Case: M.P. State Co-op. Dairy Fedn. Ltd. &amp; Another Vs. Rajnesh Kumar Jamindar &amp; Others

3. Before us, there are 52 matters. Out of 52 concerned employees, 16 Writ Petitions were allowed by a learned Single Judge. Writ appeals filed there against by the Federation were dismissed but only 50% back wages had been granted to the employees. Respondents have not questioned the correctness of the said judgment. Remaining 36 writ petitions were dismissed by a learned Single Judge. However, writ appeals filed there against have been allowed directing reinstatement of the concerned respondents with only 20% back wages.4. Federation is a society registered and incorporated under the provisions of the Madhya Pradesh Cooperative Societies Act, 1960 (for short "the Act"). It is an apex society classified as a Central Society. It is registered under Section 9 of the Act. The Government of Madhya Pradesh through its Veterinary Department had been carrying out in certain areas of the State activities of supply of milk through its offices established for the said purpose. A company known as Madhya Pradesh State Dairy Development Corporation Limited was incorporated on or about 22.03.1975 for carrying out the business of sale of milk and its products. It was registered under the Indian Companies Act, 1956. Its object was development and procurement of milk and for bringing out a `white revolution.5. Federation was constituted to promote sale of milk and its products inter alia with a view to providing employment to agriculturists, milk suppliers so as to enable it to implement a World Bank scheme effectively. The said company underwent voluntary winding up. Its assets both movable and immovable were transferred to the Federation as part of shareholdings of the State Government.6. Federation is a federal society within the meaning of Section 2(k) of the Act. It is also an apex society within the meaning of Section 2(a-1) of the Act. It has its own bye-laws. Bye-law No. 3 provides for betterment of the economic conditions of agriculturists and milk producers by monitoring the activities as also different programmes relating to production, collection, Processing, distribution and marketing of milk and milk products. From time to time, it helps and provides technical assistance to the primary societies, independent bodies which are engaged in the production of milk and its proper distribution in urban areas. It also issues guidelines. Its functions are enumerated in Bye-law Nos. 3.2.1 to 3.2.26.7. In terms of Section 55 of the Act, the Registrar framed regulations known as the M.P. State Cooperative Dairy Federation Ltd. Employees Recruitment, Classification and Conditions of Service Regulations, 1985 (for short "the Regulations"). Indisputably, terms and conditions of employment of the employees of the Federation are governed by the said Regulations; Regulation 13 whereof provides for compulsory retirement of an employee on attaining the age of 55 years or on completion of 25 years of service. Regulation 13 was amended with effect from 24.12.2001 providing for compulsory retirement of an employee of the Federation on attaining the age of 50 years or completion of 20 years of service. It reads asCompulsory Retirement1. The appointing officer has the powers that he can without giving any reason compulsory retire any employee on completion of twenty years of his service and on this ground any claim for special compensation would not be rejected, however, this power would be exercised in those circumstances when the appointing officer is of the view that it is in the interest of the Federation and it can be done by giving 3 months prior intimation otherwise not.2. Any employee who has completed 20 years of service at any time would be able to retire from the Federation, however, before retiring at least three months notice in writing has to be given to the concerned officer in this regard. If he wants to retire before the completion of the period of notice, then he would be paid the amount equivalent to the salary and allowances which is less than three months.The said provision is at par with Rule 42(b) of the Madhya Pradesh Civil Service (Pension) Rules, 1976 applicable to the government servants. The said provision is also at par with the circular letter issued by the State Government on 22.08.2000.9. Indisputably, pursuant to or in furtherance of Regulation 13 of the Regulations, a Scrutiny Committee as also a Review Committee were constituted for the purpose of finding out as to how many employees can be compulsorily retired in terms thereof.10. It is also not in dispute that during the period 1975 to 1981, no guideline had been laid down in regard to the mode and manner for recording of annual confidential reports. Such parameters, however, were introduced in the year 1986-87.11. Respondents indisputably have completed 20 years of service. A Scrutiny Committee constituted therefor scrutinized the service records of the respondents for about 20 years. The formula for determination of the fitness of the concerned employees to continue in the service of the Federation was the same which is made applicable to the case of the government servants; in terms whereof the entire service records of the employees were required to be considered wherefor the grading in the confidential reports was to be made on the following"Outstanding" category four marks, for "Very Good" category three marks, for "Good" category two marks, for "Average" category one mark, and for "Poor" category zero marks has been allotted. The total marks are to be divided by the number of years for which the confidential reports are available and which have been considered. It is further stated that in case the average marks are two or more than two then the employee should not be compulsorily retired and on the other hand if he gets less than two average marks he should be compulsorily retired.The circular letter issued by the Government of Madhya Pradesh dated 22.08.2000 inter aliaAn evaluation of complete service records should not be below `good Cagetory - B.Simultaneously, it will be seen whether there is any decline in the working efficiency of the Government servant. It is to be seen whether the working efficiency, especially in preceding five years has declined oragain, by a circular letter dated 20.03.2003, it wasabove mentioned subject State Government has decided accordingly :(1) referred memorandum dated 12.12.2001 issued by this Department which was having directions for drawing average marks on the basis of service period by showing the classification marks of the confidential reports of the government employee on average basis for the purpose of screening, is being hereby cancelled.(2) The standards for screening that were fixed by the referred memorandum dated 22.03.2000 in its para 2(1), now deleting its standard No.4 following standards are now being prescribed :Standard No. (4)(one) though at the time of screening whole record of the employee should be checked, even then any government employee should not be held retired on the basis of normal disability, if his previous 5 years of service has been found satisfactory, or if he has been promoted on some higher grade in last 5 years and his services on the higher grade have been found satisfactory. (two) any of the Government Employee, shall not be retired from the service on the ground of normal disability, if within one year of the date of screening he is going to be retired after completing his age of superannuation. Abovesaid condition shall not be applicable in cases of employees having doubtful integrity.The report of the Scrutiny Committee was placed before the Review Committee, which in its reportthe course of examination, it has also been observed on perusal of the Confidential Reports that in some Confidential Reports for certain years, the group/category have not been marked but the marks have been awarded. The Confidential Report has the categories of `poor and `very poor while on the circular for evaluation issued by the State, there being no category `very poor, the `very poor category has been treated as `poor, `poor has been treated as `average, `average has been considered as `good and `good has been considered as `very good for the purpose of evaluation.On making a review, following criteria have been prescribed by the Government for the purpose of compulsory retirement:-1. Recommendations may be made after considering complete records of the employee for the purpose of his honesty and integrity being in doubt.2. Depletion in physical capacities.3. An evaluation of the goodwill and working efficiency of a Government servant may be carried out on the basis of complete service records of the Government servant. It is not necessary that every adverse comment and/or such comment which can be given the nomenclature of adverse comment must be communicated to the employees.4. An all round evaluation of records of total period of service : must not below "good" category. Simultaneously, it may also be seen that is there any decline in the working efficiency of the Government servant. Especially, whether there is any decline in the working efficiency in preceding fiveThe question as to whether the Federation is a `State within the meaning of Article 12 of the Constitution of India or not came up for consideration before a Full Bench of the Madhya Pradesh High Court in Dinesh Kumar Sharma v. M.P. Dugdh Mahasangh Sahakari Samiti Maryadit [1993 MPLJ 786]. Inter alia relying on or on the basis of the decisions of this Court in Ajay Hasia v. Khalid Mujib Sehravardi [(1981) 1 SCC 722] , Ramana Dayaram Shetty v. International Airport Authority of India [(1979) 3 SCC 489] and Chander Mohan Khanna v. National Council of Educational Research and Training [(1991) 4 SCC 578 : AIR 1992 SC 76 ], it was held that the Federation is not a `State, opining:(i) The entire share capital is not held by the State Government.(ii) The entire expenditure of the cooperative societies is not met by the State Government.(iii) It does not enjoy a monopoly status.(iv) The State Government does not have any deep and pervasive control over the societies.It was, however, noticed that the Managing Director is appointed by the State Government but the Chairman of the Federation has a right to contest election; its functions inter alia being to encourage the villagers, the persons engaged in the sale of milk and milk products, to give them employment, primarily resting on the cooperative principles which are not carried out pursuant to the State requirements in discharge of States obligations for health, safety or general welfare of public generally.15. The matter, however, was referred to a Special Bench in M.P. State Co-operative Dairy Federation and Others v. Madan Lal Chourasia [2007 (2) M.P.L.J. 594] for reconsideration of the said decision. Speaking for the Special Bench, consisting of five Honble Judges, the Chief Justice of the High Court noticed that the six authoritative tests culled out in the case of Ajay Hasia (supra) having been reconsidered in Pradeep Kumar Biswas v. Indian Institute of Chemical Biology [(2002) 5 SCC 111] , the tests laid down therein only were required to be considered,Federation was registered as a Co- operative Society under the M.P. Co-operative Societies Act, 1960 on or about 13-5-1980. Bye- law 3.1 of the Bye-laws of the Federation states that the main object of the Federation comprised of conducting various programmes of manufacture, collection, processing, distribution and sale of milk and milk products for the economic development of the farmers and for developing and safeguarding the milk business, milk producing animals and for the economic development of the groups engaged in milk production and spreading and developing other joint activities...the main object of the Federation discussed above clearly show that the work of the Federation relates to economic development of farmers, who are engaged in production and sale of milk in the State of Madhya Pradesh and this work has been taken up by the State Government through the agency of the Federation because development of milk and milk products and economic development of farmers carrying the business of sale of milk and milk products are part of the functions of a welfarewas found that the State Government and the Central Government were having more than 91% of shares in terms of Bye-laws 4.0, 4.9 and 4.9.1. It wasBye-law 2.2 of the bye-laws of the Federation defines the Board of Directors of the Federation to mean the Board constituted, elected and nominated under the bye-laws. Bye-law 22 provides for composition of the Board of Directors and the Council fornoticed the composition of the Board of Directors of the Federation towill be clear from the aforesaid composition of the Board of Directors of the Federation that out of 13 members of the Board of Directors as many as 8 members are the nominees of the State Government, Central Government and their agencies.18. Under bye-law 27 of the bye-laws of the Federation, vast powers have been vested in the Board of Directors of the Federation including the power to appoint, dismiss, suspend and regularize the services of the employees of the Federation such as Managers, Secretaries, Officers, Clerks and to fix their powers, duties, wages and allowances. The Board of Directors of the Federation appear to have under the bye-laws of the Federation over all administrative powers and since the majority of the Board of Directors are nominees of the State Government and the Central Government as representatives of their respective departments and not as experts as contended by Mr. Singh, we hold that the administrative control of the Federation is with the Government.19. Bye law 30 of the bye-laws of the Federation is titled Managing Director and bye-law 30.1 states that for managing the business of the Federation, Managing Director shall be appointed by the State Government. Bye law 30.2 states that the Managing Director of the Federation shall be a Chief Executive and will work under the control, direction and guidance of the Board of Directors. Bye law 30.3 of the bye-laws states that the Managing Director shall execute the business and work as per powers given to him, from time to time, by the Board of Directors and he can delegate his powers given by the Board of Directors to his subordinate officers and he will place the information of delegation of his powers to subordinate officers in the next meeting of the Board of Directors. It will thus be clear that the Managing Director is not only appointed by the State Government but is also under the control, direction and guidance of the Board of Directors, which is dominated by the Government nominee. Hence, day to day functioning of the Federation is also controlled by the Government though the Managing Director and the Board of Directors of the20. Bye law 17 of the bye-laws is titled General Assembly and bye law 17.1 states that the General Assembly of the Federation will have the supremacy under the Act, Rules and Bye-laws. Bye law 17.2 deals with the composition of the General Assembly and says that it will comprise of elected members of the Milk Union and all the nominated members of Board of Directors. Bye law 17.3 states that the Federation will call a General Assembly every year, which will be before three months of the end of financial year and bye law 17.4 states that the Federation can at any time call a General Assembly to discuss emergency work. Bye law 18 states that the General Assembly will consider the subjects mentioned therein and these are mainly the budget and programme presented by the Board of Directors, the annual financial report placed by the Board of Directors of the Federation, the distribution of profits and decision on the audit application and audit removal report of the Board of Directors. These provisions relating to the General Assembly of the Federation show that the General Assembly was also dominated by the Board of Directors. As the Board of Directors is dominated by the nominees of the Government, the General Assembly will also take decisions in its meeting in the manner as desired by the Government. Hence, the Federation is also dominated and controlled by the Government administratively and functionally as in the cases of Pradeep Kumar Biswas and Virendra Kumar Srivastavathe aforementioned findings, the decision of the Full Bench in Dinesh Kumar Sharma (supra) was overruled.

Court's reasoning:
28. We have noticed the history of the Federation. It was a part of the Department of the Government. It not only carries on commercial activities, it works for achieving the better economic development of a section of the people. It seeks to achieve the principles laid down in Article 47 of the Constitution of India, viz., nutritional value and health. It undertakes a training and research work. Guidelines issued by it are binding on the societies. It monitors the functioning of the societies under it. It is an apex body.29. We, therefore, are of the opinion that the appellant herein would come within the purview of the definition of `State as contained in Article 12 of the Constitution of India.30. The learned Single Judge called for the records. It was found that the Regulations were amended in conformity with the government circulars and, thus, the said amendment was valid. It was noticed that at least in cases of 16 employees, the average grading being "good", their services could not have been dispensed with.Before us, like before the learned Single Judge and the Division Bench of the High Court, various discrepancies in the report of the Scrutiny Committee as approved by the Review Committee were pointed out. The examples placed before us clearly demonstrate that neither the Scrutiny Committee nor the Review Committee took into consideration the relevant factors germane for the purpose of passing such an order and in fact had taken into consideration irrelevant factors which were not germane therefor.34. Some of the employees, for a number of years, had been shown to be good officers; ACRs of some of whom in some of the years have been "very good". As has been noticed hereinbefore, the Scrutiny Committee as also the Review Committee proceeded to determine each individual case keeping in view the ACRs of the employees concerned from 1980, since when the Federation had started functioning, to the year 2000, when the decision had been taken to compulsorily retire the employees, by amending the Regulations. We have noticed hereinbefore that although criteria adopted by the State were required to be considered for the purpose of determining the suitability or otherwise of the employees to continue in service, the necessity to give special consideration to the performance of the employees for the last five years before the order was passed had been given a completeThe learned Single Judge as also the Division Bench, as noticed hereinbefore, clearly held that for the purpose of weeding out the dead wood, it was absolutely necessary to take into consideration the performance of each of the employees at least for the last two years.35. Each case, thus, was required to be considered on its own merit. The broad criteria, which are not only applicable generally for the aforementioned purpose, were required to be followed but there cannot be any doubt or dispute that the criteria laid down by the State was imperative in character. Thus, the Federation adopted the rules and circulars made or issued by the State Government. The Federation itself having formulated the criteria required to be applied for passing orders of compulsory retirement was, thus, bound thereby. It is now aprinciple of law that the employer would be bound by the rule of game. It must follow the standard laid down by itself. If procedures have been laid down for arriving at some kinds of decisions, the same should substantially be complied with even if the same are directory in nature.It is also aprinciple of law that an authority discharging a public function must act fairly. It, for the aforementioned purpose, cannot take into consideration an irrelevant or extraneous matter which is not germane for the purpose for which the power is sought to be exercised. The Scrutiny Committee as also the Review Committee was required to pose unto themselves a correct question of law so as to enable them to find out a correct answer. It was, therefore, imperative that the criteria laid down in the circulars issued by the State of Madhya Pradesh should have been scrupulously followed.40. Federation, therefore, in our opinion, having regard to the fact that there was no material to show that the respondentsemployees had become dead wood, inefficient or corrupt, must be held to have abused its power.41. `Interest of the Federation as contained in Regulation 13 of the Regulations would not mean that services of a large number of employees should be dispensed with only for the purpose of cutting administrative expenses. Even such a power does not exist in terms of the Regulations nor any such ground had been taken in thebefore the High Court.42. Strong reliance has been placed by Mr. Sreekumar on a recent decision of this Court in Mundrika Dubey and Others v. State of Bihar and Others [(2008) 4 SCC 458] wherein orders of compulsory retirement by way of an economic measure had been found to be in the interest of the employer.43. It may be placed on record that neither there exist any such provision nor such a stand had been taken before the High Court. Furthermore, it isthat while a power is exercised by an authority, ordinarily, the reasons contained in the order should be supported by the materials on records.44. Submission of Mr. Sreekumar, that the High Court should not have interfered with the order of compulsory retirement keeping in view the fact that no malafide has been alleged in the Scrutiny Committee nor any case of discrimination has been made out, cannot be accepted. It is one thing to say that a yardstick has been fixed for the purpose of taking recourse to the power of compulsory retirement but there cannot be any doubt or dispute that such yardstick must be based on relevant criteria. If the relevant criteria, as has been laid down by the State, which has been adopted by the Federation, had not been acted upon, the order must be held to have been suffering from jurisdictional error.45. It may be true that the superior courts in exercise of their power of judicial review ordinarily would not go into the factual findings as to which section of the employees should be brought within the parameters of Regulation 13 of the Regulations and which of them would not, but, in this case, we are concerned with a different question.46. We, therefore, do not find any infirmity in the judgment of the High Court.47. So far as the question of payment of back wages is concerned, we may notice Regulation 49(2) of the Regulations, which reads as(2) When the termination or retirement of an employee from his service has been set aside by the court and the employee is reinstated without any further departmental proceeding, then the period of absence from the period of suspension, will be treated s the period on duty for all purposes including the grant of salary and allowances. The amount of subsistence allowance to him if has been paid will be deducted from the payable amount under this subbare perusal of the said Regulation would clearly show that it applies in a case where an order of dismissal and/ or compulsory retirement by way of punishment is set aside. It is not a case where order of compulsory retirement had been passed by way of punishment. Respondentsemployees herein were not charged with any misconduct. The order of compulsory retirement was issued in terms of the Regulation 13 of the Regulations only.48. Various decisions have been placed before us with regard to grant of back wages. Even the learned Single Judge had granted 50% back wages in favour of 16 employees. The Division Bench did not interfere therewith. We, therefore, fail to understand as to why the Division Bench thought fit to grant 20% back wages in respect of other employees. The decisions placed before us show that this Court keeping in view the facts and circumstances of each case had refused to grant 75% back wages.49. We, therefore, are of the opinion that 50% back wages should have been granted.50. In Civil Appeal arising out of SLP (C) No. 17705 of 2008, as noticed hereinbefore, an additional ground has been taken that Section 47 of the 1995 Act would be attracted in the case of the appellant. Section 47 of the 1995 Act reads asn in Government employment(1) No establishment shall dispense with, or reduce in rank, an employee who acquires a disability during his service:Provided that, if an employee, after acquiring disability is not suitable for the post he was holding, could be shifted to some other post with the same pay scale and service benefits:Provided further that if it is not possible to adjust the employee against any post, he may be kept on a supernumerary post until a suitable post is available or he attains the age of superannuation, whichever is earlier.(2) No promotion shall be denied to a person merely on the ground of his disability:Provided that the appropriate Government may, having regard to the type of work carried on in any establishment, by notification and subject to such conditions, if any, as may be specified in such notification, exempt any establishment from the provisions of this section.The learned counsel submits that his client suffered disability in 1991. The 1995 Act, thus, did not come into force at that point of time. His services were continued not as a disabled person within the provisions of the 1995 Act. He was treated equally and, thus, we see no reason as to why the entire back wages should be granted in his favour whereas all other employees would be given 50% of their back wages.52. Furthermore, such a contention had not been raised before the Division Bench. It may be true that in a given case, this Court may allow the appellant to raise such a contention, as was done in the case of Kunal Singh v. Union of India and Another [(2003) 4 SCC 524] whereupon strong reliance has been placed, but it is not automatic.It is evident from the record that even before the learned Single Judge the said contention was not raised at the first instance. Only in the review petition, the said contention was raised. But, the said review petition was dismissed. As indicated hereinbefore, the said contention was again not raised before the Division Bench. We, therefore, are not inclined to agree with the contention that in terms of the 1995 Act, the appellant should be given 100% back wages.