IN THE HIGH COURT OF JUDICATURE ANDHRA PRADESH AT HYDERABAD THE HON'BLE MR JUSTICE J.CHELAMESWAR and THE HON'BLE MR JUSTICE RAMESH RANGANATHAN WRIT PETITION NO:26113 of 2003 Dated:23-12- 2005. Between: Dr. J.Balakrishna Rao ..... PETITIONER AND State of Andhra Pradesh, represented by its Secretary, Health, Medical and Family Welfare Department and others .....RESPONDENTS THE HON’BLE SRI JUSTICE J.CHELAMESWAR AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN W.P.No.26113 of 2003 & C.C.No.501 of 2004 JUDGMENT : (per JC,J) Medical colleges were being run both by State and private managements in the State of Andhra Pradesh for quite some time. The policy of the State in the matter of allowing private managements to run medical colleges kept on changing from time to time. The medical colleges run in private sector in 1950’s and 1960’s known as Ranga Raya Medical College, Kakinada and Kakatiya Medical College, Warangal were taken over by the State, the details of which insofar as they are relevant will be examined later. Subsequently, another private management was permitted to start a medical college called `Siddhartha Medical College at Vijayawada. As a matter of history, it can be recorded that only the private educational institutions, more particularly, medical colleges run by private managements used to collect substantial amounts towards capitation in consideration of granting admission to students in the medical colleges. In the year 1983, there was a major shift in the policy of the State thought it fit to prohibit the collection of capitation fee in the educational institutions which was considered to be an undesirable practice long before the celebrated Unnikrishnan’s case and enacted Act 5 of 1983. We can only conjecture that as a consequence the Siddhartha Academy of General and Technical Education which was the `educational agency’ running the Siddhartha Medical College at Vijayawada apart from certain other educational institutions, it appears agreed to hand over to the government, the buildings and other facilities of the medical college. What reasons prompted the private management to take such a decision and what reasons prompted the State to accept “such a gift” to the government are not clear from the record except a letter dated 7.10.1986 issued by the Secretary to Government, Health, Medical and Family Welfare Department, Hyderabad, which is placed on record by the learned Advocate General. The relevant portion of the letter reads : “I am directed to invite your attention to the letters cited and to state that the Siddhartha Academy of General & Technical Education has agreed to hadover to the Government, the buildings and other facilities, such as equipment etc., then available for the medical colleges after completion of the construction of the college without claiming any compensation The Government had also reiterated that the Academy handover all the facilities created including the amounts standing to the credit of the Medical College Education Fund to Government free of cost without claiming any compensation. The Government have examined very carefully your request for the reimbursement of the overspent amount and also the rental charges for the accommodation, and consider that there is little justification in your claim for compensation now. I am therefore, directed to request you to honour the commitment made by the Academy and handover possession of the buildings and other facilities such as equipment etc., direct to the University of Health Sciences without claiming any compensation, as and when the said University commences to function.” The said letter refers to three earlier letters of the management dated 5.9.1983, 16.4.1986 and 30.7.1986. Apparently, some correspondence between the State and the private management took place in the preceding three years after coming into force of Act 5 of 1983. It is relevant to mention here that Section 60 of the Andhra Pradesh Education Act, 1982 (Act 1 of 1982) provides for the taking over of management of educational institutions in public interest. Under the scheme of the said Section 60, the government is authorized to take over the management of any educational institution `either in the public interest or in order to secure the proper management by a notification and with effect from the dates specified in the notification, the management of such acquired institution vests in the government.’ Further on such taking over all the assets, rights, properties also vest in the State. Obviously, such assets include the rights arising under contracts entered into between the private management and the employees. Therefore, the Legislature made it clear under section 61, that the government is entitled to terminate any such contract if in the opinion of the government such a contract is unduly onerous. Notwithstanding the availability of such power under Act 1 of 1982, the State of Andhra Pradesh did not however exercise the said power, but agreed to take over Siddhartha Medical College by a private negotiation virtually a “gift” to the State. When the negotiations for such “gift” were in progress, the State of Andhra Pradesh enacted the NTR University of Health Sciences Act, 1986. The Act came into force on 13.10.1986. The broad scheme of the Act is that the medical education in the State of Andhra Pradesh is sought to be brought under the control of the newly formed University. The various medical colleges existing as on that date were affiliated to the various Universities in the State. Section 8 of the Act makes a categoric declaration to the effect that the colleges and institutions specified in the First Schedule shall on and from the appointed date be disaffiliated from the said universities and thereupon they shall be deemed to have been affiliated to the newly formed university. In view of the above mentioned new enactment and the scheme as indicated above, the government thought it fit to direct Siddhartha Academy of General and Technical Education (the educational agency running Siddhartha Medical College) to handover the medical college directly to the new university. Apparently, such a direction was given in a government letter No.1786/E1/84-6, dated 7.10.1986 which is referred to in a subsequent communication from the Secretary to Government, Health, Medical and Family Welfare to the Officer on Special Duty, In-charge of the newly formed university affairs dated 27.10.1986. The letter reads : “Government of Andhra Pradesh Health,Medical & Family Welfare Department Letter No.1786/E1/86-1, Dated : 27.10.86. From The Secretary to Government, Health, Medical & Family Welfare Department, Hyderabad. To Dr.P.Mahapathra, I.A.S., Officer-on-Special Duty, H.No.54-16-822, Shree Siddhartha Nagar, Opp. Layola East Stadium, Vijayawada. Sir, Sub : Medical Education – Siddhartha Medical College, Vijayawada – Take over of the Siddhartha Medical College, Vijayawada –Reg. Ref : Govt.Lr. No.1786/E1/84-6, dt. 7.10.1986. *** In the reference cited the Government has requested the Secretary of the Siddhartha Academy of General & Technical Education, Vijayawada to hand over the Siddhartha Medical College directly to the University of Health Sciences without claiming any compensation when the said University commences to function. The said communication was acknowledged on 9.10.1986 by the Academy. As per the decision of the Government, the take over of the Siddhartha Medical College has to synchronize with the establishment f the University of Health Sciences. The University of Health Sciences is coming into force with effect from 1.11.1986. As such Siddhartha Medical College has to be taken over by the said date. I am therefore directed to request you to take appropriate action for the take over of the Siddhartha Medical College, Vijayawada so as to synchronise with the establishment of the University of Health Sciences. Yours faithfully, Sd/- For Secretary to Government” Admittedly, the private management complied with the direction. While handing over of Siddhartha Medical College, the private management by a resolution [communicated to the University] requested for certain commitments. One of them being that the entire staff of the college and hospitals as on the day of the takeover be taken into service of the government or the university. The private management also requested that the past services of such staff should also be taken into consideration for the purpose of seniority, promotion, increments, pension etc. The University responded by a resolution saying that “50% of the service put in by each staff of the medical college will be counted for all purposes like seniority, promotions, periodical increments, pension etc., in future. This is on the basis of the precedent of Ranga Raya Medical College, Kakinada, Kakatiya Medical College, Warangal …”. Considering the request of the management, the Executive Council of the University passed a resolution insofar as it pertains to the staff of the medical college to the effect that they would be absorbed by the University. Such a decision of the University was communicated to the private management by a letter dated 3.1.1987 by the Officer-on-Special Duty referred to earlier. The pathetic state of affairs in the present case is that the original petitioner one Dr.J.Bala Krishna Rao, who joined Siddhartha Medical College initially as a tutor on 29.12.1984 and retired as a tutor on 31.10.2000 died during the pendency of the present writ petition. The litigation is continued by his legal representatives. It is averred in the affidavit filed in support of the present writ petition as follows : “…By a Resolution of the Executive Council the Teaching and Non-teaching staff working in Siddhartha Medical College were absorbed into the services of the A.P. University of Health Sciences w.e.f., 21.12.1986. After appropriate passing of the teaching and non-teaching staff of Siddhartha Medical College were absorbed into the University w.e.f. 21.12.1986 and monetary benefits were granted w.e.f. 1.4.1988, pending finalization of the service rules. The staff were given revised pay scales of 1986 from 21.12.1986 with monetary benefits from 1.4.1988. I submit that the University has taken decision to extend the pensionary benefits to the employees and the University had issued Proceedings No.760/HE2/92, dated 14.12.1993 stating that the University has adopted the A.P. Revised Pension Rules, 1980 to the staff with retrospective effect. By G.O. Rt.No.562, Health, Medical and Family Welfare (E1) Department, dated 2.2.3.1996 according permission to the University to count 100% service rendered by its staff under private management for the purpose of pensionary benefits.” Though a counter affidavit is filed by the state of Andhra Pradesh, no counter is filed by the University. The counter is silent as to what are the terms and conditions on which the petitioners and others who were absorbed into service. Subsequently, by an amendment to the Health University Act, by Act 6 of 1987, sub- section (3) was inserted in Section 8 of the Act by which the control and management of all the medical colleges, teaching hospitals etc., (all owned and run by the State) stood transferred and vested in the University. By a statutory declaration, the properties of those colleges, assets and liabilities etcs., stood devolved of the University. Under sub-section 3(c), all officers and employees who were working with any such transferred institution were mandated to work with the university on deputation subject of course to an option to be exercised by such officers or employees either to be absorbed into the service of the university or remain in the government service to which they originally belonged. The section further provided that the terms and conditions of service applicable to such officers who choose to be absorbed into the service of the university shall not be less favourable than those applicable to them before the absorption in all respects. The relevant portion reads as follows : “(i) the terms and conditions applicable to such officers and employees consequent on their absorption in the service of the University shall not be less favourable than those applicable to such employees immediately before such absorption as respects, pay and allowances, leave, pension, gratuity, provident fund and age of superannuation; (ii) the service rendered by any such officer or employee in the aforesaid institutions and the Directorate of Medical and Health Services prior to their absorption in the service of University shall be deemed to be service under the University and he shall be entitled to count that service for the purpose of increments, leave, pension, provided fund and gratuity;” As a consequence of the amendment, there were two classes of employees in the university. One class that were absorbed into the service of the university from the service of the State whose service conditions were protected and another class of the employees like the petitioner whose service conditions are not made known to anybody at any rate to this court in the present litigation. Curiously, clause (e) of Section 3 authorises the University to appoint such other officers and employees in addition to the absorbed staff on such terms as may be prescribed from time to time. It is doubtful whether the University could have employed people on service conditions which are different from those applicable to the employees absorbed from the government service. We shall examine this issue later in this judgment. The matter did not end there. The State of Andhra Pradesh came out with another amendment to the Health University Act in the year 1988 by Act No.1 of 1988. By the Act 1 of 1988, sub-sections (3) and (4) of Section 8 were substituted. The relevant portion of the substituted sub-section 3(8) reads as follows : “3) with effect on and from the commencement of the University of Health Sciences (Amendment) Act, 1988 :- a. the control and management of all the Medical Colleges, Teaching Hospitals, Dental Colleges, Nursing Colleges and Nursing Schools in the State, except the Siddhartha Medical College, Vijayawada and the Centre for training and Research in Community Health Sciences, Mangalagiri (hereinafter in this section referred to as “institutions”), shall stand transferred to and vest in the Government and shall function under the administrative control of the Government, as affiliated colleges of the University; b. all the properties, assets and liabilities, rights and obligations, in relation to such institutions and all obligations of the University in relation to them shall devolve upon the Government; c. every officer or employees who immediately before such commencement was working in any such institution shall continue to work in such institution as it’s employees not withstanding that he exercised the option to be absorbed in the service of the University;” As a matter of fact, the amendment was preceded by an Ordinance No.8 of 1987 which was promulgated on 29.9.1987 i.e., within a period of seven months from the date of the Act 6 of 1987, referred to earlier. Under the scheme of the substituted sub-section (3), once again the management and control of all the medical colleges except Siddhartha Medical College and few other institutions referred to in subsection 3(a) stood transferred and vested in the government. However, insofar as the employees who were working in those various re-transferred institutions were mandated to continue working in such institutions notwithstanding the fact that such officers and employees had already exercised an option to be absorbed into the service of the University obviously under the provisions of the Act 6 of 1987 referred to earlier. The resultant portion appears to be that those employees who exercised their option pursuant to the provisions of Act 6 of 1987 would still continue to be the employees of the University enjoying the protection of service conditions already noticed above, but working in the various institutions owned and run by the government by virtue of the transfer effected under the Act 1 of 1988. In response to a specific query from the Court, the learned Advocate General made a statement that 176 employees were absorbed by the Health University from Siddhartha Medical College including the petitioner herein. In view of the specific exclusion of Siddhartha Medical College, under Act 1 of 1988, the service conditions of the above mentioned 176 employees remained uncertain. However, the Government of Andhra Pradesh in G.O.Rt.No.562, dated 22.3.1996, took a decision as follows : “ 2 . The Government after examination of the above proposal of the University of Health Sciences hereby accord permission to University of Health Sciences to count 50% of service rendered by the employee of Siddhartha Medical College under private management for the purpose of seniority and 100% service rendered by them under the said private management for the purpose of pensionary benefits subject to payment of pension contribution by the concerned employees at the rates indicated by the Government from time to time.” It appears from the said G.O. that the Executive Council of the University in its meeting dated 29.12.1986 resolved to count 50% service rendered by Siddhartha College staff while it was under the private management for the purposes of seniority, promotion, increments, pension etc., The relevant portion of the G.O. reads as follows : “In the letter read above, the Registrar, University of Health Sciences stated that the Siddhartha Medical College, Vijayawada, was taken over by University of Health Sciences on 21.12.1986 and after taken over of the college, the Executive Council of University of Health Sciences in its meeting held on 29.12.1986 have resolved the count 50% service rendered by the staff of the college in the private management for the purposes like seniority, promotion, periodical increments, pension etc., Further, the Registrar has reported that the various employees of the Unions including teaching staff of Siddhartha Medical College, Vijayawada are representing to take over 100% past service rendered by them in the private management of the college for the purpose of monetary benefits. Therefore he has requested the government to consider the request of the employees for taking their 100% service rendered in the private management for allowing monetary benefits as in the case of Rangaraya Medical College, Kakinada and Kakatiya Medical College, Warangal. Both Rangaraya Medical College, Kakinada and Kakatiya Medical College at Warangal were established and run by two societies known as Medical Education Society, Kakinada and Regional Medical Education Society, Warangal respectively. By Act 17 of 1977 called Rangaraya Medical College (taking over of Management) Act, the management of the said private medical college was taken over by the State. It appears subsequent to such take over of the management, the society passed a resolution on 25.3.1978 transferring all properties belonging to the medical college to the State. Subsequently, by an agreement executed on 26.3.1980, the assets of the college were taken over. In the case of Kakatiya Medical College also, there was a take over. In the context of the take over of both the above, the question arose as to what should happen to the employees of those two colleges. In the case of the Ranga Raya Medical College, the government issued G.O.Ms.No.823, dated 31.7.1980 ordering that the employees of the college working as on 30.4.1977 if they did not opt for retrenchment from service shall be treated as government servants with effect from 30.4.1977. It was further directed that such employees shall continue to draw the same pay and allowances as they were drawing before the date of take over until the procedure for absorption into government service and the terms and conditions of such absorption are finalized by the State. Eventually, by G.O.Ms.No.478, Medical and Health (M.2) Department, dated 4.8.1983, the government ordered as follows : “3. The Government have examined the above points raised by the employees of Rangaraya Medical College, Kakinada and issue the following clarifications : Point : 1 :- The Government direct that 50% of the continuous service rendered by the staff under private management be counted for purpose of seniority in the corresponding grades for categories into which they are to absorbed, subject, however, to the fulfillment of the qualifications laid down for the respective posts in Government services. Point : 2 :- The service rendered by the employees under the Private Management before the take over of the college shall be counted for purpose of pension subject to payment of pension contribution to the Government either by the institution or by the individual employee concerned at a flat rate of 9.5% of the maximum pay of the post held in the case of non-gazetted officers at the rate of 11.5% of the maximum pay of the post held by the Gazetted Officers. As the employees are governed by contributory provident fund, which comprises the employer’s and the employees share, the employer’s share will be adjusted towards the pension contribution and to extent pension contribution so adjusted falls short of the pension contribution payable as worked out at the rates mentioned above, the employee should make good this deficit before his service under the private management is counted for the purpose of pension. The excess of employer’s share in the C.P.F. remaining after adjustment of the pension contribution due, if any, will lapse to Government. Point : 3 :- Necessary orders have already been issued in G.O.Ms.No.690, Medical and Health, Dated 15.09.1982. Point : 4 :- The Government order that the class IV employees also can contribute to the C.P.F. There is no provision in the GPF rules to return the contribution made by the employee to the CPF before retirement. Therefore, the balance on CPF Accounts representing the employee’s share together with interest thereon cannot be refunded but it will form the opening balance of the GPF account to be opened in Government after absorption. This order issues with the concurrence of Fiancne and Planning Department vide their U.O.No.221660/318/Pension/83-1, dated 20.6.1983.” Similar orders were issued in the case of Kakatiya Medical College in G.O.Ms.No.721, Medical and Health (B.1) Department, dated 16.6.1980. Dealing with the aspect of pension, the order is as follows : “(3) Retirement benefits for counting total service :- The service rendered by the Employees under the private management before the take over of the college shall be counted for purposes of pension subject to payment of pension contribution to the Government either by the Institution or by the individual employee concerned at a flat rate of 9.5% of the maximum pay of the held in the case of Non-Gazetted Officers and at the rate of Rs.11.5% of the maximum pay of the post held by the GAzetted Officers. As the employees are governed by contributory provident fund, which comprises the employer’s and the employees’ share, the employees’ share will be adjusted towards the pension contribution and to the extent of pension contribution worked out at the rates mentioned above falls short, the employee should make it good before his service under the private management is counted for the purpose of pension.” The employment under the Health University Act is governed under Section 53 of the said Act which stipulates that every employee shall be appointed under a written contract. Section 56 of the Act authorizes the University to constitute such schemes of pension, provident fund which reads as follows : “56) 1) The University shall, constitute for the benefit of its employees in such manner and subject to such conditions as may be prescribed by the Statutes, such schemes of pension, provident fund and insurance as it may deem fit with the prior approval of the Government. (2) Where such provident or pension fund has been so constituted, the Government may declare that the provisions of the Provident Funds Act, Act 9 of 1925 shall apply to such funds as if it were a 1925 Government Provident Fund.” Though it is exclusively within the power of the University to decide the service conditions of its employees by virtue of Section 53, though Section 56 authorises the University to constitute such schemes as regards pension etc., as deemed fit and notwithstanding the decision of the University in its resolution dated 13.12.1986 which was communicated to the private management through the Special Officer by his letter dated 3.1.1987 that the employees working in Siddhartha Medical College while it was under the private management would be absorbed into the service of the University and 50% of their service prior to the absorption would be counted for various purposes like seniority, promotion, pension etc., as it was done in the case of Rangaraya and Kakatiya Medical Colleges, though the University admittedly passed a resolution dated 29.12.1986 to take into account 50% of the