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CASE NO.:

Appeal (civil) 4092 of 2001

PETITIONER:

State of U.P.

RESPONDENT:

Neeraj Awasthi & Others

DATE OF JUDGMENT: 16/12/2005

BENCH:

S.B. Sinha & P.P. Naolekar

JUDGMENT:

JUDGMENT

W I T H

CIVIL APPEAL NOS. 3872, 3873, 4038, 4093-4102,

7545-7646, 7647-7748 of 2001,

CIVIL APPEAL NO. 6810 of 2005

and CIVIL APPEAL NO. 6814 of 2005

S.B. Sinha, J :

The jurisdiction of the High Court to issue a direction for framing a

scheme for regularisation of the employees of the U.P. State Agricultural

Produce Market Board (for short "the Board") is in question in this batch of

appeals which arise out of judgments and orders passed by the High Court of

Judicature at Allahabad in the writ petitions filed by the private respondents

either dismissing or allowing the same.

ACT

The legislature of the State of Uttar Pradesh enacted The Uttar

Pradesh Krishi Utpadan Mandi Adhiniyam, 1964 (for short "the Act"). The

Board has been established under Section 26-A of the Act. Section 26-B

provides for the constitution of the Board. In exercise of its power conferred

upon it by Section 25-A and 26-X of the Act, regulations have also been

framed by the Board laying down the terms and conditions of the service of

the employees of the Market Committees known as the Uttar Pradesh

Agricultural Produce Market Committees (Centralised) Services

Regulations, 1984 (for short "Services Regulations"). Similar regulations

have also been framed by the Board in respect of its own employees being

the Uttar Pradesh Agricultural Produce Markets Board (Officers and Staff

Establishment) Regulations, 1984 (for short "Establishment Regulations").

BACKGROUND FACT

In the State of Uttar Pradesh, there are 244 Market Committees. 3395

posts were sanctioned but indisputably 5600 appointments have been made.

We are herein concerned with the orders of appointments and orders of

terminations issued in respect of about 1021 employees who were appointed

between the period 1.4.1996 and 30.10.1997. A resolution was passed by the

Board on or about 30th September, 1996 proposing regularisation of the

services of those employees who have completed one thousand days of

service. The Board had also its construction divisions. The said proposal

was, however, confined to the employees working in the construction

divisions against contingency funds. Approval having been sought for from

the State Government in relation to framing of appropriate rules, in this

behalf, informations were sought for from various departments including

Mandi Parishad in regard to the appointments made in past six months by a

letter dated 20th November, 1997. Relevant informations were furnished by

the Director of the Mandi Parishad whereafter the State sought for further

informations and details regarding the appointments made in the Mandi

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Parishad and Mandi Samities by a letter dated 17.3.1998. Such informations

were sought for by the State again by a letter dated 18.5.1998. On or about

12.2.1999, an order was issued by the State directing that services of all such

employees who had been irregularly appointed during the period 1.4.1996 to

30.10.1997 be cancelled on last-come-first-go-basis stating:

"1. The irregular appointment made in the Mandi

Parishad and Mandi Samities during the period

w.e.f. 1.4.96 to 30.10.97 should be cancelled

immediately. The following course should be

adopted to terminate such appointments:

(a) There is no legal impediment in terminating

the service of the employee concerned after

cancelling the appointments which have been

made without any created/ sanctioned post but the

reason therefor shall have to be recorded in the

order.

(b) There is no legal impediment in terminating

the service after cancelling the appointments of

such persons as did not have educational

qualifications prescribed for the post concerned but

the reason therefor should be recorded in the order.

(c) The termination of service of such persons,

as have been appointed in relation to some post

and also have educational qualification prescribed

for that post, should be made in accordance with

the procedure mentioned in their appointment

order. In case, no procedure is mentioned in the

appointments order, their service should be

terminated after giving either notice or pay in lieu

thereof.

(2) In this regard I have to inform this thing also

that after making intensive examination in respect

of irregular appointments made in the Mandi

Parishad and Mandi Samities before 1.4.96, kindly

furnish clear report alongwith detailed statement

by 20.2.99.

(3) Kindly make available in each case by

18.2.99 your proposal with clear recommendation

to the Govt. for action against the officers

responsible for the said irregular appointments."

Further directions were issued on 17.3.1999 in the following terms:

"In regard to the appointed subject and Semi Govt.

Letter No. Dire-Camp/99-468 dt. 8.3.99, I have

been directed to say that keeping in view, the

decision taken by Govt. in regard to irregular

appointments made on the post of various

categories in U.P. State Agricultural Production

Marketing Board, there has been no requirement of

prescribed procedure rules. In such circumstances,

the proposal sent to Govt. vide letter 1418/Camp

dt. 18.10.96 of Marketing Board Office is rejected

by the Govt. after due consideration."

Pursuant thereto or in furtherance of such directions, the services of a

large number of employees were terminated on or about 20th March, 1999.

On 27.1.1998, the Director of the Board informed the Secretary,

Department of Agriculture that all appointments are unauthorized/ irregular

and, thus, void ab initio and, therefore, their appointments should be

terminated following the rules. In the said letter, the opinion of the

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Chairman of the Board was quoted stating:

"As the action, whatsoever, taken in this matter

will create wide ranging ramifications (both

political and administrative) therefore it will be

proper to send the factual report of the whole case

to Govt. for guidance. It will be expedient to take

further action after consulting the department of

justice and obtaining orders from the Hon'ble

Minister for Agriculture and the Hon'ble Chief

Minister."

Photocopies of the notesheets and photocopies of the details of all

appointments and the report received from the Deputy Director

(Administration) were annexed thereto.

It may be noticed that the State in the meantime had also refused to

approve the proposed rules framed by the Board for regularisation of its

employees.

PROCEEDINGS BEFORE THE HIGH COURT

Questioning the aforementioned directions of the State, one Rajnish

Varsheny filed a writ petition before a Division Bench of the Allahabad

High Court in April, 1999. By a judgment and order dated 11.8.2000, a

learned Single Judge of the Allahabad High Court allowed the same holding

that the orders of termination issued pursuant to the orders of the State

Government dated 12.2.1992 were illegal. A Division Bench of the High

Court, Lucknow Bench, put its seal of approval to the order of the learned

Single Judge by a judgment and order dated 5.9.2000 in similar writ

petitions filed by other dismissed employees. A writ petition filed by one

Anshuman Misra, however, was dismissed by another Division Bench of the

Allahabad High Court at Lucknow upholding the said order of the State

Government.

The parties are, thus, before us.

SUBMISSIONS

On behalf of the Board:

Submission of Mr. M. L. Verma, learned senior counsel appearing on

behalf of the Board are:

(i) In terms of the statutory mandate contained in Section 26-M of the

Act, the Board was bound by the directions issued by the State.

(ii) The appointments having been made in utter disregard of the

mandatory provisions of the Services Regulations and the

Establishment Regulations, the employees did not derive any legal

right to continue in the said posts.

(iii) Such appointments having been made on a pick and choose method

and on an adhoc basis, the judgments of the High Court cannot be

sustained.

(iv) Indisputably the provisions of U.P. Industrial Disputes Act and the

rules framed thereunder relating to retrenchment of workmen were

complied with and in that view of the mater it cannot be said that the

orders of termination passed against the employees were illegal.

(v) In any view of the matter, the remedy of the employees, if any, was to

approach the industrial courts.

(vi) It is not a case, it was urged, where principles of natural justice were

required to be complied with.

On behalf of the State

Mr. Uday Umesh Lalit, learned senior counsel appearing on behalf of

the State of Uttar Pradesh submitted that from the records it would appear

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that the State adopted a known criterion for cancellation of appointment of

such employees who were in the last slots, namely, 1.4.1996 to 30.10.1997.

Such orders of termination ensured that the principles of last-come-first-go

basis are followed and the employees are paid one month's salary in lieu of

notice as also 15 days wages for each completed year of service by way of

compensation. No appointment having been made after 30.10.1997, the

impugned judgment of the High Court cannot be sustained.

On behalf of the Writ Petitioners

Mr. Anoop G. Chaudhari, learned senior counsel appearing on behalf

of the Respondents, on the other hand, urged:

(i) that the appointments of the employees cannot be said to be illegal as

the provisions contained in the respective regulations apply to

appointments in regular cadre.

(ii) There is no embargo in appointing employees on adhoc basis in

exigency of service or on work charge basis recognised in the

regulations in view of the fact that such employees do not derive the

benefits which are granted to the regular employees.

(iii) Section 26-M of the Act had no application in the facts of the case in

view of the fact that appointment of adhoc employees is not a matter

which would come within the purview of the functions of the Board as

envisaged under Section 26-F and 26-L of the Act. In any event, so

far as the appointments of employees employed in the Market

Committees are concerned, the same being governed by Section 23 of

the Act, Section 26-M thereof will have no application.

(iv) By reason of purported directions issued under Section 26-M, the

rights and privileges granted to the employees under other statutes

cannot be taken away.

(v) In view of the decision of this Court in Rakesh Ranjan Verma and

Others v. State of Bihar and Others [1992 Supp (2) SCC 343] and

U.P. State Electricity Board v. Ram Autar and Another [(1996) 8 SCC

506], the statutory power of appointment being vested in the Board,

the State could not interfere therewith.

(vi) In any view of the matter, the purported policy decision adopted by

the State must be held to be wholly illegal and without jurisdiction as

prior thereto the requirements of each of the samities had not been

taken into consideration. It was pointed out that even by 1998 full

reports had not been submitted by the Board as regards the financial

position of the Market Committees vis-a-vis the strength of the

employees and, thus, the policy decision must be held to have been

made without any application of mind.

(vii) A policy decision of a State cannot be communicated by a demi-

official letter without complying with the constitutional norms.

(viii) One set of adhoc employees and/ or daily wagers should not be

replaced by another set of adhoc employees/ daily wagers.

(ix) The Board having adopted a resolution to regularise the services of its

employees, there was no need to obtain any approval from the State.

(x) As admittedly no appointment whatsoever was made in terms of the

statutory regulations since the inception of constitution of the Market

Committees and Boards, the State could not have ignored the past

practice particularly in a case of this nature where the employees

concerned have requisite educational qualifications.

(xi) The court in such a situation can be said to have the requisite

jurisdiction in directing a State within the meaning of Article 12 of the

Constitution of India to make a scheme of regularisation.

Mr. G.L. Sanghi, learned senior counsel appearing on behalf of

another writ applicant submitted that institutions of the market committees

and the Board having their activities principally in rural areas, the human

problem should not be ignored as without such daily wagers or adhoc

employees functions of the statutory body may have to be stopped.

The learned counsel submitted that the appointments being not void

ab initio and of no effect, the State could not have issued directions for

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termination of their services. As the appointments were made having regard

to the necessity felt by the Market Committees and the Board, this Court

should not exercise its discretionary jurisdiction under Article 136 of the

Constitution of India.

Mrs. Shobha Dixit, learned senior counsel appearing on behalf of

Rajnish Varshney supplemented the arguments of Mr. Chaudhary and Mr.

Sanghi contending that there was no material before the government for

issuing the impugned instructions. It was submitted that the Market

Committees having regard to Section 19 of the Act had their own funds, the

case of each Committee should have been considered separately.

HIGH COURT

A learned Single Judge of the High Court in his order dated

11.8.2000, which has been approved by the Division Bench of the Allahabad

High Court in its judgment dated 5.9.2000, held that:

(i) the normal functions of the Board pertain to establishment or

construction of new Market yards; control over Market Committees,

direction to the Committees to ensure efficiency, etc., it could not

have interfered in the functioning of the Market Committees.

(ii) The procedures prescribed were to be applied in relation to selection

of regular employees and not adhoc employees or daily wagers.

(iii) No principle has been laid down as to why adhoc employees engaged

before 1.4.1996 and after 30.10.1997 should be retained in service

and, thus, the action of the State was discriminatory in nature.

(iv) The Government instead of formulating any policy resorted to an

arbitrary method of issuing a 'Tugalaki' order in terminating the

services of the employees recruited between 1.4.1996 and 30.10.1997

were also terminated.

(v) Although such irregular appointments have been made by several

directors but only those made by two of them, namely, Shri P.N.

Misra and Dr. Raja Ram, having been picked up for being cancelled,

the same being discriminatory and mala fide, the order impugned in

the writ application were unsustainable.

(vi) An employee should not be continued to be kept as adhoc employee

for more than 240 days.

(vii) The resolution of the Board to regularise services of such employees

who have completed one thousand days of service was valid. As the

writ petitioners have been working in various Committees for a long

period ranging from six to nine years, termination of their services

was arbitrary.

(viii) The principles of natural justice have been ignored in terminating the

services of such employees and, thus, the orders terminating the

services of the writ petitioners were bad in law.

It was directed:

"Having regard to the discussions made above, I

am inclined to hold that written and verbal

termination orders of the petitioners issued by the

authorities at the direction of the Government as

contained in letter dated 12.2.99 are arbitrary,

unreasonable and discriminatory and, therefore, all

such termination orders along with the irrational

impugned letter of source dated 12.2.99 are hereby

quashed. A writ of certiorari is issued accordingly.

Further, a writ of mandamus is also issued

commanding the opposite parties to allow the

petitioners to resume their duty with immediate

effect. They shall be deemed to have continued in

service and as such, they shall be relegated to their

original position. However, they will not get their

back wages. The U.P. Agricultural Produce

Market Board shall within six months resolve and

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formulate a policy to deal with the terms of their

service by giving due consideration to its earlier

resolution regarding regularization of their

services. The Board will also take stern step to

ensure that such an odd situation to the

embarrassment of the competent authorities does

not arise in future."

However, as noticed supra, another Division Bench of the same Court

in its judgment dated 13.11.2000 opined that the appointments having been

made in violation of the statutory regulations, the appointees must be held to

have entered into service through backdoor and in that view of the matter,

the State has the requisite jurisdiction to issue a direction in terms of

Section 26-M of the Act.

The judgment of the Division Bench dated 5.9.2000 passed in Rajnish

Varshney v. State of U.P. was made in ignorance of an earlier division bench

decision in Raja Ram Maurya v. U.P. Rajya Krishi Utpadan Mandi Parishad,

Lucknow and, thus, was rendered per incuriam.

RELEVANT PROVISIONS OF THE STATUTES

Before adverting to the rival contentions, we may briefly notice the

provisions of the said Act.

Market Committees are incorporated and constituted in terms of

Sections 12 and 13. Section 19 of the said Act provides for establishment of

a Market Committee Fund. Sub-section (2) of Section 19 mandates that all

expenditure incurred by the committee shall be defrayed out of the said fund

and the surplus, if any, shall be invested in such a manner as may be

prescribed. Sub-section (3) of Section 19 inter alia illustrates as to how such

funds are to be utilised including salaries, pensions and allowances, etc. and

other expenses, as may be prescribed, as specified in clause (ii). The proviso

appended thereto mandates that annual expenditure in respect of matters

specified in clause (ii) shall not exceed 10% of the total annual receipts of

the Committee excluding loans raised by it and advances or grants made to it

except with the prior approval of the Board.

Section 23 of the Act occurring in Chapter IV provides for

appointments of officers and servants of the Market Committee and their

conditions of services. The appointments of such officers who may be

appointed for carrying out the purpose of the Act must be done in terms of

the bye-laws framed by it. Sub-section (2) of Section 23 envisages that

every Committee shall have such number of Secretaries and such other

officers as may be considered necessary by the Board for the effective

discharge of the functions of the Committee, appointed by the Board on such

terms and conditions as may be provided for in the regulations made by it.

Chapter V of the Act deals with external control. Establishment and

constitution of the Board are envisaged under Sections 26-A and 26-B.

Section 26-A empowers the Board to appoint such officers and servants as it

considers necessary for efficient performance of its functions on such terms

and conditions, as may be provided for in the regulations made by the Board.

Section 26-L provides for the powers and functions of the Board. Functions

of the Board are provided for in Sub-section (1) thereof stating:

"(i) superintendence and control over the working

of the Market Committees and other affairs thereof

including programmes undertaken by such

Committees for the construction of New Market

Yards and development of existing Markets and

Market Areas;

(ii) giving such direction to Committees in general

or any Committee in particular with a view to

ensure efficiency thereof;

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(iii) any other function entrusted to it by this Act;

(iv) such other functions as may be entrusted to the

Board by the State Government by notification in

the Gazette."

The powers of the Board have been enumerated under Sub-section (2)

of Section 26-L of the Act which includes:

"(x) to do such other things as may be of general

interest to Market Committees or considered

necessary for the efficient functioning of the Board

as may be specified from time to time by the State

Government."

Section 26-M of the Act empowers the State Government to issue

directions in the following terms:

"(1) In the discharge of its functions, the Board

shall be guided by such directions on question of

policy, as may be given to it by the State

Government.

(2) If any question arises whether any matter is or

is not a matter as respects which the State

Government may issue a direction under sub-

section (1), the decision of the State Government

shall be final."

Section 26-V of the Act provides for accounts and audit. Section 26-

X thereof empowers the Board to make regulations with the previous

approval of the State Government which shall be subject to the said Act and

the rules made thereunder. Section 32 of the Act confers power upon the

Board to call for the proceedings of a Committee for the purpose of

satisfying itself as regard legality or propriety of a decision or an order or

orders and pass order thereon as it may deem fit if it is of the opinion that the

decision or order of the Committee should be modified, annulled or

reversed. Section 33-B of the Act reads as under:

"Powers of the State Government.-(1) The State

Government with a view to satisfying itself that the

powers, functions and duties of the Board or a

Committee by or under this Act are exercised or

performed by it properly, may require the

Commissioner or the Collector or any other person

or persons to inspect or cause to be inspected any

property, office, document or any work, of the

Board or the Committee or to make inquiries into

all or any of the activities of the Board or the

Committee in such manner as may be prescribed

and to report to it the result of such inquiry within

such period as may be specified.

(2) The Board or the Committee, as the case may

be, shall give to the Commissioner or the

Collector, or other person or persons, all facilities

during inspection and for the proper conduct of the

inquiry and shall produce any document or

information in its possession, when so demanded

for the purpose of such inspections or inquiry, as

the case may be."

Section 39 of the Act provides for the bye-laws making power in the

Market Committee. Proviso appended to Section 33 provides that no bye-

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law other than a bye-law made by adopting draft or model bye-law

suggested by the Board shall be valid unless approved by it. Section 40 of

the Act provides for rule making power.

The State Government framed rules known as "The U.P. Krishi

Utpadan Mandi Niyamavali, 1965 (for short "the Rules") in terms of Section

40 of the Act. The functions, duties and powers of the Committees in terms

of Sections 16 and 17 of the Act have been laid down in Rule 46. Rule 60

states that the qualification, designations, grades, salaries and allowance of

the posts of officers and servants whose appointing authority is the

Committee shall be approved by the Director. Such appointment made by

the Committee under sub-section (1) of Section 23 of the Act for those posts

wherefor the Committee is the appointing authority shall be intimated within

30 days of the date of such appointments to the Directors or to such officer

as may be authorised by the Director in this behalf. Sub-rule (3) of Rule 60

mandates that the Market Committee shall maintain service records and

character rolls in such forms as are prescribed for government servants and

those records shall be kept in the custody of the Market Secretary. Rule 63

provides for the functions, powers and duties of the Secretary.

In exercise of its regulation making power, as noticed hereinbefore,

Services Regulations and the Establishment Regulations have been made.

Regulation 2(e) defines "Employee" to mean 'every person appointed

on whole time basis in Classes A, B, C and D mentioned in Regulation 5,

whether on contract basis, on deputation or otherwise but does not include

persons employed on daily wages, work charged and on part-time basis.

Chapter IV of the Establishment Regulations provides for recruitment and

appointment. Regulation 9 specifies the appointing authority in respect of

the posts shown in Column 1 of the table. Regulation 10 provides for the

source of recruitment inter alia providing that 85 per cent posts in lowest

grade in Class C shall be filled by direct recruitment and 15 per cent by

promotion from Class D and all the posts in Class D shall be filled by direct

recruitment. Regulation 11(1) provides for constitution of a Selection

Committee for the purpose of recruitment to Class A and B posts whereas

Regulation 11(2) provides for constitution of a Selection Committee for

recruitment to Class C and D posts. Regulation 12 empowers the appointing

authority to determine the number of vacancies in all the classes to be filled

during the course of the year as also the number of vacancies to be reserved

for candidates belonging to Schedules Castes and Scheduled Tribes and

other categories under Regulation 8. The other sub-regulations contained in

Regulation 12 provides for the mode and manner in which such vacancies

shall be filled up. Chapter V lays down the conditions of service by way of

appointment, probation, confirmation and seniority. Chapter VI provides for

superannuation, pay, allowances and other service conditions.

The Services Regulations contain similar provisions. Part III of the

said Regulations deal with recruitment and procedure. Regulation 10 lays

down that recruitment may be made either from the open market or from

promotion. Regulation 11 provides for reservation. Constitution of

Selection Committee is contained in Regulation 12. Regulation 14 provides

for determination of vacancies whereas Regulation 16 provides for the

procedure of selection by direct recruitment. Chapter V of the said

Regulations lays down the mode and manner in which the appointment,

probation, confirmation and seniority would be made.

LEGALITY OF THE APPOINTMENTS

The Board is a 'State' within the meaning of Article 12 of the

Constitution of India. It was constituted in terms of the provisions of the

said Act. The powers and functions of the Board as also the State in terms

of the provisions of the statute having been delineated, they must act strictly

in terms thereof. It is a statutory authority. Its powers, duties and functions

are governed by the statute. It is responsible for constitution of the Market

Committees for the purpose of overseeing that the agriculturists while

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selling their agricultural produce receive the just price therefor. It not only

regulates sale and purchase of the agricultural produce but also controls the

markets where such agricultural produces are bought and sold. The Board is

entitled to levy market fee and recover the same from the buyers and sellers

through Market Committees. Indisputably, Market Committees and the

Board have power to appoint officers and servants. Although, the power of

the Board in this respect is not circumscribed, that of the Market Committees

is. Market Committees can appoint only such number of secretaries and

other officers as may be necessary for efficient discharge of its functions.

Terms and conditions of such services are to be provided by it. Section 19

of the Act, however, imposes further restriction on the power of the Market

Committee by limiting the annual expenditure made in this regard not

exceeding 10% of the total annual receipt of the Committee.

The appointments for different classes of employees are to be made

by the Board and the officers, as the case may be, in terms of the provisions

of the regulations.

Both the Services Regulations and the Establishment Regulations, as

noticed hereinbefore, are applicable respectively to the employees of the

Board as also the Market Committees. The said regulations provide for

detailed procedure for appointment and the terms and conditions therefor.

No appointment, thus, can be made in violation of the provisions of statute

and statutory rules.

Submission of the learned counsel appearing on behalf of the

employees is that the procedures prescribed by reason of the Regulations are

applicable to the regular employees. It is so. The question which, however,

falls for consideration is as to whether any appointment can be made de'hors

the provisions of the Act and the rules. Our attention has been drawn to the

definition of 'employee' which does not include persons employed on daily

wages, work charged and/ or part-time basis. If the expression "employee"

does not bring within its fold any person employed on daily wages, work

charged or on part- time basis, the same would mean that the persons so

appointed would not be the employees within the meaning of the said

regulation. It would, therefore, not be correct to contend that the Market

Committee or the Board have the jurisdiction to appoint anybody on daily

wages, work charged or on part-time basis de'hors the rules. The power to

make appointments by the committee or the board whether contained in

Section 23 or Section 26-F of the Act are statutory in nature. In absence of

any provisions conferred upon them to appoint any employee de'hors the

provisions of Sections 23 and 26-F and the regulations framed thereunder,

indisputably would mean that such appointments are de'hors the Act and the

rules. The Rules also provide that any appointment made by the Committee

under Sub-section (1) of Section 23 shall be intimated within 30 days of

such appointment to the Director or to such other officer as may be

authorised by the Director in this behalf. It implies that although the Market

Committee may have power to make appointments, such appointments can

be made in relation to the posts created therefor by the Board wherefor

requisite intimation has to be given to the Director or the officer authorised

in this behalf. We may assume that for meeting the exigencies of situations

it may be possible for the Committee or the Board to appoint a person on

adhoc basis. Such adhoc employees, however, being not employee within

the meaning of the provisions of the Act and the Regulations, a legal

relationship between the employer and the employee would not come into

being. As no legal relationship of employer and employee comes into being,

evidently, such persons do not derive any status. They a fortiori derive no

legal right to continue in service subject, of course, to the compliance of the

provisions of any other Act or the rules conferring certain benefits to them.

[See State of M.P. and Another v. Dharam Bir (1998) 6 SCC 165]

Sections 23 and 26-F of the Act categorically mandate that all

appointments must be made in terms of the provisions of the regulations.

The terms and conditions of such services are also required to be prescribed

by the regulations, the logical corollary whereof would be that permanent

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status is required to be given to a person who is not otherwise an employee

of the Board or the Market committee, as the case may be. It is required to

be done in terms of the regulation only.

The Board is entitled to take a decision which is within its powers and

functions delineated by the Act. A decision by way of resolution or

otherwise cannot be taken by the Board which is beyond the scope and

purview of the Act and the regulations framed thereunder.

The Board, therefore, was bound to make a regulation if it intended to

put the respondents on its rolls. The High Court, as noticed hereinbefore,

however, was of the opinion that it was not necessary so to do. For the

reasons aforementioned, we do not agree.

POWER OF STATE TO ISSUE DIRECTIONS

The State in exercise of its power conferred upon it could issue

directions. The power of the State Government is confined to issue

directions on question of policy. It cannot, however, interfere in the day to

day functionings of the Board. Such policy decision, however, must be in

relation to the activities of the Board under the Act and not de'hors the same.

[See Rakesh Ranjan Verma (supra), Ram Autar (supra) and Bangalore

Development Authority & Others v. R. Hanumaiah & Others 2005 (8)

SCALE 80]

Such a decision on the part of the State Government must be taken in

terms of the constitutional scheme, i.e., upon compliance of the requirement

of Article 162 read with Article 166 of the Constitution of India. In the

instant case, the directions were purported to have been issued by an officer

of the State. Such directions were not shown to have been issued pursuant to

any decision taken by a competent authority in terms of the Rules of

Executive Business of the State framed under Article 166 of the Constitution

of India.

In Punit Rai v. Dinesh Chaudhary, [(2003) 8 SCC 204], this Court

held:

"The said circular letter has not been issued by the

State in exercise of its power under Article 162 of

the Constitution of India. It is not stated therein

that the decision has been taken by the Cabinet or

any authority authorized in this behalf in terms of

Article 166(3) of the Constitution of India. It is

trite that a circular letter being an administrative

instruction is not a law within the meaning of

Article 13 of the Constitution of India. (See

Dwarka Nath Tewari v. State of Bihar)"

However, it is not correct that the power of the State to issue

directions must be confined to the matters enumerated in Sub-section (1) of

Section 26-L of the Act. Section 26-L is subject to the provisions of the Act.

The functions of the Board enumerated in Section 26-L of the Act are,

therefore, not exhaustive. Appointment of servants and officers are also one

of the functions of the Board. The Board also has right to supervise and

control the activities of the officers and Market Committees. In that view of

the matter, if a policy decision is taken by the Board in regard to the

appointment or terms and conditions of the servants, in the event, regulations

made in this behalf do not contain any provisions, such policy decision must

conform to the directions of the State issued in that behalf, if any. The

Board further is empowered to do such other things as are specified in clause

(x) of Section 26-L of the Act.

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The Board, however, in law could not have abdicated its power in

favour of the State Government.

We are, therefore, of the opinion that the direction by the State was

strictly not in accordance with law.

The directions of the State were, therefore, although not binding on

the Board, the same cannot be said to be wholly irrational. In his report

dated 7.1.1998, the Chairman of the Board sought for advice of the

Government. The State had the power of supervision over the activities of

the officers of the Board and the Board itself. While granting such advice,

the State had taken into consideration the last segment of employment. The

State was not expected to direct the Board and the Board in turn could not

have directed the Market Committees to dismiss all the employees who have

been illegally appointed. If such directions had been confined to the period

1.4.1996 to 30.10.1997 on following certain basic principles like last-come-

first-go-basis, we do not see any reason as to why the same would be termed

to be arbitrary or discriminatory.

NATURAL JUSTICE

If the employees are workmen within the purview of the U.P.

Industrial Disputes Act, they are protected thereunder. Rules 42 and 43 of

the U.P. Industrial Disputes Rules provide that before effecting any

retrenchment in terms of the provisions of Section 6-N of the U.P. Industrial

Disputes Act, the employees concerned would be entitled to a notice of one

month or in lieu thereof pay for one month and 15 days wages for each

completed year service by way of compensation. If such a retrenchment is

effected under the Industrial Disputes Act, the question of complying with

the principles of natural justice would not arise. The principle of natural

justice would be attracted only when the services of some persons are

terminated by way of a punitive measure or thereby a stigma is attached.

[See Dr. Suresh Chandra Verma and Others v. The Chancellor, Nagpur

University and Others (1990) 4 SCC 55, para 16, Karnataka Public Service

Commission and Others v. B.M. Vijaya Shankar and Others, (1992) 2 SCC

206, paras 4 and 5 and State of M.P. and Others v. Shyama Pardhi and

Others (1996) 7 SCC 118, paras 4 and 5]

In Viveka Nand Sethi v. Chairman, J&K Bank Ltd. and Others

[(2005) 5 SCC 337], it was held:

"The principle of natural justice, it is trite, is no

unruly horse. When facts are admitted, an enquiry

would be an empty formality. Even the principle of

estoppel will apply. [See Gurjeewan Garewal (Dr.)

v. Dr. Sumitra Dash] The principles of natural

justice are required to be complied with having

regard to the fact situation obtaining therein. It

cannot be put in a straitjacket formula. It cannot be

applied in a vacuum without reference to the

relevant facts and circumstances of the case."

The High Court, therefore, must be held to have erred in law in

holding that the principles of natural justice were required to be complied

with.

DIRECTIONS OF THE HIGH COURT

The directions of the High Court, in our opinion, were not justified. It

may be that in implementing the advice of the State, some of the officers of

the Board became overzealous in terminating services of the employees who

were appointed prior to 1.4.1996. The learned Single Judge of the High

Court was not, therefore, correct in describing a decision of the Board an

arbitrary or a discriminatory one. No sufficient or cogent reason has been

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assigned by the learned Single Judge to arrive at a finding that such period

has been picked up out of the hat. With a view to judge the correctness or

otherwise of such a decision, it was necessary to consider the backdrop

thereof. We have noticed hereinbefore the contents of the correspondences

passed between the parties. When the advice of the Chief Minister and/ or

the State was sought for, the Chief Minister wanted the details of such

appointment made within the last six months. However, at a later stage, the

validity or otherwise of the appointments made by the Directors of the Board

on different periods had been taken into consideration. It is only upon

application of mind on the facts and circumstances of this case that a

direction was issued on 17.3.1999 by the State.

REGULARISATION

The direction of the High Court to frame scheme for regularisation of

the employees as also the resolution of the Board to regularise the services

of the employees who had completed one thousand days of service must be

considered having regard to the aforementioned legal position in mind.

When questioned, Mr. Chaudhari and Mr. Sanghi submitted that

regularisation would mean permanence. Regularisation of the services of an

employee would, therefore, mean that the concerned persons who had no

status within the purview of the definition of 'employee' would become

employee. Thus, a change in the status would be effected.

An attempt to induct an employee without following the procedure

would be a backdoor appointment. Such backdoor appointments have been

deprecated by this Court times without number. [See for example Delhi

Development Horticulture Employees' Union v. Delhi Admn. (1992) 4 SCC

99, para 23]

Even in State of Haryana v. Piara Singh [(1992) 4 SCC 118],

whereupon the learned counsel for the parties relied upon, it is stated:

"Ordinarily speaking, the creation and abolition of

a post is the prerogative of the Executive. It is the

Executive again that lays down the conditions of

service subject, of course, to a law made by the

appropriate legislature. This power to prescribe the

conditions of service can be exercised either by

making rules under the proviso to Article 309 of

the Constitution or (in the absence of such rules)

by issuing rules/instruct-ions in exercise of its

executive power. The court comes into the picture

only to ensure observance of fundamental rights,

statutory provisions, rules and other instructions, if

any, governing the conditions of service. The main

concern of the court in such matters is to ensure

the rule of law and to see that the Executive acts

fairly and gives a fair deal to its employees

consistent with the requirements of Articles 14 and

16\005"

A 3-Judge Bench of this Court upon taking into consideration a large

number of decision in A. Umarani v. Registrar, Cooperative Societies and

Others [(2004) 7 SCC 112] held that illegal appointments cannot be

regularised. It was further held:

"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."

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The power to frame regulations is expressly conferred on the Board in

terms of Section 26 of the Act. Such regulations are to be made with the

previous approval of the State Government. Indisputably, the State

Government by its letter dated 17.3.1999 refused to accord permission in

relation thereto.

If no appointment could be made by the State in exercise of its power

under Article 162 of the Constitution of India as the same would be in

contravention of the statutory rules, there cannot be any doubt whatsoever

that the Board or for that matter the Market Committees cannot make an

appointment in violation of the Act and the Regulations framed thereunder.

In Executive Engineer, ZP Engg. Divn. And Another v. Digambara

Rao and Others [(2004) 8 SCC 262], it was held:

"It may not be out of place to mention that

completion of 240 days of continuous service in a

year may not by itself be a ground for directing an

order of regularisation. It is also not the case of the

respondents that they were appointed in

accordance with the extant rules. No direction for

regularisation of their services, therefore, could be

issued. (See A. Umarani v. Registrar,

Coop. Societies and Pankaj Gupta v. State of J&K)

Submission of Mr Maruthi Rao to the effect that

keeping in view the fact that the respondents are

diploma-holders and they have crossed the age of

40 by now, this Court should not interfere with the

impugned judgment is stated to be rejected."

[See also Madhyamik Shiksha Parishad, U.P. v. Anil Kumar Mishra

and Others, (2005) 5 SCC 122]

In Mahendra L. Jain and Others v. Indore Development Authority and

Others [(2005) 1 SCC 639], it was categorically held:

"The question, therefore, which arises for

consideration is as to whether they could lay a

valid claim for regularisation of their services. The

answer thereto must be rendered in the negative.

Regularisation cannot be claimed as a matter of

right. An illegal appointment cannot be legalised

by taking recourse to regularisation. What can be

regularised is an irregularity and not an illegality.

The constitutional scheme which the country has

adopted does not contemplate any back-door

appointment. A State before offering public

service to a person must comply with the

constitutional requirements of Articles 14 and 16

of the Constitution. All actions of the State must

conform to the constitutional requirements. A

daily-wager in the absence of a statutory provision

in this behalf would not be entitled to

regularisation. (See State of U.P. v. Ajay Kumar

and Jawaharlal Nehru Krishi Vishwa Vidyalaya v.

Bal Kishan Soni.)"

In Manager, Reserve Bank of India, Bangalore v. S. Mani and Others

[(2005) 5 SCC 100], Umarani (supra) was followed holding that in law 240

days of continuous service by itself give rise to permanence which reason

has weight with the opinion of learned Single Judge of the High Court.

It is, therefore, not correct to contend that only because in the

correspondences between the State and the Board the appointments of such

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persons have been described to be irregular, the same would not mean that

they are not illegal.

In any event, no temporary or permanent status can be granted to an

employee by way of regularisation. [See Union of India v. Gagan Kumar

(2005) 5 SCC 70 and State of Maharashtra and Another v. R.S. Bhonde and

Others (2005) 5 SCC 751].

PRECEDENTS

Mr. Chaudhary has relied upon a large number of decisions to contend

that this Court has directed framing of such schemes.

In Surya Narain Yadav and Others v. Bihar State Electricity Board

and Others [(1985) 3 SCC 38], the writ petitioners were appointed as trainee

engineers pursuant to an advertisement issued therein. Representations have

been made to them that after their training was completed, they would be

absorbed in regular employment of the Board. Some employees who were

getting age-barred for government employment and had left the Board were

told to come back under the temptation of getting permanently employed

under the Board. When the Board was reeling under a strike of its

employees, these trainee engineers stood by the Board to keep up the

generation and distribution of electricity and had been assured of absorption.

The Board had decided to absorb them on permanent basis but initially on a

probation of two years without conducting any further examination. It was

in aforementioned situation, this Court applied the principles of promissory

estoppel and observed that the Board should have regularized the services of

the trainee engineers. The Court did not lay down any law that

regularization would be directed despite the fact appointments had been

made in violation of the rules.

In Piara Singh (supra), this Court was beset with the scheme framed

by the State to regularize the services of its employees. The Bench did not

go into the question of validity or otherwise of such a scheme. We have,

however, noticed hereinbefore that even such a scheme would be

impermissible in law.

In Madan Singh and Others etc. v. State of Haryana and Others [AIR

1988 SC 2133], this Court was dealing with a matter where the State

Government had come forward with orders from time to time for absorption

of work charged employees. The Court was of the opinion that the benefits

conferred thereunder were available to them.

In Raj Narain Prasad and Others v. State of U.P. and Others [(1998) 8

SCC 473] yet again no law has been laid down. No decision other than

Piara Singh (supra) has been referred to. Before this Court, a scheme was

submitted in terms whereof the scheme had undertaken to regularize work-

charged employees employed prior to 19.9.1985. This Court besides the

proposals made therein issued certain other directions.

Strong reliance has been placed by Mr. Chaudhary on R.N.

Nanjundappa v. T. Thimmiah & Anr. [(1972) 2 SCR 799] for the proposition

that irregular employees can be regularized. Therein it was held:

"The contention on behalf of the State that a rule

under Article 309 for regularisation of the

appointment of a person would be a form of

recruitment read with reference to power under

Article 162 is unsound and unacceptable. The

executive has the power to appoint. That power

may have its source in Article 162. In the present

case the rule which regularised the appointment of

the respondent with effect from February 15, 1958,

notwithstanding any rules cannot be said to be in

exercise of power under Article 162. First, Article

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162 does not speak of rules whereas Article 309

speaks of rules. Therefore, the present case touches

the power of the State to make rules under Article

309 of the nature impeached here. Secondly when

the Government acted under Article 309 the

Government cannot be said to have acted also

under Article 162 in the same breath. The two

articles operate in different areas. Regularisation

cannot be said to be a form of appointment.

Counsel on behalf of the respondent contended

that regularisation would mean conferring the

quality of permanence on the appointment whereas

counsel on behalf of the State contended that

regularisation did dot mean permanence but that it

was a case of regularisation of the rules under

Article 309. Both the contentions are fallacious. If

the appointment itself is in infraction of the rules

or if it is in violation of the provisions of the

Constitution illegality cannot be regularised.

Ratification or regularisation is possible of an act

which is within the power and province of the

authority but there has been some non-compliance

with procedure or manner which does not go to the

root of the appointment. Regularisation cannot be

said to be a mode of recruitment. To accede to

such a proposition would be to introduce a new

head of appointment in defiance of rules or it may

have the effect of setting at naught the rules."

The said decision has been noticed in various judgments referred to

hereinbefore. It instead of helping the Respondents goes directly against

them.

In All Manipur Regular Posts Vacancies Substitute Teachers'

Association v. State of Manipur [1991 Supp (2) SCC 643], this Court was

confronted with various interim orders passed by the High Court from time

to time in several writ petitions. It was observed that if the direct

recruitment takes place on one hand and substituted teachers are also

directed to be regularized subsequently, it would create an enormous

problem for the department to accommodate both the categories of persons

and in the aforementioned situation, in exercise of its power under Article

142 of the Constitution of India, this Court with a view to avoid further

litigation and also to avoid seemingly conflicting interim orders issued by

the High Court gave certain directions. Such directions having evidently

been issued by this Court in exercise of its power under Article 142 of the

Constitution of India do not constitute a binding precedent. Even therein,

the scope and ambit of this Court's jurisdiction under Article 142 vis-`-vis

existence of the statue and statutory rules and the constitutional mandate

contained in Articles 14 and 16 of the Constitution of India had not been

taken into consideration.

On the other hand, in a series of decisions, which we have noticed

hereinbefore, this Court has now firmly laid down the law that regularization

cannot be a mode of appointment.

OTHER CONTENTIONS

Mr. Chaudhari has placed strong reliance upon the provisions of the

U.P. Regularisation of Adhoc Appointments (on Posts Outside the Purview

of the Public Service Commission) Rules, 1979 purported to have been

framed by the State in pursuance of the provisions of Clause (3) of Article

348 of the Constitution of India. Rule 4 of the said Rules reads, thus:

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"4. Regularisation of ad hoc appointments \026 (1)

Any person who \026

(i) was directly appointed on ad hoc basis on or

before June 30, 1998 and is continuing in service

as such on the date of commencement of the Uttar

Pradesh Regularisation of Ad hoc Appointments

(On Posts Outside the Purview of the Public

Service Commission) (Third Amendment) Rules,

2001.

(ii) possessed requisite qualifications prescribed

for regular appointment as the time of such ad hoc

appointment; and

(iii) has completed or, as the case may be, after he

has completed three years service shall be

considered for regular appointments in permanent

or temporary vacancy, as may be available, on the

basis of his record and suitability before any

regular appointment is made in such vacancy in

accordance with the relevant rules or orders.

(2) In making regular appointments under these

rules reservations for the candidates belonging to

the Scheduled Castes, Scheduled Tribes, Backward

Classes and other categories shall be made in

accordance with the orders of the Government in

force at the time of recruitment.

(3) For the purpose of sub-rule (1) the appointing

authority shall constitute a Selection Committee.

(4) The appointing authority shall prepare an

eligibility list of the candidates, arranged in order

of seniority, as determined from the date of order

of appointment and if two or more persons are

appointed together from the order in which their

names are arranged in the said appointment order,

the list shall be placed before the Selection

Committee along with the character rolls and such

other records of the candidates as may be

considered necessary to assess their suitability.

(5) The Selection Committee shall consider the

cases of the candidates on the basis of their records

referred to in sub-rule (4).

(6) The Selection Committee shall prepare a list of

the selected candidates, the names in the list being

arranged in order of seniority, and forward it to the

appointing authority."

Apart from the fact that such contention has not been raised before the

High Court as also in the counter-affidavit filed before us, the provisions of

the said rules by no stretch of imagination can be said to be applicable in the

instant case.

Submission of Mr. Chaudhary to take recourse to Regulation 29 of the

Establishment Regulations providing that in regard to the matters not

specifically covered by the rules persons appointed to the services of the

Board shall be governed by the regulations applicable generally to the State

Government employees is misconceived.

The said submission of Mr. Chaudhary is furthermore inconsistent

with his submissions, as noticed supra, that even in terms of Section 26-M of

the Act, the State Government had no power to issue any direction

governing appointment in respect of terms and conditions of the services of

the employees. Persons who may be appointed to the services of the Board,

furthermore, even according to the learned Counsel appearing on behalf of

the Respondents, are those who are regular employees having been

appointed in terms of the provisions of the Act and the Regulations framed

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thereunder. We have, therefore, no doubt in our mind that Regulation 29 of

the Establishment Regulations which is in Chapter VII of the Act refers to

only such regulations and orders which would be applicable to the regular

employees.

The fact that all appointments have been made without following the

procedure or services of some persons appointed have been regularised in

past, in our opinion, cannot be said to be a normal mode which must receive

the seal of the court. Past practice is not always the best practice. If

illegality has been committed in the past, it is beyond comprehension as to

how such illegality can be allowed to perpetrate. The State and the Board

were bound to take steps in accordance with law. Even in this behalf Article

14 of the Constitution of India will have no application. Article 14 has a

positive concept. No equality can be claimed in illegality is now well-

settled. [See State of A.P. v. S.B.P.V. Chalapathi Rao and Others,(1995) 1

SCC 724, para 8, Jalandhar Improvement Trust v. Sampuran Singh (1999) 3

SCC 494, para 13 and State of Bihar and Others v. Kameshwar Prasad Singh

and Another (2000) 9 SCC 94, para 30].

In the instant case, furthermore, no post was sanctioned. It is now

well-settled when a post is not sanctioned, normally, directions for

reinstatement should not be issued. Even if some posts were available, it is

for the Board or the Market Committee to fill-up the same in terms of the

existing rules. They, having regard to the provisions of the regulations, may

not fill up all the posts.

It may be that from the very inception the provisions of the Act and

the Regulations framed thereunder had been given a complete go-by. It,

furthermore, may be that the Board had adopted resolution for purported

regularization of the services of its employees and employees of Market

Committees appointed prior to 1.10.1988. We have, however, noticed

hereinbefore that such a resolution on the part of the Board was beyond its

domain. It is also true, as has been contended by Mr. Chaudhary and Mr.

Sanghi, that the power to create posts was with the Board but the Board did

not exercise its power nor the competent authorities of the Market

Committees proceeded to appoint employees on the sweet will of the

concerned authorities without in any way bothering for the provisions of the

Act and the Rules framed thereunder. It is interesting to note that the Market

Committees claimed themselves to be local authorities for the purpose of

obtaining exemption from payment of income tax. The officers of the local

authorities had a bounden duty not only to act within the four-corners of the

statute but having regard to the constitutional scheme in mind. They failed

and/ or neglected to do so. As appointments had been made de'hors the

rules and without following the procedures known in law and in flagrant

violation of constitutional scheme as laid down in Articles 14 and 16 of the

Constitution of India, the appointments although might have been made in

exigencies of services, they must be held to be wholly illegal and without

jurisdiction. An attempt has been made by the Respondents to show that the

income of the Market Committees has increased from Rs. 1.92 crore to Rs.

210.88 crores and the quantum of construction work has also increased from

Rs. 65.8 crores to Rs. 128.4 crores. It has also been suggested that in

November, 2005, the income has increased in the year 2004-05 to Rs. 400

crores and the annual budget of the Market Committees which has been

sanctioned is approximately Rs. 350 crores. The availability of funds is not

and cannot be a valid ground to make the appointments of persons without

proper sanction and creation of posts and cannot be taken to be an excuse to

perpetuate illegalities.

A contention has been raised by Mrs. Dixit that there was no material

before the Government for issuing the impugned instructions insofar as the

financial position vis-`-vis the strength of the employees had been taken into

consideration. It is not necessary for us to go into the aforementioned

question inasmuch as we are herein concerned with the legality and/ or

validity of the impugned orders of termination of services and the same

having not been done, the appointment of the concerned employees were

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wholly illegal and without jurisdiction and, thus, void and of no effect.

CONCLUSION

The upshot of our aforementioned discussions is:

(i) The Board and the Market Committees were bound by the Act, the

Rules and Regulations framed thereunder in making appointments.

Statutory provisions as also the constitutional requirements were

required to be complied with.

(ii) The Board had no jurisdiction to frame any scheme for regularization

in the pith of the statutory regulations operating in the field. Any

legislation involving appointment or laying down the conditions of

service of the employees would require prior sanction of the State.

(iii) The State of Uttar Pradesh in exercise of its purported power under

Section 26-M of the Act could not have issued the directions as it has

been done but such a direction cannot be said to be wholly

unreasonable.

(iv) The State although could not exercise a statutory power beyond the

provisions of the statute but the same although might have been done

under a misconception of law but was not otherwise arbitrary or mala

fide.

(v) Availability of vacancies and/ or the fund by themselves would not

allow the Market Committees or the Board to make appointments in

flagrant violation of the statutory provisions. Although the direction

of the State of U.P. which had been acted upon by the Board did not

have a statutory backing, the High Court could not have issued a writ

of or in the nature of mandamus as the writ petitioners \026 Respondents

did not have any legal right.

(vi) We are not oblivious of the fact that there may be some employees

whose services have been terminated without any rhyme or reason.

Mr. Verma appearing on behalf of the Board has assured us that the

Board shall look into cases of such employees whose termination has

been effected beyond the policy decision taken by the State although

we do not intend to express any opinion as regards such employees.

We, however, direct the Board and the Market Committees to fill up

all existing vacancies strictly in accordance with law as expeditiously as

possible and preferably within six months from date. While doing so,

amongst other eligible candidates, the candidature of the employees whose

services have been terminated should also be taken into consideration and in

the event, the appropriate authority of the Market Committees or the Board

can relax the age-bar, the same would be done. The respective Market

Committees, however, in the meanwhile, if for exigencies of the work,

intend to appoint any person, it may do so. However, post facto approval

therefor should be obtained from the Board. In the offers of appointment

which may be issued to such temporary or ad hoc employees it shall be

made clear that their appointments would be ad hoc in nature and the same

shall be co-terminus with the appointment of regular employees.

In view of our findings aforementioned, we are of the opinion that the

judgment and order dated 11.8.2000 passed by the learned Single Judge

which has been upheld by the Division Bench by its order dated 5.9.2000

does not lay down the law correctly and the judgment and order dated

13.11.2000 passed by a Division Bench of the Lucknow Bench of the

Allahabad High Court in Writ Petition No. 1093 (S/B) of 1999 lays down

the law correctly. In the result, Civil Appeal arising out of SLP(C) No.

15797 of 2001 is dismissed and other civil appeals filed by the Board and

the State of Uttar Pradesh as also civil appeal arising out of SLP(C) No.

15677 of 2003 filed by the Board are allowed. However, there shall be no

order as to costs.