigilance      establishment constituted under the      U.P.Vigilance  Establishment   Act,      1965 or  any report from the CID of      the State of U.P.           iv. Every  such decision taken      in sub-rule (iv) shall be deemed to      have  been   taken  in  the  public      interest or  in the interest of the      Corporation as the case may be."      Clause (i) of Rule 27 prescribes 58 years as the age of superannuation for  311 employees  except employees of Class IV for  whom the age of superannuation is fixed at 60 years. Clauses (ii) and (iii) enable an employee of the Corporation to seek  voluntary retirement  by giving three months notice to the  appointing authority at any time after attaining the age of  45 years or after he has completed the service of 20 years and  the period  of notice  can  be  waived  fully  or partially by  the appointing authority. Clause (iv) empowers the appointing  authority at any time in the public interest or in  the interest of the Corporation to retire an employee who has  attained the age of 50 years by giving him 3 months notice or  pay in  lieu thereof.  The said  clause does  not prescribe a  minimum period  of service  for the exercise of the  power   of  compulsory  retirement  by  the  appointing authority, Clause  (v) prescribes  the material  that can be taken into  consideration while  exercising the  power under clause (iv).      The question  is whether  it is obligatory to prescribe minimum  length  of  service  in  a  provision  relating  to compulsory retirement  and whether  in the absence of such a requirement the  provision relating to compulsory retirement has to be held to be invalid.      The  object   underlying  a   provision  enabling   the appointing authority  to  compulsorily  retire  an  employee before he attains the prescribed age of superannuation is to energize the  administration and  make it  more efficient by chopping of  deadwood and  to ensure that a key post is held by a  person of  undoubted ability  and integrity.  [ See  : Union of  India v.  Col. J.N.Sinha,  1971 (1)  SCR 791 at p.



796]. The  decisions of this Court show that such provisions fall in three categories : I.   A provision  which enables  compulsory retirement of an employee after  he has  put in  a certain period of service. [See :  Shyam Lal  vs. Union  of India,  1955 (1) SCR 26 and Tara Singh,  etc. vs.  State of Rajasthan & ors. air 1975 SC 1487. Compulsory  retirement permissible on completion of 25 years of qualifying service] II    Provision  which enables  the compulsory retirement on attaining a  particular age.  [ See : Col. J.N.Sinha [supra] Fundamental Rule  56(j) -  compulsory retirement permissible on attaining the age of 50 years]. III.  Provision   which  enables  compulsory  retirement  on attaining a  particular age or on completion of a particular period of qualifying service. [ See : The State of Bombay v. Saubhagchand M.Doshi, 1958 SCR 571;  T.G. Shivacharana Singh etc. etc.  v. State  of Mysore,  AIR 1965  SC 280; Baikuntha Nath &  Anr, v.  Chief District  Medical Officer, Baripada & Anr., 1992 (2) SCC 299].      In Saubhagchand  M. Doshi  [supra], this  Court,  while distinguishing  compulsory   retirement  from  dismissal  or removal from service, has pointed out that while in the case of retirement  misconduct and  efficiency merely furnish the background and  there is  no duty to hold an enquiry, in the case of dismissal or removal from service they form the very basis on  which the  order is  made and  the enquiry thereon must be  formal  and  must  satisfy  the  rules  of  natural justice. This Court has further observed :      "It should  be added that questions      of the  above character could arise      only when the rules fix both an age      of superannuation  and an  age  for      compulsory   retirement   and   the      services of  a  civil  servant  are      terminated between  these points of      time. But  where there  is no  rule      fixing  the   age   of   compulsory      retirement, or  if there is one and      the servant  is retired  before the      age prescribed  therein, then  that      can be  regarded only  as dismissal      or removal  within Art.311(2)." [p.      579]      In Moti  Ram  Deka  etc.  V.  General  Manager,  N.E.F. Railways, Maligaon,  Pandu, etc.  1964 (5)  SCR  683,  while examining the  validity of  Rules   148(3) and 149(3) of the Indian  Railway   Establishment  Code   which  provided  for termination of  services of  a permanent servant by giving a notice by  either side,  this Court  has taken  note of  the decisions of this Court relating to compulsory retirement of Government employees  including the decision in Saubhagchand M. Doshi  [supra] and  the observations  referred to  above. After quoting the said observations. it has been observed:      "It would  be noticed that the rule      providing for compulsory retirement      was upheld  on the ground that such      compulsory  retirement   does   not      amount to  removal under  Art. 3  )      because  it  was  another  mode  of      retirement and it could be enforced      only between  the period  cf age of      superannuation prescribed and after      the  minimum   period  of   service      indicated in  the rule had been put      in. if  however,  no  such  minimum



    period is prescribed by the rule of      compulsory     retirement.     that      according to  the  judgment,  would      violate Art.  311(2) and though the      termination of a servant’s services      may  be   described  as  compulsory      retirement,  it   would  amount  to      dismissal  or  removal  within  the      meaning  of  Article  311(2).  With      respect,   we   think   that   this      statement correctly  represents the      true position in law." [pp.715-716]      These  observations  regarding  prescribing  a  minimum period of  service have  to be  read in  the  light  of  the observations in  Saubhagchand M.  Doshi [supra]  referred to above which  have been approved and which refer to fixing of the age of compulsory retirement. The observations in Moti Ram  Deka [supra]  were made  in  the  context  of  the provisions of Rule 165-A of the Bombay Civil Services Rules, as amended  by the  Saurashtra Government,  which was  under consideration in  Saubhagchand M. Doshi [supra]. It provided for compulsory  retirement of  a Government servant after he had completed  25 years of qualifying service or 50 years of age. In  Saubhagchand M.  Doshi  [supra]  the  employee  was appointed in 1948 and he was compulsorily retired on October 30, 1952,  after 4  years service, under the said rule since he had  attained the  age of  50 years, He had not completed the period of 35 years of qualifying service. The said order was upheld  by this Court. The observations of this Court in Moti Ram Deka [supra] regarding the requirement of a minimum period of  service cannot, therefore, be read to mean that a provision  regarding   compulsory  retirement   must  always provide for  a minimum  period of  service. In Moti Ram Deka [supra] what  has been  emphasized by this Court is that the validity of  a rule  providing for compulsory retirement may be open  to  question  if  having  fixed  a  proper  age  of superannuation it  permits a permanent servant to be retired at an early stage of his career.      This question  came to  be considered  in Gurdev  Singh Sidhu v.  State of  Punjab &  Anr., 1964 (7) SCR 587, in the context of  Article 9,1  of the  Pepsu Services  Regulations which  provided   that  the   Government  could  retire  any Government servant  after  he  had  completed  10  years  of qualifying service.  The said rule was held to be invalid as being violative  of Article  311(2) of  the Constitution. It has been observed :      "If a  permanent public  servant is      compulsorily  retired   under   the      rules which  prescribed the  normal      age of  superannuation and  provide      for a  reasonable  long  period  of      qualified service after which alone      compulsory   retirement    can   be      ordered, that  again may not amount      dismissal or  removal under Article      311(2) mainly  because that  is the      effect  of   a   long   series   of      decisions of  this Court. But where      while reserving  the power  to  the      State  to   compulsorily  retire  a      permanent public servant, a rule is      framed prescribing  a proper age of      superannuation, and another rule is      added giving the power to the State      to compulsorily  retire   permanent



    public servant  at the  end  of  10      years on  his service, that cannot,      we think,  be treated  as fallowing      outside    Art.     311(2).     The      termination of  the  service  of  a      permanent public servant under such      a rule,  though  called  compulsory      retirement   is,    in   substance,      removal under Art. 311( [P. 594]      The High Court, in striking down clause (iv) of Rule 27 of the  Rules, has  placed reliance on the decisions of this Court in  Moti Ram  Deka [supra]  and Gurdev  Singh Sidhu  v State bank  of Punjab  & Anr.  [supra] to  hold that  it was incumbent to  prescribe a  minimum  period  of  service.  In taking the  said view  the High  Court failed  to note  that under clause  (iv) of  Rule 27  of the  Rules the  power  of compulsory  retirement   can  be  exercised  only  after  an employee attains  the age  of 50  years. The  normal age  of superannuation prescribed  under Rule  27 is  58 years.  The fixation  of  the  age  of  50  years  for  the  purpose  of compulsory  retirement   does  not   result  in   compulsory retirement of  an employee  at an early stage of his career. As  noticed   earlier,  there  is  a  similar  provision  in Fundamental  Rule   56(j)  which   provides  for  compulsory retirement on  attaining the  age of 50 years or 55 years as mentioned in  Col. J.N.Sinha  [supra] and  the orders passed for compulsory retirement under the said provision have been upheld by  this court.  Similarly there are provisions where the power  of compulsory  retirement can be exercised either on attaining  a particular  age [generally  50 years]  or on completion of  the prescribed  period of  qualifying service and orders for compulsory retirement passed on attaining the prescribed age have been held to be valid as in Saubhagchand M.Doshi [supra]  and T.G.Shivachandra  Singh  [supra]  .  In Saubhagchand  M.   Doshi  [supra]   the  employee  had  been compulsorily retired  on completion of about 4 years service only. We  are, therefore,  unable to  agree with the view of the High  Court that clause (iv) of Rule 27 suffers from the vice of  arbitrariness and is violative of the provisions of Articles 14  and 16  of the Constitution inasmuch as it does not prescribe  a minimum  length of service for the exercise of the power of compulsory retirement.      Shri Tripathi,  the learned  counsel appearing  for the respondent, has urged that even if clause (iv) of Rule 27 is held to be valid the said clause could not be applied in the case of  the respondent  because the  respondent joined  the service of  the Corporation  in 1977  end  this  clause  was introduced after  his joining  the service  with effect from May 15,  1988. It  has been  urged that  the said  provision cannot be  given retrospective  effect so as to apply to the respondent who  had joined  the service  of the  Corporation prior to the introduction of the said clause. The submission is that  the amendment  that was  introduced in the rules in 1988 can  only  operate  prospectively  and  does  not  have retrospective  operation.   We  find   no  merit   in   this contention. The  amendment that  has been  introduced in the rules by  the Amendment  Rules of  1988 with effect from May 15, 1988  operates  prospectively  and  the  said  operation cannot be  held to be retrospective in nature merely because it applies  if to employees who joined the Corporation prior to the said amendment but were in service of the Corporation on the  date of  coming into operation of the amendment. The rule operates  prospectively in respect of all the employees of the Corporation who were employed with the Corporation on May 15,  1988. Moreover,  the letter  of  appointment  dated



January 18,  1977 which was given to the respondent contains the following terms :      "You will  be governed by the rules      and regulations  of the Corporation      framed from time to time" The respondent,  therefore, cannot make a grievance that the amendment that was made in the Rules in 1988 whereby Rule 27 was substituted  is not  applicable to  him and  was wrongly applied.      Shri Tripathi  has next  submitted that  even if clause (iv) of  Rule 27  is held to be valid the application of the said rule  in the  case of  the respondent  suffers from the vice of  arbitrariness  inasmuch  as  the  services  of  the respondent have  been arbitrarily  terminated. In support of his aforesaid  submission, Shri  Tripathi  has  invoked  the principles laid  down  by  this  Court  in  Delhi  Transport Corporation v. DTC Mazdoor Congress, 1990 Supp. (1) SCR 142; Central Inland  Water Transport  Corporation Ltd. & Anr, vs. Brojo Nath Ganguly & Anr., 1986 (3) SCC 156; and West Bengal State Electricity  Board v.  D.B.Gupta, 1985 (3) SCC 116, In our  opinion,  this  submission  is  without  substance.  As pointed out  by this  Court in  Shyam Lal [supra] compulsory retirement differs from dismissal or removal from service in the sense  that while  in the  case of  dismissal or removal involves loss  of benefit  already earned  an officer who is compulsorily retired  does not  lose any part of the benefit that he  has earned and on compulsory retirement he would be entitled to the benefit that he has actually earned and that there is  no diminution of the accrued benefit [p.42]. It is not the  case of  the respondent that he has been denied the benefit which  accrued to him on the basis of his service in the Corporation. The fact that the respondent joined service at a  late stage  when he  was about  41 years  old  and  on account of his being compulsorily retired his services stood terminated after  putting about 9 years of service only does not mean  that the  order of compulsory retirement ceases to be an  order for compulsory retirement and should be treated as an  order for  removal from  service. Merely  because the respondent would  not be  able to  earn pension since he had not put in the prescribed period of qualifying service would not invalidate  the order  of compulsory retirement if it is other wise  found to have been passed in accordance with the requirements of Rule 27(iv).      The impugned  order of compulsory retirement was passed on  the   basis  of   the  recommendations  of  a  Screening Committee  consisting  of  the  Managing  Director  and  two Directors of  the Corporation. In the Confidential Report of the respondent  for the  year 1933-84 following remarks have been made by the Reviewing Officer : f      "I regret  that I cannot agree with      the   Reporting    Officer.    Shri      K.C.P.Sinha  evaded  responsibility      and  his   general  reputation  for      integrity was  bad. He  got his own      brother-in-law appointed  as  Sales      Agent for  Silica  sand  and  other      products  without  disclosing  this      fact   to    the   Management   and      continued   to    deal   with   him      throughout without  disclosing this      relationship.      His      general      reputation  somehow  has  not  been      very good. I was not satisfied even      with his  administrative ability. I      would assess  his  performance  and



    leadership qualities inadequate. He      might be  able to work successfully      under  close   supervision  but  is      unsuitable   for   an   independent      assignment.  His  written  work  is      well below average.      I would  rate  his  performance  as      poor."      Shri Tripathi  has submitted that the said remarks were made by  Shri A.P.Singh  on May 19, 1985 after he had ceased to be  the Managing  Director of the Corporation and that he had taken the file with him when he left the Corporation and he returned the file only in 1987. It has also been urged by Shri  Tripathi   that  the   respondent  had   submitted   a representation against the remarks and the same has not been considered. The  fact of  the respondent  having submitted a representation against  the said  remarks was  denied by the appellants before  the High  Court. The High Court felt that this being a disputed question of fact, could not be decided in writ jurisdiction. We are in agreement with the said view of the  High Court. Insofar as the remarks are concerned, we are of the view that the same cannot be ignored only because the relevant  file was  taken away  by Shri  A.P.Singh,  the Reviewing Officer, with him and the file was sent back after two years  in 1987.  No case of mala fides has been made out by the  respondent against  the Reviewing  Officer. The said remarks  contain  a  reflection  on  the  integrity  of  the respondent in  the matter  of discharging his duties. Having regard to  the said  remarks it is not possible to hold that the  compulsory   retirement  of   the  respondent   by  the appointing authority  under order  dated August 20, 1988 was not in  public interest. We are, therefore, of the view that the order  of compulsory  retirement of  the respondent does not suffer  from any  infirmity and  the High  Court was not justified in setting aside the said order.      By order  dated August  27, 1990, this Court had stayed the reinstatement  of the  respondent on  condition that the appellants will  continue to  pay 60%  of the  salary to the respondent and the respondent had agreed that the receipt of the said  payment would be subject to further orders of this Court. It  appears that  the respondent  was paid 60% of the salary in  accordance with  the said  order but subsequently the Corporation, instead of paying 60% of the salary without obtaining  his  services  considered  it  essential  in  the interest of  the Corporation  to obtain  his services and by order dated  January 12, 1995 he has been appointed as Chief marketing Manager  and he  is functioning  on that post now. Since we are upholding the order of compulsory retirement it will be  open to  the Corporation  to consider  whether  the respondent should  continue on  the post  of Chief Marketing Manager. As  regards the  period for which he respondent had been paid  60% of the salary in pursuance of the order dated August 27,  1990 the  said amount shall be refundable by the respondent to  the Corporation.  The said  amount  shall  be refunded by the respondent within a period of three months.      In the  result the  appeal  is  allowed,  the  impugned judgment of  the High  Court .  is set  aside and  the  writ petition filed  by   the respondent is dismissed.  No orders as to costs.