THE HIGH COURT OF DELHI AT NEW DELHI SUBJECT : SERVICE MATTER Judgment delivered on: 2nd February, 2011 WP(C) No.5774 of 1998

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1 THE HIGH COURT OF DELHI AT NEW DELHI SUBJECT : SERVICE MATTER Judgment delivered on: 2nd February, 2011 WP(C) No.5774 of 1998 MAHINDER KUMAR...Petitioner Through: Mr.G.D. Gupta, Sr.Advocate with Mr.Vishal Anand, Advocate versus DELHI FINANCIAL CORPORATION... Respondent Through: Mr.V.K. Rao, Sr.Advocate with Mr.Ayushman Kumar, Advocate CORAM: HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE SANJIV KHANNA DEEPAK MISRA, CJ 1. By this writ petition, the petitioner, Deputy General Manager (Technical) in Delhi Financial Corporation (for short the Corporation?) established under the State Financial Corporation Act, 1951, has challenged the order dated 24th April, 1996, purported to have been passed in exercise of the powers conferred on the authority by virtue of Regulation 20 of the Delhi Financial Corporation (Staff) Regulations, 1961 (for brevity 1961 Regulations ) pre-maturely retiring him on the foundation that the Regulation 20 is unconstitutional and once the provision is declared as unconstitutional, the acts undertaken on the base or bedrock of the said provision deserves to be lanceted and a fall out of that all the consequential benefits are to follow. 2. On a perusal of the pleadings in the writ petition, it is clear as crystal that the petitioner has been compulsorily retired at the age of 51 years placing reliance on the Regulation 20(1) of the 1961 Regulations. It is contended in the petition that the said Regulation is arbitrary and hit by Article 14 of the Constitution of India inasmuch as there is no guidance in the said provision and on a keener scrutiny, it would be manifest that unguided, unfettered and unbridled power has been conferred on the authority to pre-maturely retire a

2 person which invites the frown of the equality clause as enshrined in Article 14 of the Constitution of India. 3. Mr.Gupta, learned senior counsel appearing for the petitioner, submitted that he is not inclined to advance any other contention or assail the order on any other substratum like how the power has been exercised inasmuch as the authority bereft of the provision or sans the power could not have exercised the power. The learned counsel would submit that if the source of power is declared as ultra vires, the exercise thereof as a sequitur would automatically get annulled. 4. Mr.Rao, learned senior counsel appearing for the Corporation, after referring to the counter affidavit, has submitted that the provision does not play foul of Article 14 of the Constitution of India since the concept of public interest inheres in the said provision. It is his further submission that if the entire career graph of the petitioner is scrutinized, there can be no trace or shadow of doubt that the present case is one where the petitioner deserves to be compulsorily retired from service. 5. Regard being had to the submissions raised at the Bar, the heart of the matter is whether the relevant Regulation in question is invalid or stands the test of Article 14 of the Constitution of India. To appreciate the controversy, we think it apposite to reproduce Regulation 20(1) of the 1961 Regulations. It reads as follows: - An employee shall retire at fifty eight years of age provided that the Board may at its discretion, sanction from time to time the extension of his employment for a period not exceeding one year at a time but in no case beyond the age of sixty, and provided further that the Corporation may, at its discretion, retire an employee on completion of 25 years of service or 50 years of age. 6. Mr.Gupta, learned senior counsel for the petitioner, has commended us to the decision rendered in Senior Superintendent of Post Office and others v. Izhar Hussain, AIR 1989 SC In the said decision, the challenge was to the validity of Rule 2(2) of the Liberalised Pension Rules, 1950 on the ground that unguided powers were conferred on the government and hence, the said provision was ultra vires Articles 14 and 16 of the Constitution. To have a complete picture, we think it apt to reproduce the said provision: Rule 2(2) - An Officer may retire from service any time after completing 30 years' qualifying service provided that he shall give in this behalf a notice in writing to the appropriate authority at least 3 months before the date on

3 which he wishes to retire. Government may also require an officer to retire, any time after he has completed 30 years qualifying service provided that the appropriate authority shall give, in this behalf a notice in writing to the officer at least three months before the date on which he is required to retire, or three months' pay and allowances in lieu of such notice. While dealing with the validity of the said provision, their Lordships have expressed the view as follows: - 4. Fundamental Rule 56(j) while granting absolute right to the Government provides that such power can only be exercised in 'Public Interest'. This guide-line is a sufficient safeguard against the arbitrary exercise of power by the Government. The object of this Rule is to chop-off the dead-wood. Rule 2(2) of the Pension Rules on the other hand provides no guide-line and gives absolute discretion to the Government. There is no requirement under the rule to act in 'Public Interest'. A person who joins Government service at the age of 21 years can be retired at the age of 51/52 years as by then he must have completed 30 years of qualifying service. Although the rules are mutually exclusive and have been made to operate in different fields but the operational effect of the two rules is that a Government servant who has attained the age of 55 years can be retired prematurely under F. R. 56(j) only on the ground of 'Public Interest' whereas another Government servant who is only 51 and has completed 30 years of qualifying service, can be retired at any time at the discretion of the Government under Rule 2(2) of the Pension Rules. 5. The object of Rule 2(2) of Pension Rules may also be to weed-out those Government servants who have outlived their utility but there is no guide-line provided in the Rule to this effect. The Rule gives unguided discretion to the Government to retire a Government servant at any time after he has completed 30 years of qualifying service though he has a right to continue till the age of superannuation which is 58 years. Any Government servant who has completed 30 years of qualifying service and has not attained the age of 55 years can be picked-up for premature retirement under the Rule. Since no safeguards are provided in the Rule, the discretion is absolute and is capable of being used arbitrarily and with an un-even hand. We, therefore, agree with the Division Bench of the High Court and hold that Rule 2(2) of the Pension Rules is ultra-vires Articles 14 and 16 of the Constitution of India. (Emphasis added) 7. A two-judge Bench of the Apex Court in Union of India and others v. Shaik Ali, AIR 1990 SC 450, considered the validity of paragraph 620(ii) of the Railway Pension Manual which reads as follows: 620(ii) The authority competent to remove the railway servant from service may also

4 require him to retire any time after he has completed thirty years? qualifying service provided that the authority shall give in this behalf a notice in writing to the railway servant, at least three months before the date on which he is required to retire or three months? pay and allowances in lieu of such notice. Their Lordships placing reliance on Izhar Hussain s case held as follows: In Izhar Hussain s case the Court was concerned with F.R.56(j) and Rule 2(2) of the Pension Rules. F.R.56(j) is substantially the same as Rule 2046(h)(ii) of the Code and Rule 2(2) is substantially the same as paragraph 620 with which we are concerned. Since Rule 2(2) has been struck down as violative of Article 14 of the Constitution, paragraph 620(ii) would meet the same fate. After declaring the said provision their Lordships proceeded to state thus: 7. Before we part we may observe that the concerned authorities will do well to amend Rule 2(2) of the Pension Rules and Paragraph 620(ii) referred to above so as to incorporate therein the requirement of public interest, that is to say, the premature retirement on completion of qualifying service of thirty years can be ordered in public interest only. 8. In Uttar Pradesh Cooperative Sugar Factories Federation Ltd. v. P.P. Gautam and others, (2008) 17 SCC 365, the decision of the Allahabad High Court declaring the second proviso to sub-regulation (1) of Regulation 21 of the U.P. Cooperative Sugar Factories Federation Limited Employees Services Regulations, 1988 as unconstitutional was approved by the Apex Court placing reliance on Izhar Hussain (supra). The provision that was under consideration read as follows: - An employee shall retire on attaining the age of 60 years: Provided that an employee, who attains the age of superannuation on any day other than the first day of any calendar month shall retire on the last day of that month: Provided further that the appointing authority may, at any time, by giving three months? notice or pay in lieu thereof, to any employee (whether temporary or permanent), without assigning any reason, require him to retire after he attains the age of fifty years or such employee may, by giving three months? notice to the appointing authority voluntarily retire at any time after attaining the age of forty-five years or after he has completed twenty years of service under the establishment of the Federation. After referring to the said provision, their Lordships have held thus The High Court has come to the conclusion that the aforesaid proviso confers an unbridled power on the employer to require an employee to retire on his attaining the age of 55 years and conferment of such unbridled power is violative of Article 14 of the Constitution. It is no doubt true that the order of compulsory retirement is not penal in nature, and

5 every employer has a right to require the employee to compulsorily retire in accordance with the relevant service regulation, provided the noncontinuance of service of the employee is held to be in public interest. The impugned regulation, however, does not indicate that the power under the second proviso could be exercised in public interest. To our query as to whether the employer has issued any guidelines for the exercise of power under the second proviso, and has indicated that such power could be exercised only in public interest, the answer was in the negative. In the absence of any such guidelines, and in the absence of such provision in the proviso itself, the conclusion of the High Court that it confers an unbridled power and is violative of Article 14 is unassailable. In fact, a decision of this Court on somewhat similar provisions in Senior Supdt. of Post Offices v. Izhar Hussain fully supports the conclusion of the High Court. (Emphasis supplied) 9. The present Regulation, in our considered opinion, is similar to the Regulations which have been struck down as ultra vires by the Apex Court in the aforesaid three decisions. It suffers from the same fallibility and vulnerability, which has repeatedly prompted and compelled the Supreme Court to strike down the unguided power of compulsory retirement. 10. Mr.Rao, learned counsel for the respondent, has commended us to a two- Judge Bench decision in National Aviation Company of India Ltd. v. S.M.K. Khan, AIR 2009 SC 2637 to highlight that merely because the words at its discretion have been used, the provision cannot be treated as unconstitutional. At the very outset, we may state with profit that the constitutionality of the provision was not the subject matter of assail in the aforesaid case. In paragraph 9, their Lordships have opined thus 9. The learned counsel for the respondent next submitted that recourse to compulsory retirement? should be only in public interest?; and that in this case, as neither the regulations nor the order of compulsory retirement referred to public interest, the compulsory retirement was vitiated. This contention has no merit. Public interest is used in the context of compulsory retirement of Government servants while considering service under the state. The concept of public interest would get replaced by institutional interest? or utility to the employer? where the employer is a statutory authority or a Government company and not the Government. When the performance of an employee is inefficient or his service is unsatisfactory, it is prejudicial or detrimental to the interest of the institution and is of no utility to the employer. Therefore compulsory retirement can be

6 resorted to (on a review of the service on completion of specified years of service or reaching a specified age) in terms of relevant rules or regulations, where retention is not in the interests of the institution or of utility to the employer. It is however not necessary to use the words not in the interests of the institution? or service not of utility to the employer? in the order of compulsory retirement as the regulation provides that no reason need be assigned. 11. On a perusal of the aforesaid paragraph, it is quite vivid that the constitutionality of the regulation was not challenged and their Lordships have only interpreted the provision. 12. In our considered opinion, the controversy is covered by the decisions in Izhar Hussain (supra), Uttar Pradesh Cooperative Sugar Factories Federation Ltd. (supra) and S.M.K. Khan (supra). In view of the aforesaid, we have no hesitation in holding that unfettered, unbridled and unguided power has been conferred on the authority to pass the order of compulsory retirement and, accordingly, we declare the said provision to be unconstitutional. 13. At this juncture, we may note with profit that we have been apprised at the Bar that the said regulation has been deleted. On a query being made as to what prevailed on the respondent to delete the said provision, Mr. Rao, learned senior counsel, submitted that the respondents have taken the decision in their own wisdom. We have noted so only for the sake of completeness. 14. Presently, to the issue of grant of necessary relief. Once the regulation is declared as ultra vires, the sequitur has to be axing of the order of pre-mature retirement and, accordingly, we so direct. Be it noted, in the meantime, the petitioner has attained the age of superannuation. Therefore, despite our quashment of the order of pre-mature retirement, we are not inclined to grant full back wages to the petitioner. As is perceptible from the material on record, he was compulsorily retired in April, 1996 and attained the age of superannuation in Regard being had to the totality of circumstances, we are inclined to restrict the back wages to 40% of the dues that would have been earned by the petitioner with the pay revision. However, he shall be entitled to all consequential benefits including pension and any other benefits under the Scheme as he would be deemed to be in service for all purposes. Be it clarified, all other benefits would also include medical

7 facilities because he was deprived from opting for the same as he was visited with the order of pre-mature retirement prior to the expiry of the date of option. However, we may hasten to clarify that if for some other reason, he is not entitled to get the medical benefits under the scheme, the same may be brought to his notice. Needless to emphasize, the benefits that have already been availed of by the petitioner because of compulsory retirement shall be adjusted towards 40% back wages. 15. The writ petition is, accordingly, allowed in part. There shall be no order as to costs. Sd./- DEEPAK MISHRA,CJ Sd./- SANJIV KHANNA, J