[2009) 7 S.C.R. 118

R.R. PILLAI (DEAD) THROUGH LRS.

COMMANDING OFFICER HQ S.A.C. (U) AND ORS.

Civil Appeal No. 3495 of 2005

APRIL 28, 2009

(DR. ARIJIT PASAYAT, P. SATHASIVAM AND AFTAB

ALAM, JJ.)

Service Law: c Rules regulating the Terms and Conditions of Service of Civilian Employees of Air Force Unit Run Canteen paid out of non public funds:

Rules 2, 4 and 24 - Status of an employee of Unit Run Cf; mteen in Aimed Forces - Held: They do not get the status D of Government employees at any stage - On the peculiar facts of the case direction issued for payment of Rs.2 lakhs to the family of the deceased employee - Regulations for the Air Force, 1964, para 1454.

E A reference was made to the three-Judge Bench as regards the correctness of the decision in Union of India vs. Mohd. Aslam [2001 (1) SCC 720].

Disposing of the appeals, the Court

HELD : 1. In As/am's case a Bench of this court F proceeded on incorrect factual premises inasmuch as after noticing that the URCs are not funded from the Consolidated Fund of India, it went wrong in concluding that the URCs are funded by CSD as well as the articles were supplied by the CSD. Unfortunately, it did not notice G that no such funding is made by the CSD. Further, only

refundable loans can be granted by the CSD to URCs at the rate of interest laid down by it from time to time upon ..

the application of URCs seeking financial assistance.

URCs can also take from other Non-Public Funds. Further

H 118

observation regarding supply is also not correct. URCs, A in fact, purchase articles from CSD depots and it is not an automatic supply and relation between URCs and CSDs is that of buyer and seller and not of principal and the agent. This Court further went wrong in holding that URCs are parts of CSDs when it has been clearly stated B that URCs are purely private ventures and their employees are by no stretch of imagination employees of the Government or CSD. [Para 8] [123-G-H; 124-A-B]

1.2 There was no statutory obligation on the part of the Central Government to provide canteen services to c - its employees. The profits generated from the URCs are -< not credited to the Consolidated Funds, but are distributed to the Non Public Funds which. are used by the units for the welfare of the troops. As per para 1454 of

-; the Regulations for the Air Force, 1964 the losses incurred D by the non public funds are not to be borne by the State. [Para 8] [124-C-D]

Union of India v. Mohd. Aslam 2001 (1) SCC 720affirmed.

Union of India and Anr v. Chote Lal 1999 (1) SCC 554 - E dissented from.

Kona Prabhakara Rao v. M. Seshagiri Rao and Anr 1982 ..

(1) SCC 442; Satrucharla Chandrasekhar Raju v. Vyricherla JI Pradeep Kumar Dev and Anr 1992 (4) SCC 404 and Chandra Raha and Ors. V Life Insurance Corporation of India 1995 F

Supp (2) SCC 611 - referred to.

1.3 The factors highlighted to distinguish Chotelal's case are without any material. There was no scope for - making any distinction factually between Aslam's case G -- and Chotelelal's case, Aslam's case was not correctly • decided. [Para 9] [124-E]

2. The question whether the URC can be treated as an instrumentality of the State does not fall for consideration as that aspect has not been considered by CAT H

A or the High Court. Apparently, on that score alone the appeal could have been dismissed. But it is found that the High Court placed reliance on Rule 24 to deny the effect of the appointment. From Rule 4 read with Rule 2 it is clear classification that all employees are first on probation and B they shall be treated as temporary employees. After completion of five years they might be declared as permanent employees. They do not get the status of the Government employees at any stage. In As/am's case CAT's order was passed in 1995. By that time 1999 Rules

c were not in existence and 1984 rules were operative.

[Para 10] [124-F-H; 125-A]

Union of India vs. Mohd. Aslam 2001 (1) SCC 720 - referred to. -

3. It is to be noted that financial assistance is given, but interest and penal interest are charged. The URCs can ' also borrow from financial institutions. The reference is answered by holding that employees of URCs are not government servants. [Para 11) [125-A-B] - E

4. Present appellant had questioned validity of Rule

24. High Court should have considered that challenge in the proper perspective. But it is not necessary to examine that question as the employee has already expired. But, in the peculiar facts of the case we direct that a sum of F Rs.2 lakhs be paid to his legal representatives within a ...

period of three months in full and final settlement of all his claims. [Para 12) [125-C-D]

Delhi Transport Corporation v. D. TC. Mazdoor Congress and others AIR 1991 SC 101 - referred to.

G .....

Case Law Reference --.,....__

2001 (1) sec 120 affirmed Para 1 • 1982 (1) sec 442 referred to Para 5

H 1992 (4) sec 404 referred to Para 5

1999 (1) sec 554 dissented from Para 6

1995 Supp (2) SCC 611 referred to Para 8

Para 12

AIR 1991 SC 101 referred to

CIVILAPPELLATE JURISDICTION: Civil Appeal No. 3495 B of 2005

From the Judgement and Order dated 23.01.2003 of the Hon'ble High Court of Kerala at Ernakulam in O.P. No. 34353 of 2002 (S)

WITH

Civil Appeals Nos. 3557 of 2005

Civil Appeals Nos. 3559 of 2005

Civil Appeals Nos. 3560 of 2005

Civil Appeals Nos. 3561 of 2005

P.P. Rao, Arvind Kumar Shukla, Purushottam S.T., Sahar Bakht, Utsav Sindhu, M.P. Vinod, R.D. Upadhayay, with him for the Appellant( s).

A. Saran, A.S.G., AmitAnand Tiwari, Sanchit Guru, Shalini Kumar, B.V. Balaram Das, Sushma Suri, B.K. Prasad, Sumant Bhardwaj, Mridula Roy Bharadwaj, with him for the Respondent(s).

The Judgement of the Court was delivered by

DR. ARIJIT PASAYAT, J.

1. Doubting correctness of the view of this Court in Union of India v. Mohd. Aslam (2001 (1) SCC 720) reference has been made to a three-Judge Bench and that is how these appeals are before this Bench. The controversy lies within a very narrow compass.

2. The issue is as to the status of an employee of Unit Run Canteen in Armed Forces. While admitting Civil Appeal H

A No.3495/2005 the matter was referred to a larger Bench as noted above and other cases were tagged with Civil Appeal No.3495 of 2005. We shall deal with the factual scenario in Civil Appeal No.3495 of 2005 and after deciding the legal issues involved, apply the decision to the other appeals.

3. Appellant Shri R.R. Pillai was recruited as Airman in the Indian Air force on 7.10.1967 and was discharged from service on 31.10.1988 as Junior Warrant Officer as he sought for premature retirement from service. Before his discharge he had been looking after the affairs of the Unit-Run-Canteen (in short C the 'URC'). After discharge he was engaged as Manager of

URC at Southern Air Command on an honorarium of Rs.1,000/ -P.M. w.e.f 1.2.1989. Para 6 of the appointment letter clearly stated that the appointment was governed by the terms and conditions as laid down in Air HQ letter No.20728/P/Org dated D 31st Janua1y, 1984 issued under the relevant Regulations. The terms and conditions of service of canteen employees are covered by the rules called "The Rules regulating the Terms and Conditions of Service of' Civilian Employees of Air Force Unit Run Canteen paid out of Non Public Funds".

4. According to the appellant the view taken in Mohd Aslam's case (supra) is the correct view, it is stated that even if Canteen Store Department (in short the 'CSD') was not the source of funding, other parameters clearly cover the employees in question of Government service.

5. Reference is made to certain decisions to support the stand, e.g., Kona Prabhakara Rao v. M. Seshagiri Rao and Anr. (1982 (1) SCC 442 (para 9) and Satruchar/a Chandrasekhar Raju v. Vyricherla Pradeep Kumar Dev and G Anr._(1992 (4) SCC 404 at 412). Even if full funding is not there

partial funding by quality discount is there which is the test for determining as to which employee is a government servant.

Reference is also made to certain subsequent decisions in which As/am's case (supra) has been referred to. It is pointed H out that on the date the OAs were decided, Aslam's case (supra)

was applicable and therefore de facto doctrine would apply. In A any event, it is stated that Rule 24 cannot take out the benefits in the manner done. The High Court had not considered the challenge to Rule 24. It is pointed out that the decision which has been given can only be re-considered for compelling reasons and the view taken in Aslam's case (supra) is a possible view.

B In any event, the appointing body is an instrumentality of State and, therefore, Articles 14 and 16 of the Constitution of India, 1950 (in short the 'Constitution') are applicable. With reference to Section 23 of the Indian Contract Act, 1923 (in short the 'Contract Act') it is stated that Section 23 of the Contract Act c clearly prohibits the appointments in the manner done.

6. Learned counsel for the Union on the other hand submitted that Aslam's case (supra) proceeded on erroneous factual basis. It proceeded on the basis as if the canteen or the establishment in question was funded by the CSD. The issue is D not whether it is an instrumentality of the State. Issue is whether the concerned employees are government employees. It is • submitted that Union of India and Anr. v. Chote Lal (1999 (1) sec 554) clearly applies to the facts of the case.

7. It is submitted that unit run canteen is amenable to Shops E

and Commercial Establishments Statutes because tl:le appointment cannot be made dehors the Rules. There is no

~ prescribed qualification or age limit. Similarly there is no grade or cadre. Therefore, it cannot be said that the concerned employees are holders of civil posts.

8. In the case of Asia m's case (supra) a Bench of this court proceeded on incorrect factual premises inasmuch as after '

noticing that the URCs are not funded from the Consolidated ..

Fund of India, it went wrong in concluding that the URCs are . funded by CSD as well as the articles were supplied by the G ..

CSD. Unfortunately, it did not notice that no such funding is made by the CSD. Further, only refundable loans can be granted by the CSD to URCs at the rate of interest laid down by it from

( . time to time upon the application of URCs seeking financial H y

A assistance. URCs can also take from other Non-Public Funds.

Further observation regarding supply is also not correct. UR Cs, in fact, purchase articles from CSD depots and it is not an automatic supply and relation between URCs and CSDs is that of buyer and seller and not of principal and the agent. This Court B further went wrong in holding that UR Cs are parts of CSDs when it has been clearly stated that URCs are purely private ventures and their employees are by no stretch of imagination employees of the Government or CSD. Additionally, in Asia m's case (supra) reference was made to Chandra Raha and Ors. V. Life C Insurance Corporation of India (1995 Supp (2) SCC 611). The Bench hearing the matter unfortunately did not notice that there was no statutory obligation on the part of the Central Government to provide canteen services to its employees. The profits generated from the URCs are not credited to the Consolidated D Funds, but are distributed to the Non Public Funds which are used by the units for the welfare of the troops. As per para 1454 of the Regulations for the Air Force, 1964 the losses incurred by the non public funds are not to be borne by the State.

9. The factors highlighted to distinguish Chotelal's case

(supra) in our considered opinion are without any material. There was no scope for making any distinction factually between Aslam's case (supra) and Chotelelal's case (supra). In our view, therefore, Aslam's case (supra) was not correctly decided.

10. The question whether the URC can be treated as an instrumentality of the State does not fall for consideration as that aspect has not been considered by CAT or the High Court.

Apparently, on that score alone we could have dismissed the appeal. But we find that the High Court placed reliance on Rule G 24 to deny the effect of the appointment. From Rule 4 read with

Rule 2 it is clear classification that all employees are first on probation and they shall be treated as temporary employees.

After completion of five years they might be declared as permanent employees. They do not get the status of the H Government employees at any stage. In Aslam's case (supra)

CAT's order was passed in 1995. By that time 1999 Rules were A not in existence and 1984 rules were operative.

11. It is to be noted that financial assistance is given, but interest and penal interest are charged. The URCs can also borrow from financial institutions. The reference is answered by holding that employees of URCs are not government B servants.

12. The High Court has come to an abrupt conclusion about validity of Rule 24, distinguishing the decision of this Court in Delhi Transport Corporation v. D. T. C. Mazdoor Congress and c others (AIR 1991 SC 101). Present appellant had questioned validity of Rule 24. High Court should have considered that challenge in the proper perspective. But it is not necessary to examine that question as the original employee R.R. Pillai has already expired. But, in the peculiar facts of .the case we direct D that a sum of Rs.2 lakhs be paid to his legal representatives within a period of three months in full and final settlement of all his claims.

13. The applications for intervention are dismissed.·

14. This order shall operate in respect of the appeal filed § by the deceased through his 1egal heirs and other appeals by the Union of India.

15. The appeals are disposed of accordingly.

G.N.

Appeals disposed of.