SCA/8023/1999 1/14 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 8023 of 1999 For Approval and Signature: HONOURABLE MR.JUSTICE ANANT S. DAVE ====================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ====================================== SHANTILAL JOITARAM PATEL Versus SECRETARY, COOPERATION DEPARTMENT, GOVERNMENT OF GUJARAT AND OTHERS ====================================== Appearance : Mr. Prakash K. Jani for the petitioner Mr. Asmita Patel, Assistant Government Pleader for respondent Nos. 1 and 2 Mr. Deepak Thakker, for M/s. Thakkar Associates for respondent No.3 ====================================== CORAM : HONOURABLE MR.JUSTICE ANANT S. DAVE Date : 09/04/2008 SCA/8023/1999 2/14 JUDGMENT CAV JUDGMENT 1 This petition under Article 226 of the Constitution of India is filed by the petitioner, a retired Secretary of the Agricultural Produce Market Committee, Visnagar, against the respondents-Authorities, in withholding gratuity, amount of earned leave and 180 days of half-pay leave, and arrears of Fifth Pay Commission pay-scale, as null and void, arbitrary, capricious, discriminatory, illegal and in violation of Articles 14 and 19 of the Constitution of India, and prayed for release of payment of all the above retiral dues and other dues reflected in paragraphs 13(A), (B) and [C] of the petition incorporated by way of a draft amendment granted by order dated 17th August 2007. 2 Respondent No.3 is an Authority within a meaning of Article 12 of the Constitution of India and the Committee appointed under the Gujarat Agricultural Produce Markets Act, 1963 and the Rules framed thereunder. It is not in dispute that respondent No.3-Committee is under the administrative and financial control of respondent Nos. 1 and 2 and respondent No.3-Committee is duty bound to carry out the functions as enumerated under the Statute. 3 Since the status of the petitioner and the statutory character of respondent No.3-Committee are not in dispute, it is necessary, however, to refer to the events briefly, which took place in the past, giving rise to the disputes raised in this petition. 3.1 It is the case of the petitioner that the petitioner was appointed as Secretary of respondent No.3-Committee by order dated 2nd December SCA/8023/1999 3/14 JUDGMENT 1985 and came to be confirmed on 1st November 1986. The Director of Agricultural Marketing & Rural Finance, Gujarat State, Gandhinagar, by order dated 21st May 1986 approved the appointment of the petitioner. Having been appointed as Secretary of respondent No.3-Committee in accordance with law, Rules and Regulations being a regular employee, the petitioner performed his duties diligently and sincerely. However, by order dated 8th December 1988, the petitioner came to be dismissed from service on certain grounds, which came to be challenged by way of a writ petition, being Special Civil Application No.131 of 1989 before this Court and, after hearing the parties, by order dated 10th April 1996, the learned Single Judge of this Court was pleased to allow the said writ petition and quashed and set aside the order of dismissal dated 8th December 1988 passed by respondent No.3-Committee dismissing the petitioner. By the very order, the learned Single Judge directed the respondents to reinstate the petitioner in service forthwith and was pleased to further hold that the petitioner shall be entitled to all consequential benefits flowing from the order. Letters Patent Appeal No.750 of 1996 filed by respondent No.3-Committee came to be dismissed by the Division Bench of this Court [Coram: C.K. Thakker & Miss. R.M Doshit, JJ.] by order dated 22nd September 1997 with the following operative order: “Looking to the above facts, it is clear that the petitioner was gainfully employed and had drawn an amount of Rs.45,350/-. In these circumstances, from the amount towards payment of backwages, the above amount is ordered to be deducted. Appeal stands partly allowed with no order as to costs.” Thereafter, the petitioner came to be reinstated in service as Secretary of respondent No.3-Committee by order dated 8th October 1997. On attaining the age of superannuation, by order dated 31st December 1997, the petitioner came to be retired from service. SCA/8023/1999 4/14 JUDGMENT 3.2 On 2nd February 1998, by Cheque No.279289, the petitioner was paid retiral dues amounting to Rs.1403767.40 ps. However, the above amount was not towards full and final payment of retiral dues. The petitioner filed Misc. Civil Application No.235 of 1996 [for contempt] which came to be disposed of by the Division Bench of this Court by order dated 14th December 1999 observing that, since the payment was made towards retiral dues, and other claim of the applicant was not admitted by the Market Committee, it is open for the applicant to claim any disputed amount before the appropriate forum. Hence, the present petition. 4 Mr. P.K. Jani, learned counsel appearing for the petitioner, has submitted that the petitioner is entitled to the following retiral dues. [a] Gratuity [10 salaries] - Rs.13,000/- [approximately] monthly multiplied by 10 = Rs.1,30,000/- [approximately]. [b] Encashment of Earned Leave [10 salaries] – Rs.13,000/- [approximately] monthly salary multiplied by 10 = Rs. 1.30,000/-. [c] Amount of 180 days half pay leave, that is equal to three month's full pay – Rs.13,000/- [approximately] monthly salary multiplied by 3 = Rs.39,000/-. [d] Arrears of 5th Pay Commission Pay-scale Salary prior to the 5th Pay Commission Pay Scale was about Rs.9000/-. After the 5th Pay Commission Pay Scale, there is an increase of about Rs.4000/-. So the salary after the implementation of the 5th Pay Commission Pay Scale is Rs.13,000/- [approximately] and arrears for the period from 1.1.1996 to 31.12.1997 i.e. Rs.4000/- [approximately] multiplied by 24 = Rs.96,000/- [approximately]. [e] In addition to the above, in view of certain amendments made by the respondents, vide Government Resolution dated 15/30th July 1986, SCA/8023/1999 5/14 JUDGMENT the petitioner is entitled to encashment of earned leave and also salary of 180 days by way of medical leave and in view of the revised leave rules by the Finance Department of the State of Gujarat and adopted by respondent No.2, the petitioner is entitled to encashment of earned leave of 300 days instead of 240 days. 4.1 Mr. P.K. Jani, learned counsel appearing for the petitioner, has submitted that, by withholding legally permissible retiral dues of the petitioner, the respondent No.3-Committee has acted arbitrarily, unreasonably, illegally and in violation of Article 14 of the Constitution of India in spite of the order passed by this Court quashing and setting aside the order of the dismissal of the petitioner. It is submitted that the order of dismissal of the petitioner dated 8th December 1988 came to be quashed and set aside by the learned Single Judge vide order dated 10th April 1986 in Special Civil Application No.131 of 1989 and confirmed in Letters Patent Appeal No.750 of 1996 vide order dated 22nd September 1997, barring deduction of amount received by the petitioner for the period of gainful employment and thereafter reinstatement in service by order dated 8th October 1997. The petitioner had performed his duty as Secretary diligently and honestly till the age of superannuation when the petitioner came to be retired on 31st December 1997. No other act of misconduct or misbehavior of whatsoever nature is attributable against the petitioner. Denial of retiral benefits amounts to unreasonable and arbitrary exercise of power and violative of Articles 14 and 19 of the Constitution of India and, therefore, appropriate direction may be issued to the respondents-Authorities to release the retiral dues to the petitioner. 4.2 Mr. P.K. Jani, learned counsel appearing for the petitioner, further submitted that there is no justification of whatsoever nature for denying SCA/8023/1999 6/14 JUDGMENT the petitioner retiral dues claimed in this petition. Since the petitioner is entitled to receive gratuity under Rule 31A of the Gujarat Market Committee Rules and as per Rule 37 of the Rules, encashment of earned leave and half-pay leave. Learned counsel for the petitioner further submitted that the respondent-Committee is duty bound to follow the Rules framed by the Committee and as approved by respondent No.2 and any denial of retiral benefits, in violation of such Rules, would amount to unreasonable and arbitrary exercise of power and in violation of Article 14 of the Constitution of India, which deserves interference by this Court in exercise of power under Article 226 of the Constitution of India. 4.3 Mr. P.K. Jani, learned counsel appearing for the petitioner, further submitted that even denial of recurring benefits of grant of revision of pay-scale pursuant to the recommendation made by the 5th Pay Commission which came to be accepted by the Market Committee vide Resolution dated 24th August 1999, is also illegal and cut off date prescribed in clause 4 of the above Resolution that benefit of difference of salary/pay-scale fixed on the basis of acceptance of the recommendation of the 5th Pay Commission, will be made applicable to the employees serving as on 1.1.1999 and denying the same to the retired or expired employees is also arbitrary, unreasonable, and illegal in view of the fact that the recommendation of 5th Pay Commission is applicable with effect from 1.1.1996. Likewise, benefit accrued pursuant to the Circular dated 15/30th July 1986 and the amendment incorporated in Rule 37A about the benefits of 180 days earned leave and medical leave vide resolution dated 19th February 1988 by the Finance Department of State of Gujarat, for benefit of accumulation of earned leave, which came to be enhanced to 300 days as per the revised Leave Rules of 1985, cannot be denied to the petitioner. Therefore, according to Mr. P.K. Jani, the petitioner is entitled to all the above benefits for SCA/8023/1999 7/14 JUDGMENT which appropriate direction may be given to the respondents to release the same. 5 Mr. Deepak Thakkar, learned counsel appearing for respondent No.3-Market Committee, has mainly relied upon the affidavit-in-reply filed by the Chairman of APMC, Visnagar and submitted that the petitioner is already paid legally permissible retiral dues amounting to Rs.1403767.40 ps in 1998 and he is not entitled to any other benefits. According to the learned counsel for respondent No.3-Market Committee, as per Rule 31A of the Market Committee Rules, with regard to payment of gratuity, not only length of service rendered by the employee, but the conduct of the employee is also relevant and to be considered while passing resolution for payment of gratuity and since the petitioner was out of service pursuant to the order of dismissal, there was no opportunity for the Market Committee to judge the conduct and behaviour of the petitioner and, therefore, no amount of gratuity can be paid to the petitioner. Likewise, encashment of earned leave is also not permissible since the petitioner has not worked with the Market Committee from 8.12.1988 i.e the date of order of dismissal till 8.10.1987 i.e. the date of reinstatement, since Rule 37 of the Rules governing service conditions of the employee of the Market Committee, provides that employee who remained on leave without pay is not entitled to earned leave and the petitioner who was out of job for nine years cannot claim earned leave. For the above reasoning, according to the learned counsel for respondent No.3-Market Committee, the petitioner is not entitled to payment of half-pay leave. 5.1 Mr. Deepak Thakkar, learned counsel appearing for respondent No.3-Market Committee, has further submitted that the benefit of even SCA/8023/1999 8/14 JUDGMENT 5th Pay Commission Pay-scales cannot be extended to the petitioner in view of clause 4 of the Resolution dated 24/24th August 1999 passed by the Agricultural Produce Market Committee, Visnagar, which clearly demarcates the kind of employees to be given benefits i.e. those who are in service of the Committee as on 1.1.1999 and the said benefits are not available to the retired and expired employees as on 1.1.1999. The petitioner retired on 31.12.1997 and, therefore, the benefit of even 5th Pay Commission Pay-scales cannot be extended to the petitioner. 5.2 No further argument is canvassed by the learned counsel appearing for respondent No.3-Market Committee. 6 In rejoinder, Mr. P.K. Jani, learned counsel appearing for the petitioner, has relied on the following decisions in support of his submission about release of retrial dues of the petitioner and issuance of appropriate directions to the respondents-Authorities. [i] AIR 2000 SC 3513 [Vijay L. Malhotra vs. State of U.P] [ii] AIR 2003 SC 1526 [H. Gangahanume Gowda vs. Karnataka Agro Industries Corporation Limited] [iii] AIR 1999 SC 1212 [Dr. Uma Agrawal vs. State of U.P] [iv] AIR 2007 SC 3100 [The Commissioner, Karnataka Housing Board vs. C. Muddaiah] [v] 1998 (8) Service Law Reporter 528 [Banwari Lal vs. State of Punjab and others] rendered by the Division Bench of Punjab & Haryana High Court. 7 Having heard the learned advocates for the parities and on perusal of the record, admittedly, the petitioner came to be reinstated in service as Secretary of respondent No.3-Committee vide order dated 8th October SCA/8023/1999 9/14 JUDGMENT 1997 consequent to quashment of the order of dismissal dated 8th December 1988 by the learned Single Judge directing the respondents to reinstate the petitioner in service with further declaration that the petitioner would be entitled to all consequential benefits flowing from the order. The above order of the learned Single Judge dated 10th April 1996 was upheld by the Division Bench by order dated 22nd September 1997 passed in Letters Patent Appeal No.750 of 1996 with partial modification of adjustment of amount of gainful employment by the petitioner. 7.1 The payment of about Rs.14,03,767.40 ps on 2nd February 1998 also remains undisputed. 7.2 Entitlement of the petitioner to receive gratuity cannot be denied by the respondents, in as much as, respondent No.3-Committee has framed Rules pertaining to service conditions of the employees of respondent No.3-Committee and Rules 31A and 31B specifically prescribe payment of gratuity to the employees. A bare perusal of the above Rules reveals that the Market Committee reserves power with regard to payment of gratuity to an employee after considering the overall service record of an employee and pass necessary resolution. While releasing the gratuity, what is left with the Market Committee is scrutiny of the conduct of an employee and nothing else. Rule 31B provides that if an employee is removed due to misconduct or for any such reason, such an employee is not entitled to gratuity. Barring the above factor, it is not open for the Market Committee to withhold gratuity of an employee, who is superannuated in ordinary course. If the facts of the present case are noticed, then, the order of dismissal of the petitioner from service was held to be illegal and null and void by the learned Single Judge as confirmed by the Division Bench, and the SCA/8023/1999 10/14 JUDGMENT petitioner came to be reinstated in service and the back wages are also paid. The defence of the learned counsel for respondent No.3-Committee that the petitioner was out for reasonably good time from the service of the Market Committee as Secretary due to dismissal, and there was no time for the Committee to assess the conduct and performance of the petitioner, is misconceived, in as much as, when the order of dismissal is declared as null and void and illegal, the petitioner cannot be deprived of the gratuity. Even after reinstatement of the petitioner in service, i.e. on 8th October 1997 till 31st December 1997, when the petitioner attained the age of superannuation, no untoward incident had taken place empowering the Market Committee to exercise power under Rule 31A of the Service Rules of the Market Committee. During the above period, the petitioner was never served with any show cause notice or memo or even warning about his past conduct and, therefore, the decision of the Market Committee to deny gratuity to the petitioner is unjust, unreasonable, colourable exercise of power and in violation of Article 14 of the Constitution of India. The claim of the petitioner to receive gratuity is found to be well established and it is hereby declared that the petitioner is entitled to receive gratuity upon superannuation from service since 31.12.1997. 7.3 Likewise, the encashment of earned leave and also salary of 180 days by way of medical leave as per the Circular dated 15/30.7.1986, issued by the Director of Agricultural Produce Market Committee, and adopted by respondent No.3-Committee, cannot be denied to the petitioner on the ground that the petitioner had not worked from 8.12.1988 to 8.10.1997. Upon quashment of the order of dismissal, which was held to be illegal and null and void and since the petitioner came to be reinstated with continuity of service, he deserves all the benefits of retiral dues, as held in the earlier paragraph. SCA/8023/1999 11/14 JUDGMENT 7.4 Similar reasoning adopted by respondent No.3-Committee for denial of encashment of earned leave also deserves to be quashed and set aside and it is held that, upon quashment of the order of dismissal as patently illegal and void, the petitioner is entitled to receive encashment of earned leave as claimed. 7.5 So far as the difference of arrears of 5th Pay Commission pay-scale and adopted by respondent No.3-Committee in its general meeting dated 24th August 1999 and Resolution No.120 is concerned, fixation of cut off date for the difference of salary to be paid to an employee who was in service as on 1.1.1999, is unreasonable, arbitrary, discriminatory and violative of Article 14 of the Constitution of India, in as much as, the cut off date for grant of benefit of 5th Pay Commission pay-scale to the employee of the Market Committee is not based on any rational ground, which has any nexus with the object sought to be achieved by the Market committee. It is a different matter altogether if such difference of arrears to be deposited in the GPF account of the employee or to pay in installments, but to deny such benefit altogether on the ground of date of retirement is not germane to the desirable object sought to be achieved by accepting the 5th Pay Commission pay-scale. The employees served with the respondent No.3-Committee are homogeneous group and the recommendations of 5th Pay Commission have to be implemented with effect from 1.1.1996. Respondent No.3-Market Committee passed Resolution No.120, dated 24th August 1999, and created two sets of employees out of homogeneous group by prescribing a cut-off line of 1.1.1999 for grant/refusal of the benefits of 5th Pay Commission and resolved that the employees who have retired prior to 1.1.1999 will have no right to get the benefits of 5th Pay Commission and the same will be admissible to the employees who retired thereafter. When the SCA/8023/1999 12/14 JUDGMENT recommendations as a whole of the 5th Pay Commission were to be given effect from 1.1.1996, any artificial division of homogeneous group of employees for conferring such benefits simply on the basis of a particular date 1.1.1999, i.e. the year in which the resolution came to be passed by the Market Committee, has no intelligible differentia and rational with the objects sought to be achieved by the Committee. The above cut-off line for conferring the benefits of 5th Pay Commission by respondent No.3-Committee, being a 'State' within the meaning of Article 12 of the Constitution of India, is a case of arbitrary and discriminatory exercise of power and in violation of Articles 14 and 19 of the Constitution of India and deserves to be quashed and set aside. Respondent No.3- Committee is, therefore, directed to pay the arrears of 5th Pay Commission pay-scale to the petitioner with effect from 1.1.1996 till the date of superannuation of the petitioner i.e. 31.12.1997. 8. Considering the above facts, it is held that the petitioner is entitled to all the retiral dues as claimed by him in the relief clause including the amended clause. 9. The decision relied upon by Mr. P.K. Jani, reported in 1998 (8) SLR 528 [Banwari Lal vs. State of Punjab and others] rendered by the Division Bench of Punjab & Haryana High Court, about the effect of quashment of the order of termination and reinstatement in service, the period of termination during which the petitioner remained out of service in the above case because of termination such period was considered for the purpose of increments and all other benefits and the pay to be fixed notionally, supports the case of the petitioner. 9.1 Similarly, another decision relied upon by Mr. P.K. Jani, reported in (2003) 3 SCC 1526 [H. Gangahanume Gowda vs. Karnataka Agro SCA/8023/1999 13/14 JUDGMENT Industries Corporation Limited] on delayed payment of gratuity which was denied to the employee on the ground that there was doubt whether the employee was entitled to gratuity, or not, the Apex Court once again held that, 'there was no fault of the employee and he was entitled to interest on the delayed payment of gratuity. 9.2 Recently, the Apex Court in the case of Commissioner, Karnataka Housing Board vs. C. Muddaiah, reported in (2007) 7 SCC 689, while considering the case of an employee of the Karnataka Housing Board, where certain consequential benefits were not extended to him, and upon contempt petition came to be dismissed, a substantive petition was filed contending that though an order was passed in the earlier writ petition regarding reassignment of seniority and payment of consequential benefits, arrears to which he was entitled were not paid to him. Dismissal of the writ petition by the learned Single Jude was reversed by the Division Bench and the Karnataka Housing Board moved the Apex Court and while dismissing the appeal with costs, in paragraph 32, the Apex Court has observed as under: “We are of the considered opinion that once a direction is issued by a competent court, it has to be obeyed and implemented without any reservation. If an order passed by a court of law is not complied with or is ignored, there will be an end of the rule of law. If a party against whom such order is made has grievance, the only remedy available to him is to challenge the order by taking appropriate proceedings known to law. But it cannot be made ineffective by not complying with the directions on a specious plea that no such directions could have been issued by the court. In our judgment, upholding of such argument would result in chaos and confusion and would seriously affect and ipair administration of justice. The argument of the Board, therefore, has no force and must be rejected.” The Apex Court confirmed the order of the Division Bench allowing the SCA/8023/1999 14/14 JUDGMENT claim of the employee. 10. Considering the above aspects and case-laws, this petition is allowed. The petitioner is hereby entitled to [i] receive gratuity upon superannuation from service since 31.12.1997, [ii] encashment of earned leave and also salary of 180 days by way of medical leave as per the Circular dated 15/30.7.1986, issued by the Director of Agricultural Produce Market Committee, and adopted by respondent No.3-Committee, [iii] the arrears of 5th Pay Commission pay-scale with effect from 1.1.1996 till the date of superannuation of the petitioner i.e. 31.12.1997. 11 The claim of interest made by the petitioner on the retiral dues also deserves to be accepted. In this regard, the decision relied upon by Mr. P.K. Jani, reported in AIR 2000 SC 3513 of the Apex Court [Vijay L. Malhotra vs. State of U.P] directing payment of retiral dues at the rate of 18% interest saddled on the Authority since payment was not made on the date of retirement or soon thereafter, equally applies to the facts of the present case. However,considering the facts and circumstances of the present case, it would be just and proper to award simple rate of interest at 8% per annum on the payment of retiral dues as