[2009] 7 S.C.R. 1084

SWARAN SINGH CHAND i - V.

PUNJAB STATE ELECTRICITY BOARD & ORS.

Civil Appeal No. 3298 of 2009

MAY 6, 2009

[S. B. SINHA AND DR. MUKUNDAKAM SHARMA, JJ]

Service Law - Compulsory retirement - Order of compulsory retirement when stigmatic in nature - Held: Is bad • ..; in law - On facts, order of compulsory retirement passed ... c against employee -A/legation that he lacked integrity was also unfit to be retained in service, are stigmatic in nature - Also, it is not a case where there had been steady decline in the

~ performance of employee - There was non-compliance of necessary directions in the circular laying down guidelines for D compulsory retirement, thus amounted to malice in law- Thus, order of compulsory retirement being illegal, is not sustainable

" and is set aside - Circular letter dated 14.08.1981.

The question which arose for consideration in this

E appeal is as to whether an order of compulsory retirement being a stigmatic one would be valid in law.

Allowing the appeal, the Court

HELD :1.1 An order of compulsory retirement inter

>' alia can be passed when the officer concerned is found F to be a dead wood. Although for the said purpose, the principles of natural justice are not required to be complied with and even adverse entries made in the confidential record including uncommunicated entries may be taken into consideration but the same should not G be passed in place of or in lieu of a disciplinary proceedings. If an order of compulsory retirement is stigmatic in ....

nature, the same would be bad in law. Furthermore when the State lays down the rule for taking any action against

H 1084

SWARAN SINGH CHAND V. PUt-JJAB STATE 1085

ELECTRICITY BOARD & ORS.

an employee which would cause civil or evil consequence, A it is imperative on its part to scrupulously follow the same. [Paras 8, 9 and 1 OJ [1092-A-D]

M.P State Co-op. Dairy Fedn. Ltd. & Anr. v. Rajnesh Kumar Jamindar & Ors. 2009(6) SCALE 16; H. V Nirmala v.

B Karnataka State Financial Corporation (2008) 7 SCC 639 - relied on.

Vitarelli v. Seaton 359 US 535 - referred to. " ... 1.2 The guidelines issued by the State are binding -; on it. Appellant had been compulsorily retired with effect c from 29.9.2003. Salary for three months from the said date was paid, i.e. upto December, 2003. His actual date of retirement was 31.10.2004. The impugned order, therefore, was passed although not strictly within a period of one year preceding the date of superannuation but near about D .. the same. Thus, spirit of clause (ii) of the guidelines issued " by order dated 14.08.1981 should have also been taken into consideration. So far as clause (iii) of the said guidelines is concerned, there is a change of post as he had been promoted to a higher post in 2001. As he had E been promoted despite recording of the adverse remarks, the said fact also should have been taken into consideration. If adverse report on integrity relates to a distant

A past or more than ten years old, yet again it should not have been considered. [Para 11) [1092-G-H; 1093-A-B] F

Baikuntha Nath Das and Anr. v. Chief District Medical Officer, Baripada and Anr. (1992) 2 SCC 299 - referred to.

1.3 An order of compulsory retirement would be held to be stigmatic inter alia, in the event the employer has G lost confidence or has concealed his earlier record. He .... 'I can, however, be subjected to compulsory retirement inter alia if he has outlived his utility.[Para 13) [1093-F-G)

Chandu Lal v. Management of Mis. Pan American World Airways Inc. (1985) 2 SCC 727; Jagdish Parsad v Sachiv, Zila H


A Ganna Committee, Muzaffarnagar and Another (1986) 2 SCC

338; State of Uttar Pradesh v. Madan Mohan Nagar AIR 1967 r SC 1260 - relied on.

Baikuntha Nath Das and Another v. Chief District Medical Officer, Bari pad a and Another ( 1992) 2 SCC 299; Allahabad B Bank Officers' Association and Anr. v. Allahabad Bank and Ors.

(1996) 4 SCC 504; State of Gujarat v. Umedbhai M. Patel

(2001) 3 SCC 314; Jaswantsingh Pratapsingh Jadeja v. Rajkot Municipal Corporation and Anr.(2007) 10 SCC 71 - referred to. c 1.4 Allegation against the delinquent was not only that he lacked integrity but also unfit to be retained in

~ • ., rvice. Those comments are stigmatic in nature. It is also not a case where there had been a steady decline in the

0 perfonnance of the employee. [Para 16] (1096-C-D]

Purushottam Kumar Jha v. State of Jharkhand and Ors.

(2006) 9 sec 458 - referred to.

1.5 In a case of this nature, the appellant has not alleged malice of fact. The requirements to comply with E the directions contained in the said circular letter dated 14.08.1981 were necessary to be complied with in a case of this nature. Non-compliance whereof would amount to malice in law. Thus, when an order suffers from malice in law, neither any averment as such is required to be made F nor strict proof thereof is insisted upon. Such an order being illegal would be wholly unsustainable. The impugned order is set aside. [Paras 18, 19 and 20] [1097-B-E]

Manager, Government Branch Press and Anr. v. D.B.

G Bel/iappa (1979) 1 SCC 477; Smt. S.R. Venkataraman v.

Union of India and Anr. (1979) 2 SCC 491; P Mohanan Pillai

v. State of Kera/a and Ors. (2007) 9 sec 497 - relied on. ,,..

Case Law Reference

2009(6) SCALE 16 Relied on.

Para 8

' -

SWARAN SINGH CHAND V. PUNJAB STATE 1087

ELECTRICITY BOARD & ORS.

359 us 535 Referred to. Para 10 A

(2008) 7 sec 639 Relied on.

Para 10

(1992) 2 sec 299 Referred to.

Para 12 1

(1985) 2 sec 121 Relied on. 1 Para 13 B

(1986) 2 sec 338 Relied on.

Para 13

AIR 1967 SC 1260 Relied on.

Para 13

'I _..

(1996) 4 sec 504 Referred to.

Para13 "!"'

(2001) 3 sec 314 Referred to.

Para 14 c

(2007) 1 o sec 11 Referred to.

Para 15

...j•

(2006) 9 sec 458 Referred to.

Para 17

(1979) 1 sec 477 Relied on.

Para 18 D

cJ.

(1979) 2 sec 491 Relied on.

Para 18

(2007) 9 sec 497 Relied on.

Para 18

CIVILAPPELLATE JURISDICTION: Civil Appeal No. 3298 of 2009 E

From the Judgment and Order dated 17.08.2006 of the Hon'ble High Court of Punjab & Haryaa at Chandigarh in Civil

~·\.

Writ Petition No. 10549 of 2004

Nidesh Gupta, Tarun Gupta (for S. Janani), with him for the F Appellant(s).

Ajit Kumar (for S.K. Sabharwal), for the Respondent(s).

The Judgment of the Court was delivered by

S.B. SINHA, J .

G ..... ..,

1. Leave granted.

2. The core question, in this appeal, arising out of a juElgment and order dated 17.08.2006 passed by the High Court of Punjab and Haryana in CWP No. 10549 of 2.004, is as to H

A whether an order of compulsory retirement being a stigmatic one would be valid in law.

3. Appellant was directed to be compulsorily retired on attaining the age of 55 years in terms of a circular letter dated

14.08.1981 laying down guidelines for compulsory retirement, the relevant portion whereof reads as under:

"(i) Although the entire service record of an employee has to be considered, premature retirement should not be • ordered if during the last 5 years the work and conduct of ... c the employee has been good or better than that. ..

(ii) Ordinarily, no retirement should be ordered within a period of one year preceding the date of superannuation of the Governrnent employee. '\.-

(iii) If an adverse entry relating to integrity exists in the confidential reports during the 10 years preceding the review, or if after its recording there has been no change in the class, status or the post of the officer, that single entry should be considered sufficient for ordering

E premature retirement.

(iv) If the adverse report on integrity relates to the distant past or is more than 10 years old, the subsequent record of the employee should be scrutinized carefully. If the subsequent reports vouch-safe the integrity of the employee ~- F in unambiguous terms, the inference is that he has improved his conduct and it should not be necessary to order his premature retirement. A similar view can be taken if an employee has been promoted after the recording of the adverse remarks."

4. Admittedly, the said order of retirement dated 29.09.2003 was based on the aforementioned circular letter. It y

reads as under:

"Whereas Shri Swaran Singh Chand, UDC S/o Sh.

H Gurbachan Singh presently working in the office of Sr.Xen, .

, Focal Point Spl. Division, Ludhiana has attained the age A • of 55 years on 14.10.01 because his date of birth is 15- 10-1946.

Whereas as per PSEB Services (Premature Retirement) Regulations, the case of Shri Swarn Singh Chand UDC B was considered on 17.9.2003 by the High Empowered

Integrity Committee (HEIC) which has been set up to screen the cases of non-gazetted employees of Central Zone for retention in service beyond the age of 50/55 ., years. The Committee took note of ACRs, disciplinary f Cases, personal record and his reputation. c

Report of disciplinary cases of above noted employee (as derived from his personal file) is as under :- • CE/Op/Central Zone, Ludhiana stopped one increment without future effect vide this office order 81 dated 5.2.96 D in the case of charge sheet No.C-653 dated 30.5.95 issued to him for embezzlement of Board's Cash of Rs.3069/- from M/s Falcon Industry having A/C No.J537.

The assessment of ACRs of the above official was E scrutinized and observed that the following AC Rs are below average with adverse remarks:

(1) 28.10.93 to 31.3.94 below average integrity doubtful with adverse remarks of the following nature A i) Trust worthy Not Good F

ii) Habits Not Good

iii) Knowledge of work Not Good

iv) Knowledge of rules/Codes Less knowledge G

v) Relations with Co-employees and other Sections of the office and with Public Not Good

vi) Integrity Doubtful H

~- A vii) Overall Assessment Below Average

viii) Capable for next Promotion No r

(2) 1.4.94 to 20.10.94 Below Average with adverse of following nature :

B i) Control over subordinate employees No

ii) Relations with employees & Public No

iii) Knowledge of work No

r c iv) Capable of next Promotion No i - v) Not Good in Office Work

5. Appellant indisputably preferred an appeal thereagainst.

In the Memorandum of Appeal, he questioned the legality of the - D said order inter alia contending:

(i) Although a disciplinary proceeding for imposing major

penalty had been initiated, a minor punishment was imposed without holding a departmental proceeding.

E (ii) ACRs of the relevant period had been recorded within a period of 11 Yz months only for the purpose of upholding the chargesheet.

(iii) He, having been promoted to the post of Upper

Division Clerk by an office order No. 135 dated F 6.11.2001, the Appointing Authority could not have J.

taken into consideration his ACRs prior to the said period.

The said appeal was rejected by the appellate authority,

G stating:

"I have gone through the relevant record/ comments of field officers and it is found that there is no point in his 1- '. pleading that he was promoted as UDC recently. in 'll .promotion cases, different criteria are followed. In

H promotion,, s on seniority-cum-merit, incumbent is required

• to qualify only minimum bench marks on the basis of AC Rs A

of last 5 years and punishment awarded in disciplinary cases. In cases for extension in service, past 1 O years' record of the concerned employee is put to be screened by the HEIC constituted for the purpose. The appellant has mostly average record including his ACR for 28.10.93 B to 31.3.94 as Below Average with Integrity as 'Doubtful'.

Further his ACR for 1.4.94 to 20.10.94 was also below average. In the disciplinary case relating to embezzlement

~ of Rs.3069/-, his one AG I without future effect, was stopped. f

Therefore, the decision of the competent authority is found c to be based on facts and record and there is no justification to intervene in the recommendations made by HEIC of

..:.-.._ Central Zone, with regard to his extension in service being not approved on the basis of which, the competent authority, viz CE/Op. (Central), Ludhiana has ordered his premature D retirement.

Appeal rejected."

6. Indisputably, therefore, not only a minor punishment inflicted on him had been taken into consideration while passing E the impugned order, but it was also based inter alia on the premise that his integrity was doubtful.

7. Before the High Court, appellant had inter alia raised a

-·~

contention that the appellate authority had not taken into consideration the contentions raised by him before it. By reason F of the impugned judgment, a Division Bench dismissed the said writ petition opining that the action taken by the respondents could not be held to be unconscionable, stating:

"An employee who reaches the age of 55 years can only be permitted to continue in service beyond the aforesaid G age on the basis of the assessment of the work by the competent authority. The view taken by the respondent is neither arbitrary nor contrary to any statutory rules."

8. The law relating to compulsory retirement is no longer H

A res integra. An order of compulsory retirement inter alia can be passed when the officer concerned is found to be a dead wood. [See M.P State Co-op. Dairy Fedn. Ltd. & Anr v. Rajnesh Kumar Jamindar & Ors., 2009 (6) SCALE 16]

9. Although for the said purpose, the principles of natural 8 justice are not required to be complied with and even adverse entries made in the confidential record including uncommunicated entires may be taken into consideration but the same should not be passed in place of or in lieu of a disciplinary proceedings. If an order of compulsory retirement is stigmatic C in nature, the same would be bad in law.

10. It is furthermore well-settled that when the State lays down the rule for taking any action against an employee which would cause civil or evil consequence, it is imperative on its

0 part to scrupulously follow the same.

Mr. Justice Frankfurter in Vitarelli v. Seaton [359 US 535] stated:

"An executive agency must be rigorously held to the standards by which it professes its action to be judged ....

Accordingly, if dismissal from employment is based on a defined procedure, even though generous beyond the requirements that bind such agency, that procedure must be scrupulously observed .... This judicially evolved rule of administrative law is now firmly established and, if I may add, rightly so. He that takes the procedural sword shall perish with that sword."

[See also H. V Nirmala v. Karnataka State Financial Corporation (2008) 7 SCC 639]

11. The guidelines issued by the State are binding on it.

Appellant had been compulsorily retired with effect from + 29.09.2003. Salary for three months from the said date was paid, i.e., upto December, 2003. His actual date of retirement was 31.10.2004. The impugned order, therefore, was passed H although not strictly within a period of one year preceding the

.J..

date of superannuation but near about the same. Thus, spirit of A ' Clause (ii) of the guidelines issued by order dated 14.08.1981 should have also been taken into consideration. So far as Clause (iii) of the said guidelines is concerned~ there is a change of post as he had been promoted to a higher post in 2001. As he had been promoted despite recording of the adverse B remarks, the said fact also should have been taken into consideration. If adverse report on integrity relates to a distant past or more than ten years old, yet again it should not have

'\ been considered. f

12. This Court in Baikuntha Nath Das and Anotherv. Chief c

District Medical Officer, Baripada and Another [(1992) 2 SCC 299] laid down the law inter alia as under:

"(iv) The government (or the Review Committee, as the case may be) shall have to consider the entire record of D service before taking a decision in the matterof course attaching more importance to record of and performance during the later years. The record to be so considered would naturally include the entries in the confidential

records/character rolls, both favourable and adverse. If a E government servant is promoted to a higher post notwithstanding the adverse remarks, such remarks lose their sting, more so, if the promotion is based upon merit

(selection) and not upon seniority."

__ ,,,

13. It is a well-settled principle of law that an order of F compulsory retirement would be held to be stigmatic inter alia, in the event the employer has lost confidence [See Chandu Lal

v. Management of Mis. Pan American World Airways Inc.

(1985) 2 sec 727 at 730, para 8], or he has concealed his earlier record [See Jagdish Parsad v. Sachiv, Zita Ganna G Committee, Muzaffarnagar and Another (1986) 2 SCC 338 at 342-343, para 9].

He can, however, be subjected to compulsory retirement inter alia if he has outlived his utility (See The State of Uttar Pradesh v. Madan Mohan Nagar, AIR 1967 SC 1260 at 1262].

A In Allahabad Bank Officers' Association and Another v.

Allahabad Bank and Others [(1996) 4 SCC 504], it was held:

"17. The above discussion of case-law makes it clear that if the order of compulsory retirement casts a stigma on the government servant in the sense that it contains a statement casting aspersion on his conduct or character, then the court will treat that order as an order of punishment, attracting provisions of Article 311 (2) of the Constitution.

The reason is that as a charge or imputation is made the condition for passing the order, the court would infer therefrom that the real intention of the Government was to punish the government servant on the basis of that charge or imputation and not to exercise the power of compulsory retirement. But mere reference to the rule, even if it mentions grounds for compulsory retirement, cannot be regarded as sufficient for treating the order of compulsory retirement as an order of punishment. In such a case, the order can be said to have been passed in terms of the rule and, therefore, a different intention cannot be inferred.

So also, if the statement in the order refers only to the assessment of his work and does not at the same time cast an aspersion on the conduct or character of the government servant, then it will not be proper to hold that the order of compulsory retirement is in reality an order of punishment. Whether the statement in the order is stigmatic or not will have to be judged by adopting the test of how a reasonable person would read or understand it."

14. The question came up for consideration before a Division Bench of this Court in State of Gujarat v. Umedbhai M. Patel [(2001) 3 SCC 314] wherein Balakrishnan, J. (as the G learned Chief Justice then was), summarized the law, thus:

"11. The law relating to compulsory retirement has now crystallised into definite principles, which could be broadly summarised thus:

(i) Whenever the services of a public servant are no longer

, i

' ' useful to the general administration, the officer can be A ~

compulsorily retired for the sake of public interest.

(ii) Ordinarily, the order of compulsory retirement is not to be treated as a punishment coming under Article 311 of the Constitution. 8

(iii) For better administration, it is necessary to chop off dead wood, but the order of compulsory retirement can

.., be passed after having due regard to the entire service "

record of the officer.

(iv) Any adverse entries made in the confidential record c l shall be taken note of and be given due weightage in passing such order.

(v) Even uncommunicated entries in the confidential record can also be taken into consideration.

(vi) The order of compulsory retirement shall not be passed as a short cut to avoid departmental enquiry when such course is more desirable.

(vii) If the officer was given a promotion despite adverse E entries made in the confidential record, that is a fact in favour of the officer.

(viii) Compulsory retirement shall not be imposed as a , -"" punitive measure."

15. In a slightly different context, viz., in a case of probation, this Court in Jaswantsingh Pratapsingh Jadeja v. Rajkot Municipal Corporation and Another ((2007) 10 SCC 71] opined as under:

"24. In this case, however, the period of probation as G provided for under the statute had expired and his misconduct had been taken note of. Such misconduct was not founded only upon absence from duty, but also upon carelessness, negligence on the part of the appellant and lack of devotion amongst others.

Upon taking into consideration some precedents operating in the field, it was concluded:

"28. From the discussions made hereinbefore, it is evident that termination of services of the appellant purporting to discharge him simpliciter cannot be accepted, being stigmatic in nature. The form of the order terminating the services coupled with the background facts clearly leads to the conclusion that the order impugned in the writ petition by the appellant was punitive." c

16. The learned counsel appearing on behalf of the respondent would contend that the principles of natural justice are not required to be complied with in a case of compulsory retirement, particularly, when no mala fide is alleged. Allegation against the delinquent was not only that he lacked integrity but

0 also unfit to be retained in service. Those comments, in our opinion, are stigmatic in nature.

It is also not a case where there had been a steady decline in the performance of the employee.

17. The learned counsel appearing on behalf of the E respondent would contend that in this case malice has neither been alleged nor been proved. In support of his contention reliance has been placed on Purushottam Kumar Jha v. State of Jharkhand and Others [(2006) 9 SCC 458] wherein Thakker, J. speaking for the Bench, stated the law, thus: F

"23. It is well settled that whenever allegations as to mala fides have been levelled, sufficient particulars and cogent materials making out prima facie case must be set out in the pleadings. Vague allegation or bald assertion that the action taken was mala fide and malicious is not enough.

In the absence of material particulars, the court is not expected to make "fishing" inquiry into the matter. It is equally well established and needs no authority that the burden of proving mala tides is on the person making the allegations and such burden is "very heavy". Malice cannot

t be inferred or assumed. It has to be remembered that A such a charge can easily be "made than made out" and hence it is necessary for the courts to examine it with extreme care, caution and circumspection. It has been rightly described as "the last refuge of a losing litigant". (Vide Gulam Mustafa v. State of Maharashtra; Ajit Kumar B Nag v. GM (PJ), Indian Oil Corpn. Ltd.)"

18. In a case of this nature the appellant has not alleged . malice of fact The requirements to comply with the directions contained in the said circular letter dated 14.08.1981 were necessary to be complied with in a case of this nature. Non- C compliance whereof would amount to malice in law. [See Managaer, Government Branch Press and Another v. D.B.

Belliappa (1979) 1 SCC 477, Smt. S.R. Venkataraman v.

Union of India and Another ( 1979) 2 SCC 491 and P Mohan an Pillai v. State of Kera/a and Others (2007) 9 SCC 497] D

19. Thus, when an order suffers from malice in law, neither any averment as such is required to be made nor strict proof thereof is insisted upon. Such an order being illegal would be wholly unsustainable.

20. For the reasons aforementioned, the impugned order is set aside. The appeal is allowed. However, in the facts and circumstances of the case, there shall be no order as to costs.

N.J.

Appeal allowed.