Civil Appeal No 722 of 1978
From the Judgment and Decree dated 1141977 of the Madhya Pradesh High Court in Second Appeal No 315 of 1970
SKGambhir for the Appellant
SS Khanduja for the Respondent 
The Judgment of the Court was delivered by KRAMASWAMYJ
The facts in this appeal would lie in a short compass
The appellant appointed the respondent as Lower Division Clerk on September 22 1966 and put him on probation for a period of two years which expired on September 21 1968
On December 9 1968 the appellant served him with one month s notice terminating the services with effect from January 9 1969
Calling in question the order of termination the respondent laid the suit for declaration that the termination without enquiry and an opportunity of being heard was violative of Rule 9A of the Madhya Pradesh Civil Service Classification Control  Appeal Rules 1966 with consequential declaration that he became a permanent employee of the corporation with cotiuity of service and arrears of salary
The Trial Court dismissed the suit and on appeal it was confirmed
The High Court in Second Appeal No 31570 by judgment and decree dated April 11 1977 allowed the appeal and decreed the suit as prayed for
On leave under article 136 the Appellant filed this appeal
Shri Sk
Gambhir learned counsel for the appellant contended that the respondent being a probationer acquires permanent status only on confirmation
Before confirmation the appellant had exercised its power in terms of the rules and terminated the respondent s service
The High Court committed manifest error of law in its finding that on expiry of two years period of probation the respondent must be deemed to have been confirmed under Rule 14 of the Municipal Officers and Servants Recruitment Rules which no longer were in force
He further contended that rule 8 of the Madhya Pradesh Government Servants  General Conditions of Service Rules 1961 for short the Rules  expressly provides confirmation of probation as a condition precedent
Notice was issued terminating the service before confirmation and so it is valid in law
Shri SS Khanduja learned counsel for the respondent contended that by operation of the resolution passed 324 by the Municipal Corporation under section 25 of the Central Provinces and Berar Municipality Act 1922 the Municipal Officers and Servants are governed by recruitment rules thereunder
Rule 14 thereof relied on by the High Court expressly provided to put an employee on probation for a period of two years subject to being confirmed
At the end of the probationary period if the probationer was found unfit the Municipal Committee shall if he was a direct recruit to dispense with his service and if he has been recruited by tranfer to revert to his original post
On expiry of the period of two years no action was taken by the Municipal Corporation
Therefore the respondent must be deemed to have been confirmed
Thereafter the only power which the Corporation had was to terminate the service of the respondednt in accordance with Classification Control and Appeal Rules after conducting an enquiry and giving him reasonable opportunity that too for misconduct
No such procedure was adopted
Therefore the impugned notice was illegal and the High Court was justified in granting the decree
The first question is which are the relevant rules that would be applicable to the respondent Admittedly the Municipal Council became a Municipal Corporation on or after August 26 1967
A resolution was passed making a draft bye law by a Municipal Council on November 11 1960 exercising the power under section 1783 of the Madhya Pradesh Municipal Act 1922 and confirmed the same under section 25 1 of the said Act adopting Government Rules to regulate the conditions of service of officers and servants of Municipal Committee which provides thus The fundamental rules and the Civil Service regulations as amended from time to time in their applications to MP the MPGovernment Servants Conduct Rules 1959 as amended from time to time and the General Book Circulars of the Govt
of MP as in force for the time being shall apply to the officers and servants of the MC in the same way as they apply to Govt
Servants
Thus it is clear that the Fundamental Rules Civil Service Regulations Govt Servants Conduct Rules and the General Book Circulars of the Government of Madhya Pradesh as amended from time to time etc
shall apply to the officers and servants of the Municipal Committee
The Previous rules were thus superseded and were no longer in force
Reliance on Rule 14 referred to above made by the High Court is therefore wrong
Rule 8 of the Rules reads thus 325 Probation 1 A person appointed to a service or post by direct recruitment shall ordinarily be placed on probation for such period as may be prescribed
2 The appointing authority may for sufficient reasons extend the period of probation by a further period not exceeding one year
Note A probationer whose period of probation is not extended under this Sub Rule but who has neither been confirmed nor discharged from service at the end of the period of probation shall be deemed to have been continued in service subject to the condition of his service being terminable on the expiry of a notice of one calender month given in writing by either side
3 A probationer shall undergo such training and pass such departmental examinations during the period of his probation as may be prescribed
4 and 5 are not relevant hence omitted
6 On the successful completion of probation and the passing of the prescribed departmental examinations the probationer shall be confirmed in the services or post to which he has been appointed Thus it is clear from Rule 8 of the Rules that the procedure to place a direct recruit on probation for a prescribed period was provided
The appointing authority would be entitled to place a direct recruit on probation for a specified period and for sufficient reasons may extend the period of probation to a further period not exceeding one year
Under the note to sub rule 2 if the probationer is neither confirmed nor discharged from service at the end of the period of probation he shall be deemed to have been continued in service as probationer subject to the condition of his service being terminated on the expiry of a notice of one calender month given in writing by either side
As per sub rule 6 on passing the prescribed departmental examination and on successful completion of the period of probation the probationer shall be confirmed in the service or post to which he has been appointed
Then he becomes an approved probationer
Therefore after the expiry of the period of probation and before its confirmation he would be deemed to have been continued in service 326 as probationer
Confirmation of probation would be subject to satisfactory completion of the probation and to pass in the prescribed examinations
Expiry of the period of probation therefore does not entitle him with a right to a deemed confirmation
The rule contemplate to pass an express order of confirmation in that regard
By issue of notice of one calender month in writing by either side the tenure could be put to an end which was done in this case
In State of Punjab vs
Dharam Singh  considering the effect of continuing a probationer in service after the period of probation was completed the Constitution Bench held that there was no rule for the extension of probation after October 1 1960 and it was not possible to presume the competent authority extended it beyond October 1 1960Thus in the above case there was no power to extend the probation in the rules beyond the specified period
It was held that The initial period of probation of the respondents ended on October 1 1958
By allowing the respondents to continue in their posts thereafter without any express order of confirmation the competent authority must be taken to have extended the period of probation upto October 1 1960 by implication
But under the proviso to Rule 63 the probationary period could not extend beyond October 1 1960
In view of the proviso to Rule 63 it is not possible to presume that the competent authority extended the probationary period after October 1 1960 or that there after the respondents continued to hold their posts as probationers
Accordingly it was held that the respondent therein was deemed to have been confirmed
In Om Prakash Maurya vs UP Co op
Sugar Factories Federation Lucknow  Ors
 this Court held that UP Co op
Sugar Factories Federation Service Rules 1976 made under the UP Co op
Societies Act were in force
Regulations 17 of 1975 Regulations does not permit continuance of an employee for a period of more than two years
One year normally was the period of probation and further being extended to a period of one more year
Rule 5 of 1976 Rules does not prescribe any limit on the extension of the probationary period
In the light of the operation of those rules when the probationary period was prescribed on promotion to the post of Commercial Officers with a condition that his probationary period may be extended and he could be reverted to the post of Office Superinten 327 dent without any notice this Court held that the stipulation for extension of probationary period in the appointment order must be considered in accordance with the proviso to regulation 171 which means that the probationary period could be extended for a period of one year more and the probationary period was further extended to one year during which period the service of the appellant was neither terminated nor was he reverted to his substantive post instead he was allowed to continue
On those facts this Court held that since under those regulations  appellant s probationary period could not be extended beyond the maximum period of two years he stood confirmed on the expiry of maximum probationary period and there after he could not be reverted to lower post treating him on probation
In MA Agarwal vs Gurgaon Bank  Ors and in State of Gujarat vs Akhilesh C Bhargav  Ors  this Court reiterated the same view
Exercise of the power to extend the probation is hedged with the existence of the rule in that regard followed by positive act of either confirmation of the probation or discharge from service or reversion to the substantive post within a reasonable time after the expiry of the period of probation
If the rules do not empower the appointing authority to extend the probation beyond the prescribed period or where the rules are absent about confirmation or passing of the prescribed test for confirmation of probation and inaction for a very long time may lead to an indication of the satisfactory completion of probation
But in this case Rule 8 expressly postulates otherwise
The period of probation is subject to extension by order in writing for another period of one year
Passing the prescribed examinations and successful completion of probation and to make an order of confirmation are condition precedent
Mere expiry of the initial period of probation does not automatically have the effect of deemed confirmation and the status of a deemed confirmation of the probation
An express order in that regard only confers the status of an approved probationer
We are of the view that note to sub rule 2 read with sub rule 6 of Rule 8 manifests the legislative intent that confirmation of the probation of the respondent would be made only on successful completion of the probation and the passing of the prescribed examinations
It is not the respondent s case that he passed all the examinations
He shall be deemed to be continued on probation
Before confirmation the appointing authority is empowered to terminate the service of the probationer by issuing on calender month s notice in writing and on expiry thereof the service stands terminated without any further notice
Within three months from the date of expiry of original two 328 years period of probation and within one year s period the order of termination was made
In this view the question of conducting an inquiry under the Classification Control and Appeal Rules after giving an opportunity and that too for specific charges does not arise
The High Court therefore committed manifest error of law in decreeing the suit
By an interim order passed by this court the respondent received a sum of Rs 5000 from the appellant
The appellant shall not recover the same from him
The appeal is accordingly allowed
The judgment and decree of the High Court is set aside and that of the Trial Court and the Ist Appellate Court are confirmed
But in the circumstances parties are directed to bear their own costs
NPV Appeal allowed


Summary:
The appellant a manufacturer of cement entered into an agreement with the Cement Manufacturing Company of India Limited for sale of cement
Under the agreement the appellant was to sell its cement only through the marketing company and certain sums would be paid for the cement supplied by the marketing company which had the discretion to fix the sale price
For the 1950 51 1951 52 and 1952 53 periods when the appellant was assessed to sales tax for the supply of cement it maintained at the assessment stage that the transactions were not exigible to sales tax as they were covered under the Explanation to Article 2861a
The first Appellate Authority and the Board of Revenue did not accept the stand of the appellant
The Board of Revenue held that cement being a controlled commodity distribution of cement continued to be controlled during the period notwithstanding the expiry of the Defence of India Rules
Relying on the decision of this Court in the case of Rohtas Industries Limited vs State of Bihar 12 STC 621 the Board of Revenue held that the Cement Marketing Company was an independent organisation and was carrying on business as an independent entity and that what had actually been taxed were the sales effected by the appellant to the Cement marketing Company and not the sales made to the parties which obtained authorization from the Cement Controller
After analyzing the terms of the contract between the manufacturer and the Marketing Company this Court held in Rohtas Industries case that there was sale between the manufacturer and the Marketing Company
251 Following its view taken in Rohtas Industries case as the present case had the same terms which had been considered in the earlier case and examining the question whether the sale that took place between the manufacturer and the Marketing Company could be taken to be covered by the Explanation to Article 2861a this Court dismissing the appeals HELD 1
There was preceding local sales complete in every respect within Madhya Pradesh by which title to the cement had passed from the appellant to the Marketing Company
The concept of inter State sale as brought in by the Sixth Amendment or in the subsequent statute known as the Central Sales Tax Act was not in existence for the relevant period now under consideration
The finding recorded by the authorities was that the delivery of the cement was not the direct result of such sale or purchase of the cement outside the State
In the absence of such privity the Explanation is not attracted to the transactions254E G
In view of the finding recorded by the authorities that the cement in this case actually had not been delivered as a direct result of such sale or purchase for the purpose of consumption outside the State the only conclusion that can follow is that the Explanation does not apply and the assessments are justified254H 255A
Rohtas Industries Limited vs State of Bihar 12 STC 621 followed
Mohmd
Serajuddin vs State of Orissa  distinguished