ivil Appeal No 1995 of 1990
From the Judgment and Order dated 23111988 of the Patna High Court in CWJC No 8457 of 1988
AK Sen Shankar Ghosh and MP Jha for the Appellant
GS Misra for the Respondents
The Judgment of the Court was delivered by J
This appeal on special leave is directed against the judgment and order dated November 23 1988 passed in CWJC No 8457 of 1988 by the High Court Patna dismiss ing the writ petition moved by the appellant assailing the order of his compulsory retirement from service by notifica tion dated October 26 1988 issued by the Government of Bihar compulsorily retiring him from service with effect from the date of issue of the notification
The salient facts giving rise to this appeal are that the appellant was initially appointed on December 9 1957 to the post of Industrial Expansion Officer and he was con firmed to the said post on May 15 682 1958
The appellant was promoted to the post of Planning cum Evaluation officer a Gazetted post on December 19 1973 because of his excellent service career
The appellant was further promoted to the next higher post of Industrial Economist by notification dated September 24 1983 with effect from December 19 1978 in the scale of Rs1350 2000
Because of excellent character role and merit of the appellant he was promoted to the next higher post of Joint Director in his original scale of pay of Rs1350 2000 with 20 per cent personal pay for holding such higher post which he held from September 24 1983 to March 31 1984
From April 1 1984 the appellant was provided with the higher post of General Manager under the respondent State in its Industries Department
The respondent State issued a notification on September 16 1988 promoting a large number of juniors to the higher scale of Rs1575 2300 without considering the case of the appellant
Being aggrieved the appellant filed one representation against his supersession which was made without considering the case of the appellant
The representation was filed on October 7 1988
In the said representation the appellant brought to the notice of the respondent State that the serv ice record of the appellant throughout remained excellent integrity beyond doubt and the appellant was never communi cated with any punishment in his service career
While the appellant was awaiting for a decision the respondent State issued the impugned notification dated October 26 1988 compulsorily retiring the appellant from the post of General Manager District Industries Centre Deoghar under the provisions of Rule 74bii of the Bihar Service Code
The appellant claimed that the aforesaid order of com pulsory retirement has been issued by the respondent State on the basis of a memorandum dated October 6 1988 though in the garb of Rule 74bii of the Bihar Service Code but in fact this has been made as a measure of punishment
Being aggrieved and dissatisfied by the order of compul sory retirement passed against him by the respondents the appellant preferred a writ petition being CWJC No 8457 of 1988 before the High Court Patna questioning the im pugned order on the grounds inter alia 683 that the appellant throughout his 30 years had an exemplary service career and his integrity remained unquestionable that the appellant was never communicated with any adverse remarks nor any departmental proceeding was ever initiated against the appellant nor any explanation was ever called for
The High Court without at all considering and appreci ating the contentions dismissed the writ application by a laconic order
Feeling aggrieved by the said order the instant appeal on special leave has been filed
The only crucial question that fails for consideration in this Court is whether the impugned order of compulsory retirement from service has been made by the Appointing Authority in public interest in accordance with Rule 74bii of Bihar Service Code 1979 or for any oblique motive as an extraneous consideration or by way of punish ment casting stigma on the service career of the appellant even though the impugned order was couched in innocuous language
The relevant Rule 74b reads as follows Rule 74bi Notwithstanding anything contained in the preceding subrule a Government Servant may after giving at least three months  previous notice in writing to the appointing authority concerned retire from service on the date on which such a Government servant completes thirty years of qualifying service or attains fifty years of age or any date thereafter to be specified in the notice
Provided that no Government servant under suspension shall retire from service except with the specific approval of the State Government
Provided further that in case of officers and servants of the Patna High Court including those of Circuit Bench at Ranchi under the rule marking authority of the Chief Justice no such officers and servants under suspension shall retire from service except with the specific approval of the Chief Justice
Rule 74bii The appointing authority concerned may after giving a Government servant at least three months  previous 684 notice in writing or an amount equal to three months  pay and allowances in lieu of such notice require him in public interest to retire from service on the date on which such a Government servant completes thirty years of qualifying service or attains fifty years of age or on any date there after to be specified in the notice
 On a plain reading of the said Rule it appears that the appointing authority has been conferred power to retire a government servant from service in public interest after giving three months  prior notice in writing or an amount equal to three months  pay and allowances in lieu of such notice on the date on which such government servant com pletes thirty years of qualifying service or attains fifty years of age or on any date thereafter to be specified in the notice
The impugned notification was made on October 26 1988 by the Government of Bihar intimating the appellant that as he had completed the age of more than 50 years and in the opinion of the Government of Bihar in public inter est he is compulsorily retired from service with effect from the date of issue of this notification
He will be paid salary of three months with allowances in lieu of three months  notice under Rule 74bii of Bihar Service Code
It has been contended on behalf of the appellant that though the impugned order is couched in innocuous terms and it is made in compliance with the provisions of Rule 74bii of Bihar Service Code on appellant s reaching the age of more than 50 years and it does not prima facie appear to cast any stigma on the service career of the appellant yet it has been made by way of punishment casting stigma on the appellant s service career and as such the impugned order is illegal bad and the same has been made in viola tion of audi alterem partem rule as well as Article 3112 of the Constitution
It has been further submitted in this connection that the power to retire the appellant compulso rily from service has not been made in public interest under Rule 74bii of Bihar Service Code but on the basis of the fact finding report given by the Deputy Development Commis sioner Dumka by his letter dated September 19 1987 re garding grave financial irregularities committed by the appellant in consideration of which a memorandum was pre pared by the Additional Commissioner cum Special Secretary Shri T Nand Kumar on October 6 1988 recommending to the respondent State to compulsorily retire the appellant from service under Rule 74bii of Bihar Code
It has also been contended that the basis of the order was made with oblique purposes 685 in consideration of extraneous matter and the impugned order purports to removal from service on certain serious allega tions of misconduct and consequently it casts a stigma on the service career of the appellant
Such order of compulso ry retirement from service though appears to be innocuous has been made by way of punishment and as such it is liable to be set aside and quashed
It has on the other hand been urged on behalf of the respondent State that the impugned order has been made under Rule 74bii of Bihar Service Code in public interest and there is nothing to show from the order itself that it has been made by way of punishment and it casts a stigma on the service career of the appellant
The language of the order is innocuous
The appellant cannot delve into the secretari at files to find out the basis of the order
Some decisions have been cited at the bar in support of this submission
Rule 74bii of the Bihar Service Code confers power on the Appointing Authority to compulsorily retire a govern ment servant on his attaining 50 years of age or after completing 30 years of qualifying service in public inter est
The object of this rule is to get rid of the government servant who has become dead wood
This order is made only to do away with service of only those employees who have lost their utility become useless and whose further continuance in service is considered not to be in public interest
In the instant case the appellant has an unblemished career and undoubtedly by dint of his merit and flawless service career he had been promoted to the post of Joint Director in 1983 and subsequently on 1st April 1984 he was promoted to the higher post of General Manager under the respondent State in its Industries Department
The appellant has specifically pleaded in paragraph K of this appeal that he came to know that the impugned order of compulsory retirement has been issued by the respondent State on the basis of a memorandum dated October 6 1988
It has been further pleaded that the appellant came to know from the memorandum that the impugned order of compulsory retirement dated October 26 1988 has been issued by the respondent State though in the garb of Rule 74bii of the Bihar Service Code but in fact the same has been issued as a measure of punishment
This fact will be evident from the memorandum dated 6th October 1988 wherein the State has alleged that six items of charges have been proved against the petitioner appellant
The State Government has also accepted that there is no question of going into the formality of departmental proceeding but has decided to retire the petitioner compulsorily under Rules 74bii of the Bihar Service Code
Paragraphs 686 2 to 4 of the Memorandum dated 6th October 1988 make it clear that the impugned order dated October 26 1988 of compulsory retirement has been issued as a measure  of punishment
It is further submitted that the order passed on October 26 1988 was without giving any notice or any show cause to the petitioner
It has been stated in para 4 to 7 of the counter affidavit as under 4 That it is not at all necessary to draw departmental proceeding against the petitioner appellant before effect ing his compulsory retirement from government service
Since his retirement under Rule 74bii of the Bihar Service Code does not amount to dismissal or removal from government service within the meaning of clause 2 of Article 311 of the Constitution it is therefore not necessary to obtain the advice of the Bihar Public Service Commission Limita tion of Functions Regulation 1956
5 That it is relevant to state that while the petitioner appellant was General Manager District Industries Centre Dumka and Deoghar during the year 1985 onwards till his compulsory retirement an enquiry into the serious charges of corruption omission and commission of financial and administrative lapses and foul play against him had been conducted respectively by Deputy Development Commissioner Dumka Deputy Commissioner Dumka and Additional Director of Industries Bihar Patna
The above charges were proved such as i The charge of registration of bogus unit had clearly been established ii Allegations of recommendations and sanction of capital subsidy on DG sets to bogus units have been proved iii Where there were no DG sets and the unit was bogus subsidy had been sanctioned against the departmental in structions iv Seed money had been sanctioned to non existent units and payments made in violation of Government orders 687 v Registration had been done for restricted items vi Subsidy on DG sets had been sanctioned and payments made to units located outside his jurisdiction and vii Appointment of persons had been made on ad hoc basis beyond his delegated powers in gross violation of Government rules
6 That in the above mentioned cases registration recom mendations and payments had been made by the petitioner appellant after making personal inspections of the units which facts are sufficient to prove that he had commited the said irregularities knowingly for his personal gains and thereby the State Government had suffered a heavy loss
This misconduct on his part had tarnished the image of the Gov ernment in the public
It is therefore his so called exemplary service record which has no co relation with his compulsory retirement as stated in the aforesaid paragraph
7 That contention of the petitioner appellant as stated in para viii of the special leave petition that the memo randum which have formed the basis of causing the compulsory retirement of the petitioner appellant is absolutely wrong and without any substance
It is relevant to state that the memorandum being confidential papers of the re spondent State Government cannot be termed as the Order of compulsory retirement and which order does not contain any word from which a stigma may be inferred
 It has been further averred in para 8 of the said affi davit that on a perusal of the order of compulsory retire ment of the petitioner appellant it is sufficiently clear that no stigma has been attached to the petitioner nor there is any word in the said Order from which a stigma may be inferred
The Supreme Court has held in the case of IN Saxsena vs The State of Madhya Pradesh 967 2 SCR 496 that where an order requiting a Government servant to retire compulsorily contains express words from which a stigma can be inferred that order will amount to removal within the meaning of Article 311
But where there are no express words in the order itself which would throw any stigma on the Government order we cannot delve into Secretariat files to discover whether some kind of stigma can be inferred on such research
688 In para 9 it has been stated that it is therefore as per the decision of the Supreme Court in the said case the Court cannot look into the background resulting in the passing of the order of compulsory retirement in order to discover whether some kind of stigma can be inferred and accordingly in the instant case the memorandum is totally irrelevant for the consideration by the Court and in view of the same the appeal of the appellant can be dismissed
A supplementary affidavit has been filed on behalf of the appellant sworn by Suhird Kumar son of the appellant
In para 3 of the said affidavit it has been submitted that the memorandum is prepared on the basis of two enquiry reports done by the different officers without there being any notice or getting any other version and this sort of memorandum cannot be said to be a fair memorandum in the eyes of law and so any action taken by the State Government on the basis of the said Memorandum is bad and violative of Article 14 and 16 of the Constitution of India
It is thus clear and evident from the counter affidavit filed on behalf of the State Government referred to herein before that the basis of the impugned order of compulsory retirement from service of the appellant is not in public interest as stated in the order of compulsory retirement dated October 26 1988
The impugned order in fact has been passed on the basis of the memorandum dated October 6 1988 which is also based on the Report given by the Deputy Development Commissioner Dumka by his letter dated Septem ber 19 1987 without asking any explanation from the appel lant and without giving him any opportunity to defend his case before the Deputy Development Commissioner
It is therefore wrong to say that the basis of the order is not the said memorandum as well as the report of the Deputy Development Commissioner which clearly evinces that the impugned order of compulsory retirement is a mere camouflage being couched in innocuous terms and in fact the same has been made by way of punishment
In support of the impugned order it has been vehemently urged on behalf of the respondent State that the order of compulsory retirement dated October 26 1988 does not show prima facie that it has been made by way of punishment
The Order as it is speaks of compulsory retirement of the appellant from service in accordance with the provisions of Rule 74bii of the Bihar Service Code
It has been con tended further  that this order being couched in innocuous terms cannot be questioned and the appellant cannot delve into the secre 689 tariat filed to find out the basis of the order and to challenge the same on that basis
Reference has been made in this connection to the case of 1
N Saksena vs The State of Madhya Pradesh supra
In that case the State of Madhya Pradesh issued a memorandum on February 28 1963 raising the age of retirement of its employees from 55 to 58 years
Clause 5 of the memorandum however said that the appoint ing Authority may require a Government servant to retire after he attained the age of 55 years on three months  notice without giving any reasons
The clause further said that this power was normally to be used to weed out unsuit able employees
The appellant who was a District and Ses sions Judge in the service of the State Government would normally have retired at the age of 55 years in August 1963
In September 1963 however Government communicated to
him an order that he was to retire on December 31 1963 under Rule 56 of the Fundamental Rules applicable to the State of Madhya Pradesh
This order was challenged by the appellant by writ petition before the High Court of Madhya Pradesh
It was rejected
Thereafter the appellant came with a certificate to this court
It has been held by this Court in that case that Where there are no express words in the order of compulsory retirement itself which would throw a stigma on the Govern ment servant the Court would not delve into Secretariat files to discover whether some kind of stigma could be inferred on such research
Since in the present case there are no words of stigma in the order compulsorily retiring the appellant there was no removal requiring action under article 311 of the Constitution
 This decision does not in any way apply to this case for the simple reason that in the affidavit in counter filed by the respondent State it has been categorically stated that while passing the impugned order of compulsory retirement the officers concerned were guided by the report dated September 19 1987 submitted by the Deputy Development Commissioner Dumka who stated in his report that the appel lant was responsible for the grave and serious financial irregularities resulting in financial loss to the State Government without giving any opportunity of hearing and without intimating the allegations to the appellant before forming his opinion
The said report was taken into consid eration and memorandum in question was issued on October 26 1988 by the Additional Secretary Industries Department Government of Bihar wherein it has been clearly stated that the impugned order of compulsory retirement was made as the said mis 690 conduct on the part of the appellant tarnished the image of the Government in the public
This categorical statement made in the affidavit in counter clearly proves that the basis of making the order of compulsory retirement of the appellant from the service is the aforesaid report of the Deputy Development Commissioner Dumka referred to hereinbe fore
In such circumstances it is futile to argue that the order of compulsory retirement being couched in an innocuous language without causing any stigma is unassailable
It is pertinent to mention in this connection the case of Shyam Lal vs The State of UP  Anr  wherein it has been held by the Constitution Bench that A compulsory retirement under the Civil Services Classifi cation Control and Appeal Rules does not amount to dis missal or removal within the meaning of Article 311 of the Constitution and therefore does not fall within the provi sions of the said Article
 There is no such element of charge or imputation in the case of compulsory retirement
The two requirements for compulsory retirement are that the officer has completed 25 years  service and that it is in the public interest to dispense with his further services
It is true that this power of compulsory retirement may be used when the authori ty exercising this power cannot substantiate the misconduct which may be the real cause for taking the action but what is important to note is that the directions in the last sentence in Note 1 to Article 465 A make it abundantly clear that an imputation or charge is not in terms made a condi tion for the exercise of the power
In other words a com pulsory retirement has no stigma or implication of misbeha viour or incapacity
 It has been further held that A compulsory retirement does not amount to dismissal or removal and therefore does not attract the provisions of Article 311 of the Constitution
In Baldev Raj Chadha vs Union of India and Ors 1 it was held that 691 The whole purpose of Fundamental Rule 56j is to weed out the worthless without the punitive extremes covered by Article 311 of the Constitution
But under the guise of public interest  if unlimited direction is regarded accept able for making an order of premature retirement it will be the surest menace to public interest and must fail for unreasonableness arbitrariness and disguised dismissal
The exercise of power must be bona fide and promote public interest
 It has also been observed that An officer in continuous service for 14 years crossing the efficiency bar and reaching the maximum salary in the scale and with no adverse entries at least for five years immedi ately before the compulsory retirement cannot be compulsori ly retired on the score that long years ago his performance had been poor although his superiors had allowed him to cross the efficiency bar without qualms
 In the case of Union of India vs Col JN Sinha and Anr 1971 1 SCR 791 it has been observed by this Court that Fundamental Rule 56i does not in terms require that any opportunity should be given to the concerned Government servant to show cause against his compulsory retirement
It says that the appropriate authority has the absolute right to retire a government servant if it is of the opinion that it is in the public interest to do so
If that authority bona fide forms that opinion the correctness of that opinion cannot be challenged before courts though it is open to an aggrieved party to contend that the requisite opinion has not been formed or the decision is based on collateral grounds or that it is an arbitrary decision
 In Shamsher Singh  Anr
vs State of Punjab  the appellant Shamsher Singh was a Subordinate Judge on probation
His services were terminated by the Government of Punjab in the name of Governor of Punjab by an order which did not give any reasons for the termination
It has been held that No abstract proposition can be laid down that where the services of probationer are terminated without saying any 692 thing more in the order of termination that it can never amount to a punishment in the facts and circumstances of the case
If a probationer is discharged on the ground of mis conduct or inefficiency or for similar reason without a proper enquiry and without his getting a reasonable opportu nity of showing cause against his discharge it may in a given case amount to removal from service within the meaning of Article 3112 of the Constitution
 In that case the appellant was asked to show cause why his services should not be terminated and there were four grounds
One was that the appellant s behaviour towards the Bar and the litigant public was highly objectionable de rogatory non cooperative and unbecoming of a judicial officer
The second was that the appellant would leave his office early
The third was the complaint of Om Prakash Agriculture Inspector that the appellant abused his position by proclaiming that he would get Om Prakash involved in a case if he did not cooperate with Mangal Singh a friend of the appellant and Block Development officer Sultanpur
The fourth was the complaint of Prem Sagar that the appellant did not give full opportunity to Prem Sagar to lead evi dence
Prem Sagar also complained that the decreeholder made an application for execution of the decree against Prem Sagar and the appellant without obtaining office report incorporated some additions in the original judgment and warrant of possession
The appellant showed cause stating that he was not provided with an opportunity to work under the same superior officer for at least six months so that independent opinion could k formed about his knowledge work and conduct
Thereafter the appellant received a letter from the Deputy Secretary to the Government addressed to the Registrar Punjab and Haryana High Court that the services of the appellant had been terminated
It has been held that in the facts and circumstances of the case it is clear that the order of the termination of the appellant Shamsher Singh was one of punishment
The authorities were to find out the suitability of the appellant
The order of termination is in infraction of Rule 9 which makes it incum bent upon the authority that the services of a probationer can be terminated on specific fault or on account of unsat isfactory record implying unsuitability
The order of termi nation was therefore set aside
This judgment has been followed in the case of Anoop Jaiswal vs Government of India and Anr  It has been observed that 693 It is therefore now well settled that where the form of the order is merely a camouflage for an order of dismissal for misconduct it is always open to the Court before which the order is challenged to go behind the form and ascertain the true character of the order
If the Court holds that the order though in the form is merely a determination of em ployment is in reality a cloak for an order of punishment the Court would not be debarred merely because of the form of the order in giving effect to the fights conferred by law upon the employee
 It has also been observed that Even though the order of discharge may be non committal it cannot stand alone
Though the noting in the file of the Government may be irrelevant the cause for the order cannot be ignored
The recommendation of the Director which is the basis or foundation for the order should be read along with the order for the purpose of determining its true character
If on reading the two together the Court reaches the conclu sion that the alleged act of misconduct was the cause of the order and that but for that incident it would not have been passed then it is inevitable that the order of discharge should fall to the ground as the appellant has not been afforded a reasonable opportunity to defend himself as provided in article 3 112 of the Constitution
 On a consideration of the above decisions the legal position that now emerges is that even though the order of compulsory retirement is couched in innocuous language without making any imputations against the government serv ant who is directed to be compulsorily retired from service the Court if challenged in appropriate cases can lift the veil to find out whether the order is based on any miscon duct of the government servant concerned or the order has been made bona fide and not with any oblique or extraneous purposes
Mere form of the order in such cases cannot deter the Court from delving into the basis of the order if the order in question is challenged by the concerned government servant as has been held by this Court in Anoop Jaiswal s case
This being the position the respondent State cannot defend the order of compulsory retirement of the appellant in the instant case on the mere plea that the order has been made in accordance with the provisions of Rule 74bii of the Bihar Service Code 694 which prima facie does not make any imputation or does not cast any stigma on the service career of the appellant
But in view of the clear and specific averments made by the respondent State that the impugned order has been made to compulsorily retire the appellant from service under the aforesaid Rule as the appellant was found to have committed grave financial irregularities leading to financial loss to the State the impugned order cannot but be said to have been made by way of punishment
As such such an order is in contravention of Article 311 of the Constitution of India as well as it is arbitrary as it violates principles of natural justice and the same has not been made bona fide
In the premises aforesaid we hold that the impugned order has not been made bona fide but for collateral pur poses and on extraneous consideration by way of punishment
The impugned order is therefore illegal and unwanted and so it is liable to be quashed and set aside
We therefore allow the appeal and set aside the impugned order
We fur ther direct the respondents to reinstate the appellant in service forthwith with full back wages
The respondents will pay costs to the appellant
NPV Appeal allowed


Summary:
The Respondent Company which was established in 1942 went into production in 1944 manufacturing Straw Boards and Mill boards only uptil the year 1964
In 1965 it expanded its activities by manufacturing duplex board
In the follow ing year it started manufacturing packing and wrapping paper on experimental basis and on commercial basis after 1967
Sometime in 1971 the Company wrote to the Assistant Collec tor of Central Excise enquiring as to whether it would be entitled to exemption from duty under Notification No 1631965 both in respect of production attributable to its installed capacity as in 1967 as well as in respect of production attributable to its expanded capacity
The As sistant Collector passed an Order holding the company was entitled to concession under column 5 of the Table of the Notification No 163 of 1965 in respect of production at tributable to its enlarged capacity namely the third ma chine and rejected its claim for exemption on production attributable to its capacity as it existed in 1967
Dissat isfied the company preferred appeal to the Appellate Collec tor who maintained the order of the Assistant Collector
The Respondent Company thereupon moved the High Court by a writ petition under Article 226 of the Constitution of India
In allowing the writ Petition the High Court held that on a plain literal construction it is obvious that the commencement of production must refer not to the production of excisable goods paper in general failing under item 17
but to production of those specified exempted categories of paper in column 2 of the aforesaid notification
Hence this appeal by the Union of India
Allowing the appeal and dismissing the Writ Petition of the Company
this Court
HELD When the question is whether a subject falls in the Notification or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is removed and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction
663D E A close reading of both parts of the Notification together leaves no 660 room for doubt that it was intended to be exhaustive grant ing exemption to all factories producing packing and wrap ping paper whether existing or commencing production from 1st March
1964 to the former to the extent of enlarged capacity and to latter to the full extent
663G H As the Respondent Company did not fall in the first clause of the notification there was no question of giving the clause a liberal construction and hold that production of goods by the Respondent mentioned in the Notification were entitled to the benefit
Production of packing and wrapping paper by Respondent was entitled to exemption only to the extent it was at tributable to enlarged capacity and not to the existing capacity
665F 664F Hansraj Goverdhan vs HH Dave Asstt
Collector Cen tral Excise  Customs Surat and Others 1969 2 SCR 252 Commissioner of Inome tax vs Madho Prasad   Tara Oil Mills Co Ltd vs Collector of Central Excise  referred to