Case: State Of Gujarat Vs. Dr. R.B. Chandrachud

Now the Articles of the merger agreement may furnish valuable evidence of the affirmance of rights conferred by the predecessor State, see 1959 SCR 729 = (AIR 1958 SC 816 ) (supra) at p. 748 (of SCR) = (at p. 826 of AIR). In the State of M P. v. Shyam Lal a recognition of those rights was inferred from article in merger agreements providing for the continuance of the laws of the merging State and for the taking over its assets and liabilities by the new State. In the present case Article VIII of the merger agreement dated March 21, 1951 provided:-(1) The Government of India hereby guarantees either the continuance in service of the permanent members of the Public Services of Baroda on conditions which will not be less advantageous than those on which they were serving before the date on which the administration of Baroda is made over to the Government of India or the payment of reasonable compensation. (2) The Government of India further guarantees the continuance of pensions and leave salaries sanctioned by His Highness the Maharaja to the members of its public services of the State who have refired or proceeded on leave preparatory to retirement, before the date on which the administration of Baroda is made over to the Government of India. Clause (2) of Article VIII applies to the respondent. He was a member of the public services of the Baroda State and he retired before the date of the merger.It guarantees the continuance of the pension and leave salary sanctioned to him by the Maharaja. Now what does the word "pension" in Cl. (2) of Art. VIII mean ? Ordinarily the word "pension" means a periodical allowance of money granted by the Government in consideration or recognition of meritorious services. The word "Pension" in the Pensions Act, 1871 Section 60 (1) (g) of the Code of Civil Procedure. 1908 and Section 6 (g) of the Transfer of Property Act, 1882 implies periodical payments of money by Government to the pensioner, see Nawab Bahadur of Murshidabad v. Karnani Industrial Bank Ltd. (l931) 58 Ind App 215 at pp. 219-20 = (AIR 1931 PC 160 at p. 161). Pension, gratuity and provident fund are three distinct types of retirement benefits. But the word "pension" (Pensionem payment) in its widest etymological sense can be construed as including all payments of every kind and description to a retiring Government servant, see Secy. of State v. Khemchand Jeychand, (1880) ILR 4 Bom 432 at p. 436.The term "pension" is frequently, particularly in recent years, used in the broad sense of retirement allowance or adjusted compensation for services rendered, see Corpus Juris Secundum, Vol. 67 Page 331, Vol. 70, page 425. It has received the wider connotation in the definition sections of many modern statutes. To give a few illustration, the word "pension" includes "any payment of a lump sum in respect of a persons employment", see Fatal Accidents Act, 1959 (7 and 8 Elis, 2 c, 65), Section 2 (2), "a superannuation allowance", see Midwives Act, 1936 (26 Geo. 5 and 1 Edw. 8 c 40), Section 2 (6) a "gratuity" and a return of contributions to a pension fund with or without interest thereon or any other addition thereto, see Transport Act, 1947, (10 and 11 Geo. 6 c. 49), Section 125 (1), Gas Act, 1948 (11 and 12 Geo. 6 c. 67), Section 74 (1). 11. Now Clause (1) of Article VIII of the merger agreement guarantees payment of reasonable compensation to officials whose services are dispensed with by the new Government Clause 2 guarantees the continuance of pensions and leave salaries sanctioned by the Maharaja to officers who had retired before the date of the merger. Considering that the object of Article VIII is to guarantee payment of retirement benefits to retired public servants of the merged State, we are not inclined to give the word "pensions" a narrow interpretation. In our opinion, the word "pensions" in Clause 2 of Article VIII includes the lump sum payable to the respondent as compensation under the Huzur order dated February 8, 1948 as modified by the Huzur order dated July 22, 1948 In substance, the Huzur order directed that the respondent would get his full salary as his pension from the date of his Premature retirement up to the completion of his superannuation age and allowed him to draw immediately the entire allowance for the period in one lump sum. The allowance so payable to the respondent, a retiring Government servant, in recognition of his past services is "pension" within the meaning of Clause 2 of Article VIII of the merger agreement. 12. Article VIII of the merger agreement thus furnishes strong evidence of recognition by the Government of India of the liability to pay retirement compensation under the Huzur order dated February 8, 1948. We have also noticed that the successor Governments continued the old laws of the Baroda State until they were repealed or altered. The successor Governments resisted the respondents claim on the ground that the order of forfeiture passed by the Executive Council on April 22, 1949 was lawful. There was no question of their disclaiming liability under the Huzur order of February 8, 1948 in case it was found that the order of the Executive Council dated April 22, 1949 was invalid. In the circumstances, we hold that the successor Governments recognized and took over the liability under the Huzur order dated February 8, 1948. If so, it is not disputed that the liability has now devolved on the State of Gujarat. It follows that the Courts below rightly decreed the suit. 13. This conclusion is sufficient to dispose of the appeal and we express no opinion whether the liability was also recognized by paragraph 4 (1) (b) of the Administration of Baroda State Order, paragraph 5 (iii) (a) of the Baroda State (Application of Laws) Order, 1949 or Paragraph 7 (1) of the States Merger (Governors Provinces) Order, 1949.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 0

Reasoning from the judgment:
0[ds]In view of Section 18 (d) of the Baroda Constitution Act, 1940 even a legislative bill affecting an order passed by the Maharaja in the exercise of his prerogative rights could not be moved in the Dhara Sabha without his previous sanction. Under Section 32 (f) pensions and gratuities sanctioned by the Maharaja were charged on the revenues of the State. The Huzur order was passed by the Maharaja on February 8, 1948 in the exercise of his prerogative and inherent powers. The order was executed and the monies were paid under it to the respondent. The Executive Council had no authority to revoke the Huzur order and to forfeit the monies. We hold that the order of the Executive Council dated April 22, 1949 was ultra vires its powers and was illegal and not binding upon the respondent6. It is now conceded that the direction in the order dated April 22, 1949 for the recovery of the monies under Section 148 of the Baroda Land Revenue Code was illegal. That section did not allow recovery of moneys payable under an order of the Executive Council. The attachment levied on the respondents properties was unlawful. The recovery of Rs. 65,000/- from the respondent under the invalid order of the Executive Council cannot be justified as an act of State.The Courts below rightly found that the respondent was compelled to pay Rs. 65,000/- under coercion. The result of the illegal recovery was that to the extent of Rs. 65,000/- the liability of the Baroda Government under the Huzur Order dated February 8,1948 remained outstanding12. Article VIII of the merger agreement thus furnishes strong evidence of recognition by the Government of India of the liability to pay retirement compensation under the Huzur order dated February 8, 1948. We have also noticed that the successor Governments continued the old laws of the Baroda State until they were repealed or altered. The successor Governments resisted the respondents claim on the ground that the order of forfeiture passed by the Executive Council on April 22, 1949 was lawful. There was no question of their disclaiming liability under the Huzur order of February 8, 1948 in case it was found that the order of the Executive Council dated April 22, 1949 was invalid. In the circumstances, we hold that the successor Governments recognized and took over the liability under the Huzur order dated February 8, 1948. If so, it is not disputed that the liability has now devolved on the State of Gujarat. It follows that the Courts below rightly decreed the suit13. This conclusion is sufficient to dispose of the appeal and we express no opinion whether the liability was also recognized by paragraph 4 (1) (b) of the Administration of Baroda State Order, paragraph 5 (iii) (a) of the Baroda State (Application of Laws) Order, 1949 or Paragraph 7 (1) of the States Merger (Governors Provinces) Order, 1949.