ON Civil Appeal No 3726 of 1984
From the Judgment and Order dated 881981 of the Guja rat High Court in LPA No 145 of 1978
BK Mehta and MV Goswami for the Appellant
GA Shah and MN Shroff for the Respondent
The Judgment of the Court was delivered by RATNAVEL PANDIAN J
This is an appeal by special leave from the judgment of the Gujarat High Court dismissing the appeal made in Letters Patent Appeal No 145 of 1978 arising from the order passed in Special Civil Application No 268 of 1978 of the said High Court
As this case has a chequerred history spreading over decades we feel that the relevant facts that are necessary for the disposal of this appeal are to be stated in brief
The appellant was born on 15th January 1909 and he obtained the Degree of Bachelor of Engineering Civil
He joined the service of the erstwhile State of Junagadh in Saurashtra region on 1st August 1934
While the appellant was in the service of Junagadh State he was governed by the Junagadh State Pension  Parwashi Allowances Rules of 1932 hereinaf ter called as Junagadh Rules which had been published in the official Gazette of that State and which were subse quently codified and published in the Jugagadh State Account Code
Rule 241 A of the aforesaid Junagadh Rules provided for pension and Parwashi Allowances
The State of Junagadh was integrated into the State of Saurashtra on 20th January 1949
Thereafter the appellant was absorbed in the service of the State 219 of Saurashtra
The supplementary Covenant which brought about the integration read with article 16 of the main Covenant expressly protected the conditions of the service of the absorbed servants and the protection was also statutorily recognised by the Saurashtra Ordinance 3 of the 1949 read with Ordinance 1 of 1948
A proclamation providing a guaran tee that the conditions of service could not be varied to the disadvantage of the Covenanting State servants was also issued in that behalf on 20th January 1949 which was the date of the merger of the State into the State of Saurash tra
Based on the decision of this Court in Bholanath J Thakar vs State of Saurashtra AIR 1954 SC 680 wherein it was held that the rules as regards the age of superannua tion which prevailed in the covenanting State which in that case was the State of Wadhwan continued to cover those Government servants who had come from that State and had been absorbed in the services of the State of Saurashtra
The State of Saurashtra made the Saurashtra Covenanting State Servants Superannuation Age Rules 1955 hereinafter called as Saurashtra Rules in exercise of the powers conferred by article 309 of the Constitution of India
Rule 3i provided A Govt
servant shall unless for special reasons otherwise directed by Government retire from service on his completing 55 years of age After the integration of the Saurashtra State into the State of Bombay a resolution was passed by the Government on 7th January 1957 applying the old Bombay Civil Service Rules to Saurashtra area
On 1st July 1959 the Bombay Civil Serv ices Rules 1959 hereinafter called the Bombay Rules were promulgated under article 309 of the Constitution
Clause c2ii1 of Rule 161 is as follows Except as otherwise provided in this Sub clause Government servants in the Bombay Service of Engineers Class 1 must retire on reaching the age of 55 years and may be required by the Government to retire on reach ing the age of 50 years if they have attained to the rank of Superintending Engineer
 The appellant was compulsorily retired from service under the above rule by an order passed by the State of Gujarat on 12101961 with effect from 1211962 when he had completed the age of 53 years
This order of retirement was unsuccess fully challenged by the appellant 220 before the Gujarat High Court by a writ petition under article 226 of the Constitution
Not being satisfied the appellant took up the matter before this Court which by its judgment dated 941969 allowed the appeal and declared that the appellant was entitled to remain in service until he at tained the age of 55 years and that the impugned order directing his retirement was invalid and ineffective This judgment is reported in  Takhatray Shivdatray Mankad vs State of Gujarat
As per this decision the appellant had the right to continue in service till he attained the age of 55 years
It may be noted that the appellant had already completed the age of 55 years by the time the judgment was pronounced by the Supreme Court
In due compliance of the above judgment of this court the Government of Gujarat by its order dated 481969 intimated the appellant that he should be deemed to have remained in service upto the date on which he attained the age of 55 years that its upto 1411964
In other words by this order the appellant was retired on his attaining the age of 55 years on 1411964
Prior to this decision of the Supreme Court the age of superannuation for Government servants of the Government of Gujarat was raised to 58 years with reservation of power to the State Government to compul sorily retire a Government servant at 55 years by serving a notice
The appellant in order to avail of this benefit of the changed circumstances filed a Special Civil Application No 70 of 1970 before the High Court of Gujarat but became unsuccessful
Being dissatisfied with that judgment of the High Court he filed a Special Leave Petition No 977 of 1975 before this court which by its order dated 2171975 declined to interfere with the decision of the High Court under article 136 of the Constitution of India
The resultant effect is that the matter came to a finality to the effect that the appellant was not entitled to continue in service beyond the age of 55 years
Even before he was compulsorily retired by the Govern ment s Order dated 12101961 a departmental enquiry on the ground of slackness of supervision had been initiated on 621961
Thereafter a second departmental enquiry was ordered against the appellant on charges of over payment to contractors and consequent loss to the Government on 1141963
A third enquiry was ordered against him on 1781963 on charges Of payment in advance before the re ceipt of goods
Thus there were three departmental enquiries before his retirement on attaining the age of 55 years that is on 1411964
These enquiries were pending against the appellant till 1971
Be that as it may the appellant filed a Special Civil Application 221 No 504 of 197 1 before the High Court of Gujarat seeking issue of a writ of mandamus against the State of Gujarat to direct the State to pay the appellant all the outstanding salary allowances as well as the revised
pay and allow ances including increment subsequent to the stage of effi ciency bar falling due from 1211962 to 1411964 together with interest  6 per annum from the date of payment with held till the date of actual payment thereof to him
The State defended this action of withholding the pension on the ground that the departmental enquiries initiated against him were pending
The appellant therefore filed a Civil Appli cation No 2304 of 1972 in the above said Special Civil Application No 504 of 1971 for interim relief which appli cation he withdrew subsequently
According to the appellant he withdrew the application on the representation made on behalf of the respondent therein that the departmental enquiries had become infructuous consequent upon the retire ment of the appellant
In the meanwhile the State of Gujarat issued a show cause notice dated 1771971 to the appellant informing him that the Government had considered that his service had not been found thoroughly satisfactory on account of the reasons mentioned in the said show cause notice and therefore the Government had proposed to make reduction of 50 per cent both in the amount of pension and death cum retirement gratuity admissible to him
We shall now reproduce the relevant portion of the show cause notice Annexure C  Government therefore proposes in exercise of the powers vested in it under i Para 241E3 and 3 of the Junagadh Account Code or ii Rule 76 of the Ex Saurashtra Pension Rules as contained in Saurashtra Government Resolution Finance Department No 12140 dated 19101949 or iii Rule 188 of Bombay Civil Services Rules as may be applicable to you to make a reduction of 50 fifty per cent both in the amount of pension and Death cum Retirement Gratuity admissible to you
 The appellant submitted his reply and the proceedings went on before the Government for a considerable length of time
Ultimately the final order was passed on 15111977 reducing the pension and gratuity by 50 per cent
Being aggrieved by the said order the appellant filed Special Civil Application No 268 of 1978 before the High Court of Gujarat for quashing the order reducing his pension and gratuity
The learned single Judge of Gujarat High Court rejected the said civil application in limine by his order dated 831978 concluding 222 In the present case the Government recorded reasons why it came to the conclusion that the petitioner s service were unsatisfactory and therefore put a proportionate cut on the petitioner s right to pension
No case of discrimination is made out
 As against this order the appellant filed the Letters Patent Appeal No 145 of 1978 before a Division Bench of the High Court contending that he was governed by the Junagadh Rules and he continued to be governed by those rules in spite of the fact that the Bombay Rules were sought to be made applicable to him
In the alternative it was submitted that even if the Bombay Rules were to be made applicable so far as the question of payment was concerned inasmuch as they were not less advantageous on compulsory retirement proportionate pension was payable to the appellant under the Bombay Rules of 1959
The Division Bench examined both the alternative contentions with reference to the concerned rules and ultimately concluded thus Under either set of rules therefore it was open to the State Government to reduce the amount of pension payable to the petitioner since his service had not been found satisfac tory by the State Government under the Juna gadh State Rules or in the alternative under the Bombay Civil Services Rules his service has not been found thoroughly satisfactory
In view of these conclusions we agree with the conclusion reached by AD Desai 3
though he did not examine the alternative case from the point of view of the Bombay Civil Services Rules
 On the basis of the above findings the appeal was dismissed
Hence the present appeal
Shri BK Mehta learned counsel appearing on behalf of the appellant assailed the impugned judgment of the Divi sion Bench of the High Court inter alia contending 1 that the High Court had clearly gone wrong in upholding the impugned order of reduction in pension made in the purported exercise of power under Rules 188 and 189 of the Bombay Rules in view of the finding of this Court in CA No 409 of 1966 Takhatray Shivdatray Mankad s case supra where in it was held that the Bombay Rules could not be made applicable to the appellant 2 that the appellant is not governed by the Saurashtra Rules because the said rules do not provide for compulsory retirement as pointed out by the Supreme Court in CA No 409 of 1966 and 3 223 that the State Government has not specifically stated in the show cause notice dated 1771971 Annexure C as well as in the impugned order for reducing the pension Annexure A as to under what set of rules namely whether under the Juna gadh Rules or the Saurashtra Rules or the Bombay Rules they were exercising the power for reducing the pension and gratuity
It has been further urged that clauses 3 13 and 15 of Rule 241 A of Junagadh Rules operate in different fields in that while Rule 3 applies to cases of normal superannuation Rule 13 applies to cases of compulsory retirement and therefore the observation of the Division Bench of the High Court in the Letters Patent Appeal approving the view taken by the learned single judge that Rule 3 controls Rule 13 would practically render Rule 13 as ultra vires article 311 of the Constitution of India since compulsory retirement together with reduction of pension would amount to penalty in the absence of procedural safeguards
Further it is urged that during the pendency of the appeal CA No 40966 before this court the Bombay Rules were extended to the Saurashtra State Covenanting servants and the superannuation age was raised to 58 years and therefore the appellant in any case was entitled to continue upto 60 years of age under the Junagadh Rules or upto 58 years of age under the Bombay Rules
When it was so the retirement of the appellant on attaining the age of 55 years should be construed as a case of compulsory retirement before the normal age of superannu ation which coupled with the order of reduction in pension would amount to penalty which could not have been imposed without following the prescribed procedure under the Con duct
Discipline and Appeal Rules
In support of this last submission reliance was placed on the decision of this Court in Dalip Singh vs State of Punjab 1961 I SCR 88 and Moti Ram Deka Etc
vs General Manager NEF Railways Maligaon Pandu Etc  In the alternative he submitted assuming that the Bombay Rules apply to the case of the appellant the enquiry as prescribed under Rule 189 of the Bombay Rules was not followed
further if the case of the appellant is to be governed by the Saurashtra Rules there was no provision for compulsory retirement as pointed out by the Supreme Court in CA No 409 of 1966
Finally he submitted that the impugned order for reduction of pension is bad in law and void be cause 1 no enquiry for the reasons as contemplated under Rule 189 of the Bombay Rules had been conducted and 2 admittedly the State had stated before the High Court in the course of hearing of the Civil Application on 24101972 that the departmental enquiry had become 224 infructuous and was dropped as the appellant had already retired
In any case no enquiry could be held in pursuance to the show cause notice dated 1771971 after a lapse of 4 years in view of the prohibition under proviso bii of Rule 189 A of the Bombay Rules
Therefore the reduction of pension and gratuity by 50 is wholly unreasonable unwar ranted and arbitrary
Mr CA Shah learned counsel appearing on behalf of the respondent stoutly opposed the submissions made on behalf of the appellant stating that the appellant was directed to retire on attaining the age of 55 years as per the judicial pronouncement of this court in CA No 40966 fixing his age of retirement at 55 years and hence the appellant cannot be permitted to be heard that his retire ment at the age of 55 should be construed as compulsory retirement in view of the fact that the age of retirement was increased to 60 years under the Junagadh Rules and 58 years under the Bombay Rules
According to Mr Shah after the dismissal of the Special Civil Application No 70 of 1970 by the Gujarat High Court holding that the right of the appellant to continue in service was judicially determined by this court and so it cannot be said that the State Gov ernment had discriminated the appellant which decision of the High Court was upheld by this court by the order of dismissal of the Special Leave Petition on 2111979
It is urged by the learned counsel for the respondent that the appellant s retirement having been a normal one he was entitled to pension under Rule 241 A of the Junagadh Rules and as such the State Government in exercise of the powers under the said rules had passed the order dated 15111977 reducing the pension and gratuity to 50 after affording an opportunity to him by issuing a show cause notice alleging several acts of misconduct to which notice the appellant did not give any explanation in spite of several opportunities afforded for over 6 years
Hence the order of the Government reducing the pension and gratuity to 50 on the finding that the allegations of misconduct are proved is justified
According to him Rules 188 and 189 of the Bombay Rules are inapplicable to the case of the appellant
Moreover these rules are in pari materia to Rule 241 A of the Junagadh Rules and therefore as held by the Division Bench of the High Court under either of the Rules the Government is competent to reduce the pension for misconduct
Coming to Rule 189 A which was introduced on 29101971 after the issue of show cause notice in this case it is said that this Rule provides that the proceedings already initiated shall be deemed to be a proceeding under this rule and continued and concluded by the authority
In the present case the proceedings were initiated even while the appel lant was in service and they were 225 dropped after his retirement
Therefore the appellant is not justified in contending that those proceedings relate to misconduct which had occurred 4 years prior to the institu tion and therefore they are not sustainable as per proviso bii of Sec
189 A of the Bombay Rules
We shall scrutinize the respective contentions of the learned counsel with reference to the facts of this case and the position of law with reference to the relevant rules and the various judicial pronouncements of this court in a series of decisions dealing with powers vested in the ap pointing authority to reduce the pension and gratuity on proof of allegations of misconduct or negligence committed by the employee or on the proof of inefficiency and unsatis factory service
The appellant who was retired compulsory on 1211962 in pursuance of the order of the Public Works Department State of Gujarat dated 12101961 under the Bombay Rules when he had completed the age of 53 years successfully contested that matter and obtained the order in his favour from this court in CA No 409 of 1966 by the judgment dated 9469 quashing the order of compulsory retirement and declaring that the appellant was entitled to remain in service until he attained the age of 55 years In pursuance of the above judgment of this court the Government passed the following order on 481969 the relevant portion of which reads as under Shri TS Mankad should be deemed to have remained in service as Executive Engineer upto the date on which he had attained the age of 55 years ie upto 14164 AN The orders issued in Government Order Public Works Department No DPA 1861 E dated 121061 should be treated to have been cancelled
 The aforesaid order was challenged by the appellant in Special Civil Application No 70 of 1970 before the Gujarat High Court with a prayer to declare this order dated 481969 as illegal void ultra vires bad in law and inoperative and the same was not binding on the appellant besides challenging the constitutional validity of the latter part of the amended Rules 161ii1 of the Bombay Rules
But this Special Civil Application No 70 of 1970 was rejected holding that the right of the appellant to continue in service was judicially determined by this court and that judicial determination was given effect to by the State Government by its order dated 481969
As against this judg 226 ment the appellant preferred Special Leave Petition before this court which was dismissed on 2111979
Thus the con troversy was put to an end and the result was that the appellant was not entitled to continue in service beyond 55 years of age
Hence the contention of the learned counsel for the appellant that the appellant is entitled to avail the benefit of the increase of age of superannuation fixing it at 60 years under the Junagadh Rules or at 58 years under the Bombay Rules cannot be accepted
The further submission made on behalf of the appellant that his retirement should be construed only as compulsory retirement coupled with the order of reduction in pension and gratuity amounting to penalty without following the procedures prescribed under the Conduct Discipline and Appeal Rules is also equally to be dismissed as devoid of any merit since the appellant was retired only in accordance with the pronouncement of this court
We have now to examine whether the propositions of law expatiated in the decisions cited by Mr BK Mehta can be made applicable to the facts of this instant case
In Dalip Singh vs State of Punjab the appellant therein namely Dalip Singh was retired from service for administrative reasons 
He brought a suit on a plea that the order of his retirement amounted to removal from service within the meaning of article 3112 of the Constitution
The Trial Court decreed the suit in his favour
On appeal by the State the High Court dismissed the suit holding that the order of compulsory retirement in that case did not amount to removal from service within the meaning of article 3 11 of the Constitution
As against this Dalip Singh approached this court
This Court held that there were no basis for saying that the order of retirement contained any imputation or charge against the officer and that he had been allowed full pension as provided in Rule 278 of the Patiala State Regulations on the strength of which Dalip Singh was re tired and that the order of retirement was hardly by way of punishment
In that view this court agreed with the view taken by the High Court and dismissed the appeal
In Moti Ram Deka Etc
General Manager NEF Rail ways Maligaon Pandu Etc
  the only question for consideration was whether the termination of services of a permanent Railway servant Civil under Rule 1483 and 1493 of the Indian Railway Establishment Code amounted to removal under article 3112 of the Constitution of India
Majority of the seven judges Bench having regard to the facts therein held that the termination of services of a permanent servant otherwise than on ground of superannuation or compulsory retirement must per se amount to his removed and if by 227 Rule 1483 or Rule 1493 such a termination is brought about the Rule clearly contravenes article 3112 and so it must be held to be invalid
On carefully going through both the decisions we are of the firm view that these two deci sions cannot be of any assistance to the case of the appel lant since in the present case the appellant s retirement on attaining the age of 55 years pursuant to the declara tion of this Court was a normal retirement on reaching the age of superannuation and not a compulsory retirement by way of punishment for misconduct as contended by the appellant
Next we shall deal with the respective contentions of both the parties with reference to the Junagadh Rules and the Bombay Rules
It may be mentioned here that the appel lant himself under the ground h of his Special Leave Petition had stated that his services were to be governed by the Junagadh Rules
It was also urged on behalf of the respondent that the appellant s retirement being a normal one he is entitled to pension under Junagadh Rules and the State Government in exercise of the power vested in it had passed the order dated 1511
1977 reducing the pension and gratuity to 50
As pointed out by the Division Bench of the High Court under the scheme of the Junagadh Rules as per clause 10 of Rule 241A the pensions are admissible for superior service of not less than 10 years and they are divided into 4 classes namely 1 compensation pension 2 invalid pension 3 superannuation pension and 4 retiring pension
As we are concerned only with the superan nuation pension in the present  case we would refer to the relevant clause which reads as follows 13 Superannuation pension is admissi ble only on attaining the age of 60 years except in cases in which the authorities consider it desirable in the interest of the State an officer should retire on attaining the age of 55 years or at any time thereafter on such superannuation pension as he may have earned at the time of retirement
 A bare perusal of the above clause shows that superannu ation pension is admissible to the State Government servant on his attaining the age of 60 years save in cases in which the authorities consider in the interest of the State to retire an officer on attaining the age of 55 years or at any time thereafter on such superannuation pension as he may have earned at the time of his retirement
Clause 15 of Rule 24 1 A deals with the proportionate pension
As clause 3 of Rule 241 A is material for our purpose that clause is reproduced hereunder 228 The full amount of pension or gratuity admissible under the rules will not be granted unless the service is proved from State records on receipt of an application for pension or gratuity from the retired officer in Form No 53 and will be liable to reduction in the absence of such proof or if the service is not reported by the Head of the Department to have been satisfactory As per this clause the Government servant will be entitled to full amount of pension or gratuity only if his service is proved from the records satisfactory lest the pension will be liable to reduction
A combined reading of clauses 3 13 and 15 shows that clause 3 is an exception to the general scheme laid down in clauses 13 and 15
On careful considera tion of this rule we see no merit in the submissions made by the learned counsel that these clauses operate in differ ent fields and therefore observations of the High Court that Rule 3 controls Rule 13 would render Rule 13 as ultra vires article 311 of the Constitution of India since compulsory retirement together with reduction of pension would amount to penalty in the absence of the procedural safeguards
The Government in its detailed order dated 15111977 has set out the reasons for reducing the amount of pension and gratuity
The relevant portion of the order reads thus Government is satisfied that the services of Shri TS Mankad Executive Engineer have not been found to be thoroughly satisfactory
Accordingly Government hereby orders that the pension and Death cum Retirement Gratuity which may be accepted by the Accountant Gener al Ahmedabad as admissible under the rules shall be reduced by the specified extents aS under i Amount of reduction in pension  50 Fifty percent ii Amount of reduction in gratuity  50 Fifty percent According to the respondent the appellant instead of giving a proper explanation to the show cause notice dated 1771971 entered into long correspondence with respondent raising all sorts of irrelevant questions and seeking sever al adjournments thereby adopting delayed tactics and further the appellant though informed the authorities that he would inspect certain documents in the Department for making his 229 reply he would not do so and therefore according to the learned counsel it was in those circumstances the Govern ment was constrained to pass this order dated 15111977 after a lapse of more than 6 years taking into consideration that his service had not been found thoroughly satisfactory for the reasons mentioned in the show cause notice to which he had not given any reply
We see much force in the above submission made by Mr Shah the learned counsel appearing for the respondent
In view of the above position we are of the view that the impugned order dated 15111977 cannot  be said to contravene the Junagadh Rules
Now we shall pass on to the alternative contention on the assumption that Bombay Rules would apply to the case of the appellant
The relevant Rules are Rules 188 and 189 which are reproduced below 188
Government may make such reduction as it may think fit in the amount of the pension of a Government servant whose service has not been thoroughly satisfactory 189
Good conduct is an implied condition of every grant of pension
Government may with hold or withdraw a pension or any part of it if the pensioner be convicted of serious crime or be found to have been guilty of grave misconduct either during or after the comple tion of his service provided that before any order to this effect is issued the procedure referred to in Note 1 to Rule 33 of the Bombay Civil Services Conduct Discipline and Appeal Rules shall be followed
 An examination of Rule 188 shows that the Government may reduce the amount of pension of a Government servant as it may think fit if the service of the Government servant has not been thoroughly satisfactory
As per Rule 189 the Gov ernment may withhold or withdraw a pension or part of it if the petitioner is convicted of severe crime or found to have been guilty of misconduct during or after the completion of service provided that before any order to this effect is issued the procedure referred to the Bombay Civil Services Conduct Discipline and Appeal Rules are followed
These Rules thus have expressly preserved the State Government s power to reduce or withhold pen 230 sion by taking proceedings against a Government servant even after his retirement
The validity of these rules have not been challenged
These two rules came for interpretation before this court in State of Maharashtra vs MH Mazumdar  and this Court expressed its view with reference to these rules as follows The aforesaid two rules empower Government to reduce or withdraw a pension
Rule 189 contem plates withholding or withdrawing of a pension or any part of it if the pensioner is found guilty of grave misconduct while he was in service or after the completion of his serv ice
Grant of pension and its continuance to a Government servant depend upon the good con duct of the Government servant
Rendering satisfactory service maintaining good conduct is a necessary condition for the grant and continuance of pension
Rule 189 expressly confers power on the Government to withhold or withdraw any part of the pension payable to a Government servant for misconduct which he may have committed while in service
This rule further provides that before any order reduc ing or withdrawing any part of the pension is made by the competent authority the pensioner must be given opportunity of defence in ac cordance with the procedure specified in Note I to Rule 33 of the Bombay Civil Services Conduct Discipline and Appeal Rules
The State Government s power to reduce or withhold pension by taking proceedings against a Gov ernment servant even after his retirement is expressly preserved by the aforesaid rules
The validity of the rules was not challenged either before the High Court or before this Court
In this view the Government has power to reduce the amount of pension payable to the respondent
In M Narasimhachar vs State of Mysore 1960 1 SCR 981 AIR 1960 SC 247 and State of Uttar Pradesh vs Brahm Datt Sharma 1987 2 SCC 179 similar rules authorising the Government to withhold or reduce the pension granted to Government servant were interpreted and this Court held that merely because a Gov ernment servant retired from service on at taining the age of superannuation he could not escape the liability for misconduct and negli gence or financial irregularities which he may have committed during the period of his serv ice and the Government was entitled to with hold or reduce the pension granted to a Gov ernment servant
 231 In compliance with the principle of natural justice requir ing an opportunity of hearing to be afforded to a Government servant before an order affecting his fight is passed and in accordance with the procedure specified in Note I to Rule 33 of the Bombay Civil Services Conduct Discipline and Appeal Rules a show cause notice as pointed out earlier had been issued to the appellant on 177197 1 calling upon him to show cause within 30 days from the date of the receipt of the notice as to why the proposed reduction should not be made in the pension and death cum retirement gratuity
But the appellant failed avail that opportunity to disprove the allegations and satisfy appointing authority that he ren dered satisfactory service throughout
It was in those circumstances the appointing authority taking into consider ation of the serious allegations levelled against him in the disciplinary proceedings had thought it fit to impose reduc tion in the pension and gratuity in accordance with Rules 188 and 189 of the Bombay Rules on the ground that the appellant had not rendered satisfactory service
The appel lant is not entitled to take advantage of clause bii of the proviso to Section 189 A of the Bombay Rules since the proceedings had been instituted long before his retirement
Further as per clause a of the said proviso the proceed ings already instituted while the Government servant was in service could be continued and concluded even after his retirement
Hence for the reasons stated above the impugned order dated 15111977 reducing the pension and gratuity cannot be said to contravene the Bombay Rules
At the risk of repetition we may point out that three departmental proceedings containing serious allegations of misconduct were instituted against the appellant of which one was instituted even before he was compulsorily retired on 1211961 and other two proceedings were instituted in the year 1963 that is much earlier the appellant attaining the age of superannuation on 1411964
These departmental proceedings are stated to have become infructuous consequent upon the retirement of the appellant on attaining the age of superannuation
To the show cause notice dated 1771971 proposing to inflict reduction in pension and gratuity the appellant instead of giving a proper reply disproving the charges and satisfying the appointing authority that he rendered satisfactory service throughout had delayed the matter for over a period of six years
It was in that situa tion that the impugned order dated 15111977 happened to be passed
The learned counsel for the appellant strenuously contended that after the disciplinary inquiries had been dropped on the ground that they had become infructuous the Government was not right and 232 justified in reducing the pension and gratuity on the same charges which were the subject matter of the enquiries
This argument of the learned counsel in our opinion does not merit consideration because the charges against the appel lant were not made use of for awarding any punishment after his retirement from service but only for determining the quantum of the appellant s pension in accordance with the rules relating to the payment of pension and gratuity
In this connection it would be apposite to refer the observa tion of the Supreme Court in State of Uttar Pradesh vs Brahm Datt Sharma  Anr 1987 2 SCC 179 which we quote below If disciplinary proceedings against an em ployee of the Government are initiated in respect of misconduct committed by him and if he retires from service on attaining the age of superannuation before the completion of the proceedings it is open to the State Government to direct deduction in his pension on the proof of the allegations made against him
If the charges are not established during the disciplinary proceedings or if the disci plinary proceedings are quashed it is not permissible to the State Government to direct reduction in the pension on the same allega tions but if the disciplinary proceedings could not be completed and if the charges of serious allegations are established which may have bearing on the question of rendering efficient and satisfactory service it would be open to the Government to take proceedings against the Government servant in accordance with rules for the deduction of pension and gratuity
 The above principle laid down in that case squarely applies to the facts of the present case
For all the reasons hereinbefore stated we hold that the order of State Government dated 15 11 1977 reducing the amount of pension and the gratuity on the ground that the service of the appellant had not been found thoroughly satisfactory by the appointing authority cannot be assailed
In that view of the matter we see no reason to interfere with the impugned judgment of the High Court
In the result the appeal is dismissed but without any order as to costs
YL Appeal dis missed


Summary:
Reliance Industries Ltd RIL and Reliance Petrochemi cals Industries Ltd RPL are inter connected and repre sented Companies in the large industrial house known as Reliance Group
RIL had promoted RPL
RPL was incorporated on 1111988 and has been a cent percent subsidiary of RIL
It was claimed that RPL would set up the largest petrochemi cal complex in India with foreign collaboration
RPL pro posed to issue convertible debentures for raising capital for the project
The Controller of Capital Issues CCI who functions under the had on 15th September 1984 by way of press release issued certain non statutory guidelines for approval of issue of secured con vertible and non convertible debentures
These guidelines were subsequently amended on 831985
Guidelines were also given by the CCI for issue of convertible cumulative prefer ence shares and for employees stock option scheme
RPL had on 451988 made an application to CCI for issue of debentures of the face value of Rs200 crores fully convertible into equity shares on the following terms A sum of Rs 10 being 5 of the face value of each deben tures by 44 way of first conversion immediately into one equity share at par on allotment ii A sum of Rs40 being the 20 of the face value of each debenture by way of second conversion after three years but before four years from the date of allotment at a premi um to be fixed by the Controller of Capital Issues iii The balance of Rs 150 representing 75 of the face value of each debenture as third conversion after five years but not later than seven years from the date of allot ment at a premium to be fixed by the Controller of Capital Issues
The CCI accorded his sanction for the issue of deben tures on 471988
However the sanction was amended on 19th July 1988
The amendment put a non transferability condi tion on the preferential share holders of RPL
It was limit ed to the corporate shareholders of RIL and relaxed for individual share holders of RIL
The amendment also stipu lated that the Company should obtain prior approval of the Reserve Bank of India Exchange Control Department for the allotment of debentures to the non residents as required under the Foreign Exchange Regulation Act 1973
On 26th July 1988 there was another amendment which restricted the transfer of shares allotted to the employees of RPL and RIL
The consent orders issued by the CCI were challenged in various High Courts by way of writ petitions and a suit
Some High Courts issued injunctions restraining the issue of the debentures
This Court on 19th August 1988 restrained the afore said issuance of injunctions by the High Courts and issued directions for the issue of debentures
The cases pending in various High Courts were transferred to this Court
In these transferred cases the consent orders of the CCI were challenged mainly on the grounds that Despite the fact that RPL did not fulfil the require ments of a proper application and the necessary consent and approval RPL s application was
entertained and processed by the CCI with undue expedition and without application of mind The guidelines issued by the CCI himself were deviated from 45 The CCI had processed the application of RPL in a hurry within two months The CCI did not take into account the fact that RIL had earlier issued debentures for manufacture of identical products The CCI failed to note that RPL did not have the neces sary licences consents and approvals from the relevant departments of the Government of India The CCI failed to consider the financial soundness and feasibility of the project of RPL The CCI did not take adequate care to examine the terms of the issue and had blindly accepted the terms as proposed by RPL RPL in its brochures has misled the public by describing the debentures as fully secured convertible debentures The security for the debentures was inadequate RPL has been permitted to create securities which would have priority over the securities available to the present debenture holders and without their consent RPL has misled the public in that in its prospectus it had stated that security would be provided to the satisfac tion of the trustees The CCI had failed to examine whether RIL had misused the funds raised on its debentures There has been a discrimination in favour of RIL in that RIL would be entitled to allotment of shares of the face value of Rs5750 crores whereas only 5 of the investment of the debenture holders could be converted Whereas RIL s loan of Rs50 crores would be converted into shares at par the debenture holders would have to pay premium to be fixed by the CCI at the time of second conver sion of 20 of the debentures and In the application filed by RPL no shares were ear marked for the employees of RIL and RPL but ultimately it was done
46 On behalf of the petitioners it was contended inter alia that the issue of the debentures in question was detri mental to public interest and that public interest had been ignored
On behalf of Respondents it was argued that the sanction issued by the CCI had been genuine and valid and that no irregularity had been committed
It was submitted that it was a misconception that the CCI had not followed his own guidelines relating to sanction of the issue of the deben tures and it was incorrect to say that there had not been proper security
Dismissing the writ petitions and the suit this Court HELD 11
The CCI functions under the  an Act to provide for control over the issue of capital
The purpose of the Act must be found from the language used
The scheme and the language used strict ly speaking do not indicate any positive role for the CCI in discharging his functions in respect of grant of sanc tion
But it has to be borne in mind that he is a part of State instrumentalities committed to the endeavours of the constitutional aspiration to secure justice social and economic and also under Article 39b  c of the Consti tution to ensure that the ownership and control of the material resources of the community are so distributed as to best subserve the common good and that the operation of the economic system does not result in concentration of wealth and means of production to the common detriment
Yet every instrumentality and functionary of the State must fulfil its own role and should not trespass or encroachentrench upon the field of others
Progress is ensured and development helped if each performs his role in the common endeavour
90B 124F H 125A 12
In the changed socio economic conditions of the country one who is charged to ensure capital investment has to perform a social role in capital formation and to protect the interest of the capital market and to oversee the growth of industrialisation and investment in such a manner as to ensure employment and demand in the national economy to prevent wasteful investment and to promote sound methods of corporate finance
In recent years there has been a vast increase in the number of members of public who have surplus money to invest
The size of the issues has assumed macro proportions and the type of investments are also more so phisticated
Entrepreneurs with expert legal assistance could easily trap unwary investors and the development of a public interest lobby that can scrutinise issues carefully and advise prospective investors may be desirable
125A B F G 47 13
The guidelines are only a guide and nothing more
The application of mind by the CCI before sanction must be in the perspective for which he is enjoined by the Act
He must endeavour to secure a balanced investment of the coun try s resources in industry agriculture and social serv ices
The Controller should perform the role of social control and fulfil the social purpose in conjunction with other authorities and functionaries
It is necessary for him in the discharge of his functions to ensure that there is not too much concentration of particular industries in particular areas and that there is a scientific development and proper investment in key and core projects
125C D 14
The duties of the CCI have to be construed in the context of the above particularly when there is no clear cut delineation of their scope in the enactment
This is also reinforced by the expanding scope of the guidelines issued under the Act from time to time and the increasing range of financial instruments that enter the market
The responsilbilities of the CCI in this direction should not be widened beyond the range of expeditious implementation of the scheme of the Act and should atleast be restricted and limited to ensuring that the issue to which he is granting consent is not patently and to his knowledge so manifestly impracticable or financially risky as to amount to a fraud on the public
While it is true that some procedure may have to be evolved to ensure that the CCI gets the benefit of the comments suggestions and objections from the public before arriving at his decision whether to grant consent or not and if so on what terms and conditions it will be too cumbersome to have a provision that the details of every proposed application for consent should be publicised to the maximum extent by the CCI that objections and comments from the public should be called for that there should be public hearing by the CCI and that he should pass a reasoned order granting or withholding consent
That would delay the whole process of approvals which should be as expeditious as possible
93C E 125G H 126A B 15
The CCI has also a role to play in ensuring that public interest does not suffer as a consequence of the consent granted by him
To go beyond this and require that the CCI should probe in depth into the technical feasibili ties and financial soundness of the proposed projects or the sufficiency or otherwise of the security offered and such other details may be to burden him with duties for the discharge of which he is as yet ill equipped
93D F 16
Being non statutory in character the guidelines are not judicially enforceable
A policy is not law
A statement of policy is not a 48 prescription of binding criterion
The competent authority might depart from these guidelines where the proper exercise of his discretion so warrants
In the instant case the statute provided that rules can be made by the Central Government only
And according to section 62 of the Act the competent authority has the power and jurisdiction to con done any deviation from even the statutory requirements prescribed under sections 3 and 4 of the Act
The CCI applied his mind to the facts of this case and the factors in general
The CCI did not act malafide or on extraneous consideration
122D F 124B D Fernandez vs State of Mysore   R Abdullah Rowther vs State of Tansport etc AIR 1959 SC 896 Dy
Iron  Steel Controller vs Manekchand Pro prietor   Andhra Industrial Work vs CCI  E   KM Shanmugham vs SRVS Pvt Ltd   Sagnata Investments Ltd vs Norwich Corpn  British Oxygen Co vs Board of Trade   relied on
Ramanna Dayaram Shetty vs International Airport Authori ty   Motilal Padampat Sugar Mills vs Uttar Pradesh   Ex P Khan 1981 1 All
ER 40 IRC vs National Federation   Reqina vs Preston Supplementary  Council of Civil Service Unions  Others vs Minister for the Civil Service  referred to
Foulkes  Administrative Law 6th Edn
pp 181 to 184 re ferred to 2
As regards the contention that the sanction of the CCI was accorded with undue haste and favouritism in the first place an application of this type is intended to be disposed of with great expedition
In a project of the type proposed to be launched by the petitioner passage of time may prejudicially affect the applicant and it is not only desirable but also necessary that the application should be disposed of within as short a time as possible
It is therefore difficult to say that the period of two months taken in granting consent in the present case is so short that an inference of haste must follow
Secondly on behalf of the Union of India a list of various applications re ceived and disposed of by the office of the CCI between September 1987 and September 1988 has been produced to show that generally speaking these applications are dis posed of within a month or two
It is true that none of these issues is of the same colossal magnitude as the present issue
Nevertheless the CCI could hardly keep the application pending merely because the amount involved is heavy
It is not possible therefore to say merely from the 49 short span of time that there was a hasty grant of consent in the present case
73G H74A C 31
The consent of the CCI was not accorded in igno rance of the facts pertaining to the G series of RIL deben tures
The application for consent makes it clear that the petitioner company is a new company promoted by RIL and that RIL was promoting this company to manufacture High Density Polyethylene HDPE Poly Vinyl Chloride PVC and Mono Ethyl ene Glycol MEG
The application refers to the fact that the total cost of the project was expected to be Rs650 crores and that this cost had been approved earlier in 1985
Considering that RPL had come into existence only on 1111988 this was a clear indication that the projects for which the debenture issue was being proposed were projects which had been mooted even by the RIL as early as 1985
Again in the detailed application form submitted by the RPL it has been mentioned that the RIL had already obtained approval of the Central Government for implementation of the aforesaid projects under the MRTP Act
In part C of the application form it has been mentioned that the promoter company had made necessary applications for endorsement in favour of the company of the Letter of IntentIndustrial Licences already issued by the Central Government under the Industries Development  Regulation Act 1951 in the name of the holding company viz RIL
It is therefore ex tremely difficult to agree that the fact of issue of the earlier series of debentures by the RIL or the purposes thereof could have escaped the notice of the CCI particu larly when it is remembered that the issue of G series of debentures by the RIL was quite recent and had also attract ed a lot of publicity
74D H 75C D 32
The CCI was not performing the role of a social mentor taking into account the purpose of RIL
If RIL has misutilised any of its funds or the funds had not been utilised for G series then RIL would be responsible to its shareholders or to authorities in accordance with the rele vant provisions of the 
This aspect does not enter into sanctioning the capital issue for the new project in accordance with the guidelines
Even if RIL and RPL have to be treated as one for this purpose and the grant of consent for earlier debenture issues in favour of RIL are to be taken into account in judging the necessity of the issues there is no illegality or irregularity in the grant of consent to RPL
RIL had not been able to utilise any part of the G  series of debentures on the MEG project as there had been a cost overrun and it was decided to have a wholly owned subsidiary
Hence the projects are those of the RIL to be implemented by RPL
The additional finances were needed for the extension expansion and diversification of 50 the projects originally envisaged
This is one of the ob jects for which a debenture issue is permissible under the guidelines
101F H 102A B 41
So far as HDPE is concerned it appears that there was a valid licence and it may be mentioned that on 24th August 1985 pursuant to an application made by RIL under section 223a of the MRTP Act the Govt
granted approval for the establishment of a new undertaking for manufacture of HDPE
77F 42
Regarding foreign collaboration an application was made by RIL in 1984 for approval of foreign collaboration with Ms Du Pont Inc Canada for manufacture of HDPE
The approval was given and the validity was extended and the foreign collaboration approval was endorsed in favour of RPL on 12th October 1988
Similar other consents were there
Finally capital goods clearance was endorsed in favour of RPL for the PVC project on 12th August 1988
Capital goods clearance was also endorsed in favour of RPL for HDPE project on 23rd August 1988
Thus it will be seen that all the basic groundwork had already been done by the RIL
77G H 78A 43
On 16th June 1987 by a Press Note issued by the Deptt
of Industrial Development in the Ministry of Industry of the Govt
of India declared that where a transferee Company is a fully owned subsidiary of the Company holding the Letter of Intent or licence the change of the Company implementing the project would be approved
It is in the light of this that the Board of RIL on 30th December 1987 passed a resolution to incorporate a 100 subsidiary Company whose main objects were to implement the licencesLetters of Intent received by RIL and to carry on the activities relat ing to production and distribution
The resolution approved the name of the Company as RPL
On 11th January 1988 the RPL was incorporated and the Certificate of Incorporation was issued
Thereafter on 12th January 1988 letters were written by RIL for endorsement of licencesLetters of Intent in favour of RPL
The certificate of commencement of busi ness was thereafter issued
78B E 44
The Press Note is clear that the transfers from one company to an allied company were considered unexceptionable except where trafficking in licences is intended
In this situation the change of name from RIL to RPL of the li cences letter of intent and other approvals was only a matter of course and much importance cannot be attached to the fact that CCI did not insist upon these endorsements being obtained even before the letter of consent is granted
In any event the letter of 51 consent is very clear
Clause h of the conditions attached to the consent letter makes it clear that the consent should not be construed as exempting the company from the operation of the provisions of the Monopolies  Restrictive Trade Practices Act 1969 as amended
Clause c makes it clear that it is a condition of this consent that the company will be subject to any measures of control licensing or acqui sition that may be brought into operation either by the Central or any State Government or any authority therein
Under clause t the approval granted is without prejudice to any other approvalpermission that may be required to be obtained under any other Actslaws in force
Having regard to the above and also to the terms and conditions of the consent letter the grant of consent itself being condi tioned on RPL obtaining the necessary approvals consents and permissions before embarking on the project there was no impropriety in the CCI granting the consent without waiting for the formal endorsement of the various licences letters and approvals in favour of RPL
Moreover CCI is aware of the progress of the various applications made by the company
The Controller is also aware that the ICICI had looked into the financial soundness and feasibility of the project and there is material to show that the comments of the ICICI were made available to him
When a project is being appraised by the institution like the ICICI and when the CCI is also aware by reason of the participation of his representatives at the meetings of the Department of Indus try and the Department of Company Affairs about the stage or outcome of the proposals made under the IDR and MRTP Acts it is clear that the CCI did not overlook any crucial aspect and that his grant of consent in anticipation of the neces sary transfers to the RPL was based on a practical appraisal of the situation and fully in order
78F H 79A B 80B D 5
There has been sufficient compliance with the guide lines on the quantum of issue debt equity ratio interest rate and the period of redemption
There was sufficient security for the debentures in the facts and circumstances of this case
The preference in favour of shareholders of RIL was justified and based on intelligible differentia
Indeed if one considers the role of the CCI he is primari ly concerned to ensure a balanced investment policy and not to guarantee the solvency or sufficiency of the security
Most of the criticisms directed against deviation from guidelines were misplaced
94G H 95A B 61
The discrimination alleged is on two grounds
The first is that RIL is entitled straightaway to the allotment of shares of the face value of Rs5750 crores whereas only 5 of the investment by the debenture holders can be con verted into shares at par simultaneously 52 with the issue
The second is that a loan of Rs50 crores advanced by RIL to RPL will be converted into shares at par at the end of 3 years whereas the debenture holders will have to pay a premium even for converting 20 of their debentures into shares by that time
These allegations do not bear scrutiny
So far as the first ground is concerned there is no justification for a comparison between these two categories of investors
RIL is the promoter company which has conceived the projects got them sanctioned invested huge amounts of time and money and transferred the projects for implementation to RPL
It is therefore in a class by itself and there is nothing wrong if it is allotted certain shares in the company quite independently of the debenture issue in lieu of its investments
So far as the second ground is concerned it overlooks certain disadvantages attached to RIL in regard to the loan of Rs50 crores ad vanced by RIL as compared with the investor in the deben tures
Firstly RIL s advance is interest free for 3 years whereas the debenture holders got interest at the rate of 125 during the period
Secondly the debenture loan is secured while the RIL s are not
Thus the debenture holders have certain benefits which RIL does not have and if the debenture holders have the disadvantage of having to pay a premium that cannot constitute basis for a ground of dis crimination
103E H 104 A B 62
RPL is a company not the State or a State instru mentality that is issuing the shares and debentures
It is entirely for the company to issue the shares and debentures on such terms as they may consider practicable from their point of view
There is no reason why they should not so structure the issue that it confers certain great advantages and benefits on the existing share holders or promoters than on the new subscribers
It is not permissible for the CCI to withhold consent only for this reason or to stipulate that consent can be given only if the share holders and promoters as well as prospective debenture holders are all treated alike
The subscribers to the debenture are only lenders to the company who have an option to convert their debt into equity on certain terms
It is perfectly open to the sub scribers to balance the pros and cons of the issue and to desist from taking the debentures if they feel that the dice are loaded unfavourably in favour of the proprietors of the company
104B E 71
In the present case a legal mortgage has been created by RPL in favour of the trustees in respect of its immovable and movable assets except book debts in respect of which financial institutions will hold a first charge on account of foreign loan
RPL does not have any existing loans
Therefore the charge in favour of the debenture holders 53 iS presently the first charge
No further borrowing is contemplated at this stage except the foreign currency loan to the extent of Rs84 crores
Even if the value of the foreign currency which has been sanctioned in principle by the three financial institutions is taken into account the assets coverage goes down at each stage and does not make any critical difference to the value of the security of the debenture holders under the Trust Deed
The purposes of borrowings namely term loan borrowings deferred payment creditsguarantees and borrowing for financing new projects do not on analysis raise any difficulty
There are suffi cient in built checks and controls
The company being an MRTP company would have to obtain both MRTP permission for creating any security irrespective of its value and fresh CCI consent under the CCI Act except in case of exempted securities
119G H 120A C 72
With the escalation in the value of the fixed assets due to passage of time on the one hand and the re demption of a good portion of the debentures by the end of three years on the other the security provided is complete and in any event more than adequate to safeguard the interests of the debenture holders
96G H 8
Clauses 5 and 6 are only enabling clauses and in the nature of permitting the Company despite the mortgage in favour of the debenture holders to carry on his business normally
What is referred to therein as residual charge is really a floating charge
The Company s normal business activities would necessarily involve alienation of some of its assets from time to time such as goods manufactured by it as well as procurement and discharge of loan and accommo dation facilities from banks financial institutions and others
The entire progress of the company would come to a standstill in the absence of such enabling provisions
They are not only usual but essential because the basic idea is that the finances raised by the debentures should be em ployed for running the project profitably and thereby gener ate more and more funds and assets which will also be avail able to the debentures holders
Further what the clauses provide is only that the consent and concurrence of the debenture holders need not be obtained by the company before creating securities that may have priority over the present issue of debentures
But the trustees for the debenture holders have to concur before the company can raise any future borrowings and create therefor the security which will have priority over the security available to the present debenture holders
The ICICI is not only a financial institution in the public sector but also one of the insti tutions financing the project and thus has a stake in its success and so can be trusted to safeguard the interests of the debenture holders
The debenture trust 54 deed also contains a provision by which at the time of creation of any future charge the terms and ranking have to be agreed upon between RPL and ICICI
Clause 16 of the trust deed authorises the trustees to intervene and crystallise the charge in certain circumstances and stultify an attempt by the company to create higher ranking charges
There are also restraints on the company under the and the MRTP Act involving the consent of public financial institutions Commercial Banks the term lenders share holders the MRTP Commission the Central Govt
and the CCI before the creation of such securities
98B H 99A E F 9
In certain brochures and pamphlets issued by RPL the debentures were described as fully secured convertible debentures
The company admitted that there was such a description but explained that this was due to an oversight the words fully secured convertible debentures were print ed in some brochures instead of the words secured fully convertible debentures without meaning or intending any change
It was stated that the company s representation was that the debentures were secured fully convertible ones
This is also what had been set out in the application for consent
Though the company did claim that the debentures were also fully secured the emphasis in the issue was that the debentures were fully convertible and secured
This explanation is plausible
No importance or significance need be attached to the different description in some places
particularly
in the context of the nature of security actually provided for the debentures
95F H 96A 10
Prospectus issued by RPL is not misleading because it stated that security will be provided to the satisfaction of the trustees and the CCI accepted that statement in the application for consent
The debenture trustees are well known financial institutions and it is not possible for the CCI to ensure more than the usual practice which was fol lowed in the present case
100D E 11
The CCI modified paragraph 5 of the consent by his letter of the 19th July 1988 to say that allotment to the employees shall not exceed 50 debentures per individual
It does not appear that the restriction of the allotments to the employees was at the instance of the Company nor does it seem that any discrimination was intended in respect of the allotments to the employees
Nor has attention been invited to any legal requirements or guidelines prescribing any fixed or minimum quota of allotment to the employees of the Company
Under the circumstances the question of dis crimination does not arise
107C D 55 12
The consent order of the CCI clearly indicated that the consent conveyed in the letter shall lapse on the expiry of 12 months from the date thereof
The consent order cate gorically stated that the approval was without prejudice to any other aPprovalpermission that may be required to be obtained under any other Acts and laws in force
It neces sarily follows that the obligation to obtain other permis sions continued
There was no legal conditions that other approvals should be examined by the CCI before grant of its own consent
As defined in the  a debenture need not be secured
Therefore guideline 10 means that security should be provided as is customarily adopted in corporate practice
In the present case the debentures are compul sorlly convertible and so no repayment is really involved
The debenture is essentially an acknowledgement of debt with a commitments to repay the principal with interest
The question of security becomes relevant for the purpose of payment of interest only in the unlikely event of winding up
The guidelines did not provide for the quantum and the nature of the security
A debenture may therefore be secured or unsecured
An ordinary debenture has to be dis tinguished from a mortgage debenture which necessarily creates mortgage on the assets of a Company
A compulsorily convertible debenture does not postulate any repayment of the principal and so does not constitute a debenture in the classic sense
Even a debenture which is only convertible at option has been recognised as a hybrid debenture
The guide lines for the protection of debenture holders issued on 1411987 recognise the basic distinction between converti ble and non convertible debenture
Compulsorily convertible debentures in corporate practice were adopted in India sometime after 1984
Wherever the concept of compulsorily convertible debenture is involved various guidelines issued by the Government of India treat them as equity and not as loan or debt
Even a non convertible debenture need not always be secured
In fact modern tendency is to raise loan by unsecured stock which does not create any charge on the assets of a Company
Whenever a security is created it is invariably in the form of a floating charge
In addition they are frequently secured by a trust deed as in the present case where specific propertyland etc
has been mortgaged to the trustees
In the instant case if the permission of the debenture holders were required or is insisted upon to create future security 25 million debenture holders have to be informed and invited for the meeting
The extravagant effects of this course would be collosal especially when a shareholders meeting is also additionally called for the same 56 body of persons
It is therefore incorrect to say that a floating charge creates an illusory charge because future securities can be created ranking in priority over it
118D E The British India Steam Navigation Co vs The Commis sioner of Inland Revenue  Re
Colonial Dusts Corporation  Speyar Brothers vs The Commissioner of Inland Revenue  Lemon vs Austin Friars Investment Trust Ltd  Flor ence Land  Public Works Co  Re
Panama New Zealand and Australian Royal Mail Co  Re Standard Manufacturing Co  Re
Borak Foster vs Borax Co  Creatnor Maritime Co Ltd vs Irish Marine Management Ltd referred to
Palmer s Company Law 24th Edn
672 675 676 706 The Encyclopaedia of Forms and Precedents 4th Edn Vol
6 p 1094 1095 1097 1098 referred to
The Court would be reluctant to interfere simply because one or more of the guidelines have not been adhered to even where there are substantial deviations unless the deviations are by nature and extent such as to prejudice the interests of the public which it is their avowed object to protect
Per Contra the Court would be inclined to overlook or ignore such deviations if the object of the statute and public interest warrant justify or necessitate such devia tions in a particular case
Judicial control takes over only where the deviation either involves arbitrariness or dis crimination or is so fundamental as to undermine a basic public purpose which the guidelines and the statute under which they are issued are intended to achieve
In the in stant case there is no such infraction of the norms re quired to be followed in granting the sanction
123F H 124A B 15
Before the Courts grant any injunction they should have regard to the principles of comity of courts in a federal structure and have regard to self restraint and circumspection
It may be impossible to lay down hard and fast rules of general application because of the diverse situations which give rise to problems of this nature
Each case has its own special facts and complications and it will be a disadvantage rather than an advantage to attempt and apply any stereo typed formula to all cases
Perhaps in this sphere the High Courts themselves might be able to intro duce a certain amount of discipline having regard to the principles of comity of courts administering the same gener al 57 laws applicable all over the country in respect of granting interim orders which will have repercussion or effect beyond the jurisdiction of the particular courts
Such an exercise will be a useful contribution in evolving good conventions in the federal judicial system
126F G 127A Having considered the facts and circumstances of the present cases this Court directed refund of the sum of Rsone lakh deposited RPL as ordered by the Court on 991988
The deposit amount was meant for payment to the petitioners in case they were to spend unduly