Civil Appeal No 2329 of 1977
Appeal by Special Leave from the Judgment and Order dated 30 11 1976 of the Karnataka High Court in WP
No 230771
CIVIL APPEAL NOS
2330 235077 Appeals by Special Leave from the Judgment and Order dated 30 11 1976 of the Karnataka High Court in WP Nos
230771 79672 and 462 467 553 560 943 944 1033 1027 and 103273 and CIVIL APPEAL NOS
2351 237077 Appeals by Special Leave from the Judgment and Order dated 30 11 1976 of the Karnataka High Court in WP Nos
462 467 553 560 796 943944 1027 103373
P Ram Reddy and section section Javali for the Appellant in CA 232977
F section Nariman B P Singh and A K Srivastava for the Appellants in CA Nos
2351 237077
L N Sinha and Narayan Nettar for the Appellants in CA 2330 to 237077
A K Sen Muralidhar Rao and P R Ramasesh for RR
235 and 7 in CA 232977
P R Ramasesh for RRPromotees in CA 2330 235077 and RR in CA 2352 237077
941 Y section Chitale M Muralidhar Rao P R Ramasesh and section section khanduja for the RR in CA 235177
The Judgment of the Court was delivered by KOSHAL J
By this judgment we shall dispose of 42 appeals by special leave namely Civil Appeals Nos 2329 to 2370 of 1977 all of which are directed against a judgment dated the 30th November 1976 of a Division Bench of the High Court of Karnataka
Civil Appeals Nos 2329 and 2351 to 2370 of 1977 have been filed by different persons who were appointed Assistant Engineers in the Karnataka State on 31st October 1961 by way of direct recruitment while the other 21 appeals have been filed by that State
The facts giving rise to the impugned judgment may be set down in some detail
A new State came into existence on the 1st of November 1956 as a result of integration of the areas which formed part of the erstwhile States of Mysore Madras Coorg Bombay and Hyderabad hereinafter referred to as the Merged States
It was then given the name of one of its constituents namely the State of Mysore which was later changed to that of the Karnataka State
In the Public Works Departments of the Merged States there was a class of non gazetted officers ranking below Assistant Engineers
The class was designated as Graduate Supervisors in the Merged State of Mysore as Junior Engineers in the Merged State of Madras and as Supervisors in the Merged States of Hyderabad and Bombay
The Graduate Supervisors were paid a fixed salary of Rs 225 per mensem which was lower by Rs 25 per mensem as compared to the starting salary of Assistant Engineers who in the normal course were expected to head sub divisions
To the post of Assistant Engineer a Graduate Supervisor was appointed only on promotion
Prior to the 1st of November 1956 quite a few Graduate Supervisors were given charge of sub divisions and designated as Sub Divisional Officers in order to meet the exigencies of service and they continued to act as such after the merger when they claimed equation of their posts with those of Assistant Engineers in the matter of integration of services
To begin with their claim was turned down by the Central Government who equated the posts of Graduate Supervisors with the posts of Junior Engineers of the Merged State of Madras and the posts of Supervisors of the Merged States of Hyderabad and Bombay
By a notification dated the 6th of February 1958 the Government of Karnataka then known as the Government of Mysore 942 promulgated the Mysore Government Servants Probation Rules 1957 hereinafter called the Probation Rules and on the next day came into force the Mysore Government Servants Seniority Rules 1957 hereinafter referred to as the Seniority Rules both having been framed under Article 309 of the Constitution of India
On the 1st of October 1958 the Karnataka Public Service Commission invited applications from candidates for appointment to the posts of Assistant Engineers by direct recruitment
In the meantime Graduate Supervisors and Government employees holding equivalent posts had continued to press their claim for the equation of their posts with the posts of Assistant Engineers and they succeeded partially when on the 15th of November 1958 the Karnataka Government promoted 167 of them including 107 Graduate Supervisors who had been working as such in the Merged State of Mysore as officiating Assistant Engineers with immediate effect
The promotion was notified in the State Gazette dated the 20th of November 1958 Exhibit A the relevant portion whereof may be reproduced for facility of reference  
The following supervisors of Public Works Department are promoted as officiating Assistant Engineers with immediate effect and until further orders against the existing vacancies subject to review after the finalisation of the Inter Se Seniority List of Supervisors and the Cadre and Recruitment Rules of Public Works Department
The promotion of officers from Sl
No 74 to 167 against existing vacancies will be purely on a temporary basis pending filling up of the vacancies by Direct Recruitment as per rules
The Seniority inter se of the Promotees will be provisional according to the order given below    
299 more persons of the same class were promoted to the posts of Assistant Engineers by eight notifications published during the period from 22nd of December 1958 to the 13th of October 1960
On the 21st 31st of August 1960 the State Government passed an order in regard to the 107 Graduate Supervisors from the Merged State of Mysore and mentioned above directing that they be treated as Assistant Engineers and be paid the pre revision scale of pay of Rs 250 25 450 from the 1st of November 1956 to the 31st of December 1956 and the revised scale of pay of Rs 250 25 450 30 600 from the 1st of January 1957 onwards
The order further directed that the said 107 officers shall be placed in the inter se seniority list below the Assistant Engineers
943 On the 3rd of December 1960 the Karnataka Government promulgated the Mysore Public Works Engineering Department Services Recruitment Rules 1960 hereinafter referred to as the Recruitment Rules under Article 309 of the Constitution of India which envisaged appointment of Assistant Engineers in the Public Works Department by direct recruitment to the extent of 40 per cent and by promotion for the rest viz 50 per cent from the cadre of Junior Engineers and 10 per cent from the cadre of Supervisors
The cadre of Assistant Engineers was stated in the Rules to consist of 344 permanent and 345 temporary posts
On the 23rd of October 1961 the Recruitment Rules were amended so as to be operative retrospectively ie with effect from the 1st of March 1958
On the 31st of October 1961 88 candidates were appointed as Probationary Assistant Engineers by direct recruitment
Two notifications were issued by the State Government on the 27th of February 1962
By each one of them 231 Junior Engineers were given regular promotions as Assistant Engineers with effect from specified dates falling within the period 15th of November 1958 to the 10th of November 1960
The first of these notifications stated inter alia  
However the promotions are subject to review after finalisation of the interse Seniority List of Junior Engineers  The second of the notifications issued on the 27th of February
1962 mentioned that the officers named therein would be deemed to be temporarily promoted and permitted to continue to officiate as Assistant Engineers on a provisional basis and until further orders
The case of the said 107 officers received further consideration at the hands of the State Government who on the 6th of October 1962 issued another order Exhibit D superseding the one dated the 31st of August 1960 and promoting them as Assistant Engineers with effect from the 1st of November 1956
By the 24th of September 1966 the number of Probationary Assistant Engineers appointed through direct recruitment hereinafter called direct recruits had fallen to 85 for reasons which need not be stated
On that day the State Government passed an order that they had all completed their period of probation satisfactorily and stood absorbed against substantive vacancies with effect from the 1st of November 1962
944 In 1971 various orders were passed promoting some of the direct recruits to the posts of Executive Engineers and those orders were challenged in a writ petition dated the 15th of September 1971 by the promotees to the posts of Assistant Engineers hereinafter referred to as the promotees
On the 28th of September 1972 a list Exhibit G of Assistant Engineers indicating their seniority inter se as on the 1st of November 1959 was prepared by the State Government
In that list the promotees were accorded seniority to their satisfaction
However that list was superseded by another list dated the 4th of September 1973 in which the seniority inter se of all Assistant Engineers functioning in the State Public Works Department as on 1st of January 1973 was declared
The new list purported to have been framed in accordance with the Recruitment Rules
Objections to the list were invited and were submitted by various officers
During the year 1973 more writ petitions challenging the promotion of direct recruits to the posts of Executive Engineers were instituted by the promotees on whose behalf two claims were made before the High Court namely 1 that they had been regularly promoted as Assistant Engineers against substantive vacancies with retrospective effect and rightly so and 2 that in the case of those of them whose promotion was made effective from a date prior to the 1st of March 1958 the Recruitment Rules especially the quota rule could not affect them adversely
Both these claims were accepted by the High Court the first on the basis of the decision of this Court in Ram Prakash Khanna  others vs section A F Abbas1 coupled with the pleadings of the parties and the various orders issued by the State Government and mentioned above and the second on the authority of another decision of this Court in V B Badami  others vs State of Mysore  others2
The High Court accordingly held that the quota rule would not be attracted to the case of those promotees who had been appointed to the posts of Assistant Engineers with effect from a date prior to the 1st of March 1958
By way of a clarification  the High Court further ruled that the promotion of the 107 officers working in the Merged State of 945 Mysore was made to substantive posts of Assistant Engineers with effect from the 1st of November 1956 and that the State Government or the direct recruits could not be allowed to urge to the contrary
According to the High Court such promotion was subject to review only if the course was warranted and necessitated by the final inter se seniority list of Junior Engineers the right to review having been reserved by the Government in its orders dated the 27th of February 1962
In relation to the direct recruits the High Court made a reference to the judgment of this Court in B N Nagarajan vs State of Mysore  others1 wherein it was held that their appointments although made after the Recruitment Rules had come into force were valid as the process of direct recruitment had been set in motion by the State Government in exercise of its executive powers under article 162 of the Constitution of India well before the Recruitment Rules were promulgated and that those appointments were therefore outside the Recruitment Rules
The High Court consequently held that the direct recruits were also not subject to the quota rule which could not according to it affect them adversely
Summing up the High Court gave the following directions 1 Promotees other than those covered by direction 2 and direct recruits would not be governed by the quota system as envisaged in the Recruitment Rules
2 Promotees who were appointed to posts of Assistant Engineers with effect from the 1st of March 1958 or later dates would be governed by the quota system as envisaged in the Recruitment Rules
3 Promotees appointed Assistant Engineers prior to the 31st of October 1961 would rank senior to the direct recruits whose appointments were made on that date
4 The claim of each of the promotees to the next higher post shall be considered with effect from a day prior to that on which any officer found junior to him was promoted
The first contention we would like to deal with is one raised by Mr F section Nariman appearing for the direct recruits
He argued that the scope of the writ petitions instituted by the promotees was limited to the question of promotion of Assistant Engineers as Executive Engineers and that no challenge to the seniority list dated the 4th of September 1973 could be entertained
In this connection 946 reference was made to the prayer clause appearing in Writ Petition No 462 of 1973 which is in the following terms In this writ petition it is prayed that this Court may be pleased to 1 quash the promotion of respondents 2 to 31 to the cadre of Executive Engineers made as per order dated 3 2 1973 2 direct the respondent 1 to consider the case of the petitioner for promotion to the cadre of Executive Engineers with effect from 3 2 1973 on which date respondents 2 to 31 were promoted and 3 pass an interim order restraining the respondent 1 from making further promotion to the cadre of Executive Engineers without considering the case of the petitioner for such promotion pending disposal of this writ petition It was assumed at the hearing of the appeals that the prayer made in the other writ petitions is to a similar effect
It is true that no prayer has been made by the promotees to quash or rectify the seniority list dated the 4th of September 1973 but then their whole case is based on the contention that they had been promoted to the posts of Assistant Engineers in a substantive capacity prior to the appointment of the direct recruits that they would take precedence over direct recruits in the matter of seniority and regular absorption in the cadre of Assistant Engineers and that it was on that account that the promotion of direct recruits to the posts of Executive Engineers without consideration of the case of the promotees for such promotion was illegal
The attack on the said seniority list therefore is inherent in the case set up by the promotees of which it forms an integral part
In this view of the matter we cannot agree with Mr Nariman that the scope of the writ petitions is limited as stated by him
No exception is or can be taken on behalf of the promotees to the finding arrived at by the High Court that the appointment of direct recruits to the posts of Assistant Engineers was in order in view of the judgment of this Court in B N Nagarajan vs State of Mysoresupra
Nor can it be urged with any plausibility on behalf of direct recruits that the appointment of the promotees as Assistant 947 Engineers prior to the enforcement of the Recruitment Rules lay outside the powers of the Government or was otherwise illegal
The real dispute between the direct recruits and the promotees revolves round the quality of the tenure held by the latter immediately prior to the enforcement of the Recruitment Rules and that is so because of the language employed in rule 2 of the Seniority Rules
The relevant portion of that rule is extracted below 2
Subject to the provisions hereinafter contained the seniority of a person in a particular cadre of service or class of post shall be determined as follows a Officers appointed substantively in clear vacancies shall be senior to all persons appointed on officiating or any other basis in the same cadre of service or class of post b The seniority inter se of officers who are confirmed shall be determined according to dates of confirmation but where the date of confirmation of any two officers is the same their relative seniority will be determined by their seniority inter se while officiating in the same post and if not by their seniority inter se in the lower cadre c Seniority inter se of persons appointed on temporary basis will be determined by the dates of their continuous officiation in that grade and where the period of officiation is the same the seniority inter se in the lower grade shall prevail
Explanation       d   Now in so far as the direct recruits are concerned they were appointed as Probationary Assistant Engineersie Assistant Enginers appointed on probation which term is defined in rule 2 of the Probation Rules
That rule states 2
For the purpose of these rules  1 Appointed on Probation means appointed on trial in or against a substantive vacancy
2 Probationer means a Government servant appointed on probation
A Government servant so appointed and continuing in service remain a probationer until he is confirmed
 948 In view of these definitions it cannot be gainsaid that the direct recruits were appointed Assistant Engineers substantively in clear vacancies as envisaged by clause a of rule 2 of the Seniority Rules
If any of the promotees also satisfied that requirement at any time earlier to the 31st of october 1961 he would be bracketed with the direct recruits under that clause and his seniority vis a vis those recruits would the be governed by clause b of the rule ie on the basis of his and their respective dates of confirmation
If on the other hand none of the promotees can be said to have been appointed substantively in a clear vacancy clause a aforesaid would have no application to them and all direct recruits would rank senior to them and it is in the ligrht of the said clauses a and b therefore that learned counsel for the State and the direct recruits have challenged the finding of the High Court that the promotion of the 107 officers working in the Merged State of Mysore was made to substantive posts of Assistant Engineers with effect form the 1st of November 1956 and that the State Government or the direct recruits could not be allowed to urge to the contrary
The controversy has to be resolved in the light of the orders passed by the State Government from time to time in relation to those officers and others similarly situated
The first order appointing promotees as Assistant Engineers is dated the 15th of November 1958 Exhibit A
That order made it clear that all the promotees covered by it were appointed officiating Assistant Engineers and were to hold office until further orders
The promotion was also made subject to review after the finalisation of the inter se seniority list of Supervisors and the Recruitment Rules
The notification went on to state that in the case of 94 of the officers promoted under it their appointment as Assistant Engineers was being made on a purely temporary basis inasmuch as they would have to vacate the posts against which they were being fitted as soon as candidates were available through a process of direct recruitment
The language employed leaves no doubt that the promotion of the 167 officers was not substantively made the tenure being specifically stated to be either officiating or purely temporary which expressions clearly militate against a substantive appointment
Orders made by the State Government later on and right upto the 31st of October 1961 when the direct recruits were appointed Assistant Engineers did not improve the position of any of the promotees in any manner
Those orders were either silent on the point of the nature of the tenure of the promotees as Assistant Engineers or stated 949 in no uncertain terms that the promotees would hold the posts of Assistant Engineers on a temporary or officiating basis
That is why Dr Chitaley and Mr Sen learned counsel for the promotees mainly placed their reliance on the two notifications dated the 27th of February 1962 and order exhibit D dated the 6th of october 1962 the combined effect of which was to promote the said 107 officers as Assistant Engineers with effect from the 1st of November 1956 on a regular basis
It was argued that the regularisation of the promotion gave it the colour of permanence and the appointments of the promotees as Assistant Engineers must therefore be deemed to have been made substantively right from the 1st of November 1956
The argument however is unacceptable to us for two reasons
Firstly the words regular or regularisation do not connote permanence
They are terms calculated to condone any procedural irregularities and are meant to cure only such defects as are attributable to the methodology followed in making the appointments
They cannot be construed so as to convey an idea of the nature of tenure of the appointments
In this connection reference may with advantage be made to State of Mysore and Another vs section V Narayanappa1 and R N Nanjundappa vs T Thimmiah and Another2
In the former this Court observed Before we proceed to consider the construction placed by the High Court on the provisions of the said order we may mention that in the High Court both the parties appear to have proceeded on an assumption that regularisation meant permanence
Consequently it was never contended before the High Court that the effect of the application of the said order would mean only regularising the appointment and no more and that regularisation would not mean that the appointment would have to be considered to be permanent as an appointment to be permanent would still require confirmation
It seems that on account of this assumption on the part of both the parties the High Court equated regularisation with permanence In Nanjundappa s case also the question of regularisation of an appointment arose and this Court dealt with it thus  
Counsel on behalf of the respondent contended that regularisation would mean conferring the quality of permanence on the appointment whereas counsel on behalf 950 of the State contended that regularisation did not mean permanence but that it was a case of regularisation of the rules under Article 309
Both the contentions are fallacious
It the appointment itself is in infraction of the rules or if it is in violation of the provisions of the Constitution illegality cannot be regularised
Ratification or regularisation is possible of an act which is within the power and province of the authority but there has been some non compliance with procedure or manner which does not to to the root of the appointment
Regularisation cannot be said to be a mode of recruitment
To accede to such proposition would be to introduce a new head of appointment in defiance of rules or it may have the effect of setting at naught the rules
 Apart from repelling the contention that regularisation connotes permanence these observations furnish the second reason for rejection of the argument advanced on behalf of the promotees and that reason is that when rules framed under article 309 of the Constitution of India are in force no regularisation is permissible in exercise of the executive powers of the Government under article 162 thereof in contravention of the rules
The regularisation order was made long after the Probation Rules the Seniority Rules and the Recruitment Rules were promulgated and could not therefore direct something which would do violence to any of the provisions thereof
Regulaisation in the present case if it meant permanence operative from the 1st of November 1956 would have the effect of giving seniority to promotees over the direct recruits who in the absence of such regularisation would rank senior to the former because of the Seniority Rules read with the Probation Rules and may in consequence also confer on the promotees a right of priority in the matter of sharing the quota under the Recruitment Rules
In other words the regularisation order in colouring the appointments of promotees as Assistant Engineers with permanence would run counter to the rules framed under article 309 of the Constitution of India
What could not be done under the three sets of Rules as they stood would thus be achieved by an executive fiat
And such a course is not permissible because an act done in the exercise of the executive power of the Government as already stated cannot override rules framed under Article 309 of the Constitution
The case has for both the above reasons to be decided on the footing that all though the relevant period the promotees held appointments as Assistant Engineers in a non substantive capacity ie either on an officiating or a temporary basis
This being the position 951 they would all rank junior to the direct recruits who from the very start held appointments made substantively in clear vacancies
We may here make it clear that this order does not cover such officers as were holding the posts of Assistant Engineers on a substantive basis prior to the 1st of November 1956 when the new State of Mysore now known as Karnataka came into being
Nor would it adversely affect the case of any Assistant Engineer who acquired a substantive status prior to the promulgation of the Recruitment Rules and the appointment of the direct recruits
Persons falling within these two categories will first have to be accommodated in the clear vacancies available and only the remaining vacancies will have to be utilised for fitting in the direct recruits and the Assistant Engineers who have disputed their claim in these proceedings
It may also be mentioned that the quota rule will not stand in the way of the Government giving effect to this arrangement which has been taken care of in the amendment promulgated on the 23rd of October 1961 to the Recruitment Rules
The relevant portion of that amendment is contained in item 3 thereof which is reproduced below 3
To rule 2 of the following proviso shall be added and shall be deemed always to have been added namely Provided that in respect of direct recruitment of Assistant Engineers for the first time under these rules the percentages relating to direct recruitment and recruitment by promotion specified in column 2 of the Schedule shall not be applicable and the minimum qualifications and the period of production shall be the following namely Qualifications      It is common ground between the parties that the posts comprised in the cadre of Assistant Engineers constituted by the Recruitment Rules have yet to be filled in for the first time
The proviso extracted above therefore will apply fully to the utilization of those vacancies as stated above
It goes without saying that all questions of seniority shall be decided in accordance with the Seniority Rules and that the Recruitment Rules as amended from time to time shall be fully implemented as from the date of their enforcement ie 1st of March 1958
In the result we accept the appeals set aside the judgment of the High Court and decide the dispute between the parties in accordance with the observations made in paragraphs 5 and 6 hereof
VDK Appeals allowed


Summary:
The assesses had made profits during the assessment year 1951 52 but after deduction of the depreciation allowance it was found to have incurred a loss for income tax purposes
In the same year the assesses declared dividends
The Income tax Officer treated this amount as excess dividend  and levied additional income tax as provided in paragraph B of Part I of the First Schedule to the Indian Finance Act 1951
The assesses contended that inasmuch as there was no income at all which was 954 taxable the words  on the total income  in paragraph B did not apply to it and no additional income tax could be levied
The appellant relying on the proviso to paragraph B contended that additional income tax was imposed on excess dividend and if excess dividend was paid out the liability to tax arose Held that the assessee was not liable to pay additional incometax
The liability to tax was imposed by section 3 of the Income tax Act and the Finance Act merely laid down the rates at which tax was to be levied on the total income
If there was no income there was no question of applying a rate to the  total income  and no income tax or super tax could possibly result
The word  additional  in the expression additional income tax  implied that there was a tax before
The expressions  charge on the total income  and  profits liable to tax  in paragraph B contemplated only those cases where there was income and not cases where there was loss
Consequently the expression  dividends payable out of such profits  could only apply when there were profits and not when there were no profits
The imposition of additional income tax was conditioned by the existence of income and profits
The legislature used language appropriate to income and applied the rate to the  total income 
Where there was no total income the law could not apply and the courts could not be asked to supply the omission made by the legislature or to delete or to modify any words
If the words of a taxing statute failed then so did the tax
The courts could not except rarely and in clear cases help the draftsman by a favourable construc tion
Curtis vs Stovin  Commissioner of Incometax vs Teja Singh SC Whitney vs Commissioners of Inland Revenue  Special Commissioners of Income Tax vs Linsleys Ltd and Commissioners of Inland Revenue vs South Georgia Co Ltd  distinguished
The Cape Brandy Syndicate vs The Commissioners of Inland Revenue1620 and Wolfson vs Commissioners of Inland Revenue1949  referred to
The proviso to paragraph B prescribed varying rates for varying circumstances it dealt with rates alone and not with the chargeability to tax
There were no words in this proviso making the excess dividend into income or subjecting it to tax independently of the charge to tax on the total income