Appeal No. 68 of 1964.

Appeal from the judgment and decree dated July 27, 1959 of the Allahabad High Court in Income tax Reference No. 307 of 1957.

S.V. Gupte, Solicitor General, R. Ganapathy Iyer and R.N. Sachthey, for the appellant.

A.V. Viswanatha Sastri and S.P. Varma, for the respondent.

The Judgment of the Court was delivered by Sikri, J.

This appeal pursuant to a certificate granted by the Allahabad High Court under section 66A(2) of the Income tax Act (hereinafter referred to as the Act) is directed against the judgment of the High Court in a reference under the Act, answering the question referred to it in the negative.

The question referred by the Appellate Tribunal is: "Whether on a true interpretation of clause (viii) of subsection 3 of section 4 of the indian Income tax Act the sum of Rs. 36,396/ received by the assessee as an allowance during the previous year of the assessment year 1949 50 is revenue income liable to tax under the Indian Income tax Act, 1922?" The relevant facts stated in the Statement of the case are as follows: The assessee is a Hindu undivided family headed by one Sri Trivikram Narain Singh who is a descendant of one Sri Babu Ausan Singh who was the original founder and owner of what is known as Ausanganj State in the district of Benaras.

The district of Benaras was formerly a part of Oudh territory.

By a Treaty between the East India Company Nawab Asfuddaula in or about the year 1775, the province of Benaras was ceded to the British Government.

The British Government granted a sanad of Raj to Raja Chet Singh who in turn gave the Jagir of Parganas Seyedpore and Bhittery in perpetuity to Babu Ausan Singh.

It appears that in 1796 there were some disputes between Babu Ausan Singh and the Zamindars in the district and the matter was referred by the Collector of Benaras to the Board of Revenue in Calcutta.

The disputes between the Jagirdars and Zamindars ultimately ended in 1837 by a compromise between the British Government and the then Jagirdar Hat Narain Singh whereby the British Government 702 granted a pension of Rs. 36,322/8/ to Babu Hat Narain Singh anal his heirs in perpetuity.

The quantum of this pension was calculated on the basis of 1/4th of the revenue of the Jagir.

By this arrangement the revenue or land collections of Jagir became payable by the Zamindars direct to the Government and by the grant of the pension, Babu Hat Narain Singh and his successors no longer remained the proprietors of the Parganas or the Jagir and became entitled to merely a pension.

The letter by which the amount of pension was determined at Rs. 36,322/8/ is dated 7th of July, 1837 and was from H. Elliot Esqr., the Secretary Sadar Board of Revenue N.W.P. Allahabad, to J. Thompson Esqr., Offg.

Secretary to Lt. Government, N.W.P.".

The pension was paid regularly from year to year by the Government to Babu Har Narain Singh and his heirs.

During the previous year of the assessment year 1949 50, the assessee received a sum of Rs. 36,396/ on account of the aforesaid pension.

The Income tax Officer, in spite of the objection of the assessee, held that it was a regular annual income of the assessee and did not fall within the category of agricultural income tax.

He observed that "in fact this income arose from a statutory obligation of the Government to pay it, and although the Government recouped this from the person with whom the land was settled, land in the genealogical tree of Malikana appears in the second degree, its immediate and effective source is the Government 's statutory obligation to pay it, and this obligation is not land within the meaning of Income tax Act, vide C.I.T.v.

Raja Bahadur Karnakhaya Harain Singh(1)".

The assessee appealed to the Appellate Assistant Commissioner who held that "the alleged cash grant of varying and unspecified amount received by the appellant, in relation to land revenue of Seyedpur now Tehsil of District Ghazipur, clearly fell within the definition of agricultural income under Section 2(1) of the Incometax Act." The Income tax Officer appealed to the Income tax Appellate Tribunal.

The Tribunal held that the sum of Rs. 36,396/ was chargeable to tax under the Act as the income was not agricultural income for "although the pension was determined with respect to the quantum of the rent collection the rent collections or the land could not be said to be the immediate source of the pension.

The source of the pension was a liability undertaken by the Government for extinguishing the proprietary rights of the Jagirdar and when the immediate source of the income was not land or rent collections from land, it is difficult to hold that the receipt of the assessee was agricultural income within the meaning of Section 4(3)(viii) of the Income tax Act.

" The High Court held that from the language of the letter of July 7, 1837, it was manifest that the right which was conferred 703 was a right to a share of one fourth in the net land revenue collections after deducting costs of Tahsil establishment.

It relied on the fact that the amount which had been received by the successors of Babu Harnarain Singh varied from year to year.

It observed that "the language of the letter and this conduct of the parties can only lead to the inference that, by this settlement contained in the letter of 7th July, 1837, Babu Har Narain Singh and his successors were granted in perpetuity a right to one fourth of the land revenue collections themselves and not merely a right to receive u sum of money calculated on that basis." The High Court accordingly answered the question in the negative.

The learned Additional Solicitor General, on behalf of the appellant, contends that according to the true interpretation of the letter dated July 7, 1837, no right in the land revenue was granted to the assessee.

He relies on the decision of this Court in State of Uttar Pradesh vs Kunwar Sri Trivikram Narain Singh(1).

That case arose out of the writ petition filed by the present respondent in the High Court of Judicature at Allahabad for a writ in the nature of mandamus calling upon the State of Uttar Pradesh to forbear from interfering with his right to regular payment of the "pension, allowance or Malikana" payable in lieu of the hereditary estate of Harnarain Singh in respect of parganas "Syudpore Bhettree" and for an order for payment of the "pension, allowance or malikana" as it fell due.

This Court interpreted the same letter, dated July 7, 1837, and came to the conclusion that the respondent did not acquire any interest in land or any land revenue.

Shah, J., speaking for the Court, observed: "Because the annual allowance is equal to a fourth share of the net revenue of the mahals, the right of the respondent does not acquire the character of an interest in land or in land revenue.

Under the arrangement, the entire land revenue was to be collected by the Government and in the collection Harnarain Singh and his descendants had no interest or obligation.

As a consideration for relinquishing the right to the land and the revenue thereof, the respondent and his ancestors were given an allowance of Rs. 30,612 13 0.

The allowance was in a sense related to the land revenue assessed on the land, i.e. it was fixed as a percentage of the land revenue; but the percentage was merely a measure, and indicated the source of the right in lieu of which the allowance was given.

" The learned counsel for the respondent, Mr. A. Viswanatha Sastri urges that on its true interpretation the letter dated July 7, 1837, showed an arrangement for sharing collections.

We are unable to agree with his contention.

We respectfully adopt the reasoning and conclusion of this Court in the case of State of ; 704 Uttar Pradesh vs Kunwar Sri Trivikram Narain Singh(1) and hold that the respondent, under the arrangement, had no interest in land or in the land revenue payable in respect thereof.

If this is the true interpretation of the arrangement arrived at, the question arises whether the pension or allowance is agricultural income. 'Agricultural income ' is defined in section 2 of the Act as follows: "(1) "agricultural income" means (a) any rent or revenue derived from land which is used for agricultural purposes and is either assessed to land revenue in British India or subject to a local rate assessed and collected by officers of the Crown as such: . " In Maharajkumar Gopal Saran Narain Singh vs Commissioner of Income tax, Bihar and Orissa(2), the facts were that the assessee had conveyed the greater portion of his estate.

The consideration for the transfer was, inter alia, an annual payment of Rs. 2,40,000/to the assessee for life.

The Privy Council held that this "annual payment was not agricultural income as it was not rent or revenue derived from land but money payable under a contract imposing a personal liability on the covenantor the discharge of which was secured by a charge on land." The Privy Council, in Commissioner of Income tax Bihar and vs Raja Bahadur Kamakhaya Narayan Singh and construed the word 'derived ' as :follows: "The word "derived" is not a term of article Its use in the definition indeed demands an enquiry into the genealogy of the product.

But the enquiry should stop as soon as the effective source is discovered.

In the genealogical tree of the interest land indeed appears in the second degree, but the immediate and effective source is rent, which has suffered the accident of nonpayment.

And rent is not land within the meaning of the definition." This Court observed in Mrs. Bacha F. Guzdar, Bombay Commissioner of Income tax, Bombay(4) as follow: "Agricultural income as defined in the Act is intended to refer to the revenue received by direct association with the land which is used for agricultural purposes and not by indirectly extending it to cases where that revenue or part thereof changes hands either by way of distribution of dividends or otherwise." (1) ; (2) (3) 16 I.T.R.325 (4) 705 The same test was adopted by this Court in Maharajadhiraja Sir Kameshwar Singh vs Commissioner of Income tax, Bihar and Orissa(1) and the Court again looked to the source of the right in order to determine whether income was agricultural income or not.

Shah, J., observed: "The appellant has no beneficial interest in the lands which are the subject matter of the trust: nor is he given under the trust a right to receive and appropriate to himself the income of the properties or a part thereof in lieu of any beneficial interest in that income.

The source of the right in which a fraction of the net income of the trust is to be appropriated by the appellant as his remuneration is not in the right to receive rent or revenue of agricultural lands, but rests in the covenant in the deed to receive remuneration for management of the trust.

The income of the trust appropriated by the appellant as remuneration is not received by him as rent or revenue of land; the character of the income appropriated as remuneration due is again not the same as the character in which it was received by the appellant as trustee.

Both the source and character of the income are, therefore, altered when a part of the income of the trust is appropriated by the appellant as his remuneration, and that is so, notwithstanding that computation of remuneration is made as a percentage of the income, a substantial part whereof is derived from lands used for agricultural purposes.

The remuneration not being received as rent or revenue of agricultural lands under a title, legal or beneficial in the property from which the income is received, it is not income exempt under section 4(3)(viii).

" It follows from the decisions of the Privy Council and the judgments of this Court cited above that if it is held in this case that the source of the allowance or pension is the arrangement arrived at in 1837.

then the income cannot be held to be derived from land within the meaning of the definition in section 2(1)(a) of the Act.

It seems to us that in this case the source of income is clearly the arrangement arrived at in 1837 and, therefore, it is not agricultural income as defined in the Act.

Mr. Sastri sought to distinguish those cases on the ground that the allowance here varied from year to year.

Assuming that the allowance varied from year to year, the source of the income still remains the arrangement and not land.

The next point that arises in this case is whether the allowance is taxable income at all.

Mr. Sastri contends that it is capital receipt.

He says that if the assessee 's predecessor had received ) 706 compensation for relinquishing his title to the lands in dispute, that would have been a capital receipt and not taxable.

He further says that the allowance was in fact a payment of the compensation for relinquishing the title to those lands.

He says that we must consider the quality of the income and not its periodicity.

He refers to the following passage from the speech of Viscount Simon in Commissioner of Inland Revenue vs Wesleyan and General Assurance Society(1): "It may be well to repeat two propositions which are well established in the application of the law relating to Income tax.

First, the name given to a transaction by the parties concerned does not necessarily decide the nature of the transaction.

To call a payment a loan if it is really an annuity does not assist the taxpayer, any more than to call an item a capital payment would prevent it from being regarded as an income payment if that is its true nature.

The question always is what is the real character of the payment, not what the parties call it.

" He, therefore, asked us to disregard the word 'pension ' in the letter dated July 7, 1837, and determine the real character of the payment.

Another passage from the speech of Viscount Simon is also relevant.

Lord Simon observed: "Secondly, a transaction which, on its true construction, is of a kind that would escape tax, is not taxable on the ground that the same result could be brought about by a transaction in another form which would attract tax.

As the Master of the Rolls said in the present case: 'In dealing with Income tax questions it frequently happens that there are two methods at least of achieving a particular financial result.

If one of those methods is adopted tax will be payable.

If the other method is adopted, tax will not be payable .

The net result from the financial point of view is precisely the same in each case, but one method of achieving it attracts tax and the other method does not.

There have been cases in the past where what has been called the substance of the transaction has been thought to enable the Court to construe a document in such a way as to attract tax.

That particular doctrine of substance as distinct from form was, I hope, finally exploded by the decision of the House of Lords in the case of Duke of Westminster vs Commissioner of Inland Revenue(2)".

It seems to us that where an owner of an estate exchanges a capital asset for a perpetual annuity, it is ordinarily taxable income in his hands.

The position will be different if he exchanges (1) 30 T.C. II.

(2) 707 his estate for a capital sum payable in installments.

The installments when received would not be taxable income.

Mr. Sastri, relying on Perrin vs Dickson(1) contends that an annuity is not always taxable as income.

This is true, but in this case no material has been produced to show that the allowance was in fact a payment in instalments of the value of the disputed title of the assessee 's predecessor in 1837.

In the result, we hold that the allowance is revenue income and not exempt from taxation as agricultural income.

Therefore, we accept the appeal and answer the question referred in the affirmative.

The appellant will have his costs here and in the High court.

Appeal allowed.

Summary: The respondent was the head of a Hindu undivided family and was the descendant of a Jagirdar.

Summary: Certain disputes between the Jagirdar and the Zamindars in the district had been settled in 1837 by a compromise between the British Government and the then Jagirdar, whereby, the Government granted the Jagirdar and his heirs a pension in perpetuity to be calculated on the basis of one fourth of the revenue of the Jagir.

Summary: By this arrangement the collections from the Jagir became payable by the Zamindars direct to the Government and the Jagirdar and his successors no longer remained the proprietors of the Jagir and became entitled only to a pension.

Summary: The Income tax Officer assessed the receipt of the pension by the respondent as part of his regular income and rejected the latter 's contention that the amount received was agricultural income within the meaning of section 4(3)(viii) of the Income tax Act, 1922.

Summary: In appeal, the Assistant Commissioner accepted the respondent 's contention, but the Tribunal reversed this finding.

Summary: The High Court, on a reference, decided the issue in favour of the respondent, on the grounds, inter alia, that the right conferred under the compromise of 1837 was a right to a share of one fourth in the net land revenue collections and furthermore, the amount received by the successors of the Jagirdar varied from year to year.

Summary: In the appeal before the Supreme Court, it was also contended on behalf of the respondent that the amount received was in the nature of a capital receipt, being a payment to the Jagirdar and his successors of compensation for relinquishing the title to the Jagir lands.

Summary: HELD: (i) Under the compromise and arrangement of 1837, the respondent had no interest in the land or in the land revenue payable in respect thereof.

Summary: [704 A] State of U.P.v.

Summary: Kunwar Sri Trivikram Narain Singh; , , followed.

Summary: As the source of the income in this case was the arrangement of 1837, the income could not be held to be derived from land within the meaning of the definition of agricultural income in section 2(1)(a) of the Act.

Summary: Even if the income varied from year to year, the source of the income was still the arrangement and not land.

Summary: [705 G] Maharajkumar Gopal Saran Narain Singh, vs

Summary: C.I.T. Bihar and Orissa, , C.I.T. Bihar and Orissa vs Raja Bahadur Kamkhya Narayan Singh and Ors, , Mrs. Bacha F. Guzdar vs

Summary: C.I.T. Bombay , MaharaJadhiraja Sir Kameshwar Singh, vs C.I.T. Bihar and Orissa, , followed.

Summary: (ii) The amount received by the respondent was not a capital receipt but revenue income and therefore taxable.

Summary: 701 Where an owner of an estate exchanges a capital asset for a perpetual annuity, it is ordinarily taxable in his hands.

Summary: The position would be different if he exchanged his estate for a capital sum payable in installments.

Summary: Such installments when received would not be taxable as income.

Summary: But in the present case there was no material to show that the amount received was an instalment of this nature.

Summary: [706 H~707C] Commissioner of Inland Revenue vs Wesleyan and General Assurance Society, , and Perrin vs Dickson , referred to.


it case for initiating any procee d ings for contempt against the respondents.

[109F] & ORIGINAL JURISDICTION: Writ Petition (Civil) No. 530 of 1983 etc.

(Under Article 32 of the Constitution of India).

V.A. Bobde, Shyam Mudaliar, V.M. Tarkunde, G.L. Sangh i, A.K. Sanghi, Mrs. R. Karanjawala, Mrs. Meenakshi Karanjawa la N.M. Popli and V.J. Francis for the Petitioners.

Ms. A. Subhashini, D.N. Dwivedi, Girish Chandra, C.V. section Rao, M.C. Dhingra and N.K. Sharma for the Respondents.

The Judgment of the Court was delivered by OJHA, J.

The petitioners in the aforementioned wr it petitions claim to have been appointed as Supervisors Gra de 'A ' in various ordnance factories between 1962 to 1966 a nd have filed these writ petitions with the prayer that t he same relief may be granted to them also as was granted by this Court to 75 appellants in Civil Appeal No. 441 of 19 81 vide its order dated 2nd February, 1981.

The three civ il miscellaneous petitions referred to above on the other ha nd have been made by the appellants of Civil Appeal No. 441 of 1981 asserting that the direction given by this Court on 2 nd February, 1981 has not been complied with in the manner as it ought to have been by the respondents and they should be consequently required to comply with the said direction.

T he exact nature of the prayer made in these miscellaneo us applications shall be indicated after referring to t he relief granted on 2nd February, 1981 in Civil Appeal No. 4 41 of 1981.

The 75 appellants of Civil Appeal No. 441 of 1981 fil ed a writ petition in the Allahabad High Court in 1972 asser t ing that they had been appointed as Supervisors Grade 'A ' on various dates in pursuance of a circular dated 6th Novembe r, 1962 issued by the Director General of Ordnance Factorie s, the relevant portion whereof reads as hereunder: "Subject: NON INDUSTRIAL ESTABLISHMENT PROMOTION D.G.O.F. has decided that Diploma holders serving as 97 Supervisor 'A ' (Tech)/Supervisor 'B '/(Tech) and in equiv a lent grades should be treated as follows (i) All those Diploma holders who have been appointed as Supervisor 'B ' (Tech) (and in equivalent grades) should on completion of one year 's satisfactory service in ordnan ce factories be promoted to Supervisor 'A ' (Tech) and in equi v alent grades.) (ii) All those Diploma holders who work satisfactorily as Supervisor 'A ' (Tech) or in equivalent grades for 2 years in Ordnance Factory should be promoted to Chargeman.

Kindly acknowledge receipt.

Sd/ K.G. Bijlani ADGOF/Est.

for D.G.O.F. Their grievance in the writ petition was that ev en though quite a large number of Supervisors Grade 'A ' h ad been promoted to the post of Chargeman grade II on compl e tion of two years ' satisfactory work they had been discrim i nated against and had not been so promoted immediately on the expiry of two years ' in pursuance of the aforesa id circular even though their work was satisfactory.

The reli ef prayed for in the said writ petition was for the issue of a writ of mandamus directing the Union of India through t he Director General of Ordnance Factories to promote the appe l lants to the post of Chargeman II.

The writ petition w as contested by the respondents thereto inter alia on t he ground that under the rules of promotion from Supervisor ' A ' to Chargeman II first Departmental Promotion Commit.tee at the factory level and then a Departmental Committee at t he Central level screens the service record of each of t he Supervisors 'A ' who comes within the range of eligibili ty and then finally the Director General of Ordnance Factori es draws up a list and sanctions promotions.

It was furth er asserted that in accordance with the said rule the cases of all the appellants were screened by the Promotion Committ ee at the factory level and then at the Central level and th ey not having been found fit were not promoted.

It appears th at the criterion of promotion is seniority cum merit.

T he learned Single Judge, however, did not go into the merits of the controversy and dismissed the writ petition on t he ground of unexplained laches and also on the ground that a previous petition for similar relief had not been presse d. Against the 98 judgment of the learned Single Judge the appellants pr e ferred a special appeal before a Division Bench of th at Court.

The learned Judges who decided the special appeal d id not consider it appropriate to uphold the dismissal of t he writ petition on the technical ground which found favo ur with the learned Single Judge and they went into the meri ts of the respective contentions of the parties.

They, howeve r, did not find any substance in the submission made on beha lf of the appellants and accordingly dismissed the speci al appeal on 8th February, 1977.

The learned Judges pointed o ut that it was admitted that the conditions of service applic a ble to the case of the appellants were governed by t he Indian Ordnance Factories (Recruitment and Conditions of Service of Class III Personnel) Rules, 1956 (hereinaft er referred to as the Rules) framed by the President of Ind ia under Article 309 of the Constitution.

It was further poin t ed out that Rule 8 contemplated that appointments by prom o tion were to be made on the basis of a selection list pr e pared for the different grades by duly constituted Depar t mental Promotion Committees laid down in the said ru le whereas Rule 12 provided that no appointment to the posts to which these rules apply shall be made otherwise than as specified therein.

With regard to the circular dated 6 th November, 1962 the learned Judges took the view that it w as difficult to read in that circular any intention or delibe r ation on the part of the Director General of Ordnance Fact o ries that as soon as two years were completed by a diplo ma holder in the Grade of Supervisor 'A ' there would be an automatic promotion to the post of Chargeman Il.

Accordi ng to the learned Judges such a view would militate again st Rule 12 of the Rules mentioned above.

It was further he ld that even if it was to be assumed that the Director Gener al of Ordnance Factories automatically promoted some Superv i sors 'A ' immediately on the completion of 2 years of servi ce to the post of Chargeman II without the recommendation aft er screening by the Promotion Committee no right would accr ue in favour of the appellants inasmuch as such promotio ns would be in the teeth of Rule 12 and could not confer a legal right on the appellants to be likewise promoted in breach of Rule 12.

With regard to the plea based on Artic le 16 of the Constitution.

it was held "A half hearted argume nt was raised at the end of the hearing on behalf of the appe l lant petitioners that they have been discriminated again st by depriving them the benefit of automatic promotion in violation of constitutional guarantee under Article 16 of the Constitution.

This was an argument, neither pleaded as a ground for the petition nor was raised before the learn ed Single Judge.

Moreover, we do not think any case, on t he basis of violation of Article 16 of the Constitution can be found in favour of the appellant petitioners only becau se some 99 supervisors, equally placed, were promoted against the rul es of service.

No formal foundation has been raised in t he pleadings in the writ petition in support of the grou nd based on Article 16 of the Constitution.

" It is against this judgment that Civil Appeal No. 441 of 1981 was preferred in this Court.

Since the order dated 2 nd February, 1981 passed in Civil Appeal No. 441 of 1981, so to speak, constitutes the basis for the writ petitions me n tioned above, it is in our opinion expedient to reprodu ce the said order.

It reads: "Heard counsel.

Special leave granted.

"Our attention has been invited by learned counsel for bo th the sides to the relevant rules which govern promotion to the post of Chargeman Grade II.

It appears that a lar ge number of persons have been promoted to those posts thou gh they have completed only two years of service.

The Gover n ment now appears to insist that in so far as the appellan ts are concerned they cannot be considered for promotion unle ss they complete three years of service.

We see no justific a tion for any such differential treatment being given to t he appellants.

If a large number of other persons similar ly situated have been promoted as Chargeman Grade II aft er completing two years of service, there is no reason why t he appellants should also not be similarly promoted aft er completing the same period of service.

We are not suggesti ng that the appellants are entitled to be promoted to t he aforesaid posts even if they are found unfit to be promote d.

We Therefore direct that the concerned authoriti es will consider the cases of the appellants for promotion as Chargeman Grade II and promote them to the said posts unle ss they are found to be unfit.

If the appellants are promote d, they will naturally have to be promoted with effect from t he date on which they ought to have been promoted.

This order will dispose of the appeal.

There will be no order as to costs.

" As already pointed above the petitioners in the writ pet i tions refer 100 red to above have prayed for the same relief which w as granted in Civil Appeal No. 441 of 1981.

Now we shall rev rt to the exact prayers made in the three miscellaneous pet i tions aforesaid.

The prayer made in Civil Miscellaneo us Petition No. 3325 of 1987 is for the issue of an inter im order restraining the respondents from making any furth er promotions during the pendency and final heating of t he miscellaneous petition and for initiating contempt procee d ings.

Almost analogous prayer had been made in Miscellaneo us Petition No. 9357 of 1983 also namely that the responden ts may be restrained from promoting officers to the next high er posts on the basis of recommendations of certain Departme n tal Promotion Committees without complying with the dire c tions of this Court in its order dated 2nd February, 198 1.

The reliefs prayed for in the above two civil miscellaneo us petitions are thus of an interim nature.

The main relie fs which have been prayed for apart from for initiating pr o ceedings for contempt for disobedience of the order of th is Court dated 2nd February, 1981 are reliefs (i), (ii) a nd (iii) contained in Civil Miscellaneous Petition No. 9356 of 1983.

They are as hereunder: "(i) pass appropriate orders directing the respondents to implement in true letter and spirit, the judgment of th is Hon 'ble Court dated 2.2.1981 in Civil Appeal No. 441 of 1 98 1; (ii) issue appropriate directions commanding the responden ts to promote the appellants to the next higher posts of Chargeman Grade I, Assistant Foreman, and Foreman, wi th effect from the date they are entitled to, after giving th em the benefit of the directions of this Hon 'ble Court dat ed 2.2.1981; (iii) issue appropriate directions to the respondents to give all consequential benefits to the appellants, includi ng payment of arrears.

" The aforesaid writ petitions came up for hearing befo re a bench of two learned Judges of this Court on 9th Septe m ber, 1987.

On the view that the judgment of this Court dat ed 2nd February, 1981 in Civil Appeal No. 441 of 1981 in t he case of Virendra Kumar and Others vs Union of India & Ors ., [1981] 3 SCC Page 30 may require reconsideration, the pet i tions were directed to be placed before a three Judge Ben ch "where inter alia the correctness of the judgment could be looked into and the nature of relief available to the pet i tioners on the 101 facts now stated would also be considered.

" It is in view of this order that these matters have been listed before us.

Learned counsel for the petitioners contended that t he reason which weighed with this Court in allowing Civ il Appeal No. 441 of 1981 applies to these writ petitions al so and the same relief may accordingly be granted to the pet i tioners.

It was also brought to our notice that similar ly placed 125 employees got the benefit of the circular dat ed 6th November, 1962 in pursuance of an order passed by t he Madhya Pradesh High Court on 4th April, 1983 in writ pet i tions filed by them.

It was urged that in case the sa me relief is not granted to the petitioners they are likely to become juniors to some of the appellants in Civil Appeal N o. 441 of 1981 and the petitioners in the writ petitions deci d ed by the Madhya Pradesh High Court on 4th April, 1983.

For the respondents on the other hand it was urged th at service conditions including promotion of employees inclu d ing Supervisors 'A ' in the Indian Ordnance Factories we re governed by the Rules and in view of Rule 12 no appointme nt to the various posts to which the Rules applied could be made otherwise than as specified therein; According to learned counsel since Rule 8 of the Rules contemplated th at appointments by promotion were to be made on the basis of selection list prepared in the manner provided therei n, there was no scope for automatic promotion merely aft er expiry of 2 years of continuous service on the basis of t he circular dated 6th November, 1962.

According to learn ed counsel the Rules did not prescribe the minimum number of years of service as Supervisors 'A ' which would make th em eligible for promotion as Chargeman II and the circul ar dated 6th November, 1962 which was in the nature of an executive instruction prescribed 2 years ' service as Supe r visor 'A ' to make him eligible for promotion.

Howeve r, merely on completion of two years ' service a Supervisor ' A ' could not claim automatic promotion.

On the other han d, promotion depended, inter alia, on availability of posts a nd the incumbent being found fit by the Departmental Promoti on Committee for being included in the selection list.

It w as only such a Supervisor Grade 'A ' whose name found place in the selection list who could be promoted to the post of Chargeman II as and when vacancies were available.

It w as further urged that the petitioners of these writ petitio ns were on the basis of the Rules considered for promotion a nd it is not disputed that all of them have in due course be en promoted as Chargeman II and some of them have even be en promoted to higher posts.

Our attention was further invit ed by learned counsel for the respondents to an order commun i cated among others to the Director 102 General of Ordnance Factories, vide letter dated 28th Dece m ber, 1965 of the Government of India, Ministry of Defenc e, saying inter alia that a minimum period of service of thr ee years in the lower grade should be fixed for promotion to the next higher grade.

It was pointed out that this had be en found necessary not only because it would be in conformi ty with the practice obtaining in other Ministries but al so because on merits this period is necessary to judge t he performance in the lower post and the potentialities f or promotion to a higher post.

He also brought to our notice a subsequent circular dated 20th January, 1966 by the Direct or General of Ordnance Factories who had issued.

the earli er circular dated 6th November, 1962 which provides: "Sub: N.G. Establishment Treatment of Diplo ma Holders and ex apprentices serving as Supr.

or in equivalent grades in the matter of promotion.

Ref: This office confidential No. 673/A/NG dt.

62 and 4416/A/NG dt.

The question of promotion of Diploma holders in Mech/Elec.

Engineering and Ex apprentices serving as Sup r. 'A ' Gr.

or in equivalent grades has received further consi d eration of the D.G.O.F. who has decided that in futu re promotions of all such individuals will be effected in accordance with the normal rules i.e. on the basis of the ir listing by the relevant D.P.C. and not merely on completi on of 2 years satisfactory continuous service as Supr.

or equivalent grades.

" It was urged that after the issue of the subseque nt order dated 28th December, 1965 and circular dated 20 th January, 1966 no Supervisor 'A ' could claim to have beco me eligible for promotion merely on completion of 2 year s ' satisfactory service and his promotion thereafter could be effected only in accordance with the normal Rules.

Having heard learned counsel for the parties we fi nd substance in the submission made by the learned counsel f or the respondents.

Relying on two earlier decisions in B. N. Nagarajan & Ors.

vs State of Mysore & Ors., 82 and Sant Ram Sharma vs State of Rajasthan & Anr.

, ; it was held by a Constitution Bench of this Court in Ramachandra Shankar Deodhar and Ors.

vs The State of Mah a rashtra & Ors.; , that in the absence of legislative Rules it was competent to the State Governme nt to take a 103 decision in the exercise of its executive power under Art i cle 162 of the Constitution.

The matter has been consider ed in a recent decision of this Court in the case of Union of India & Ors.

vs Sh.

Soraasundararn Viswanath & Ors., [198 8] 3 S.C. Judgments Today 724 wherein it has been held: "It is well settled that the norms regarding recruitment a nd promotion of officers belonging to the Civil Services can be laid down either by a law made by the appropriate Legisl a ture or by rules made under the proviso to Article 309 of the Constitution of India or by means of executive instru c tions issued under Article 73 of the Constitution of Ind ia in the case of Civil Services under the Union of India a nd under Article 162 of the Constitution of India in the ca se of Civil Services under the State Governments.

If there is a conflict between the executive instructions and the rul es made under the proviso to Article 309 of the Constitution of India, the rules made under the proviso to Article 309 of the Constitution of India prevail, and if there is a co n flict between the rules made under the proviso to Artic le 309 of the Constitution of India and the law made by t he appropriate Legislature, the law made by the appropria te Legislature prevails.

" It is thus apparent that an executive instruction cou ld make a provision only with regard to a matter which was n ot covered by the Rules and that such executive instructi on could not override any provision of the Rule.

Notwithstan d ing the issue of instruction dated 6th November, 1962 ther e fore, the procedure for making promotion as laid down in Rule 8 of the Rules had to be followed.

Since Rule 8 in t he instant case prescribed a procedure for making promotion t he said procedure could not be abrogated by the executi ve instruction dated 6th November, 1962.

The only effect of t he circular dated 6th November, 1962 was that Supervisors ' A ' on completion of 2 years ' satisfactory service could be promoted by following the procedure contemplated by Rule 8.

This circular had indeed the effect of accelerating t he chance of promotion.

The right to promotion on the oth er hand was to be governed by the Rules.

This right was co n ferred by Rule 7 which inter alia provides that subject to the exception contained in Rule 11, vacancies in the pos ts enumerated therein will normally be filled by promotion of employees in the grade immediately below in accordance wi th the provisions of Rule 8.

The requirements of rule 8 in brief have already been indicated above.

Rule 12 provides 104 that no appointment to the posts to which these rules app ly shall be made otherwise than, as specified in these rule section This right of promotion as provided by the Rules was neith er affected nor could be affected by the circular.

The ord er dated 28th December, 1965 which provided a minimum period of service of three years in the lower grade for promotion to the next higher grade and the circular dated 20th Janua ry 1966 which provided that promotions in future will be e f fected in accordance with the normal rules and not merely on completion of 2 years ' satisfactory continuous service h ad the effect of doing away with the accelerated chance of promotion and relegating Supervisors 'A ' in the matter of promotion to the normal position as it obtained under t he Rules.

In the case of Ramchandra Shankar Deodhar & Ors ., (supra) the petitioners and other allocated Tehsildars fr om ex Hyderabad State had under the Notification of the R aj Pramukh dated September 15, 1955 all the vacancies in t he posts of Deputy Collector in the ex Hyderabad State avai l able to them for promotion but under subsequent rules of July 30, 1959 fifty per cent of the vacancies were to be filled by direct recruitment and only the remaining fif ty per cent were available for promotion and that too on div i sional basis.

The effect of this change obviously was th at now only fifty per cent vacancis in the post of Depu ty Collector being available in place of all the vacancies it was to take almost double the time for many other allocat ed Tehsildars to get promoted as Deputy Collectors.

In oth er words it resulted in delayed chance of promotion.

It wa s, inter alia, urged on behalf of the petitioners that t he situation brought about by the rules of July 30, 1959 co n stituted variation to their prejudice in the conditions of service applicable to them immediately prior to the reorga n isation of the State and the Rules were consequently i n valid.

While repelling this submission the Constituti on Bench held: "All that happened as a result of making promotions to t he posts of Deputy Collectors divisionwise and limiting su ch promotions to 50 per cent of the total number of vacanci es in the posts of Deputy Collector was to reduce the chanc es of promotion available to the petitioners.

It is now we ll settled by the decision of this Court in State of Mysore vs G.B. Purohit that though a right to be considered for prom o tion is a condition of service, mere chances of promoti on are not.

A rule which merely affects chances of promoti on cannot be regarded as varying a condition of service.

In Purohit 's case the districtwise seniority of sanitary in 105 spectors was changed to Statewise seniority, and as a resu lt of this change the respondents went down in seniority a nd became very junior.

This, it was urged, affected the ir chances of promotion which were protected under the provi so to Section 115, sub section (7).

This contention was neg a tived and Wanchoo, J., (as he then was), speaking on beha lf of this Court observed: "It is said on behalf of the r e spondents that as their chances of promotion have be en affected their conditions of service have been changed to their disadvantage.

We see no force in this argument becau se chances of promotion are not conditions or service.

" It i s, therefore, clear that neither the Rules of July '30, 195 9, nor the procedure for making promotions to the posts of Deputy Collector divisionwise varies the conditions of service of the petitioners to their disadvantage.

" The same view was reiterated in Mohammad Shujat Ali a nd Ors.

vs Union of India & Ors.

, ; In the bri ef written submission filed on behalf of the petitioners in Writ Petition Nos.

9522 27 of 1983 it has been pointed o ut that employees who had joined much later than 20th Januar y, 1966, namely, the date of the subsequent circular of t he Director General of Ordnance Factories superseding h is earlier circular dated 6th November, 1962, have also g ot benefit under the orders of this Court dated 2nd Februar y, 1981 aforesaid as also under the orders of the Madhya Pr a desh High Court dated 4th April, 1983 in the writ petiti on filed before that Court.

This circumstance by itself is sufficient to indicate that when Civil Appeal No. 441 of 1981 was heard by this Court either the subsequent ord er dated 28th December, 1965 as well as the circular dated 20 th January, 1966 and the legal consequences flowing therefr om were not brought to the notice of the learned Judges by t he learned counsel for the respondents, or the same was n ot properly emphasised, the judgment dated 2nd February, 19 81 being completely silent on the point and the appeal w as allowed only on the ground that some Supervisors having be en promoted as Chargeman II on expiry of 2 years of the ir service in view of the circular dated 6th November, 1962 t he non promotion of the appellants was discriminatory being in violation of Article 16.

As regards the order of the Madh ya Pradesh High Court dated 4th April, 1983 .it may be point ed out that the said High Court in an earlier writ petiti on being Misc.

Petition No. 596 of 1978 had disallowed t he relief for the petitioners of that writ petition bei ng treated as Chargeman II on completion of two years ' servi ce as Supervisor 'A ' by its order dated 16th April, 1979 as is apparent from the said judgment dated 4th April, 1983 b ut the subse 106 quent writ petitions which seem to have been filed after t he decision of this Court dated 2nd February, 1981 in Civ il Appeal No. 441 of 1981 were allowed in view of the aforesa id decision of this Court.

In this connection it is also of significance to noti ce that it does not seem to have been the case of the appe l lants in Civil Appeal No. 44 1 of 198 1 that those w ho according to them had been promoted in pursuance of t he circular dated 6th/November, 1962 on completing two year s ' service were junior to them.

At this place it will be usef ul to refer to an affidavit dated 19th November, 1983 of D. P. Gupta, who is one of the appellants in Civil Appeal No. 4 41 of 1981, filed in C.M.P. Nos.

9356 57 of 1983.

Annexure I to the said affidavit gives a break up of the total diplo ma holders recruited in the Department due to acute need of Ordnance Department following the chinese aggression.

It indicates that approximately 125 diploma holders were r e cruited in 1962, 550 in 1963, 250 in 1964, 150 in 1965 a nd 100 in 1966, the total number of such recruits being appro x imately 1175.

The said Annexure further indicates that o ut of the 1175 recruits about 625 were promoted to the post of Chargeman II in 1965 66 under the 2 year policy contained in circular dated 6th November, 1962 and that approximately 5 50 diploma holders were denied promotion which resulted in discrimination.

From this break up it is apparent that a ll the diploma holders recruited in 1962 whereas 500 out of 5 50 recruited in 1963 were promoted on expiry of 2 years of service.

It appears that the remaining 50 diploma holde rs recruited in 1963 and those who had been recruited in t he begning of 1964 or thereafter could not be promoted inasmu ch as by the time their cases could be considered for promoti on the subsequent order dated 28th December, 1965 had come in to force and had also come into force the circular dated 20 th January, 1966 which had superseded the circular dated 6 th November, 1962 and had provided that in future promotions of all such individuals will be effected in accordance with t he normal rules and not merely on the completion of two yea rs satisfactory continuous service.

It cannot be disputed that the Director General of Ordnance Factories who had issued the circular dated 6 th November, 1962 had the power to issue the subsequent circ u lar dated 20th January, 1966 also.

In view of.

the leg al position pointed out above the aforesaid circular could n ot be treated to be one affecting adversely any condition of service of the Supervisors 'A '.

Its only effect was that t he chance of promotion which had been accelerated by the circ u lar dated 6th November, 1962 was deferred and made depende nt on selection according to the Rules.

Apparently, after t he coming into force of the 107 order dated 28th December, 1965 and the circular dated 20 th January, 1966 promotions could not be made just on compl e tion of 2 years ' satisfactory service under the earli er circular dated 6th November, 1962 the same having be en superseded by the later circular.

It is further obvious th at in this view of the matter Supervisors 'A ' who had be en promoted before the coming into force of the order dat ed 28th December, 1965 and the circular dated 20th Januar y, 1966 stood in a class separate from those whose promotio ns were to be made thereafter.

The fact that some Superviso rs 'A ' had been promoted before the coming into force of t he order dated 28th December, 1965 and the circular dated 20 th January, 1966 could not, therefore, constitute the basis f or an argument that those Supervisors 'A ' whose cases came up for consideration for promotion thereafter and who we re promoted in due course in accordance with the rules we re discriminated against.

They apparently did not fall in t he same category.

It may also be noticed that even though the petitione rs on their completion of 2 years ' service as Supervisor ' A ' were not promoted as Chargeman 11 in or about the year 19 66 they chose to wait for about 17 years to file these wr it petitions which were filed in 1983, and nearly 2 years ev en after the decision dated 2nd February, 1981 in Civil Appe al No. 441 of 1981, which indicates that but for the decisi on in Civil Appeal No. 441 of 1981 they would perhaps not ha ve even thought of filing these writ petitions inasmuch as in the meantime they had not only been promoted in the norm al course as Chargeman 1I but some of them had been promot ed even to higher posts in the hierarchy.

For aught we know if the effect of the order dated 28 th December, 1965 and the circular dated 20th January, 1966 h ad been properly emphasised at the time of hearing of Civ il Appeal No. 441 of 198 1 its result may have been differen t.

In this connection, reference may also be made to the cou n ter affidavit of Sobha Ramanand, Deputy Director, Ordnan ce Factory Cells G. Block, Ministry of Defence, filed in Wr it Petition (Civil) Nos.

3812 19 of 1983 with regard to a matter relevant for promotion.

In paragraph 2(i) it has be en stated that during 1962 63 due to sudden expansion of Or d nance Factories Organisation in the wake of Chinese aggre s sion a large number of posts of Chargeman 11 and other pos ts were created and as a result thereof persons already in service as Supervisors 'A ' were promoted to the posts of Chargeman II on completion of 2 years ' service.

It h as further been stated therein that after the newly creat ed posts were thus filled by promotion, chances of promotion of those who were appointed subsequently diminished and f or want of sufficient number of 108 vacancies as Chargeman II they could not be promoted to th at post soon after the completion of 2 years ' service.

There is a further averment in the said counter affidavit that pet i tioners were duly considered in their turn and their nam es were brought on the approved panel.

They were thereaft er promoted as soon as vacancies became available and th at during the period that they were on the approved panel no person junior to them or of equal seniority superseded the m.

Nothing substantial has been brought to our notice on beha lf of the petitioners on the basis of which the aforesa id statements made in the counter affidavit may be doubted.

In view of the foregoing discussion, we find it diff i cult to grant the reliefs prayed for in the aforesaid 'wr it petitions simply on the basis of the judgment of this Cou rt dated 2nd February, 1981 in Civil Appeal No. 441 of 198 1.

These writ petitions, therefore, deserve to be dismissed.

Since, however, the judgment of this Court dated 2 nd February, 1981 in Civil Appeal No. 441 of 1981 has not be en challenged and has become final, the next question whi ch falls for consideration is as to what further relief, if any, are the appellants in Civil Appeal No. 44 1 of 19 81 entitled in pursuance of the Civil Miscellaneous Petitio ns referred to above filed by them.

The reliefs which they ha ve claimed have already been indicated above.

It is now n ot disputed that the appellants of this appeal have in purs u ance of the order of this Court dated 2nd February, 19 81 been given a back date promotion to the post of Chargeman II synchronising with the dates of completion of their 2 yea rs of service as Supervisor 'A '.

The grievance of the petitio n ers, however, is that this promotion tantamounts to impl e mentation of the order of this Court dated 2nd Februar y, 1981 only on paper inasmuch as they have not been grant ed the difference of back wages and promotion to higher pos ts on the basis of their back date promotion as Chargeman I I.

As already noticed earlier certain writ petitions filed in Madhya Pradesh High Court were allowed by that Court on 4 th April, 1983 relying on the judgment of this Court dated 2 nd February, 1981 in Civil Appeal No. 441 of 1981.

Against t he aforesaid judgment of the Madhya Pradesh High Court dat ed 4th April, 1983 Special Leave Petitions (Civil) Nos.

5987 92 of 1986 were filed in this Court by the Union of India a nd were dismissed on 28th July, 1986.

The findings of t he Madhya Pradesh High Court in its judgment dated 4th Apri l, 1983 thus stand approved by this Court.

In this view of t he matter to put them at par it would be appropriate that t he appellants in Civil Appeal No. 441 of 1981 may also be granted the same relief which was granted to the 109 petitioners in the writ petitions before the Madhya Prade sh High Court.

As regards back wages the Madhya Pradesh Hi gh Court held: "It is the settled service rule that there has to be no p ay for no work i.e. a person will not be entitled to any p ay and allowance during the period for which he did not perfo rm the duties of a higher post although after due considerati on he was given a proper place in the gradation list havi ng deemed to be promoted to the higher post with effect fr om the date his junior was promoted.

So the petitioners are n ot entitled to claim any financial benefit retrospectively.

At the most they would be entitled to refixation of the ir present salary on the basis of the notional seniority gran t ed to them in different grades so that their present sala ry is not less than those who are immediately below them.

" In so far as Supervisors 'A ' who claimed promotion as Chargeman 11 the following direction was accordingly giv en by the Madhya Pradesh High Court in its judgment dated 4 th April, 1983 aforesaid: "All these petitioners are also entitled to be treated as Chargeman Grade II on completion of two years satisfacto ry service as Supervisor Grade A. Consequently, notion al seniority of these persons have to be refixed in Supervis or Grade A, Chargeman Grade II, Grade I and Assistant Forem an in cases of those who are holding that post . .

T he petitioners are also entitled to get their present sala ry re fixed after giving them notional seniority so that t he same is not lower than those who are immediately bel ow them.

" In our opinion, therefore, the appellants in Civ il Appeal No. 441 of 1981 deserve to be granted the same limi t ed relief.

We are further of the opinion that it is not a fit case for initiating any proceedings for contempt again st the respondents.

In the result, the writ petitions fail and are di s missed.

The Civil Miscellaneous Petitions in Civil Appe al No. 441 of 1981 are disposed of by issuing a direction to the respondents to give the appellants in the said Civ il Appeal the same benefits as were given by the Madhya Prade sh High Court to such of the petitioners before that Court w ho were Supervisors 'A ' and were granted promotion as Chargem an II by its judgment dated 4th April, 1983.

In the circu m stances of the case, however, there shall be no order as to costs.

R.S.S. Petitions dismissed.

Summary: The petitioners in the writ petitions were appointed as Supervisors Grade 'A ' in various ordnance factories betwe en 1962 and 1966, in pursuance of circular dated 6th Novembe r, 1962 issued by the Director General of Ordnance Factorie section The circular further provided for promotion from Supervis or 'A ' to Chargeman I1, on completion of two years ' satisfact o ry service.

Summary: 75 Supervisors Grade 'A ' had moved a writ petition in the Allahabad High Court in 1972.

Summary: Their grievance was th at even though quite a large number of Supervisors Grade ' A ' had been promoted to the post of Chargeman Grade II on completion of two years ' satisfactory work, in pursuance of the circular dated 6th November, 1962, they had been di s criminated against and had not been so promoted immediate ly on the expiry of two years ' service.

Summary: The writ petition was contested on the ground that t he promotion from Supervisor Grade 'A ' to Chargeman II we re governed by the Indian Ordnance Factories (Recruitment a nd Conditions of Service of Grade III Personnel) Rules, 19 56 and such promotions could be made only in accordance wi th the procedure prescribed by Rule 8 of these Rules.

Summary: The learned Single Judge dismissed the writ petition on the ground of unexplained laches.

Summary: The Division Bench did n ot find any substance in the submission made on behalf of t he petitioners and dis 93 missed their special appeal.

Summary: According to the Divisi on Bench, it was difficult to read in the circular that aft er two years of satisfactory service there would be automat ic promotion from Supervisor Grade 'A ' to Chargeman II as su ch a view would militate against Rule 12 of the Rules, whi ch provided that no appointment shall be made otherwise than as specified in the Rules.

Summary: It was further held by the Divisi on Bench that even assuming that some Supervisors Grade 'A ' h ad been automatically promoted on completion of two year s ' service, without the recommendation after screening by t he Promotion Committee, as provided in Rule 8, no right wou ld accrue in favour of the appellants inasmuch as such prom o tions would be in the teeth of Rule 12.

Summary: Against the judgment of the Division Bench, Civil Appe al No. 441 of 1981 (Virendra Kumar and Others vs Union of Ind ia and Others, was preferred and this Court by its order dated 2.2.1981 directed that the cases of the 75 appellants in Civil Appeal No. 441 of 1981 be considered f or promotion as Chargeman Grade II and they be so promot ed unless found to be unfit.

Summary: Another group of 125 Supervisors Grade 'A ' got t he benefit of the Circular dated 6.11.1962 in pursuance of an order passed by the Madhya Pradesh High Court on 4th Apr il 1983 on the basis of the judgment of this Court in Civ il Appeal No. 441 of 1981.

Summary: Special Leave Petitions against t he judgment of the Madhya Pradesh High Court were dismissed by this Court.

Summary: The petitioners in the present writ petitions pray th at the same relief may be granted to them as had been grant ed in Civil Appeal No. 441 of 1981.

Summary: In the Civil Miscellaneous petitions now filed in Civ il Appeal No. 441 of 1981, the petitioners, apart from t he prayer for initiating proceedings for contempt against t he respondents for disobedience of the order of this Cou rt dated 2.2.1981, have prayed for orders directing the r e spondents to implement in true letter and spirit the sa id order and to promote the petitioners to the next high er posts after giving them the benefit of the directions of that order.

Summary: Their grievance is that their promotion tant a mounts to implementation of the order of this Court dat ed 2.2.1981 only on paper inasmuch as they have not been gran t ed the difference of back wages and promotion to high er posts on the basis of their back date promotion as Chargem an II.

Summary: Before this Court it has been urged on behalf of the r e spondents 94 that (i) promotions of employees including Supervisor ' A ' were governed by the Rules and in view of Rule 12 no a p pointment could be made otherwise than as specified therei n; (ii) appointments by promotion were to be made according to Rule 8 on the basis of selection list prepared in the mann er provided there in and there was no scope for automat ic promotion merely after expiry of 2 years of continuo us service on the basis of the circular dated 6th Novembe r, 1962; (iii) the circular which was in the nature of an executive instruction prescribed 2 years ' service as Supe r visor 'A ' to make them only eligible for promotion; and (i v) after the issue of the subsequent order dated 28th Decembe r, 1965 and circular dated 20th January, 1966 no Supervis or could claim to have become eligible for promotion merely on completion of 2 years ' satisfactory service and his prom o tion thereafter could be effected only in accordance wi th the normal Rules.

Summary: Dismissing the writ petitions and disposing of t he miscellaneous petitions, it was, HELD: (1) An executive instruction could make a prov i sion only with regard to a matter which was not covered by the Rules and such executive instruction could not overri de any provision of the Rule.

Summary: [103E] B.N. Nagarajan vs State of Mysore, ; 2; Sant Ram Sharma vs State of Rajasthan, 1; Ramchandra Shenkar Deoghar vs The State of Maharashtr a; , ; Union of India vs Somasundaram Viswanat h, [1988] 3 SC.

Summary: Judgments Today 724, referred to.

Summary: (2) Notwithstanding the issue of instructions dated 6 th November, 1962 the procedure for making promotion as la id down in Rule 8 of the Rules had to be followed, and the sa id procedure could not be abrogated by the executive instru c tions dated 6th November 1962.

Summary: [103F] (3) The only effect of the circular dated 6th Novemb er 1962 was that Supervisors 'A ' on completion of 2 year s ' satisfactory service could be promoted by following t he procedure contemplated by Rule 8.

Summary: This circular had inde ed the effect of accelerating the chance of promotion.

Summary: T he right to promotion on the other hand was to be governed by the Rules.

Summary: This right of promotion as provided by the Rul es was neither affected nor could be affected by the circula r. [103F G] 95 (4) After the coming into force of the order dated 28 th December, 1965 and the circular dated 20th January, 19 66 promotions could not be made just on completion of 2 year s ' satisfactory service under the earlier circular dated 6 th November, 1962, the same having been superseded by the lat er circular.

Summary: [106H; 107A B] (5) Circular dated 20th January, 1966 could not be treated to be one affecting adversely any condition of service of Supervisors 'A '.

Summary: Its only effect was that t he chance of promotion which had been accelerated by the circ u lar dated 6th November, 1962 was deferred and made depende nt on selection according to the Rules.

Summary: Though a right to be considered for promotion was a condition of service, me re chances of promotion were not.

Summary: [106G H] Ramchandra Shankar Deodhar vs The State of Maharashtr a, (supra) and Mohammad Shujat Ali & Ors.

Summary: vs Union of India Ors.

Summary: ; , , referred to.

Summary: (6) Supervisors 'A ' who had been promoted before t he coming into force of the order dated 28th December, 1965 a nd the circular dated 20th January, 1966 stood in a cla ss separate from those whose promotions were to be made ther e after.

Summary: The fact that some Supervisors 'A ' had been promot ed before the coming into force of the order dated 20th Jan u ary, 1966 could not, therefore, constitute the basis for an argument that those Supervisors 'A ' whose cases came up f or consideration thereafter and who were promoted in due cour se in accordance with the Rules, were discriminated agains t. [107B C] (7) There were sufficient indications that when Civ il Appeal No. 441 of 1981 was heard by this Court either t he subsequent order dated 28th December, 1965 as well as t he circular dated 20th January, 1966 and the legal consequenc es flowing therefrom were not brought to the notice of t he learned Judges by the learned counsel for the respondent s, or the same was not properly emphasized.

Summary: [105E F] (8) The findings of the Madhya Pradesh High Court in i ts judgment dated 4th April stood approved by this Court wh en the Court dismissed the special leave petition against th at judgment.

Summary: The appellants in Civil Appeal No. 441 of 19 81 therefore deserved to be granted the same benefit as regar ds back wages and further promotion as were given by the Madh ya Pradesh High Court to such of the petitioners before th at Court who were Supervisors 'A ' and were granted promotion as Chargeman I1 by its judgment dated 4th April, 1983.

Summary: [108 H;


Civil Appeal Nos.3677 3680 of 1986 Etc.

From the Judgment and Order dated 10.3.1986 of the Karnataka High Court in W.P. Nos.

4053 to 4056 of 1985.

Shanti Bhushan, Dr. Y.S. Chitale, H.B. Datar, K.R. Nagaraja, 1011 R.S. Hegde, R.B. Datar, S.S. Jawali, B.P. Singh, N.D.B. Raju, R.P., Wadhwani, Aruneshwar Gupta, Swaraj Kaushal, KMM Khan, S.R. Setia, A.T.M. Sampath and C.S. Vaidyanathan for the appearing parties.

The Judgment of the Court was delivered by CHINNAPPA REDDY, J.

Special leave granted in all the cases.

These appeals raise common questions of law and may therefore, be disposed of by a common judgment.

In exercise of its powers under section 63(7) of the , the Central Government specified 50 as the number of 'All India Tourist Vehicle Permits ' which may be granted by the Karnataka State Transport Authority.

By section 24 of Amending Act 47 of 1978, a proviso to section 63(7) was introduced.

We are concerned in these appeals with the vires and interpretation of this proviso.

By the time the proviso came into force, 36 permits had been granted by the Karnataka State Transport Authority and 14 remained to be granted.

There were as many as 495 applications for the grant of these 14 permits.

By an order dated February 1, 1984, the Supreme Court directed the Karnataka State Transport Authority to dispose of these applications.

The State Transport Authority, by its proceedings dated April 30, 1984, granted 11 out of the 14 permits to the Karnataka State Tourism Development Corporation, one permit to the Indian Tourism Development Corporation and two permits to the Karnataka State Road Transport Corporation.

A number of appeals were preferred to the Karnataka State Transport Appellate Tribunal.

The Tribunal by its order dated February 28, 1985 set aside the grant of the two permits in favour of the Karnataka State Road Transport Corporation, set aside the grant of three out of eleven permits to the Karnataka State Tourism Development Corporation and instead granted three permits to private operators and increased the number of permits granted to the Indian Tourism Development Corporation from one to three.

The Tribunal took the view that having regard to the rule of preference enunciated by the proviso to section 63(7), the applications from the 'non preferred ' category had to be excluded as the number of applications from the applicants who were required to be given preference exceeded the number of permits to be granted.

It was on that ground that the grant of two permits to the Karnataka State Road Transport Corporation was set aside, though the Appellate Tribunal had no doubt regarding the resources and ability of that corporation to operate the tourist services.

It was on that ground again, it was so stated by the Tribunal, that some of the appellants 1012 before the Tribunal had to be denied the grant of permits though otherwise they would have been entitled to the grant of permits having regard to their expertise, experience and resources.

The Tribunal rejected their appeals regretfully.

A large number of applicants filed writ petitions in the High Court.

The writ petitions were rejected by the High Court on the ground that the preference contemplated by the proviso to section 63(7) contemplated exclusion of the 'non preferred ' class if sufficient number of applicants from the preferred classes were available.

The decision of this Court in Sher Singh vs Union of India, ; was distinguished on the ground that in that case the court interpreted the word 'preference ' occurring in section 47(1 H) in the back ground of the provisions of Chapters IV and IV A of the Act, under the former of which the State Transport Undertaking would have preference whereas under the latter the State Transport Undertaking would have a monopoly.

The Karnataka State Road Transport Corporation, the Karnataka State Tourism Development Corporation and some other private operators have filed these appeals by special leave of this Court under article 136 of the Constitution.

Shri Shanti Bhushan, learned counsel for the Karnataka State Road Transport Corporation, Dr. Chitley, learned counsel for some of the private operators, Shri Datar, learned counsel for the Karnataka State Tourism Development Corporation, Shri Sampat and Shri Javali, learned counsel for other private operators submitted that the State Transport Appellate Tribunal and the High Court were wrong in distinguishing the decision of this court in Sher Singh 's case and that the true position was that on a correct interpretation of the proviso to sec.

63(7), the preference became operative only if other things were equal.

It was also urged that the fourth sub clause of the proviso offended article 14 and had to be struck down.

Shri C.S. Vaidyanathan, learned counsel for some of the preferred private operators urged that the view taken by the High Court and the State Transport Appellate Tribunal was correct and that the fourth sub clause of the proviso to section 63(7) did not offend article 14 of the Constitution.

We may now glance at some of the relevant provisions of the . section 2(33) defines a "transport vehicle" as meaning a "public service vehicle or a goods vehicle".

A "public service vehicle" is defined in section 2(25) as "any motor vehicle used or adapted to be used for the carriage of passengers for hire or reward, and includes a motor cab, contract carriage, and stage carriage".

A "motor car" is defined in section 2(16) as "any motor vehicle other than a transport vehicle, 1013 omni bus, road roller, tractor, motor cycle or invalid carriage".

A "contract carriage" is defined as, broadly, a motor vehicle which carries a passenger or passengers for hire or reward under a contract. "Tourist vehicle" is defined by section 2(29 A) as "a contract carriage constructed or adapted and equipped and maintained in accordance with such specifications as the State Government may, by notification in the Official Gazette, specify in this behalf".

"Stage carriage" is defined by section 2(29) as "a motor vehicle carrying or adapted to carry more than six persons excluding the driver which carries passengers for hire or reward at separate fares paid by or for individual passengers, either for the whole journey or for stages of the journey." Chapter IV, sections 42 to 68, deals with "Control of Transport vehicles".

Section 42 prescribes permits for the use of a transport vehicle in any public place.

Sections 46, 47 and 48 deal with the grant of stage carriage permits.

Section 47(1) prescribes the matters to be taken into consideration in granting stage carriage permits and the first consideration, naturally, is "the interest of the public generally.

" The proviso to section 47(1) prescribes that, other things being equal, a registered cooperative society and a person possessing a licence for driving transport vehicles shall be given preference over individual owners in granting stage carriage permits.

Section 47(1 A) enables the State Government to reserve a certain percentage of stage carriage permits for the Scheduled Castes and Scheduled Tribes.

Section 47(1 C) enables the State Government to reserve a certain percentage of stage carriage permits to persons belonging to economically weaker sections of the community.

Section 47(1 H) prescribes that notwithstanding anything contained in the section, an application for stage carriage permit from a State Transport undertaking for operating in any inter State route shall be given preference overall other applications, provided, of course, the authority is satisfied that the State Transport Undertaking would be able to operate in the inter State route without detriment to its responsibility for providing efficient and adequate road transport services in any notified area or notified route.

Sections 49, 50, 51 deal with the grant of contract carriage permits.

Section 52 and 53 deal with private carrier 's permit and sections 54, 55 and 56 deal with public carrier 's permit.

Section 57 deals, generally with the procedure to be followed in applying for and granting permits.

Section 63(1) stipulates, broadly, that a permit granted by the Regional Transport Authority of any one region shall not be valid in any other region, unless the permit has been countersigned by the Regional Transport Authority of that other region, and a permit granted in any one State shall not be valid in any other State unless countersigned by the State Transport Authority of 1014 that other State or by the Regional Transport Authority concerned.

Section 63(7) is the provision with whose interpretation and vires we are primarily concerned in this case.

It is as follows: "(7) Notwithstanding anything contained in sub section(1) but subject to any rules that may be made under this Act, any State Transport Authority may, for the purpose of promoting tourism, grant permits valid for the whole or any part of India, in respect of such number of tourist vehicles as the Central Government may, in respect of that State, specify in this behalf, and the provisions of Sections 49, 50, 51, 57, 58, 59, 59 A, 60, 61 and 64 shall, as far as may be, apply in relation to such permits: Provided that preference shall be given to applications for permits from (i) the India Tourism Development Corporation; (ii) a State Tourism Development Corporation; (iii) a State Tourist Department; (iv) such operators of tourist cars, or such travel agents, as may be approved in this behalf by the Ministry of the Central Government dealing in tourism.

" Section 68 enables the State Government to make rules for the purpose of carrying into effect the provisions of Chapter IV.

Chapter IV A relates to "special provisions relating to State Transport Under takings.

" Sections 68 C, 68 D and 68 E provide for the preparation and publication of schemes of road transport service to be provided by State Transport Undertakings, the procedure to be followed, etc.

Section 68 F(1) prescribes that where, in pursuance of an approved scheme, a State Transport Undertaking applies for a stage carriage permit, a contract carriage permit or a public carrier 's permit in respect of a notified area or notified route, such permit shall be granted to the State Transport Undertaking by the State Transport Authority in a case where the said area or route lies in more than one region and the Regional Transport Authority in any other case.

This is to be so notwithstanding anything to the contrary contained in Chapter IV.

1015 The general scheme of the Act in the matter of grant of permits for stage carriages and contract carriages appears to be that except in the case of a notified route or notified area, where under section 68 F(1) the permit has to be necessarily granted to the State Transport Undertaking, in all other cases, the claims of all eligible applicants must be considered on merits, applying the rules of preference wherever the claims are approximately equal.

Except in the case of a notified route or notified area, the application of no applicant may be altogether excluded from consideration on the sole ground that another applicant is entitled to preference under one or the other provisions of the statute.

The proviso to section 47(1) for example, provides that other conditions being equal, an application for a stage carriage permit from a cooperative society or a person holding a valid licence for driving transport vehicles shall as far as may be, be given preference over applications from individual owners.

There is no problem here since the proviso itself says that the rules of preference will apply only if other conditions are equal.

Section 47(1 H) also enunciates a rules of preference and says that an application for stage carriage permit from State Transport Undertaking for operating in any inter State route shall be given preference overall other applications.

While it is true that section 47(1 H) does not expressly refer to "other things being equal", it appears to be implicit in the provision that other things are equal.

The rule is a rule of preference and not a rule of exclusion.

Section 47(1 H) does not say, for example, like section 68 F(1) that the permit shall be granted to the State Transport Undertaking.

That is how section 47(1 H) was interpreted in Sher Singh 's case.

Desai, J., speaking for the court observed: "However, when an application for a permit is made under Chapter IV, the Undertaking has to compete with private operators who may as well make an application for permit.

When the Undertaking applies for permit under Chapter IV, it must satisfy the Regional Transport Authority that it is better suited than the private operator to render transport facility to the travelling public.

47(1 H) however, provides that in the case of inter State route, the Undertaking will have preference in the matter of stage carriage permit.

Does preference of this nature deny equality guaranteed by article 14? The expression 'preference ' amongst others means prior right, advantage, precedence etc.

But how would it be possible to give precedence to one over the other.

It signifies that other things being equal, 1016 one will have preference over the others.

When an application for a stage carriage permit is being processed as required by sec.

47, the application of the Undertaking for an inter State route shall be examined as application of any other private operator.

Their merits and demerits must be ascertained keeping in view the requirements of (a) to (f) of section 47(1) and after comparing the merits and demerits of both, not with the yard stick of mathematical accuracy, but other things being equal, the application of the Undertaking will have preference over others.

Qualitative and quantitative comparison on broad features of passenger transport facility such as fleet, facilities to travelling public and other relevant consideration may be undertaken and after balancing these factors other things being equal, the application of the Undertaking shall be given preference over other applicants.

There is no question of eliminating private operators merely because the Undertaking applies for a stage carriage permit under Chapter IV.

That situation is catered to under Chapter IV A.

In an application under Chapter IV, Corporation has to enter the arena like any other applicant, face the competition and come up to the level of other private operators intending to obtain stage carriage permits and then in respect of the route in question claim preference.

Would this statutory provision violate equality guaranteed by article 14? The answer is obviously in the negative." . . . . . . . . . . . . . . . . . ". . . let it be made clear that while considering the application for stage carriage permit under section 47, the private operator has an equal chance to get a permit even on inter State route if it shows that the Undertaking is either unable to provide efficient and economical service or that the private operator is better equipped to render the same.

Preference in this context would mean that other things generally appearing to be qualitatively and quantitatively equal though not with mathematical accuracy, statutory provision will tilt the balance in favour of the Undertaking.

" What has been said by the Court with reference to the preference 1017 provided for in section 47(1 H) applies with equal force to the preference provided for by the proviso to section 63(7).

In the judgment under appeal, the High Court attempted to distinguish the decision of this Court in Sher Singh 's case on the ground that any other interpretation would have wiped out the difference between Chapter IV and Chapter IV A.

We do not think the High Court was right in distinguishing the case in that fashion.

The reference to Chapter IV A there was for the purpose of contrasting the exclusion contemplated by section 68.F(1) with the preference to be given under section 47 (1 H) and so to interpret the word 'preference ' occurring in section 47(1 H).

We have no hesitation in saying that all that has been said about 'preference ' in Sher Singh 's case in relation to section 47(1 H) applies mutatis mutandis to the preference contemplated by the proviso to section 63(7).

Since the State Transport Appellate Tribunal and the High Court have failed to consider the merits of the claims of the Karnataka State Road Transport Corporation and the private operators who did not get a certificate of approval from the Central Government, because of the rule of preference contained in proviso to section 63(7), the proper course for us is to set aside the orders of the State Transport Appellate Tribunal and the High Court and to direct the State Transport Appellate Tribunal to re hear the appeals and dispose them of in accordance with law, after considering the claims of the eligible applicants in the manner indicated in Sher Singh 's case and now.

A question was raised before us about the vires of the fourth clause of the proviso to section 63(7).

Clauses (i) to (iii) of the proviso providing for preference to be given to applications for permits from the Indian Tourism Development Corporation, the State Tourism Development Corporation and the State Tourist Department were not questioned, but the preference provided for by clause (iv) and to be given to "such operators of tourist cars, or such travel agents, as may be approved in this behalf by the Ministry dealing in tourism" was questioned as an infringement of article 14 of the Constitution.

We find it difficult to sustain this clause and uphold its validity.

The very idea that a Tribunal created by a statute for the purpose of considering rival claims and granting permits on merits should be compelled to give peference to persons securing the approval of the executive Government, appears to us to be arbitrary and unreasonable.

To the extent that it goes, the clause pre empts the decision of the designated tribunal by executive discretion.

It was said that the clause contained sufficient guidelines for the exercise of discretion in granting approval by the Central Government.

It was said that the object of the proviso to section 1018 63(7) was very obviously the promotion of tourism and the approval of the Central Government would be given to those operators of tourist cars and travel agents who may be expected to serve that purpose.

It is difficult to agree with these submissions.

In the first place, clause (d), it is seen, provides for a preference, not to operators of tourist vehicles but to operators of tourist cars and travel agents.

Though the permits to be granted are for tourist vehicles, the preference is confined to operators of tourist cars and travel agents.

One may understand a preference granted to operators of tourist vehicles but it is difficult to understand why preference should be given to operators of tourist cars in the matter of granting permits for tourist vehicles which may well be omnibuses required to travel long distances.

Surely it cannot be said that experience of running a tourist taxi is a better qualification than running a tourist bus when the question of granting permits for tourist vehicles arises.

The High Court of Karnataka tided over the difficulty by interpreting the expression "tourist cars" as meaning "tourist vehicles".

It is difficult to agree with the interpretation of the Karnataka High Court having regard to the definitions of "Transport Vehicle" and "motor car" contained in section 2(29 A) and section 2(16) respectively.

While a tourist vehicle may include a motor car, a motor car, by definition, excludes an omnibus.

In the second place, we have no indication as to the manner in which the approval of the Central Government is to be sought and granted and the considerations which are expected to weigh with the Central Government.

Shri C.S. Vaidyanathan, learned counsel for the 'Preferred ' Operators has placed before us 'a Scheme for granting approval to tourist transport operators in India. ' The scheme makes no reference to the proviso to sec.

63(7) of the .

On the other hand, it mentions that approval carries with it certain privileges, such as, allotment of ex STC vehicles and that it is, therefore, necessary that the department is able to exercise some control on the functioning of these operators.

The terms and conditions to be fulfilled are that 'the party must have been in the car hire business for a period of 2 years with the help of cars of indigenous make or cars obtained from elsewhere and should have sufficient contacts with travel agencies hoteliers/airlines, etc.

and should be financially sound or that they should be owning and operating five vehicles as tourist taxies of either indigenous make or acquired from elsewhere regardless of the period in the car hire business or that they should be ex Defence Service personnel, who satisfy certain prescribed conditions.

It is seen that the scheme excludes omnibus operators and requires applicants to have 1019 either two years ' experience in the car hire business with contacts in the tourist business or to own five tourist taxies.

There are no guidelines as to how the discretion to grant approval is to be exercised once the minimum conditions are fulfilled.

The matter appears to be left to the total discretion of the Central Government, virtually as we said, pre empting the decision of the statutory tribunal.

We think that clause (iv) of the proviso to section 63(7) is unconstitutional and we so declare it.

In the result we set aside the orders of the State Transport Appellate Tribunal and the High Court and direct the State Transport Appellate Tribunal to hear the appeals in the light of what we have said.

P.S.S. Appeals allowed.

Summary: Sub section (7) of section 63 of the empowers the State Transport Authority, for the purpose of promoting tourism, to grant permits valid for the whole or any part of India, in respect of such number of tourist vehicles as the Central Government may in respect of that State specify in this behalf.

Summary: A proviso to that sub section, introduced by section 24 of the Amending Act of 1978 laid down that preference shall be given to applications for permits from (i) the India Tourism Development Corporation; (iii) a State Tourism Development Corporation; (iii) a State Tourist Department, and (iv) operators of tourist cars, or travel agents, approved in this behalf by the Central Government.

Summary: There were as many as 495 applications before the Karnataka State Transport Authority for the grant of 14 All India Tourist Vehicle permits.

Summary: By its proceedings dated April 30, 1984, the Authority granted 11 permits to the Karnataka State Tourism Development Corporation, one to the Indian Tourism Development Corporation and two to the Karnataka State Road Transport Corporation.

Summary: 1009 On appeals being preferred, the Karnataka State Transport Appellate Tribunal, by its order dated February 28, 1985 set aside the grant of two permits in favour of the Karnataka State Road Transport Corporation, three out of eleven permits to the Karnataka State Tourism Development Corporation, and instead granted three permits to private operators and increased the number of permits granted to the Indian Tourism Development Corporation from one to three, on the premises that in view of the rule of preference enunciated by the proviso to section 63(7) the applications from the non preferred category had to be excluded as the number of applications from the applicants who were required to be given preference exceeded the number of permits to be granted.

Summary: Though some of the appellants before the Tribunal had better expertise, experience and resources they did not succeed.

Summary: The High Court rejected the writ petitions on the ground that the rule of preference contained in the proviso to section 63(7) contemplated exclusion of the 'non preferred ' class, if sufficient number of applicants from the preferred classes were available.

Summary: In these appeals by special leave, it was contended for the appellants that on a correct interpretation of the proviso to section 63(7) the preference became operative only if other things were equal.

Summary: It was also urged that the fourth sub clause of the proviso offended article 14 of the Constitution, and had to be struck down.

Summary: Allowing the appeals, the Court, ^ HELD: 1.1 The rule contained in the proviso to section 63(7) of the is a rule of preference and not a rule of exclusion, for it does not say that the permit shall be granted to the categories of operators specified therein.

Summary: The claims of eligible applicants must be considered on merits, applying the rule of preference whenever the claims are approximately equal.

Summary: The application of an applicant is not to be altogether excluded from consideration on the sole ground that another applicant is entitled to preference.

Summary: Though the proviso does not expressly refer to other things being equal, the principle is very much implicit in it.

Summary: [1015B E] 1.2 What has been said by this Court in Sher Singh vs Union of India; , , about preference in relation to section 47(1 H) applies mutatis mutandis to the preference contemplated by the proviso to section 63(7) in the instant case.

Summary: [1017C] 1010 2.1 Clause (iv) of the proviso to section 63(7) is arbitrary, unreasonable and unconstitutional.

Summary: There is no indication in it as to the manner in which the approval of the Central Government is to be sought and granted and the considerations which are expected to weigh with the Central Government.

Summary: It compels a tribunal, created by a statute for the purpose of considering rival claims and granting permits on merits, to give preference to persons securing the approval of the Executive Government.

Summary: To the extent the clause goes, it pre empts the decision of the designated tribunal by executive discretion.

Summary: [1017E G] 2.2 The clause provides for a preference not to operators of tourist vehicles but to operators of tourist cars and travel agents, though the permits to be granted are for tourist vehicles.

Summary: It is difficult to understand why preference should be given to operators of tourist cars in the matter of granting permits for tourist vehicles which may well be omnibuses required to travel long distances.

Summary: [1018B C] 2.3 The experience of running a tourist taxi cannot be said to be a better qualification than running a tourist bus when the question is of granting permits for tourist vehicles.

Summary: [1018C D] 3.

Summary: Having regard to the definitions of 'tourist vehicle ' and 'motor car ' contained in section 2(29 A) and section 2(16) respectively of the Act, the expression 'tourist cars ' cannot be said to mean 'tourist vehicles '.

Summary: While a tourist vehicle may include a motor car, a motor car, by definition, excludes an omnibus.

Summary: [1018D E] In the instant case, the State Transport Appellate Tribunal and the High Court have failed to consider the merits of the claims of the Karnataka State Road Transport Corporation and the private operators who did not get a certificate of approval from the Central Government, because of the rule of preference contained in proviso to section 63(7).

Summary: Their orders are, therefore, set aside.

Summary: The State Transport Appellate Tribunal is directed to re hear the appeals and dispose them of in accordance with law.

Summary: [1017C E]