Constitution of the United States – Evolution of Doctrine of Prospective Overruling – Objectives and Purpose – Factors to be considered for its applicability – Discussed: Held: The doctrine of prospective overruling is applied when a constitutional court overrules a well-established precedent by declaring a new rule but limits its application to future situations – The underlying objective is to avert injustice or hardships, per Great Northern Railway Co. v. Sunburst Oil and Refining Co., 287 US 358 (1932) – Relied on Linkletter v. Walker, 381 US 618 (1965) to hold that the doctrine was applied by the courts in the US on the basis that the US Constitution “neither prohibits nor requires retroactive effect.” – US Supreme Court identified three separate factors to be considered while deciding the applicability of prospective overruling in Chevron Oil Company v. Huson 404 US 97 (1971): (i) the decision to be applied prospectively must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied, or by deciding an issue of first impression whose resolution was not foreshadowed; (ii) the court must weigh the merits and demerits in each case by looking to the prior history of the rule in question,its purpose and effect, and whether retrospective operation will further or retard the operation of the rule; and (iii) whether the application of nonretroactivity avoids substantial inequitable results, injustice or hardships. [Paras 5, 6]

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[2024] 8 S.C.R. 540 : 2024 INSC 607

Mineral Area Development Authority & Anr. v. M/s Steel Authority of India & Anr. Etc.

(Civil Appeal No. 4056-4064 of 1999)

14 August 2024

[Dr. Dhananjaya Y. Chandrachud,* CJI, Hrishikesh Roy, Abhay S. Oka, J.B Pardiwala, Manoj Misra,

Ujjal Bhuyan, Satish Chandra Sharma and Augustine George Masih, JJ.]

Issue for Consideration

Whether the 9-judge bench judgment in Mineral Area Development Authority v. M/s Steel Authority of India & Anr. Etc 2024 INSC 554 be given prospective effect?

Headnotes

Constitution of the United States – Evolution of Doctrine of Prospective Overruling – Objectives and Purpose – Factors to be considered for its applicability – Discussed:

Held: The doctrine of prospective overruling is applied when a constitutional court overrules a well-established precedent by declaring a new rule but limits its application to future situations – The underlying objective is to avert injustice or hardships, per Great Northern Railway Co. v. Sunburst Oil and Refining Co., 287 US 358 (1932) – Relied on Linkletter v. Walker, 381 US 618 (1965) to hold that the doctrine was applied by the courts in the US on the basis that the US Constitution “neither prohibits nor requires retroactive effect.” – US Supreme Court identified three separate factors to be considered while deciding the applicability of prospective overruling in Chevron Oil Company v. Huson 404 US 97 (1971): (i) the decision to be applied prospectively must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied, or by deciding an issue of first impression whose resolution was not foreshadowed; (ii) the court must weigh the merits and demerits in each case by looking to the prior history of the rule in question,its purpose and effect, and whether retrospective operation will further or retard the operation of the rule; and (iii) whether the application of nonretroactivity avoids substantial inequitable results, injustice or hardships. [Paras 5, 6]

Constitution of India – Article 142 – Application of the Doctrine of Prospective Overruling in India – Explained:

Held: Relying on Golak Nath v. State of Punjab [1967] 2 SCR 762, held that the doctrine of prospective overruling can be invoked only in matters arising under the Constitution and that it can be applied only by the Supreme Court as it has the constitutional jurisdiction to declare law binding on all the courts in India – The scope of the retroactive operation of the law is left to the discretion of the Supreme Court to be moulded in accordance with the justice of the cause or matter before it – The power of the Supreme Court to mould the relief claimed to meet the justice of the case is derived from Article 142 – It is applied by the Supreme Court while overruling its earlier decision, which was otherwise final – It has also been applied when deciding on an issue for the first time. [Paras 9, 10]

Principles emerging from application of Doctrine of Prospective Overruling – Discussed:

Held: The doctrine of prospective overruling has been accepted by the Supreme Court and the following principles emerge from the application of doctrine of prospective overruling – The power of the Supreme Court to mould the relief claimed to meet the justice of the case is derived from Article 142 – It is applied by the Supreme Court while overruling its earlier decision, which was otherwise final – It has also been applied when deciding on an issue for the first time – The object is to validate all the actions taken before the date of declaration in the larger public interest – The doctrine does not validate an invalid law, but the declaration of invalidation takes effect from a future date – Cases that have attained finality are saved because doing otherwise would cause unnecessary and avoidable hardships – It is applied to bring about a smooth transition of the operation of law without unduly affecting the rights of the people who acted upon the overruled law – It is a device innovated to avoid: (i) reopening settled issues, (ii) refund of amounts collected under invalid legislation, and (iii) multiplicity of proceedings – It is applied to avoid social and economic disruptions and give sufficient time to the affected entities and institutions to make appropriate changes and adjustments. [Para 11]

Applicability of the Doctrine of Prospective Overruling to Mineral Area Development Authority v. M/s Steel Authority of India & Anr. Etc 2024 INSC 554 – Rejected:

Held: Mineral Area Development Authority & v. M/s Steel Authority of India & Anr. Etc 2024 INSC 554 (hereinafter “MADA”) has upheld the legislative competence of States under Entries 49 and 50 of List II – If MADA (supra) is given a prospective application, the validity of all relevant legislation enacted before the date of the decision, that is 25 July 2024, will have to be tested on the touchstone of the previous law – The previous law on the aspects of interpretation of Entry 54 of List I and Entries 23 and 50 of List II of the Seventh Schedule was unsettled because of the conflicting decisions in India Cement Ltd. v. State of Tamil Nadu

(1990) 1 SCC 12 and State of West Bengal v. Kesoram Industries Ltd (2004) 10 SCC 201 – There is always a presumption of constitutionality in favor of a statutory enactment – If MADA (supra) is applied prospectively, the relevant taxing legislations may conceivably be invalidated, requiring the States to refund the amount collected to the assesses – Since MADA (supra) has answered the reference and resolved the conflict, it would be iniquitous to apply the decision prospectively. [Para 17]

Balancing of equities – Outstanding interest accrued on principal payable to the States be waived – Reliefs granted:

Held: A pragmatic solution to reconcile the financial interests of the States and the assesses can be achieved by proscribing the States from demanding taxes pertaining to Entries 49 and 50 of List II of the Seventh Schedule for the period before Kesoram (supra) – Taking into consideration the lapse of more than three decades since India Cement (supra) and more than a decade since the matter was referred to a larger Bench, equities will be balanced if the State governments waive the outstanding interest accrued on the principal due from the assesses – This direction applies to all assesses, regardless of whether they have approached the Supreme Court or the High Courts challenging the validity of the relevant statutes – While the States may levy or renew demands of tax, if any, pertaining to Entries 49 and 50 of List II of the Seventh Schedule in terms of the law laid down in the decision in MADA (supra) the demand of tax shall not operate on transactions made prior to 1 April 2005 – The time for payment of the demand of tax shall be staggered in instalments over a period of twelve years commencing from 1 April 2026 – The levy of interest and penalty on demands made for the period before 25 July 2024 shall stand waived for all the assesses [Paras 20, 22, 24, 25]

Case Law Cited

Mineral Area Development Authority v. M/s Steel Authority of India & Anr. Etc, 2024 INSC 554 – Clarified.

Golak Nath v. State of Punjab [1967] 2 SCR 762; India Cement Ltd. v. State of Tamil Nadu [1989] Supp. 1 SCR 692 : (1990) 1 SCC 12; State of West Bengal v. Kesoram Industries Ltd. [2004] 1 SCR 564 : (2004) 10 SCC 201; Jindal Stainless Ltd. v. State of Haryana [2016] 10 SCR 1 : (2017) 12 SCC 1; Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc [2012] 12 SCR 327 : (2012) 9 SCC 552 – relied on.

Union of India v. Mohd. Ramzan Khan [1990] Supp. 3 SCR 248 : (1991) 1 SCC 588; Managing Director, ECIL v. B Karunakar [1993] Supp. 2 SCR 576 : (1993) 4 SCC 727; Municipal Council, Kota v. Delhi Cloth & General Mills Co. Ltd. [2001] 2 SCR 287 : (2001) 3 SCC 654; Shankari Prasad Singh Deo v. Union of India [1952] 1 SCR 89 : 1951 SCC 966; Sajjan Singh v. State of Rajasthan, [1965] 1 SCR 933 : 1964 SCC OnLine SC 25; Kesavananda Bharati v. State of Kerala [1973] Supp. 1 SCR 1 : (1973) 4 SCC 225; Belsund Sugar Co. Ltd. v. State of Bihar [1999] Supp. 1 SCR 146 : (1999) 9 SCC 620; Somaiya Organics (India) Ltd. v. State of U.P. [2001] 3 SCR 33 : (2001) 5 SCC 519; Baburam v. C C Jacob (1999) 3 SCC 362; Raymond Ltd. v. MP Electricity Board [2000] Supp. 4 SCR 668 : (2001) 1 SCC 534; Sarwan Kumar v. Madan Lal Aggarwal [2003] 1 SCR 918 : (2003) 4 SCC 147; Ramesh Kumar Soni v. State of M P [2013] 1 SCR 1129 : (2013) 14 SCC 696; L.Chandra Kumar v. Union of India [1997] 2 SCR 1186 : (1997) 3 SCC 261; Ashok Kumar Gupta v. State of U.P. [1997] 3 SCR 269 : (1997) 5 SCC 201; M A Murthy v. State of Karnataka [2003] Supp. 3 SCR 327 : (2003) 7 SCC 517; Shree Mahavir Oil Mills v. State of Jammu and Kashmir [1996] Supp. 9 SCR 356 : (1996) 11 SCC 39; New Noble Educational Society v. CIT [2022] 18 SCR 1082 : (2023) 6 SCC 649; Gaurav Kumar v. Union of India, 2024 SCC OnLine SC 1841; Orissa Cement Ltd. v. State of Orissa [1991] 2 SCR 105 : (1991) Supp (1) SCC 430; Atiabari Tea Co. Ltd. v. State of Assam [1961] 1 SCR 809 : AIR 1961 SC 232; Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan [1963] 1 SCR 491 : AIR 1962 SC 1406; Association for Democratic Reforms v. Union of India [2024] 2 SCR 420 : (2024) 5 SCC 1; Charanjit Lal Chowdhury v. Union of India [1950] 1 SCR 869; State of Bihar v. Bihar Distillery Ltd. [1996] Supp. 9 SCR 479: (1997) 2 SCC 453; Mafatlal Industries Ltd. v. Union of India [1996] Supp. 10 SCR 585 : (1997) 5 SCC 53; State of Rajasthan v. J.K. Synthetics Ltd. [2011] 10 SCR 993 : (2011) 12 SCC 518; State of U P v. Prem Chopra [2022] 2 SCR 990 : 2022 SCC OnLine SC 1770; K C Ninan v. Kerala State Electricity Board [2023] 9 SCR 637 : 2023 SCC OnLine SC 663 – referred to.

Great Northern Railway Co. v. Sunburst Oil and Refining Co., 287 US 358 (1932) ; Linkletter v. Walker, 381 US 618 (1965); Chicot County Drainage Dist. v. Baxter State Bank, 308 US 371 (1940); Chevron Oil Company v. Huson, 404 US 97 (1971) – referred to.

List of Acts

Constitution of India.

List of Keywords

Doctrine of Prospective Overruling; Moulding of relief; Balancing equities.

Case Arising From

CIVIL APPELLATE/ORIGINAL JURISDICTION: Civil Appeal Nos. 4056-4064 of 1999

From the Judgment and Order dated 22.03.1999 of the High Court of Judicature at Patna, Ranchi Bench, Ranchi in C.W.J.C. No.1885/94 (R), 178/94 (R), 2251/94 (R), 2252/94 (R), 1783/9 (R), 2591 (R), 3113/93 (R), 269/9 (R) and 268/94 (R)

With

Civil Appeal No.7937 of 2019, Writ Petition (Civil) No.512 of 2018, Civil Appeal Nos.7938 and 7936 of 2019, Civil Appeal No.6221 of 2008, Civil Appeal No.5250 of 2019, Writ Petition (Civil) Nos.729 and 1029 of 2019, Special Leave Petition (Civil) No.16028 of 2021, Civil Appeal No.4286 of 2023, Civil Appeal No.5682 of 2007, Civil Appeal No.1295 of 2008, Civil Appeal Nos.874, 8269-8271, 8268, 8267, 6135, 8272 and 9458 of 2013, Special Leave Petition (Civil) No.18600 of 2013, Civil Appeal No.4332 of 2013, Civil Appeal No.5329 of 2002, Civil Appeal No.4993 of 2006, Civil Appeal Nos.8273 and 8274 of 2013, Civil Appeal No.3869 of 2014, Civil Appeal No.2632 of 2013, Civil Appeal No.14685 of 2015, Civil Appeal No.6784 of 2014, Writ Petition (Civil) No.376 of 2015, Civil Appeal No.10082 of 2016, Civil Appeal Nos.886, 4588 and 205 of 2017, Civil Appeal Nos.5728-5729 of 2018, Civil Appeal Nos.4722-4724 of 1999, Civil Appeal Nos.5333, 5335-5336 and 5332 of 2002, Civil Appeal No.1352 of 2005, Civil Appeal No.1883 of 2006, Transfer Petition (Civil) No.722 of 2006, Civil Appeal Nos.4745, 4990, 5599 and 5649 of 2006, Civil Appeal Nos.378, 665 and 1180 of 2007, Transfer Petition (Civil) Nos.481 and 906 of 2007, Civil Appeal No.3401, 3400 and 3402 of 2008, Civil Appeal No.8311 of 2011, Civil Appeal No.4293 of 2012, Civil Appeal No.2055 of 2009, Transfer Petition (Civil) No.951 of 2006, Civil Appeal Nos.4991 and 4992 of 2006, Special Leave Petition (Civil) No.763 of 2007, Special Leave Petition (Civil) No.15900 of 2007, Civil Appeal No.3403 of 2008, Civil Appeal No.98 of 2009, Transfer Petition (Civil) Nos.613 and 626 of 2009, Civil Appeal Nos.4479 and 4478 of 2010, Civil Appeal No.3643 of 2011, Civil Appeal Nos.4710-4721 of 1999, Civil Appeal No.2174 of 2009, Civil Appeal Nos.6497, 6498, 6137 and 7397 of 2008, Civil Appeal No.96 of 2009, Civil Appeal No.6499 of 2008, Civil Appeal No.97 of 2009 and Special Leave Petition (Civil) No.26160 of 2008.

Appearances for Parties

R. Venkataramani, Attorney General for India, Tushar Mehta, Solicitor General, Ms. Aishwarya Bhati, K. M. Nataraj, A.S.G., Amit Anand Tiwari, Sr. A.A.G., Tapesh Kumar Singh Sr. Adv./A.A.G., Shiv Mangal Sharma, Nachiketa Joshi, Apurv Kurup, Bishwajit Dubey, Atul Jha, K. Parameshwar, A.A.Gs., Vikrant Singh Bais, Praneet Pranav, D.A.Gs., Arvind P. Datar, Ashok K. Parija, Ajit Kumar Sinha, Dr. Manish Singhvi, A M Singhvi, Kailash Vasdev, Rakesh Dwivedi, Dr. Abhishek Manu Singhvi, Arvind Datar, S.K. Bagaria, Rupesh Kumar, Mukul Rohatgi, Vijay Hansaria, S.P. Singh, Ans Nadkarni, Harish Salve, Sr. Advs., Gp. Capt. Karan Singh Bhati, Hemendra Sharma, Ms. Chitrangda Rastravara, Abhijeet Singh, Anirudh Singh, Aishwary Mishra, Dhananjai Shekhwat, Shiv Autar Singh Sengar, Dashrath Singh, Yogeshwar Krishna, Ms. Anjali Saxena, Guntur Prabhakar, Sunil Kumar Jain, Ram Lal Roy, Shiv Singh Yadav, Mrs. Prabha Swami, Nikhil Swami, Mahesh Agarwal, Rishi Agrawala, Ninad Laud, Anshuman Srivastava, Ankur Saigal, Rajesh Kumar, Chirag Nayak, E. C. Agrawala, M.S. Ananth, Ms. S. Lakshmi Iyer, Zubin Dash, Himanshu Saraswat, Naveen Kumar, Abhimanyu Bhandari, Ms. Stuti Bisht, Ms. Roohe Hina Dua, Arav Pandit, Nitesh Bhandari, Harshit Khanduja, Prabhat Kumar Rai, Ms. Dhankshi Gandhi, Shourajeet Chakravarty, Sahib Kochhar, Ms. Nidhi Singh, Ms. Aprajita Bhardwaj, Randeep Sachdeva, Maitreya, Ms. Shreya Arora, Aditya Goyal, Ashok Kumar Singh, Shantwanu Singh, Ms. Pragya Singh, Akshay Singh, Praveen Kumar, Ms. Sunaina Kumar, Kunal Verma, Mrs. Yugandhara Pawar Jha, Mrs. Lavanya Dhawan, Ritik Gupta, Shivraj Pawar, H. D. Thanvi, Nikhil Kumar Singh, Rishi Matoliya, K. V. Mohan, K.V. Balakrishnan, R.K. Raghavan, Ms. Sumita Hazarika, Ms. Monsi Mehta, Ms. Pooja Dhaiya, Mrs. Sheela Goel, T. G. Narayanan Nair, Ms. Priya Balakrishnan, Ms. Samyuktha H Nair, Ramesh Babu M.R, Ms. Priya Balakrishan, Shibu Devasia Olickal, Ms. Swathi H. Prasad, Shantanu Sagar, Prabhat Ranjan Raj, Anil Kumar, Gunjesh Ranjan, Shashwat Anand, Mrs. Divya Mishra, M/s. Gagrat and Co., Ujjwal A. Rana, Himanshu Mehta, S. K. Verma, Ashwarya Sinha, Ms. Priyanka Sinha, Aditya Malhotra, Mrinmay Bhatmewara, Sanjay Kumar Tyagi, Divyansh Rai, Ms. Smriti Singh, Sandeep Singh, Ms. Manjeet Kirpal, P. V. Yogeswaran, M/s. Khaitan & Co., Mrs. Vanita Bhargava, Sanjeev Kumar Kapoor, Ajay Bhargava, Aakash Bajaj, Ms. Monika Singh, Gaurav Juneja, Ms. Nandita Chauhan, Avirat Kumar, Ms. Muskan Narang, Ms. Prerona Banerjee, Ms. Tijil Thakur, Ms. Aarushi Yadav, Neeraj Kumar Gupta, Pitambar Acharya, Mrs. Kirti Renu Mishra, Ms. Sharmila Upadhyay, Pawan R Upadhyay, Sarvjit Pratap Singh, Sarad Kumar Singhania, Ms. Rashmi Singhania, Yash Singhania, Dhananjya Mishra, Ms. Shally Bhasin, P. S. Sudheer, Rishi Maheshwari, Ms. Anne Mathew, Bharat Sood, Ms. Miranda Solaman, Ms. Nivedita Sudheer, Shailendra Swarup, Ms. Bindu Saxena, Ms. Aparajita Swarup, Dhruv C Saxena, Umrao Singh Rawat, Ms. Aashtha Bhardwaj, Surender Kumar Gupta, Ms. Muskan Gupta, Milind Kumar, Syed Shahid Hussain Rizvi, Ms. Nandini Sen Mukherjee, Sumit Teterrwal, Ms. Sansriti Pathak, Eklavya Dwivedi, Sukant Vikram, Aditya Pratap Singh, Prashant Bhardwaj, Amarjeet Gupta, Uddyam Mukherjee, Swapnil Pattanayak, Ms. Manisha Chava, Agnibha Chatterjee, Ms. Shagun Thakur, Ms. Bln Shivani, Rustam Singh Chauhan, Ms. Sthavi Asthana, Ashwin Joseph, Ms. Poornima Singh, Annirudh Singh, Ms. Shreya Jain, Ms. Ruchi Kohli, Abhishek Gupta, Sabarish Subramanian, C. Kranthi Kumar, Ms. Devyani Gupta, Vishnu Unnikrishnan, Ms. Tanvi Anand, Ms. Saushriya Havelia A, Naman Dwivedi, Danish Saifi, Ms. Arjoo Rawat, Sarathraj B, Khushi Mohammed, Mohit Gaurav, Anjum Parvez, Ms. Nilofar Khan, G. N. Reddy, Dr. Charu Mathur, Ms. Shambhi Jaiswal, B.S. Rajesh Agrajit, Vishal Meghwal, Abhijeet Shah, Shyamal Kumar, Mrs. Pragya Palawat, Ms. Jyoti Rana, Harsha Vinoy, Ms. Priya Nagar, Jatin Nagar, Mrs. Meetu Goswami, Siddharth Goswami, Ms. Raj Bala, Aakash Sharma, T. Harish Kumar, Sandeep Kumar Jha, Ms. Abhinandini Sharma, Saurabh Rajpal, Ms. Nidhi Jaswal, Ms. Shalini Singh, Deepak Verma, Abhishek Sharma, Amogh Bansal, Ajay Aggarwal, Adarsh Aggarwal, R.P. Aggarwal, Rajan Narain, Sunny Choudhary, Padmesh Mishra, Sandeep Sharma, Ms. Ruchira Goel, M/s. Ars Associates, Arjun Garg, V. K. Verma, Ambhoj Kumar Sinha, Mrs. Manik Karanjawala, Ms. Nandini Gore, Ms. Tahira Karanjawala, Akhil Abraham Roy, Rajat Dasgupta, Ms. Manvi Rastogi, Aman T Mehta, Mohammad Shahyan Khan, Ms. Ankita Sharma, Arjun D Singh, S. S. Shroff, Vinayak Sharma, Apoorv Shukla, Ravinder Kumar Yadav, Vinay Mohan Sharma, Mrs. Prabhleen Apoorv Shukla, Ms. Kritika Yadav, Ms. Devina Sehgal, Gaurav Kejriwal, Rajeev Kumar Dubey, Ashiwan Mishra, Kamlendra Mishra, Santosh Krishnan, Abhisth Kumar, Ramendra Mohan Patnaik, Ms. Punam Kumari, Ms. Mrinal Gopal Elker, Sandeep Sudhakar Deshmukh, Nishant Sharma, Rakesh K. Sharma, Rohit K. Singh, Pritam Bishwas, Uday Nath Tiwari, Ms. Pratibha Malviya, Ms. Manjula Gupta, Harsh Parashar, Kaushik Choudhury, Shaantanu Jain, Ms. Anusha Agarwal, Deepanshu Jain, Achintya Kumar Sinha, Kumar Ajit Singh, Manish Jain, Ms. Rashika Swarup, Sachin Sharma, Ms. Kanika Kalaiyarasan, Saksham Garg, Jyotirmoy Chatterjee, Abhishek Kumar Pandey, Raman Chitwan Singh, Ms. Pankhuri Srivastav, Ms. Shreya Mathur, Ms. Neelam Sharma, Jatinder K. Bhatia, Gurmeet Singh Makker, K. Parameshwar, Shailesh Madiyal, Siddharth Dharmadhikri, Ms. Rukhmini Bobde, Chitvan Singhal, Raman Yadav, Kartikay Aggarwal, Ameya Vikrama Thanvi, Raghav Sharma, Kanu Agarwal, Karan Lahiri, Mukesh Kumar Singh, Ms. Pragati Neekhra, Aniket Patel, Atul Dong, Prem Sunder Jha, Kedar Nath Tripathy, Mishra Saurabh, Sunil Roy, Ms. Ritika Gambhir Kohli, Omar Ahmad, Ayush Agarwal, Vikram Shah, Tuhin Dey, Nikhil Kohli, Kushank Garg, Ms. Kritika Khurana, Ms. Shrishti Jeswani, Rutwik Panda, Ms. Nikhar Berry, Ms. Anshu Malik, Rajiv Shanker Dvivedi, Ms. Tulika Mukherjee, Beenu Sharma, Venkat Narayan, Gaurav Jain, Ms. Abha Jain, Ms. Kavya Jhawar, Pawanshree Agarwal, Ms. Sneha Kalita, Abhinav Hansaria, Ms. Nandini Rai, Jaivir Singh, Ms. Sheenu Chauhan, Sanjeev Malhotra, Parijat Kishore, Santosh Salvador, Praveen Swarup, Ameet Siingh, Ms. Pareena Swarup, Ravi Kumar, Devesh Maurya, K.P. Singh, Ms. Payal Swarup, Nityanand Mahato, Nithin Chowdary Pavuluri, Ms. Shivika Mehra, Ms. Anupriya Srivastava, Ms. Anuradha Arputam, Akshaj Singh, Ms. Radhika Misra, Sunit Chaudhary, Vasu Vats, Ms. Riddhi Jad, Abhinav Gupta, Gopal Prasad, Shibashish Misra, M/s. Chambers of Kartik Seth, Kartik Seth, Ms. Shriya Gilhotra, Ms. Maithili Moondra, Prashanth Dixit, Mahesh Bhati, Saurabh Chaturvedi, Chiranjeev Sharma, Pushkin Tandon, K. R. Sasiprabhu, Jaydeep Patel, S. Mahesh Sahasranaman, Ms. Shilpa Balani, Vishnu Sharma A S, Prakhar Agarwal, Kumar Visalaksh, Udit Jain, Archit Gupta, Abhishek Vikas, M/s. Trilegal Advocates on Record, Sudipta Bhattacharjee, Onkar, Rajat Mittal, Arjyadeep Roy, Vivek Sharma, Dr. Vijay Kumar Sharma, Anand Varma, Ms. Apoorva Pandey, Ms. Adyasha Nanda, Akshat Shrivastava, Ms. Anuradha Dutt, Ms. Fereshte D. Sethna, Tushar Jarwal, Ms. Suman Yadav, Ms. Priyanka MP., Haaris Fazili, Kunal Dutt, Yash Mittal, Rahul Sateeja, Raghav Dutt, Ms. B. Vijayalakshmi Menon, Manish Kumar Saran, Advs. for the appearing parties.

Judgment / Order of the Supreme Court

Order

Dr Dhananjaya Y Chandrachud, CJI

Table of Contents*

A.

Background.................................................................................................

6

B.

Submissions.................................................................................................

6

C.

Prospective overruling...............................................................................

9

D.

A pragmatic solution to reconcile the conflicting interests...................

15

E.

Conclusion...................................................................................................

21

A. Background

1.In Mineral Area Development Authority v. Steel Authority of India,1 the nine-Judge Bench of this Court answered the questions referred in terms of the conclusions arrived at by the majority. In the process, the judgment overruled India Cement Ltd. v. State of Tamil Nadu2 and subsequent decisions of this Court which relied on it. After the pronouncement of the judgment, counsel for the assesses submitted that the judgment may be given prospective effect. Therefore, the proceedings were listed for hearing submissions on whether or not the judgment should be given prospective effect.

B. Submissions

2.Mr R Venkataramani, Attorney-General for India, Mr Tushar Mehta, Solicitor-General of India, Mr Harish Salve, Mr Abhishek Manu Singhvi, Mr Mukul Rohatgi, and Mr Arvind Datar, senior counsel, made the following submissions:

a.India Cement (supra) held the field for thirty-five years before it was overruled in MADA (supra). Demands for tax under state legislation pertaining to Entries 49 and 50 of List II of the Seventh Schedule have been stayed in terms of the law laid down in India Cement (supra). The affected parties (which include public sector undertakings) have factored in the state levies which were valid and applicable at the relevant point of time and passed them on to the end consumers. If State legislatures are allowed to renew the tax demands, end consumers will ultimately bear the burden;

b.After the decision in India Cement (supra), the levies collected by the States were protected because of validation legislation enacted by Parliament. If a ruling creates or renews a liability for the assesses, there is no protection against retrospective demands;

c.Since 2015, entities bidding for mineral concessions have submitted their financial bids on the basis of the legal position in India Cement (supra). If MADA (supra) is given retrospective effect, it will rewrite commercial bargains underpinning the mineral auctions. This Court ordinarily does not disturb past or concluded transactions in tax matters;

d.The doctrine of prospective overruling is well-established in Indian constitutional jurisprudence. MADA (supra) should be given prospective effect because it lays down new constitutional principles; and

e.Where enforcement of taxing legislation was either partially or completely interdicted by judicial orders, it should be directed that no new tax demand be made for the period before the judgment in MADA (supra), that is, before 25 July 2024.

3.On the other hand, Mr Rakesh Dwivedi, Mr Vijay Hansaria, and Mr Tapesh Kumar Singh, senior counsel, appearing for the States made the following submissions:

a.The doctrine of prospective overruling is applicable only when the judgment invalidates a legislation or introduces a new interpretation by overruling its earlier decision. The doctrine of prospective overruling has never been applied to situations where the declaration of law attaches validity to taxing legislation;

b.If MADA (supra) is applied prospectively, India Cement (supra) will have to operate till 25 July 2024. Resultantly, all relevant state legislation will be tested on the anvil of India Cement (supra) and may be declared ultra vires. This consequence is unjust and against the public interest; and

c.In State of West Bengal v. Kesoram Industries Ltd,3 a Constitution Bench upheld the validity of legislation enacted by the State of West Bengal. After Kesoram (supra), several states such as Chhattisgarh, Madhya Pradesh, and Rajasthan enacted legislation which was upheld by the respective High Courts. Giving prospective effect to MADA (supra) will result in a discriminatory situation. While West Bengal will continue to collect tax (which it has been doing since 1992), other states with similar enactments may be deprived of collecting tax from the date of their enactments.

4.We have also heard Mr Pitambar Acharya, Advocate General of the State of Orissa, who emphasized the importance of protecting the financial interests of States.

C. Prospective overruling

5.The doctrine of prospective overruling is applied when a constitutional court overrules a well-established precedent by declaring a new rule but limits its application to future situations. The underlying objective is to avert injustice or hardships.4 The doctrine was applied by the courts in the US on the basis that the US Constitution “neither prohibits nor requires retroactive effect.”5 The US Supreme Court has considered the existence of a statute or judicial decision as an “operative fact” having “consequences which cannot justly be ignored” or “erased by a new judicial declaration.”6 Therefore, it was held that the effect of a subsequent ruling as to invalidity may have to be considered in light of various aspects.7

6.In Chevron Oil Company v. Huson,8 the US Supreme Court identified three separate factors to be considered while deciding the applicability of prospective overruling: (i) the decision to be applied prospectively must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied, or by deciding an issue of first impression whose resolution was not foreshadowed; (ii) the court must weigh the merits and demerits in each case by looking to the prior history of the rule in question, its purpose and effect, and whether retrospective operation will further or retard the operation of the rule; and (iii) whether the application of nonretroactivity avoids substantial inequitable results, injustice or hardships.

7.This Court has adopted the doctrine of prospective overruling, partly inspired by the jurisprudence developed in the US. In Golak Nath v. State of Punjab, a Bench of eleven Judges of this Court was called upon to decide the validity of the Constitution (Seventeenth Amendment) Act 1964 which included certain state agrarian laws in the Ninth Schedule of the Constitution. The majority held that an amendment to the Constitution was “law” according to the definition under Article 13. Further, it was held that constitutional amendments are also subject to limitations prescribed under Article 13(2).9 Resultantly, the constitutional amendment was declared void for infringing Article 13(2). The next issue before the Court was whether the decision should be applied prospectively.

8.Golak Nath (supra) overruled earlier decisions10 of this Court which had held that Parliament can amend or abridge the fundamental rights in Part III of the Constitution. The States had relied on the earlier rulings to enact agrarian legislation. During 1950 and 1967, various amendments were carried out to the Constitution validating the agrarian reforms undertaken after Independence. In this context, Chief Justice K Subba Rao observed that giving retrospective operation to the decision “would introduce chaos and unsettle the conditions in our country.” Resultantly, it was observed that overruling the earlier decisions but restricting the ruling to the future and not to the past was a “reasonable principle” to resolve extraordinary situations:

“49. […] It is really a pragmatic solution reconciling the two conflicting doctrines, namely, that a court finds law and that it does make law. It finds law but restricts its operation to the future. It enables the court to bring about a smooth transition by correcting its errors without disturbing the impact of those errors on the past transactions. It is left to the discretion of the court to prescribe the limits of the retroactivity and thereby it enables it to mould the relief to meet the ends of justice.”

(emphasis added)

9.The Chief Justice held that the power of this Court to apply the doctrine of prospective overruling could be traced to Article 142 and formulated the following propositions about the applicability of the doctrine:

a.It can be invoked only in matters arising under the Constitution;

b.It can be applied only by this Court as it has the constitutional jurisdiction to declare law binding on all the courts in India; and

c.The scope of the retroactive operation of the law is left to the discretion of this Court to be moulded in accordance with the justice of the cause or matter before it.

10.After laying down the broad canvas, the learned Chief Justice concluded:

“53. […] What then is the effect of our conclusion on the instant case? Having regard to the history of the amendments, their impact on the social and economic affairs of our country and the chaotic situation that may be brought about by the sudden withdrawal at this stage of the amendments from the Constitution, we think that considerable judicial restraint is called for. We, therefore, declare that our decision will not affect the validity of the Constitution (Seventeenth Amendment) Act, 1964, or other amendments made to the Constitution taking away or abridging the fundamental rights. We further declare that in future the Parliament will have no power to amend Part III of the Constitution so as to take away or abridge the fundamental rights.”

(emphasis added)

11.Although Golak Nath (supra) was subsequently overruled in Kesavananda Bharati v. State of Kerala,11 the doctrine of prospective overruling has been accepted by this Court. This Court has applied the doctrine in varied contexts. The following principles emerge on the application of the doctrine:

a.The power of this Court to mould the relief claimed to meet the justice of the case is derived from Article 142;12

b.It is applied by this Court while overruling its earlier decision, which was otherwise final. It has also been applied when deciding on an issue for the first time;13

c.The object is to validate all the actions taken before the date of declaration in the larger public interest.14 The doctrine does not validate an invalid law, but the declaration of invalidation takes effect from a future date;15

d.Cases that have attained finality are saved because doing otherwise would cause unnecessary and avoidable hardships;16

e.It is applied to bring about a smooth transition of the operation of law without unduly affecting the rights of the people who acted upon the overruled law;17

f.It is a device innovated to avoid: (i) reopening settled issues, (ii) refund of amounts collected under invalid legislation, and (iii) multiplicity of proceedings;18 and

g.It is applied to avoid social and economic disruptions and give sufficient time to the affected entities and institutions to make appropriate changes and adjustments.19

12.This Court has often used its powers under Article 142 to limit the retroactivity of its decisions. In Union of India v. Mohd. Ramzan Khan,20 a three-Judge Bench of this Court held that non-furnishing of an enquiry report to a delinquent employee would amount to a violation of the rules of natural justice. The Court declared the law to be prospective, but gave relief to the employees before the Court. The correctness of Ramzan Khan (supra) came up before a Constitution Bench in Managing Director, ECIL v. B Karunakar.21 The Constitution Bench upheld Ramzan Khan (supra). It was further held that the law laid down in Ramzan Khan (supra) cannot be applied retrospectively because:

a.the legal position on furnishing the report of an enquiry officer to the delinquent employee was unsettled before Ramzan Khan (supra);

b.the authorities had proceeded on the assumption that there was no requirement to furnish a copy of the enquiry report to the delinquent officer; and

c.reopening of all disciplinary proceedings before Ramzan Khan (supra) would result in grave prejudice to the administration which outweighed the benefit to the employees.

Hence, it was held that no proceedings before the decision in Ramzan Khan (supra) should be challenged on the ground that there was a failure to furnish the enquiry report.

D. A pragmatic solution to reconcile the conflicting interests

13.In India Cement (supra), a Bench of seven Judges of this Court held that royalty is tax. Resultantly, it was held that the State legislatures have no legislative competence to impose cess on royalty under Entries 23 and 50 of List II. Fifteen years later, a Constitution Bench in Kesoram (supra) held that royalty is not a tax. It was further held that the power to levy tax on mineral rights vests with the State legislatures and is subject to any limitations laid down by Parliament by law relating to mineral development. Given this divergence, a reference was made to a larger Bench. MADA (supra) has laid down the principles for interpreting Entry 54 of List I and Entries 23 and 50 of List II. In the process, this Court overruled India Cement (supra).

14.The doctrine of prospective overruling has been applied by this Court in situations where the new declaration results in the invalidation of legislation, which would otherwise have been valid under the old declaration.22 The doctrine has also been used where this Court has declared a legislation as ultra vires.23 In the case of taxing statutes, such a declaration would make the State liable to refund all amounts collected under the invalid legislation. Therefore, this Court declares the new rule to apply prospectively not only to secure the revenues of the State but also to protect the rights and obligations crystallized by persons and entities under the old regime.24

15.This Court generally does not declare prospective overruling when upholding the legislative competence of legislatures. In Municipal Council, Kota v. Delhi Cloth & General Mills Co. Ltd.,25 this Court was called upon to decide the validity of the dharmada tax levied and collected by the Municipal Council. The High Court held that the Municipal Council was not authorized to collect the tax. Further, the High Court directed the State government to refund the collections made to the assesses. In the appeal, a two-Judge Bench of this Court upheld the competence of the Municipal Council to levy the tax. It also set aside the order of the High Court granting refunds to the assesses.

16.In Jindal Stainless Ltd. v. State of Haryana,26 a Bench of nine Judges of this Court held that a non-discriminatory tax does not per se constitute a restriction on the right to free trade, commerce and intercourse guaranteed under Article 301. This Court overruled long-standing precedents that held that taxes, except for compensatory taxes, offend Article 301.27 In that case, the counsel specifically submitted that the judgment should be given a prospective effect.28 However, the decision was given a retrospective effect. In her concurring opinion, Justice Banumathi dealt with the issue raised by the assesses about payment/refund of tax in case the validity of the legislation was upheld or otherwise. The learned Judge rejected the claim of the assesses for refund of taxes thus:

“481. It is well settled that a claim of refund can be allowed only when the claimant establishes that he has not passed on the tax burden to the consumers. No refund can be granted so as to cause windfall gain to any person when he has not suffered the burden of tax. The possibility of the tax burden having been passed on to the consumers by the assessees cannot be ruled out in the present case. Applying the law laid down above to the present case, it emerges that the assessees cannot claim refund irrespective of whether the impugned legislations are declared valid or unconstitutional. Unless the assessees establish that they have not passed on the tax burden to the consumers, they cannot make a claim for refund and unjustly enrich themselves.”

(emphasis added)

17.MADA (supra) has upheld the legislative competence of States under Entries 49 and 50 of List II. If MADA (supra) is given a prospective application, the validity of all relevant legislation enacted before the date of the decision, that is 25 July 2024, will have to be tested on the touchstone of the previous law. The previous law on the aspects of interpretation of Entry 54 of List I and Entries 23 and 50 of List II of the Seventh Schedule was unsettled because of the conflicting decisions in India Cement (supra) and Kesoram (supra). There is always a presumption of constitutionality in favor of a statutory enactment. It is based on the theory that the elected representatives are aware of the needs of the citizens and are best placed to frame policies to resolve them.29 Legislation represents the will of the people and cannot be lightly interfered with unless it transgresses constitutional principles.30 If MADA (supra) is applied prospectively, the relevant taxing legislations may conceivably be invalidated, requiring the States to refund the amount collected to the assesses. Since MADA (supra) has answered the reference and resolved the conflict, it would be iniquitous to apply the decision prospectively.

18.The learned Solicitor General relied on the Constitution Bench decision in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc.31 to draw upon the point that this Court has applied the doctrine of prospective overruling where the parties have entered into commercial relations based on the prevailing legal position. In Bharat Aluminium (supra), this Court held:

“197. The judgment in Bhatia International [(2002) 4 SCC 105] was rendered by this Court on 13-3-2002. Since then, the aforesaid judgment has been followed by all the High Courts as well as by this Court on numerous occasions. In fact, the judgment in Venture Global Engg. [(2008) 4 SCC 190] has been rendered on 10-1-2008 in terms of the ratio of the decision in Bhatia International [(2002) 4 SCC 105]. Thus, in order to do complete justice, we hereby order, that the law now declared by this Court shall apply prospectively, to all the arbitration agreements executed hereafter.”

19.The decision in Bharat Aluminium (supra) was applied prospectively to arbitration agreements concluded after the date of judgment. However, the legal context in the present batch of matters is different. Article 265 of the Constitution prescribes that no tax shall be levied or collected except by authority of law. The law must be valid in the sense that it must be within the legislative competence of the legislature and consistent with other provisions of the Constitution.32 Further, the power to levy tax is an incidence of sovereignty.33 If we are to give a prospective application to MADA (supra), it would result in a situation where the legislation enacted by the States in pursuance of their plenary powers under Entries 49 and 50 of List II may conceivably be invalidated based on a position of law which has been overruled. This would not be a constitutionally just outcome.

20.After India Cement (supra), Parliament enacted the Cess and Other Taxes on Minerals (Validation) Act 1992 to validate the imposition and collection of taxes on minerals made under the State legislations before 1991. The Central Government also increased the rates of royalty to compensate the States for the loss of mineral revenues.34 The recalibration of the royalty rates protected the States from the amount lost due to the abolition of cess on minerals and mineral rights. The assesses submit that in the interregnum they have structured their commercial bargains in terms of the prevalent law. Subsequently, Kesoram (supra) took a view that diverged from the ruling in India Cement (supra). Kesoram (supra) is an operative fact based on which many State legislatures have already enacted taxing statutes. A pragmatic solution to reconcile the financial interests of the States and the assesses can be achieved by proscribing the States from demanding taxes pertaining to Entries 49 and 50 of List II of the Seventh Schedule for the period before Kesoram (supra).

21.The learned Solicitor General has pointed out that the total amount due by the assesses (which includes public sector undertakings) to the governments is substantial and will impose a heavy financial burden on the assesses. During the pendency of the present reference, this Court passed interim orders in the tagged matters. These include (i) rejection of the stay of proceedings while allowing restitution in the event the appeal is allowed;35 (ii) grant of interim stay subject to the assesses submitting bank guarantees for the whole amount sought to be recovered;36 and (iii) direction to the States to take no coercive steps against the assesses for recovery of any demands of tax pending the appeal.37 The payment or non-payment of the dues was thus made subject to the outcome of the appeals or petitions. It is a settled legal position that a beneficiary of an interim order of stay has to pay interest on the amount withheld or not paid under the interim order in the event the outcome goes against the beneficiary.38

22.The total amount, that is the principal plus the interest, due by the assesses in the pending matters may be substantial in comparison to their total net worth. Steel Authority of India has stated on affidavit that retrospective application of MADA (supra) will lead to revival of cumulative demands to the tune of approximately Rupees three thousand crores from different States. The delay in the court proceedings should not be to the detriment of the assesses.39 Taking into consideration the lapse of more than three decades since India Cement (supra) and more than a decade since the matter was referred to a larger Bench, equities will be balanced if the State governments waive the outstanding interest accrued on the principal due from the assesses. This direction applies to all assesses, regardless of whether they have approached this Court or the High Courts challenging the validity of the relevant statutes.

23.During the proceedings, the Solicitor General submitted that a few States do not wish to collect the dues accrued before the decision in MADA (supra). It is the prerogative of the State legislatures to determine whether to forego the dues for the period before 25 July 2024.

E. Conclusion

24.The submission that MADA (supra) should be given prospective effect is rejected.

25.Bearing in mind the consequences that would emanate from the past period, the following conditionalities are directed to prevail:

a.While the States may levy or renew demands of tax, if any, pertaining to Entries 49 and 50 of List II of the Seventh Schedule in terms of the law laid down in the decision in MADA (supra) the demand of tax shall not operate on transactions made prior to 1 April 2005;

b.The time for payment of the demand of tax shall be staggered in instalments over a period of twelve years commencing from 1 April 2026; and

c.The levy of interest and penalty on demands made for the period before 25 July 2024 shall stand waived for all the assesses.

Result of the case: Directions issued.

1 Civil Appeal Nos. 4056-4064 of 1999; 2024 INSC 554 (“MADA”).

2 [1989] Supp. 1 SCR 692 : (1990) 1 SCC 12

3 (2004) 10 SCC 201

4 Great Northern Railway Co. v. Sunburst Oil and Refining Co., 287 U S 358 (1932)

5 Linkletter v. Walker, 381 US 618 (1965)

6 Chicot County Drainage Dist. v. Baxter State Bank, 308 US 371 (1940)

7 Chicot County Drainage Dist (supra)

8 404 US 97 (1971)

9 Constitution of India, Article 13

10 Shankari Prasad Singh Deo v. Union of India (1951) SCC 966; Sajjan Singh v. State of Rajasthan (1964) SCC OnLine SC 25.

11 [1973] Supp. 1 SCR 1 : (1973) 4 SCC 225

12 Belsund Sugar Co. Ltd. v. State of Bihar (1999) 9 SCC 620 [112]

13 Somaiya Organics (India) Ltd. v. State of U P (2001) 5 SCC 519 [24]

14 Baburam v. C C Jacob (1999) 3 SCC 362 [5]

15 Somaiya Organics (supra) [37]

16 Raymond Ltd. v. MP Electricity Board (2001) 1 SCC 534 [24]; Sarwan Kumar v. Madan Lal Aggarwal (2003) 4 SCC 147 [15]; Ramesh Kumar Soni v. State of M P (2013) 14 SCC 696 [21].

17 L Chandra Kumar v. Union of India (1997) 3 SCC 261 [94]; Ashok Kumar Gupta v. State of U P (1997) 5 SCC 201 [54]

18 M A Murthy v. State of Karnataka (2003) 7 SCC 517 [8]; Shree Mahavir Oil Mills v. State of Jammu and Kashmir (1996) 11 SCC 39 [27]

19 New Noble Educational Society v. CIT (2023) 6 SCC 649 [84]

20 [1990] Supp. 3 SCR 248 : (1991) 1 SCC 588

21 [1993] Supp. 2 SCR 576 : (1993) 4 SCC 727

22 Golak Nath (supra) [53]; Synthetics & Chemicals Ltd v. State of U P (1990) 1 SCC 109 [89]

23 Gaurav Kumar v. Union of India, 2024 SCC OnLine SC 1841 [108]

24 India Cement Ltd v. State of T N (1990) 1 SCC 12 [35]; Orissa Cement Ltd v. State of Orissa (1991) Supp (1) SCC 430 [69]

25 [2001] 2 SCR 287 : (2001) 3 SCC 654

26 [2016] 10 SCR 1 : (2017) 12 SCC 1

27 Atiabari Tea Co. Ltd. v. State of Assam, AIR 1961 SC 232; Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, AIR 1962 SC 1406

28 Jindal Stainless Ltd. (supra) [897]

29 Association for Democratic Reforms v. Union of India (2024) 5 SCC 1 [45]

30 Charanjit Lal Chowdhury v. Union of India [1950] SCR 869; State of Bihar v. Bihar Distillery Ltd. (1997) 2 SCC 453 [17]

31 [2012] 12 SCR 327 : (2012) 9 SCC 552

32 Mafatlal Industries Ltd. v. Union of India (1997) 5 SCC 536 [25]

33 Jindal Stainless Ltd. (supra) [17]

34 See ‘Mineral Royalties’, Government of India, Ministry of Mines (2011) 16.

35 Civil Appeal No. 5329 of 2002; Civil Appeal No. 4745 of 2006; Civil Appeal No. 4478 of 2010

36 Civil Appeal No. 6498 of 2008

37 Civil Appeal No. 874 of 2013; Civil Appeal No. 3642 of 2011; Civil Appeal No. 10082 of 2016; Civil Appeal No. 4588 of 2017.

38 State of Rajasthan v. J K Synthetics Ltd. (2011) 12 SCC 518 [23]; State of U P v. Prem Chopra, 2022 SCC OnLine SC 1770 [24]

39 See K C Ninan v. Kerala State Electricity Board, 2023 SCC OnLine SC 663 [339]

* Ed. Note: Pagination as per the original Judgment.

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Service Law – Revised Pay Scale Rules, 2008 – Constitution of India – Article 12, 14, 16 – “authority” under Article 12 – Claim for pensionary benefits under the 6th CPC, by the appellants-Saving Scheme Deposits (SSD) employees appointed as Junior Accountant, Accountant, UDC, LDC on running pay scales to manage the Compulsory SSD Fund of the Special Frontier Force (SFF) – Denied – Duties of the appellants, if were similar to those of regular employees in the Accounts Section of SFF HQ Estt.No.22 and thus, were they entitled to the pensionary benefits under the 6th CPC and denial thereof was unjustified:

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[2024] 8 S.C.R. 516 : 2024 INSC 621

Rajkaran Singh & Ors. v. Union of India & Ors.

(Civil Appeal Nos. 9721 of 2024)

22 August 2024

[Hima Kohli and Sandeep Mehta,* JJ.]

Issue for Consideration

Whether the appellants despite being classified as temporary employees of a scheme managed by contributory pooling of funds, can claim entitlement to pensionary benefits in accordance with the 6th Central Pay Commission (CPC).

Headnotes

Service Law – Revised Pay Scale Rules, 2008 – Constitution of India – Article 12, 14, 16 – “authority” under Article 12 – Claim for pensionary benefits under the 6th CPC, by the appellants-Saving Scheme Deposits (SSD) employees appointed as Junior Accountant, Accountant, UDC, LDC on running pay scales to manage the Compulsory SSD Fund of the Special Frontier Force (SFF) – Denied – Duties of the appellants, if were similar to those of regular employees in the Accounts Section of SFF HQ Estt.No.22 and thus, were they entitled to the pensionary benefits under the 6th CPC and denial thereof was unjustified:

Held: Yes – Appellants’ employment bears substantial hallmarks of regular government service, despite their formal classification as temporary employees – Appellants were admittedly appointed on a regular pay scale indicating a formalised employee-employer relationship akin to permanent government employee – Appellants’ career paths were managed like permanent employees indicating a level of governmental oversight and control consistent with regular government service – Provisions of leave and other benefits, including grant of Assured Career Progression reinforces the similarity between the appellants’ employment conditions and those of regular government employees – Their charter of duties involving the maintenance of accounts for the SSD Fund is an assignment of public importance closely related to governmental functions – Applying the principles laid down in Ajay Hasia case which established various tests to determine whether an entity can be considered an instrumentality or agency of the Government and thus an “authority” under Article 12 of the Constitution of India to the present case, the appellants meet the characteristics of regular government servants – Appellants served SFF HQ Estt. No. 22 for over three decades – While the duration of service alone may not be determinative, it is a significant factor when considered in conjunction with the other aspects of their employment – Such long-term service suggests a level of permanence and integration into the governmental structure that belies their classification as temporary employees – Appellants performed duties similar to those of regular employees in the Accounts Section of SFF HQ Estt. No.22 and served the government for decades in a manner indistinguishable from regular employees – Administrative orders and Board proceedings also consistently treated the appellants as equivalent to regular government employees – Denial of pensionary benefits solely on the basis of their temporary status not justifiable and is arbitrary and violates the fundamental rights guaranteed by Articles 14 and 16 – Impugned judgment of the High Court unsustainable, set aside – Appellants entitled to the benefits of the 6th CPC including the pensionary benefits under the Revised Pay Scale Rules, 2008 in the same terms as afforded to their peers in the Accounts Section of SFF HQ Estt. No. 22. [Paras 27-29, 32-36]

Constitution of India – Article 12 – “authority” under – An entity, when is an instrumentality/agency of the Government – Tests laid down in Ajay Hasia and Others v. Khalid Mujib Sehravardi and Others – Assessment of nature of employee-employer relationships – Discussed.

Case Law Cited

Ajay Hasia and Others v. Khalid Mujib Sehravardi and Others [1981] 2 SCR 79 : (1981) 1 SCC 722; Pradeep Kumar Biswas v. Indian Institute of Chemical Biology and Others [2002] 3 SCR 100 : (2002) 5 SCC 111; Vinod Kumar and Others v. Union of India [2024] 1 SCR 1230 : (2024) SCC OnLine SC 1533 – relied on.

State of Karnataka & Ors. v. M.L. Kesari & Ors. [2010] 9 SCR 543 : (2010) 9 SCC 247; Surinder Singh and Another v. Engineer-in-Chief, C.P.W.D. and Another (1986) 1 SCC 639; State of Punjab & Ors. v. Jagjit Singh & Ors. [2016] 7 SCR 350 : (2017) 1 SCC 148; Union of India v. Dineshan K.K. [2008] 1 SCR 100 : (2008) 1 SCC 586; Randhir Singh v. Union of India & Ors. [1982] 3 SCR 298 : (1982) 1 SCC 618 – referred to.

List of Acts

Revised Pay Scale Rules, 2008; Constitution of India; Central Civil Services (Pension) Rules, 1972.

List of Keywords

Special Frontier Force (SFF); Compulsory Saving Scheme Deposits (SSD) Fund; Maintenance of accounts for SSD Fund; Temporary employees; Temporary status; Classified as temporary employees; Formal classification as temporary employees; Regular employees; Duties similar to regular employees; Instrumentality or agency of the Government, “Authority” under Article 12 of the Constitution of India; Employee-employer relationships; Pensionary benefits; Pensionary benefits denied; Regular government servants; Regular government employees; 4th, 5th, 6th Central Pay Commissions; Revised Pay Scale Rules.

Case Arising From

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 9721 of 2024

From the Judgment and Order dated 25.04.2017 of the High Court of Delhi at New Delhi in WP No. 3543 of 2017

Appearances for Parties

Ms. Neha Rathi, Kamal Kishore, Ms. Kajal Giri, Sanyam Jain, Kislay Panday, Hariom Yaduvanshi, Ms. S. Harini, Avi Dhankar, Ms. Gyanvi Roy, Arjun Yaduvanshi, Dr. Monika Gusain, Advs. for the Appellants.

K M Nataraj, A.S.G., Vatsal Joshi, B K Satija, Sharath Nambiar, Divyanshu Kumar Srivastava, Siddharth Venkatesh Thakur, Arvind Kumar Sharma, Advs. for the Respondents.

Judgment / Order of the Supreme Court

Judgment

Mehta, J.

1.Heard.

2.Leave granted.

3.The present appeal by special leave, is preferred on behalf of the appellants, assailing the judgment dated 25th April, 2017 passed by the High Court of Delhi in Writ Petition (Civil) No. 3543 of 2017, dismissing the writ petition filed by the appellants and upholding the judgment dated 4th October, 2016 passed by the Central Administrative Tribunal, Principal Bench, New Delhi (hereinafter being referred to as the ‘Tribunal’) in Original Application Nos. 60 of 2013 and 459 of 2013. The Tribunal had rejected the appellants’ claim for benefits of the replacement scales of the Revised Pay Rules, 2008 (hereinafter referred to as ‘RP Rules’) in accordance with the 6th Pay Commission Report, with effect from 1st January, 2006.

Brief facts: -

4.The facts in a nutshell, are that the appellants (Appellant No. 1 to Appellant No. 6) were appointed to manage the Compulsory Saving Scheme Deposits (hereinafter referred to as SSD) Fund of the Special Frontier Force (hereinafter referred to as SFF) in various positions such as Junior Accountant, Accountant, Upper Division Clerk (UDC), and Lower Division Clerk (LDC), on running pay scales. The SSD Fund is a welfare initiative funded through the personal contributions of the SFF troops from their salaries. Upon having been engaged as above, the appellants also received Traveling Allowance (TA), Dearness Allowance (DA), House Rent Allowance (HRA), Special Security Allowance (SSA), Gratuity, Bonus, Winter Allowance, and High-Altitude Allowance, etc. along with salary as per the 4th and 5th Central Pay Commissions (‘CPC’).

5.On 1st January, 2006, the Union of India implemented the 6th Central Pay Commission and made the same applicable to all government employees of the SFF. However, these benefits were not extended to the appellants i.e. SSD employees and instead, an ad-hoc amount of Rs. 3,000/- per month was given to each of them. For the sake of brevity, the details of the appellants with reference to their appointments, retirement, length of service, and their salaries in accordance with the different CPC are illustrated in a tabular form below: -

Name of the Appellant

Appointment Date

Post

Date of Retirement

Service rendered

Salary paid initially

Salary paid after 2010

Rajkaran Singh (‘A1’)

1st January, 1975

Lower Division Clerk

31st August 2012

37 years and 8 months

Rs. 220-270

As per the 5th CPC & Rs. 3,000/- instead of 6th CPC

Jagat Ram Joshi (‘A2’)

25th April, 1975

Lower Division Clerk

28th February 2013

37 years and 10 months

Rs. 220-270

As per the 5th CPC & Rs. 3,000/- instead of 6th CPC

Vishu Dutt Tripathi (‘A3’)

2nd May, 1978

Lower Division Clerk

31st July 2013

35 years and 3 months

Rs. 260-400

As per the 5th CPC & Rs. 3,000/- instead of 6th CPC

HK Naithani (‘A4’)

27th November,1982

Lower Division Clerk

31st August 2018

35 years and 9 months

Rs. 260-400

As per the 5th CPC & Rs. 3,000/- instead of 6th CPC

Shiv Kumar (‘A5’)

25th May, 2005

Junior Accountant

18th February 2014 (VRS)

8 years and 9 months

Rs. 5000-8000

As per the 5th CPC & Rs. 3,000/- instead of 6th CPC

Surat Singh (‘A6’)

16th July, 1977

Lower Division Clerk

1st January 2009 (VRS)

31 years and 5 months

Rs. 260-290

As per the 5th CPC & Rs. 3,000/- instead of 6th CPC

6.Upon attaining the age of superannuation i.e., 60 years, the appellants claimed pensionary benefits under the 6th Central Pay Commission (‘CPC’). On 28th July, 2011, appellant No. 1 (Rajkaran Singh) filed a representation to the respondent No. 1 seeking pensionary benefits under the 6th CPC, however, the same was rejected vide order dated 15th October, 2012, on the ground that he was not a government employee and had not been appointed by following any Recruitment Rules, and therefore, the Central Civil Services (Pension) Rules, 1972(hereinafter being referred to as ‘CCS Rules’), would not apply to him. The other appellants (appellant No. 2-appellant No. 6) also filed similar representations to the respondents which met a similar fate on the same reasoning.

7.Aggrieved by the rejection of their claim for pensionary benefits under the 6th CPC, the appellants filed Original Applications before the Tribunal, laying a challenge to the non-implementation of the benefits of the 6th CPC and also raising a grievance about the lack of General Provident Fund (GPF) provisions in the SSD Fund, despite they having been appointed to posts created under the authorisation of the Cabinet Secretariat and after following the due process of law in making the appointments.

8.The Tribunal, vide order dated 4th October, 2016 dismissed the Original Applications and rejected the appellants’ claims holding that they were not employed in government service. The Tribunal referred to Rule 2 of the CCS Rules, and held that the appellants were not entitled to the benefits under the CCS Rules as their salaries were neither paid from the Consolidated Fund of India, the Contingent Fund or the Public Accounts Funds, nor were their services governed by statutory obligations i.e. no recruitment rules were applicable to them. The Tribunal further held that the appellants were not recruited under an advertisement issued where people at large were given the opportunity of appearing; there was no question of any obligation cast under the Factories Act for running the SSD Fund, as it was not covered under the definition of a factory; and the services performed were not statutory in nature because the SSD Fund is a voluntary contribution made by the SFF employees. The Tribunal found that the SSD Fund was financed by voluntary contributions from SFF employees and hence the services rendered therein did not qualify as government service.

9.The appellants challenged the Tribunal’s order by filing a writ petition before the Delhi High Court which came to be rejected and the Tribunal’s order was affirmed, taking note of the fact that the appellants were appointed for the purpose of maintaining the SSD Fund, a welfare scheme run through personal contributions made by the troops of SFF. The High Court held that while the troops of SFF, undoubtedly, are government servants, however, that by itself would not clothe the appellants with the status of government servants. The impugned order dated 25th April, 2017 passed by the High Court is subjected to challenge in this appeal by special leave.

Submissions on behalf of the appellants: -

10.Ms. Neha Rathi, learned counsel representing the appellants, vehemently and fervently contended that the appellants had served the department for more than three decades to maintain the accounts of the SSD Fund and therefore, not granting them pensionary and other service benefits in accordance with the 6th CPC on a surmise, that their employment was temporary/non-governmental in nature, tantamounts to grossly arbitrary action, violative of the fundamental rights of the appellants as guaranteed under the Constitution of India.

11.Learned Counsel submitted that the appellants satisfy all the characteristics of regular government servants, considering the fact that they were appointed in a regular pay scale and received increments and promotions at par with those being admitted to other government employees, along with leave and other benefits and emoluments. Additionally, they were granted the benefits of Assured Career Progression (ACP).

12.Learned counsel further contended that the nature of the work assigned to the appellants was similar to the work of the regular employees of the Accounts Section of SFF HQ Estt. No.22. Moreover, permanent employees of the SFF Accounts are also working with the SSD Staff for maintaining the SSD Fund, performing the same duties. Learned counsel submitted that following the transfer of the SSD Funds Accounts to HQ SFF w.e.f. 1st April 2003, the SSD Funds are being managed by the Deputy Director (AG) at HQ SFF, under the overall control of the Inspector General of SFF. Consequently, the appellants’ services have been brought within the jurisdiction of HQ SFF and fall under the aegis of the Inspector General of SFF. It was further contended that for all other purposes, the appellants have been treated at par with regular employees of the Accounts Section, which places them at same level with government employees. Therefore, the appellants are entitled to receive the same benefits as the regular employees of the Accounts Section and also to receive the pensionary as well as consequential benefits flowing from the 6th CPC.

13.Learned counsel also submitted that the denial of pensionary benefits to the SSD Fund staff, while granting the same to the SFF personnel and other SFF Accounts staff, constitutes an arbitrary and discriminatory decision, violating Article 14 of the Constitution of India. The pensionary benefits were extended to SFF personnel from 1st January, 2009 and to other SFF Accounts staff employed through the same procedure at SSF HQ Estt. No. 22, under the Commandant’s authority, from the onset of their employment (initially temporary for six months). Despite being part of the same establishment and governed by the same Commandant, the appellants working at the SSD Fund were unjustly excluded from these benefits. This differential treatment lacks a reasonable basis and is discriminatory. Learned counsel highlighted the comparative statement of benefits and allowances granted to SSD Fund and SFF permanent employees as per the following table:

Particulars

SSD Staff

SFF Permanent employees

Basic Pay

Yes

Yes

Dearness allowance

Yes

Yes

TA/DA (on deputation)

Yes

Yes

House Rent Allowance

Yes

Yes

Transport Allowance

Yes

Yes

Children Education Allowance

No

Yes

High Altitude Allowance

Yes

Yes

Winter Allowance

Yes

Yes

Ration Allowance

Yes

Yes

Special Security Allowance

Yes

Yes

Gratuity

Yes

Yes

Leave Encashment (Not paid at the time of retirement after 6th CPC)

No

Yes

Yearly Bonus

Yes

Yes

Yearly increments

Yes

Yes

LTC

Yes

Yes

ACR (till 6th CPC)

Yes

Yes

Maintenance of Service Book (till 6th CPC)

Yes

Yes

ACP for higher pay scale

Yes

Yes

Promotions

Yes

Yes

Member of SSD Provident Fund

Yes

Yes

Member of Group Insurance Policy

Yes

Yes

CGHS facility (at New Delhi)

No

Yes

Medical facility at Military Hospital

Yes

Yes

14.Learned counsel further contended that the responsibility to devise a suitable scheme for the regularisation of employees who have served for more than ten years lies with the respondents i.e., the State. She submitted that the respondent had rejected the appellants’ representation on a purely arbitrary ground that they were not appointed through a rigorous selection process and that the CCS (Conduct) Rules, 1964 did not apply to them. She urged that the appointment of the appellants was conducted under due process of selection, following the rules of the Cabinet Secretariat, and cannot be deemed irregular or illegal simply for the lack of statutory recruitment and service rules. Learned counsel in this regard placed reliance upon the decision of this Court in the case of the State of Karnataka & Ors. v. M.L. Kesari & Ors.1

15.Learned counsel further submitted that the case of the appellants is squarely covered by the principle of “equal pay for equal work” and that the right of equal wages conferred upon temporary employees flows, inter alia, from Article 39 of the Constitution of India. This principle of “equal pay for equal work” expounded through various decisions of this Court constitutes the law, which is binding upon all the Courts in India and consequently upon the respondents. It also extends to temporary employees performing the same duties and responsibilities as regular employees. Learned counsel in this regard placed reliance upon the decisions of this Court in the cases of Surinder Singh and Another v. Engineer-in-Chief, C.P.W.D. and Another,2 State of Punjab & Ors. v. Jagjit Singh & Ors.,3 Union of India v. Dineshan K.K.,4 and Randhir Singh v. Union of India & Ors.5

On these grounds, learned counsel for the appellants implored the Court to accept the appeal, set aside the impugned judgments and direct the respondents to release in favour of the appellants, the benefits of the replacement scales set out in the RP Rules issued in pursuance of the 6th CPC report with effect from 1st January, 2006.

Submissions on behalf of the Respondents: -

16.Mr. K.M. Nataraj, learned ASG, representing the respondents, vehemently and fervently opposed the submissions advanced by the learned counsel for the appellant. He submitted that the SSD Fund is a welfare scheme, introduced with effect from 1st October 1964, for force personnel on the analogy of the Armed Force Personnel Provident Fund to cater to their welfare measures. It is a contributory fund subscribed by force personnel for their better future and no government funds are involved in the SSD Fund, thereby, establishing a clear alienation from the Central government. The government has no control what to talk of deep and pervasive control over the affairs of the fund.

17.Learned ASG further submitted that the appellants were hired on a temporary basis to manage the SSD Fund, which is generated from the difference between the interest earned on the invested amount and the annual interest paid to subscribers. The recruitment, selection, and promotion process for SSD Fund employees (i.e. appellants) did not adhere to the procedures applicable to regular Central government employees. Since the appellants were hired temporarily, they were not subjected to probation or given confirmation letters as permanent employees and unlike Central government employees, there was no provision for the annual evaluation of their performance. The terms of engagement of these employees explicitly outlined their temporary status and the associated conditions, including the potential for termination without prior notice. This aligns with the fundamental nature of their employment, which does not confer upon them, the status or entitlements typically associated with regular government employees.

18.Learned ASG also submitted that the appellants’ salaries, which were finally increased by Rs. 3,000/- per month in September 2009, are paid from the SSD Fund, which is contributed by SFF personnel and involves no government money. Furthermore, following the 4th and 5th CPC, the Government examined and extended limited benefits thereof to the SSD Fund employees (i.e., appellants), but with specific reference to maintain the fund’s objectives. These conditions include not comparing their pay scales to those recommended by the 4th CPC in future references and considering pay increments or Dearness Allowance instalments on an ad hoc basis, when necessary. He urged that the Commandant, SFF HQ Estt. No. 22, holds discretionary authority over the SSD Fund in accordance with the Cabinet Secretariat Order No. EA/EF-EST-13/75 dated 11th October, 1976. This order underscores the fact that the fixation of pay for these employees is not mandated to adhere to scales applicable to Central government employees.

19.Learned ASG further submitted that the claim of benefits accorded under the 6th CPC and RP Rules relied upon by the appellants is totally unfounded. These benefits are expressly designed for and applicable exclusively to Central government employees and do not extend to individuals engaged in roles akin to those overseeing contributory schemes like the SSD Fund. While certain benefits were extended to the fund employees post the 5th CPC, the feasibility of aligning their compensation with the 6th CPC was constrained by the financial limitations of the SSD Fund. Any enhancements in pay, allowances, or promotions were dispensed judiciously as welfare measures, guided by the operational imperatives and financial health of the SSD Fund.

20.Learned counsel further submitted that the appellants’ entitlements, including any financial assistance and promotions, were provided in consideration of their service and the prevailing socio-economic conditions, and do not establish a precedent for future claims. The respondents maintain that these distinctions are essential to uphold the integrity and sustainability of the SSD Fund, which operates independently of governmental appropriations and is solely reliant on contributions from subscribing SFF personnel.

On these grounds, the learned Additional Solicitor General implored the Court to dismiss the appeal and affirm the impugned judgments.

Discussion and Conclusion: -

21.We have given our thoughtful consideration to the submissions advanced at a bar and have perused the impugned judgments. With the assistance of learned counsel for the parties, we have thoroughly examined the material available on record.

22.The core issue presented for adjudication by the Court is whether the appellants herein, despite being classified as temporary employees of a scheme managed by contributory pooling of funds, can claim entitlement to pensionary benefits in accordance with the 6th CPC.

23.To address this issue, we must first consider the legal framework established by this Court in various landmark decisions, particularly in Ajay Hasia and Others v. Khalid Mujib Sehravardi and Others6 and Pradeep Kumar Biswas v. Indian Institute of Chemical Biology and Others.7 While Ajay Hasia (supra) and Pradeep Kumar Biswas (supra) primarily dealt with determining whether a corporation could be considered an instrumentality of the state, the principles laid down therein provide valuable guidance in assessing the nature of employee-employer relationships. The relevant paragraphs of Ajay Hasia (supra) are reproduced below: -

“7. …..If a corporation is found to be a mere agency or surrogate of the Government, “in fact owned by the Government, in truth controlled by the Government and in effect an incarnation of the Government”, the court, must not allow the enforcement of fundamental rights to be frustrated by taking the view that it is not the Government and therefore not subject to the constitutional limitations. We are clearly of the view that where a corporation is an instrumentality or agency of the Government, it must be held to be an “authority” within the meaning of Article 12 and hence subject to the same basic obligation to obey the Fundamental rights as the Government.

8. We may point out that this very question as to when a corporation can be regarded as an “authority” within the meaning of Article 12 arose for consideration before this Court in R.D. Shetty v. International Airport Authority of India [(1979) 3 SCC 489]….

The court then addressed itself to the question as to how to determine whether a corporation is acting as an instrumentality or agency of the Government and dealing with that question, observed:

“A corporation may be created in one of two ways. It may be either established by statute or incorporated under a law such as the Companies Act, 1956 or the Societies Registration Act, 1860. Where a corporation is wholly controlled by Government not only in its policy-making but also in carrying out the functions entrusted to it by the law establishing it or by the charter of its incorporation, there can be no doubt that it would be an instrumentality or agency of Government. But ordinarily where a corporation is established by statute, it is autonomous in its working, subject only to a provision, often times made, that it shall be bound by any directions that may be issued from time to time by Government in respect of policy matters. So also a corporation incorporated under law is managed by a board of Directors or committees of management in accordance with the provisions of the statute under which it is incorporated. When does such a corporation become an instrumentality or agency of Government? Is the holding of the entire share capital of the Corporation by Government enough or is it necessary that in addition there should be a certain amount of direct control exercised by Government and, if so, what should be the nature of such control? Should the functions which the corporation is charged to carry out possess any particular characteristic or feature, or is the nature of the functions immaterial? Now, one thing is clear that if the entire share capital of the corporation is held by Government, it would go a long way towards indicating that the corporation is an instrumentality or agency of Government. But, as is quite often the case, a corporation established by statute may have no shares or shareholders, in which case it would be a relevant factor to consider whether the administration is in the hands of a board of Directors appointed by Government though this consideration also may not be determinative, because even where the Directors are appointed by Government, they may be completely free from Governmental control in the discharge of their functions. What then are the tests to determine whether a corporation established by statute or incorporated under law is an instrumentality or agency of Government? It is not possible to formulate an all-inclusive or exhaustive test which would adequately answer this question. There is no cut and dried formula, which would provide the correct division of corporations into those which are instrumentalities or agencies of Government and those which are not.”

The court then proceeded to indicate the different tests, apart from ownership of the entire share capital: (SCC pp. 508 & 509, paras 15 & 16)

“…..

……There is also another factor which may be regarded as having a bearing on this issue and it is whether the operation of the corporation is an important public function. It has been held in the United States in a number of cases that the concept of private action must yield to a conception of State action where public functions are being performed. Vide Arthur S. Miller: The Constitutional Law of the ‘Security State’ [5 10 Stanford Law Review 620, 644] …. It may be noted that besides the so-called traditional functions, the modern State operates a multitude of public enterprises and discharges a host of other public functions. If the functions of the corporation are of public importance and closely related to Governmental functions, it would be a relevant factor in classifying the corporation as an instrumentality or agency of Government. This is precisely what was pointed out by Mathew, J., in Sukhdev v. Bhagatram [(1975) 1 SCC 421] where the learned Judge said that ‘institutions engaged in matters of high public interest of performing public functions are by virtue of the nature of the functions performed Government agencies. Activities which are too fundamental to the society are by definition too important not to be considered Government functions’.”

….

These observations of the court in the International Airport Authority case have our full approval.

9. The tests for determining as to when a corporation can be said to be an instrumentality or agency of Government may now be culled out from the judgment in the International Airport Authority case…..We may summarise the relevant tests gathered from the decision in the International Airport Authority case as follows:

“(1) One thing is clear that if the entire share capital of the corporation is held by Government, it would go a long way towards indicating that the corporation is an instrumentality or agency of Government. (SCC p. 507, para 14)

(2) Where the financial assistance of the State is so much as to meet almost entire expenditure of the corporation, it would afford some indication of the corporation being impregnated with Governmental character. (SCC p. 508, para 15)

(3) It may also be a relevant factor … whether the corporation enjoys monopoly status which is State conferred or State protected. (SCC p. 508, para 15)

(4) Existence of deep and pervasive State control may afford an indication that the corporation is a State agency or instrumentality. (SCC p. 508, para 15)

(5) If the functions of the corporation are of public importance and closely related to Governmental functions, it would be a relevant factor in classifying the corporation as an instrumentality or agency of Government. (SCC p. 509, para 16)

(6) ‘Specifically, if a department of Government is transferred to a corporation, it would be a strong factor supportive of this inference’ of the corporation being an instrumentality or agency of Government.” (SCC p. 510, para 18)

If on a consideration of these relevant factors it is found that the corporation is an instrumentality or agency of Government, it would, as pointed out in the International Airport Authority case, be an “authority” and, therefore, ‘State’ within the meaning of the expression in Article 12.

….

11. We may point out that it is immaterial for this purpose whether the corporation is created by a statute or under a statute. The test is whether it is an instrumentality or agency of the Government and not as to how it is created. The inquiry has to be not as to how the juristic person is born but why it has been brought into existence. The corporation may be a statutory corporation created by a statute or it may be a government Company or a Company formed under the Companies Act, 1956 or it may be a society registered under the Societies Registration Act, 1860 or any other similar statute. Whatever be its genetical origin, it would be an “authority” within the meaning of Article 12 if it is an instrumentality or agency of the Government and that would have to be decided on a proper assessment of the facts in the light of the relevant factors. The concept of instrumentality or agency of the Government is not limited to a corporation created by a statute but is equally applicable to a Company or society and in a given case it would have to be decided, on a consideration of the relevant factors, whether the Company or society is an instrumentality or agency of the Government so as to come within the meaning of the expression “authority” in Article 12.”

(emphasis supplied)

24.This Court in Ajay Hasia (supra) established several tests to determine whether an entity can be considered an instrumentality or agency of the Government, and thus an “authority” under Article 12 of the Constitution of India. These tests include but are not limited to ;

1.Extent of financial support from the government;

2.Deep and pervasive control of the government;

3.Functions performed are of public importance and closely related to governmental functions;

4.Entity enjoys monopoly status conferred or protected by the State;

5.The government department has been transferred to the entity.

25.In Pradeep Kumar Bishwas (supra), this Court held that the tests laid down in Ajay Hasia (supra) are relevant for the purpose of determining whether an entity is an instrumentality or agency of the State. Neither all the tests are required to be answered in positive nor a positive answer to one or two tests would suffice. It will depend upon a combination of one or more of the relevant factors depending upon the essentiality and overwhelming nature of such factors in identifying the real source of governing power, if need be by removing the mask or piercing the veil disguising the entity concerned.

26.The relevant paragraphs of Pradeep Kumar Biswas (supra) are reproduced below: -

“98. We sum up our conclusions as under:

(1) Simply by holding a legal entity to be an instrumentality or agency of the State it does not necessarily become an authority within the meaning of “other authorities” in Article 12. To be an authority, the entity should have been created by a statute or under a statute and functioning with liability and obligations to the public. Further, the statute creating the entity should have vested that entity with power to make law or issue binding directions amounting to law within the meaning of Article 13(2) governing its relationship with other people or the affairs of other people — their rights, duties, liabilities or other legal relations. If created under a statute, then there must exist some other statute conferring on the entity such powers. In either case, it should have been entrusted with such functions as are governmental or closely associated therewith by being of public importance or being fundamental to the life of the people and hence governmental. Such authority would be the State, for, one who enjoys the powers or privileges of the State must also be subjected to limitations and obligations of the State. It is this strong statutory flavour and clear indicia of power — constitutional or statutory, and its potential or capability to act to the detriment of fundamental rights of the people, which makes it an authority; though in a given case, depending on the facts and circumstances, an authority may also be found to be an instrumentality or agency of the State and to that extent they may overlap. Tests 1, 2 and 4 in Ajay Hasia [Ajay Hasia v. Khalid Mujib Sehravardi (1981) 1 SCC 722] enable determination of governmental ownership or control. Tests 3, 5 and 6 are “functional” tests. The propounder of the tests himself has used the words suggesting relevancy of those tests for finding out if an entity was instrumentality or agency of the State. Unfortunately thereafter the tests were considered relevant for testing if an authority is the State and this fallacy has occurred because of difference between “instrumentality and agency” of the State and an “authority” having been lost sight of sub silentio, unconsciously and undeliberated. In our opinion, and keeping in view the meaning which “authority” carries, the question whether an entity is an “authority” cannot be answered by applying Ajay Hasia [Ajay Hasia v. Khalid Mujib Sehravardi, (1981) 1 SCC 722] tests.

(2) The tests laid down in Ajay Hasia case [Ajay Hasia v. Khalid Mujib Sehravardi (1981) 1 SCC 722] are relevant for the purpose of determining whether an entity is an instrumentality or agency of the State. Neither all the tests are required to be answered in the positive nor a positive answer to one or two tests would suffice. It will depend upon a combination of one or more of the relevant factors depending upon the essentiality and overwhelming nature of such factors in identifying the real source of governing power, if need be by removing the mask or piercing the veil disguising the entity concerned. When an entity has an independent legal existence, before it is held to be the State, the person alleging it to be so must satisfy the court of brooding presence of the Government or deep and pervasive control of the Government so as to hold it to be an instrumentality or agency of the State.”

(emphasis supplied)

27.Applying these principles to the case at hand, we find compelling evidence on record which establishes that the appellants meet the characteristics of regular government servants. Admittedly, the appellants were appointed on a regular pay scale. This factor strongly indicates a formalised employee-employer relationship akin to permanent government employees. In Ajay Hasia (supra), this Court observed that the nature of financial arrangements can indicate governmental character. The use of government pay scales for the appellants suggests a level of integration into the government’s financial structure that goes beyond typical temporary employment. During the course of their service, the appellants received increments and promotions comparable to those of other government employees. This pattern of career progression mirrors that of regular government servants and suggests a deep and pervasive governmental control over their employment terms. In Ajay Hasia (supra), the degree of state control was highlighted as a key factor for identifying State instrumentalities. The chart(supra) provides positive evidence to show that the appellants’ career paths were managed like permanent employees indicating a level of governmental oversight and control consistent with regular government service. Furthermore, the office order dated 12th March 2003, issued by the Deputy Director (AG), which transferred the SSD Funds Accounts to HQ SFF under the overall control of the Inspector General of SFF, along with the associated documents and clerical staff, demonstrates that administrative recognition of the appellants’ services was made which is integral to the governmental structure. This transfer of the entire cadre of SSD Fund to the HQ SFF aimed at ensuring better utilization and monitoring of the fund, fortifies the concept that the appellants possessed the characteristics of regular government servants.

28.The provisions of leave and other benefits, including grant of Assured Career Progression (ACP), further reinforces the similarity between the appellants’ employment conditions and those of regular government employees. These benefits are typically associated with formalized, long-term employment relationships within the government sector. The proceedings of the Board of Officers dated 23rd June, 2006 unequivocally acknowledged that the terms and conditions, including the pay and allowances payable to SSD Fund staff, were fixed in March 1978 in accordance with those applicable to the ministerial staff employed in the Accounts Section of SSF HQ Estt. No. 22. The extension of Assured Carrer Progression (ACP) and alignment of terms and conditions with regular government employees, in particular, is an affirmative action indicating that the government viewed and treated these employees as long-term assets, despite their ostensibly temporary status. Substantially, the appellants’ charter of duties involving the maintenance of accounts for the SSD Fund, can be considered as an assignment of public importance closely related to governmental functions. This aligns with another test laid down in Ajay Hasia (supra), which considers the public importance and governmental nature of the functions performed. The management of funds generated from the personal provident fund contributions of the entire SFF cadre is a critical function that has a direct bearing on the public interest and the effective operation of government services.

29.Indisputably, the appellants have served SFF HQ Estt. No. 22 for over three decades. While the duration of service alone may not be determinative, it is a significant factor when considered in conjunction with the other aspects of their employment. Such long-term service suggests a level of permanence and integration into the governmental structure that belies their classification as temporary employees. The appellants performed duties similar to those of regular employees in the Accounts Section of SFF HQ Estt. No.22. This similarity in job functions further blurs the line between the appellants’ status and that of regular government employees, suggesting that the distinction may be more formal than substantive. The extension of significant elements from the 4th and 5th CPC to the appellants further cements their plea of being employed in governmental functions.

30.Learned ASG appearing for the respondents has argued that the recruitment, selection, and promotion processes for SSD Fund employees did not follow the procedures used for regular employees and that the appellants were not subjected to probation or given confirmation letters as permanent employees. However, this Court finds such argument to be untenable as it fails to account for the substantive nature of the appellants’ employment over an extended period running into three decades. In this regard, reference may be made to the judgment of this Court in the case of Vinod Kumar and Others v. Union of India,8 wherein this Court noted;

“5. Having heard the arguments of both the sides, this Court believes that the essence of employment and the rights thereof cannot be merely determined by the initial terms of appointment when the actual course of employment has evolved significantly over time. The continuous service of the appellants in the capacities of regular employees, performing duties indistinguishable from those in permanent posts, and their selection through a process that mirrors that of regular recruitment, constitute a substantive departure from the temporary and scheme-specific nature of their initial engagement. Moreover, the appellants’ promotion process was conducted and overseen by a Departmental Promotional Committee and their sustained service for more than 25 years without any indication of the temporary nature of their roles being reaffirmed or the duration of such temporary engagement being specified, merits a reconsideration of their employment status.

6. The application of the judgment in Uma Devi (supra) by the High Court does not fit squarely with the facts at hand, given the specific circumstances under which the appellants were employed and have continued their service. The reliance on procedural formalities at the outset cannot be used to perpetually deny substantive rights that have accrued over a considerable period through continuous service. Their promotion was based on a specific notification for vacancies and a subsequent circular, followed by a selection process involving written tests and interviews, which distinguishes their case from the appointments through back door entry as discussed in the case of Uma Devi (supra).

7. The judgment in the case Uma Devi (supra) also distinguished between “irregular” and “illegal” appointments underscoring the importance of considering certain appointments even if were not made strictly in accordance with the prescribed Rules and Procedure, cannot be said to have been made illegally if they had followed the procedures of regular appointments such as conduct of written examinations or interviews as in the present case. Paragraph 53 of the Uma Devi (supra) case is reproduced hereunder:

“53. One aspect needs to be clarified. There may be cases where irregular appointments (not illegal appointments) as explained in S.V. Narayanappa [(1967) 1 SCR 128], R.N. Nanjundappa [(1972) 1 SCC 409] and B.N. Nagarajan [(1979) 4 SCC 507] and referred to in para 15 above, of duly qualified persons in duly sanctioned vacant posts might have been made and the employees have continued to work for ten years or more but without the intervention of orders of the courts or of tribunals. The question of regularisation of the services of such employees may have to be considered on merits in the light of the principles settled by this Court in the cases above referred to and in the light of this judgment. In that context, the Union of India, the State Governments and their instrumentalities should take steps to regularise as a one-time measure, the services of such irregularly appointed, who have worked for ten years or more in duly sanctioned posts but not under cover of orders of the courts or of tribunals and should further ensure that regular recruitments are undertaken to fill those vacant sanctioned posts that require to be filled up, in cases where temporary employees or daily wagers are being now employed. The process must be set in motion within six months from this date. We also clarify that regularisation, if any already made, but not sub judice, need not be reopened based on this judgment, but there should be no further bypassing of the constitutional requirement and regularising or making permanent, those not duly appointed as per the constitutional scheme.”

8. In light of the reasons recorded above, this Court finds merit in the appellants’ arguments and holds that their service conditions, as evolved over time, warrant a reclassification from temporary to regular status. The failure to recognize the substantive nature of their roles and their continuous service akin to permanent employees runs counter to the principles of equity, fairness, and the intent behind employment regulations.”

(emphasis supplied)

31.As held in Vinod Kumar (supra), “the essence of employment and the rights thereof cannot be merely determined by the initial terms of appointment when the actual course of employment has evolved significantly over time.”

32.This Court fully associates with this principle and finds it wholly applicable in the present case, especially in light of the administrative orders and Board proceedings referred to supra that have consistently treated the appellants as equivalent to regular government employees. The mere classification of employees as ‘temporary’ or ‘permanent’ is not merely a matter of nomenclature but carries significant legal implications, particularly in terms of service benefits and protections.

33.In the present case, the totality of circumstances indicates that despite their formal classification as temporary employees, the appellants’ employment bears substantial hallmarks of regular government service. The denial of pensionary benefits solely on the basis of their temporary status, without due consideration of these factors, appears to be an oversimplification of their employment relationship with the government. This approach runs the risk of creating a class of employees who, despite serving the government for decades in a manner indistinguishable from regular employees, are deprived of the benefits and protections typically accorded to government servants.

34.Thus, we are of the opinion that the denial of pensionary benefits to the appellants is not tenable or justifiable in the eyes of law as the same is arbitrary and violates the fundamental rights as guaranteed by Articles 14 and 16 of the Constitution of India. It is indeed relevant to note that the appellants’ batch seems to be the last in their genre of SSD Fund temporary employees and thus, manifestly, the direction to extend the benefits of the 6th CPC and the RP Rules to the appellants shall not form a precedent so as to have a detrimental effect on the financial health of the SSD Fund.

35.In the wake of the discussion made hereinabove, we are of the view that the impugned judgment rendered by the High Court does not stand to scrutiny and the same is unsustainable in the eyes of law and is set aside.

36.The respondents are directed to extend the benefits of the 6th Central Pay Commission including the pensionary benefits under the Revised Pay Scale Rules, 2008 to the appellants herein in the same terms as are being afforded to their peers in the Accounts Section of SFF HQ Estt. No. 22.

37.The appeal is allowed in these terms. No costs.

38.Pending application(s), if any, shall stand disposed of.

Result of the case: Appeals allowed.

1 [2010] 9 SCR 543 : (2010) 9 SCC 247

2 (1986) 1 SCC 639

3 [2016] 7 SCR 350 : (2017) 1 SCC 148

4 [2008] 1 SCR 100 : (2008) 1 SCC 586

5 [1982] 3 SCR 298 : (1982) 1 SCC 618

6 [1981] 2 SCR 79 : (1981) 1 SCC 722

7 [2002] 3 SCR 100 : (2002) 5 SCC 111

8 [2024] 1 SCR 1230 : 2024 SCC OnLine SC 1533

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Service Law – Incentives – Grant of two advance increments on acquiring Ph.D. degree to Scientists in Agricultural Research Service – Employees working on the technical side in the Agricultural Research Service seeking the same benefit – Allowed by the tribunal and the High Court – Correctness:

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[2024] 8 S.C.R. 507 : 2024 INSC 622

Indian Council of Agricultural Research Through the Director General and Anr. v. Rajinder Singh and Ors.

(Civil Appeal Nos. 97-98 of 2012)

22 August 2024

[J.K. Maheshwari and Rajesh Bindal,* JJ.]

Issue for Consideration

Employees working on the technical side in the Agricultural Research Service, if entitled to two advance increments given to the Scientists in Agricultural Research Service on acquiring Ph.D. degree in their service career.

Headnotes

Service Law – Incentives – Grant of two advance increments on acquiring Ph.D. degree to Scientists in Agricultural Research Service – Employees working on the technical side in the Agricultural Research Service seeking the same benefit – Allowed by the tribunal and the High Court – Correctness:

Held: Benefit of two advance increments for acquiring Ph.D. qualification was part of the pay package of the Scientists – Similar benefit was not extended to the technical personnel – For technical personnel, the appellants had adopted the revised scales as recommended by the Government of India for Central Government employees – Merely because Study Leave Regulations, 1991 were extended to technical personnel, would not entitle them to other benefits which are available to the scientists – Merely after having Ph.D. qualification, the technical personnel would not become eligible for grant of two advance increments when the same has not been recommended for them – In any institution incentives may be given to a particular category of employees to get higher qualifications during service, considering their job requirements – Merely because different set of employees, who may be working in aid but governed by different set of rules and having different duties to discharge also obtain that qualification, would not entitle them to the benefits which were extended to different set of employees by the competent authority – Art. 14 would not have any application – Tribunal and High Court erred by equating technical personnel and scientists and granting respondents advance increments to which they are not entitled to – Additional qualification merely makes them eligible for the higher post in the different cadre and not to grant them benefits, attached to the higher post in a different cadre – Impugned orders passed by the High Court and the tribunal set aside. [Paras 9, 10, 10.1, 10.2, 11]

List of Acts

Societies Registration Act, 1860; Agricultural Research Service Study Leave Regulations, 1991; Constitution of India.

List of Keywords

Incentives; Two advance increments on acquiring Ph.D. degree; Scientists in Agricultural Research Service; Employees on the technical side in the Agricultural Research Service.

Case Arising From

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.97-98 of 2012

From the Judgment and Order dated 21.07.2010 of the High Court of Delhi at New Delhi in WP Nos. 3364 and 3365 of 2004

Appearances for Parties

Praveen Swarup, Ameet Siingh, Ms. Payal Swarup, Ms. Aditi Singh, Devesh Maurya, Syed Zafar Husain, Baij Nath Yadav, Ravi Kumar, K. P. Singh, Advs. for the Appellants.

Dr. K. B. Sounder Rajan, Sr. Adv., Sudarshan Rajan, Mahesh Kumar, Ms. Srishti Sharma, Ramesh Rawat, Rohit Bhardwaj, Hitain Bajaj, Sachin S, Ashutosh Gupta, Nand Ram, Advs. for the Respondents.

Judgment / Order of the Supreme Court

Judgment

Rajesh Bindal, J.

1.The appellants are aggrieved by an order dated 21.07.2010 passed by the High Court1 in Writ Petition2 filed against the order dated 18.07.20033 passed by the Tribunal4. The Tribunal had allowed the application filed by the respondents, extending them the benefit of the scheme5 dated 27.02.1999 in terms of which a scientist was eligible for two advance increments as and when he acquires a Ph.D. degree in his service career.

2.Briefly the facts as are available on record are that the appellant No.1-Indian Council of Agricultural Research (ICAR) before this Court is a Society registered under the Societies Registration Act, 1860. It is engaged in agricultural research. On 01.10.1975, the appellant No.1 constituted two services namely Agricultural Research Service (in short “ARS”) and Technical Service (in short “TS”). These are governed by two sets of Service Rules. The nature of duties performed by the incumbents employed under the two services are totally different.

2.1The pay scales of the employees of the Central Government were revised on the recommendations of the Fifth Central Pay Commission. The appellant/ICAR issued a scheme vide letter dated 27.02.1999 to all field offices informing them about the revision of pay scales of the scientists working with the appellants. The communication provided for existing pay scales and the corresponding new pay scales for the Scientists, Scientists (senior scale), Scientists (selection grade/Senior Scientists), Principal Scientist and other Senior Officers.

2.2Clause (ii) of the aforesaid communication provided for incentives for Ph.D./M.Phil. Sub-clause (d) which is relevant for the case at hand provided that a ‘scientist will be eligible for two advance increments as and when he acquires a Ph.D. degree in his service career’. The aforesaid clause is the root cause for the litigation in question.

2.3The respondents who are working on technical side in Indian Agricultural Research Institute (for short “IARI”), a unit under the appellant No.1 approached the Tribunal by filing an application6 for a direction to the appellants for grant of advance increments to them in terms of letter dated 27.02.1999 on acquiring the Ph.D. degree as was applicable in the case of scientists. The Tribunal vide order dated 06.06.2002 directed the appellants to consider the representation made by the respondents claiming the aforesaid relief.

2.4In terms of the directions issued by the Tribunal, the appellant/ICAR considered the representation and rejected the same vide memorandum dated 02.08.2002. It was mentioned therein that the appellant had categorized its staff as scientific, technical, administrative, auxiliary and supporting staff. Each of the categories were governed by separate set of rules and had independent cadres. The recruitment of the scientists was at the entry level of ₹8,000-13,500 and made on All India basis through a written competitive examination followed by interview whereas in technical service there were 3 categories i.e. grades I, II and III. The recruitment in these categories was made at the institute level. The appellants had adopted UGC pay scales for scientists in ARS with effect from 01.01.1986 and award of advance increments to the scientists in ARS for having Ph.D. qualification during service was part and parcel of the pay package applicable to the scientists. As respondents are part of the technical service, the pay scales as recommended by the Government of India for the Central Government employees were adopted. There was no additional incentive to the respondents for Ph.D. qualification, if obtained during service career.

2.5Aggrieved against the aforesaid order, the respondents filed OA No. 2939/2002 before the Tribunal. The same was allowed vide order dated 18.07.2003. Aggrieved against the same the appellants preferred Writ Petitions before the High Court, which were dismissed. The said order is under challenge in the present appeals.

3.Learned Counsel for the appellants submitted that the Tribunal, while allowing the application filed by the respondents had travelled beyond the jurisdiction vested in it. It was wrongly opined that both categories of employees, namely the scientists and technical personnel, are working with the appellant for the same object, hence, there should not be any distinction. If the scientist were granted two advance increments on acquiring Ph.D. qualification during service, the respondents should not have been discriminated. The Tribunal could not have ventured into this aspect of the matter as the competent authority, in its wisdom, had granted the benefit of two advance increments to the category of employees, who deserved it. Merely because other sets of employees also obtained the same qualification, they will not be eligible to get those benefits.

3.1He further submitted that extension of ARS Study Leave Regulations, 1991 to the technical personnel had nothing to do with grant of advance increments. It was merely to encourage them to improve their qualifications with no promise of any financial benefit. The writ petition was dismissed by a cryptic order. The High Court upheld the order of the Tribunal on wrong premise by invoking Article 14, trying to equate the scientist and technical staff, merely because they are working with the appellants. They are governed by different sets of rules and belong to different cadres.

3.2The prayer in the present appeal is to set aside the order of the Tribunal as well as the High Court and rejection of the application filed by the respondents before the Tribunal.

4.On the other hand, learned Senior Counsel appearing for the respondents relied upon Entry 66 in List I to the 7th Schedule attached to the Constitution of India which deals with determination of standards in institutions for higher education or research and scientific and technical institutions. The submission was that the words ‘research’ and ‘technical’ have been mentioned in the same Entry. Even if the scientists were directly engaged in research, the respondents are working on the technical side. As the added qualification of Ph.D., made their assistance in research better, the relief claimed by them was rightly allowed by the impugned order.

4.1It was further submitted that Study Leave Regulations, 1991 which were applicable to the scientists were made applicable to the technical personnel, in terms of which they were entitled to get study leave for a period of 3 years for undertaking Ph.D. program. This establishes that they were being equated with the scientists and the study leave granted for undertaking program was to enable them to assist the scientists in a better way. Hence, the benefit of two advance increments, which are admissible to the scientists, was rightly awarded to the respondents.

4.2He further referred to a Circular7 dated 01.05.1995 in terms of which the names of the technical staff who have obtained Ph.D. qualification will also be permitted to be included in the research projects/papers/reports, in addition to other scientists. It was further argued that when the technical personnel acquires a Ph.D. qualification, they become eligible for lateral entry to the scientists cadre. Hence, the qualification has relation with the scientist cadre.

4.3The submission is that there is no error in the orders passed by the High Court as well as the Tribunal. Grant of advance increments merely encouraged the respondents and the other technical personnel to improve their qualifications and contribute more efficiently to the research.

5.Heard Learned Counsel for the parties and perused the relevant referred record.

6.The root cause of the litigation is the circular dated 27.02.1999 vide which the pay scales of the scientists working with the appellants were revised after acceptance of the recommendations by the Fifth Central Pay Commission. The relevant clause is extracted below:

“(ii) Incentives for Ph.D./M.Phil

(a)Four and two advance increments will be admissible to those who hold Ph.D. and M.Phil degrees, respectively, at the time of recruitment as Scientists.

(b)One increment will be admissible to those scientists with M.Phil degree who acquire Ph.D. within two years of recruitment.

(c)A Scientist with Ph.D. will be eligible for two advance increments when he moves into the Selection Grade as Sr. Scientists.

(d)A Scientist will be eligible for two advance increments as and when he acquires a Ph.D. degree in his service career.”

(emphasis supplied)

7.The argument raised by the appellants is that it constituted two services, namely Agricultural Research Service (ARS) and Technical Service (TS) on 01.10.1975. Both the services are governed by their independent sets of rules having different cadres and different promotional avenues.

8.Reliance was placed on Bye-laws 21 of Rules and Bye-laws of ICAR, which classified scientific and technical categories. The same is extracted below:

“(A) SCIENTIFIC: Scientific personnel shall be those who are engaged in agricultural research and education (including extension educational whether in physical, statistical, biological, engineering, technological or social sciences. This category shall also include persons engaged in planning, programming and management of scientific research.

(B) TECHNICAL: Technical Personnel shall be those, who perform technical service in support of research and education whether in the Laboratory, Workshop or Field, or in areas like Library, Documentation, Publication and Agricultural Communication.”

9.At the time of argument, it was not denied by the respondents that they are governed by different set of rules, have their own channel of promotion, and different qualifications prescribed for recruitment. The duties assigned to them are also different as compared to the scientists, who are engaged in core work of agricultural research and education whereas the respondents being technical personnel provide support in different areas. It is further the stand of the appellants that the scientists belonging to Agricultural Research Service are getting UGC pay scales with effect from 01.01.1986. The benefit of two advance increments for acquiring Ph.D. qualification was part of their pay package. Similar benefit was not extended to the technical personnel. For technical personnel, the appellants had adopted the revised scales as recommended by the Government of India for Central Government employees.

10.Merely because Study Leave Regulations, 1991 were extended to technical personnel, this would not entitle them to other benefits which are available to the scientists. The idea of grant of study leave for pursuing Ph.D. to the technical personnel was only to enable them to improve their qualifications.

10.1Merely after having Ph.D. qualification, the technical personnel will not become eligible for grant of two advance increments when the same has not been recommended for them. In any institution incentives may be given to a particular category of employees to get higher qualifications during service, considering their job requirements. Merely because different set of employees, who may be working in aid but governed by different set of rules and having different duties to discharge also obtain that qualification, will not entitle them to the benefits which were extended to different set of employees by the competent authority. In the said sequel of facts, Article 14 of the Constitution of India will not have any application.

10.2The Tribunal and High Court have erred by equating technical personnel and scientists and granting respondents advance increments to which they are not entitled to. The argument raised by the respondents that after obtaining the Ph.D. qualification, the Technical Staff are entitled to be considered for lateral entry into the scientists is also to be noticed and rejected as the additional qualification merely makes them eligible for the higher post in the different cadre and not to grant them benefits, which are attached to the higher post in a different cadre. Similar is the position regarding Entry 66 in List I to the 7th Schedule attached to the Constitution of India. The contents of the Entries in 7th Schedule only prescribe limits of the powers of the Parliament or the State Legislature to enact laws.

11.For the reasons mentioned above, we find merit in the present appeals. The same are allowed. The impugned orders passed by the High Court and the Tribunal are set aside. The Original Applications filed by the respondents before the Tribunal are dismissed. No order as to costs.

Result of the case: Appeals allowed.

1 High Court of Delhi

2 W.P.(C) Nos. 3364-65/2004

3 Passed in OA No. 2939/2002

4 Central Administrative Tribunal, Principal Bench, New Delhi

5 Order No. 1 (15)98-Per IV of Indian Council of Agricultural Research, Krishi Bhavan, New Delhi

6 Original Application No. 1536/2002

7 No. 25-4/95-Per V of the Indian Agricultural Research Institute, New Delhi.

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