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Tuesday, October 22, 2013

Though the appellant is eligible for consideration of the selection in to IAS - she was denied as she was a junior officer - not correct approach and against the rules and guidelines - B. Amrutha Lakshmi … Appellant Versus State of Andhra Pradesh and Ors. … Respondents= judis.nic.in/supremecourt/filename=40890

Though the appellant is eligible for consideration of the selection in to IAS - she was  denied as she was a junior officer - not correct approach and against the rules and guidelines = Apex court held wrong but due to lapse of time the apex court granted damages instead of disturbing processes already taken over long back=

the right of the  appellant  for  being
considered for the selection into the Indian Administrative  Services  (IAS)
from the Non-civil services in the state of Andhra Pradesh.  =
In  the  present  case,  the  Commissioner  did  not
      strictly go by rule of seniority among the eligible  officers  in  the
      Commercial Taxes Department.  The course adopted by him is that  since
      a large number of officers have to be forwarded going by the  criteria
      of eligibility as per Regulation  4  (iii)  and  G.O.Ms  No.  634,  he
      restricted the zone or level of officers for  consideration  upto  the
      level of Additional Commissioners and Joint Commissioners.  Thus  this
      is a case where the seniority rule has not been followed but the  zone
      of consideration has been restricted upto a particular level…….” 
 whether   such   a
restriction  of  the  candidates  to  be  considered,  who  were   otherwise
eligible, was permissible under the rules.  =

At the relevant time, she  was  working  as  the  Assistant
Commissioner of the  Sales  Tax,  and  she  satisfied  all  the  eligibility
criteria, yet the Principal Secretary,  Department  of  Revenue  (Commercial
Tax)  Department,  Hyderabad,  Andhra  Pradesh,  and  the  Commissioner   of
Commercial Taxes, Hyderabad,  Andhra  Pradesh,  respondent  Nos.   2  and  3
respectively, restricted the  zone  of  consideration  only  to  the  higher
officers amongst the eligible candidates viz., to the Joint  and  Additional
Commissioners of the Commercial Tax Department.
The
case of the appellant is that, though she was eligible for being taken  into
the panel for consideration, she lost her opportunity due to  the  erroneous
interpretation of the relevant rules by  the  respondent  No.  1,  State  of
Andhra Pradesh. 

However, once a candidate comes into  the  zone  of
consideration,  and  satisfies  all  the  requirements,  including  that  of
outstanding merit and ability, he cannot be told that merely because  he  is
junior in the seniority, his name will not be forwarded  for  consideration.
The rule requires that from amongst the outstanding officers, 15  names  are
to be forwarded to the Central Government, and hence  it  is  possible  that
amongst these 15, a junior officer may as well figure,  depending  upon  the
assessment of his merit.  He cannot be eliminated merely on the ground  that
he is a junior officer, and that if selected he will write the ACRs  of  his
superiors.

 In  the  circumstances  we  allow  this  appeal,  set-aside  the
impugned judgment and order of the High Court as  well  as  of  the  Central
Administrative Tribunal, modify the relief as prayed in the O.A.,  and  hold
that the decision of the Respondents not to consider the appellant  for  the
selection, amounted to  her  being  treated  dissimilarly,  though  she  was
situated similarly to the recommended officers.  The decision was  violative
of Article 14 and Article 16(1) of the Constitution, since  it  was  arrived
at on the basis of a criterion  which  was  not  laid  down.   However,  the
selection for the year 2011 was over, even before  the  interim  application
in the CAT was decided.  Setting aside  the  selection  conducted  some  two
years  back,  and  asking  the  respondents  to  re-do  the  exercise  after
considering the appellant and other  similarly  situated  candidates,  would
create lot of uncertainty, in as  much  as  the  appellant  and  such  other
similarly situated candidates, might or might not  finally  succeed  in  the
selection process. Hence, it will  not  be  proper  now  to  set  aside  the
selection of the selected candidates.  Therefore,  though  this  declaration
is being granted, viz. that the appellant  and  persons  situated  like  her
were entitled to be considered by the committee, no further relief  in  that
behalf can be granted to them.  The opinion rendered  by  us  will  have  to
operate prospectively in the matter of application of the  concerned  rules,
for the future selections.  Hence, this appeal is being allowed in part.
21.         We cannot, however, ignore that the appellant had to  resort  to
this litigation for no fault of hers.  
The non consideration  of  her  claim
was totally unjust.  
Hence, even though for the reasons that we have  stated
earlier, the appellant can not get the relief in the nature of  a  direction
to consider her for the selection which she had sought,  she  must  get  the
damages for non-consideration on  unjust  grounds.   
This  is  because,  the
Commissioner  for  Commercial  Tax  had  acted  to  reduce   the   zone   of
consideration, contrary  to  the  rules,  and  inspite  of  a  letter  dated
1.7.2010 from the Principal Secretary Revenue (CT-I) Department,  which  had
clarified that the Commissioner may  send  the  proposals  of  the  eligible
candidates of the cadre of Assistant Commissioners and above,  who  were  of
outstanding merit. 
The  award  of  damages  is  necessary  also  because,  a
message must go down that those who are responsible  for  administration  of
the State cannot trample upon the rights of others on the grounds which  are
unsustainable in law.   
We, therefore, direct the State  of  Andhra  Pradesh
to pay the damages of rupees fifty thousand to the appellant. 
 This will  be
over and above the litigation cost of rupees twenty five thousand, which  we
hereby award.

                                                                  REPORTABLE


                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION


                       CIVIL APPEAL NO. 9193   OF 2013
          (@ out of SPECIAL LEAVE PETITION (CIVIL) NO. 23761/2011)


B. Amrutha Lakshmi                                 …   Appellant

                                    Versus

State of Andhra Pradesh and Ors.                   …   Respondents

                                    WITH

                       CIVIL APPEAL NO. 9194   OF 2013
          (@ out of SPECIAL LEAVE PETITION (CIVIL) NO. 16042/2012)

Irrinki Srinagesh                                        …   Appellant

                                    Versus

State of Andhra Pradesh and Ors.                   …   Respondents


                             J U D G  E M E N T


H.L. Gokhale J.

            Leave Granted.

2.          We will first deal with the facts and legal submissions  of  the
first SLP (C)  23761  of  2011.  This  appeal  by  Special  Leave  seeks  to
challenge the judgment and order dated 31.12.2010, rendered  by  a  Division
Bench of the Andhra Pradesh High Court  in  Writ  Petition  No.  32290/2010,
dismissing the same.  The said Writ Petition sought to challenge  the  order
passed  by  the  Central  Administrative  Tribunal  (CAT)  Hyderabad,  dated
20.12.2010, on the  Interim  Application  moved  by  the  appellant  in  her
Original Application No. 1291/2010,  wherein,  the  CAT  rejected  the  said
Interim Application.
      Facts leading to this appeal are as follows:-
3.          The appeal is concerning
the right of the  appellant  for  being
considered for the selection into the Indian Administrative  Services  (IAS)
from the Non-civil services in the state of Andhra Pradesh.  
The  selection
into the IAS is governed by  the  All  India  Services  Act  1951,  and  IAS
(Recruitment) Rules 1954.
There are three sources for being  selected  into
the IAS as per the IAS (Recruitment) Rules 1954.  
They are:- 
(i)  by  direct recruitment; 
(ii) by promotion of a substantive  member  of  a  state  civil service and 
(iii) by selection from amongst those persons who hold  gazetted
posts in substantive capacity in connection with the affairs of  the  State,
and who are not members of a State Civil Service.
4.          The vacancies in the IAS cadre for  each  particular  State  are
notified by the Central Government.  In the present case, we  are  concerned
with the three vacancies meant for category (iii) above  viz.  the  officers
of Non State Civil Services, which were notified for  the  year  2011.   The
case of the appellant is that, though she was eligible for being taken  into
the panel for consideration, she lost her opportunity due to  the  erroneous
interpretation of the relevant rules by  the  respondent  No.  1,  State  of
Andhra Pradesh.  At the relevant time, she  was  working  as  the  Assistant
Commissioner of the  Sales  Tax,  and  she  satisfied  all  the  eligibility
criteria, yet the Principal Secretary,  Department  of  Revenue  (Commercial
Tax)  Department,  Hyderabad,  Andhra  Pradesh,  and  the  Commissioner   of
Commercial Taxes, Hyderabad,  Andhra  Pradesh,  respondent  Nos.   2  and  3
respectively, restricted the  zone  of  consideration  only  to  the  higher
officers amongst the eligible candidates viz., to the Joint  and  Additional
Commissioners of the Commercial Tax Department.
5.          The appellant, therefore, filed Original  Application  No.  1291
of 2010 before the Central Administrative Tribunal (CAT) and prayed for  the
following main reliefs:-
            “1.) This Hon’ble court may  be  pleased  to  declare  that  the
   action of the 3rd respondent in not considering the case of the applicant
   for being  proposed  for  appointment  to  I.A.S.,  in  terms  of  I.A.S.
   (appointment by selection) Regulation 1997 is illegal and is contrary  to
   and violation of  Regulation  4  of  I.A.S.  (appointment  by  selection)
   Regulation 1997 and is also violative of Article 14, 16  and  21  of  the
   Constitution of India.
            2).  This Hon’ble Tribunal may be pleased to declare the  action
   of the 5th respondent in not forwarding the name of the applicant to  3rd
   respondent is illegal and contrary to G.O.Ms NO. 634 dated 24.8.2007  and
   is also contrary to Regulation  No.  4  (1)  of  I.A.S.  (appointment  by
   selection) Regulation 1997.
            3).  This Hon’ble  Tribunal  may  be  pleased  to  declare  that
   applicant is entitled to be considered by the Committee  (as  constituted
   under Regulation 3) by 2nd  respondent  for  appointment  to  I.A.S.,  by
   selection based on her outstanding merit and ability and pass such  other
   order or orders as this Hon’ble Tribunal may deem fit and proper  in  the
   circumstance of the case.”

6.          The appellant  prayed  for  the  interim  order  which  read  as
follows:-
                 “In the above circumstances this Hon’ble  Tribunal  may  be
    pleased to direct the 2nd respondent not to convene the meeting of  the
    Committee and not to  consider  the  case  of  any  other  candidate(s)
    proposed by the 3rd respondent for appointment to I.A.S.  by  selection
    (of A.P. State Non-SCS Officers), pending disposal of  O.A.,  and  pass
    such other order or orders as this Hon’ble Tribunal may  deem  fit  and
    proper in the circumstances of the case.
                 In the alternative direct the 3rd  respondent  to  consider
    and propose the name of the applicant  for  consideration  by  the  2nd
    respondent for appointment by  selection to I.A.S. before the cases  of
    other candidates are considered and pass such other order or orders  as
    this Hon’ble Tribunal may deem fit and proper in the  circumstances  of
    the case.”
        7. The CAT, however, declined to grant the interim relief that  the
           appellant had prayed for.  The appellant therefore, carried  the
           matter to the Andhra Pradesh High Court, where  the  High  Court
           has held the restriction of the  zone  of  consideration  to  be
           valid.  Being aggrieved by this order, the appellant  has  filed
           this appeal by Special Leave.
        8. Mr. P.S. Narshimha, learned  senior  counsel  appeared  for  the
           appellant, Mr. A.T.M.  Rangaramanujam,  learned  senior  counsel
           appeared for the first respondent State of Andhra  Pradesh,  and
           the Principal Secretary to the Department of Revenue (Commercial
           Taxes) Andhra Pradesh, and the Commissioner of  Commercial  Tax,
           Andhra Pradesh.  Mr. P.P. Malhotra, Additional Solicitor General
           has appeared for  respondent  No.  4  Union  of  India  and  Mr.
           Radhakrishnan, learned senior counsel for respondent No. 5 Union
           Public Service Commission.
        9. It was pointed out by Mr. Narshimha,  learned  counsel  for  the
           appellant, that the relevant regulations for our purpose are the
           I.A.S. (Appointment by Selection) Regulations, 1997.  Clause No.
           3, regulation Nos.  3  and  4  thereof,  are  relevant  for  our
           purpose.  Regulation 3 deals with the determination of vacancies
           to be filled.  Regulation No. 4 lays down the provisions for the
           State Government to send  proposals  for  consideration  of  the
           committee  referred  to  in  regulation  No.  3,  which  is  the
           committee constituted under  regulation  No.  3  of  the  Indian
           Administrative Services (Promotion by  Appointment)  Regulations
           1955.  These two regulations Nos. 3 and 4 read as follows:-
          “3.    Determination of vacancies to be filled:
       The  Central  Government  shall,  in  consultation  with  the  State
    Government concerned, determine  the  number  of  vacancies  for  which
    recruitment may be made under these regulations each year.  The  number
    of vacancies shall not exceed the number of substantive  vacancies,  as
    on the first day of January of the year, in which the  meeting  of  the
    Committee to make the selection is held.


           4.    State Government to send proposals  for  consideration  of
    the Committee:-
      (1) The State Government shall consider the  case  of  a  person  not
    belonging to the State Civil Service but serving in connection with the
    affairs of the State who,
      i) is of outstanding merit and ability; and
      ii) holds a Gazetted post in a substantive capacity; and
      iii) has completed not less than 8 years of continuous service  under
    the State Government on the first day of January of the year  in  which
    his case is being considered  in  any  post  which  has  been  declared
    equivalent to the post of Deputy Collector in the State  Civil  Service
    and propose the person for consideration of the Committee.  The  number
    of persons proposed for consideration of the Committee shall not exceed
    five times the number of vacancies proposed to  be  filled  during  the
    year.
    Provided that the State Government shall not consider  the  case  of  a
    person who has attained the age of 54 years on the first day of January
    of the year in which the decision is taken to propose the names for the
    consideration of the Committee.
    Provided also that the State Govt shall not  consider  the  case  of  a
    person who, having been included in an earlier  Select  List,  has  not
    been appointed  by  the  Central  Government  in  accordance  with  the
    provisions of regulation 9 of these regulations.”

10.   As can be seen from these two regulations, the Central Government  has
to determine the number vacancies for which recruitment  may  be  made  each
year, which is to be done in consultation with the  State  Government.   The
number of vacancies to  be  determined,  shall  not  exceed  the  number  of
substantive vacancies, as on the first day of January of the year, in  which
the meeting of the selection committee  is  held.   Regulation  No.  4  lays
down, that the State Government has to send the proposal  for  consideration
of  the  committee.
 It  is  important  to  note  that  while  sending   the
recommendations from Non Civil Services section, the Government has  to  see
that (i) the person concerned is a person of outstanding merit and  ability,
(ii) he holds a Gazetted post  in  a  substantive  capacity,  (iii)  he  has
completed at least 8 years  of  continuous  service  on  the  first  day  of
January of the year in which his case is being considered, (iv)  the  person
must belong to a post which has been declared  equivalent  to  the  post  of
Deputy Collector in the State Civil  Service,  (v)  the  number  of  persons
proposed for consideration of the committee shall not exceed five times  the
number of vacancies, and (vi) the persons to be recommended should not  have
attained the age of 54 years on the first day of January  of  that  year  in
which the names are considered by the committee.
11.   As far as the  equivalence  with  the  post  of  Deputy  Collector  is
concerned, the Andhra Pradesh Government came out with a G.O.Ms No.  634  of
the General  Administration  (Special  Department)  dated  24.8.2007,  which
provided as follows:-
                       “NOTIFICATION

             In  supersession  of  the  order  issued  in  G.O.Ms,   General
   Administration (Special.A) Department,  Dated:  08.06.2006,  G.O.Ms.  No.
   807, General Administration (Special A)  Department,  Dated:  23.12.2006,
   read with G.O.Ms No. 63 General Administration  (Special  A)  Department,
   Dated: 08.02.2007, and in the exercise of  powers  conferred  under  sub-
   regulation (iii) of regulation 4(1) of the Indian Administrative  Service
   (Appointment by  Selection)  Regulations,  1997,  the  Government  hereby
   declare that, all the post carry the scale of pay  of  Rs.  10,845-22,995
   and above (revised scales of 2005) in all the departments under the Govt.
   of Andhra Pradesh, barring the services viz. (i)  State  Police  Service,
   (ii) State Forest Services, and (iii) Judicial Service, are equivalent to
   the post of Deputy Collector in the State Civil Service for  the  limited
   purpose in regulation ibid.  Officers  who  have  completed  8  years  of
   continuous service in the said scale as on 1st  January of the  year  for
   which selection is made and are substantive in the above scale of pay  as
   stipulated in  IAS  (Appointment  by  Selection)  Regulations  1997,  are
   eligible for consideration.
        (BY ORDER AND IN THE NAME OF THE GOVERNOR OF ANDHRA PRADESH)

                                                               J.HARI NARYAN
                                               CHIEF SECRETARY TO GOVERNMENT

12.   Thus, as can be seen,  sub-regulation   (iii)  of  regulation  4  (1),
referred to above,  includes all the posts which carry the scale of  pay  of
Rs. 10,845-22,995 and above, and  (ii)  persons  from  all  the  departments
under the Government of Andhra Pradesh except State  Police  Service,  State
Forest Service and Judicial Service are  eligible  to  be  considered.   The
notification declared such posts to be equivalent  to  the  post  of  Deputy
Collector in the State Civil Service, for the limited purpose  specified  in
the Regulations. The Principal  Secretary  to  the  Government  accordingly,
wrote to the different departmental heads to send the  full  particulars  of
eligible Non Civil Services officers who fulfill the criteria.   In  para  4
of this letter he specifically stated as follows:-
            “4.  The Regulations stipulate that the Non-SCS Officers to  be
    considered for selection should be of outstanding  merit  and  ability.
    This aspect should be thoroughly ensured before sending the  proposals.
    An Officer who  is  facing  disciplinary  enquiries  and  against  whom
    adverse remarks are recorded in the  ACR  or  whose  integrity  is  not
    certified, cannot unequivocally be said to be of outstanding merit  and
    ability.”

13.         The Commissioner  of  Commercial  Tax,  Andhra  Pradesh  by  his
letter dated 18.6.2010 sought  a  clarification  whether  all  the  eligible
officers  in  the  cadre  of  Assistant  Commissioner  and  above  would  be
considered as eligible, if they were of substantive ability,  had  completed
the minimum years of service, and had not crossed the age of 54 years as  on
1.1.2010. The Commissioner got a reply that the necessary  instructions  may
be adhered  to  scrupulously.  He  subsequently  got  another  letter  dated
1.7.2010 from the Principal Secretary, of  the  Revenue  (CT-I)  Department,
that the names of officers from  the  cadre  of  Assistant  Commissioner  of
Commercial Taxes and above, who are of outstanding merit and  are  eligible,
may be forwarded.  It so happened,  that  the  names  which  were  sent  for
consideration were, however, only of the Joint Commissioners and  Additional
Commissioners and not Assistant Commissioners.  It is, therefore,  that  the
appellant filed the above  Original  Application  and  applied  for  interim
relief which came to be  declined,  and  the  order  of  the  CAT  was  left
undisturbed by the High Court. This has led to the present Civil appeal.
14.         According to Mr. Narshimha, the relevant rules were very  clear,
and the appellant satisfied all those requirements.   The  appellant  was  a
Gazetted Officer in a substantive capacity, and she had completed more  than
8 years of continuous service as an  Assistant  Commissioner  of  Sales  Tax
which was a post declared to be equivalent to the post of Deputy  Collector.
 She had not completed the age of 54 years, and there was no  dispute  about
her outstanding merit and ability.  The CAT, however,  rejected  the  prayer
for interim relief, solely on the ground that by the  time  the  matter  was
considered by the  CAT,  the  selection  had  already  been  completed,  and
therefore, the interim prayer as sought could not be granted.  In  the  High
Court,  it  was  however  contended  on  behalf  of  the  Commissioner   for
Commercial Tax, that if the criterion was  to  be  applied  as  it  is,  the
number of officers to be  considered  from  the  Commercial  Tax  Department
itself would be more than 300.  It was submitted that there are  in  all  30
departments in the State Government, and  therefore,  the  Commissioner  and
other heads of department were well within their power to restrict the  zone
of consideration up to a particular level,  from  which  the  names  may  be
forwarded.  It was also pointed out on behalf of  the  Government  that,  if
the criterion as insisted by the appellant was applied, some of the  persons
of the rank of Assistant Commissioners  or  Deputy  Commissioners  will  get
selected, they will become superior to Joint and  Additional  Commissioners,
and will write the Annual Confidential Reports of  such  officers  who  were
presently holding posts higher to them. The High Court posed  the  question,
as to whether the names of these  junior  officers  should  be  mechanically
forwarded. In paragraph 19 of the judgment the High Court held as follows:-
                 “19.   In  the  present  case,  the  Commissioner  did  not
      strictly go by rule of seniority among the eligible  officers  in  the
      Commercial Taxes Department.  The course adopted by him is that  since
      a large number of officers have to be forwarded going by the  criteria
      of eligibility as per Regulation  4  (iii)  and  G.O.Ms  No.  634,  he
      restricted the zone or level of officers for  consideration  upto  the
      level of Additional Commissioners and Joint Commissioners.  Thus  this
      is a case where the seniority rule has not been followed but the  zone
      of consideration has been restricted upto a particular level…….”

15.         Again, in paragraph  23,  the  High  Court  observed  that  just
because the  appellant  officers  satisfy  the  criteria  and  are  eligible
officers, their names could not be forwarded. This is because the number  of
vacancies  to  be  filled  was  3,  and  the  number  of  candidates  to  be
recommended will be 5 times that  number  i.e.  15  only.   The  High  Court
therefore, held that the Commissioner of Commercial Taxes had the  power  to
restrict the zone of consideration in sending the names above the  level  of
Additional Commissioners and Joint Commissioners. The  Writ  Petition  filed
by the appellant was, therefore, dismissed.

16.         It is material to note, that a counter affidavit has been  filed
on behalf Government of Andhra Pradesh, where in para  4  it  is  stated  as
follows:-
                 “4.   I say and submit that there may be  large  number  of
    officers  who  will  meet  above  eligibility  but  number  has  to  be
    restricted to five times  the  vacancies  for  consideration  from  all
    departments put  together.   Commercial  Taxes  Department  is  one  of
    departments in the State.  There are more than 30  departments  in  the
    State.  There were only (3) vacancies.  Hence maximum number that could
    be considered by  the  Committee  was  (15)  for  all  departments  put
    together.  In order to have healthy competition and to avoid  unhealthy
    competition, out of all eligible persons having outstanding  merit  and
    ability, persons having highest seniority were recommended. …”

17.          The  question  for  our  consideration  is
  whether   such   a
restriction  of  the  candidates  to  be  considered,  who  were   otherwise
eligible, was permissible under the rules. 
 It  is  not  disputed  that  the
petitioner was very much eligible for being considered, and  there  were  so
many  similar  eligible  candidates.   It  was  being   portrayed   by   the
respondents that from every department 300 persons were eligible, and  there
are 30 departments and therefore, the number would  go  to  some  9,000  and
above.  Now, what is to be noted is that  all  that  the  eligible  officers
concerned have, is a limited right of being considered, though they  do  not
have a right of promotion, as held in Shankarsan Dash  Vs.  Union  of  India
1991 (3) SCC 47.  Mr. Narshimha submitted that  this  limited  right  should
not be denied to the candidates like the appellant,  on  the  basis  of  the
ground that in such a  case  a  large  number  of  names  will  have  to  be
forwarded.  That apart, he submitted that there was  no  substance  in  this
justification, and it was merely a bogie.  This is because  what  the  State
Government had to do  first  was  to  find  out  as  to  who  fulfilled  the
criteria.   Undoubtedly,  a  large  number  of  persons  will  fulfill   the
criteria, being Gazetted Officers with more than 8  years  of  service,  and
less than 54 years of age on the relevant date.  They would also have to  be
in the required pay scale.  
However,  as  stated  in  paragraph  4  of  the
Principal Secretary’s letter, while considering the  outstanding  merit  and
ability, those with adverse remarks and those facing departmental  enquiries
were to be excluded.
Therefore, there was no difficulty in  excluding  such
persons on those grounds.  
Thereafter, what remained to be seen  was  as  to
who were the persons with outstanding ability and merit  amongst  them?
The
State Government maintains their annual  appraisal  reports,  and  for  such
selection it lays down some criteria of maintaining  the  outstanding  merit
and ability over certain  period  viz.  that  in  previous  five  years  the
officer must have 3 outstanding reports, or that in  the  previous  3  years
the officer concerned must have all throughout an  outstanding  rating  etc.
It is for the  State  Government  to  lay  down  by  rules  as  to  how  the
outstanding merit and ability is to be assessed, and over how  much  period.
After all these tests are applied, the number of persons to  be  recommended
will not be very large.  However, once a candidate comes into  the  zone  of
consideration,  and  satisfies  all  the  requirements,  including  that  of
outstanding merit and ability, he cannot be told that merely because  he  is
junior in the seniority, his name will not be forwarded  for  consideration.
The rule requires that from amongst the outstanding officers, 15  names  are
to be forwarded to the Central Government, and hence  it  is  possible  that
amongst these 15, a junior officer may as well figure,  depending  upon  the
assessment of his merit.  He cannot be eliminated merely on the ground  that
he is a junior officer, and that if selected he will write the ACRs  of  his
superiors.
18.         We have got to accept that, if the rules for  selection  contain
a requirement, the same has to be applied uniformly and strictly,  and  none
from the eligible group can be  eliminated  from  being  considered  on  any
criteria, other than those which are provided in the rules.  If there  is  a
criteria laid down for selection, the Administration has to confine  to  the
same, and it cannot impose an additional criterion over and  above  whatever
has been laid down.  If that is done, it will no longer remain  an  exercise
of discretion, but will result into discrimination. It  will  mean  treating
similarly situated employees dissimilarly, and denying equal opportunity  to
some of them in the matter of public employment on the basis of a  criterion
which is not laid down, resulting into violation of Articles 14 and  Article
16(1) of the Constitution of India. If the rules were  to  provide  that  in
the event of large number of persons coming into the zone of  consideration,
the names of the senior most alone will be forwarded,  then  it  would  have
been a different situation.  In the absence any such  restrictive  rule,  as
in the present case, the decision of the respondents cannot be justified.
19.         In view of the reasons stated above, we accept  the  submissions
canvassed on behalf of the appellant.  The prayers in the O.A. filed by  the
appellant were negatively worded viz. to declare  that  the  action  of  the
respondents not to consider the case of the appellant, and  not  to  forward
her name, was illegal.  In a way it was a prayer for a positive  declaration
viz., that the appellant and persons situated like her were entitled  to  be
considered by the committee, if they are otherwise eligible. We are  of  the
view that, the appellant is entitled to such a positive  declaration,  which
order takes care of the prayer as made in the Original Application.
20.         In  the  circumstances  we  allow  this  appeal,  set-aside  the
impugned judgment and order of the High Court as  well  as  of  the  Central
Administrative Tribunal, modify the relief as prayed in the O.A.,  and  hold
that the decision of the Respondents not to consider the appellant  for  the
selection, amounted to  her  being  treated  dissimilarly,  though  she  was
situated similarly to the recommended officers.  The decision was  violative
of Article 14 and Article 16(1) of the Constitution, since  it  was  arrived
at on the basis of a criterion  which  was  not  laid  down.   However,  the
selection for the year 2011 was over, even before  the  interim  application
in the CAT was decided.  Setting aside  the  selection  conducted  some  two
years  back,  and  asking  the  respondents  to  re-do  the  exercise  after
considering the appellant and other  similarly  situated  candidates,  would
create lot of uncertainty, in as  much  as  the  appellant  and  such  other
similarly situated candidates, might or might not  finally  succeed  in  the
selection process. Hence, it will  not  be  proper  now  to  set  aside  the
selection of the selected candidates.  Therefore,  though  this  declaration
is being granted, viz. that the appellant  and  persons  situated  like  her
were entitled to be considered by the committee, no further relief  in  that
behalf can be granted to them.  The opinion rendered  by  us  will  have  to
operate prospectively in the matter of application of the  concerned  rules,
for the future selections.  Hence, this appeal is being allowed in part.
21.         We cannot, however, ignore that the appellant had to  resort  to
this litigation for no fault of hers.  
The non consideration  of  her  claim
was totally unjust.
Hence, even though for the reasons that we have  stated
earlier, the appellant can not get the relief in the nature of  a  direction
to consider her for the selection which she had sought,  she  must  get  the
damages for non-consideration on  unjust  grounds.   
This  is  because,  the
Commissioner  for  Commercial  Tax  had  acted  to  reduce   the   zone   of
consideration, contrary  to  the  rules,  and  inspite  of  a  letter  dated
1.7.2010 from the Principal Secretary Revenue (CT-I) Department,  which  had
clarified that the Commissioner may  send  the  proposals  of  the  eligible
candidates of the cadre of Assistant Commissioners and above,  who  were  of
outstanding merit. 
The  award  of  damages  is  necessary  also  because,  a
message must go down that those who are responsible  for  administration  of
the State cannot trample upon the rights of others on the grounds which  are
unsustainable in law.   
We, therefore, direct the State  of  Andhra  Pradesh
to pay the damages of rupees fifty thousand to the appellant. 
 This will  be
over and above the litigation cost of rupees twenty five thousand, which  we
hereby award.
22.         The issue involved in the appeal arising  from  the  second  SLP
(C) No. 16042/2012 is same as the one in the earlier matter.
We  have  heard
Mr. Jayant Bhushan, learned senior counsel for the petitioner in the  second
matter, as well as, the counsel for the respondents. For the reasons  stated
in the first matter, we grant leave in this matter and pass the same  order,
as in the first one. This appeal will also stand allowed, accordingly,  with
damages quantified at rupees fifty thousand, and cost of rupees twenty  five
thousand to be paid by the first respondent.
23.         We direct that the amounts towards the damages and the  cost  be
paid to both the appellants within six weeks from the receipt of a  copy  of
this order.  In both these appeals, it will be open to the State  Government
to recover these amounts from  the  then  Commissioner  of  Commercial  Tax,
and/or whoever were the officers responsible for  the  non-consideration  of
the claim of both the appellants.


                                                  …………………………………..J.
                                       [ H.L. Gokhale ]

                                                         …………………………………..J.
                                       [ J. Chelameswar  ]



New Delhi
Dated : October 18, 2013
-----------------------
                                     19



When the contract is governed by Statutory rules and Regulations - General terms of contract Act like sec. 56 Doctrine of Frustration apples - No = MARY ...APPELLANT VERSUS STATE OF KERALA AND ORS. ... RESPONDENTS - judis.nic.in/supremecourt/filename=40891

When the contract is governed by Statutory rules and Regulations - General terms of contract Act like sec. 56 Doctrine of Frustration apples  - No =

Abkari Licence - Highest bidder - public opposing for stalling a shop - refund of deposited amount - contract frustrated due to public oppose  - When the contract is governed by Statutory rules and Regulations - General terms of contract Act like sec. 56 Doctrine of Frustration apples - Apex court confirmed the high court Division bend order in writ appeal - upheld that state is entitled to  forfeit the deposited amount of Rs.7,68,600/- as per rule 15(5)  - Writ petitioner/Highest bidder not entitled to refund of the same =

 whether  the  appellant  could  invoke  the
         doctrine of frustration or impossibility or whether  she  will  be
         bound by the terms of the statutory contract. 
In other words,  in
         case of a statutory contract, will it necessarily destroy all  the
         incidents of an ordinary contract that are otherwise  governed  by
         the Contract Act? =

From a plain reading of  the  aforesaid  provision sub-rule (15) of  Rule  5, it  is
         evident that 
on the failure of the auction  purchaser  to  execute
         the agreement whether temporary or permanent, the deposit  already
         made by auction purchaser towards earnest money and security money
         shall be forfeited. 
 Un disputedly, the appellant was  declared  as
         auction purchaser and, in fact, she had deposited 30% of  the  bid
         amount, that is, 7,68,600/- in terms of Rule 5(10) of  the  Rules.
         
It is further an admitted position  that  the  appellant  did  not
         execute a permanent agreement or for that matter, did not  execute
         the privilege.  
Hence, in terms of sub-rule (15) of  Rule  5,  the
         money deposited by her is liable to  be  forfeited.   
  doctrine of  reasonableness  or
         fairness cannot apply in  a  commercial  transaction.  It  is  not
         possible for us to equate a contract of employment with a contract
         to vend  arrack.   
A  contract  of  employment  and  a  mercantile
         transaction stand on a different footing. 
 It makes no  difference
         when the contract to vend arrack is between an individual and  the
         State.  
This would be evident from the  following  text  from  the
         judgment:
      “286. ……This principle, however, will not apply where  the  bargaining
                   power of the contracting parties is equal or almost equal
                   or where both parties are businessmen and the contract is
                   a commercial transaction.”


                                       (underlining ours)




                Accordingly, we are of the opinion that in a contract under
         the Abkari  Act  and  the  Rules  made  thereunder,  the  licensee
         undertakes to abide by the terms and conditions of the Act and the
         Rules made thereunder which are statutory and in such a situation,
         the  licensee  cannot  invoke  the   doctrine   of   fairness   or
         reasonableness.  Hence,  we  negative  the   contention   of   the
         appellant.


                       In the result, we do not find any merit in the appeal
         and it is dismissed accordingly but without any order as to costs.


                                                                REPORTABLE


                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION


                        CIVIL APPEAL NO.9466 OF 2003






         MARY                                           ...APPELLANT
                                   VERSUS


         STATE OF KERALA AND ORS.        ... RESPONDENTS




                                  JUDGMENT




         CHANDRAMAULI KR. PRASAD,J.




                 The appellant, aggrieved by the judgment and  order  dated
         13.6.2002 passed by the Division Bench of the Kerala High Court in
         Writ Appeal No.1734 of 1995 setting aside the judgment  and  order
         dated 4.8.1995 passed by learned Single Judge  of  the  said  High
         Court in Original  Petition  No.12514  of  1994;  whereby  it  had
         directed for refund of  an  amount  of  Rs.7,68,600/-  along  with
         interest, is before us with the leave of the Court.




                 The appellant, Mary was a successful bidder in  an  auction
         conducted on 24.3.1994 for sale of privilege  to  vend  arrack  in
         Shop Nos. 47 to 55 and 57 in Kalady  Range  –III  for  the  period
         1.4.1994 to 31.3.1995. 
 Her bid was for a sum  of  Rs.25,62,000/-.
         The sale of the privilege to vend arrack is governed by the Kerala
         Abkari  Shops  (Disposal  in  Auction)  Rules,  1974  (hereinafter
         referred to as ‘the  Rules’).
The  officer  conducting  the  sale
         declared the appellant to be the ‘auction purchaser’ in  terms  of
         Rule 5(8) of the Rules.
Being declared as auction purchaser,  she
         deposited 30% of the bid amount i.e.  Rs.7,68,600/-  on  the  same
         date and executed a temporary agreement in  terms  of  Rule  5(10)
         which was subject to confirmation  by the Board of  Revenue.
Rule
         5(19) makes this deposit as security for due  performance  of  the
         conditions of licence.
Kalady is the  holy  birth  place  of  Adi
         Sankaracharya and adjoining thereto existed  a  Christian  pilgrim
         centre associated with St. Thomas. 
The residents  of  those  areas
         objected to the running of any abkari  shop.  A  large  number  of
         people collected and offered physical resistance to the opening of
         the abkari shops and the law and order enforcing agency could  not
         assure smooth conduct of business. 
The aforesaid circumstances led
         the appellant to believe that it was impossible for her to run the
         arrack shop in the locality in question.
The appellant, therefore,
         by her letter dated 3.4.1994 addressed to the  Board  of  Revenue,
         District Collector and Assistant Commissioner  of Excise, informed
         them that because of mass movement it was not possible for her  to
         open  and run the shops.
Accordingly, she requested  them  not  to
         confirm the sale in her favour as it was  impossible  for  her  to
         execute the privilege for the reasons beyond her control. She also
         requested that the proposed contract may be treated as  rescinded.
         She further reserved her right to claim  refund  of  the  security
         amount. There  is  nothing  on  record  to  show  that  after  the
         appellant  refused  to  carry  out  her  obligations,  the   State
         Government took any step to re-sell or re-dispose the arrack shops
         in question.


                  Notwithstanding that, the Excise Inspector of Kalady Range
         sent a notice dated 8.4.1994 to the appellant, inter alia, stating
         that the sale has  already  been  confirmed  in  her  favour.  The
         appellant was asked to accept the confirmation  notice  and  enter
         into  a  permanent  agreement.  By  the  said  notice  the  Excise
         Inspector also called upon the appellant to show cause as  to  why
         further proceedings as contemplated under the Rules should not  be
         initiated against her.
The appellant filed her reply to show cause
         on 17.4.1994 reiterating her inability to run the arrack shops and
         further requested that all proceedings  pursuant  to  the  auction
         held on 24.3.1994 be cancelled and the amount already deposited by
         her be refunded to her. 
It seems that   the  cause  shown  by  the
         appellant did not find favour with the authority and the Assistant
         Excise Commissioner, by notice dated 20.4.1995,  called  upon  the
         appellant to pay a  sum  of  Rs.33,41,400/-  towards  the  balance
         amount payable by her, together with interest at the rate  of  18%
         thereon.
Revenue recovery notice dated 30.6.1995 was  also  issued
         for realisation of the aforesaid amount. 
The appellant  challenged
         the aforesaid notices issued to  her  in  a  writ  petition  filed
         before the Kerala High Court  which  was  registered  as  Original
         Petition No.9976 of 1995 (Mary vs.  State  of  Kerala  &  Others).
         While challenging the aforesaid notices and  further  proceedings,
         the appellant contended that Rule 5(15) and  5(16)  are  arbitrary
         and violative of Article 14 of  the  Constitution  of  India.  The
         appellant filed another writ petition,  inter  alia,  praying  for
         direction to  the  State  authorities  to  refund   an  amount  of
         Rs.7,68,600/- paid by her  as initial deposit. This writ  petition
         was registered as Original Petition No.12514  of  1994  (Mary  vs.
         State of Kerala & Others).


                 Both the  writ  petitions  were  heard  together  and  the
         learned Single Judge vide judgment dated 4.8.1995 allowed both the
         writ petitions. The learned Single Judge quashed the  notices  and
         all the proceedings initiated against the  appellant  and  further
         directed the refund of the amount of  Rs.7,68,600/-  deposited  by
         her along with interest. However, learned  Single  Judge  did  not
         strike down Rule 5(15) and 5(16).  While doing so, learned  Single
         Judge observed as follows:


                       “15.  The  undisputed  and  uncontroverted  facts  as
                   appearing  above  clearly   attract   the   doctrine   of
                   frustration and impossibility leading to  the  conclusion
                   that the contract from its  inception  becomes  void  and
                   discharged. Consequently, it is needless to consider  and
                   decide other contentions urged as  regards   excesses  of
                   delegated legislation in the forms of the rules, as  they
                   are  unnecessary  altogether  in  view   of   the   above
                   conclusion. Both these petitions succeed accordingly.”




                 The State of Kerala and its  functionaries,  aggrieved  by
         the aforesaid  judgment,  preferred  separate  appeals.  Both  the
         appeals were heard together and disposed of by a common  judgment.
         Writ Appeal No.1722 of 1995, filed against  the  recovery  of  the
         balance amount was dismissed.  While allowing Writ Appeal  No.1734
         of 1995 which was against the  direction  of  the  learned  Single
         Judge for refund of the initial deposit, the Division  Bench  held
         that the State is justified in forfeiting the said amount in  view
         of Rule 5(15). While doing so,  the  Division  Bench  observed  as
         follows:


                   “8………However, where there are statutory  provisions,  the
                   contractual terms are defined by the statutory provisions
                   which must govern the relationship between  the  parties.
                   Where the statute governs the  relationship,  it  is  the
                   statutory terms which have to be applied for deciding the
                   disputes between the parties. In this view of the matter,
                   particularly when the contention of  invalidity  of  sub-
                   rule (15) and (16) of Rule 5 was negatived by the learned
                   Single Judge, we are of the  view  that  the  rights  and
                   liabilities between the parties have  to  be  worked  out
                   purely in accordance with the applicable rules.”




                 Accordingly, the Division Bench found that the offer of the
         appellant  having  been  accepted,  same  could  not   have   been
         withdrawn. For coming to the aforesaid conclusion, the High  Court
         placed reliance on sub-rules (10)&(15) of Rule 5 and  observed  as
         follows:


                   “10. It is on the basis of these rules that the rights of
                   the parties have to be  determined.  These  rules  really
                   form the substratum of the contract between the  parties,
                   though all disputes arising between the parties  have  to
                   be resolved in accordance with the principles of contract
                   law, taking the  rules  as  forming  the  basic  contract
                   between the parties. That the accepted offer is incapable
                   of being withdrawn, is clear from  the  provisions  under
                   sub-rule(10) of Rule 5. The first respondent,  therefore,
                   could not have purported to withdraw the offer or rescind
                   the contract by letter dated  3.4.1994.  That  the  first
                   respondent did  not  carry  out  several  obligations  as
                   provided in sub-rule  (10)  of  Rule  5  is  also  beyond
                   dispute. Consequently, by reason of sub-rule(15) of  Rule
                   5 of the Rules, the State was  entitled  to  forfeit  the
                   entire deposit amount of Rs.7,68,600/-.  Thus far,  there
                   is no difficulty. “






                  In the present appeal, we have been called upon to examine
         the validity of this part of the  judgment  whereby  the  Division
         Bench held that the State  was  entitled  to  forfeit  the  entire
         deposited amount of Rs. 7,68,600/-.


                  We have heard Ms. Neha Aggarwal for the appellant and  Ms.
         Mukta Chowdhary for respondents.  Ms. Aggarwal contends  that  the
         appellant  could  not  carry  out  her  obligation  as  it  became
         impossible in view of the mass movement and resistance which State
         could  not  contain.   In  this  connection,  she  has  drawn  our
         attention to Section 56 of the Contract Act.  In  support  of  the
         submission reliance has also been placed on  a  decision  of  this
         Court in the case of Sushila Devi v. Hari Singh, (1971) 2 SCC 288,
         and our attention has been drawn to Paragraph 11 of  the  judgment
         which reads as follows:


                   “11. In our opinion on this point the conclusion  of  the
                   appellate court is not sustainable. But in fact, as found
                   by the Trial Court as well as by the appellate court,  it
                   was impossible  for  the  plaintiffs  to  even  get  into
                   Pakistan. Both the Trial Court as well as  the  appellate
                   court  have  found  that  because   of   the   prevailing
                   circumstances, it was impossible for  the  plaintiffs  to
                   either take possession of the properties intended  to  be
                   leased or even to collect rent from the cultivators.  For
                   that situation the plaintiffs were not responsible in any
                   manner.
As observed by this Court in Satyabrata Ghose  v.
                   Mugneeram Bangur and Co.,(1954) SCR 310,
the doctrine  of
                   frustration is really an aspect or part  of  the  law  of
                   discharge  of   contract   by   reason   of   supervening
                   impossibility or illegality of the act agreed to be  done
                   and hence comes within the purview of Section 56  of  the
                   Indian Contract Act.
The view  that  Section  56  applies
                   only to cases of physical impossibility  and  that  where
                   this section is not applicable recourse can be had to the
                   principles of English law on the subject  of  frustration
                   is not correct.
Section 56 of  the  Indian  Contract  Act
                   lays down a rule of positive law and does not  leave  the
                   matter to be determined according to the intention of the
                   parties. 
The impossibility contemplated by Section 56  of
                   the Contract Act is not confined to  something  which  is
                   not humanly possible. If the performance  of  a  contract
                   becomes impracticable or useless  having  regard  to  the
                   object and purpose the parties had in view then  it  must
                   be held that the performance of the contract  has  become
                   impossible. But the supervening events should  take  away
                   the basis of the contract and it  should  be  of  such  a
                   character that it strikes at the root of the contract.”




                  Yet another decision on  which  Ms.  Aggarwal  has  placed
         reliance is the decision of this Court in Har  Prasad  Choubey  v.
         Union of India, (1973) 2 SCC 746, in Paragraph 9  whereof  it  has
         been held as follows:


                   “9. This elaborate narration would make it clear that the
                   appellant had bid for  the  coal  under  the  honest  and
                   reasonable  impression  that  he  would  be  allowed   to
                   transport the coal to Ferozabad, that this  was  thwarted
                   by the attitude of the Coal Commissioner, that  later  on
                   the parties proceeded on the basis that the auction  sale
                   was to be cancelled and the appellant refunded his money.
                   But apparently because by that time much of the coal  had
                   been lost and the Railways would have been in  difficulty
                   to explain the loss they chose to  deny  the  appellant's
                   claim. We can see no justification on facts  for  such  a
                   denial and the defendants cannot  refuse  to  refund  the
                   plaintiff's  amount.  The  contract  had  become  clearly
                   frustrated. We  must  make  it  clear  that  we  are  not
                   referring to the refusal to supply wagons but the refusal
                   of the Coal Commissioner to allow the movement of coal to
                   Ferozabad in spite of the fact that it was not one of the
                   conditions of the auction. The appellant  is,  therefore,
                   clearly entitled to the refund of his money. Furthermore,
                   the contract itself not being in accordance with  Section
                   175 of the Government  of  India  Act  is  void  and  the
                   appellant is entitled to the refund of his money. We  are
                   unable to understand the reasoning of the High Court when
                   it proceeds as though the appellant was trying to enforce
                   the contract. We can see no justification for  the  lower
                   Court refusing to  allow  interest  for  the  plaintiff's
                   amount at least from the  date  of  his  demand,  or  the
                   latest from the date of suit.”




                  Ms. Chowdhary, however, contends that in the case in hand,
         the terms and conditions for grant of privilege is governed by the
         Rules and in view  of  specific  consequences  provided  for  non-
         compliance of the  terms  and  conditions  of  the  contract  i.e.
         forfeiture of the security money, the Division Bench of  the  High
         Court has not committed any error in holding that  the  State  was
         entitled to forfeit the entire deposit.


                  In view of the rival submission we deem it expedient to go
         through the relevant rules.
Rule  2(a)  defines  Abkari  shop  to
         include an arrack shop with which we are concerned in the  present
         appeal.  Chapter IV of the Rules provides for  general  conditions
         applicable to sale of Abkari shops.
It consists of only one  Rule
         i.e. Rule 5 but it has 22 sub-rules.
Sub-rule 15 of Rule 5  reads
         as follows:
                  5.         xxx        xxx        xxx
                   (15) In addition to the  solvency  certificate  and  cash
                   security mentioned in sub-rule(10) the auction  purchaser
                   shall furnish such personal sureties as may  be  required
                   of him  to  the  satisfaction  of  the  Assistant  Excise
                   Commissioner.  The Board of  Revenue  may,  if  in  their
                   opinion it is necessary, require the auction purchaser to
                   furnish additional cash security as may be fixed by  them
                   at the time of confirmation.  The auction purchaser shall
                   also  execute  a  permanent  agreement  in  Form  No.  11
                   appended to these rules and take  out  necessary  licence
                   before installation of the shop or shops. On the  failure
                   of the auction purchaser to make such deposit referred to
                   in sub-rule (10) or take out such licence or execute such
                   agreement temporary or permanent or furnish such personal
                   surety or additional  cash  security  as  aforesaid,  the
                   deposit already made by him  towards  earnest  money  and
                   security shall be forfeited to Government  and  the  shop
                   resold or otherwise disposed of by the  Assistant  Excise
                   Commissioner subject to  confirmation  by  the  Board  of
                   Revenue.   Disposal   otherwise   includes   closure   or
                   departmental management.  In the  case  of  death  of  an
                   auction purchaser before the execution of  the  permanent
                   agreement, the same shall be obtained from the  heirs  of
                   the deceased unless  the  Assistant  Excise  Commissioner
                   subject to the  confirmation  by  the  Board  of  Revenue
                   cancels the contract.  In the case of death of an auction
                   purchaser after confirmation of the sale of the  shop  or
                   shops, his heirs, if any, shall be  required  to  produce
                   the necessary legal evidence in support  of  their  claim
                   and  on  production  of  the  same  the  shop  shall   be
                   transferred to them and pending such  transfer  the  shop
                   shall be run on departmental management.  It is  open  to
                   the Assistant Excise Commissioner to call  upon  them  to
                   furnish additional security, if  in  his  opinion  it  is
                   necessary for the successful working of the contract.  If
                   the heirs fail to produce within a period  of  one  month
                   from the date of  death  of  the  auction  purchaser  the
                   necessary evidence  in  support  of  their  claim  or  to
                   deposit the additional security required,  the  Assistant
                   Excise Commissioner shall order the re-sale of  the  shop
                   or shops or otherwise dispose of the shop or shops at the
                   risk of the original purchaser subject to confirmation by
                   the Board of Revenue.


                             xxx        xxx        xxx”
                                            (underlining ours)




                 From a plain reading of  the  aforesaid  provision  it  is
         evident that 
on the failure of the auction  purchaser  to  execute
         the agreement whether temporary or permanent, the deposit  already
         made by auction purchaser towards earnest money and security money
         shall be forfeited. 
 Undisputedly, the appellant was  declared  as
         auction purchaser and, in fact, she had deposited 30% of  the  bid
         amount, that is, 7,68,600/- in terms of Rule 5(10) of  the  Rules.
         
It is further an admitted position  that  the  appellant  did  not
         execute a permanent agreement or for that matter, did not  execute
         the privilege.  
Hence, in terms of sub-rule (15) of  Rule  5,  the
         money deposited by her is liable to  be  forfeited.   
However,  as
         stated above, the appellant’s plea is that it was due to the facts
         beyond her control that she could  not  derive  benefit  from  the
         privilege  granted  to  her  and  hence  did  not  run  the  shop.
       
Therefore, the security amount deposited by her is not fit  to  be
         forfeited.  
In  view  of  the  aforesaid,  what  falls  for   our
         determination is as to
whether  the  appellant  could  invoke  the
         doctrine of frustration or impossibility or whether  she  will  be
         bound by the terms of the statutory contract.
In other words,  in
         case of a statutory contract, will it necessarily destroy all  the
         incidents of an ordinary contract that are otherwise  governed  by
         the Contract Act?


                  It is not  the  case  of  the  State  that  appellant  has
         purposely, or for any oblique motive, or as a device to avoid  any
         loss, refused to execute the agreement.  It appears to us that the
         State was helpless because of the public upsurge against the  sale
         of arrack at Kaladi, the birth place of Adi Shankaracharya as,  in
         their  opinion,  the   same   will   render   the   soil   unholy.
         Consequently, the State also found it impossible to re-sell or re-
         dispose of the arrack shops.   In  view  of  second  paragraph  of
         Section 56 of the Contract Act, a contract  to  do  an  act  which
         after the contract is made, by reason  of  some  event  which  the
         promissory could not prevent becomes impossible, is rendered void.
         Hence, the forfeiture of the security amount may be  illegal.  But
         what would be the position in a case in which the consequence  for
         non-performance of contract is provided in the statutory  contract
         itself? The case in hand is one of such cases.   The  doctrine  of
         frustration excludes  ordinarily  further  performance  where  the
         contract is silent as to the position of the parties in the  event
         of performance becoming literally  impossible.   However,  in  our
         opinion, a  statutory  contract  in  which  party  takes  absolute
         responsibility cannot escape liability whatever may be the reason.
          In such a situation, events will not discharge the party from the
         consequence  of  non-performance  of  a  contractual   obligation.
         Further, in a case in which the consequences of non-performance of
         contract is provided in the statutory contract itself, the parties
         shall be bound by that and cannot take shelter behind  Section  56
         of the Contract Act.  Rule 5(15) in no  uncertain  terms  provides
         that “on the failure of the auction purchaser to make such deposit
         referred to in sub-rule 10”  or “execute such agreement  temporary
         or permanent” “the deposit already made  by  him  towards  earnest
         money and security shall be forfeited  to  Government”.   When  we
         apply the aforesaid principle we find that the appellant  had  not
         carried out several obligations as provided in  sub-rule  (10)  of
         Rule 5 and consequently, by reason of sub-rule (15), the State was
         entitled to forfeit the security money.


                  Now reverting to the decisions of this Court in the  cases
         of Sushila Devi (supra) and Har Prasad Choubey (supra), we are  of
         the opinion that they are clearly distinguishable.  In those cases
         the contract itself did not provide for the consequences  for  its
         non-performance.  On the face of the same, relying on the doctrine
         of frustration, this Court came to the conclusion that the parties
         shall not be liable.  As  stated  earlier,  in  the  face  of  the
         specific consequences having been provided, the appellant shall be
         bound by it and could not  take  benefit  of  Section  56  of  the
         Contract Act to resist forfeiture of the    security money.


                  Confronted with this, Ms. Aggarwal  raises  the  issue  of
         validity of Rule 5(15). The learned Single Judge had  allowed  the
         writ petition filed by the appellant but negatived  her  challenge
         to the validity of Rule 5(15) and 5(16) of the Rules. In an appeal
         preferred by the State, it does not seem that  the  appellant  had
         raised the plea of invalidity of the Rules but before us it is the
         contention of the appellant that Rule  5(15)  does  not  meet  the
         requirement of the doctrine of reasonableness or fairness  and  on
         this ground alone the  rule  is  invalid.   As  a  corollary,  the
         forfeiture made is illegal. It is pointed out that in  a  contract
         of the present  nature,  the  relative  bargaining  power  of  the
         contracting parties cannot be overlooked. Viewed from this  angle,
         the rule  is  opposed  to  public  policy,  contends  the  learned
         counsel. Reference in this connection has been made to a  decision
         of this Court  in the  case  of  Central  Inland  Water  Transport
         Corporation Limited and Another v. Brojo Nath Ganguly and  Another
         etc. (1986) 3 SCC 156. In this case, the terms in the  contract of
         employment as also  service  rules  provided  for  termination  of
         service of permanent employees without  assigning  any  reason  on
         three months’ notice or pay in lieu thereof  on  either  side  was
         under challenge. Taking  into  account  unequal  bargaining  power
         between the employer and the employee, the term  in  contract  and
         the rules were held to be  unconscionable,  unfair,   unreasonable
         and against the public policy. On these grounds, this Court struck
         down the  termination  as  void.   The  relevant  portion  of  the
         judgment reads as follows:

                   “100…………The said Rules  form  part  of  the  contract  of
                   employment between the Corporation and its employees  who
                   are  not  workmen.  These  employees  had   no   powerful
                   workmen’s Union to support them. They had no voice in the
                   framing of the said Rules. They  had  no  choice  but  to
                   accept the said  Rules  as  part  of  their  contract  of
                   employment.  There  is  gross   disparity   between   the
                   Corporation and its employees, whether they be workmen or
                   officers. The Corporation can afford to dispense with the
                   services of an officer. It will find hundreds  of  others
                   to take his place but an officer cannot  afford  to  lose
                   his job because if he does so, there are not hundreds  of
                   jobs waiting for him. A clause such as clause (i) of Rule
                   9  is  against   right   and   reason.   It   is   wholly
                   unconscionable. It has been entered into between  parties
                   between whom there  is  gross  inequality  of  bargaining
                   power. Rule 9(i) is a term of the  contract  between  the
                   Corporation and all its  officers.  It  affects  a  large
                   number of  persons  and  it  squarely  falls  within  the
                   principle  formulated  by  us  above.  Several  statutory
                   authorities have a clause similar to Rule 9(i)  in  their
                   contracts of employment.  As  appears  from  the  decided
                   cases, the West Bengal State Electricity  Board  and  Air
                   India International have it. Several government companies
                   apart from the Corporation (which is the first  appellant
                   before us) must be having it. There  are  970  government
                   companies  with paid-up  capital of Rs.16,414.9 crores as
                   stated in the written arguments submitted  on  behalf  of
                   the Union of India. The government and its  agencies  and
                   instrumentalities constitute the largest employer in  the
                   country. A clause such as Rule  9(i)  in  a  contract  of
                   employment affecting large  sections  of  the  public  is
                   harmful and injurious to the public interest for it tends
                   to create a sense of insecurity in the minds of those  to
                   whom it applies and consequently  it  is  against  public
                   good. Such a clause,  therefore,  is  opposed  to  public
                   policy and being opposed to public  policy,  it  is  void
                   under Section 23 of the Indian Contract Act.”




                 Reference has  also  been  made  to  a  Constitution  Bench
         judgment of this Court in the case of Delhi Transport  Corporation
         v. D.T.C.Mazdoor Congress and Another 1991 Supp (1)  SCC  600.  In
         this  case,  Brojo  Nath  Ganguly  (supra)  has  elaborately  been
         discussed and while endorsing the view by majority this Court held
         as follows:


                       “338. Accordingly I hold that the ratio in Brojo Nath
                   Ganguly case, (1986) 3 SCC 156  was  correctly  laid  and
                   requires no reconsideration  and  the  cases  are  to  be
                   decided in the light of the  law  laid  above.  From  the
                   light shed by the path I tread, I express my deep regrets
                   for my inability to agree with my  learned  brother,  the
                   Hon’ble  Chief  Justice  on  the  applicability  of   the
                   doctrine  of  reading  down  to  sustain  the   offending
                   provisions.  I  agree  with  my  brethren   B.C.Ray   and
                   P.B.Sawant,JJ. with their reasoning  and  conclusions  in
                   addition to what I have laid earlier.”




                 However,  it  has  been  contended   by   learned   counsel
         representing the respondent-State that  doctrine  of  fairness  or
         reasonableness is  not  capable  to  be  invoked  in  a  statutory
         contract. Strong reliance has been placed on a  decision  of  this
         Court in the case of Assistant Excise Commissioner and  Others  v.
         Issac Peter and Others (1994) 4 SCC 104,  and  our  attention  has
         been drawn to the following passage.


      “26…………We are, therefore, of the opinion that  in  case  of  contracts
                   freely entered into with  the  State,  like  the  present
                   ones, there is no  room  for  invoking  the  doctrine  of
                   fairness and reasonableness  against  one  party  to  the
                   contract(State), for the purpose of altering or adding to
                   the terms and conditions of the contract, merely  because
                   it happens to be the State. In  such  cases,  the  mutual
                   rights and liabilities of the parties are governed by the
                   terms of the contracts (which may be  statutory  in  some
                   cases) and the laws relating to  contracts.  It  must  be
                   remembered that these contracts are entered into pursuant
                   to public auction, floating of tenders or by negotiation.
                   There is no compulsion on  anyone  to  enter  into  these
                   contracts. It is voluntary on both sides. There can be no
                   question of  the  State  power  being  involved  in  such
                   contracts.”



                 We have  given  our  most  anxious  consideration  to  the
         submission advanced and we  do  not  find  any  substance  in  the
         submission of the  learned  counsel  for  the  appellant  and  the
         decision relied on by her, in fact, carves  out  an  exception  in
         case of a commercial transaction. The duty to act fairly is sought
         to be imported into the statutory contract to avoid forfeiture  of
         the bid amount. The doctrine of fairness is nothing but a duty  to
         act fairly and reasonably. It  is  a  doctrine  developed  in  the
         administrative law field to ensure rule  of  law  and  to  prevent
         failure of justice where an action is  administrative  in  nature.
         Where the function is quasi-judicial, the doctrine of fairness  is
         evolved to ensure fair action. But, in our opinion,  it  certainly
         cannot be invoked to amend, alter, or vary an express term of  the
         contract between the parties. This is so even if the  contract  is
         governed by a statutory provision i.e. where  it  is  a  statutory
         contract.  It is one thing to say that a statutory contract or for
         that matter, every contract must be construed  reasonably,  having
         regard to its language.   But  to  strike  down  the  terms  of  a
         statutory  contract  on  the  ground  of  unfairness  is  entirely
         different. Viewed from this angle, we are of the opinion that Rule
         5(15) of the Rules cannot be struck down on the  ground  urged  by
         the appellant and a statutory contract cannot be varied, added  or
         altered by importing the doctrine of fairness.  In a  contract  of
         the present nature, the licensee takes a calculated  risk.   Maybe
         the appellant was not wise enough but  in  law,  she  can  not  be
         relieved of the obligations undertaken by her under the  contract.
         Issac Peter (supra) supports this view and says so  eloquently  in
         the following words:

      “26…………In short, the duty to act fairly is sought to be imported  into
                   the contract to modify and alter its terms and to  create
                   an obligation upon the State which is not  there  in  the
                   contract. We must confess, we are not aware of  any  such
                   doctrine of fairness or  reasonableness.  Nor  could  the
                   learned counsel bring to our notice any  decision  laying
                   down such a proposition. Doctrine of fairness or the duty
                   to act fairly and reasonably is a doctrine  developed  in
                   the administrative law field to ensure the  rule  of  law
                   and to prevent failure of justice  where  the  action  is
                   administrative in nature. Just as principles  of  natural
                   justice ensure fair decision where the function is quasi-
                   judicial, the doctrine of fairness is evolved  to  ensure
                   fair action where the function is administrative. But  it
                   can certainly not be invoked to amend, alter or vary  the
                   express terms of the contract between the  parties.  This
                   is so, even if the  contract  is  governed  by  statutory
                   provisions, i.e., where it is a statutory contract  —  or
                   rather more so. It is one thing to say that a contract  —
                   every contract —  must  be  construed  reasonably  having
                   regard to its language…”




                 Now, referring to the decision of this Court in  the  case
         of Brojo Nath Ganguly (supra),  the  same  related  to  terms  and
         conditions of service and the decision in the said case  has  been
         approved by this Court in the  case  of  D.T.C.  Mazdoor  Congress
         (supra). 
But while doing so,  the  Constitution  Bench  explicitly
         observed in unequivocal terms that 
doctrine of  reasonableness  or
         fairness cannot apply in  a  commercial  transaction.  It  is  not
         possible for us to equate a contract of employment with a contract
         to vend  arrack.   
A  contract  of  employment  and  a  mercantile
         transaction stand on a different footing. 
 It makes no  difference
         when the contract to vend arrack is between an individual and  the
         State.  
This would be evident from the  following  text  from  the
         judgment:
      “286. ……This principle, however, will not apply where  the  bargaining
                   power of the contracting parties is equal or almost equal
                   or where both parties are businessmen and the contract is
                   a commercial transaction.”


                                       (underlining ours)




                Accordingly, we are of the opinion that in a contract under
         the Abkari  Act  and  the  Rules  made  thereunder,  the  licensee
         undertakes to abide by the terms and conditions of the Act and the
         Rules made thereunder which are statutory and in such a situation,
         the  licensee  cannot  invoke  the   doctrine   of   fairness   or
         reasonableness.  Hence,  we  negative  the   contention   of   the
         appellant.


                       In the result, we do not find any merit in the appeal
         and it is dismissed accordingly but without any order as to costs.






                                                  ………………………………………………………………J.
                                                   (CHANDRAMAULI KR. PRASAD)




                                                    ………..………………………………………..J.
                                             (V.GOPALA GOWDA)
         NEW DELHI,
         OCTOBER 22, 2013.
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