' •' '

STATE OF GUJARAT & ANOTHER

RAMAN LAL KESHA V LAL SONI & OTHERS

January 27, 1983

[Y.V. CHANDRACHUD, CJ, S. MURTAZA FAZAL ALI,

V.D. TULZAPURKAR, 0. CH!NNAPPA REDDY AND

A. VARADARAJAN, JJ.]

Gujarat Panchayat Act, 1961-As amended by the Gujarat Panchayat (Third Amendment) Act, 1978-0fficers and servants of the panchayats-Whether Government servants.

Mastr and servant relations-Tests for the determination of.

Constitution of India, 1950, Articles 14 and 311-Status of Government servant-If could be determind retrospectively.

Interpretation-Legislature, if has power to take away or impair a consti tutional right retrospectively.

The Gujarat Panchayats Act, 1961 was enacted to consolidate and amend the law relating to village panchayats and district local boards with a view to reorganise the administration pertaining to local G.overnment in furtherance of the object of democratic decentralisation of powers in faVour of different classes of panchayats. It was provided that the state Government should exercise control over panchayats either directly or thrvugh such officer or officers as it may appoint for that purpose. The Panchayat Organisation consisted of Gram Panchayats, Taluqa Panchayats and District Panchayats which are bodies corporate with perpetual succession and common seal. Notwithstanding that they were separate bodies corporate, the panchayats formed part of the panchayat organisation set up for secudng a greater measure of participation by tlie people in the-local governmental functions. They were enjoined to perform :functions and duties assigned by or under the Act so• as to confonn to the State :plans, National plans and the State policy in general. The State Government

was empowered to cause inspection to be made and to call for and examine the 'record of the proceedings of any panchayat. On the enactment of the 1961 Act,

1the District Local Boards, village panchayats and municipalities constituted under earlier Acts stood transformed as District Panchayats, gram or nagar pancbayats, depending on population. Officers and servants of the District Local Boards were deemed to be transferred to the service of the district panchayats, Secretaries, officers and servants in the employ of the old village panchayats became Secretaries, officers and servants of the new gram panchayats and officers and servants in the em, pior of municipalities became oflicers al\d servan.t' of .the interim p1nchayats,

~'---~

288 SUPllBME COURT llBPOllTS

(1983) 2 s.c.R.

The gram pancbayats were entrusted with the work of looking -after sanitation and health, public works, community development, agriculture, preservation of forests and a number of other subjects. They were entrusted with the work of collection of land revenue and do any or all the functions and duties of village Accountant or Patel or other similar functions of any other person in relation to the collection of land revenue and dues recoverable as , arrears of land revenue. Provision had been made in the Act for the transfer to the District Pancb!}yats of such powers, functions and duties relating to any matters as are exercised or perform., d by the State Government or ao)I officer of the Government under any enactment which the 'State Legislature is competent to enact or otherwise in the executive power of the Seate. The Act also provided that any functions and duties relating to any of the matters specified in the paochayat functions list, previously being performed by the State Government, shall be transferred to the District Paachayats togetlicr with the funds provided and the staff employed tberefo:r. On such transfer, the District Panchayat may delegate, with the approval of the Government, to any panchayat subordinate to it any of the functions and duties so transferred. A fund called the Gram Fund or Nagar Fund was created and the proceeds of any tax or fee imposed by or assigned to the Pancbayat under the Act, sums contributed to the fund by the State Governmt:nt and all other sums received by the Panchayat were to be credited in the fund. The Act provided for appointment of a Secretary and such other ser~ vants as may be determined for every Gram Panchayat and Nagar Panchayat in ac:ordance with rules prescribed by the Govrncnent. Depending on the facts and circumstances of a case, the State GJverament may direct that a group of Pa.nchayats sliall have one Secretary only. The Secretary and other servants were required to do all the administrative functions as may be conferred on them by tho Panchayat. The Act provided that there shall be a Secretary for every Taluqa Pancbayat and that the Taluqa Development Officer who shall be an officer belonging to the State servico and posted under the panchayat, sBall be ex-officio Secretary of the pancbayat. The District Development Officer posted under the District Panchayat was t-0 be. the ex-officio Secretary of the District Panchayat.

For the purpose of bringing about uniform scales of pay and uniform con~ dition3 of service for persons employed in the pancbayats, the Act provided for the constitution of a panchayat service which was declared to be distinct from the State service. P1Jwer was given to the State Government to determine from time to time classes, cadres and posts of officers and their strength. A servant belonging to district cadre was liable to be posted, whether by promotion or transfer, to any post in any othr cadre as provided in the rules. The State Government was empowered to make rules regulating the mode of recruitment either by holdiog examinatioos or otherwise and their conditions of service.

Appointments to posts in the panchayat service were to be made by direct recruitment or by promotion or by transfer of a member of the State service to t11e paachayat servic~. The Staie Government was empowered to allocate to the panchyat service the requisite number of officers and servants who _shall be taken over by the panchayat in such cadre and on such tenure, remuneration and other conditions of service as the State Government may determine and the expenditure on account of pay and allowances of officer and servants of thr

panchayat wa~ to be met fro!ll the fnd~ of the ppchaat, The Avt enabled

- --._-

. ---,

- f'

GUJARAT V, RAMAN LAL

the State Government to direct the posting of officers of the Indian Administra~ tive Service and of Class-II service9 of the State Government in panchaY, at institutions. Provision was made for the constitution of a Panchayat Service Selection Board and ()istrict Panchayat Service Selection Com1nittces for selection of officers nd other 1nembers of staff.

After the coming into force of the 1961 Act the State Government made several sets of rules, one of which was the Gujarat Panchayat Service (Absorp

tion, Seniority, Pay and Allowances) Rules, 1965. The Rules provided for the equation of posts, fixation of seniority, scales Qf pay and allowances of "allocated employees". An "allocated employee" meant a person allocated to the panchayats service. Under the rules every allocated employee holding a corresponding post immediately before the appointed day shall be appointed to the_equivalent post. that is, a post -in the pancbayat service, which the State Government may, by order. determine to be gen!rally corresponding to a post held by an allocated employee immediately before the appointed day (called corresponding post) having regard to the pay scales, minimum educational and other qualifications prescribed for the equivalent post and the corresponding post and the nature and magnitude of responsibilities aHached to such posts.

Therefore, unless equivalence of posts was first detern1ined by order of the State Government, the 1965 Rules could not be applied. The State Government did not mnke any order regarding the equation or posts of the staff in the local cadre and the fixation of their scales of pay, although such orders were made in respect of posts of other cadres. The Government did not extend to the staff borne on the local cadre, the benefit of revision of scales of pay made on the bash of the

recommendations of the two Pay Commissions, though such benefit was cxten dcd to the District and Taluqa Cadres; nor did the Government mak~ any order providing for promotional avenues to employees of the local cadre.

Aggrieved by the inaction of the Government, the employees of the local cadre of the panchayat service filed a writ petition in the High Court seeking various relief&. The Government contended that members of the panchayat service were not Government servants and so were not entitled to claim the reliefs asked for by them.

Allowing the petitions the High Court held that the employees belonging to the local cadre were Government servants and directed the State Government to make suitable orders under the 1965 Rules to initially fix the pay scales and other conditions of service, to revise the scales of pay in accordaoce with the recommendations of the Pay Commission. Certain other reliefs were also given.

The State Governmeot filed in this Court an appeal against the judgment G of the High Court. In 1he meantime, the Governor promulgated the Gujarat Panchayats Amendment Ordinance, 1978 which later became the Gujarat Panchayats (fbird Amendment) Act, 1978 .

The amending Act of 1978 was enacted to get over the effect of the judgment of the High Court. It denied the status of Government servants to certain categories or employees and their anoi;1;1i99 to te panharat §ervice was, cancelled with retrospective effect. ·

SUPREME COURT REPORTS

[1983) 2 S.C.R.

Jn their writ petitions the employees of the local cadre contended that the provisions of the Amendment Act of 1978 were violative of Article 311 of the Constitution, that tbe Act was discriminatory and that the benefits acquired by them could not be taken away with re.trospcctive effect.

In the appeal it was contended that having regard to the various provisions of the Act the members of the panchayat service were Government servants.

Dismissing the appeal and allowing the petitions,

HELD : The panchayat service constituted under the Act is a civil service of the State and the member~ of the service are Government servants.

[309 CJ +-

It is not possible to lay down any disti!'lctive test to determine when a person may be said to hold a civil post under the Government. The presence of all or some of the factors such as the rigbt to select for appoint ment 1 the right to appoint, the right to terminate the employment, the right to take disciplinary action or deterinine the service, the source from which wages or salary are paid and a host of such circumstances may have to be considered to determine the existence of the relationship of master and servant.

[306 B-D]

Gurugobinda Basu v. Sankari Prasad Ghosal, [1964] 4 SCR 311 ; , State of Uttar Prod.sh v. Audh Naroin Singh, [1964] 7 SCR 89; State of Assam

v. Shri Kamakchandra Dutta, [1967] l SCR 679; Gurushontappa v. Abdul Khuddus, [1969] 3 SCR 425 ; S.L. Aggarwol v. Hindustan Steel Ltd., [1970] 3 SCR 363 ; Jalgaon Zilla Parishad v. Duman Gobind and others, C.A. No. 24 & 25 of 1968 decided on December 20, 1968, referred to.

In-the instant case, merobers of the service are required to perform funetions in connection with those affairs of the State entrusted to the panchayats either by the Act itself or by transfer by the Gov-ernment under the Act. It may be that the pay and other allowances of the officers were paid out of the panchayats' own funds but the sums consisted of funds contributed or lent by the State Government and or the proceeds of any tax or fee imposed by or assigned to the panchayats under the Act.

This imposition of a tax or fee in the nature of a lax is essentially a function of the State. So the salary and allowances of servants and officers are paid out of the funds contributed or Jent by Government or raised by the discharge of an essential governmental function.

Officers and staff are to be appointed by an authority prescribed by the Government and their conditions of service shall be as may be prescribed by the Gov 1ernment. The Act contemplates the constitution of a single centralised panchayat service, the classes, cadres and posts of which have to be determined by the Government from time to time. Such other topics like recruitment, conditions of service, transfer, promotions, disciplinary action to be taken against the officers and servants are to be regulated by rules made by the Government, There cannot be any question of a rule providing for promotion from the panchayat service to the State service µnless the panc_hayat service is alsQ a eryice oder the State. The provisiops

' -

.-r

GUJARAT v. RAMAN LAL i91

relating to inter.district transfers of servants of the panchayat service and provisions which provide for promotion and transfer of servants belonging to the different cadres within the District, Taluqa and Gram or Nagar panchayat clearly show that these servants are not the servants of the individual panchayats but belong to a centralised service. The provision relating to transfer and allocation of members of the , State service to the pancbayat service necessarily implies that the panchayat service is also a service under the State and such transfers would be impermissible unless the panchayat service is also a service under the 'State. The very idea that there can be an allocation to the Panchayat service from a State service and a reallocation from the panchayat service to the State service is only consistent with the panchayat service also being a service under the State.

[306 G-H, 307 A-H, 308 BJ

The provision under the Act that the panchayat service shall be distinct from the State service does not indicate a disclaimer by the Legislature th'at the panchayat service is a service under the State; it is a distinct service from the state service because the pancbayat institutions constitute an almost parallel but subsidiary Government. Again Government servants do not cease to be Government servants merely because, for the time being, they'are allocated to different panchayat institutions and are paid out of the funds of institutions Which are declared to be bodies corporate. [308 F-H, 309 B-Cf

G.L. Shukla v.

Stat~ of Gujarat; 8 G.L.R. 833, approved.

The Gujarat Panchayats (Third Amendment) Act, 1978 is unconstitutional as it offends Articles 311 and 14 and is arbitrary and unreasonable.

The provisions are so intertwined with ooe another that it is impossible to separate

he offending sections from the others. [320 E-G]

.The object of the 1961 Act was "democratic decentralisation of power and the consequent reorganisation of the administration of local' Government" and even after the 1978 amendment this object continued to be the same.

Even so, section 11 (1) which declared that the different panchayats shall constitute a panchayat organisation wa11 omitted. The Statement of objects and reasons stated that the amendments were necessitated to get over the judgment of the High Court that the panchayat service was a State service.

Tbat could not be a reason to go against the object of the principal Act and to abandon the constitution of the State panchayat organisation. [312 EHJ

The effect of the amending Act was that non-Talati Secretaries and other officers and servants of lhe Gram and Nagar panchayats were to be deemed to be the servants of the respective panchayats notwithstanding the judgments of courts declaring them to be Government servants. The District pancbayats were barred from transferring their staff to Oram and Nagar panchayats consequent on the delegation of functions, powes and duties to Gram and Nagar paochayats.

A paochayat service consisting of persons employed in connection with the affairs of Taluqa panchayats and District panchayats and of specified servants was constituted notwithstanding anything contained in any judgment, decree or order of any court and such persons and servants were deemed to have always been {the officers cind servants of tho Taluqa panchayats or tho District panchayats for the ostensible reason

292 SUPll.EME COURT UPORTS

11983) 2 S.C.Q,

A of enabling the respective panchayats to exercise their powers and perform their

functions efficiently. In so doing it omitted the Oram and Nagar pancbayats -which are at the very base of democratic decentralisation and on which the superstructure stands. [314 CH, 315 E-F)

Before the Amending Act of 1978 was passed, ex-municipal emp1oyees who had been allocated to the panchayat service as Secretaries, officers and servants of Gram and Nagar panchayats had achieved the status of Government servants. The amending Act bas done away with their status as members of a service under tbe State without giving them an option. Retrospectivity is given in order that they could not claim that they \Vere ever Government servants. But their status as Government servants could not be extinguished so long as the posts were not abolished and their services were not terminated in accordance with -the provisions of Article 311 of the Constitution nor was it permissible to single them out for differential treatment because that would offend Arlicie 14 of the Constitution. [319 BD]

There is no force in the contention that some of the officers and servants of the Gram and Nagar panchayats were Government servants from 1he beginning while other officers and servants of Oram and Nagar panchayats were not and that a classification on the basis of source of their services was permissible. Once they bad joined the common stream of service and performed the same duties, it is not permissible to make any classification on the basis of their origin. [319 DE]

Undoubtedly, the Legislature is competent to legislate with retrospective effect to take away or i111pair any vested right but since laws are made under a w1itten constitution and have to conform to the do's and don'ts of the constitution neither prospective nor retrospective laws can be made so as to contravene the fundamental rights. A Legislature cannot legislate today with reference to a situation that obtained 20 years ago and ignore the constitutional. rights accurcd in the course of 20 years.. A Jaw which, if made today, would be plainly invalid as offending constitutional provisions in the context of the existing, :situation cannot become valid by being made retrospective. [319 G-H, 320 B, BJ

CIVIL APPELLATE JURISDICTION; Civil Appeal No. 359 of 1978.

Appeal by Special leave from the Judgment and Order-dated the 28th January, 1977 of the Gujarat High Court in Special Civil

Application No. 309 of I 975.

AND Writ Petition Nos. 4266-4270 of 1978.

(Under Article 32 of the Constitution of India)

')-

V.M. Tarkunde, D1'ranjan Mehta, P.H. Parekh and Mrs. Manik >-- Tarkunde for the Petitioners in MPs. and R.R. 1-3 and in CA. 359.

H D. V. Patel, C. V. Subba Rao, Dy. Govt. Advocate, M. N.

Shroff, G. N. Desai and R. N. Poddar for the Appellant in CA. 359 and RR 1 and 2 in Wl's.

GUJARAT v. RAMAN LAL ( Chinnappa Reddy, J.) 293

Vimal Dave and Miss Kai/ash Mehta for tbe Intervener in W, P.

Mukul Mudgal for Respondent No. '9 in CA. 359/79 and for Respondent No. 6 in WPs.

The Judgment of the Court was delivered by

CHINNAPPA REDDY, J. The attitude of the State of Gujarat in these cases has indeed left us puzzled and wondering. On the one hand, there are lakhs of employees working under various Panchayat Institutions, call them Government servants or no, to whom the benefits of the recommendations of the two Pay Commissions, the Sarela and the Desai Commissions, have been extended, while on the other hand, there is a microscopic number (comparatively) of about six thousand employees of the lowest category, also working under Pancbayat Institutions, who are denied the benefits of those recommendations, on the sole ground of a birth-mark, if we may so call it, since they are denied the benefits because before they came to work under the Panchayat Institutions, they were employed in municipalities while the others were Government servants to start with. The unfairness and the injustice of the distinction is patent, whatever legal justification may be put forward. Surely, the State,

dedicated as it is to socialism, equality and economic justice and enjoined by the Directive Principles to secure the right to work, a living wage, equal pay for equal work and so on cannot make such a distinction. But the distinction has been made; it is sought to be sustained by those making it and we are constrained to examine whether there is any Constitutional or other legal sustenance for the distinction. We did request the Counsel for the State of Gujarat to communicate with his clients to find out if the benefits cannot gracefully be extended to the erstwhile employees of municipalities presently working under Panchayat Institutions also. We are told that the answer of the State of Gujarat is in the negative. '

The appeal and the Writ Petitions were heard once before by a Constitution Bench consisting of Chandrachud, CJ, Sarkaria, Untwalia, Kailasam and Venkataramiah, JJ. The opinion of the Constitution Bench was pronounced by Vcnk, taramiah, J., on July 13, 1980. (The opinion is reported in [1981] l SCR 144). But on the application of the appellants, the opinion was set aside and the appeal and the Writ Petitions were directed to be set down for hearing once more by the Constitution Bench. That is how the matters have again come before us.

SUPREME COURT REPORTS [1983] 2 s.c.R.

Pursuant to the Constitutional mandate in Art. 40 that "the State shall take steps to organise village panchayats and endow them with such powers and authority as may be necessary to function as units of self-Government", the State of Gujarat enacted the Gujarat Panchayats Act 1961 (Act No. VI of 1962) 'to consolidate and amend the law relating to village Panchayats and district local boards with a view to reorganise the administration pertaining to local Government in furtherance of the object of the democratic decentralisation of powers in favour of different classes of Panchayats'.

The Gujarat Panchayats f\ct 1961 was substantially amended in 1978 in an attempt, as .we shall presenily point out, to circumvent the judgment of the Gujarat High Court which is under appeal before us. The Constitutional validity of the Amending Act is in question in the Writ Petitions which are before us.

We shall first refer to the provisions of the Gujarat Panchayats Act, as they stood before they were amended in 1978. By s. II (l) of the Act, as it originally stood, a Panchay at Organisation was constituted for the State of Gujarat, consisting of Gram Panchayats, Taluqa Panchayats, District Panchayats, Gram Sabhas, Nyaya Panchayats and Conciliation Panchas. It is provided by Section 11

(2) that the State Government shall exercise control over Panchayats either directly .or through such officer or officers as it may appoint for that purpose. Local areas comprising of revenue villages or groups of revenue villages or hamlets forming parts of revenue villages or other administrative units or parts thereof are to be declared Grams under the Act, if the population of the local areas does not exceed I 0,000 and Nagars if the populatio.n of the local areas exceed 10,000 but does not exceed 20,000. There is to be a Gram Panchayat for each Gram and Nagar Panchayat for each Nagar. There is also to be a Taluqa Panchayat for each taluqa and a District Panchayat for each district, as constituted from time to time under the Land Revenue Code. The Gram Panchayat, the Nagar Panchayat, the Taluqa Panchayat and the District Pancbayats are to be bodies corporate with perpetual succession and common seal. Sec. 8 prescribes the hierarchy and provides that, subject to the control of the Government, a Gram Panchayat is to be subordinate to the Taluqa Panchayat and the District Panchayat, while a Nagar Panchayat and Taluqa Panchayat are to be subordinate to the District Paochayat. While the Gram Panchayats, Nagar Panchayats,

GUJARAT v. RAMAN LAL (Chinnappa Reddy, J.)

29S

Taluqa Panchayats and District Panchayats are to be bodies corporate, Sec. 287 makes it explicit that, notwithstanding that they are separate bodies corporate having distinct territorial jurisdiction and territorial functions to perform, the Gram Panchayats, Nagar Pachayats, Taluqa Panchayats and District Panchayats shall form part of the panchayat organisation, set up for the purpose of securing a greater measure of participaiion by the people of the State in local government functions and shall perform the functions and duties assigned to them by or under the Act so as to conform to the State plans, National plans and the State policy in general, and also so as to give effect to general or special directions as may be issued by the State Government. Sec. 292 (A) aqd Sec. 305 authorise the State Governmnt to cause inspection to be made and to call for and examine the record of the proceedings of any panchayat.

.· At this juncture, we may mention that prior to the enactment of the Gujarat Panchayats Act, 1961, there were in force in the State of Gujarat the Bombay Village Panchayat Act, 1958, the Bombay Local Boards Act, 1923, the Bombay District Municipal Act, 1901 and the Bombay Municipal Boroughs Act, 1925. The Bombay Village

Panchayat Act 1958 and the Bombay Local Boards Act, 1923 are repealed by Secs. 325 and 326 of the Gujarat Village Panchayats Act, 1961. A local area declared to be a village under the Bombay Village Panchayats Act, 1958 and a Panchayat constituted under that Act, are deemed to be gram and panchayat under the Gujarat Gram Panchayats Act, 1961. The Secretaries and all officers and servants under the employment of the old village Panchayats are to be Secretaries, Officers and servants of the new gram panchayats. A District Local Board constituted under the Bombay Local Boards Act for a local area is to stand dissolved. All property which stood vested in the district local board immediately before the appointed day is to be deemed transferred to the district panchayat constituted for the local area, called the successor panchayat. All officers and servants in the employment of the District Local Board are similarly to be deemed transferred to the service of the successor panchayat.

Where local areas are declared to be grams or nagars under Sec. 9 of the Gujarat Gram Panchayats Act, 1961 and such areas correspond to the limits of a municipal district or municipal borough under the Bombay District Municipal Act or Bombay Municipal Borough Act, it is provided by Sec. 307 of the Gujarat Panchayats Act that the municipality previously functioning in such local area shall cease to exist and that the councillors of such municipality shall constitute an interim

SUPREMIB COURT REPORTS

(1983] 2 !.C.R.

gram panchayat or interim nagar panchayat as the case may be for the gram or nagar. It is also provided that all officers and servants in the employment of the municipality immediately before the date of declaration of the Jocnl ar., as as gram or nagar, shall be officers and servants of the interim panchayat.

Thus broadly, District Local Boards under the Bombay Local Boards Act stand transformed as District Panchayats, village panchayats under the Bombay Village Panchayats Act as gram panchayats and municipalities under the Bombay District Municipal Act and Bombay1 Municipal Boroughs Act as gram or nagar panchayats, depending on the population. Officers and servants in !he employ of the District Local Boards are deemed to be transferred to the service of the district panchayats; Secretaries, officers and servants in the employ of the old village panchayat become Secretaries, officers and servants of new gram panchayats and officers and servants in the employ of municipalities become officers and servants of interim panchayats.

To continue our tour of inspection (if one may use such an expression) of the provisions of the Act, Sec. 88 of the Act empowers each gram panchayat to make, in the area within its jurisdiction, and so far as the fund at its disposal will allow, reasonable provi sion in regard to all or any of the matters specified in Sch. I. Sch. I enumerates a host of matters under the beads 'Sanitation and Health'. 'Public works', 'Education and Culture', Self Defence and Village Defence', 'Planning and Administration', 'Community Development, Agriculture, Preservation of forests and Pasture Lands', 'Animal Husbandry', 'Village Industries' and 'Collection of Land Revenue'. Under each of these beads innumerable subjects are specified.

In regard to the collection of land revenue express provision is further made by Sec. 149 that the Government shall, notwithstanding anything contained in Land Revenue Code or any other Jaw, entrust to every Gram Panchayat and every Nagar Panchayat, any or all of the functions and duties of village Accoun' tant or Patel or other similar functions of any other person by whatever name called, in r<:lation to the collection of land revenue and dues recoverable as arrears of land revenue and all other functions and duties of villa1ge Accountant under the Land Revenue H Code. Sec. 150 provides that the panchayat so entrusted under Sec. 149 shall be responsible for the collection of land revenue and other dues of the gram or nagar as the case may be.


 GUJARAT Y. RAMAN LAL (Chinnappa Ready, J.) 297

Jn addition to the functions enumerated in Sch. I. Sec. 89 imposes certain other duties and functions on the panchayat. A panchayat may, fer example, carry out in the area within the limits of jurisdic.tion, any other work or measure which is likely to promote health, safety, education, comfort, convenience or social or economic or culture well-being of the inhabitants of the area including secondary education. A panchayat is also required to carry out the directions or orders given or issued from time to time by the

State Government for the amelioration of the condition of scheduled castes and scheduled tribes, and other backward classes.

Taluqa and District Panchayats are required by secs. 117 and 13 7 respectively to make reasonable provision in respect of matters specified in Schedules II and III. In Schedule II, a number of subjects are enumerated under the heads 'Sanitation and Health', 'Commun'tcation', 'Education and Culture', 'Social Education', 'Community Development', 'Agriculture and Irrigation', •Animal Husbandry', 'Village and Small Scale Industries', 'Corporation'. 'Women's Welfare', 'Social Welfare', 'Relief', 'Collection of Statistics', 'Trtitts', 'Forests', 'Rural Housing,' and 'Information'. In

Schedule III, similarly, a number of subjects are enumerated under the beads 'Sanitation and Health', 'Public Works', 'Education and Other Cultural Activities', •Administration', 'Community Development', 'Agriculture', •Animal Husbandry', 'Village and Small Scala

Industries', 'Social Welfare', 'Relief' and 'Minor Irrigation Projects'.

Sec. 155 provides for the transfer of the functions previously performed by District School Boards under the Bombay and Saurashtra Primary Bducation Act to taluqa and district panchayats.

, Sec. 156 provides for the delegation to district and taluqa panchayats such powers and functions and duties of the Registrar or any other authority under the Bombay Cooperative Societies Act, as may be specified.

Sec. I 51 provides for the transfer to District Panchayats of such powers, functions and duties relating to any matters as are exercised or performed by the State Government or any officer of the Government under any enactment which the State Legislature is competent to enact, or otherwise in the executive power of the State. On the transfer of such functions, the Government is also required to allot to the District Panchayats such funds and personnel


(1983] 2 S.C.R.

as may be necessary to enable the District Panchayats to exercise the powers and discharge functions and duties so transferred. Sec.

157 (2) mentions the subjects which in particular may be transferred to the District Panchayats. Sec. 157 (3) further provides that on the transfer of powers, functions and duties under sub-Sec. (1) and (2), the District Panchayat shall, if the State Government so directs and may with the previous approval of the Government, delegate to any panchayat subordinate to it any of the functions, powers and duties so transferred and allot to such Panchayats such funds and staff as may be necessary to enable the Panchayat to discharge the functions and duties so delegated.

Sec. 158 provides that any function and duties relating to any of the matters specified in the Panchayat functions list, which were previously being performed by the State Government, shall be transferred to the District Panchayats together with the funds provided and the staff employed therefor. On such transfer, the District Panchayat may delegate, subject to the approval of the Government, to any panchayat subordinate to it a11y of the functions and duties so transferred.

Sec. 96 of the Act anthorises the State Government to vest in a Panchayat open sites, waste, vacant or grazing lands or public roads, streets, bridges, ditches, dikes and fences, wells, river banks, streams, lakes, nallas, canals, water courses, trees or any other property in the gram or nagar.

Sec. 99 provides for the creation of gram and nagar funds.

Each gram nnd nagar is to have a fund called the Gram Fund or the Nagar Fund into which ar~ to be paid, inter-alia, the proceeds of any tax or fee imposed by or assigned to the panchayat under the Act, sums contributed to the fund by the State Government or the Taluqa Panchayat or the District Panchayat and all sums received by way of loans from the State Government or the Taluqa Panchayat or the District Panchayat or out of the District Development Fund or otherwise.

Sec. 119 vests in the Taluqa Panchayat every road building and other work constructed by the Taluqa Panchayat any land or property transferred to the Taluqa Panchayat by the State Government and any land or property transferred by any other Panchayat. Sec. 139 vests in the District Panchayat every road --

. ,...,

GUJARAT v. RAMAN LAL (Chinnappa Reddy, J.) ~9~

building or other work constructed by the Pancbayat, any land or property transferred to a District Panchayat by the State Government and any land or other property transferred to the District Panchayat by any other Panchayat.

We may now refer, conveniently, at this stage to the provisions relating to services. Sec. 102 provides that there shall be a Secretary for every gram panchayat and nagar panchayat, who shall be appointed in accordance with the rules.

Rules, of course; hav~ to be made by the Government under Sec. 323.

Sec. 102 also provides that a gram panchayat . and nagar panchayat may have such other servants as may be determined under Sec. 203, who shall be appointed by such authority and with such conditions of service, as may be prescribed. 'Prescribed' again means 'prescribed by rules' and rules have to be made by the Government.

It is further provided that having regard to the population of a gram and its income, the State Government may direct that a group of gram panchayats shall have one Secretary only. The Secretary is required to keep in his custody all records and registers of the panchayats, issue receipts on behalf of the panchayats, prepare all statements and reports required under the Act al)d perform such other functions and duties, as may be prescribed under the Act. Other servants of the panchayat are required to perform such functions and duties and exercise such powers as may be imposed or conferred on them by the Panchayat, subject to any rules which may be made.

Sec. 122 provides that there shall be a Secretary for every Taluqa Panchayat and that the Taluqa Development Officer, who shall be an officer belonging to the State service and posted under the panchayat, shall be the ex-officio Secretary of the panchayat.

Sec. 122 further provides that the taluqa panchayat shall have such other officers an<l servants as may be determined under Sec. 203, who may be appointed by such authority, with such conditions of service, as may be prescribed.

Similarly, Sec. 142 provides that the District Development Officer posted under the District Panchayat shall be the ex-officio Secretary of the District Panchayat. In addition, the District Panchayat shall have such officers and servants, as may be determined under Sec. 203, performing such functions as may be prescribed and appointed by such authority with such conditions of service, as !Ila! be prescribed, We have earlier referred to Secs. 157 and 15~

300 SUPREME COuRT RBPORts

[1983} 2 S.C.R.

which provide for the allotment and transfer of staff to the District Panchayat when functions are transferred by the Government to the District Panchayats under those provisions.

We have already referred to Sec. 326 which provides that all officers and servants in the employment of an existing District Local Board shall be deemed to ho transferred of the service of the successor District Panchayat.

We have also referred to Sec. 325 which stipulates that the Secretaries and all officers and servants in the employ of old village panchayats under the Bombay Village Panchayats Act shall be Secretaries, officers and servants of the new Gram Panchayats. We have further referred to Sec. 307 which provides that all officers and servants in the employment of municipalitie1 whose loc1l areas have been declared as grams or nagars as the case may be, shall be officers and servants of the interim panchayats of such grams or nagars.

Sec. 203, as it stood before it was amended in 1978, provided for the constitution of a Pancliayat srvice for the purpose of bringing about uniform scales of pay and uniform conditions of service for persons employed in the discharge of functions and duties of Panchayats. Such service, it was declared, shall be distinct from the State Service. The panchayat service was to consist of such classes, cadres a11d posts and the initial strength of officers and strength of such classes cadres and posts was to be such as the State Government might determine from time to time.

District Panchayats were empowered to alter, with the previous approval of the State Government, any class, cadre or number of posts determined by the Governmeat. The cadres were to consist of district cadres, taluqa cadres and local cadres. A servant belonging to a district cadre was liable to be posted, whether by promotion or transfer, to any post in any taluqa or of the district. A servant belonging to the taluqa cadre was liable to be posted whether by promotion or transfer to any post in any gram or nagar in the same taluqa. A servant belonging to a local cadre was liable to be posted whether by promotion or transfer to any post in, the same gram or nagar. In addition to the posts in the district taluqa and local cadres, a panchayat might have such other posts of such classes as the State Government may, by general or special order, determine such posts being called 'deputation posts'. They were to be filled in accordance with the provisions of Sec. 207.

The State Govern ment was empowered to make: rules regulating the mode of recruit

!Dent either b; hcldiug exami11ations or otJierwise 1111d onditions

GUJARAT V. RAMAN LAL (Chinnappa Ready, J.) 301

of service of persons appointed to the panchayat "service and powers of appointment, transfer and promotion of officers and servants in the panchayat service and disciplinary action against. such officers and servants. The rulei were required to make provision entitling servants of such cadres in the Panchayat Service to promotion to such cadres in the State service as may be prescribed. The rules were also required to provide for inter-district transfer of servants belonging to the panchayat service.

Subject to the rules made under Sec. 203, appointment to posts in the panchayat service, Sec. 205 provides, shall be made by direct recruitment by promotion or by transfer of a member of the State service to the paachayat service. Sec. 206 obliges the State Government by general or special order to allocate to the paachayat service: "(i) such number of officers and servants out of the staff allotted or transferred to a panchayat under sections (157, 158 and

325) as it may deem fit, (ia) all officers and servants of the municipalities dissolved under Sec. 307, (ii) all officers and servants in the service of district local boards and district school boards immediately before their dissolution under this Act and transferred to the pancbayats under secs. 155 and 326". It is further provided that officers and servants so allocated shall be taken over by such panchayats in such cadre and on such tenure, remu[)eration and other conditions of service, as the State Government may determine.

Sec. 204 provides that, subject to the rules which the State Govern

ment may make, the expenditure towards the pay, allowances and other benefits allowed to an officer or servant of the panchayat service serving for the time being under any panchayat shall be met by that panchayat from its own fund.

Sec. 207 enables the State Government to direct the posting of officers of the Indian administrative service and of Class II services of the. State under panchayat institutions. Sec. 208 enables a panchayat to obtain the services of any officer of Government on loan. Sec. 210 provides for the constitution of a Panchayat Services Selection Board and Sec. 211 provides for the constitution of District Panchayat Service Selection Committees and District Primary Education Staff Selection Committees.

The broad and general picture that we have on a perusal of the relevant provisions of the Act, as it stood before it was amended in 1978, is that the Gujarat Legislature aimed at the democratic \{ecentralization of important governmental functions by vestin~

302 SUPREME COURT li.EPoiTS flc.1831 2 s.c.i,

such functions in gram, nagar, taluqa and district panchayats (see Sec. 88 read with Sch. I, Sec. 117 read with Sch. It and Sec. 131 read with Sch. III) and, besides, by enabling the State Government to transfer other powers, functions and duties to the Panchayat institutions (see Secs. 89, 149, 150, 155,1156, 157 and 158). A perusal of the lists of subjects entrusted to the Panchayat Institutions shows that they are not merely the ordinary run of subjects entrusted to municipal bodies, such as, public health, sanitation, etc., but they include a great variety of subjects intimately connected with all aspects of community life and vital to it, except functions, such as, Jaw and order, administration of justice and the like. Even part of the revenue administration is entrusted to panchayat institutions, as evident from the fact that collection of land revenue is one of the duties of the gram panchayats under the Act.

Since decentralisation was not to mean mere chaotic fission and confusion, a threetier organisation was set up, subject to the overall control of the Government and it was as if a parallel but subsidiary or subordinate Government was set up by the Government itse.lf to discharge some of its functions.

Not merely were the panchayat institutions required to discharge governmental functions, the organisation and its three-tier units were to have very close links with the Government at every twist and turn, as it were. The property of the panchayats was that which. previously belonged to the Government but came to be vested in them or transferred to them and the funds of the panchayats were those to be provided subst antially by way of contribution or loan by the Government. The Government was not only empowered to make the rules to carry on! the objects of the Act. but also to issue directions from time to time to all or any of the panchayats. The Government was also empowered to cause inspection to be made and, further, to call for the proceedings of the panchayat, to satisfy itsetr as to the legality or propriety of any order made by the Panchayat. For the purpose of efficiently discharging the functions and duties of the various panchayat institutions and havining regard to the three-tier system which had been established, it was apparently thought necessary to constitute a panchayat service, the members of which would have uniform ' scales of pay and uniform conditions of service. So a single centralised Panchayat Service was constituted which was to be 'distinct from the State Service'. The distinction Jay in that it was a service parallel to the State Service and not in that the members of the service were not Government servants. The question

GUJARAT v. RAMAN LAL (Chinnappa Reddy, J.) 303

whether the members . of the panchayat servfoe are Government servants or not is the principal question to be answered in the appeal and we will come back.to it again later.

After the coming into force of the 1961 Act, several sets of rules were promulgated and orders were made which concerned the Gujarat Panchayat Service.

One such order was that madeon January 2, 1967 under Sec. 203 (2) directing that the Panchayat service shall consist of district cadre, taluqa cadre and local cadre and further specifying the posts which belonged to each of the cadres. Amongst the rules made were the Gujarat Panchayat Service (Absorption, Seniority, Pay and Allowances). Rules, 1965, which provided for the equation of posts, fixation of seniority, scales of pay and allowances of "allocated employees". "Allocated employees" were defined in the rules to mean persons allocated to the panchayat service under the provisions of Sec. 206 (i). The rules provide that every allocated employee holding a correspoding post, immediately before the appointed day, shall be appointed to the equivalent post. Equivalent post is defined to mean a post in the panchayat service, which the State Government may, by order, determine to be generally corresponding t~ a post held by an allocated employee immediately before the appointed day (called corresponding post) -having regard to the pay scales, the minimum educational and other qualifications prescribed for the equivalent post and the corresponding post and the nature and magnitude of responsibilities attached to such posts. Therefore, unless equivalence of posts is first determined, by order, by 1he Government the

Gjarat Panchayat Service Absorption Seniority Pay and Allowances

Rules, 1965 cannot be effectively applied. Even so, the State Government did not make any order regarding equation of posts ./ F of the staff in the local cadre and the fixation of their scale of pay, . although such orders were made in respect of posts of other cadres.

The State Government did not also extend to the staff borne on the local cadre of the panchayat service the benefit of revision of scales of pay, etc. which were made on the basis of the recommendations G of the two Pay Commissions, though such benefit was.extended to the District and Taluqa cadres; nor did the Government make any order providing for promotional avenues to employees of the local cadre. Aggrieved by the deaf ear turned to their representations, certain ex-municipal employees now included in the local H cadre of the Panchayal Service, for themselves and on behalf


(1983) 2 S.C.R.

of other ex-municipal employees now in the local cadre of the Panchayat Service, filed a Writ Petition in 'the High Court of Gujarat seeking various reliefs.

The Writ Petition was resisted by the State of Gujarat and the Development Commissioner on the principal ground that the mem hers of the Panchayat Service were not Government servants and therefore, they were.:not entitled to claim the reliefs asked by them. The High Court of Gujarat allowed the Writ Petition holding that the members of the panchayat service belonging to the local cadre were Government servants and directed the State Government :

"(I) To make suitable orders under the Gujarat Panchayat Service (Absorption, Seniority, Pay and Allowances) Rules, 1965 as regards the equivalence of posts, fixation of P!'Y scales for such posts, fixation of the petitioners and the person to whom they represent at an appropriate stage in such pay scales and other incidental matters covered by the said rules and to give effect to such orders from the date of allocation of the petitioners and the persons whom they represent to the Panchayat Service, that is to say, from February ll, 1969.

(2) To initially fix the pay scales and allowances and other conditions of service, including the grant of houserent allowance, compensatory local allowance, leave

benets, medical benefits, retirement benefits, etc. of the petitioners and the persons whom they represent in the equivalent posts in the Panchayat Service in accordance with the provisions of the Gujarat Panchayats Service (Absorption, Seniority, Pay and Allowances) Rules, 1965 and simultaneously give to them the benefit of such of the accepted recommendations of the First Pay Commission (Sarala Co'mmissio.o) in the said matters as were extended to the other officers and servants of the Panchayat Service; alternatively, having initially fixed the pay scales, allowances and other conditions of service in the equivalent post in accordance with the said rules, to revise subsequently such pay scales and other conditions of service as per the accepted recommendations of the First Pay Commission (Sarala Commission) iu te said mat\ers with effect from fbruary I I, J 969.

GUJARAT v. RAMAN LAL (Chlnnajlpa Reddy, J.) 305

(3) To further revise the pay scales and allowances and other conditions .of service, including the grant of house rent allowance, cQJllpensatory local allowance, leave benefits, medical benefits, retirement benefits, etc. of the Second Pay Commission (Desai Commission) in the said matters and to give effect to such revision on and with effect from Jannary I, 1975.

(4) To extend to the petitioners and the persons whom they represent the benefit of interim relief in the same manner in which such benefit was extended to the other officers and servants of the Panchayat Service.

(5) To pay to the petitioners and the persons whom they represent the amount payable to them as a consequence of the rationalisation or revision of pay scale and allowances and other conditions of service in pursuance of the directions contained. in clause.s (I) to (4) hereinabove.

(6) To consider the question of making suitable prov1s1ons in the Gujarat Pancbayats Service (Promotion to Cadres in State Service) Rules, 1974 or by framing appropriate Rules for promotion of the ex-municipal staff of the Panchayat Service to consider the question of

providig to such staff, by framing appropriate rules, promotional avenues to the other two cadres in the Panchayat Service, namely, the taluka cadre anq the district cadre".

The State Government and the Development Commissiner have filed the appeal which is now before us. But during the pendency of the appeal, in an effort to undo the basis of the decision of the High Court, the Governor of Gujarat promulgated the Gujarat Panchayats Amendment Ordinance, 1978, later replaced by the Gujarat Panchayats (Third Amendment) Act, 1978. The constitutional validity. of the Amending Act is questioned in the Writ Petitions by the ex-municipal employees now included in the local cadre.

The appeal was argued first as if the Amending Act had not been passed and the main question argued in the appeal was whether the members of the Panchayat service were Government servants . . The Writ Petitions were argued next and the question argued in the Writ Petitions w11s about the 9ol)stitl!tional validity of t4e l\men<ling Act.

SUPREME COURT REPORTS [1983] 2 s.c.11.

We have tci first consider the question whether the members of the Gnjarat Panchayat Service are Government Servants. Earlier we have already said enough to indicate our view that they are Government Servants.

We do not propose and indeed it is neither politic nor possible to lay down any definitive test to determine when a person may be said to hold a civil post under the Government.

Several factors may indicate~ the relationship cif master and servant.

None may be conclusive. On the other hand, no single factor may be considered absolutely essential. The presence of all or some of the factors, such as, the right to select for appointment, the right to appoint, the right to terminate the employment, the right to take other disciplinary action, the right to prescribe the conditions of service, the nature of the duties performed by \he employee, the right to control the employee's manner and method of the work, the right to issue directions and the right to determine and the source from which wages or salary are paid and a host of such circums' tances, may have to be considered to determine the existence of the relationship of master and servant. In each case, it is a question of fact whether a person is a servant of the State or not. Amongst the cases cited before us were Guru Govinda Basu v. Sankar Prasad Ghosal('), State of Uttar Pradesh v. Audh Narasin Singh('), State of Assam v. Shri Kanakchandra Dutt('), Gurushantappa v.

Abdul Khuddus('), S.L. Aggarwal v. Hindustan Steel Ltd.(•) .and Jalgaon Zila Parishad v. Duman Gobind and Others(').

We have considered all of them and do not 1consider it necessary to refer to each of them.

We may now revert to the question whether the members of the Gujarat Panchayat SeJvice are Government servants. First, we see that the duties which they are f required to perform are in connection with those affairs of the State which are entrusted to the Panchayat Institutions, by the statute itself or by transfer by the Government under the statute. Next, the expenditure towards the pay and allowance of officers and servants of the panchayat service, serving for the time being under any paochayat has; no .doubt, tci be met by the panchayat frorn its own fund, but, as we have seen, the

(!) (1964] 4 S.C.R. 311.

(2) [1964) 7 S.C.R. 89.

(3) [1967] I S.C.R. 679.

(4) [1969] 3 S.C.R. 42S.

(5) (1970] 3 S.C.R. 363.

(6) C.A. Nos. 24 aod 2' gf J9~S llecided oo December 20, 1968. -

' ),

OtJJAllAT v. llAMAN LAL (Chinnappa Reddy, J.) 301

fund consists substantially of sums contributed or lent by the State Government and of the proceeds of any tax or fee imposed by or assigned to the panchaya, t under the Act. The imposition of a tax or a fee in the nature of a tax, as we know, is essentially a function of the State. So the salary and allowances of the servants and officers of the panchayat service are paid out of funds contributed or lent by the Government or raised by the discharge of an essential governmental function. Secretaries of Gram and Nagar Panchayats are to be appointed in accordance with the rules made by the Government, while the Taluqa Development Officer is to be the Secretary of the Taluqa Panchayat and the District Development Officer is to be the Secretary of the District Panchayat. Taluqa and District Development Officers are, of course, officers of the State service. Gram and Nagar panchayats may have other servants, as may be determined under Sec. 203, but they have to be appointed by such authority as may be prescribed by the Government and their conditions of service shall be such as may be prescribed by the Government. Sec. 203, as already noticed by us, contemplates the constitution of a single centralised Panchayat Service, the classes, cadres and posts of which have to be determined by the Government from time to time. The mode of recruitment, whether by examination or otherwise, the conditions of service the powers in respect of appointments, transfers and promotions of officers and servants and disciplinary action which may be taken against them, are to be regulated by the rules made by the Government. The rules so made are particularly required to contain "a provision entitling servants of such cadres in the panchayat service to promotion to such cadres in the State service, as may be prescribed : vide Sec. 207 (4) (a). this is an important provision. There cannot be any question of a rule providing for promotion from the panchayat service to the

State service unless the Panchayat Service is also a service under the State. Again Sec. 203 (5) requires that rules may provide for inter. district transfers of servants belonging to the panchayat service and the circumstances in which and the conditions subject to which such transfers may be made. This provision along with the provisions of Sec. 203 which provide for the promotion and transfer of servants belonging to the district, taluqa and local cadres within the district taluqa and gram or nagar clearly show that the servants are not the servants of the individual panchayats but belong to a centralised service. Sec. 205 provides that appointments to posts in the Panchayat service shall be made (i) by direct recruitment, (ii) by promotion or (iii) by transfer of a member of the State service to the Panchayat service. This provision which enables an appointment to be

308 SUPREME COUllT REPORTS (1983] 2 s.c.11..

made to a post in the Panchayat Service by transfer of a member of the State service necessarily implies that the panchayat service is also a service under the State. Secs. 157 and 158 provide for the transfer of certain functions performed bY., the Government to Panchayat Institutions togetlier with funds and staff.

Sec. 325, as we have already seen, provides that secretaries, all officers and servants in the employ of old village panchayats shall be secretaries, officers and servants of the new gram panchayats. It is not disputed that Talaties and Kotwals, who were Government Servants, were the Secretaries and officers of old village panchayats. Now, Sec. 206 (1)

(i) provides for the allocation to the Panchayat service of such number of officers and servants out of the staff transferred to the panchayat under Sec. 157, 158 and 325, as the Government may deem fit. Sec. 206 (l) (iii) further provides for the allocation to the Panchayat service of such other officers and servants employed in the State service as may be necessary to enable the panchayats to discharge efficiently their functions and duties under the Act.

Obviously this transfer and allocation of members of State services to the Panchayat service under Sections 157, 158, 325, 206 (I) (i) and 206 (I) (iii) will be impermissible unless the Panchayat service is also a service under the State. Otherwise, there would be a patent violation of the provisions of Art. 311 of the Constitution. Sec. 206A authorises a review of allocation within a period of four years and reallocation to the State service of these transfers under Sections

157 and 158. The very idea that there can be an allocation to the Pancbayat Service from a State service and a reallocation from the Panchayat Service to the State Service is only consistent with the Panchayat Service also being a service nnder the State.

Considerable stress was laid by the Counsel for the State of Gujarat on the statement in Sec. 203 that such service (Panchayat Service) shall be distinct from the State service. We do not think this is to be interpreted :as a disclaimer by the Legislature that the Panchayat service is a service under the State. All that it can possibly mean is that the Panchayat service is not a service which can be identified with other State Services for the reason that while the Panchayat service too discharges the duties connected with the affairs of the State, it does so not directly under the State but under the various Panchayat Institutions to whom are delegated or transferred certain functions of the State Government. Panchayat Service is dfstinct from a State Service because the Panchayat institutions whom it serves together constitute an almost parallel but subsidiary Government. It is only in that sense Panchayat Service is distinct from a

-0''

GU!All.AT ··.RAMAN LAL (Chinnappa Reddy, J.) 309

State Service and not in the same that members of the service are A not servants of the State.

It is also argued that the several Panchayat Institutions are declared to be bodies corporate by the Act and, therefore; their servants cannot be Government servants. We are unable to see any force in the submission. Government servants do not cease to be Government servants merely because, for the time being, they are allotted to different Panchayat Institutions and are paid out of the funds of those institutions. We' have already explained why the servants belonging to the various cadres of the Panchayat service cannot be considered to be servants of individual pancbayats. It is nnnecessary to pursue the matter further.

We are, therefore, of the view that the Panchayat_ Service constituted nnder Sec. 203 of the Gujarat Pancbayats Act is a civil service of the State and that the members of the service are Government servants. This very ques.tion had been decided by the High D Court of Gujarat more than 15 years back in G.L. Shukla and Anr .

v. The State of Gujarat(') and there appears no good reason to depart from the view then taken by the High Court. Bbagl\'ati

J., who spoke for the Court bad said, "The Pancbayat Service contemplated under the Act is as much a civil service of the

State as the State Service.

The legislature by enacting the Act E provided for the establishment of the Pancha yat Organisation of the. State and !for the 'efficient administration of the Panchayat Organisation, particularly in view of the fact that a large part of the service personnel would be drawn from different sources and would, therefore, be heterogeneous in composition with widely differing scales of pay and conditions of service, the Legislature felt F that it would be desirable to have a separate civil service of persons employed in the discharge of functions and duties of panchayats with uniform scales of pay and uniform conditions of service and, therefore, with that end in view the Legislature provided for constitution of the _panchayat service.

All the provisions of the Act relating to the panchayat service point unmistakably and inevitably G to one and only one conclusion, namely, that the panchayat service is one single service with the State as the master. The panchayat service is to be constituted by the State Government and its strength is also to be determined by the State Government. Sec. 203 sub

sec. (2) says that the panchayat service shall consist of such classes, H

(I) 8 G.L. R. 833.

. y-- --·

310 SUPB.llMIB COURT aEPORTS [ 1983] 2 s.c.a.

cadres and posts and the initial strength of officers and servants in each such class and cadre shall be such as the State Government may be order from time to time determine ................................ . . . . . . . ... . . . . . . . . . . .. . . . . .. . " ........................................................... . "The provisions of different cadres in the panchayat service and the transferability of persons employed in the panchayat service from a post in the district cadre to a post in any taluka in the district and from a post in the taluka cadre to a post in any taluka in the district and from a post in the taluka cadre to a post in any gram or nagar in the same taluka emphasize that the panchayat service is one single service with one master, namely, the State and each panchayat is not the master of the servant employed in the discharge of its functions and duties. It is difficult to imagine that the Legislature should have provided for transfer of servants from one master to another ............................................................................ . ... ...... ... ... ... ······ ······ ... ······ .................................... ·····~··· ..... . "The mode of recruitment, the conditions of service and matters relating to appointments, transfers and promotions of persons employed in the panchayat service as also disciplinary action against them are all determined by the State Government and that is con- sistcnt only with the State being the master in the entire panchayat service. The mandatory provision for promotion from panchayat service to State service which is required to be made in the rules also shows that both the services are services of the State. There could be no question of promotion from one service to another if the masters in the two services were different. Then it would be a case of termination of one s.ervice and appointment to another ...... . ... ... ... ... .. ... ... ...... ········· ......... ······ .................................... . "Then comes Sec. 206 which provides for making of an order of allocation to the panchayat service .......................................... .

"This provision relating to allocation of officers and servants under clauses (i) and (iii) does not contemplate any termination of service of such officers and servants or any fresh appointment to a new service. There is no concept of termination of the existing service and reappointment to a new service involved in the process of allocation: the concept is only of transfer from one service of the State to another without any break in the continuity of service and that clearly postulates that both services are under the same master, namely, the State. Sec. 206A also reinforces this conclusion. It makes the initial allocation provisional and permits the State to

GUJA!l.AT v. RAMAN LAL (Chinnappa Reddy, J.j 311

review the allocation within a period of four years from 1st April, 1963 ................................................................................... . "It is not possible to believe that the officer or servant could have been intended by the Legislature to be treated like a chattel which can be tossed about from one master to another. The only reasonable way of looking at the matter seems "to be and that conclusion is inevitable on the language of these provisions, that the panchayat service is a civil service of State like 'the State service and since both

Ille services are civil services o°fthe State with the State as the master an officer or servant can be allocated from the State service to the panchayat service and re-allocated from the panchayat service to the State '.service ............................................................... .

"The conclusion which emerges from this discussion is that the panchayat service is a distinct and separate service set up for serving the Panchayat Organisation of the State and it is as much a civil service of the State as the State service .. The State can have many services such as State Service, police service, engineering service etc. and panchayat service is one of them. In the panchayat service, as in the State service, the State is the master and every officer or servant employed in the panchayat service is the servant of the State and not of the panchayat under which he may b: serving for the time

being. The panchayat service is one single service with the State as the master."

~ E

' _!._

We entirely agree with the above observations of the learned Judge;

It was argued that the High Court was wrong in issuing directions for equation of posts, revision of pay scales and payment of salaries. We do not think that the High Court committed any error in issuing the directions which were consequential to its findings. The High Court had directed the State Government to discharge its statutory duty to make orders for the equation of posts and to extend the benefits arising out of the reports of the two Pay Commissions, which benefits had been denied to"the local cadre only.

The obligation to make provision for the payment of salaries, allowances and other benefits to Government servants did not cease by their being allocated to Panchayat Institutions, notwithstanding that Sec. 204 places an obligation on the Panchayat under whom an officer or servant of the Panchayat service may service for the time being to meet the expenditure towards the pay, allowances and benefits availab_le to such officer or servant. We do not have any doubt that the case was correctly decided by the High Court and

.._.----· ----...-.

SUPREME COURT REPORTS [1983] 2 s.c.R.

that the appeal deserves to be dismissed with costs which we quantify at Rs. 15,000.

We then come to the Writ Petitions.

As mentioned by us earlier, the Gujilrat Panchayats Act was amended during the pendency of the appeal in an effort to nullify the effect of the judgment of the Gujarat High Court.

First, the Government promulgated an ordinance and next the legislature enacted the Amending Act.

Sec. 1 of the Amending Act stipulates the dates from which C the various amending provisions must be deemed to have come into force.

We shall refer to the dates from which some of the provisions are deemed to have come into force when we refer to those provisions.

By Sec. 2 of the Amending Act, original Sec. 11 (t) which declared that the Gram panchayats, Taluqa panchayats, District panchayats, Gram . sabhas, Nagar Panchayats and Conciliation Panchas shall constitute the Panchayat organisation of the State of Gujarat was omitted and original Sec. 11 (2) which provided for the control of the State Government over panchayats directly or through their officers was made Sec. 11. It is extremely difficult to understand the omission of old Sec. 11 (I). The whole object of the Gujarat Panchayats Act is "democratic decentralisation of power and the consequent reorganisation of the administration of Local Government''. The object is to decentralise and reorganise.

So it was thought that Gram Panchayats, Nagar Panchayats, Taluqa Panchayats, District Panchayats, etc. should constitute the panchayat organisation of the State of Gujarat. The object of the Act is still the same, yet s. 11(1) has been omitted. Does it mean that there is a disbandment of organisation ? According to the Statement of Objects and Reasons, the amendments were necessitated to get over the judgment of the Gujarat High Court that the Panchayat Service is a State Service. But surely that can't be a reason to go against the object of the Principal Act and to abandon the constitution of a State Panchayat Organisation. No wonder it was described as an act of cutting the nose to spite the face. We may mention here that s. 2 is deemed to have come into force on February 24, 1962, the date on which the origina s. 11 came into force.

-- --r -

GUJARAT v. RAMAN LAL. (Chinnappa Reddy, J.) 313

Sec. 3 of the Amending Act introduced substantial changes in i;. 102. While the provision that there shall be a Secretary for every Gram panchayat and Nagar panchayat, who shall be _ appointed in accordance with the rules, was retained, a proviso was added in the following terms : "Provided that where on account of conversion of municipality into a Gram panchayat or a Nagar panchayat under. s. 307, an officer of a municipality becomes a Secretary of such panchayat or where any person not .being a Talaticum-Panchayat Secretary is appointed as a Secretary to such panchayat, such Secretary shall not be governed by the rules so made and the rules for regulating recruitment and conditions of service of such Secretary shall be such as the Panchayat may, subject to general or special order of the State Government, by its resolution

determine" .. The provision in the original s. 102 (I) (b) which en!lbled the Gram panchayat or Nagar panchayat to have such other servants as may be determined under s. 203 and which provi ded that such servant shall be appointed by such authority and their conditions of service shall be such as may be prescribed was omitted and in its place a new s. 102 (I} (b) was substituted enabling the Gram panchayat itself to appoint such servants as may be necessary for the proper exercise of its powers, discharge of duties and performance of functions and further providing that the rules for regulating recruitment and conditions of service of such servants shall be made by the Panchayat itself. An explanation was added to say that the expression 'servants' included a Secretary referred to in the proviso to cl. (a). A further cl. ( c) was introduced after els. (a) and (b) of s_. 102 (I) and it is as follows : "Notwilhstanding any thing contained in any judgment, decree or order of any court, - (i) the officers and servants of a Gram Panchyat, as the case may be, of a Nagar Panchayat shall. be and shall be deemed to have always been the officers and servants of such Gram Panchayat or Nagar Panchayat; (ii) the expenditure towards the pay and allowances of, and other benefits available to, a servant of the Gram Panchayat

or, as the case may be, Nagar Panchayat, shall be met by that Panchayat from its own fund".

The mischief of the new proviso to s. 102 (I) (a) is manifest.

Amongst persons to be appointed as Secretaries of Gram and Nagar Panchayats, persons who were previously Talati-cumPanchayat Secretaries were to be appointed as Secretaries in accordance with the rules, but the rules were not to apply to officers of municipalities, who became Secretaries of Panchayats consequent on conversion

314 SUPREME OOURT REPOltTS [1983] s.c.R.

of municipalities into Gram and Nagar Panchayats under s. 307. The conditions of service of the latter category were to be regulated by the panchayat itself, by resolution, and not by any rules made by the Government as in the case of the others. Other servants of Gram and Nagar Panchayats were also to be appointed by the Panchayats and their conditions of service were also to be regulated by the Gram and Nagar Panchayats.

Notwithstanding any judgment of the court, the officers and servants of Gram and Na.gar Panchayats were to be deemed to have always been officers and servants of such Nagar and Gram Panchayats. The amended s. 102 (I) was to be given retrospective effect from February 24, 1962. In other words, the non-Talati Secretaries and other officers and servants of the Gram and Nagar Panchayats were to be deemed to be servants of the Gram and Nagar Panchayats, notwithstanding the judgments of the courts which had declared them to. be Government servants.

D By Sec. 4 of the Amending Act a proviso was added to

s. 157 (3) of the Principal Act barring the District Panchayat from transferring its staff to a Gram or Nagar Panchayat consequent on the delegation of functions, powers and duties to a Gram or a Nagar Panchayat.

By sec. 6 of the Amending Act, s. 203 of the Principal Act was substantially amended. While s. 203 (I) of the Principal Act, as it stood originally, provided for the constitution of a Panchayat Service for the purpose of bringing about uniform scales of pay and uniform conditions. of service for persons employed in the discharge of functions and duties of panchayats and declared that such service shall be distinct from the State Service, the new sub-sec. (I) introduced by cl. (I) of s. 6 of the Amending Act, is as follows : "(I) In order to enable taluka panchayats and district panchayats to exercise their powers, discharge their duties and perform their functions effectively and efficiently, there shall be constituted a Panchayat Service consisting of persons employed in connection with the affairs of taluka panchayats and district panchayats and of specified servants, and notwithstanding anything contained in any judgment, decree or order of any court s.uch persons and servants shall be and shall be deemed to have always been the officers and servants of the taluka panchayats or, as the case may be, the district panchayats.

GUJARAT v. RAMAN LAN (Chinnappa Reddy, J.) 315

Explanation-In this sub-sec., the expression "specified servants" means-

(a) talatis-cum-Panchayat secretaries discharging the functions of gram panchayat_s or of nagar panchayats, and

Jb) kotwals."

Sec. 203 (2A) was amended by omitting reference to local cadres.

Old Sec. 203 (4) (a) which obliged the making of a rule containing a provision entitling servants of such cadres in the panchayat service to promotion to such cadres in the State service as may be prescribed was omitted and in its place a new cl. (a) was substituted by cl. (4) of s. 6 of the Amending Act and it is as follows :-

"(a) A provision entitling persons holding such class of posts D in the district cadre to be recruited to such cadre in the State service as .may be prescribed.''

The opening clause of the new s. 203 is extremely curious.

It gives the reason for constituting the new Panchaya t Service of the Amending Act. The reason, it appears, is to enable taluka panchayats and district. panchayats to exercise their powers, discharge their duties and perform their functions effectively and efficiently.

But then what about the Gram and Nagar Panchayats which are at the very foundations of the whole idea of democratic decentralisation of powers in favour of panchayat institutions ?

The entire Panchayat superstructure has to stand on the base of Gram and Nagar Panchayats and obviously there can be no vigorous and strong Local Self-Government institutions without

efficient and effective Gram and Nagar Pancbayats. It is, therefore, difficult to discover the logic behind excluding Gram and Nagar Panchayats from the benefits of a centralised, effective and efficient

sel'Vice.

The vice of the new provmon is again obvious. Local cadre is made to _appear to be excluded from the Pancbayat Service, but

not truly so. In the guise of 'specified servants' are brought in, l:l as if by the back door, talatis-cum-Panchayat Secretaries functionjn~ in Gram or Nagar pancbayatsand Kotwals; What is done iq

SUPREME: COURT REPORT~

(1983) 2 S.C.R.

truth is that employees of gram or nagar panchayats, other than Talatis-cum-Panchayat Secretaries and Kotwals alone, and this primarily means, the ex-Municipal employees are excluded from the Panchayat Service and the judgment of the court that they form part of a centralised State Service, is sought. to be nullified, by giving effect to els. (!) and (4) of s. 6 of the Amending Act from February 24, 1962.

By s. 8 of the Amending Act, s. 209 (I) (i) was amended by substituting the figures and word '157 and 158' for the figures and word '157, 158 and 325'. In Sec. 206 (1) (la), the clause 'All officers and servants of municipalities dissolved under s. 307' was substituted by the clause "all persons who have under cl. (x) of S. 325 become the secretarie11 of new gram panchayats and kotwals".

In the rest of S. 206 wherever the words 'the panchayats' were used, the words 'the district and .taluqa panchayats' were substituted.

The real effect of S. 8 of the Amending Act is to take out "all officers and servants of the municipalities dissolved under S. 307" from the applicability of S. 206 though S. 206 is made otherwise applicable to all other categories of officers and servants allotted to a panchayat.

By S. 10 of the Amending Act, two new sections S. 206 (AB) and S. 206 (AC) are introduced, the object of which is really to give options to those offic:ers and servants who are a.llotted or transferred to panchayats, under the various provisions of the Act.

These provisions are obviously introduced to defeat an argument that allotment and transfer of Government servants to a non-

Government service is violi.tive of Art. 311.

By Sec, 14 of the Amending Act, a new Sec. 21 l(A) is introduced the effect of which is that the allocation of officers and servants of erstwhile municipalities and officers and servants of old village panchayats was to cease and those officers and servants were to be deemed to have always been officers and servants of the gram and nagar panchayats. It wa:< as if these officers and servants never had to be allocated by any order of the Government, but they had automatically became officers and servants of the new gram pancbayats.

There was no question of any option. They could take it or leave it. They were not to be treated as having been Govern·

ment servants at any time.

. l

GUJARAT v. RAMAN LAL_ .(Chlnnappa Reddy, J.) 317

Other provisions of the Amending Act were merely consequential to the confining of the Panchayat Services to district or taluqa cadres.

From the summary of the prov1S1ons of the 'Amending Act that has been set out above it require$ no perception to recognise the principal. target ot the ainending legislation as the category of ex-municipal employees', who are, so to say, pushed out of the Panchayat Service and are to be denied the status of Government servants and the consequential benefits. The ex-municipal employees are virtually the "poor relations", the castle, the Panchayat Service, is not for them nor the attendant advantages, privileges and perquisites, which are all for the "pedigree descendants" only. For them, only the out-houses. As a result of the amendments they cease to be Government servants with retrospective effect. Their earlier allocation to the Panchayat Service is cancelled with retrospective effect. They become servants of Gram and Nagar Panchayats with retrospective effect. They are treated differently from those working in taluqa and district panchayats as well as from the talatis and Kotwals working in Gram and Nagar Panchayats. Their condJtions of service are to be prescribed by panchayats, by resolution, whereas the conditions of service of others.are to be prescribed by the Government. Their promotional prospects are completely wiped out and all advantages which they would derive as a result of the judgments of the courts are taken away .

Several grounds were urged before us to attack the constitutional validity of the Amending Act.

It was said that the provisions of the Act were violative of Art. 311. It was said that the Act was discriminatory.

It was urged that the retrospectivity given to the provisions of the Amending Act could not cure the discrimination introduced by tho Act and sought to be perpetuated by it. In any case it was said that the benefits acquired could not be taken away with retrospective effect. On the other hand, it was argued that there_ was good reason for the classification and that in the circumstances of the case, the classification was legitimately made with retrospective effect.

It is here necessary to recapitulate a few facts. When the

l'ncharat Service was initiallr constituted soon after the passin8 of

...

SUPREME COURT REPORTS [1983] 2 s.c.R.

the Cujarat Panchayats Act, there were three cadres, the district cadre, the taluqa cadre and the local cadre. Secretaries, officers and servants of the old village panchayats under the Bombay Village Panchayats Act, 1958 became Secretaries, Officers and servants of the new Gram Panchayats under s. 325 (2)(x) of the Gujarat Panchayats Act, 1961. Talatis and Kotwals, who were Government servants were Secretaries and officers of the old village panchayats under the Bom_bay Village Panchayats Act and so they-became secretaries and officers of the new gram pancbayats under the Gujarat Panchayats Act, 1961. Some municipalities constituted for municipal districts , and municipal boroughs under the Bombay District Municipal Act and the Bombay Municipal Boroughs Act as applied to areas in the

State of Gujarat, were converted into gram and nagar panchayats under s. 307 of the Gujarat Panchayats Act and all officers and servants in the employ of su1; h municipalities became officers and servants of interim panchayats and allocated to the Panchayat Service. Thus, Secretaries and Officers of dissolved municipalities also became Secretaries and officers of gram and nagar panchayats.

District Local Boards constituted under the Bombay Local Boards Act stood dissolved on the passing of the Gujarat Panchayats Act and all officers and servants in the employment of the Board were deemed to be transferred to the service of the successor district panchayat under s. 326 of tbe Gujarat Panchayats Act. Also allocated to the Panchayat . Service were those Government servants who were transferred to the Panchayats under s. 157 and such others officers and servants employed in the State Service as were necessary (s. 206 (iii)).

All these Secretaries, officers and servants became members of a service under the State as soon as they were allocated the Panchayat Service.

Now, by the Amending Act, secretaries, officers and servants of Gram and Nagar Panchayats who were

allocated to the Panchayat service from the ranks of the ex-municipal employees are sought to be meted out differential treatment from the other members of the Panchayat Service, more particularly the Secretaries, officers and ser•1ants of Gram and Nagar Panchayats who were arawn from the ranks of secretaries, officers and servants of old village panchayats, that is the Talatis and Kotwals Their status as members of a senice under the State .is to go with no option to them. Retrospectivity is sought to be given to the amending act so that they could not claim that they were ever Government servants and so co'Jld not be made to cease to be Government servants and so that they could not claim thatthey were singled out for differential treatment, for, _if they were never in the Panchayat

- -

GUJARAT v. RAMAN LAL (Chinnappa Reddy, J.) 319

Serv_ice, they could not complain of being taken out of the Panchayat Service.

Now, in 1978 before the Amending Act was passed, thanks to the provisions of the Principal Act of. 1961, the ex-municipal employees who had been allocated to the Pancbayat Service as Secretaries, Officers and servants of Gram and Nagar Panchayats, bad achieved the status of government servants. Their status as Govern ment servants could not be extinguished, so long as the posts were not abolished and their services were not terminated in accordance with the provisions of Art. 311 of the Constitution. Nor was it permissible to single them out for differential treatment. That would offend Art. 14 of the Constitution. An attempt was made to justify the purported differentiation on the basis of history and ancestry, as it were. It was said that Talatis and Kotwals who became Secretaries, officers and servants, of Gram and Nagar Panchayats were Government servants, even to start with, while municipal employees who became such secretaries, officers and servants of Gram and Nagar Pancbayats were not. Each carried the mark or the 'brand' of bis. origin and a classification on the basis of the source from which they came into the service, it was claimed, was permissible. We are clear that it is not. Once they had joined the common stream of service to perform the same duties, it is clearly not permissible to make any classification on the basis of their origin. Such a clarification would be unreasonable aud entirely irrelevant to the object sought to be achieved. It is to navigate around these two obstacles of Art. 311 and Art. 14 that the Amending Act is sought to be made restrospective, Id bring about an artificial situation as if the erstwhile municipal employees never became members of a service under the State.

Can a law be made to be destroy today's accured constitutional rights by artificially reverting to a situation which existed seventeen years ago? No.

The legislation is pure and simple, self-deceptive, if we may use such an expression with reference to a legislature-made law. The legislature is undoubtedly competent to legislate with retrospective effect to take away or impair any vested rightacquired under existing laws but since the laws are made under a written Constitution, and have to conform to the do's and don'ts of the Constitution neither prospective nor retrospective laws r.an be made so as to contravene Fundamental Rights. The law must satisfy the require ments of the Constit11tion today ta1'ing into account" the accrued of

320 SUPllME COURT RBPOITS

(1983] 2 S, C, R

acquired rights of the parties today.

The law cannot say, twenty years ago the parties had no rights, therefore, the requirements of the Constitution will be satisfied if the law is dated back by twenty years. We are concerned with today's rights and not yesterday's.

A legislature cannot legislate today with reference to a situation that obtained twenty years ago and ignore the march of events and the constitutional rights accrued in the course of the twenty years.

That would be most arbitrary, unreasonable and a negation of history. It was pointed out by a Constitution Bench of this Court in BS. Yadav and Others etc .. v. State of Haryana and Others etc.(1) Chandrachud CJ., speaking for the Court, "Since the Governor exercises the legislative power under the proviso to Art. 309 of the Constitution, it is open to him to give retrospective operation to the rules made under that provision. But the date from which the rules

are made to operate, must be shown to bear either from the face of the rules or by extrinsic evidence, easonable nexus with the provisions contained in the rules, especially when the retrospective effect extends over a long period as in this case". Today's equals cannot be made unequal by saying that they were unequal twenty years ago and we will restore that position by making a law today and making it retrospective. Constitutional rights, constitutional obligations and constitutional consequences cannot be tempered with that way.

A law which if made today would be plainly invalid as offending constitutional provisions in the context of the existing situation cannot become valid by being made restrospective. Past virtue (constitutional) cannot be made to wipe out present vice (constitutional) by making retrospective laws. We are, therefore, firmly of the view that the Gujarat Panchayats (Third Amendment) Act, 1978 is unconstitutional, as it offends Arts. 311 and 14 and is arbitrary and unreasonable. We have considered the question whether any provision of the Gujarat Panchayats (Third Amendment) Act, 1978 might be salvaged. We are afraid that the provisions are so interwined with one another that it is well-nigh impossible to consider any life saving surgery. The whole of the Third Amendment Act must go.

In the result the Writ Petition Nos 4266-70 are allowed with costs quantified at Rs. 15,0CO. The directions given by the High Conrt, which we have confirmed, should be complied with before June 30,

1983. In the meanwhile, the employees of the Panchayats covered by the appeal and th~ Writ Petitions will receive a sum of Rs. 200

(!);. [1981) I S.C.R. 1024 •.

GU1ARAT v. RAMAN LAL (Chinnappa Reddy, J.) 321

per month over and above the emoluments they were receiving before February 1, 1978. This order will be effective from February 1, 1983 The interim order made on February 20, 1978 will be effective upto January 31, 1983. The amounts paid are to be adjusted later.

P.B.R.

Appeal dismissed.

Petitions allowed.