IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 5498 of 1999 SPECIAL CIVIL APPLICATION No 5743 of 1999 For Approval and Signature: Hon'ble MR.JUSTICE K.M.MEHTA ============================================================ 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 Civil Judge? : NO -------------------------------------------------------------- GUJARAT RAJYA DAIRY KARMACHARISABHA Versus MANAGING DIRECTOR -------------------------------------------------------------- Appearance: ------------------------------------------------------------- MR PM THAKKAR, Ld.Sr.Counsel and Ms.SANGEETA PAHWA for Petitioner In SCA No.5498/99 MR BM MANGUKIYA, Ld.Adv. for petitioner in SCA No.5743/99 MR SN SHELAT, Ld. ADVOCATE GENERAL alongwith MR.A.D.OZA, Ld.Govt.Pleader, MR.H.C.PATEL & MRS.Parekh, ld.AGP for the Respondents No.2 & 3 -State. MR KM PATEL & MR DEEPAK PATEL for Respondent No.1 -------------------------------------------------------------- CORAM : MR.JUSTICE K.M.MEHTA Date of decision: 03/05/2001 C.A.V. JUDGEMENT 1. Gujarat Rajya Dairy Karmachari Sabha - petitioner has filed this petition under Articles 226 and 227 of the Constitution of India, and has challenged the Circular dated 8.7.1999 passed by Gujarat Dairy Development Corporation Limited (hereinafter referred to as `Corporation') in which Corporation has framed the changed/modified policy regarding voluntary retirement of their employees. The petitioner has challenged the said Circular as being illegal, arbitrary and violative of Articles 14 and 16 of the Constitution of India. 2. The facts giving rise to this petition are as under: 2.1 Petitioner is a Union registered under the provisions of the Trade Union Act. The respondent No.1-Corporation is a Company registered under the provisions of the Companies Act, 1956. The respondent No.1-Corporation is a Government Company fully owned and controlled by the Government. The petitioner submitted that, as per the Memorandum & Articles of Association of the Company, all the shares of the company are subscribed by the State Government and powers of appointment of the Board of Directors vest in the Hon'ble Governor of Gujarat. The petitioner submitted that the activities of Corporation is developmental and promotional in nature and the respondents No.2 and 3 are the State of Gujarat. 2.2 In the petition, it was submitted that State of Gujarat-respondent no.2 has decided to restructure the public sector undertakings, and in pursuance to that decision, the respondent no.2 - Government has framed one Voluntary Retirement Scheme under the program by Circular dated 27.11.1997. The said voluntary retirement scheme provided following two options: (i) to be relieved from the services after taking Voluntary Retirement. (ii) to be considered as surplus and included in the list of surplus employee in the surplus employee cell constituted by the Government for the purpose of giving alternative employees to the surplus staff. (iii) It was further decided that the Government has not decided about 5th Pay Commission, however as and when Government will decide the employees who have opted for voluntary retirement will also entitle to said benefit after considering the said recommendation and if there is a difference the same has to be paid which include (salary, dearness allowance, gratuity, leave turn into cash) all these within three months in cash. It was also decided that all these amounts are to be paid from the Renewal Fund of the Government. 2.3 The said Circular has been produced at annexure `A' to the petition. 2.4 The respondent No.1-Corporation has also issued a Circular dated 9.1.1998 and has declared to implement the said Voluntary Retirement Scheme dated 27.11.1997. In that Circular, the Government has also indicated that, if in future, if Government or its Corporation decided to increase the emoluments then those benefits may also be given to those employees and all the expenses of the voluntary scheme will be reimburse through Renewal Fund Scheme of the State of Gujarat. 2.5 The respondent No.1-Corporation has issued a Circular dated 5.1.1999 and decided to give a notional benefit of 5th Pay Commission under the Scheme. However, arrears of 5th Pay Commission was denied and in the said Circular the employees who have not given options till date or employees who have given one or other option, can give option and can also modify the option given by them. The option to be given upto 21.1.99. 2.6 Thereafter, the respondent No.1-Corporation has issued Circular dated 8.7.999 (impugned circular) whereby all earlier Circulars were cancelled and one new scheme of Voluntary Retirement was introduced. In that scheme no options were given. In impugned circular an option of being considered as surplus employee is totally dropped. It was also stated that those who do not opt for voluntary retirement will be relieved from the services in accordance with law or as per the decisions of the Board for Industrial & Financial Reconstruction (hereinafter referred to as `BIFR'). As regards recommendation of 5th Pay Commission, a notional benefit will be given and not the benefit which was envisaged earlier in cash to be given. The Clause 8 also provides that once application for resignation is given the same cannot be withdrawn. In the present petition this circular has been challenged as arbitrary and violative of Articles 14 and 16 of the Constitution of India. SUBMISSION ON BEHALF OF EMPLOYEES: 3. Shri P.M.Thakkar, learned Senior Counsel alongwith Mrs.Sangeeta Pahwa, learned advocate are appearing on behalf of the petitioner. 3.1 Learned Counsels for the petitioner submitted that Circular dated 27.11.1997 is applicable in the present case for following reasons: (a) When the impugned Voluntary Retirement Scheme came into existence by Circular dated 8.7.99, the Government policy dtd.27.11.97 was in existence and the modified policy dtd.28.7.99 was not in existence and therefore the policy which was not in existence when the impugned Voluntary Retirement Scheme was floated, the same cannot be consonance with the future policy. (b) Modified policy is not made retrospective. (c) Modified policy itself provides that in those public sectors in which voluntary retirement scheme has sanctioned, the earlier policy would be applicable. In present case, the impugned policy dtd.8.7.99 was sanctioned which is evident from Annexure `B' page 27 of the petition and therefore the earlier policy dtd.27.11.97 would be applicable. 3.2 It was further submitted that the policy dtd.27.1197 gives two options namely the Voluntary Retirement Scheme as per the benefits enumerated therein and placement on the Surplus Cell Pool for being considered to be employed in other public sector. It was submitted that the impugned Voluntary Retirement Scheme floated by Gujarat Dairy Development Corporation does not provide for the option on Surplus Pool. It was submitted that though the Government declares that the employees of all the Public Sectors, which are to be closed in pursuance of "Public Sector Revival Programme" will be given the benefits of Surplus Cell Pool and though the other Public Sector namely GCEL, Gujarat Jal Sampaty Nigam Ltd., Gujarat Matshya Corporation Ltd. has given the said benefits, the employees of Gujarat Dairy Development Corporation are not given the same treatment which were given to the other Public Sector Employees. It was further submitted that the policy dated 28.7.99 is applicable then also the said policy dated 28.7.99 is the modification of the policy dtd.27.11.97. The modified policy does not take away the benefits which are to be provided for those employees who had taken the option of Voluntary Retirement Scheme as provided in Clause B 5(b) of 1997 namely arrears in Cash of 5th Pay Commission. It was submitted that Clause B-5(b) provides that those Public Sector employees who have accepted the conditions of the Government and who have accepted the Voluntary Retirement Scheme will be given the benefits of Revised Pay Scale and the pay scale of these employees will be fixed as per revised pay scale and the amount of compensation i.e. salary plus dearness allowance plus gratuity plus leave encashment will be calculated as per revised pay scale and the same will be paid within 3 months in cash. 3.3 Learned counsels for the petitioner further submitted that by impugned circular the Corporation has not given compensation in cash as per the 5th Pay Commission to the employees whereas all the Public Sector Employees have given said benefits in cash. It was submitted that since the benefit is given notionally, it is not open for the Government to pick and choose some Corporation by giving different treatment to others. It is not open for the Government to implement the policy in discriminatory manner. It was further submitted that the Government as well as Corporation has implemented the policy qua Gujarat Dairy Development Corporation employees in a discriminatory manner which is against the settled legal position in this behalf. 3.4 In support of the aforesaid submission, the learned Counsel for the petitioner has relied upon following authorities: 3.5 The learned Counsels have relied upon the judgment of the Hon'ble Supreme Court in the case of Union of India Vs. K.P.Joseph and Others reported in 1973 S.C. 303. In para 10 and 11 the Hon'ble Supreme Court has observed as under: "Para 10. In Union of India v. M/s. Indo Afghan Agencies Ltd. (1968) 2 SCR 366 at p. 377 = (AIR 1968 SC 718), this Court, in considering the nature of the Import Trade Policy said: "Granting that it is executive in character, this Court has held that Courts have the power in appropriate cases to compel performance of the obligations imposed by the Schemes upon the departmental authorities." To say that an administrative order can never confer any right would be too wide a proposition. There are administrative orders which confer rights and impose duties. It is because an administrative order can abridge or take away rights that we have imported the principle of natural justice of audi alteram partem into this area. A very perceptive writer has written: "Let us take one of Mr.Harrison's instances, a regulation from the British War Office that no recruit shall be enlisted who is not five feet six inches high. Suppose a recruiting officer musters in a man who is five feet five inches only in height, and pays him the King's shilling; afterwards the officer is sued by the Government for being short in his accounts; among other items he claims to be allowed the shilling paid to the undersized recruit. The Court has to consider and apply this regulation and, whatever its effect may be, that effect will be given to it by the Court exactly as effect will be given to a statute providing that murderers shall be hanged, or that last wills must have two witnesses." (John Chipman Gray on "The Nature and Sources of the Law"). "Para.11 We should not be understood as laying down any general proposition on this question. But we think that the Order in question conferred upon the first respondent the right to have his pay fixed in the manner specified in the Order and that was part of the conditions of his service. We see no reason why the Court should not enforce that right." 3.6 The learned Counsels have further relied upon the judgment of the Hon'ble Supreme Court in the case of Purshottamlal and others Vs. Union of India and another, reported in AIR 1973 SC 1088. In para 15 the Hon'ble Supreme Court has observed as under: "Mr. Dhebar contends that it was for the Government to accept the recommendations of the Pay Commission and while doing so to determine which categories of employees should be taken to have been included in the terms of reference. We are unable to appreciate this point. Either the Government has made reference in respect of all Government employees or it has not. But if it has made a reference in respect of all Government employees and it accepts the recommendations it is bound to implement the recommendations in respect of all Government employees. If it does not implement the report regarding some employees only it commits a breach of Arts. 14 and 16 of the Constitution. This is what the Government has done as far as these petitioners are concerned." 3.7 The learned Counsels have also relied upon the judgment of the Hon'ble Supreme Court in the case of Dr.Amarjit Singh Ahluwalia Vs. State of Punjab reported in 1975(3) SCC 503. On page 510 the Hon'ble Supreme Court has observed as under: "Now, it is true that clause(2)(ii) of the memorandum dated October 25, 1965 was in the nature of administrative instruction, not having the force of law, but the State Government could not at its own sweet will depart from it without rational justification and fix an artificial date for commencing the length of continuous service in the case of some individual officers only for the purpose of giving them seniority in contravention of that clause. That would be clearly violative of Articles 14 and 16 of the Constitution. The sweep of Articles 14 and 16 is wide and pervasive. These two articles embody the principle of rationality and they are intended to strike against arbitrary and discriminatory action taken by the `State'. Where the State Government departs from a principle of seniority laid down by it, albeit by administrative instructions, and the departure is without reason and arbitrary, it would directly infringe the guarantee of equality under Articles 14 and 16. It is interesting to notice that in the United States it is now well settled that an executive agency must be rigorously held to the standards by which it professes its actions to be judged and it must scrupulously observe those standards on pain of invalidation of an act in violation of them. Vide the judgment of Mr. Justice Frankfurter in Vitaralli v. Seaton. This view is of course not based on the equality clause of the United States Constitution and it is evolved as a rule of administrative law. But the principle is the same, namely, that arbitrariness should be eliminated in State action. If, therefore, we find that the order dated December 4, 1967 gave an artificial date from which the continuous service of respondents Nos. 3 to 19 shall be deemed to have commenced, though in fact and in truth their continuous service commenced from different dates and it was thus in contravention of the principle of seniority laid down in clause (2)(ii) of the memorandum dated October 25, 1965, it would have to be held to be void as being violative of Articles 14 and 16." 3.8 The learned Counsels have also relied upon the judgment of the Hon'ble Supreme Court in the case of State of Mysore and Another Vs. H.Srinivasmurthy reported in 1976(1) SCC 817. He has relied upon para 18 of the said judgment. "On the other hand, it is an undisputed fact that six other employees, who were similarly situated, were absorbed from the dates on which they initially joined duty, after deputation to the polytechnics. It is not the case of the appellant that this principle whereby the absorption in the Department of Technical Education was related back to the date on which a person initially came on deputation, was ever departed from, excepting in the case of the respondent. This being the case, the High Court was right in holding that the State Government had evolved a principle that if a person was deputed to the Department of Technical Education from another department and he stayed on in that other department for a reasonable long time his absorption in that department should be made to relate back to the date on which he was initially sent. There was no justification whatever to depart from this principle of policy in the case of the respondent, who was, in all material respects, in the same situation as K.N.Chetty." 3.9 The learned counsels have also relied upon the judgment of the Hon'ble Supreme Court in the case of Ramana Dayaram Shetty Vs. The International Airport Authority of India and others reported in AIR 1979 S.C. 1628. They have relied upon Paras 20, 21 & 34 of the said judgment. "Para 20. Now, obviously where a corporation is an instrumentality or agency of Government, it would, in the exercise of its power or discretion, be subject to the same constitutional or public law limitations as Government. The rule inhibiting arbitrary action by Government which we have discussed above must apply equally where such corporation is dealing with the public, whether by way of giving jobs or entering into contracts or otherwise, and it cannot act arbitrarily and enter into relationship with any person it likes at its sweet will, but its action must be in conformity with some principle which meets the test of reason and relevance." "Para 21. This rule also flows directly from the doctrine of equality embodied in Art.14. It is now well settled as a result of the decisions of this Court in E.P.Royappa v. State of Tamil Nadu, (1974) 2 SC 348 that Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. It requires that State action must not be arbitrary but must be based on some rational and relevant principle which is non-discriminatory; it must not be guided by any extraneous or irrelevant consideration, because that would be denial of equality. The principle of reasonableness and rationality which is legally as well as philosophically an essential element of equality or non-arbitrariness is projected by Article 14 and it must characterise every State action, whether it be under authority of law or in exercise of executive power without making of law. The State cannot, therefore act arbitrarily in entering into relationship, contractual or otherwise with a third party, but its action must conform to some standard or norm which is rational and non-discriminatory." "Para 34. The action of the 1st respondent in accepting the tender of the 4th respondents, even though they did not satisfy the prescribed condition of eligibility, was clearly discriminatory, since it excluded other persons similarly situate from tendering for the contract and it was also arbitrary and without reason. The acceptance of the tender of the 4th respondent was, in the circumstances invalid as being violative of the equality clause of the Constitution as also of the rule of administrative law inhibiting arbitrary action." 3.10 The learned Counsels have also relied upon in the case of Miss Nishi Maghu & Others Vs. State of Jammu & Kashmir reported in 1980(4) SCC 95. They have relied upon Para 12 of the said judgment. "The fact that the allotment of marks is in accordance with a policy decision may not conclude the matter in all circumstances; if that decision is found to be arbitrary and infringing Article 14 of the Constitution, it cannot claim immunity from challenge. When we say this we are not unmindful of the observations in Peeriakaruppan case quoted above, which were made in a somewhat similar but not altogether identical situation." 3.11 The learned counsels have also relied upon in the case of Omprakash Sud, Shamlal Kapur, Pavankumar Sharma Vs. State of Jammu and Kashmir and others reported in AIR 1981 SC 1001. They have relied upon para 8 of the said judgment which reads as under: "Equality before the Law" or "equal protection of the laws" within the meaning of Article 14 of the Constitution of India means absence of any arbitrary discrimination by the law or in their administration. No undue favour to one or hostile discrimination to another should be shown. A classification is reasonable when it is not an arbitrary selection but rests on differences pertinent to the subject in respect of which the classification is made. The classification permissible must be based on some real and substantial distinction, a just and reasonable relation to the objects sought to be attained and cannot be made arbitrarily and without any substantial basis ...... (See State of West Bengal v. Anwar Ali, 1952 SCR 284 : (AIR 1952 SC 75). The classification must not be arbitrary but be rational, that is to say, it must not only be based on some qualities or characteristics which are to be found in all the persons grouped together and not in others who are left out. Those qualities or characteristics must have a reasonable relation to the object of the law. In order to pass the test, two conditions must be fulfilled, namely, (1) that the classification must be founded on an intelligible differentia which distinguishes those that are grouped together from others, and (2) that that differentia must have a rational relation to the object sought to be achieved by the Act. The differentia which is the basis of the classification and the object of the Act are distinct things and what is necessary is that there must be a nexus between them. (See 1952 SCR 284) : (AIR 1952 SC 75). We are not unaware that the rule of equality does not mean mathematical equality and that it permits of practical inequalities. But what is needed is that the selection of the quota seekers as in the case in hand should have a rational relation to the object sought to be achieved in the industrial policy decision of the State. If the selection or differentiation is arbitrary and lacks a rational basis it offends Article 14." 3.12 The learned Counsels have also relied upon in the case of Sriniketan Co-op. Group Housing Society Ltd. Vs. Vihar Co-op. Group Housing Society Ltd. and others reported in AIR 1989 SC 1673. In para 28 on page 1684 the Hon'ble Court has observed as under: "Another factor worthy of note is that even in the application of the norm `first come first served', the Government had not followed a uniform policy. The High Court has pointed out that initially five societies were selected for allotment of land on the basis of `first come first served' but subsequently one of the societies was dropped out and there is no explanation for the said society being dropped out. In addition the High Court has commented on the fact that when the Registrar had sent a list containing the names of 15 societies, the Ministry had selected only four societies for allotment of land and rejected the applications of the other societies. No explanation is forth coming for not alloting land to those societies. As the norm of `first come first served' had not been followed in the case of all the applicant societies, the Government of India had to concede in the counter-affidavit filed by Shri A.K.Goyal that the principle `first come first served' was not universally applied to all the societies which had been allotted land. Since all the eligible societies were not treated alike and allotted land, the High Court has held that the allotment of land had been done in an arbitrary manner. This finding cannot be said to be wrong." 3.13 The learned counsels have also relied upon the decision in the case of State of Kerala Vs. Kumari T.P.Roshana and others reported in AIR 1979 SC 765. In para 34 the Hon'ble Court has observed as under: "Nor is law unimaginative, especially in the writ jurisdiction where responsible justice is the goal. The court cannot adopt a rigid attitude of negativity and sit back after striking down the scheme of Government, leaving it to the helpless Government caught in a crisis to make do as best as it may, or throwing the situation open to agitational chaos to find a solution by demonstrations in the streets and worse. We are, therefore, unable to stop with merely declaring that the scheme of admission accepted by Government is ultra vires and granting the relief to the petitioner of admission to the medical college. The need for controlling its repercussions calls for judicial response. After all, law is not a brooding omnipresence in the sky but an operational art in society." 3.14 Learned counsels