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CASE NO.:

Appeal (civil) 4481 of 2007

PETITIONER:

M.P. State Coop. Bank Ltd., Bhopal

RESPONDENT:

Nanuram Yadav & Ors

DATE OF JUDGMENT: 25/09/2007

BENCH:

Tarun Chatterjee & P. Sathasivam

JUDGMENT:

JUDGMENT

CIVIL APPEAL NO. 4481 OF 2007

(Arising out of SLP (C) No. 12236 OF 2006)

WITH

CIVIL APPEAL NO. 4483 OF 2007

(Arising out of SLP (C) NO. 19499 OF 2006)

AND

CIVIL APPEAL NO. 4482 OF 2007

(Arising out of SLP (C) NO. 3979 OF 2007)

P. Sathasivam, J.

1) Leave granted in all the special leave petitions.

2) How public appointments to be made, whether Lokayukt

constituted under the M.P. Lokayukt Evam Up-Lokayukt

Adhiniyam, 1981 has jurisdiction to go into the appointment

of employees of the M.P. State Cooperative Bank and whether

60 clerks-cum-typists appointed by the said Bank were in

accordance with the service rules are the questions to be

decided in these appeals?

3) The Madhya Pradesh State Cooperative Bank Ltd.,

through its Managing Director challenges the order dated

19.04.2006 passed by the Division Bench of High Court of

Madhya Pradesh at Jabalpur in Writ Petition No. 1421 of

2005, by way of Special Leave Petition No. 12236 of 2006

before this Court. Questioning the very same order, some of

the writ petitioners, numbering 26, who earlier approached the

High Court, filed Special Leave Petition No. 19499 of 2006

before this Court. The other writ petitioners, numbering 27,

who also agitated the matter before the High Court

questioning certain directions filed another special leave

petition No. 3979 of 2007 before this Court. Inasmuch as the

issues raised and challenge in all these petitions relate to the

very same order of the High Court and are interconnected,

they are being disposed of by the following common judgment.

4) The brief facts, in nutshell, are as follows:

On 24.06.1994, the Managing Director of the M.P. State

Cooperative Bank Ltd., (hereinafter referred to as 'the Bank')

requested the Cooperative Commissioner and Registrar of the

Cooperative Societies, M.P., Bhopal for appointment of 60 ad-

hoc clerks-cum-typists in the Bank. By letter dated

29.06.1994, conditional sanction was granted for appointment

of 40 clerks-cum-typists on ad-hoc basis for 6 months

mentioning that in the meantime the Bank has to take steps

to fill up the vacant posts by issuing advertisement and

comply the Rules keeping in view the reservation under the

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Government Rules. Again, by letter dated 25.10.1994, the

Managing Director of the Bank requested for sanctioning the

appointment of another 20 clerks-cum-typists on ad-hoc

basis. By letter dated 11.11.1994, the Cooperative

Commissioner and Registrar sanctioned the appointment of

another 20 clerks-cum-typists on ad-hoc basis for 6 months

on the condition as mentioned in the earlier letter dated

29.06.1994.

5) Pursuant to the aforesaid sanction letters, on

31.01.1995, the Bank appointed 60 clerks-cum-typists on ad-

hoc basis for a period of six months. After appointment, two

employees left the services of the Bank.

6) After expiry of six months, as envisaged under Rule 22(a)

of the Staff Service Rules, 1976, all the appointed persons

(writ petitioners before the High Court) were required to

appear in the written examination so that they could be

appointed for a period of one year as probationers. All of them

took the written examination and became successful. Those

persons were required by the Bank to appear for an interview

on 21.07.1995 before the Selection Committee. The Selection

Committee, after satisfying itself, recommended their names

for appointment on regular basis. All the appointed persons

were asked by the Bank to furnish service-cum-security Bond

for a period of three years with a deposit of Rs.5,000/- as

security in the form of FDRs. All the appointees complied with

the said condition. While they are discharging their duties,

taking into consideration of their performance etc., the

appointing authority, under Rule 14(b), confirmed their

services on the post of clerks-cum-typists on 30.10.1996.

When the matter stood thus, according to the writ petitioners,

all of a sudden, without any notice or assigning any reason,

the Managing Director of the Bank issued termination order

under Rule 61 of the Rules on 27.10.1997. Aggrieved by those

orders, the affected persons approached the High Court. It is

also the claim of the affected persons that after getting the

order of termination they came to know that the termination

order was issued by the Bank on the basis of the direction

dated 01.08.1997 issued by the Commissioner Cooperatives-

cum-Registrar to the Managing Director of the Bank on the

foundation that the Lokayukt had found 58 clerks-cum-typists

had been illegally appointed on the post, hence it was

imperative to terminate their services taking aid of Rule 61 of

the Staff Service Rules.

7) The Division Bench of the High Court, by impugned

order, while allowing the writ petition, came to the following

conclusion:-

"i. The Rule 61 of the Staff Selection Rules is ultra-

vires and unconstitutional.

ii. The order dated 04.02.2005 passed by the

Tribunal vide Annexure.P4 is quashed.

iii. The issue as to the status earned by the writ

petitioners is remanded to the M.P. Cooperative

Tribunal for adjudication.

iv. The M.P. Cooperative Tribunal shall finalise the lis

within a period of four months from the date of

order."

Questioning the above-said conclusions/directions, as stated

earlier, the Bank as well as their employees/writ petitioners

filed the above appeals.

8) We heard Mr. S.K. Gambhir and Mr. S.K. Dubey, learned

senior counsel and Mr. Krishna Mohan Shukla, learned

counsel for the appellant and Mr. B.S. Banthia and Mr.

Ramesh Babu M.R., learned counsel for the respondents.

9) Mr. S.K. Gambhir, learned senior counsel, appearing for

the Bank, raised the following contentions:

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(i) The appointment of 58 employees is not only contrary to

the directions of the Commissioner Cooperative and

Registrar, Cooperative Societies dated 29.6.1994 for

holding regular appointments after advertisement etc.

but also contrary to Rule 21 of the Rules;

(ii) The process adopted was a farce as only these candidates

were put to written test and interview in which none of

them was unsuccessful. The selection itself was a result

of favourtism and nepotism and contrary to the

provisions of Arts. 14 and 16 of the Constitution of India;

(iii) When the initial appointment itself was illegal and void

ab initio, such appointments could not be made regular

and there was no question to determine their status;

(iv) Lokayukt, who has jurisdiction upon enquiry, found that

all the appointments were farce, pre-planned and

intended to help the favoured persons. Since the said

report has not been set aside, the recommendation of the

Lokayukt is binding on the Government;

(v) The validity of Rule 61 was not called for because the

employees were not entitled to any notice and their

services deserve to be dispensed with straightaway.

10) Mr. S.K. Dubey, learned senior counsel and Mr. Krishna

Mohan Shukla, learned counsel, appearing for the employees,

raised the following contentions:

(i) The High Court having found Rule 61 invalid, there is no

need to remit the matter to the Tribunal to find out the

status of employees;

(ii) Lokayukt has no jurisdiction to go into the appointment

of these employees;

(iii) Inasmuch as the employees concerned were subjected to

written test, interview, executed security bond,

successful in their probation period, satisfied Staff

Service Rules, the order of the Managing Director

terminating their services without notice and enquiry

merely based on the direction of the Registrar of the

Cooperative Societies, cannot be sustained;

(iv) In any event, the Registrar is obliged to examine the

report of the Lokayukt before accepting the

recommendations made therein;

11) We have considered the rival contentions and the

relevant materials.

12) Before analyzing the claim of both the parties, it is useful

to refer to relevant provisions of the Staff Service Rules of

Madhya Pradesh Rajya Sahakari Bank Maryadit which were

approved by the Registrar, Co-operative Societies, M.P. Bhopal

and made applicable with effect from 19th November, 1976.

Chapter-3 deals with 'Classification of Employees'. Rule 3 (b)

defines "Permanent Employees" which reads as follows:

"3(b) A "Permanent Employee" means an employee who has

been appointed as permanent employee or who has been

confirmed on a vacant permanent post as such."

13) Chapter-6 deals with selection of personnel in the Bank.

Rules 21 and 22(a), which are relevant, read as follows:

"21. All vacancies falling within the purview of the

employment exchange (Notification of vacancies) Act, 1959

shall be duly notified to the employment exchange

concerned. The post/posts may also be advertised in the

local or All India Newspapers at the option of the appointing

authority. The advertisement should give scales of pay,

dearness allowance, the essential and preferential

qualifications, age limit etc."

" 22(a) Candidates for the posts in Grade Vth and such other

posts shall have to undergo a written test in the manner

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prescribed by the 'Staff Committee'. Candidates passing at

such test shall be eligible for appointment only after the

selection at personal interview by the 'Selection Committee'

consisting of Chairman of the Bank or his nominee Director,

Registrar, Cooperative Societies M.P. or his nominee not

below the rank of Joint Registrar, Cooperative Societies, M.P.

& Managing Director of the Bank for deciding the selection of

employees.

Provided further that for the selection of technical staff Chief

Engineer of the Bank shall additional member of the

committee. It is also provided that when elected board

ceases to function, by any reason, Chairman of the Bank

shall be replaced by the Officer-In-Charge of the Bank

remaining members of the 'Selection Committee' will remain

the same. The meeting of 'Selection Committee' will be

presided by the Chairman of the Bank/Officer-In-Charge of

the Bank as the case may be. Presence of all the members of

the committee shall be necessary for the meeting."

14) As per Rule 23(a)(iv), employees in Grade III, IV and

V, the Selection Authority is Selection Committee and the

Appointing Authority is Managing Director/General

Manager/Deputy General Manager or any person

authorized by the Managing Director. Rule 23(c) makes it

clear that appointment made to fill a vacancy of a

permanent post shall be made on probation unless

otherwise specifically mentioned in the order of

appointment given to the employee.

15) Under Section 55(1) of the Madhya Pradesh

Cooperative Societies Act, 1960 (hereinafter referred to as

"the Act"), the Registrar of Cooperative Society has been

given power to frame Service Rules of the employees

working under different cooperative institutions and in

furtherance of the powers given under the aforesaid

provision, the Registrar has framed the service conditions

for the employees of the appellant-Bank, which are called

Madhya Pradesh Rajya Sahakari Bank Employees (Terms of

Employment and Working Conditions) Rules, 1976. It is

also brought to our notice that these Staff Service Rules

have since been amended from time to time. We have

already referred to the Rules which are applicable to the

issues raised in these appeals.

16) Mr. S.K. Gambhir, learned senior counsel appearing

for the appellant-Bank, by drawing our attention to the

principles laid down by this Court in various decisions in

respect to public appointments, submitted that inasmuch

as the entire procedure and the selection made are contrary

to the Rules, first those persons are not entitled to any

notice in compliance with principles of natural justice and

secondly all of them are liable to be sent out without further

enquiry. In support of his submission, he relied on the

decision of this Court in Krishan Yadav & Anr. Vs. State

of Haryana & Ors., (1994) 4 SCC 165. While considering

fraud, nepotism, favouritism and arbitrariness in public

appointments, this Court, in paragraphs 19 and 20 of the

judgment, laid down the following principles which read as

under:

"19. It is highly regrettable that the holders of public offices

both big and small have forgotten that the offices entrusted

to them are sacred trusts. Such offices are meant for use

and not abuse. From a Minister to a menial everyone has

been dishonest to gain undue advantages. The whole

examination and the interview have turned out to be farcical

exhibiting base character of those who have been responsible

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for this sordid episode. It shocks our conscience to come

across such a systematic fraud. It is somewhat surprising

the High Court should have taken the path of least

resistance stating in view of the destruction of records, that

it was helpless. It should have helped itself. Law is not that

powerless.

20. In the above circumstances, what are we to do? The only

proper course open to us is to set aside the entire selection.

The plea was made that innocent candidates should not be

penalised for the misdeeds of others. We are unable to

accept this argument. When the entire selection is stinking,

conceived in fraud and delivered in deceit, individual

innocence has no place as "Fraud unravels everything". To

put it in other words, the entire selection is arbitrary. It is

that which is faulted and not the individual candidates.

Accordingly we hereby set aside the selection of Taxation

Inspectors."

17) In the case of Union of India & Ors. Vs. O.

Chakradhar, (2002) 3 SCC 146, this Court following the

law laid down in Krishan Yadav's case (supra), upheld

the Railway Board's decision to cancel the selection on the

ground of fraud committed by the Selection Authorities.

This Court, in paragraph 12 of the judgment, concluded as

under:

"12. As per the report of the CBI whole selection smacks of

mala fides and arbitrariness. All norms are said to have been

violated with impunity at each stage viz. right from the stage

of entertaining applications, with answer-sheets while in the

custody of Chairman, in holding typing test, in interview and

in the end while preparing the final result. In such

circumstances it may not be possible to pick out or choose

any few persons in respect of whom alone the selection could

be cancelled and their services in pursuance thereof could be

terminated. The illegality and irregularity are so inter-mixed

with the whole process of the selection that it becomes

impossible to sort out the right from the wrong or vice versa.

The result of such a selection cannot be relied or acted upon.

It is not a case where a question of misconduct on the part of

a candidate is to be gone into but a case where those who

conducted the selection have rendered it wholly

unacceptable. Guilt of those who have been selected is not

the question under consideration but the question is could

such selection be acted upon in the matter of public

employment? We are therefore of the view that it is not one

of those cases where it may have been possible to issue any

individual notice of misconduct to each selectee and seek his

explanation in regard to the large scale widespread and all

pervasive illegalities and irregularities committed by those

who conducted the selection which may of course possibly

be for the benefit of those who have been selected but there

may be a few who may have deserved selection otherwise but

it is difficult to separate the cases of some of the candidates

from the rest even if there may be some. The decision in the

case of Krishan Yadav (supra) applies to the facts of the

present case. The Railway Board's decision to cancel the

selection cannot be faulted with. The appeal therefore

deserves to be allowed."

18) In the case of A. Umarani vs. Registrar,

Cooperative Societies & Ors., (2004) 7 SCC 112, this

Court has reiterated the principles to be followed in the

matter of public employment. In that case, in the State of

Tamil Nadu, a large number of employees of Cooperative

Societies were appointed without notifying the vacancies to

the employment exchange and without following the other

mandatory provisions of the Act and the Rules framed

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thereunder relevant to recruitment. A large number of

appointees furthermore did not have the requisite

educational qualification or other qualification like

cooperative training, etc. The reservation policy of the State

was not followed by the cooperative societies. The

recruitments were made beyond the permissible cadre

strength. With a view to condone the serious lapses on the

part of the cooperative societies in making such

appointments in illegal and arbitrary manner, the State

Government issued various orders from time to time, in

terms whereof such appointments were sought to be

regularized fixing a cut-off date therefor. Latest order was

G.O. Ms. No. 86 dated 12.3.2001 by which the cut-off date

was extended up to 11.3.2001 and which sought to

regularize appointments made after 8.7.1980 without

notifying the employment exchange in respect of those

employees who had completed 480 days of service in two

years, purported to be in terms of the T.N. Industrial

Establishments (Conferment of Permanent Status to

Workmen) Act, 1981. The legality and validity of the said

Government order was challenged before the High Court.

The High Court, inter alia, held that the said order shall not

operate for regularization of any employee recruited by the

cooperative societies in violation of sub-rule (1) of Rule 149

of the T.N. Cooperative Societies Rules, 1988, as amended

by G.O. Ms. No. 212 dated 4.7.1995. The primal question

for consideration in that appeals before this Court was

whether the State had the requisite authority to direct

regularization of services of the employees of the cooperative

societies by reason of the impugned order.

While dismissing the appeals, this Court, in paragraphs

39, 40, 41, 45, 68 and 69, held as under:

"39. Regularisation, in our considered opinion, is not and

cannot be the mode of recruitment by any "State" within the

meaning of Article 12 of the Constitution of India or any

body or authority governed by a Statutory Act or the Rules

framed thereunder. It is also now well-settled that an

appointment made in violation of the mandatory provisions

of the Statute and in particular ignoring the minimum

educational qualification and other essential qualification

would be wholly illegal. Such illegality cannot be cured by

taking recourse to regularisation. (See State of H.P. v. Suresh

Kumar Verma and Anr., (1996)7 SCC 562).

40. It is equally well-settled that those who come by

backdoor should go through that door. (See State of U.P. and

Ors. v. U.P. State Law Officers Association & Ors.,(1994) 2

SCC 204).

41. Regularisation furthermore cannot give permanence to

an employee whose services are ad-hoc in nature.

45. No regularisation is, thus, permissible in exercise of the

statutory power conferred under Article 162 of the

Constitution if the appointments have been made in

contravention of the statutory Rules.

68. In a case of this nature this court should not even

exercise its jurisdiction under Article 142 of the Constitution

of India on misplaced sympathy.

69. In Teri Oat Estates (P) Ltd. v. U.T., Chandigarh and

Ors.(2004) 2 SCC 130, it is stated:

"We have no doubt in our mind that sympathy or sentiment

by itself cannot be a ground for passing an order in relation

whereto the appellants miserably fail to establish a legal

right. It is further trite that despite an extra-ordinary

constitutional jurisdiction contained in Article 142 of the

Constitution of India, this Court ordinarily would not pass

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an order, which would be in contravention of a statutory

provision."

19) In the case of Indian Drugs & Pharmaceuticals

Ltd. vs. Workmen, Indian Drugs & Pharmaceuticals

Ltd., (2007) 1 SCC 408, after referring the decision in Uma

Devi's case (supra) and other decisions, this Court

observed that the appointments made without following the

appropriate procedure under the Rules/Government

Circulars and without advertisement or inviting application

from the open market was held to be in fragrant breach of

Arts. 14 & 16 of the Constitution of India. It was further

held that the Rules of recruitment cannot be relaxed and

the Court/Tribunal cannot direct regularization of

temporary appointees de hors the Rules, nor can it direct

continuation of service of a temporary employee (whether

called a casual, ad hoc or daily-rated employee) or payment

of regular salaries to them.

20) It is clear that in the matter of public appointments,

the following principles are to be followed:

1) The appointments made without following the

appropriate procedure under the Rules/Government

Circulars and without advertisement or inviting

applications from the open market would amount to

breach of Arts. 14 & 16 of the Constitution of India.

2) Regularisation cannot be a mode of appointment.

3) An appointment made in violation of the mandatory

provisions of the statute and in particular, ignoring

the minimum educational qualification and other

essential qualification would be wholly illegal. Such

illegality cannot be cured by taking recourse to

regularization.

4) Those who come by back door should go through

that door.

5) No regularization is permissible in exercise of the

statutory power conferred under Art. 162 of the

Constitution of India if the appointments have been

made in contravention of the statutory Rules.

6) The Court should not exercise its jurisdiction on

misplaced sympathy.

7) If the mischief played so widespread and all

pervasive, affecting the result, so as to make it

difficult to pick out the persons who have been

unlawfully benefited or wrongfully deprived of their

selection, it will neither be possible nor necessary to

issue individual show-cause notice to each selectee.

The only way out would be to cancel the whole

selection.

8) When the entire selection is stinking, conceived in

fraud and delivered in deceit, individual innocence

has no place and the entire selection has to be set

aside.

21) Keeping in mind the abovementioned principles, we have

to consider whether the appointments were made in

accordance with the Rules by following the procedure? If our

answer is in the affirmative, all appointments have to be

upheld and the orders terminating their services are to be

quashed.

22) By letter dated 24.6.1994 (Annexure P-1), Mr. Balram

Prasad Sharma, Managing Director of the Bank requested the

Cooperative Commissioner and Registrar, Cooperative

Societies, M.P. that against 100 vacant posts of Clerks-cum-

Typist, at least 60 posts should be filled up from ad hoc

appointment of eligible persons so that work of the Bank may

be executed efficiently. Pursuant to the said request, Mr. R.N.

Sharda, Additional Registrar, by his reply dated 29.6.1994

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(Annexure P-2), after considering the request of the Managing

Director of the Bank permitted to appoint 40 persons on ad

hoc basis for six months. In the same proceedings, the

Additional Registrar reiterated that the posts should be filled

up within six months after issuing legal advertisement and

according to Rules and keeping in view the reservation under

Government Rules.

23) By letter dated 11.11.1994 (Annexure P-3), the Joint

Registrar accorded permission to fill up 20 more posts for six

months on ad hoc basis under prescribed qualifications.

24) Annexures P-1, P-2 and P-3 make it clear that based on

the large number of vacancies in the post of Clerk-cum-Typist,

and on the request of the Managing Director of the Bank, the

Registrar who is empowered to sanction, permitted the Bank

to fill up 60 vacant posts by following the procedure.

25) Mr. Gambhir, learned senior counsel, submitted that it

was the complaint of the Bank that all the above-mentioned

vacant posts were filled up without following the procedure

prescribed in Rules 21,22,23 of the Rules. In other words,

according to the Bank, without proper intimation to the

employment exchange and advertisement in the newspapers

mentioning all the details and without following the rule of

reservation, these persons were appointed and subsequently

regularized in the cadre of service. Rule 21 which we have

already extracted in the paragraphs (supra) makes it clear that

the vacancies should be notified to the employment exchange.

In other words, intimation to the employment exchange and

calling for a list of candidates is a mandatory one. On the

other hand, the above Rule makes it clear that advertisement

in the local or all India newspapers is at the option of the

appointing authority. To put it clear, if there is proper

intimation to the employment exchange regarding the vacancy

and a request for eligible candidates, that would satisfy Rule

21. It is the specific case of the Bank that the said Rule was

not fully complied with. In support of his submission, learned

senior counsel appearing for the Bank, heavily relied on the

report of Lokayukta. We shall deal with the complaint,

enquiry and ultimate decision by the Lokayukt in the later

paragraphs.

26) Insofar as the compliance of the Rules is concerned,

learned counsel appearing for the employees, by drawing our

attention to the statement made by the officers of the Bank

before the Additional Registrar, contended that there was no

violation of any of the Rules. One Mr. S.Kumar, former

General Manager of the Bank was examined as witness No.2

before the Additional Registrar wherein he specifically deposed

to the effect that all qualified applicants were invited as per the

service rules, have to undergo written examination and who

found successful were required to face interview by the

Selection Committee of the Bank based on the report of the

Selection Committee. According to him, those persons were

appointed by the competent authority under the service Rules.

In respect of a specific question, namely, whether the Bank

had written a letter to the employment exchange for the names

to be sent for the vacant posts, he answered "yes, the letter

was sent two months before". When he was asked whether

any list was received from the employment exchange, he

answered "No". In respect of another question whether the

Bank had given advertisement prior to the regular

appointment, he answered "No, because as per the Rules, it

was necessary to write to the employment exchange and that

was done". When he was confronted with the letter dated

27.04.1996 of the employment exchange wherein it is stated

that no such letter calling for a list was ever received, he

emphatically denied and asserted that "false entry is not done

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by the Bank". After verifying the records, he concluded that

all those persons who possess the necessary qualifications as

per the service Rules of the Bank alone were given

appointments after completing the formalities in accordance

with the Rules.

27) One Mr. A.K.Parsi, then Assistant Manager (Admn.) in

the Bank deposed before the same authority that from the

year 1995, the writ petitioners were working with the Bank.

According to him, initially they were appointed on ad-hoc

basis in the post of clerk-cum-typist, thereafter, in the month

of July, 1995, the employment exchange was informed and

they were appointed on a regular pay-scale. In the cross-

examination, after explaining the procedures to be followed, he

asserted that in the case of the petitioners also those

procedures were adopted and prior notice was published. He

further reiterated that all the candidates who were successful

in the interview were appointed and only then the Selection

Committee selected those persons and all the selected

candidates were kept under probation for a period of one year.

He also informed before the Addl. Registrar that all the

successful candidates who completed their probation period

were asked to execute a bond. He highlighted that as per the

bond, the appointees are to serve the Bank at least for three

years and in fact deposited Rs.5,000/- as security. He also

highlighted that though some of the selectees sought

permission to pursue higher studies but permission was not

granted due to the undertaking given by them by way of

executing a security bond.

28) The above-mentioned statement of General Manager and

Assistant Manager (Admn.) of the Bank cannot be lightly

ignored. If we consider the correspondence between the Bank

and the Registrar in respect of large number of vacancies,

permission by the Registrar, who is none else than the

competent authority, coupled with assertion of two responsible

officers, it cannot be said that the procedures have not been

strictly followed. No doubt, the employment exchange had

intimated Lokayukt that there was no such

information/request from the Bank, however, the fact remains

that there was no such communication to the Registrar and

under what circumstance, the same was intimated to the

Lokayukt. The above-mentioned particulars show that

procedures have been complied with before selecting those

persons in the vacant posts. The private respondents/writ

petitioners demonstrated that taking note of large number of

vacancies in the post of clerk-cum-typist and urgency in filling

up the same due to administrative reasons, after getting

proper sanction from the competent authority i.e. Registrar,

intimating the same to the employment exchange, they were

initially appointed for a period of six months on ad-hoc basis

and thereafter by conducting written examination followed by

interview, they were selected. It is also brought to our notice

that after completion of probationary period of one year, these

persons were posted in the regular cadre. Though few

selectees were related to the then Managing Director of the

Bank, on this ground alone, their appointments cannot be

interfered with. The High Court has lost sight of relevant

material aspects and confirmed the order of termination

mainly based on the report of the Lokayukt.

29) Now, let us consider complaints, proceedings and the

ultimate decision/recommendation of Lokayukt. The

Government of Madhya Pradesh in order to make provision for

the appointment and functions of certain authorities for the

enquiry in the allegations against public servants and for

matters connected therewith, enacted the M.P. Lokayukt Evam

Up-Lokayukt Adhiniyam, 1981. As per definition 2(f)

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Lokayukt means a person appointed as the Lokayukt under

Section 3. Public servant as defined in Section 2(g) reads

thus:

"2. (g) "Public servant" means person falling under any of the

following categories, namely,-

(i) Minister;

(ii) a person having the rank of a Minister but shall not

include Speaker and Deputy Speaker of the Madhya Pradesh

Vidhan Sabha and Neta Pratipaksha;

(iii) an officer referred to in clause (a);

(iv) an officer of an Apex Society or Central Society within the

meaning of clause (t-1) read with clauses (a-1), (c-1) and (z)

of Section 2 of the Madhya Pradesh Co-operative Societies

Act, 1960 (No. 17 of 1961);

(v) Any person holding any office in, or an employee of-

(i) a Government company within the meaning of Section

617 of the Companies Act, 1956; or

(ii) a Corporation or local authority established by State

Government under a Central or State enactment.

(vi) xxx xxx xxxx"

Sections 7 and 8 speak about matters which may be enquired

into by Lokayukt or Up-Lokayukt and matters not to be

enquired by the said authorities. Section 10 makes it clear

that both Lokayukt or Up-Lokayukt in each case before it,

decide the procedure to be followed for making the enquiry

and in so doing ensure that the principles of natural justice

are satisfied. Section 12 mandates that after enquiry into the

allegations, the Lokayukt or Up-Lokayukt is satisfied that

such allegation is established, submit a report in writing,

communicate his findings and recommendations along with

the relevant documents, materials and other evidence to the

competent authority. Though detailed arguments were

advanced pointing out that Lokayukt was not competent to go

into the appointments that were made, in view of Section

2(g)(iv), we are of the view that officers of the apex society or

central society under M.P. Cooperative Societies Act are

amenable and there is no need to elaborate the said aspect in

this matter since we are concerned about the validity or

otherwise of the appointment of the employees in the Bank. It

is seen from the materials that after the appointments of the

aforesaid 58 employees, a complaint was lodged with Lokayukt

by one Shri N.K. Saxena and the said complaint was

investigated by the Lokayukt. Though it is stated that the

Lokayukt afforded an opportunity of hearing to the Chairman

of the petitioner Bank as well as officials of the Bank and

Cooperative Department, admittedly the employees were not

afforded notice or opportunity of being heard in the enquiry by

the Lokayukt. It is not in dispute that on receipt of the report

of Lokayukt, the competent authority forwarded the same to

the Registrar of Cooperative Societies who, in turn, without

taking a decision or an order by following the service rules or

any of the provisions of the M.P. Cooperative Societies Act

mechanically directed the Managing Director of the Bank to

terminate all the appointees. We are of the view particularly,

as observed earlier, though the officers of the apex society

under M.P. Cooperative Societies Act are amenable to the

jurisdiction of the Lokayukt, the persons concerned who are

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 11

lower-grade employees i.e. clerks-cum-typists cannot be

terminated without following the service rules applicable to

them. It is not in dispute that elaborate procedures are to be

followed before terminating the service of an employee under

the provisions of the M.P. Cooperative Societies Act and the

service rules made thereunder. In those circumstances, in the

absence of opportunity to the employees, the termination order

which was sent at the instance of Commissioner, Cooperative

Societies based on the report of Lokayukt cannot be sustained.

30) In the light of the factual details, while reiterating the

above-mentioned principles in the matter of public

appointment, we are of the considered view that the

authorities were not justified in terminating the services of

these workmen. In view of our conclusion, it is unnecessary to

go into the correctness or otherwise of Rule 61 of the Rules

and the said issue is left open. We are also of the view and as

rightly pointed out by counsel appearing for the employees

that there is no need to remit the matter to the Registrar or

any other authority for determination of their status. The said

direction of the High Court is also liable to be set aside.

31) In the light of the above discussion, we pass the following

order:-

i) The conclusion with regard to Rule 61 of the Staff

Selection Rules is not warranted and the issue is

left open;

ii) The decision of the Bank as well as Registrar of the

Cooperative Societies terminating the services of the

employees based on the report of the Lokayukt

cannot be sustained and the same is liable to be set

aside.

iii) In view of our above conclusion, there is no need to

remand the issue to the Registrar or any other

authority for adjudication with regard to the status

earned by these employees, consequently the said

direction of the High Court is also set aside.

32) In the result, Civil Appeal No. 4481 of 2007 arising out of

SLP (C) No. 12236 of 2006 filed by the Bank is disposed of on

the above terms. Civil Appeal No. 4483 of 2007 arising out of

SLP (C) No. 19499 of 2006 and Civil Appeal No. 4482 of 2007

arising out of SLP (C) No. 3979 of 2007 filed by the employees

are allowed. However, there shall be no order as to costs.