Civil Appeal No 661 of 1971
653 From the Judgment and order dated 28101969 of the Orissa High Court in OJC No 165 of 1966
SP Pandey for the Appellant
GS Chatterjee for Respondent No 1
RK Garg and JR Dass for Respondent No 2
The Judgment of the Court was delivered by VENKATARAMIAH J
With effect from 111948 a number of princely States which were situated within the territories of the present State of Orissa were merged with the Province of Orissa as it then existed
On such merger the High Schools within the said princely States also came under the jurisdiction of the Province of Orissa
The said High Schools belonged to two categories namely A  type schools which were full fledged High Schools which were actually sending candidates for the matriculation examination and B  type schools which were incomplete schools not sending candidates for the matriculation examination
On the said High Schools being taken over by the Province of Orissa the teachers serving in the said High Schools came under the control of the Government of Orissa
It then became necessary to make an order to regulate the services of the said teachers
The Government of Orissa in the Education Department issued a letter dated 511949 to the Director of Public Instruction on the subject
The relevant pertion thereof is extracted below In the States the High Schools other than those at District Headquarters mentioned above will be of two types
The complete High Schools will be A  type High Schools and the incomplete High Schools B  type High Schools
The A  type schools will be similar to Government High Schools other than those at District Headquarters
The services of the staff of such High Schools will be pensionable and transferable and the teachers will get pay and dearness allowances at the rates prescribed for Government servants
Government will bear the whole of the recurring and non recurring costs B  type High Schools will be Government managed
654 The staff will get pay and allowances at rates prescribed for Government servants
The Headmasters of those schools will be in the upper division of the SES The services of those teachers will not be pensionable
They will have the benefits of the Contributory Provident Fund to which Government will contribute at the rate of Re 1 in the rupee of the salary
As regards recurring expenses of those schools Government will meet the difference between the standard cost and income from fees and other local subscriptions
As regards non recurring expenditure Government will meet two thirds of the cost
The standard cost for the B  type Government managed High Schools will consist of the following items a       b The total contribution on Provident Fund deposited at the rate of Re  1 in the rupee and c      
The Inspector of Schools will be the managing agent on behalf of the Government and the Headmaster will be the correspondent of a B  type Government managed High School
The appellant was appointed as an Assistant Teacher on a pay of Rs70 per month in the pay scale of Rs70 140 plus admissible dearness allowance in one of the B  type High Schools by the Inspector of Schools on 1561953 after the commencement of the Constitution of India
He continued to work as an Assistant Teacher in one or the other of the B  type High Schools to which he was transferred until August 1 1964 when the State Government published a rationalisation scheme for integrating the services of the teachers in different types of High Schools in the State of Orissa namely Zilla Schools A  type Government High Schools B  type High Schools Ex District Board High Schools and Ex Anchal High Schools hereinafter collectively referred to as integrated High Schools
The relevant part of the scheme reads thus No
18027 E Government of Orissa Education Department Resolution 1st Aug 1964 Sub Rationalisation of High Schools in the State
655 Government have under their own management quite a few types of High Schools in which conditions of service of the employees vary category to category
This ununiformity in the patterns and in the conditions of service has not only evoked public criticism but also created certain administrative difficulties and tends to lowering of standards in the institutions
It is for these reasons that Government had for some time past under their consideration the question of rationalisation of the following different types of High Schools in the State whose number is noted against each
Zilla Schools 18 2 A  type Govt
High School
52 3 B  type High Schools 22 4
Ex District Board High Schools
Ex Anchal High Schools
6 After careful consideration Government have now decided that the five types of High Schools mentioned above should be converted into a single type of Govt
School with effect from 1st June 1964
Since the employees of the B  type High Schools are in receipt of pay and allowances on the scales applicable to Government servants the question of fixation of their pay and allowances does not arise
They will continue to draw their salary that they are drawing on the date of conversion
In respect of the incumbents of B  type High Schools who are governed by the contributory provident fund rules their subscriptions if any in the fund together with the Government contribution on the date of conversion may either be refunded to them or be credited to the General Provident Fund account to be opened afresh according to their option and all the employees may be brought under the Orissa General Provident Fund Rules
After conversion Government shall not contribute anything towards the Employees  Contributory Provident Fund
All the employees of B  type High Schools will be brought over to pensionable service from the date of conversion of the schools into Government Schools
         656 The seniority of the B  type Ex District Board and Ex Anchal Schools as among themselves will be determined by their length of continuous service in their respective cadres in the old Schools
But for the purpose of reckoning their seniority in Government service their services will be counted from the date of conversion of the Schools into Government school   Underlining by us Aggrieved by the terms of the rationalisation scheme referred to above relating to i the Contributory Provident Fund and ii the seniority of teachers who were working in B  type High Schools the appellant filed a writ petition in the High Court of Orissa questioning the discriminatory treatment meted out to him and other teachers in B  type High Schools
The appellants contended that even though he had been appointed in a B  type High School he should be treated as having entered the service under the State Government on 1561953 when he was appointed as an Assistant Teacher in a B  type High School that the clause in the scheme of 1964 which provided that for the purpose of reckoning seniority in Government service the services of teachers in B  type High Schools would be counted from the date of conversion of the schools into Government schools which had the effect of wiping of the previous service put in by them in the said schools was discriminatory and that the terms relating to the Contributory Provident Fund were invalid
The petition was resisted by the State Government pleading inter alia that the decision of the Government dated 511949 being an act of State  its effect could not be challenged by the appellant even though he had entered service in the year 1953
The High Court upheld the validity of the scheme and dismissed the writ petition
It however recommended to the Government to modify the terms relating to the Provident Fund scheme applicable to the teachers of B  type High Schools
Aggrieved by the judgment of the High Court the appellant has filed this appeal by special It is urged on behalf of the appellant that the State Government was wrong in treating him as having entered the service under the State Government only from June 1 1964 although he had been appointed by the Inspector of Schools in the year 1953
It is argued that merely because the appellant was appointed in a B  type High School which once belonged to a princely State he could not be denied the benefits available to all other teachers in Government service
It is further submitted that the case of the Government that the Government was 657 running B  schools as merely agents was wholly untenable
It is no doubt true that the B  type High Schools were formerly in the princely States and that on the merger of the States the then Government of the Province of Orissa passed an order on 511949 stating that the B  type High Schools would be governed and managed by the Inspector of Schools on behalf of the Government and the Headmasters would be the correspondents of B  type Government managed High Schools
It is also true that till the commencement of the Constitution of India the position of B  type High Schools and the teachers working in them were being regulated in accordance with the terms contained in the order dated 511949
But on the commencement of the Constitution of India all the territories which immediately before the commencement of the Constitution were either comprised in the Province of Orissa or were being administered as if they formed part of that Province became and constituted the State of Orissa vide Entry No 10 in the First Schedule to the Constitution of India The State Government was under an obligation to discharge its executive functions with respect to education by virtue of Entry 11 of the Seventh Schedule to the Constitution as it then existed in respect of all the schools including B  type schools
A High School which once belonged to the princely states became a Government High School with effect from the commencement of the Constitution and it could not be anything else
The Inspector of Schools could no longer function as the managing agent on behalf of the State Government and the B  type High School could no longer be a Government managed High School 
The teachers working therein became teachers holding posts under the Government since there was no other authority which owned the B  type High Schools after January 26 1950 because there were no territories within the State of Orissa which could be considered as territories administered by the Government as if they formed a part of the State which was the case until January 26 1950
Though the princely States were subject to the paramountcy of the British Crown they were considered to be foreign States by the British Indian Provinces
Any action taken in respect of them or their subjects by the British Indian Provinces was an act of State but its effect could not be extended beyond January 26 1950 because after that date there was no longer any foreign Government
The princely States had gone out of existence
It is well settled that the doctrine of an act of State  cannot be pleaded by a State as a defence against its own citizens
An act of State  is an act done in relation to a foreigner by the sovereign power of a country or its agent either previously authorised or subsequently ratified
Such an act cannot be questioned or made the subject of legal 658 proceedings in any Court of law
But such a situation would not arise A between the State Government and a citizen like the appellant who joined service after the commencement of the Constitution
It is appropriate to refer here to the decision of the House of Lords in Johnstone vs Pedlar  in which the nature of an act of State  arose for consideration
Lord Atkinson observed at pages 278 279 thus The best definition I think of an act of State as well as the descriptions of the consequences flowing from it is that given in the judgment of Lord Kingsdown in the case of Secretary of State for India vs Kamachee Boye Sahaba
 In that case the Rajah of Tanjore a native independent sovereign who was by virtue of certain treaties under the protection of the East India Company in exercise of their sovereign power and in trust for the British Government seized the Raj of Tanjore and the whole property of the deceased Rajah as an escheat on the ground that the dignity of the Raj was extinct for want of a male heir and that this property lapsed to the British Government
It was held first as it was held in Buron vs Denman 2Ex 167 that an act done by an agent of the Government though in excess of his authority on being ratified and adopted by the Government was of the same authority as if it had originally been directed by the Government that the effect of the ratification is in the language of Parke B
In Buron vs Denman Ibid
188 9 this that it only leaves a remedy against the Crown such as it is and exempts from all liability the person who commits the trespass and second that the seizure made by the British Government acting as a sovereign power through its delegate the East India Company was an act of State to inquire into the propriety of which a municipal Court had no jurisdiction
Lord Kingsdown in delivering the judgement of the Privy Council said 13 Moo
PC 77 86 Acts done in the execution of these sovereign powers were not subject to the control of the municipal courts either of India or Great Britain
 In the same decision Lord Phillimore said at page 295 thus The defence set up in the present case is sometimes 659 called the defence of an act of State
As regards this way of looking at it I cannot put the matter better or more tersely than as I found it put in one of the reasons given by the successful plaintiffs in their case as respondents before the Privy Council in Walker vs Baird 1892 AC 491 494 Because between Her Majesty and one of her subjects there can be no such thing as an act of State And this proposition was finally accepted in the case of Walker vs Baird   494 The High Court was therefore in error in upholding the plea that the order dated section 11949 could not be questioned by the appellant who had joined service after the commencement of the Constitution
There is also no rational basis for refusing to give the benefit of the service rendered by a teacher working in a B  type High School after January 26 1950 either for purposes of seniority or for purposes of computing the retirement benefits
It may be open to the State Government while integrating the services of teachers working in different kinds of institutions to introduce a scheme of rationalisation which may have the effect of modifying the conditions of service of different groups of Government servants
It cannot however by a stroke of pen deny the benefit of the entire past service rendered by one group of such Government servants
The effect of the Government scheme was that while for purposes of inter se seniority amongst the teachers of B  type High Schools Ex District Board High Schools and Ex Anchal High Schools that is integrated High schools the length of continuous service in their respective cadres in their old schools was to be counted for purposes of reckoning seniority vis a vis teachers in Government schools their service was to be counted only from the date of conversion of those High Schools to Government Schools ie from June 1 1964
Consequently all teachers who had been in Government Schools immediately prior to June 1 1964 became seniors to the teachers working in B  type High Schools Ex District Board High Schools and Ex Anchal High Schools
The scheme put forward by the Government appears to us to be an irrational one
We may at this stage mention that when this case was heard earlier by a bench of three learned Judges of this Court consisting of VR Krishna Iyer RS Pathak as he then was and o Chinnappa Reddy JJ
it was observed by the learned Judges on January 3 1 1980 thus We have been taken through the judgment of the High 660 Court and the relevant facts by Shri Sikri and we are satisfied that the reasons given by the High Court are far from satisfactory
On the other hand no serious consideration of the ground of discrimination in ignoring the past service of the teachers has been given by the High Court
 After making the above order the learned Judges granted time to the State Government to evolve a fresh scheme for integration of the services of the teachers in the schools referred in the scheme of 1964 with the teachers employed in the High Schools which were Government Schools all along
It is reported to us that the Government was not willing either to modify the existing scheme or to formulate a new scheme in a reasonable way
We respectfully agree with the above observations made by the three learned Judges
We are of the view that the High Court was in error in upholding the terms of the scheme insofar as the question of seniority was concerned
We are therefore constrained to reverse the judgment of the High Court insofar as the question relating to the validity of the terms of the scheme pertaining to the seniority of the teachers working in the schools referred to in it is concerned
We hold that the clause in the scheme which reads But for the purpose of reckoning their seniority in Government service their services will be counted from the date of conversion of the schools into Government schools is void
We direct the State Government to treat on and after January 26 1950 the service of the teachers of B  type High Schools Ex District Board High Schools and Ex Anchal High Schools as the service under the State Government
It is open for the State Government to evolve a reasonable formula for integrating the cadres of these teachers with the cadres of teachers in High Schools which have been under the Government all along
Before bringing about such integration the Government may formulate reasonable principles for equating the posts in the Government High Schools with the posts in the B  type High Schools Ex District Board High Schools and Ex Anchal High Schools having regard to the minimum qualification for the posts pay responsibilities etc
In the light of the said principles the Government shall prepare a seniority list
Thereafter
it shall proceed to make promotions of teachers to higher cadres
We may at this stage state that the learned counsel for the appellant and other teachers working in B  type High Schools Ex District Board High Schools and Ex Anchal High Schools has submitted that these teachers do not insist upon promotions being given to them with retrospective effect even if it is found that they are entitled to it but they only pray that they may be promoted to the vacancies which may occur in the higher cadres hereafter
We express our 661 appreciation of the stand taken by the learned counsel in this regard
The State Government shall therefore promote these teachers to higher posts as and when vacancies arise hereafter on the basis of their rank in the seniority list if they are found fit for such promotion
The learned counsel has further submitted that if the State Government finds it difficult to integrate the teachers belonging to B  type High Schools and teachers of other integrated schools with the teachers working in Government High Schools the State Government may at least consider the question of treating the two groups of teachers as belonging to separate cadres and reserve certain percentage of posts for being filled up only by the teachers of B  type High Schools Ex District Board High Schools and Ex Anchal High Schools as was the case in State of Punjab vs Joginder Singh  1963 Supp 2 SCR 169
The Government is at liberty to do so if it finds it to be convenient
The order of the High Court is therefore modified to the above extent and the State Government shall prepare seniority list and make promotions accordingly within six months from today in the light of the above observations
As regards the question of the Contributory Provident Fund Scheme is concerned we are informed that it has been satisfactorily settled by the State Government
We therefore express no opinion on that question
The appeal is disposed of accordingly


Summary:
 By a notification issued in 1964 under section l04 of the Rajasthan Municipalities Act 1959 the State Government revised the rate of octroi levied on cloth by the municipal board of Abu Road which was challenged by a batch of writ petitions
A Single Judge of the High Court held that the provisions of section l041 of the Act were valid but the notification in respect of the municipal board of Abu Road relating to cloth was bad
During the pendency of the appeals before the Division Bench sub section
2 of section l04 was added by section 12 of the Rajasthan Municipalities Amendment Act of 1978
The Division Bench overlooked this amendment and reiterated the reasons of the Single Judge and dismissed the appeals
By another notification issued in 1976 the State Government revised the levy of octroi on all types of cloth in respect of Sujangarh Municipal Board which was challenged by another batch of writ petitions relying on the decision in the Abu municipal board cases but the Single Judge as also a different Division Bench which dealt with the matter did not entertain the challenge in view of the amended provision of section l04 of the Act
These two groups of appeals arose from the two batches of writ petitions aforesaid
Allowing the appeals preferred by the Municipal Board of Abu Road and dismissing the appeals relating to Sujangarh Municipality
 HELD There is no dispute as to exigibility of octroi
Every municipality under section 7 of the Rajasthan Municipalities Act 1959 is a body corporate
People residing within each municipal area can be classified as one group different from residing in any other municipality since octroi is to be levied by the municipality as provided in section l041 subject to the control regarding the rates of levy by the State Government
The plea of discrimination on the basis of the rates prevalent in another municipality cannot be entertained
The scheme in section 104 takes note of the position that local conditions and needs varied and accord 585 ingly both in the proviso to sub section
1 as also in sub section
2 itself emphasis on that feature has been put
It is thus open to the State Government on the basis of local conditions and needs to prescribe different rates in relation to different municipalities in the matter of taxes to be levied varying duty of octroi is therefore not open to challenge
The Division Bench while dealing with the appeals of Abu Road municipality should have taken note of the amendment of sub section
2 with retrospective effect
588B E 2
In some municipalities the levy is on the value of goods while in others it is on the basis of weight
Here again the State Government seems to have applied its mind and has authorised charge of octroi on weight basis taking into consideration the special circumstances
In bigger municipalities where there are wholesale markets particularly of cloth
a reduced rate of octroi has been prescribed to encourage larger import
In smaller municipalities where the import is for direct consumption the levy is on ad valorem basis at a higher rate
The State Government seems to have also taken into consideration that in smaller municipalities there is not much demand for costly and fine cloth which have higher prices while the position is otherwise in bigger municipal areas
This appears to be the justification for adopting the weight basis in respect of larger municipalities and ad valorem basis for the smaller municipalities
This seems to be a legitimate basis and we do not think any valid objection is available against this differential treatment
Law is well settled that if unequals are treated unequally there is no discrimination and article 14 of the Constitution is not available to be invoked
588E H