IN THE HIGH COURT OF GUJARAT AT AHMEDABAD LETTERS PATENT APPEAL No 699 of 2004 to LETTERS PATENT APPEAL NO 861 OF 2004 WITH LETTERS PATENT APPEAL NO 1053 OF 2004 with LETTERS PATENT APPEAL NO 865 OF 2004 TO LETTERS PATENT APPEAL NO 1026 OF 2004 and LETTERS PATENT APPEALS NO 1104 AND 1105 OF 2004 WITH CIVIL APPLICATIONS NO 2125, 2597 AND 2598 OF 2004, WITH CIVIL APPLICATIONS NO 2305 TO 2464 OF 2004 WITH CIVIL APPLICATIONS NO 3694 AND 3697 OF 2004 For Approval and Signature: HON'BLE MR.JUSTICE J.N.BHATT and HON'BLE MR.JUSTICE D.N.PATEL ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? -------------------------------------------------------------- GUJARAT STATE KHADI GRAMODYOG BOARD Versus GUJARAT STATE KHADI GRAMODYOG PENSIONERS ASSOCIATION -------------------------------------------------------------- Appearance: 1. LETTERS PATENT APPEAL No. 699 of 2004 MR DD VYAS SR.ADVOCATE WITH MR DHAVAL D VYAS for THE BOARD MR MB GANDHI for ASSOCIATION MR SN SHELAT, LD A G WITH MR AD OZA, G P WITH MS HARHSA DEVANI, AGP FOR THE STATE ======================================================== HON'BLE DR.MR.JUSTICE J.N.BHATT & HON'BLE MR.JUSTICE D.N.PATEL Date of decision: 23/07/2004 CAV JUDGEMENT (Per : HON'BLE DR.JUSTICE J.N.BHATT) In this group of Letters Patent Appeals, common questions have been involved arising out of the common judgment and therefore, upon request, the entire group is heard together and is being disposed of by this common judgment. 2. In this group of Letters Patent Appeals, under Clause 15 of the Letters Patent, the common question which has come to the surface for our consideration, determination and adjudication, is, as to whether the employees of Gujarat State Khadi Gramodyog Board, are entitled for the payment of pension, according to the revised pay scales, as per the recommendations of the 5th Pay Commission Report, as accepted and adopted by the respondents, who have retired prior to 01.1.1996, and if yes, whether the liability of such payment of revised pension is on the part of the Board and/or State of Gujarat, or both ? 3. Challenging the action of non-payment of the pensionary benefits, upon the basis of the revised pay scales, pursuant to the acceptance of the 5th Pay Commission Report by the respondent No.1- Board and the respondent No.2-State of Gujarat, brought in by original petitioner, Gujarat State Khadi Gramodyog Board Association against the respondents, interalia, contending that employees of the Board are entitled to the revised amount of pension, on the basis of the revised pay scales, based on the recommendations of the 5th Pay Commission Report, which came to be accepted and adopted by both the respondents, in case of persons who have retired prior to 01.1.1996. The original petitioner, championing the cause of retired employees of the Board for the pensionary benefits, is hereinafter referred to, as an "Association", whereas, the respondent no.1- Gujarat State Khadi Gramodyog Board is hereinafter referred to as the "Board" and the respondent no.2, the State of Gujarat is hereinafter referred to as the "State" , for convenience and brevity sake. 4. The respondent No.1- Board created under the relevant provisions of the Bombay Khadi and Village Industries Act, 1960 [ for short Act ]. The Board is also defined under Section 2 [a] of the Act. The respondent no.2 State, by virtue of the Notification issued in the official gazette, pursuant to Section 3 of the Act, constituted the Board. The Board, thus, in existence, is governed by the Act and the Regulation thereunder, since, the date of Notification, dated 5th May 1960, published on 12th May, 1960. 5. It would be appropriate to refer the underlying design and desideratum of the creation of the Board. With a view to provide encouragement, organization development and regulation of Khadi and village industries in the erstwhile State of Bombay and to constitute or open one or more Board to carry on such objects, the legislative enactment came to be made in exercise of the powers conferred by sub section (1) read with Clause (b) of sub section (2) of Section 30 of the Act and with previous approval and sanction of the State of Government, under letter dated 12th November,1973, the Rules and Regulations came to be notified known as, Gujarat Rajya Khadi Gramodyog Board Officers and Servants [ Conditions of Service ] Regulations of 1973. The said Regulation governed the terms and conditions of the personnel of the Board. The employees of the Board are also governed by the provisions contained in the Gujarat Civil Services [Discipline and Appeal ] Rules, 1971 for the conduct and discipline, as well as the appeal, when the pay and other conditions of the service of any officer or servant are as laid down in the contract entered into by the Board with him, the officer or servant shall be governed by that contract and so far as the pay and other conditions of service are concerned. Whereas in other cases, pursuant to the said Regulation, Bombay Civil Services Rules, 1959 shall apply to the officers and the servants of the Board, as regards their pay, joining time, foreign service, maintenance of records of service, addition to pay, travelling allowance, combination of appointments, leave, revised leave and superannuation. 6. Let it be noted also that in exercise of the powers conferred by clause (b) of sub section (2) of Section 30 read with sub section (3) of section 7 of Bombay Khadi and Village Industries Act, 1960, the Gujarat State Khadi Gramodyog Board with the previous sanction of the Government of Gujarat under the letter dated 11th March, 1971, has, also, formulated the regulation governing the gratuity of the employees of the Board, known as Gujarat Rajya Khadi Gramodyog Board Employees Gratuity Regulations, 1971. The terms and conditions and the liability for payment of gratuity are governed by this Regulation. 7. It would be appropriate and expedient to refer the Board provisions of the Act, since the question of liability for the payment of revised pensionary benefits, based on the revised pay scales, pursuant to the 5th Pay Commission report is under challenge. Chapter I of the Act deals with the preliminary contents, commencement and definition, which may not be very material for the present. In Chapter II, the provisions are made for the purpose of establishment Incorporation and Constitution of the Board or Boards, where Chapter III deals with the functions and powers of the Board. Chapter IV is not very material for the adjudication of the dispute involved, as it only pertains to the preparation and submissions of programme. Whereas in Chapter V of the Act, various provisions are made for finances, accounts, audit and debts of the Board. Miscellaneous provisions are made in Chapter VI for the purpose of running the of business and to carry on the aims and objects of the Act. 8. After consideration of the provisions of the Act, aims and objects and Rules of 1966, and the Regulation of 1965 under the Act, the overall managerial control, supervision, monitoring, decision making process, regulatory status, the financial powers and the very constitution of the entire Board in terms of Section 4 of the Act, leaves no any manner of doubt that the real control, authority and pervasive role that the State of Gujarat in running the business of the Board is such that though the Board is the statutory one, it is under the direct control, authority and monitoring of the respondent no.2- State of Gujarat. 9. The statutory frame of the Act, rules and regulations, the mechanism of the administration of the Board, and the transactions and the dependence of the Board for funds and finance for the administration of the Board and its activity, it becomes quite unambiguous and evident that the role of respondent no.1 State of Gujarat is of a "loco-paranti", qua the respondent no.1 Board. Notwithstanding the fact that the Board is a statutory one, right from the commencement, the management, the administration, the appointment, regulations running of activities formulations of policy making of decision, change of diversification in the business of the Board and the statutory setup, would not in any way admit, even on the hypothesis of no responsibility for the pay, pension, perks of the personnel of the Board, in so far as the respondent no.2 State of Gujarat is concerned. 10. In one group of Letters Patent Appeal, the challenge is against the direction of the learned Single Judge for the payment of revised pensionary benefits, based on the revised pay scales, pursuant to the 5th Pay Commission is, in our opinion, not only misconceived but is totally meritless. More so, when it is an admitted fact that the existing pay pension, and perks structures for the personnel of the Board is met with the funds and finance to the Board from the State. How could it be conceived even for a moment that the revised pension or pay is not the responsibility of the State ? And the Board can only be condemned and saddled to pay by the State in so far as the revised pensionary benefits based, on the revision of pay scales upon recommendations of the 5th Pay Commission report, accepted and adopted by the State of Gujarat and followed for the entire personnel of the State? The respondent no.2 State cannot be permitted to contend for a moment that the liability for the payment of enhanced or revised pensionary benefits or the revised pay scales, pursuant to the recommendations of the 5th Pay Commission Report accepted and adopted and directed to be adopted and again permitted to be adopted to the Respondent No.1 Board. 11. Could be thwarted it, by the State, on the general premise, that the State will be in acute financial burden, if such a view, as it is taken by the learned Single Judge is permitted to be taken? Right, now, in focus the question is, about the liability of the respondent no.2 State for the payment of revised pensionary benefits, based on revised pay scales on recommendations of 5th Pay Commission Report, in so far as current personnel and retired personnel of the Board is concerned. We need not and we cannot proceed on a wider hypothesis advanced on behalf of the State by the learned Advocate General in course of the submissions before us. The question which requires to be examined and considered is, as to whether the liability of respondent no.2 State is quite, coextensive with that of the liability of the Board for the payment of the enhanced pensionary benefits based on relevant pay scales and nothing beyond that, to which our answer is positively in the affirmative. 12. In our opinion, the view taken by the learned Single Judge in directing the respondent no.2 to pay along with the Board, jointly and severally, the revised pensionary benefits to the employees, who retired prior to 01/1/1996 is quite justified, and we are fully satisfied that such a view is the only permissible view, which is rightly taken by the learned Single Judge in the impugned judgment. 13. Our attention has also been invited to the observations made by the learned Single Judge in the impugned judgment. It is observed by the learned Single Judge at page- 6 of the judgment that it is not in dispute between the parties that the respondent no.1 Board, which is established in the year 1973 and is receiving 100% grant from the State Government. The respondent no.1 Board has been created under the relevant provisions of the Bombay Khadi and Village Industries Act, 1960. It is very clear from the said observations that the respondent no.1 Board is fully funded and financed by the Government and also was not in dispute before the learned Single Judge, which is surprisingly and halfheartedly reiterated and it is submitted that the respondent no.1-Board is not fully financed and funded by respondent no.2-State. Nothing has been successfully shown from the record, which would support such a statement, contrary to the observations made by the learned Single Judge. 14. The mechanism of the respondent no.1 Board is such, though it is a statutory Board, it is functioning under the management, control, direction, monitoring and pervasive supervision of respondent no.2 State. The statutory format of the respondent no.1 Board is, also, defined under Section 2[a] of the said Act. Under Chapter II, section 3, the respondent no.2 State has issued notification in the official gazette for the establishment of the Board for the entire State of Gujarat and by virtue of the notification issued by the respondent no.2 State, the Board has came into existence and, therefore, it is an establishment and statutory Board. The creator of which the respondent no.2- State, whereas Chapter V regulations provides for finance, accounts, audits of the Board and it further provided to be prepared and to be approved by the State Government and the 100% finance is provided by the State Government. Therefore, there is no doubt in our mind that the respondent no.1 Board is a statutory creation of respondent no.2 for all the purposes to encourage khadi and to regulate khadi out of State Policy. 15. For all practical purposes, respondent no.1 Board is an instrumentality of the State and, therefore, it is covered under Article 12 and undoubtedly amenable to the writ jurisdiction of this Court. Since 1973 in the set up of respondent no.1, pension scheme was introduced and was made applicable from 12.11.1973, and who were the members of the Contributory Provident Fund (CPF), they were made eligible for the pension scheme. It is, also, corroborated and supported and reinforced by the Resolution dated 06.11.87. It is, therefore, clear that the petitioners, who were employees of the respondent No.1 Board, and who have retired after 1.1.86 were also entitled to pensionary benefits. The respondent No.1 Board, undoubtedly, has been paying pension to the employees, those who have retired from service of the Board, got pensionary benefits but not in terms of the recommendations made by the 5th Pay Commission report until 31.12.1995. As a result of which, the pension which was being paid to the petitioners, were due and payable, prior to the recommendations of the 5th Pay Commission and it continued. However, the effect of the recommendations made by the 5th Pay Commission report, accepted by the State and despite that the respondent no.2 State, as well as, the respondent No.1 Board, have not been given. In other words, the pensionary benefits which were available under the pension scheme, which were not revised in terms of the 5th Pay Commission report, though accepted and adopted by the respondents authorities, have not been paid so far. 16. The grievance of the petitioners, therefore, is that the revised pension amount has not been paid to them and they are being deprived of such benefits, without any cognizable reasons, despite the fact that the Board has passed the Resolution and the Respondent No.2- State of Gujarat has approved the same. It will be also interesting to mention at this stage that the Government had issued the directions to the effect that the Government, as well as, the Board employees were also given the interim relief and accordingly the pensioners of the Board were given interim relief prior to the implementation of the 5th Pay Commission report. The observations made by the learned Single Judge on this behalf relying upon the pay slips of some of the original petitioners are cogent and weighty. 17. Question now requires to be considered is as to whether the 135 employes- pensioners who have retired prior to the date of 01.1.96, which is the cut off date for the implementation of the 5th Pay Commission report, are entitled to claim the revised pensionary benefits in terms of the report of the 5th Pay Commission or not ? There is no dispute about the fact that they were paid enhanced amount of pension by adopting the interim relief formula evolved by the Government. Since the respondent no.1 Board was not giving full effect to the pensionary benefits in terms of the 5th Pay Commission report, they have to knock the door of justice by filing the writ petitions. They have claimed the revised pensionary benefits in the light of acceptance of the report of the 5th Pay Commission, which ought to have been paid them, upon the implementation and enforcement of the recommendations of the 5th Pay Commission by the Government and the Board. The petitioners had also placed on record material information and the data in a tabular format and the statement for the amount due and payable under the 5th Pay Commission report, between the period 1.1.96 to 30.9.98 produced at Annexure D. It is in this context, the contention of the petitioners, who are the pensioners of the Board, who have retired after 1.1.96 have been given such benefits, whereas the persons who have retired prior to 1.1.96, they have not been given such benefits and, therefore, they are deprived of their legitimate pensionary benefits due and payable to them and they are discriminated by both the respondents. There is no dispute about the fact that the persons, who have retired after 1.1.96 have been receiving full pension as per the report of the 5th Pay Commission. The list of such persons came to be produced by the petitioners in the petitions at Annexure A. 18. In this group of Letters Patent Appeal, there are in all 326 appeals, out of which, the original respondent No.1 Board has preferred 164 appeals, whereas Government has preferred 162 appeals by invocation of Clause 15 of the Letters Patent. And the second group of the original writ petitions involving 25 employees and the main writ petitions being SCA No.8687 /99 filed by the Association in which the petitioners have retired after 1.1.96 and who have claimed revised pensionary benefits, as well as, higher benefit of gratuity as they are paid gratuity on the old pay scales though they have retired after 1.1.96 for the reason not known to us, claiming the revised pay scales as basis for the revision of both, pension as well as gratuity. 19. In so far as the persons in the second group of petitions in SCA 8687/99, who retired from service of the respondent No.1 Board after 1.1.96, and who have been given pensionary and other retiral benefits, since the respondents Board denied the benefits available to them for pension on the basis of the 5th Pay Commission in respect of the benefits of pension, gratuity to some of the petitioners, they had to seek justice by filing writ petition. It may be noted that the pension scheme which was introduced for the benefit of the employees of the Board, there was no reason for the respondents not to extend the benefits of the revised pension in terms of the 5th Pay Commission report, which was accepted and adopted by both the respondents. Our attention has also been invited to the office order, dated 16.10.90, issued by the respondent no.1-Board which is produced at Annexure G in the petition. The Office Order dated 16.10.1990 pertains to the pension cum gratuity and it has been mentioned in the said order that the respondent No.2- Government of Gujarat has granted approval for making applicable the pension cum gratuity scheme with retrospective effect to the employees of the Board, who have retired from service on superannuation. It has been further mentioned in the said order that the Family Pension Scheme is, also, included as per the clarification made in the Government of Gujarat Resolution dated 31.8.89. 20. It will be, also, material to mention, at this juncture, that in a Board meeting, which was held on 31.7.91 for the year 1991-92, in the Agenda Item No.4 which was relating to the application of the superannuation rules of the government employees as per the resolution of the Government, dated 31.9.89, to the employees of the Board and it has been resolved to adopt such rules in respect of the employees of respondent No.1-Board. It is not disputed that the notification of the respondent No.1-Board which was, also, placed before the Government for previous approval and upon such previous approval and sanction of the Government, the said notification, pursuant to the provisions of Section 30 sub section (2) (b) of the Act was published. 21. In Regulation 2(5) of the Regulation, known as Gujarat State Khadi Gramodyog Board Officers and Servants (Conditions of service) Regulations, 1973, the provisions are made for pay and other conditions of service of any officer or servants of the Board, which on plain perusal, undoubtedly, go to show or to suggest that when the pay and other conditions of service of any officer or servant are laid down in a contract entered into by the Board with him, the officer or servant shall be governed by that contract in so far as the pay and other conditions of service are concerned. And in other cases, the Bombay Civil Service Rules, 1959 as applied from time to time to the government servants, shall apply to the officers and servants of the Board, as regards their pay, joining time, foreign service, maintenance of record of service, addition to pay, travelling allowance, combination of appointments, leave, revised leave and superannuation. It is, therefore, incumbent upon the respondent No.1-Board to implement the resolution. There is no reason why the employees of the respondent no.1- Board should be deprived of such benefits. In fact, it is incumbent upon the respondent no.1- Board to accord and permit all the pensionary and retiral benefits in terms of the revised pay scales, as recommended by the 5th Pay Commission and its report. More so, when it is accepted and adopted by not only respondent No.1- Board, but also, by the respondent No.2- State of Gujarat. It is in this context, the denial or refusal by the Board to its employees for such benefits is unjust, unreasonable and perverse. It is a statutory right of the employees of the Board to claim pension according to the Rules and Regulations of the Board. 22. Our attention has, also, been invited to the letter written by the respondent no.1 Board, to the Commissioner of Cottage and Village Industries, Gujarat-State, dated 15.5.1999, to the effect that employees, who are entitled for pension and to discharge their liability, it is communicated in the letter that calculated amount, as per the revised scale in terms of the 5th Pay Commission, recommendations made in its report has been payable by way of pension, as well as, by way of gratuity and the letter also indicated that the increase in the said liability arose with effect from 1.1.96 being a cut off date for the implementation of the recommendations made by the 5th Pay Commission in its report and on that basis, different calculations have been made and the reference of the employees, who have retired prior to 1.1.96, has been made thereunder. 23. Despite the aforesaid request, repeatedly, made for the payment of revised pension and gratuity, to some of the retired pensioners, who were retired after 01.01.96 was not attended or subscribed to. It is very apparent from the provisions of the Act, Regulations and Rules, the State Government has deep pervasive control, managerial as well as monetary, and also monitoring of the working performance of the Board. The learned Single Judge has, rightly, found from the record that the entire financial responsibility rests on the Government, in so far as the pay, pension and perks of the personnel of the Board are concerned. The Gujarat