judgement:
: Criminal Appeal Nos. 380 of 1989 and 323 of 1988.
From the Judgment and Order dated 28.1.1988 of the Allahabad High Court in Crl.
Appln.
No. 995 of 1987.
G. Ramaswamy, Additional Solicitor General, Anil Dev Singh, Miss A. Subhashini and R.P. Kapur for the Appellants.
R.L. Kohli, Manoj Saxena and R.D. Upadhyay for the Respondents.
The Judgment of the Court was delivered by DUTT, J.
These two appeals by special leave, one pre ferred by the State of U .P. and the other by the State Bank of India, are directed against the judgment of the Allahabad High Court whereby the High Court has quashed the criminal proceedings being Crime Case No. 40 of 1983 in the Court of Special Judge, Anti Corruption, only as against the respond ent R.K. Srivastava.
In quashing the proceedings in the exercise of its jurisdiction under section 482 Cr.
P.C., the High Court took the view that allegations made in the First Information Report 836 (FIR) did not constitute any offence.
In order to appreciate the view of the High Court, it is necessary to refer to the FIR which reads as follows: "An information has been received that Shri P.C. Saxena and Shri Ram Kumar Srivastava while posted and functioning as Accountant and Clerk cum Godown Keeper in the State Bank of India, Agriculture Development Branch, Budaun, respectively entered into a criminal conspira cy with Shri Sarwant Singh and his wife Smt.
Rajwant Kaur, Props.
of M/s. National Mill Store, Budaun, during the month of June, 1982 to cheat the State Bank of India, Budaun, and in pursuance of the said criminal conspiracy an.amount of Rs.54,600 ' was withdrawn on the basis of false credit entry made in the books of accounts of the Bank and connected credit and debit vouchers were also prepared and passed by the accused employees of the Bank and payment were made to the accused persons, namely, Shri Sarwant Singh and Smt.
Rajwant Kaur who tendered cheque No. 348459 dated 2.5.
1982 for Rs.18,600 cheque No. 348482 for Rs. 19,200, date 2.6.
1982 and cheque No. 502206 dated 2.6.82 for Rs. 16,800 = 54,600.
The above facts constitute offence punishable u/s 120 B, 420, 468,471 I.P.C. and 5(2) r/w 5(1)(d) of PC Act, 1947.
A regular case is therefore regis tered and its investigation is entrusted to Shri V.P. Arya, Inspector of this establish ment." According to the FIR, as against three cheques of the aggre gate amount of Rs.54,600, presumably of three different Banks, a credit entry was made in the accounts of M/s. National Mill Stores Co., Budaun, and M/s. New Manufacturing Co., Budaun, and their partners, Sardar Sarwant Singh and his wife Smt.
Rajwant Kaur, in the State Bank of India and the said sum of Rs.54,600 was allowed to be withdrawn by them by the respondent and the accused P.C. Saxena.
The allegations in the FIR appear to be vague and al though it is alleged that the respondent and the accused P.C. Saxena made false credit entries in the books of ac counts of the Bank and connected credit and debit vouchers were also prepared and passed by them, no 837 particulars of the same have been given.
It appears from the chargesheet that the said Shri Sarwant Singh and his wife Smt.
Rajwant Kaur and their firms, namely, M/s. National Mill Stores Co., Budaun, and M/s. New ManufaCturing Co., Budaun, have current accounts in the State Bank of India, Budaun.
After the said three cheques amounting to Rs.54,600 were tendered, the respondent and the accused P.C. Saxena sent the said cheques for clearance and allowed the said Shri Sarwant Singh and his wife Smt.
Rajwant Kaur to with draw the sum of Rs. 54,600 from their current account.
It is now a well settled principle of law that if the allegations made in the FIR are taken at their face value and accepted in their entirety do not constitute an offence, the criminal proceedings instituted on the basis of such FIR should be quashed.
In the instant case, on the basis of the said FIR the respondent and the said P.C. Saxena and Shri Sarwant Singh were charged under sections 120 B, 420, 468 and 471 I.P.C. and section 5(2) read with section 5(1)(d) of the Prevention of Corruption Act, 1947.
According to the appellant, as no prima facie case was made out against Smt.
Rajwant Kaur, wife of Shri Sarwant Singh, she has been dropped from the array of the accused persons.
The question is whether the facts disclosed in the FIR constitute the offences with which the accused have been charged.
It is manifestly clear from the allegations in the FIR that the respondent or the other accused had no inten tion whatsoever to make any wrongful gain or to make any wrongful loss to the Bank.
They had accepted the said three cheques amounting to Rs.54,600 and sent the same for clear ance after debiting the LOC account.
The said cheques have been encashed and the money was received by the State Bank of India.
It may be that there was some delay in crediting the LOC account or that the money against the three cheques were credited in the accounts of the said Shri Sarwant Singh and his wife, but the allegations made either in the FIR or in the charge sheet do not show that the respondent and the said P.C. Saxena had acted dishonestly, that is to say, acted with a deliberate intention to cause wrongful gain or wrongful loss.
In our opinion, the High Court has rightly held that the allegations made in the FIR do not constitute any offence of cheating, nor do they constitute any offence of forgery.
It is true that it has been alleged that the said sum of Rs.54,600 was withdrawn on the basis of false credit entries made in the books of accounts of the Bank and connected credit and debit vouchers were also prepared and passed by the respondent and the other accused.
When the said sum of Rs.54,600 838 had been allowed to be withdrawn by the said Shri Sarwant Singh and his wife, necessary entries had to be made in the books of accounts, but it is not understandable how these entries can be characterised as false entries.
No document has been referred to in the FIR as the outcome of forgery.
The High Court has rightly held that as the criminal proceedings have been started against the respondent on the basis of a FIR which does not contain any definite accusa tion, it amounts to an abuse of process of the court and, as such, is liable to be quashed.
We entirely agree with the view expressed by the High Court.
The High Court has quashed the proceedings only as against the respondent No. 1, R.K. Srivastava.
In our opin ion, when the allegations in the FIR are the same against all the accused persons, the entire proceedings as against all the accused persons including the said P.C. Saxena and the said Shri Satwant Singh should be quashed.
Accordingly, while we uphold the judgment of the High Court, we quash the entire criminal proceedings being Crime Case No. 40 of 1983 also as against the accused P.C. Saxena and Shri Sarwant Singh.
The appeals are disposed of as above.
N.P.V. Appeals disposed of.

summary:
The respondents, two employees of a nationalised Bank and two account holders, were charged with offences punisha ble under Sections 120B, 420, 468, 471 I.P.C. and 5(2) read with Section 5(1)(d) of the Prevention of Corruption Act, 1947.
The F.I.R. alleged that the two Bank employees entered into a criminal conspiracy with the two account holders to cheat the Bank and, in pursuance thereof an amount of Rs.54,600 was allowed to be withdrawn by the account hold ers, who had tendered three cheques aggregating to Rs.54,600, on the basis of the false credit entries in the books of accounts of the Bank, and connected credit and debit vouchers were also prepared.
The case against one of the account holders was later dropped.
The High Court quashed the proceedings only against Respondent No. 1 on the ground that the allegations made in the F.I.R. did not constitute any offence of cheating or forgery.
Against this decision, the State as well as the Bank filed appeals in this Court.
Quashing the proceedings against all the respondents, HELD: 1.
If the allegations made in the FIR taken at their face value and accepted in their entirety do not constitute an offence, the criminal proceedings instituted on the basis of such FIR should be quashed.
[837C] In the instant case, the Respondent No. 1 and the other accused had accepted the three cheques in question and sent the same for clearance after debiting the LOC account.
The cheques were encashed and the money was received by the Bank.
It may be that there was some delay in crediting the LOC account or that the money against the three 835 cheques were credited in the accounts of the account hold ers, but the allegations made either in the FIR or in the charge sheet do not show that they had acted dishonestly, or with deliberate intention to cause wrongful gain or wrongful loss to the Bank.
When the amount was allowed to be with drawn by the account holders, necessary entries had to be made in the accounts of the Bank and these entries cannot be characterised as false.
No document has been referred to in the FIR as the outcome of forgery.
[837E F, 838A] The High Court was, therefore, right in holding that the allegations made in the FIR did not constitute any offence of cheating or forgery and that as the criminal proceedings had been started on the basis of a FIR which did not contain any definite accusation and it amounted to an abuse of process of the Court, they were liable to be quashed.
[837G, 838B] Since the allegations in the FIR are the same against all the accused persons, the entire proceedings as against all the accused persons should be quashed.
Accordingly, the entire criminal proceedings are quashed.
[838C]


judgement:
ivil Appeal No. 1086 of 1971.
From the Judgment and Order dated 28.4.71 of the Gujarat High Court in S.C.A. No. 671 of 1970.
R.F. Nariman, A.K. Verma and D.N. Misra for the Appellant.
V.J. Francis, (N.P.), Krishan Kumar, Vimal Dave & Co., M.N. Shroff, (N.P.) and Girish Chandra for the Respondent.
The Judgment of,the Court was delivered by OZA, J.
This appeal on certificate by the High Court of Gujarat is filed against the judgment of the Gujarat High Court dated 28th April, 1971 holding Standing Order No. 3 framed under Section 466(1)(A)(f) read with Section 147 of The Bombay Provincial Corporations Act, 1949 ( 'Act ' for short) as illegal and without the authority of law.
This Act applies to the city of Baroda and the present appellant the Municipal Corporation, Baroda is governed by this Act.
It is not in dispute that octroi on the import of goods is chargeable under the scheme of the Act.
Before this Standing Order which is the subject matter of challenge before the High Court and before us, was framed, a trans porter who brought the goods within the limits of the Munic ipal Corporation in view of Section 147 of this Act was to pay the octroi duty chargeable on the goods on the assump tion that the goods have been imported for sale, consumption or use in the limits of the city of Baroda.
Under the scheme as it was in force if the goods were not consumed or sold within the limits of the Municipal Corporation and are taken out on the other end, and if the octroi post authority was satisfied that the goods which had entered are being taken out then the transporter had to get the tax which he had paid at the octroi post refunded.
According to the appellant corporation this procedure took time at both the ends and for those transporters who were carrying goods which only were in transit in the city of Baroda still had to suffer the inconvenience of paying the octroi duty when they en tered the city limits and then satisfy the authorities at the post from where they went out of town and also had to pay first the tax and then claim a refund, in order to avoid inconvenience and the burden on the transporter this Stand ing Order was provided so that when a transporter enters the corporation limits with goods which are only in transit and not to be 865 unloaded for sale or consumption within the corporation limits and if the transporter so chooses on payment of supervision fees the transporter can carry the goods through the corporation limits without payment of octroi under the supervision of the staff of the corporation and for this purpose under this Standing Order fee of Rs.2 per heavy vehicle was prescribed.
It is alleged that originally the fee suggested was Rs.5 but on a representation made by the respondent association itself this was reduced to Rs.2 per vehicle.
By the impugned judgment, the High Court of Gujarat came to the conclusion that under Section 466(1)(A)(f) of the Act no doubt the Commissioner had the authority to frame stand ing orders but he can only frame standing orders in respect of goods on which octroi was payable under Section 466(1)(A)(f) and as the goods admittedly for which this fee was prescribed were goods not to be imported for sale or consumption the octroi was not payable thereon and therefore no standing orders could be framed under Section 466(1)(A)(f) and therefore standing order providing for fees as discussed above was beyond the authority of the Commis sioner under this Act.
The High Court also accepted the second contention of the respondent that although the Corporation claim to charge the fee as a fee for the convenience of the transporter but after examining the scheme, the learned Judges of the High Court came to the conclusion that there is no quid pro quo established nor it is established that the charge and the collection made on the basis of this charge had any ration ale ratio with the services rendered by the corporation.
Aggrieved by this decision of the High Court the Municipal Corporation has come up in appeal.
The main contention advanced on behalf of the appellant was that imposition of this fee by the Corporation could not be said to be an imposition as it was optional, as when a transporter brings goods and enters into the Corporation limits it was open to him either to choose to take advantage of this Standing Order by paying supervision fees and taking the goods straight under the supervision of the Corporation authorities without ' the payment of octroi duty but if a transporter chooses not to take advantage of this Standing Order it was not compulsory and it was open to the trans porter to pay the octroi in accordance with the normal rule and follow the normal procedure by satisfying the checkpost authorities on the other end and claim refund and get it after following the due procedure.
It was therefore contend ed that in fact this was an option given to the transporter so that if they so 866 choose they may follow this Standing Order and save them selves from the hardship of paying the octroi and then claiming the refund and for that purpose stopping at the entry checkpost and again at the exit checkpost and also to satisfy the checkpost authorities that the goods which had entered the corporation limits are being taken out in the same state and it also involved handling of sum by the transporter so that it may be possible for him to pay the octroi on the entry checkpost itself.
It was therefore contended firstly that it being an option given to the transporter, it could not be said to be an imposition or a tax and the question of the authority of the Commissioner does not arise.
That in view of language of Section 466(1)(A)(f) it is clearly with the authority of the Commis sioner to frame Standing Orders, and the Standing Orders had the approval of the Standing Committee and also of the State Government and therefore it could not be said that the Standing Orders are not framed in accordance with Section 466.
It was also contended that the affidavit filed in the High Court by the appellant clearly shows that how this fee is collected and spent for the purpose of giving a facility to the transporter for carrying the goods in transit under the supervision of the corporation authorities so that they have not to suffer the inconvenience and it was contended that in substance therefore the requirement of quid pro quo is satisfied and in fact the fee is charged only to facili tate the transporter in carrying the goods in transit with out payment of octroi and without undue detention in the process of payment of octroi at the entry and claiming refund at the exit.
It is alleged that a notice was issued suggesting this procedure as prescribed in Standing Orders, a representation was made by the respondent association accepting the suggestion of the Corporation but suggested that Rs.5 per vehicle suggested by the Corporation would be too much and it should be reduced to Rs.2 and it was on this representation that in fact the Corporation, the present appellant, chose to reduce the supervision charges to Rs.2 per vehicle.
It was therefore contended that now this is not open to the respondent association to say that this is not in accordance with law.
Learned counsel for the respondent stated that although a representation about the supervision fee was made by the association but it could not be said that there was any agreement entered into by the association nor it could be said that the Association could enter into such an agreement with the corporation.
It was contended that the High Court was right in reaching the conclusion that the Commissioner had no authority under Section 466, and that in fact quid pro quo is not satisfied as no service is rendered to the transporter.
Learned counsel 867 for the parties referred to the decision of this Court on the question of fee and the principle of quidpro quo.
Section 466(1)(A)(f) reads: "466(1) The Commissioner may make standing orders consistent with the provisions of this Act and the rules and by laws in respect of the following matters namely: (A) (a) xxx xxx xxx xxx xxx xxx (f) determining the supervision under which, the routes by which and the time within which goods intended for immediate exportation shall be conveyed out of the City and the fees payable by persons so conveying the goods;" This contemplates the authority with the Commissioner to make Standing orders consistent with this Act, rules or by laws in respect of the Act.
Clause (f) talks of supervision under which and the routes by which and the time when goods introduced for immediate exportation shall be conveyed out of the city and the fee is payable by the person carrying the goods.
It is therefore clear that this clause (f) con templates that Commissioner may by Standing Order prescribe the procedure for the goods which are introduced in the city limits, for immediate exportation and also the fees which could be charged.
It is therefore clear that this provision which confers the authority on the Commissioner to frame Standing Orders do not talk of goods on which octroi is payable.
But Section 466 pertains t9 collection of octroi.
Sub section (2) of this Section provides: "(2) No order made by the Commissioner under clause (A) of sub section (1) shall be valid unless it is approved by the Standing Commit tee and confirmed by the State Government, and no order made by the Commissioner under clause (B) or paragraph (e) of clause (c) of sub section (1) shall be valid unless it is ap proved by the Standing Committee.
" It is not in dispute that these .Standing
Orders have been approved by the Standing Committee and confirmed by the State Government which is clear from the Notification which reads as under: 868 BARODA MUNICIPAL CORPORATION "The Standing Orders made by the Municipal Commissioner, Baroda Municipal Corporation, Baroda under Section 466(1)(A)(f) of the Bombay Provincial Municipal Corporation Act, 1949 vide his order No. 2441 dated 16.8.69 and approved by the Standing Committee under its Resolution No. 882 dated 28th Novem ber, 1969 and confirmed by Government under their Resolution P.H.D. No. BMC 4470 160 P. Dated the I2th March, 1970.
Section 147 of this Act reads: "Until the contrary is proved any goods im ported into the City shall be presumed to have been imported for the purpose of consumption, use or sale therein unless such goods are conveyed from the place of import to the place of export, by such routes, within such time, under such supervision and on payment of such fees therefore as shall be determined by the standing orders.
" It is clear from this Section that when any goods are brought within the corporation limits a presumption arises that they have been brought in for the purposes or sale or consumption and the burden lies on the person who imports the goods to prove that they are not for sale or consumption and it is on the basis of language of Section 147 that the normal procedure before this Standing Order was introduced, was that the goods when entered into the corporation limits, have to stop at the checkpost and pay octroi duty on the goods as provided by the rules.
For getting out of the local limits, the transporter has to satisfy the checkpost author ities that the goods on which he has paid octroi and import ed are being exported out of the city and it is only after satisfying the authorities about the goods on which octroi is paid being exported that the transporter can claim refund of the octroi duty already paid.
It is therefore clear that the language of Section 147 in the scheme of the Octroi clearly indicates a presumption which is a rebuttable pre sumption.
Burden however lay on the transporter to establish that the goods are not for consumption or sale.
So far as this scheme before the introduction of disputed Standing Order is concerned, there is no controversy.
The only con troversy is the Standing Order which has been introduced.
It is also clear that so far as this Standing Order No. 3 is concerned wherein the transporter is to pay a supervision fees it is not compulsory as it is the option of the trans por 869 ter to take advantage of this Standing Order if he so chooses otherwise follow the normal procedure of payment of octroi and claiming refund as is clear from the affidavit filed before the High Court by the appellant 's officer i.e. Octroi Superintendent.
Paragraph 14 of this affidavit reads: "Thus the system of clearing the through traffic on charging normal supervision fees is really in the larger interest of the import ers.
As I have pointed out hereinabove this is not obligatory but purely voluntary and op tional.
Those who do not want to avail of this facility need not avail it and allow the other procedure already indicated hereinabove.
" It is therefore clear that there is no compulsion on the transporter to pay a supervision fee.
It is only an option so that if the transporter wishes to take advantage of this scheme and save time he can choose to follow it.
It is thus clear that so far as the authority of the Commissioner under Section 466 of the Act is concerned and the manner in which the Standing Orders are framed, it is clear that the Commissioner had the authority and the Stand ing Orders have been framed in accordance with procedure prescribed under Section 466 and therefore on that count the judgment of the High Court could not be sustained.
The High Court took the view that the State Legislature could enact Section 466 only if it can be brought within the ambit of Entry 52 of this State list as, that is the only entry which authorises the State Legislature to impose a tax on entry of goods into a local area and the learned Judges felt that as under Section 466 and under the standing order in question a supervision fee is charged on goods which are not for sale or consumption in the local limits.
This could not be justified under Entry 52.
The learned Judges there fore took the view that Standing Orders which the Commis sioner could frame under Section 466 could be in respect of goods on which octroi is payable and not pertaining to the goods on which the octroi is not payable.
It appears that while taking this view the High Court was examining this fees prescribed as a tax and it is on the basis of this that the High Court took the view that no such tax could be levied on goods on which no octroi is payable.
So far as the question as to whether this fees could be said to be a tax is concerned, there is no difficulty as even the learned counsel appearing for the appellant do not contend that it can be said to be a tax and as it is not a tax the imposi tion could not be said to be 870 bad because the State Legislature had no authority to impose it.
It was contended by the learned counsel that in view of Section 147 quoted above any import within the local limits would draw a presumption that it is for consumption or sale and therefore octroi duty on the goods becomes payable.
By this Standing Order, the Corporation has attempted to make it convenient to the transporter not to involve in the payment of octroi duty at the entry and after satisfying the authorities at the exit end claim the refund of the octroi paid, thereby the Corporation intended to help the trans porter in saving time and also in payment of the octroi at one end and later on claiming a refund.
This in fact was the service rendered by the corporation to the benefit of the transporter and this fees which was charged was just to meet the approximate expenses that the Corporation may have to incur to provide this facility as has been clearly stated by the corporation officer in his affidavit before the High Court and in fact even the corporation accepted the sugges tion of the petitioner association when the association suggested to the appellant corporation to reduce this fees from Rs.5 to Rs.2 which is clear from the letter written by the Association to the Corporation dated 31st March, 1970.
As regards this aspect of the matter, the learned Judges of the High Court came to the conclusion that there was no quid pro quo established which could justify the levy of this fees as fees for the services rendered in the interest of the transporter.
In Southern Pharmaceuticals & Chemicals Trichur & Ors. etc.
vs State of Kerala & Ors. etc.
; , this Court after considering the various decision distinguished fees from tax in these words. " 'Fees ' are the amounts paid for a privilege, and are not an obligation, but the payment is voluntary.
Fees are distinguished from taxes in that the chief purpose of a tax is to raise funds,for the support of the Government or for a public purpose, while a fee may be charged for the privilege or benefit conferred, or service rendered or to meet the expenses connected therewith.
Thus, fees are nothing out payment for some special privilege granted or service rendered.
" As regards the principle of quid pro quo rule in the same judgment it was observed: "That is because the Constitution did not contemplate it to be an essential element of a fee that it should be credited to a separate fund and not to the consolidated fund.
It is also 871 increasingly realised that the element of quid pro quo stricto senso is not always a sine qua non of a fee.
It is needless to stress that the element of quid pro quo is not necessarily absent in every tax.
" In the light of these observations if the affidavit filed on behalf of the appellant Corporation explaining the amount expected to be collected and spent in the process of super vision is examined it could not be said as was stated by the High Court that it did not satisfy the quid pro quo princi ple.
It is in this background that the question that this Standing Order does not impose a compulsory levy but it only gives an option to the transporter to take advantage of this provision makes it further clear that it is not a levy or an imposition of tax but merely a fees charged for the privi lege or services rendered to the payer.
In Sreenivasa Gener al Traders & Ors. etc.
vs State of Andhra Pradesh & Ors. etc.
; , this Court considered series of decisions on the question and observed: "There is no generic difference between a tax and a fee.
Both are compulsory exactions of money by public authorities.
Compulsion lies in the fact that payment is enforceable by law against a person inspite of his unwillingness or want of consent.
A levy in the nature of a fee does not cease to be of that character merely because there is an element of compul sion or coerciveness present in it, nor is it a postulate of a fee that it must have direct relation to the actual service rendered by the authority to each individual who obtains the benefit of the service.
It is now increasingly realized that merely because the collections for the service rendered or grant of a privi lege or licence are taken to the consolidated fund of the State and not separately appropri ated towards the expenditure for rendering the service is not by itself decisive.
Presumably the attention of the Court in the Shirur Mutt case was not drawn to article 266 of the Consti tution.
The Constitution nowhere contemplates it to be an essential element of fee that it should be credited to a separate fund and not to the consolidated fund.
It is also increas ingly realized that the element of quid pro quo in the strict sense is not always a sine qua non for a fee.
It is needless to stress that the element of quid pro quo is not neces sarily absent in every tax: Constitutional Law of India by H.M. Seervail Vol. 2, 2nd Edn.
p. 1252, para 22.39.
" 872 It is therefore clear that in order to establish a quid pro quo concept it is not necessary to establish exactly that the amount collected is spent on the services rendered as it was further observed in this decision: "The traditional view that there must be actual quid pro quo for a fee has under gone a sea change in the subsequent decisions.
The distinction between a tax and a fee lies primarily in the fact that a tax is levied as part of a common burden, while a fee is for payment of a specific benefit or privilege although the special advantage is secondary to the primary motive of regulation in public in public interest.
If the element of revenue for general purpose of the State predominates, the levy becomes a tax.
In regard to fees there is, and must always be, correlation between the fee collected and the service intended to be rendered.
In determining whether a levy is a fee, the true test must be whether its primary and essential purpose is to render specific services to a specified area or class; it may be of no consequence that the State may ultimately and indirectly be bene fitted by it.
The power of any legislature to levy a fee is conditioned by the fact that it must be 'by and large ' a quid pro quo for the services rendered.
However, co relationship between the levy and the services rendered expected is lone of the general character and not of mathematical exactitude.
All that is necessary is that there should be a "reasona ble relationship" between the levy of the fee and the services rendered.
" It is therefore clear that so far as the charging of super vision fees is concerned it reasonably appears to be a charge for the services rendered from the affidavit filed by the Officers of the Appellant Corporation and therefore the High Court was not right in coming to the conclusion that this fees was not justified as it is not established that it reasonably satisfies that it is in consideration of the services or privilege conferred on the transporter on goods in transit.
In our opinion, therefore, the judgment of the High Court could not be sustained.
The appeal is therefore al lowed.
The judgment of the High Court is set aside and it is held that the Standing Order No. 3 passed by the appellant Municipal Corporation is valid and enforceable.
The appel lant shall also be entitled to costs of this appeal.
Costs quantified at Rs.5,000.
R.S.S. Appeal allowed.

dataset_name: IN-Abs

summary:
The respondent who was carrying on the business of transporting goods challenged before the High Court the imposition of supervision fee levied under Standing Order No. 3 on the goods in transit through the limits of the Municipal Corporation of Baroda.
Before the framing of Standing Order No. 3, a transporter was required to pay octroi at the point of entry in the city and claim refund thereof at the point of exit after satisfying the authority that the goods which had entered were being taken out.
Standing Order No. 3 framed under section 466(1)(A)(f) read with section 147 of the Bombay provincial Corporations Act 1949, provided that when a transporter entered into the corporation limits with goods which were only in transit, he could on payment of supervision fee carry the goods through the corporation limits under the supervision of the staff of the Corporation without payment of octroi at the point of entry.
The High Court held Standing Order No. 3 as illegal and without the authority of law.
The High Court observed that under section 466(1)(A)(f) the Commissioner had the authori ty to frame standing orders only in respect of goods on which octroi was payable and as octroi was not payable on the goods which were in transit, no standing orders could be framed under the Section The High Court further held that quid pro quo was not satisfied as no service was rendered to the transporter.
Before this Court it was contended on behalf of the appellant that the levy of supervision fee was optional; the procedure under Standing Order No. 3 was introduced to avoid hardship to the transporter; it was open to him to follow the normal procedure of paying the octroi and claiming refund; the requirement of quid pro quo was in substance 563 satisfied, and the fee was charged only to facilitate the transporter in carrying the goods in transit.
Allowing the appeal, this Court, HELD: (1) The procedure under Standing Order No. 3 is not compulsory and it is the option of the transporter to take advantage of this Standing Order if he so chooses otherwise follow normal procedure of payment of octroi and claiming refund.
[868H 869A] (2) Clause (f) of section 466(1)(A) contemplates that the Commissioner may by standing order prescribed the proce dure for the goods which are introduced in the city limits.
for immediate exportation and also the fees which could be charged.
It is clear that this provision which confers the authority on the Commissioner to frame standing orders does not talk of goods on which octroi is payable.
The Commis sioner therefore had the authority under section 466, and the Standing Orders have been framed in accordance with the procedure prescribed under that section.
[867D E; 869D] (3) It appears that while taking the view that the levy could not be justified under Entry 52 of the State List which authorises the State Legislature to impose a tax on entry of goods into a local area, the High Court was examin ing the fees prescribed as a tax, and it was on that basis that the High Court took the view that no such tax could be levied on goods on which no octroi was payable.
But, as it is not a tax, the imposition could not be said to be bad on the ground that the State Legislature had no authority to impose it.
[869E 870A] (4) In order to establish a quid pro quo concept it is not necessary to establish exactly that the amount collected is spent on the services rendered.
[872A] Sourthen Pharmaceuticals & Chemicals Trichur & Ors. etc.
vs State of Kerala & Ors. etc.
; , and Sreeni vasa General Traders & Ors.
vs State of Andhra Pradesh & Ors.
, ; , referred to.
(5) So far as the charging of supervision fee is con cerned, it reasonably appears to be a charge for the serv ices rendered.
The High Court was, therefore, not right in coming to the conclusion that this fee was not justified because, according to the High Court, it was not established that the fee was in consideration of the services or privi lege conferred on the transporter.
[872F]


judgement:
vil Appeal No. 13041305 of 1987.
From the Judgment and Order dated 7.1.1987 of the Cus toms Excise and Gold (Control) Appellate Tribunal, New Delhi in Appeal No. 1120/83 C and 1806 of 1983 C. Soli J. Sorabjee, Ravinder Narain, A.N. Haksar, P.K. Ram and D.N. Misra for the Appellant.
A.K. Ganguli, P. Parmeshwaran, A. Subba Rao and Ms. Sushma Suri for the Respondent.
The Judgment of the Court was delivered by RANGANATHAN, J.
These are appeals under section 35L of the (hereinafter referred to as 'the Act ').
The appellant, Tata Oil Mills Company Limited, is engaged in the manufacture of various varieties of soaps.
The present dispute has arisen in relation to its factory at Ghaziabad in the State of Uttar Pradesh.
The dispute pertains to the eligibility of the appellant to the concession granted by the Central Government under Rule 8(1) of the Central Excise Rules, 1944 through notifi cation No. 46 of 1972, subsequently amended by the notifica tion nos.
153 of 1973 dated 24.7.73 and 25 of 1975 dated 1.3.75.
Even though there are three notifications, the point is common and both the appeals involve the same question.
841 The question arises this way.
Ad Valorem excise duty at 20% is levied on soap which falls under item 15 of the first schedule to the Act.
Notification No. 46 of 1972 exempts "such soap as is made from indigenous rice bran oil or or from a mixture of such oil with any other oils from so much of the duty of excise leviable thereon as is equivalent to the amount of duty calculated at the rate of one rupee and fifty paise per metric tonne of such soap for each addition al percentage point increase in the use of such rice bran oil which is in excess of fifteen per cent of the total oils used in the manufacture of such soap.
" To put it in simpler words, the notification intends to grant a concession where the percentage of the rice bran oil used in the manufacture of soap exceeds fifteen per cent of the total oil consump tion in the manufacture.
The extent of exemption is graded according to the percentage of rice bran oil in excess of fifteen per cent.
For example, if the rice bran oil is twenty per cent of the total oils used in the manufacture, the duty exemption will be Rs.7.50 per metric tonne of soap manufactured.
The 1973 notification is on the same lines with the only difference that the duty exemption per metric tonne is Rs.7.50 instead of Rs. 1.50.
The notification of 1975 raised the percentage of rice bran oil referred to in the 1972 notification from fifteen per cent to twenty five per cent but reduced the duty rebate from Rs.7.50 to Rs.3.50 per metric tonne.
Another notification No. 118/75 has been referred to in the papers before us but it has no relevance to the question that falls to be decided here and is left out of account.
The difficulty in the interpretation has arisen because the process of manufacture of soap in the assessee 's factory at Ghaziabad did not involve the use of rice bran oil as such.
This factory manufactured soap from rice bran fatty acid.
The rice bran fatty acid was extracted from rice bran oil in the assessee 's factory elsewhere.
Incidentally, it may be mentioned that the other factory is also licensed under the Excise Act for the manufacture of rice bran fatty acid.
The excise authorities rejected the appellant 's plea for exemption under the first three notifications on the ground that rice bran fatty acid and rice bran oil are technically and commercially two separate commodities.
It was pointed out that the concession under the notifications is available only where soap is made from indigenous rice bran oil and other oils.
This meant that rice bran oil must form part of the process of manufacture of soap in the factory which is manufacturing the soap and claiming the exemption.
The notification will not apply merely because the soap is manufactured out of rice bran fatty acid which in turn has been obtained by hydrolysis of rice bran oil in a different factory (may be one belonging to the same asses see which is a separate 842 unit of manufacture for purpose of excise duty).
The Tribunal confirmed this view.
It considered the terms of notification No. 25/75 and held: "We observe that the concession given under notification No. 25/75 is apparently with a view to encourage the use of rice bran oil in the soap industry.
The point for consideration is whether the rice bran oil for the purpose of benefit of notification should be brought into the factory of manufacturer as such and then subjected to various pretreatments re quired for its use in the soap industry or whether the same could be treated outside the factory and the necessary fraction of the rice bran oil namely rice bran fatty acid required for the manufacture of soap alone could be brought into the factory as raw material and concession availed.
It is not denied that for the use of rice bran oil, the same has neces sarily to be pre treated first and rice bran fatty acid is required to be separated from glycerine.
The appellants in the instant case have only brought in the rice bran fatty acid which has been obtained from rice bran oil by a process of pre treatment in one of their other factories.
It is seen that the Govern ment of India have clarified vide their letter No. P/92/2/72 CH.
III dated 18.7.74 that rice bran oil as such sometimes cannot be used directly and has to be subjected to pre treat ment before use in the manufacture of soap and that the exemption will be admissible in respect of rice bran oil even after pretreat ment for use in the manufacture of soap.
Thus we find that the pre treatment of rice bran oil is required to be done as a matter of necessity for its use in the manufacture of soap.
The short point therefore is whether such treatment should be done in the factory of the manufacturer or could be arranged to be done outside.
In the scheme of Central Excise, the various concessions, levies etc., are in respect of products manufactured by a particu lar licencee in the manufacturing unit so licensed and the necessary mechanism of con trols and accountability is with reference to a particular licensee and the manufacturer.
The eligibility to or the concessional assess ment of a product manufactured by the manufac turer has to be determined with reference to the particular manufacturer subject to the fulfilment of the conditions as may be set out in the rele 843 vant concessional notification.
In the instant case, a verification will be required to be done in respect of the following: (1) The nature of the oil used whether rice bran oil or otherwise; (2) The quantum used; (3) the processes of pre treatment carried out on ,the rice bran oil and the fraction thereof used for the soap making.
Now, if the rice bran oil has been pre treated outside the appellant 's factory, it is not possible for (the) jurisdictional authority to verify the facts in regard to above." The Tribunal observed that concessional rates are allowed as incentives for use of certain raw materials and these rates are determined after taking into consideration the economics of operation involving the use of the said material in the manufacturing process in the manufacturer 's factory.
Holding that the notification did not envisage the use of rice bran fatty acid and it is the rice bran oil which is required to be used in the manufacture of soap for concessional assess ment purposes, the Tribunal dismissed the appeals of the assessee.
Hence these appeals.
We are of opinion that the view taken by the Excise Authorities as well as by the Tribunal proceeds upon too narrow an interpretation of the notification.
It is true, as Mr. Ganguli contended, that an assessee claiming relief under an exemption provision in a taxing statute has to show that he comes within the language of the exemption.
But, in trying to understand the language used by an exemption notification, one should keep in mind two important aspects: (a) the object and purpose of the exemption and (b) the nature of the actual process involved in the manufacture of the commodity in relation to which exemption is granted.
So far as (b) is concerned, it is common ground before us that rice bran oil as such is not directly used in the manufac ture of soap.
Rice bran oil contains glycerol and other impurities which have to be removed by a process of hydroly sis or hydrogenation and it is only the resultant purified rice bran oil that is actually used in the manufacture of soap.
In fact, the Tribunal has given a clear finding that a pre treatment to rice bran oil is required to be done as a matter of necessity for its use in the manufacture of soap.
844 Thus even a factory which consumes rice bran oil in the manufacture of soap in its factory first converts the oil into hydrogenated oil or fatty acid and then manufactures soap out of the latter.
So far as (a) is concerned, the object of the notification as even the Tribunal finds is to grant a concession to a manufacturer of soap who manufac tures soap from rice bran oil to a substantial extent and thus discourage the use of edible oils in the manufacture.
If these two aspects are considered together, it is clear that the emphasis in the notification is not that rice bran oil should be used as raw material in the very factory which produces the soap.
The requirement is that the soap manufac ture should, to a prescribed extent, be from rice bran oil as contrasted with other types of oil.
The contrast is not between the use of rice bran oil as opposed to rice bran fatty acid or hydrogenated rice bran oil; the contrast is between the use of rice bran oil as opposed to other oils.
That is the ordinary meaning of the words used.
These words may be construed literally but should be given their fullest amptitude and interpreted in the context of the process of soap manufacture.
There are no words in the notification to restrict it to only to cases where rice bran oil is directly used in the factory claiming exemption and to exclude cases where soap is made by using rice bran fatty acid derived from rice bran oil.
The whole purpose and object of the notification is to encourage the utilisation of rice bran oil in the process of manufacture of soap in preference to various other kinds of oil (mainly edible oils) used in such manufacture and this should not be defeated by an unduly narrow interpretation of the language of the notification even when it is clear that rice bran oil can be used for manufacture of soap only after its conversion into fatty acid or hydrogenated oil.
The position will perhaps become clearer if we consider a case where an assessee manufactures soap out of hydroge nated rice bran oil (which process of hydrogenation, again, is akin to the process of hydrolysis which yields rice bran fatty acid).
The assessee will then be clearly entitled to the exemption under the notification inasmuch as the hydrog enated rice bran oil does not cease to be rice bran oil.
See in this connection: Tungabhadra Industries Ltd. vs C.T.O., ; and Collector of Central Excise vs Jayant Oil Mills etc.
,(CA 729 of 1983 and 2479 of 1987, decided by this Court on 31.3.89).
The answer cannot be different where rice bran oil is treated to yield rice bran fatty acid before soap is manufactured even if it be assumed that, unlike hydrogenated oil the fatty acid is, commercially speaking, a different commodity.
We are, therefore, of opinion that, construing the notifications literally but reasonably in the light of the process of manufacture is explained by the Tribunal, the soap manufactured by 845 the assessee is "soap made from indigenous rice bran oil" and is entitled to the exemption under the notifications to the extent permissible thereunder.
Reference was made, in the course of the arguments before us, to a tariff advice issued as early as July, 1974 by the Ministry of Finance in relation to the notification of 1972.
It reads as under: "I am directed to invite a reference to this Ministry 's notification No. 46/72 C.E. dated the 17th March, 1972, which grants exemption from duty on soap which is produced from rice bran oil or from a mixture of rice bran oil and other oils.
It has been brought to the notice of this Ministry that the benefit of exemption is not being allowed by the Central Excise Officers where rice bran oil or oil mixture is hydrogenated or pre treated before the soap is produced.
The matter has been considered in detail with the concerned authorities and keeping in view the technical opinion tendered by them that rice bran oil as such sometimes cannot be used directly and has to be pre treated before use in the manufac ture of soap, it is hereby clarified that the exemption will be admissible when the rice bran oil is, after processing or pre treat ment, used in the manufacture of soap.
In this connection it may be stated that the exemption Notification does not preclude any processing or pre treatment including hydrogenation in the manufacture of soap if such processes are incidental and ancillary to the manufacturing operating." (Underlining ours) This circular clarifies that the exemption will be admissi ble when the rice bran oil after processing or pre treat ment that is to say, when hydrogenated rice bran oil or rice bran fatty acid is used in the manufacture of soap.
But the counsel for the Union of India would have it that the circular postulates such exemption only where the pre treatment or processing is done is the same factory.
He invites attention to the last sentence of the circular, underlined by us above.
We do not think this is the correct interpretation of the circular.
In the first place, it will be noticed that the circular does not specifically say that the pre treatment or processing should be in the same facto ry of the assessee.
Secondly, no clarification by a circular or tariff advice is at all necessary to cover cases where the conversion from rice bran oil into rice bran fatty acid is done in the same factory for, to such a case, 846 the notification will clearly apply.
If it had been the intention to pin down the concession to cases where the pre treatment or processing is part of the manufacturing process within the same factory, the last sentence would not have stated the obvious but would have read something like this: "In this connection it is emphasised that the exemption notification precludes any process ing or pre treatment, including hydrogenation in the manufacture of soap, except where such processes are incidental and ancilliary to the manufacturing operations.
" The Tribunal has pointed out that the notification refers to the percentage of rice bran oil consumption and that, unless such oil is directly used in the factory, it will not be possible to work back, from the weight of fatty acid used by the assessee, the weight of rice bran ' oil out of which such acid had been obtained.
There are two answers to this objection.
One is that, if what we have stated is the correct interpretation of the notification, the mere fact that there may be some difficulty in ascertaining the weight of oil, cannot be a justification to refuse to give effect to that interpretation.
The second is that a practi cal solution to this difficulty has in fact been evolved and that, too, in the case of the same assessee.
Our attention has been invited to a circular issued by the Assistant Collector, Ernakulam II dated 23.6.77.
This circular states that the matter had been considered pursuant to an appellate order passed in one of the cases relating to the same asses see and it had been decided to fix the formula for arriving at the correlation between rice bran oil on the one hand and hydrogenated rice bran oil or rice bran fatty acid on the other as below: (a) 100 M.T. of hydrogenated = 100 MT of rice bran oil rice bran oil (b) 100 M.T. of Fatty acid = 115 MT of raw rice bran oil The circular refers to the fact that the present assessee (in relation to its Cochin factory) had accepted the above said formula and that the formula as given above was, there fore, "finally fixed in arriving at the rice bran oil con tents of hydrogenated rice bran oil and of rice bran fatty paid for ascertaining the amount of exemption as per notifi cation nos.
45 and 46 of 1972".
It is true that this is only a local instruction issued by certain assessing authorities in Cochin.
It is being referred to only show that there is no insuperable difficulty in ascertaining the weight of rice bran oil that that has been converted into fatty acid and thus 847 entered the process of manufacture in the assessee 's factory particularly in view of the fact that even the process of conversion of rice bran oil into fatty acid or hydrogenated oil is carried but in a factory subject to excise jurisdic tion.
The appellant has drawn our attention to certain ex tracts from a letter of the Ministry of Finance dated 6.4.76.
It poses the problem thus: "A doubt has been raised whether rebate of Central Excise duty would be admissible under Notification No. 24 and 25/75 CE, dated 1 3 75 (predecessor Notification Nos. 45 and 46 of 1972) where rice bran oil and other minor oils are hydrogenated in one factory and sent to another factory for manufacture of soap.
" The answer furnished is this: "The matter has been considered in the Minis try and it is felt that the purpose of rebate scheme of rice bran oil as well as other minor oils envisaged in the Notifications Nos. 24/75 and 25/75 (including their predecessor notifi cations) is to encourage the use of inedible oils in the manufacture of soap so as to relieve the pressure on edible oils.
In Board 's letter F. No. 92/2/72 CX.
3 dated 18 7 74 and F. No. 92/6/74 CX. 3, dated 27 12 74, it was clarified that in respect of rice bran oil as well as other minor oils where such oils are subjected to various treatments, including hydrogenation, such treatment would not debar them from the rebate scheme in as much as such processing is essen tial in the process of manufacture of soap.
As the notifications in question permit the rebate subject to identification of the oil as such, had the manufacturer placed the matter before the concerned Collector pointing out his practical difficulties, the Collector would have advised for suitable documentation (if the existing documentations are not enough) for the receipt, processing, movement and accounting of the oils for the concession in question.
In the circumstances, it is felt that the benefit of rebate cannot be denied to the manufacturers for want of prescribing a satisfactory procedure, especially, when it is contended by the manufacturers that they have opted for 848 the rebate scheme, their factories are under excise control, they have sufficient documen tary evidence about the receipt, processing, movement, incorporation/use in the manufacture of soap.
If, as contended by the manufactur ers, there is sufficient record maintained by them for excise purposes and the reasonable correlation is possible about the identity and use of such oils it would not be correct to deny the concession.
In this connection, it is of relevance to mention that a problem of similar nature had arisen with reference to some other excisable product and the Law Ministry was also consulted.
An extract of their opinion is appended.
It is, therefore, requested that taking into account the local practical situations existing in his jurisdic tion, the Collector may prescribe suitable procedures for identification of such oils for a meaningful implementation of the Rebate Scheme.
A copy of the Trade Notice issued in this regard by the Collector may be sent to DICCE under intimation to this Ministry.
" Following this, trade notices were issued on 25.8.76 and 8.2.77 in certain central excise jurisdiction, the relevant portion of which reads thus: "A doubt has been raised whether the rebate on Central Excise Duty would be admissible under Notification No. 40/72 CE & 46/72 CE both dated 17.3.72 as amended, where the Rice Bran Oil and other Minor Oils are hydrogenated in one factory and sent to another factory for use in the manufacture of soap.
It has been clarified that in respect of Rice bran oil and other Minor oils where such oils are subject to various treatment, including hydrogenation, such treatment would not debar them from the rebate scheme as envisaged in the above said Notifications.
" The trade notice proceeds to set out the procedural safe guards to be followed in granting this relief which are unnecessary for our purpose.
We endorse this as embodying the correct approach to the issue in this case. "This related to a claim of exemption in respect of ferti lisers (super phosphates) manufactured from sulphuric acid in a case where sulphuric acid was converted elsewhere into phosphoric acid and then used for the manufacture of the chemicals.
849 We are, therefore, of the view that the terms of the notification do not have the effect of excluding cases where the manufacture of soap is done out of rice bran oil but the entire process is not carried out by the assessee itself.
The question which one has to ask is: does the assessee manufacture soap partly or wholly out of indigenous rice bran oil? and the answer, we think, can only be in the affirmative.
We therefore hold that that the assessee is entitled to the exemption under the notifications referred to above and that the departmental authorities and the Tribunal erred in not granting the said exemption to the assessee.
The appeals are, therefore, allowed.
However, in the circumstances of the case, we make no order as to costs.
R.N.J. Appeals allowed.

summary:
The petitioner appellant is engaged in the manufacture of various varieties of soaps.
The dispute arose as to the eligibility of the appellants to the concession under rule 8(1) of the Central Excise Rule 1944 through Notification No. 46 of 1972 subsequently amended by Notification Nos.
153 of 1973 dated 24.7.73 of 25 of 1975 dated 1.3.75.
Resolving the dispute as to the interpretation of rules whether rice bran fatty acid is different from the rice Bran Oil as held by the Tribunal the Court came to the conclusion that the view taken by the Excise authorities as well as by the Tribunal proceeded upon too narrow an interpretation of the notification and erred in not granting the exemption to the assessee.
While allowing the appeals, this Court, HELD: Rice bran oil contains glycerol and other impuri ties which have to be removed by a process of hydrolysis or hydrogenation and it is only the resultant purified rice bran oil that is actually used in the manufacture of soap.
[843G] A factory which consumes rice bran oil in the manufac ture of soap in its factory first converts the oil into hydrogenated oil or fatty acid and then manufactures soap out of the latter.
[844A] In trying to understand the language used by an exemp tion notification one should keep in mind two important aspects; (a) the object and purpose of the exemption and (b) the nature of the actual process involved in the manufacture of the commodity in relation to which exemption is granted.
[843F] Construing the notifications literally but reasonably in the light of 840 the process of manufacture as explained by the Tribunal, the soap manufactured by the assessee is "soap made from indige nous rice bran oil" and is entitled to the exemption under the notifications to the extent permissible thereunder.
[844H 845A] The terms of the notification do not have the effect of excluding cases where the manufacture of soap is done out of rice bran oil but the entire process is not carried out by the assessee itself.
[849A] Tungabhadra Industries Ltd. vs C.T.O., ; and Collector of Central Excise vs Jayant Oil Mills etc.
, CA 729 of 1983 and 2479 of 1987) decided by this Court on 31.3.89, referred to.


judgement:
(Civil) No.219 of 1988.
WITH C.M.P. No. 8572 of 1989.
(Under Article 139(A)(1) of the Constitution).
AND TRANSFER PETITION NOS.
376 40 of 1985.
Rajinder Sachar and R. Vasudevan for the Petitioners in Transfer Case No. 219/88 and C.M.P. No. 8572 of 1989. ' M.K. Ramamurthy, D.S. Chauhan, Pinaki Misra, M.A. Krish namoorthy, H.S. Parihar, R.P. Kapoor, O.C. Mathur, Ms. Madhu Khatri, Ms. Bina Gupta, D.N. Misra and Harish N. Salve for the Respondents in Transfer Case No. 2 19/88 and C.M.P. 8572 of 1989.
G. Ramaswamy, Additional Solicitor General, Anil Dev Singh (NP), R.P. Srivastava, Ms. A. Subhashini and C.V.S. Rao for the Petitioners in Transfer Petition No. 376 40 1 of 1985.
S.R. Seita and P.K. Manohar for the Respondent in Trans fer Petition Nos. 386 and 376 of 1985.
The Judgment of the Court was delivered by THOMMEN, J.
The first petitioner is a registered Central Trade Union claiming to represent about 85 per cent of the officers working in the various nationalised banks.
Peti tioners 2 to 4 are principal office bearers of the first petitioner and are officers of different nationalised banks.
They are aggrieved by Circular dated 23.8.1982 (Annexure A) issued by the Joint Secretary to the Government of India, Ministry of Finance, Department of Economic Affairs, (Bank ing Division), New Delhi.
They contend that the circular is contrary to the mandate of the Banking Companies (Acquisi tion and Transfer of Undertakings) Act, 1970 (Act No. 5 of 1970) (hereinafter referred to as the 'Act ') and the Natio nalised Banks (Management and Miscellaneous Provisions) Scheme, 1980 (hereinafter referred to as the 'Scheme ').
They further contend that Clause 3 of the Scheme in terms of which the circular is purported to have been issued is ultra vires Section 9 of the Act unless the said clause is so read as to be in harmony with the Section, and when so read the said clause does not justify or support the impugned circu lar.
The petitioners, therefore, 854 seek a writ of mandamus to direct the Central Government to appoint a nominee of the majority association of each of the nationalised banks as a member of its Board of Directors.
The circular in question reads: "As you are aware, in terms of sub clause (c) of Clause 3 of Nationalised Banks (Management and Miscellaneous Provisions) Scheme, 1970/1980, one Director from among the employ ees of the nationalised banks who are not workmen, is to be appointed by the Central Government in consultation with the Reserve Bank of India on the Board of each of the Nationalised Banks.
Unlike in the case of workman, the Scheme does not lay down any procedure for selection of the non workman Director.
The intention clearly was that in the case of Officer Director, Government should have ample scope and freedom in select ing any officer of the Bank to be the non workman Director.
However, hitherto panel of names sent by the banks for selection of the non workman Director has been confined to office bearers of the Association of Officers.
Government has recently reviewed this matter in the light of the relevant provisions of the Scheme and come to a conclusion that there is no justification for restricting the choice to the office bearers of the Associations.
" The object of the circular is to clarify that the Cen tral Government no longer regards itself bound by its earli er practice of appointing a person from out of the panel of three names submitted by the respective Association repre senting the majority of the non workmenemployees of each nationalised bank.
The circular makes it clear that the Government wishes to appoint any officer of proven ability and character to the Board of Directors of a nationalised bank irrespective of his affiliation with any Association.
The petitioners contend that the circular is undemocratic and contrary to the letter and spirit of the Act and the Scheme insofar as it cuts at the root of the representative form of selection for appointment to the Board of Directors as contemplated by the statute.
The stand of the Central Government and other respond ents, as stated in their counter affidavits, appears to be that the object of the circular is to neutralise and dis courage trade unionism amongst the officers and to keep the directorship above union affiliation, and thus 855 encourage the growth of a "management culture".
Mr. Rajinder Sachar, supported by Mr. Ramamurthi, contends that there is no justification whatsoever to issue any such circular for the very object of the Act is to encourage democratic selec tion of the Directors who will truly represent the interests of the various categories of persons mentioned in the Act.
To discourage trade unionism is contrary to the very spirit of the statute and repugnant to constitutional principles enshrined in Article 19(1)(c) and Article 43A of the Consti tution of India.
The Additional Solicitor General, representing the Central Government and Mr. Harish N. Salve, counsel for the Reserve Bank of India, contend that the Act postulates both election and nomination of members of the Board of Directors and the choice between the two modes of appointment is left to the Central Government.
The election or nomination has to be conducted in a manner as specified in the Scheme.
The Scheme in effect postulates all appointments to be by nomi nation.
In the case of workmen employees, the Director is appointed by the Central Government from amongst the names of three employees furnished by the representative Union.
Such appointment, though made out of, and restricted to, the panel furnished by the Union, is in effect a nomination of the one preferred by the Central Government.
In the case of non workmen employees, the choice is not restricted to any panel and the only condition postulated is consultation with the Reserve Bank of India.
Unionisation, though desirable among workmen, is not a matter to be encouraged in the case of other employees for selection to the Board of Directors, for the Directors must represent the interest of the bank as a whole and not of any special class of persons.
The Addi tional Solicitor General also submits that appointment by election is not the only mode of representative appointment, but nomination is perfectly valid and more effective from the point of view of the true institutional interest, par ticularly with reference to management efficiency.
In the light of these rival contentions, we shall exam ine the relevant provisions of the Act and the Scheme.
Section 9 of the Act provides: "9.
Power of Central Government to make scheme (1) The Central Government may, after consul tation with the Reserve Bank, make a scheme for carrying out the provisions of this Act.
856 (2) In particular,and without preju dice to the generality of the foregoing power, the said scheme may provide for all or any of the following matters, namely: (a) . . . . . (b) the constitution of the Board of Direc tors, by whatever name called, of the corre sponding new bank and all such matters in connection therewith or incidental thereto as the Central Government may consider to be necessary or expedient; (c) . . . . . . (d) such incidental, consequential and supplemental matters as may be necessary to carry out the provisions of this Act.
(3) Every Board of Directors of a correspond ing new bank, constituted under any scheme made under subsection (1), shall include (a) representative of the employees, and of depositors, of such bank, and (b) such other persons as may represent the interests of each of the following categories, namely, farmers, workers and artisans, to be elected or nominated in such manner as may be specified in the scheme.
" The object of Section 9 of the Act, insofar as it is material, is to empower the Central Government to make a scheme for the constitution of the Board of Directors so as to include representatives of the employees and other speci fied categories.
"Employees" include workmen and non work men.
The categories specified, apart from the employees, are depositors, farmers, workers and artisans.
The representa tives of these classes of people are to be either elected or nominated in the manner specified by the Scheme.
The legis lature has left it to the Central Government to make a scheme providing for appointment to the Board from amongst the specified categories either by election or by nomina tion.
The discretion as to the mode of 857 appointment is, of course, left to the Central Government, but it is not an unrestrained or unrestricted discretion, but a discretion which must be reasonably exercised so as to give effect to the true intent of the legislature as to the composition of the Board of Directors.
The object of the legislature is to give the Board a truly representative character so as to reflect the genuine interests of the various persons manning or dealing with the bank as an industry and a commercial enterprise.
The object of the Act is to nationalise the banks in order to, as stated in the preamble to the Act, "control the heights of the economy and to meet progressively, and serve better, the needs of development of the economy in conformi ty with the national policy and objectives".
The very pur pose of that legislative exercise is to render the largest good to the largest number of people of this "sovereign, socialist, secular, democratic republic".
(See the preamble to the Constitution enshrining the national policy and objectives.) It is with this object in view that the Act has envisaged a truly representative Board of Directors chosen by election where election is feasible or by nomination where that mode is more appropriate.
But the legislature has left it to the Central Government to specify by a scheme the manner in which the election or nomination is to be conduct ed, bearing in mind the true character and objective of the banking industry and its distinguishing features as a highly sensitive commercial enterprise.
Neither the election nor the nomination should be conducted in a manner unmindful of the distinctiveness of the banking industry.
What is postu lated is such election or nomination as would lend to the Board of Directors its truly representative character in consonance and harmony with the extremely delicate, vital and significant role of the banking industry in the context of the national policy and objectives and economic develop ment.
The mode of election or nomination must, therefore, be such as would be ideally suitable and appropriate to the banking industry and the choice of the mode is generally a matter for decision by the Central Government.
The Central Government must in this regard act in consultation with the Reserve Bank of India, for it is the latter that has the necessary expertise and intimate knowledge in the field of banking, finance and other connected matters.
The Act, therefore, requires the Central Government to make the Scheme in consultation with the Reserve Bank of India.
Any amendment or variation of the Scheme also requires consulta tion with the Reserve Bank of India.
[See Section 9(4)].
The Additional Solicitor General is right when he submits that it 858 is generally within the discretion of the Central Government to choose the special mode of appointment.
The Government may choose election or nomination as the appropriate mode of appointment in respect of various categories.
But we do not agree with him when he submits that the Central Government has a discretion to avoid election even where election is appropriate and feasible in respect of a particular category of persons.
The very object of leaving the choice to the Central Government as to the mode, which is election or nomination, is to enable it to reasonably exercise its discretion in such a way as to give the best form of repre sentation to every category of persons mentioned in the Act.
It may be possible to appoint a representative of the depos itors by election instead of nomination.
It would be per fectly within the discretion of the Central Government to choose that mode.
On the other hand, the depositors being not an organised body of persons, although easily identifia ble, selection of their representative by nomination may be easier, more feasible and perhaps more appropriate for the purpose of appointment to the Board.
Farmers, workers other than employees, and artisans mentioned under subsection 3(b) of Section 9 are best represented by nomination, they being difficult of identification and their connection with the bank being more remote than in the case of employees or even depositors.
For these classes of people, the discretion is entirely that of the Central Government to choose the mode of representation.
In the case of employees, on the other hand, election is indeed the most logical, the most appro priate, the most democratic and certainly the most advanta geous form of representation.
They are well identified, well organised, well motivated and interested associates and participants in the banking industry.
They are as much a part of the bank as the management is.
There can be no legitimate management culture foreign to their vital inter ests.
There can be no valid management policy contrary to their genuine needs.
The Act does not contemplate a manage ment unmindful of the true and legitimate interest of the employees.
In a nationalised bank, everyone is as much an employee as he is an employer.
There is no antithesis be tween the management and the employees.
The distinction that traditionally existed prior to nationalisation is no longer applicable.
The true management culture is indeed the cul ture that represents the various interests of all persons specified under Section 9 as well as the larger and wider interests of national economy as postulated in the preamble to the Act.
We will now examine the Scheme.
Clause 3 of Chapter II of the Scheme provides: 859 "3.
Constitution of the Board.
As soon as may be after the commencement of this Scheme, the Central Government shall, by notification in the official Gazette, constitute the Board of a nationalised bank, consisting of ( a ) . . . . . . . . (b)(i) one Director, from among the employees of the nationalised bank, who are workmen, to be appointed by the Central Government from out of a panel of three such employees fur nished to it by the representative Union, within a date to be specified by the Central Government; . . . . . . . . . . ( i i ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . ( i i i ) . . . . . . . . (c) one Director, from among the employees of the nationalised bank, who are not workmen, to be appointed by the Central Government after consultation with the Reserve Bank; ( d ) . . . . . . . . . ( e ) . . . . . . . . . ( f ) . . . . . . . . . ( g ) . . . . . . . . . ( h ) . . . . . . . . .
The scheme making authority appears to us to have exercised the legislative power delegated to it in making the Scheme in consonance with the Act, although in a certain respect concerning the non workmen employees the intention of the delegate of the legislature could have been articu lated a little more explicitly.
We say so in 560 the light of the contemporaneous construction placed on the statute by the delegate, namely, the Central Government, as evinced by its own practice prior to the circular dated 23.8.1982.
Until the date of the circular, the consistent practice of the Central Government was to appoint a non workmen Director from out of a panel of three names fur nished to it by the majority association of non workmen employees.
The Central Government understood the Act and the Scheme to warrant such mode of appointment in the case of all employees.
In other words, the Central Government under stood sub clause (c) of Clause 3 regarding non workmen employees to warrant the same type of representation as in the case of workmen employees mentioned under sub clause (b) of Clause 3.
The field of choice was thus understood by the Government to be limited to the panel of names furnished by the representative Union of workmen or Association of non workmen as the case may be.
But, as stated earlier, sub clause (c) of Clause 3 is vaguely drafted and when read without regard to the legislative intent, as disclosed by the Act, is capable of a contrary interpretation, as is now sought to be put upon it by the Central Government, and that interpretation is, in our view, wrong, and, in any case, out of harmony with the principle enshrined in Articles 19(1)(c) and 43(A) of the Constitution The Additional Solicitor General poses the question whether the Scheme would not be even more defective if sub clause (c) were to receive the same construction as sub clause (b) so as to restrict the choice of appointment to the three persons specified on the panel furnished by the representative Association.
The Act, he says, speaks of election or nomination, and if election were to be construed to be the appropriate mode of choosing the representatives of the employees, appointment by nomination of one person out of the panel furnished by the representative Union of workmen or Association of non workmen, as the case may be, would not be a perfect representation in keeping with the principle of election.
That may or may not be so, and there is always room for improvements; but the petitioners have no complaint on that score.
If the Central Government were to provide for election in the manner chosen by it so as to appoint the true representatives of the concerned employees, Mr. Sachat submits, the petitioners would have no complaint, provided the provisions laid down in that behalf are valid and reasonable.
While, in our view, it is open to the Central Govern ment to amend the Scheme to improve on the machinery for the conduct of an appropriate election, it is incumbent upon it, until any such amend 561 ment is made, to work the present Scheme in such a way as to give the maximum scope for the concerned employees to exer cise their choice in the selection of their representatives.
That means, it would be perfectly in order for the Central Government to continue the: practice followed by it prior to the circular in question or to hold election of the repre sentatives of the concerned employees, and, if necessary, to amend the Scheme suitably for that purpose.
In the circumstances, we declare that the circular dated 23.8.1982 (Annexure A) is ultra vires the Act and the Scheme and it is, therefore, null and void and of no effect.
The Transfer Case is accordingly disposed of.
Civil Miscellane ous Petition No. 8572 of 1988 and Transfer Petitions Nos. 376 401 of 1985 are allowed.
Parties shall bear their re spective costs.
T.N.A. Petitions allowed.

summary:
The Central Govt.
in exercise of its power under Section 9 of the enacted the Nationalised Banks (Management and Miscellaneous Provisions) Scheme, 1980.
Clause 3(b) of the said scheme deals with the appointment of workmen Directors and it provides that the Central Govt.
shall constitute the Board of a Nationalised Bank consisting of one Director from among the employees of the nationalised bank, who are workmen, to be appointed from out of a panel of 3 such employees furnished to it by the Representative Union.
Clause 3(c) of the Scheme deals with appointment of non workmen Directors and it provides that the Central Government shall constitute the Board of a nationalised bank consisting of one director, from among the employees of the nationalised bank, who are not workmen, to be appointed after consultation with the Reserve Bank.
The consistent practice of the Central Govt.
was to appoint a non workman Director from out of a penal of 3 names furnished to it by the majority association of non workmen employees.
By a circular dated 23.8.82, it was clarified that as far as appointment of non workmen Director is concerned, there is no justification for restricting the choice to the office bearers of the Association.
This was to enable the Central Govt.
to appoint any officer of proven 851 ability and character to the Board of Directors of a natio nalised Bank irrespective of his affiliation with any asso ciation.
The petitioners in these petitions to this Court, chal lenged this circular as contrary to the mandate of the Act and the Scheme, and also contended that clause 3 of the Scheme was ultra vires Section 9 of the Act.
Allowing the petitions, HELD: 1.
The Circular is ultra vires the Act and the Scheme and it is, therefore, null and void and of no effect.
[861C] 2.
The object of the is to render the largest good to the largest number of people.
The object of Section 9 of the Act is to empower the Central Govt.
to make a Scheme for the constitution of the Board of Directors so as to include representatives of the employees i.e. workmen and non workmen and other specified categories viz. depositors, farmers, workers and artisans.
The representatives of these classes of people are to be either elected or nominated in the manner specified by the Scheme.
The legislature has left it to the Central Government to make a scheme providing for appointment to the Board from amongst the specified catego ries either by election or by nomination.
The discretion as to the mode of appointment is left to the Central Govern ment, but it is not an unrestrained or unrestricted discre tion, but a discretion which must be reasonably exercised so as to give effect to the true intent of the legislature i.e. to give the Board a truly representative character so as to reflect the genuine interests of the various persons manning or dealing with the bank as an industry and a commercial enterprise.
What is postulated is such election or nomina tion as would lend to the Board of Directors its truly representative character in consonance and harmony with the extremely delicate, vital and significant role of the bank ing industry in the context of the national policy and objectives and economic development.
The mode of election or nomination must, therefore, be such as would be ideally suitable and appropriate to the banking industry.
Neither the election nor the nomination should be conducted in a manner unmindful of the distinctiveness of the banking industry.
The Central Govt.
must in this regard act in consultation with the Reserve Bank of India which has the necessary expertise and intimate knowledge in the field of banking, finance and other connected matters.
[856F H; 857A B, C G] 852 2.1 But the Central Government has no discretion to avoid election even where election is appropriate and feasi ble in respect of a particular category of persons.
For the appointment of representatives of depositors, farmers, workers other than employees and Artisans, the discretion is entirely that of the Central Govt.
to choose the mode of representation.
On the other hand, in the case of employees, election is indeed the most logical, the most appropriate, the most democratic and certainly the most advantageous form of representation.
They are well identified, well organised, well motivated and interested associates and participants in the banking industry.
They are as such a part of the bank as the management is.
There can be no legitimate management culture foreign to their vital interests.
There can be no valid management policy contrary to their genuine needs.
The Act does not contemplate a management unmindful of the true and legitimate interests of the employees.
In a nationalised bank, everyone is as much an employee as he is an employer.
There is no antithesis between the management and the em ployees.
The distinction that traditionally existed prior to nationalisation is no longer applicable.
The true management culture is indeed the culture that represents the various interests of all persons specified under Section 9 as well as the larger and wider interests of national economy as postulated in the preamble to the Act.
[858B G] 3.
The Central Govt.
understood sub clause (c) of Clause 3 regarding non workmen employees to warrant the same type of representation as in the case of workmen employees men tioned under subclause (b) of Clause 3.
The field of choice was thus understood by the Government to be limited to the panel of names furnished by the representative Union of workmen or Association of non workmen as the case may be.
But sub clause (c) of Clause 3 is vaguely drafted and when read without regard to the legislative intent, as disclosed by the Act, is capable of a contrary interpretation viz. there is no justification for restricting the choice of non workmen Directors to the office bearers of the Associa tion.
That interpretation is wrong and, in any case, out of harmony with the principle enshrined in Articles 19(1)(c) and 43(A) of the Constitution.
[860B D] 4.
It is open to the Central Government to amend the Scheme to improve on the machinery for the conduct of an appropriate election, it is incumbent upon it, until any such amendment is made, to work the present Scheme in such a way as to give the maximum scope for the concerned employees to exercise their choice in the selection of their represen tatives.
[860H; 861A] 853


judgement:
ivil Appeal No. 1361 of 1974.
From the Judgment and Order dated 21.11.1973 of the Allahabad High Court in Special Appeal No. 60 of 1972.
Anil Dev Singh, C.V.S. Rao and Tara Chand Sharma for the Appellants.
R.D. Upadhyay for the Respondent.
The Judgment of the Court was delivered by KULDIP SINGH, J.
The short question for consideration before us is whether Rule 2(2) of the Liberalised Pension Rules, 1950 (hereinafter called 'Pension Rules ') which permits the Central Government to retire a Government serv ant at any time after he has completed 30 years of qualify ing service by giving him three months ' notice or pay in lieu of such notice, confers unguided powers in the Govern ment and as such is ultra vires Articles 14 and 16 of the Constitution of India.
Izhar Hussain joined the Post and Telegraph Department as a clerk on June 4, 1935.
The Director, Postal Services by an Order dated April 21, 1970, retired him from service under Rule 2(2) of the Pension Rules.
Izhar Hussain chal lenged the order of retirement by way of a writ petition before the Allahabad High Court.
The learned single Judge dismissed the writ petition holding that there was no in firmity in Rule 2(2) of the Pension Rules.
The Special Appeal filed by Izhar Hussain before the Division Bench of the High Court was accepted and rule 2(2) of the Pension Rules was declared invalid and the retirement of Izhar Hussain was set aside.
The Union of India has come up in appeal by special leave against the judgment of the Division Bench of the High Court Central Government servants superannuate at the age of 58 years.
The Government has the absolute right under Rule 56(j) of Fundamental Rules to prematurely retire a servant in 'Public Interest ' after he has attained the age of 55 years.
The Government has also the power under Rule 2(2) of Pension Rules to retire a servant at any time 799 after he has completed 30 years of qualifying service.
We may quote these Rules: "F.R. 56(j) Notwithstanding anything contained in this Rule, the appropriate authority shall, if it is of the opinion that it is in the public interest to do so, have the absolute right to retire any Government servant after he has attained the age of fifty five years by giving him notice of not less than three months in writing.
Provided that nothing in this clause shall apply to a Government servant referred to in clause (e) or clause (f)." "Rule 2(2) An Officer may retire from service any time after completing 30 years ' qualifying service provided that he shall give in this behalf a notice in writing to the appropriate authority at least 3 months before the date on which he wishes to retire.
Government may also require an officer to retire, any time after he has completed 30 years qualifying service provided that the appropriate authority shall give, in this behalf a notice in writing to the officer at least three months before the date on which he is required to retire, or three months ' pay and allowances in lieu of such notice." Fundamental Rule 56(j) while granting absolute fight to the Government provides that such power can only be exer cised in 'Public Interest '.
This guide line is a sufficient safeguard against the arbitrary exercise of power by the Government.
The object of this Rule is to chop off the dead wood.
Rule 2(2) of the Pension Rules on the other hand provides no guide line and gives absolute discretion to the Government.
There is no requirement under the rule to act in 'Public Interest '.
A person who joins Government service at the age of 21 years can be retired at the age of 51/52 years as by then he must have completed 30 years of qualifying service.
Although the rules are mutually exclusive and have been made to operate in different fields but the operational effect of the two rules is that a Government servant who has attained the age of 55 years can be retired prematurely under F.R. 56(j) only on the ground of 'Public Interest ' whereas another Government servant who is only 51 and has completed 30 years of qualifying service, can be retired at any time at the discretion of the Government under Rule 2(2) of the Pension Rules.
The object of Rule 2(2) of Pension Rules may also be to weed 800 out those Government servants who have out lived their utility but there is no guide line provided in the Rule to this effect.
The Rule gives unguided discretion to the Government to retire a Government servant at any time after he has completed 30 years of qualifying service though he has a right to continue till the age of superannuation which is 58 years.
Any Government servant who has completed 30 years of qualifying service and has not attained the age of 55 years can be picked up for premature retirement under the Rule.
Since no safeguards are provided in the Rule, the discretion is absolute and is capable of being used arbi trarily and with an un even hand.
We, therefore, agree with the Division Bench of the High Court and hold that Rule 2(2) of the Pension Rules is ultra vires Articles 14 and 16 of the Constitution of India.
Mr. Anil Dev Singh, appearing for the Union of India, contended that the Government of India has issued instruc tions dated July 11, 1955 and February 8, 1956 which lay down that the retirement under Rule 2(2) of the Pension Rules should be effected when such retirement is necessary in public interest.
The instructions being supplementary to the Rule, according to him, the order of retirement has to be in 'Public Interest ' and as such there is no vice of arbitrariness in the Rule.
We do not agree with this conten tion of the learned counsel.
A statutory rule cannot be modified or amended by executive instructions.
A valid rule having some lacuna or gap can be supplemented by the execu tive instructions but a statutory rule which is constitu tionally invalid cannot be validated with the support of executive instructions.
The instructions can only supplement and not supplant the rule.
Shri Anil Dev Singh then placed reliance on Ministry of Home Affairs Memorandum dated November 30, 1962 and argued that the same, having been issued in the name of President of India, is statutory and has the effect of amending Rule 2(2) of Pension Rules.
According to him reading the two together the power under Rule 2(2) of Pension Rules can only be exercised to weed out unsuitable employees.
The relevant part of the memorandum is as under: "It has now been decided and the President is pleased to direct that the age of compulsory retirement of Central Government servants should be 58 years subject to the following exception: 6.
Notwithstanding anything contained in the foregoing 801 paragraphs, the appointing authority may require a Government servant to retire after he attains the age of 55 years on three months ' notice without assigning any reason.
This will be in addition to the provisions already contained in rule 2(2) of the Libera lised Pension Rules 1950 to retire an officer who has completed 30 years ' qualifying serv ice, and will normally be exercised to weed out unsuitable employees after they have attained the age of 55 years.
The Government Servant also may, after attaining the age of 55 years, voluntarily retire after giving three months ' notice to the appointing author ity.
These provisions will have effect from the Ist December, 1962.
" A bare reading of the memorandum shows that there is an obvious fallacy in the argument of Mr. Singh.
The memorandum has not been issued under Article 309 of the Constitution of India and as such cannot be statutory.
The memorandum is in the nature of executive instructions issued in the name of President of India as required under Article 77(1) of the Constitution of India.
This was issued in anticipation of the Fundamental (Sixth Amendment) Rule, 1965 which inter alia incorporated Rule 56(j) into Fundamental Rules.
Even otherwise para 6 of the memorandum could not and did not add anything to Rule 2(2) of the Pension Rules.
Rule 2(2) of Pension Rules was mentioned to clarify that the power to retire under para 6 was in addition to the power already contained in the Pension Rules.
The words "weed out unsuit able employees" can only be read qua the power to retire under para 6 and not under Rule 2(2) of Pension Rules.
There is thus no force in the argument and we reject the same.
Relying on the decision of this Court in Union of India and others vs R. Narasimhan, ; Mr. Anil Der Singh contended that para 620 of the Railway Pension Manual, which is identical to Rule 2(2) of the Pension Rules, has been upheld by this Court.
In Narasimhan 's case the scope of Rule 2046 of the Indian Railway Establishment Code and para 620 of the Railway Pension Manual was consid ered by this Court.
Rule 2046 is a statutory rule and is identical to Fundamental Rule 56(j).
Para 620 is in the nature of executive instructions but is similarly worded as Rule 2(2) of Pension Rules.
A Division Bench of the Madras High Court came to the conclusion that Rule 2046 having been framed under Article 309 of the Constitution and being a compendious rule, the railway employees are only gover 802 ned by the said rule and para 620 was void and inoperative.
This Court while setting aside the judgment of the High Court held as under: "Thus the areas of operation of Para 620 of the Railway Pension Manual is different from that of clause (h) and (k) of Rule 2946 of the Rules.
Para 620 of the Railway Pension Manual should be treated as supplementary to Rule 2046 of the Rules.
The said para which has been framed by the Union Government in exer cise of its executive powers under Article 73 of the Constitution should be given due effect since there is no statutory provisions or a rule framed under the proviso to Article 309 of the Constitution which is inconsistent with it.
" Narasimhan 's case has thus no relevancy to the contro versy involved in this case.
There was no challenge to any of the rules or para 620 of the manual on the ground that it gives unguided power to the Railway authorities to pick and choose railway employees for the purpose of pre mature retirement.
Para 620 of the Manual being executive instruc tion supplementing the statutory Rule 2046 has no parity with Rule 2(2) of Pension Rule which is a statutory rule.
In any case the point before us in the present case was neither involved nor raised in Narasimhan 's case and as such Mr. Anil Dev Singh cannot derive any support from the said judgment.
There is thus no legal or equitable ground to interfer with the judgment of the Division Bench of the High Court.
The appeal is dismissed with costs which we quantify as Rs.3,000.
R.S.S. Appeal dis missed.

summary:
The respondent, and employee in the Posts and Telegraph Department, was retired from service under Rule 2(2) of the Liberalised Pension Rules, 1950 which empowered the Govern ment to retire a servant at any time after he had completed 30 years of qualifying service.
The respondent 's writ peti tion in the Allahabad High Court was dismissed by the learned Single Judge holding that there was no infirmity in the Rule.
The Division Bench, however, accepted the Special Appeal filed by the respondent and declared Rule 2(2) in valid.
Before this Court, it was contended on behalf of the appellant that the Government of India had issued instruc tions dated July 11, 1955 and February 8, 1956 which laid down that the retirement under Rule 2(2) of the Pension Rules should be effected when such retirement was necessary in public interest.
It was further contended that the Minis try of Home Affairs Memorandum dated November 30, 1962 which was issued in the name of the President of India, was statu tory and had the effect of amending Rule 2(2) of the Pension Rules, and reading the rule and the memorandum together the power under Rule 2(2) could only be exercised to weel out unsuitable employees.
Dismissing the appeal, this Court, HELD: (1) Central Government servants superannuate at the age of 58 years.
The Government has the absolute right under Rule 56(j) of 797 Fundamental Rules to prematurely retire a servant in 'Public Interest ' after he has attained the age of 55 years.
The Government has also the power under Rule 2(2) of the Libera lised Pension Rules to retire a servant at any time after he has completed 30 years of qualifying service.
[798H 799A] (2) Fundamental Rule 56(j) while granting absolute right to the Government provides that such power can only be exercised in 'Public Interest '.
This guide line is suffi cient safeguard against the arbitrary exercise of power by the Government.
The object of this Rule is to chop off dead wood.
Rule 2(2) of the Pension Rules on the other hand provides no guide line and gives absolute discretion to the Government.
There is no requirement under the rule to act in 'Public Interest '.
[799E F] (3) Although the rules are mutually exclusive and have been made to operate in different fields but the operational effect of the two rules is that a Government servant who has attained the age of 55 can be retired prematurely under F.R. 56(j) only on the ground of 'Public Interest ' whereas anoth er Government servant who is only 51 and has completed 30 years of qualifying service, can be retired at any time at the discretion of the Government under Rule 2(2) of the Pension Rules.
Any Government servant who has completed 30 years of qualifying service and has not attained the age of 55 years can be picked up for premature retirement under Rule 2(2).
Since no safe guards are provided in the Rule, the discretion is absolute and is capable of being used arbitrarily and with an un even hand.
Rule 2(2) of the Pension Rules is therefore ultra vires Articles 14 and 16 of the Constitution of India.
[799G, 800B C] (4) A statutory rule cannot be modified or amended by executive instructions.
A valid Rule having some lacuna or gap can be supplemented by the executive instructions, but a statutory rule which is constitutionally invalid cannot be validated with the support of executive instructions.
The instructions can only supplement and not supplant the rule.
[800E] (5) The Ministry of Home Affairs, Memorandum dated November 30, 1962 has not been issued under Article 309 of the Constitution of India and as such cannot be statutory.
The memorandum is in the nature of executive instructions issued in the name of the President of India as required under Article 77(1) of the Constitution of India.
[801D] 798 Union of India & Ors.
vs R. Narasimhan, A.I.R. 1988 S.C. 1733,
distinguished