judgement:
ION: Special Leave Petition (Civil) No. 7534 of 1987.
From the Judgment and Order dated 4.11.
1986 of the Kerala High Court in M.F.A. No. 64 of 1982.
E.M.S. Anam for the Petitioner.
The Order of the Court was delivered by VENKATARAMIAH, J.
The petitioner was the owner of a bus bearing No. KLD 9327 which was being run as a stage car riage.
On 24.7.1978 while the said bus was carrying passen gers it met with an accident and Saheeda, who was one of the passengers in the bus, died as a consequence of the said accident.
The accident took place, according to the Motor Accidents Claims Tribunal, due to the negligence on the part of the driver of the vehicle who had been employed by the petitioner.
The Tribunal found that the compensation payable by the petitioner to the legal representatives of Saheeda was Rs.56,800.
It, however, held that the liability of the insurer to indemnify the petitioner was limited to Rs.5,000 as the policy specifically limited the insurer 's 1153 liability to what had been provided by section 95(2)(b)(ii)(2) and (4) of (herein after referred to as the Act ').
Aggrieved by the decision of the Tribunal the petitioner filed an appeal before the High Court of Kerala.
The said appeal was dismissed.
This peti tion is filed under Article 136 of the Constitution for special leave to appeal against the judgment of the High Court.
The contention of the petitioner before this Court is that the insurer was liable to indemnify the petitioner upto a limit of Rs.75,000 under section 95(2)(b)(ii)(2) of the Act and that the further limit mentioned in section 95(2)(b)(ii)(4) of the Act was inapplicable to the case of the petitioner.
The relevant part of section 95 of the Act during the relevant time read as follows: "95(2).
Subject to the proviso to sub section (1), a policy of insurance shall cover any liability incurred in respect of any one accident up to the following limits, namely (a) where the vehicle is a goods vehicle, a limit of fifty thousand rupees in all, including the liabilities, if any, aris ing under the (8 of 1923), in respect of the death of, or bodily injury to, employees (other than the driver), not exceeding six in number, being carried in the vehicle; (b) where the vehicle is a vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment , (i) in respect of persons other than passengers carried for hire or reward, a limit of fifty thousand rupees in all; (ii) in respect of passengers, (1) a limit of fifty thousand rupees in all where the vehicle is registered to carry not more than thirty passengers; (2) a limit of seventy five thou sand rupees in all where the vehicle is regis tered to carry more than thirty but not more than sixty passengers; 1154 (3) a limit of one lakh rupees in all where the vehicle is registered to carry more than sixty passengers; and (4) subject to the limits aforesaid, ten thousand rupees for each individual pas senger where the vehicle is a motor cab, and five thousand rupees for each individual passenger in any other case; (c) save as provided in clause (d), where the vehicle is a vehicle of any other class, the amount of liability incurred; (d) irrespective of the class of the vehicle, a limit of rupees two thousand in all in respect of damage to any property of a third party.
Section 95 of the Act sets out the requirements of the policies of insurance which must be taken by the owners of motor vehicles and the limits of liabilities thereunder.
A policy of insurance should subject to the proviso to sub section (1) of section 95 of the Act cover any liability incurred in respect of any one accident upto the limits specified in sub section (2) of section 95 of the Act.
Clause (a) of section 95(2) of the Act during the relevant time provided that where the vehicle was a goods vehicle the policy should cover the liability upto Rs.50,000 in all including the liabilities, if any, arising under the Work men 's Compensation Act, 1923 in respect of death of or bodily injury to the workmen (other than the driver) not exceeding six in number being carried in the vehicle.
This clause came up for consideration before this Court in Motor Owners Insurance Co. Ltd. vs Jadavji Keshavji Modi & Ors., In that case this Court held that clause (a) of section 95(2) of the Act qualified the extent of the insurer 's liability by the use of the unambiguous expression "in all" and since that expression was specially introduced by an amendment, it must be allowed its full play.
The legislature must be presumed to have intended what it had plainly said.
But clause (a) did not stand alone and was not the only provision to be considered for determining the outside limit of the insurer 's liability.
It was necessary to give effect to the words 'any one accident ' which formed part in the opening part of sub section (2) of section 95 of the Act.
The Court, therefore, held that if more than one person was injured during the course of the same transaction each one of the persons must be deemed to have met with an accident.
Accordingly, 1155 the Court held that each of the persons who was entitled to claim compensation under clause (a) of sub section (2) of section 95 of the Act was entitled to claim a sum of Rs.50,000 which was the limit prescribed by the said clause on the date on which the accident, referred to in that case, occurred.
The Court, however, distinguished the decision of this Court in Sheikhupura Transport Co. Ltd. vs Northern India Transport Insurance Co., [1971] Supp.
SCR 20 which was a case in which clause (b) of sub section (2) of section 95 of the Act had arisen for consideration.
In doing so the Court observed thus: "The judgment of the Punjab High Court was brought in appeal to this Court in Sheikhupura Transport Co. Ltd. vs Northern India Transport Co. For reasons aforesaid, the judgment in that case is not an authority on the interpretation of clause (a) of section 95(2).
After setting out the relevant provi sions of section 95(2) at pages 24 and 25 of the Report, Hegde J. speaking for himself and Jaganmohan Reddy, J. concluded: 'In the present case we are dealing with a vehicle in which more than six passen gers were allowed to be carried.
Hence the maximum liability imposed under section 95(2) on the insurer is Rs.2,000 per passenger though the total liability may go upto Rs.20,000. ' Towards the end of the judgment, it was observed that reading the provision con tained in sections 95 and 96 together ' . it is clear that the statutory liability of the insurer to indemnify the insured is as prescribed in section 95(2).
Hence the High Court was right in its conclusion that the liability of the insurer in the present case only ex tends upto Rs.2,000 each, in the case of Bachan Singh and Narinder Nath. ' In view of the limit on the insurer 's liability in re spect of each passenger, the argument on the construction of the words 'any one accident ' had no relevance and was therefore neither made nor considered by the Court.
Different considerations may arise under clause (b), as amended by Act 56 of 1969, but we do not propose to make any observations on that aspect of the matter, since it does not di rectly arise before us.
" Section 95(2)(b) as it existed before its amendment in 1982 dealt with the limits of the liability of an insurer in the case of motor vehicles 1156 in which passengers were carried for hire or reward or by reason of or in pursuance of a contract of employment.
Sub clause (i) of section 95(2)(b) provided that in respect of death of or injury to persons other than passengers carried for hire or reward a limit of Rs.50,000 in all was the limit of the liability of the insurer.
Sub clause (ii) dealt with the liability in respect of death of or injury to passen gers.
Under that sub clause there were two specific limits on the liability of the insurer in the case of motor vehi cles carrying passengers.
The first limit related to the aggregate liability of the insurer in any one accident.
It was fixed at Rs.50,000 in all where the vehicle was regis tered to carry not more than thirty passengers, at Rs.75,000 in all where the vehicle was registered to carry more than thirty but not more than sixty passengers and at Rs. 1,00,000 in all where the vehicle was registered to carry more than sixty passengers.
The said sub clause proceeded to lay down the other limit in respect of each passenger by providing that subject to the limits aforesaid as regards the aggregate liability, the liability extended up to Rs. 10,000 for each individual passenger where the vehicle was a motor cab and Rs.5,000 for each individual passenger in any other case.
Neither of the two limits can be ignored.
In the present case the vehicle in question being a bus carrying passengers for hire or reward registered to carry more than thirty but not more than sixty passengers the limit of the aggregate liability of the insurer in any one accident was Rs.75,000 and subject to the said limit the liability in respect of each individual passenger was Rs.5,000.
We find it difficult to hold that the limit prescribed in section 95(2)(b)(ii)(4) was only the minimum liability prescribed by law.
The amount mentioned in that provision provides the maximum amount payable by an insurer in respect of each passenger who has suffered on account of the accident.
This appears to us to be a fair construction of section 95(2) of the Act as it existed at the time when the accident took place.
Our view receives support from at least two decisions of this Court.
In Sheikhupura Transport Co. Ltd. vs Northern India Transport Insurance Co. (supra) the motor vehicle involved was a passenger bus.
On account of an accident which took place on account of the negligence of the driver of the said vehicle two persons died on the spot.
Their legal represen tatives claimed compensation before the Motor Accidents Claims Tribunal.
The Tribunal found that the legal represen tatives of each of the two persons who had died on account of the accident, were entitled to compensation of Rs. 18,000 and directed that the entire sum should be paid by the insurance company.
On appeal by the legal representatives as well as by the insurance company the High Court enhanced the compensation payable to the legal 1157 representatives of each of the two deceased persons to Rs.36,000 and also allowed the appeal of the insurance company and limited its liability to the tune of Rs.2,000 in respect of each of the two deceased persons in accordance with section 95(2)(b) of the Act as it stood at the relevant time which provided that where the vehicle was a vehicle in which passengers were carried for hire or reward or by reason of or in pursuance of a contract of employment in respect of persons other than passengers carried for hire or reward, a limit of Rs.20,000 and in respect of passengers a limit of Rs.20,000 in all and Rs.2,000 in respect of an individual passenger if the vehicle was registered to carry more than six persons excluding the driver.
The Court ob served that since in the said case the vehicle was one in which more than six persons were allowed to be carried the maximum liability imposed under section 95(2) of the Act on the insurer was Rs.2,000 per passenger though the total liability might go upto Rs.20,000 in a given case where large number of persons had suffered on account of the accident.
Accordingly the Court affirmed the judgment of the High Court insofar as the question of the liability of the insurer was concerned.
Clause (b) of section 95(2) of the Act again came up for consideration before this Court in Manjusri Raha & Ors. etc.
vs B.L. Gupta & Ors.
; In that case also the motor vehicle which was involved in the accident was a bus carrying passengers on a route in the State of Madhya Pradesh.
The Court followed the decision in the case of Sheikhupura Transport Co. Ltd. vs Northern India Trans port Insurance Co., (supra) and limited the liability of the insurer to Rs.2,000 as provided by the Act at that time.
The Court found itself in complete agreement with the observa tions made by the Kerala High Court in P.B. Kader & Ors.
vs Thatchamma and Ors., AIR 1970 Kerala 241, and approved the following observations made by the Kerala High Court: "It is sad that an Indian life should be so devalued by an Indian law as to cost only Rs.2,000, apart from the fact that the value of the Indian rupee has been eroded and Indian life has become dealer since the time the statute was enacted, and the consciousness of the comforts and amenities of life in the Indian community has arisen, it would have been quite appropriate to revise this fossil figure of Rs.2,000 per individual, involved in an accident, to make it more realistic and humane, but that is a matter for the legisla ture; and the observation that I have made is calculated to remind the law makers that humanism is the basis of law and justice." 1158 The Court also suggested on its own that instead of limiting the liability of the insurance companies to a specified sum of rupees as representing the value of human life, the amount should be left to be determined by a Court in the special circumstances of each case, even in the case where passenger vehicles were responsible for the incident.
Fazal Ali, J. who delivered the judgment in the above case further observed at pages 950 95 1 thus: "While our Legislature has made laws to cover every possible situation, yet it is well nigh impossible to make provisions for all kinds of situations.
Nevertheless where the social need of the hour requires that precious human lives lost in motor accidents leaving a trail of economic disaster in the shape of their unpro vided for families call for special attention of the law makers to meet this social need by providing for heavy and adequate compensation particularly through insurance companies.
It is true that while our law makers are the best judges of the requirements of the society, yet it is indeed surprising that such an important aspect of the matter has missed their atten tion.
Our country can iII afford the loss of a precious life when we are building a progres sive society and if any person engaged in industry, office, business or any other occu pation dies, a void is created which is bound to result in a serious set back to the indus try or occupation concerned.
Apart from that the death of a worker creates a serious eco nomic problem for the family which he leaves behind.
In these circumstances it is only just and fair that the Legislature should make a suitable provision so as to pay adequate compensation by properly evaluating the pre cious life of a citizen in its true perspec tive rather than devaluing human lives on the basis of an artificial mathematical formula.
It is common knowledge that where a passenger travelling by a plane dies in an accident, he gets a compensation of Rs.1,00,000 or like large sums, and yet when death comes to him not through a plane but through a motor vehi cle he is entitled only to Rs.2,000.
Does it indicate that the life of a passenger travel ling by plane becomes more precious merely because he has chosen a particular conveyance and the value of his life is considerably reduced if he happens to choose a conveyance of a lesser value like a motor vehicle? Such an invidious distinction is absolutely shock ing to any judicial or social conscience and yet section 95(2)(d) of the seems to suggest such a distinction.
We 1159 hope and trust that our law makers will give serious attention to this aspect of the matter and remove this serious lacuna in section 95(2)(d) of the .
" These observations were quoted with approval by this Court in the course of its judgment in Motor Owners Insur ance Co. Ltd. vs Jadavji Keshavji Modi & Ors., (supra) and while doing so the Court observed that the above observa tions were still languishing in the cold.
storage of pious wishes.
Immediately after the decision in the Motor Owners Insurance Co. Ltd. vs Jadavji Keshavji Modi & Ors.
(supra) Parliament took steps to amend sub clause (ii) of clause (b) of section 95(2) of the Act by Act 47 of 1982.
After the said amendment subclause (ii) of clause (b) of section 95(2) of the Act reads thus: "95(2)(b).
Where the vehicle is a vehicle in which passengers are carried for hire or reward of by reason of or in pursuance of a contract of employment . . . . . . . . . . . (ii) in respect of passengers, a limit of fifteen thousand rupees for each individual passenger.
. . . . . . . . . . " As the law stands today the insurer is liable to pay upto Rs.15,000 in respect of death of any passenger or any injury caused to him.
In the Statement of Objects and Rea sons attached to the Bill which ultimately became Act 47 of 1982 it was stated that the limit with respect to an insur er 's liability to a passenger involved in an accident in a public service vehicle was being fixed at Rs.15,000.
After the above amendment, which was intended to increase the liability of the insurer, instead of Rs.10,000 in the case of each individual passenger where the vehicle was a motor cab and Rs.5,000 for each individual passenger in other cases which were the limits in force immediately prior to the said amendment the liability in respect of an individual passenger is now raised to Rs.15,000.
This clearly demon strates that Parliament never intended that the aggregate liability of the insurer mentioned in subclauses (1), (2) and (3) of section 95(2)(b)(ii) of the Act would be the liability of the insurer even when one passenger had died or suffered injury on account of an accident.
Such liability was always further limited by sub clause (4) of section 95(2)(b)(ii) of the Act.
Even in the latest Bill, i.e., Bill No. 56 of 1987 which was introduced in the Lok Sabha on the 11th of May, 1987 for the purpose of consolidating and amending the law in regard to the motor vehicles it is proposed by 1160 section 147 to retain the provision regarding the limit of the insurer 's liability in respect of vehicles in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment as it was provided by Act 47 of 1982.
Section 147(2)(b)(ii) of the Bill reads thus: "147(2).
Subject to the proviso to sub section (1), a policy of insurance shall cover any liability incurred in respect of any one accident up to the following limits, namely: . . . . . . . . . . . (b) where the vehicle is a vehicle in which passengers are carried for hire or, reward or by reason of or in pursuance of a contract of employment; . . . . . . . . . . (ii) in respect of passengers, a limit of fifteen thousand, rupees for each individual passenger, . . . . . . . . . .
Having regard to the large number of motor vehicles accidents which are taking place on roads and also to the fact that a large number of public service vehicles carrying passengers are involved in them, we are of the view that the limit of Rs.15,000 fixed in the case of each passenger appears to be still meagre and we hope that Parliament while enacting the Bill into law would take steps to increase the insurer 's liability keeping in view the need for providing for adequate compensation as a measure of social security.
We should at this stage state that the High Court of Madras in K.R. Sivagami, Proprietor, Rajendran Tourist vs Mahaboob Nisa Bi and Others, has taken the same view as regards the effect of section 95(2)(b)(ii) of the Act as it stood before its amendment in 1982.
It has observed that the said provision specifically provided for two limitations on the liability of the insurer in respect of an accident in which a vehicle carrying passengers was involved, the first limitation being the limitation con tained in sub clauses (1), (2) and (3) of section 95(2)(b)(ii) which provided that for the aggregate liability of the insurer in an accident and the second limitation being the one contained in sub clause (4) of section 95(2)(b)(ii) which provided that subject to the limits aforesaid Rs.10,000 for each individual passenger where the vehicle was a motor cab and Rs.5,000 1161 for each individual passenger in any other case.
Khalid, J., as he then was, of the Kerala High Court has also accepted the same construction of section 95(2)(b) in Madras Motor and General Insurance Co. Ltd. by its successor: The United Fire and General Insurance Co. Ltd. and others vs V.P. Balakrishnan and others.
, The High Court of Allahabad in New India Assurance Co. Ltd. vs Mahmood Ahmad and others, the High Court of Bombay in Shivahari Rama Tiloji and another vs Kashi Vishnu Agarwadekar and others, and the High Court of Patna in National Insurance Co. Ltd. vs Shanim Ahmad and others, and in Tara Pada Roy vs Dwijendra Nath Sen and others, have over looked the cumulative effect of sub clauses (1), (2) and (3) and of sub clause (4) of section 95(2)(b)(ii) of the Act.
They have failed to give effect to section 95(2)(b)(ii)(4) of the Act.
We are of the view that these decisions do not lay down the correct view.
We may, however, state here that in Noor Mohammad and another vs Phoola Rani and others, 18 and in Raghib Nasim and another vs Naseem Ahmed and others, two Division Benches of the Allahabad High Court have construed the provision in ques tion as we have done in this case.
The decision of the Single Judge of the Allahabad High Court in New India Assur ance Co. Ltd. vs Mahmood Ahmad and others, (supra) is dis sented from in the later decision of the Division Bench of the Allahabad High Court in Raghib Nasim and another vs Naseem Ahmad and others, (supra).
Having regard to the statute as it stood prior to the amendments by Act 47 of 1982 we hold that the insurer was liable to pay upto Rs.10,000 for each individual passenger where the vehicle involved was a motor cab and upto Rs.5,000 for each individual passenger in any other case.
The judg ment of the Kerala High Court against which this petition is filed has followed the above construction.
We do not find any ground to interfere with it.
This petition is, there fore, dismissed.
In the end we propose to make a few suggestions to the Central Government in respect of certain provisions in Chapters X, XI and XII of the Motor Vehicles Bill No. 56 of 1987 now pending before Parliament which relate to the liability without fault in certain cases, insurance of motor vehicles against third party risks and Claims Tribunals.
Sections 140, 147, 161 and 166 in the Motor Vehicles Bill No. 56 of 1987 correspond to sections 92A, 95, 109A and 110A of the present Act.
The Bill does not propose to introduce any change in sections 1162 140, 147, 161 and 166 of the Bill from what the law is today.
They are almost identical with the existing provi sions.
In section 140 of the Bill which corresponds to section 92A of the Act the liability to pay compensation in the case of death of any person or in the case of permanent disablement of any person is proposed to be retained at Rs. 15,000 and Rs.7,500 respectively in the same way in which the law stands today.
Having regard to the inflationary pressures and the consequent loss of purchasing power of the rupee we feel that the amount of Rs.15,000 and the amount of Rs.7,500 in the above provisions appear to have become unrealistic.
We, therefore, suggest that the limits of compensation in respect of death and in respect of permanent disablement, payable in the event of there being no proof of fault, should be raised adequately to meet the current situation.
Section 147 in the Bill corresponds to section 95 of the present Act, Here again the Government may consider whether it is necessary to continue the distinction between public service vehicles and other motor vehicles in regard to the liability of the insurer to pay compensation.
We also do not find any justification for continuing the distinction between the liability of the insurer to pay compensation to passengers and the liability of the insurer to pay compensa tion to other third parties under the said provisions.
Even among the public service vehicles a distinction is made in the said provisions between vehicles used as goods carriages and vehicles used for the purpose of carrying passengers.
The Central Government may consider whether the limits of liability of the insurer now incorporated in section 147 of the Bill should not be altered suitably.
Section 161 in the Bill corresponds to section 109A of the present Act which makes special provisions as to compensation payable in cases of hit and run motor accidents.
This provision provides for payment of Rs.5,000 in respect of death of any person re sulting from a hit and run motor accident and for the pay ment of Rs.1,000 in respect of grievous injury to a person from a hit and run motor accident.
It is a matter of common knowledge that hit and run motor accidents are increasing in number.
The society and the State which are responsible for such large number of motor vehicles being put on road should carry also the responsibility of protecting the interests of the innocent victims of hit and run motor accidents.
A sum of Rs.5,000 and a sum of Rs.1,000 provided as compensation in respect of death or grievous hurt respectively appear to be highly inadequate.
The Government may consider whether these figures should not be increased in an appropriate manner.
Lastly we come to section 166 of the Bill which corresponds to section 110A of the present Act.
This con tains the provisions relating to application for compensa tion to be filed before Claims Tribunals.
It is stated therein that where death has resulted from the accident an application for compensation may be 1163 made by all or any of the legal representatives of the deceased.
The expression 'legal representative ' has not been defined in the Act and it has led to serious doubts in the course of judicial proceedings.
Attention of the Government is drawn to the decision of this Court in Gujarat State Road Transport Corporation, Ahmedabad vs Ramanbhai Prabhatbhai and Another, ; and the reference made in the said decision to the Report of the English Royal Commission on Civil Liberty and Compensation for Personal Injury under the Chairmanship of Lord Pearson.
The Government may consid er whether it would not be advisable to define the expres sion 'legal representative ' for purposes of making claims before Claims Tribunal where death had resulted from a motor vehicle accident in the same way in which the English Law has been amended.
Since the Bill is on the anvil of Parlia ment we feel that this is the appropriate time for the Central Government to reconsider the above issues.
A copy of this Order may be sent to the Secretary to the Government of India, Ministry of Transport, for information.
N.P.V. Petition dismissed.

summary/full:
The petitioner was the owner of a bus being run as a stage carriage.
On 24.7.78 while carrying passengers this bus met with an accident, as a result of which one passenger died.
The Motor Accident Claims Tribunal held that the accident took place due to the negligence on the part of the driver and awarded compensation of Rs.56,800 to the legal representatives of the deceased.
It further held that the liability of the insurer to indemnify the petitioner was limited to Rs.5,000 as the policy specifically limited the insurer 's liability to what had been provided by section 95(2)(b)(ii)(2) and (4) of .
The appeal filed by the Petitioner was dismissed by the High Court.
In the Special Leave Petition before this Court, it was contended on behalf of the petitioner that the insurer was liable to indemnify the petitioner upto a limit of Rs.75,000 under section 95(2)(b)(ii)(2) of the and that the further limit mentioned in section 95(2)(b) (ii)(4) was inapplicable to the case of the petitioner.
Dismissing the Special Leave Petition, this Court, HELD: 1.
Having regard to the as it stood prior to the amendments by Act 47 of 1982.
the insurer was liable to pay upto Rs.10,000 for each individual passenger where the vehicle involved was a motor cab and upto Rs.5,000 for each individual passenger in any other case.
[1161F] 2.1 Section 95(2)(b) as it existed before its amendment in 1982 1150 dealt with the limits of the liability of an insurer in the case of motor vehicles in which passengers were carried for hire or reward or by reason of or in pursuance of a contract of employment.
[1155H; 1156A] Sub clause (i) of section 95(2)(b) provided that in respect of death of or injury to persons other than passen gers carried for hire or reward, a limit of Rs.50,000 in all was the limit of the liability of the insurer.
[1156A] Under sub clause (ii) there were two specific limits on the liability of the insurer in the case of motor vehicles carrying passengers.
The first limit related to the aggre gate liability of the insurer in any one accident.
It was fixed at Rs.50,000 in all where the vehicle was registered to carry not more than thirty passengers, at Rs.75,000 in all where the vehicle was registered to carry more than thirty but not more than sixty passengers and at Rs.1,00,000 in all where the vehicle was registered to carry more than sixty passengers.
The other limit was in respect of each passenger, which provided that subject to the limits afore said as regards the aggregate liability, the liability extended up to Rs.10,000 for each individual passenger where the vehicle was a motor cab and Rs.5,000 for each individual passenger in any other case.
Neither of the two limits can be ignored.
[1156B D] 2.2 The limit prescribed in section 95(2)(b)(ii)(4) cannot be said to be only the minimum liability prescribed by law.
The amount mentioned in that provision provides the maximum amount payable by an insurer in respect of each passenger who has suffered on account of an accident.
This is a fair construction of section 95(2) of the Act as it existed at the time when the accident took place.
[1156E] 2.3 After the 1982 amendment the liability of the insur er in respect of each individual passenger is Rs.15,000 as against Rs.10,000 in the case of each individual passenger where the vehicle was a motor cab and Rs.5,000 for each individual passenger in other cases, prior to the said amendment.
This shows that Parliament never intended that the aggregate liability of the insurer mentioned in sub clauses (1), (2) and (3) of section 95(2)(b)(ii) would be the liability of the insurer even when one passenger had died or suffered injury on account of an accident.
Such liability was always further limited by sub clause (4) of section 95(2)(b)(ii).
[1159F G] 2.4 In the instant case, the vehicle in question being a bus carrying passengers for hire or reward registered to carry more than thirty 1151 but not more than sixty passengers, the limit of the aggre gate liability of the insurer in any one accident was Rs.75,000 and subject to the said limit the liability in respect of each passenger was Rs.5,000.
[1156D] 2.5 As the law stands today the insurer is liable to pay upto Rs.15,000 in respect of death of any passenger or any injury caused to him.
Having regard to the large number of motor vehicle accidents which are taking place on roads and also to the fact that a large number of public service vehicles carrying passengers are involved in them, limit of Rs.15,000 fixed in the case of each passenger appears to be still meagre.
[1159E; 1160E] 3.
The following suggestions in respect of certain provisions of the are made for considera tion of the Central Government: (i) The limits of compensation in respect of death or permanent disablement payable in the event of there being no proof of fault have become unrealistic in view of inflation ary pressures and consequent loss of purchasing power of the rupee.
These limits should, therefore, be raised adequately.
[1162B C] (ii) There is no justification for continuing the dis tinction between public service vehicles and other vehicles and also between passengers and third parties with regard to the liability of the insurer to pay compensation.
Even among the public service vehicles a distinction is made between vehicles used as goods carriages and those used for carrying passengers.
It may be considered whether it is necessary to continue these distinctions and also whether the limits of liability of the insurer should not be altered suitably.
[1162D E] (iii) The society and the State which are responsible for a large number of motor vehicles being put on road should carry also the responsibility of protecting the interests of innocent victims of hit and run motor accidents which are increasing in number.
The amounts of Rs.5,000 and Rs.1,000 provided as compensation in respect of death or grievous hurt respectively appear to be highly inadequate.
It may be considered whether these figures should not be increased in an appropriate manner.
[1162F G] (iv) The expression "legal representative" has not been defined in the Act and it has led to serious doubts in the course of judicial proceedings.
It may be considered whether it would not be advisable to define the said expression for purposes of making claims before Claims 1152 Tribunals where death has resulted from a motor vehicle accident in the same way in which the English Law has been amended.
[1163A C] Motor Owners Insurance Co. Ltd. vs Jadavji Keshavji Modi Northern India Transport Insurance Co., [1971] Supp.
SCR 20; Manjusri Raha & Ors.
B.L. Gupta & Ors.
; , ; P.B. Kader & Ors.
vs Thatchamma and Ors., AIR 1970 Kerala 241; K.R. Sivagami, Proprietor, Rajendran Tourist vs Mahaboob Nisa Bi and others, ; Madras Motor and General Insurance Co. Ltd. by its successor: The United Fire and General Insurance Co. Ltd. and others vs
V.P. Ba lakrishnan and others, ; New India Assurance Co. Ltd. vs Mahmood Ahmad and others, ; Shiva hari Rama Tiloli and another vs Kashi Vishnu Agarwadekar and others, ; National Insurance Co. Ltd. vs Shanim Ahmad and others, ; Tara Pada Roy vs Dwijendra Nath Sen and others, ; Noor Mohammad and another vs Phoola Rani and others, ; Raghib Nasim and another vs Naseem Ahmad and others, and Gujarat State Road Transport Corporation, Ahme dabad vs Ramanbhai Prabhatbhai and Another, ; , referred to.


judgement:
Civil Appeal No. 3582 of 1986.
From the Judgment and Order dated 24.7.1985 of the Delhi High Court in Civil W.P. No. 435 of 1985.
section Rangarajan and Ms. Asha Rani Jain for the Appellant.
V.C. Mahajan, Ms. C.K. Sucharita and C.V. Subba Rao for the Respondents.
32 The Judgment of the Court was delivered by SEN, J.
This appeal by special leave directed against the judgment and order of the High Court of Delhi dated July 24, 1985 raises two questions, namely: (1) Was the Union of India justified in passing an order dated September 17, 1982 in terms of FR 25 declaring the appellant to be unfit to cross the efficiency bar as Assistant Engineer, Central Public Works Department at the stage of Rs.590 in the prerevised scale of pay of Rs.350 590 EB 900 as from October 5, 1966? And (2) Is the appellant entitled to interest on the delayed payment of his pension? This litigation has had a chequered career.
The appellant who was as Assistant Engineer in the Central Public Works Department was placed under suspension pending a departmental enquiry under r.12(2) of the Central Civil Services (Classification, Control & Appeal) Rules, 1965 on September 3, 1959.
He remained on suspension till May 25, 1970 when on repeated representations the Chief Engineer, Central Public Works Department revoked the order of suspension and he was reinstated in service.
During the aforesaid period of suspension, adverse remarks in his confidential reports for the period between April 1, 1957 and August 31, 1957 and between April 1, 1958 and March 31, 1959 were communicated to him on December 16, 1959.
After a period of nearly five years, the departmental proceedings culminated in an order of dismissal from service dated March 12, 1964 but the same on appeal by him, was set aside by the President of India by order dated October 4, 1966 with a direction for the holding of a fresh departmental inquiry under r. 29(1)(c) of the Rules, with a further direction that he shall continue to remain under suspension.
The order of suspension was revoked by the Chief F Engineer on May 8, 1970 but the departmental proceedings were kept alive.
As a result of this, the appellant was reinstated in service on May 25, 1970.
Immediately thereafter, he made representation to the Department to pass an order under FR 54 for payment of full pay and allowances for the period of suspension i.e. the period between September 3, 1959 and May 25, 1970 but the same was rejected on the G ground that departmental inquiry was still pending.
There was little or no progress in the departmental inquiry.
on April 25, 1972 the Chief Engineer passed an order of compulsory retirement of the appellant under FR 56(j).
The appellanrmade representations to various authorities, including the President of India, H against his compulsory retirement but the same was rejected Eventu 33 ally, on July 20, 1972 the appellant filed a petition under article 226 of the Constitution in the High Court challenging the validity of the order of compulsory retirement and prayed for a direction in terms of FR 54 for payment of full pay and allowances for the period of suspension and also for payment of all increments to which he was entitled.
He also prayed for quashing of the departmental proceedings.
A learned Single Judge (Wad, J.) by his judgment and order dated January 5, 1981 held that the order of compulsory retirement of the appellant was bad in law, not being relatable to FR 56(j) inasmuch as the action was not based on an overall assessment of the appellant 's record of service and was in breach of the instructions issued by the Government of India, Ministry of Home Affairs dated June 23, 1969 laying down the procedure to be followed under FR 56(j).
He further held that the action to compulsorily retire the appellant in 1972 under FR 56(j) could not obviously be taken on the basis of adverse remarks for the years 1950 51 when he was an Overseer, nor on the adverse remarks for the years 1957 59 communicated to him on December 16, 1959, after a lapse of 20 years and 13 years respectively.
Further he observed that the adverse remarks of 1957 59 were not serious enough to cut short the career of the appellant as a Government servant, particularly in view of the fact that the general confidential reports for two years immediately preceding his retirement on July 28, 1972 did not reveal anything blameworthy against him.
He accordingly quashed the order of compulsory retirement of the appellant and held that he shall be deemed to have continued in service till March 31, 1978, the date when he attained the normal age of superannuation.
During the course of his judgment, the learned Judge also adversely commented on the failure of the Department to pass an order in terms of FR 54 consequent upon the reinstatement of the appellant on May 25, 1970 within a reasonable time.
He observed that ordinarily he would have left it to the Department to pass an order under FR 54 as to whether the suspension of the appellant for the period from September 3, 1959 to May 25, 1970 was justified or not but due to the inactivity or refusal on the part of the Government to pass an order under FR 54, the Court was left with no other option but to deal with the question.
After referring to the various stages of the departmental proceedings, the learned Judge held that the suspension of the appellant was not justified and the period of suspension must be regarded as spent on duty and therefore the appellant under FR 54(2) was entitled to full pay and allowances and the increments for that period.
He further held that r. 9(2)(b) of the Central Civil Services 34 (Pension) Rules, 1972 was not attracted and accordingly quashed the departmental proceedings.
The operative part of the judgment of the learned Judge reads as follows: "The petition, for the reasons stated above, succeeds.
The order of compulsory retirement dated 25.4.1972 is set aside.
The petitioner would be entitled to continuation in service upto March 31, 1978 (the date when he reached his normal age of superannuation) and consequential benefits.
The continuation of suspension of the petitioner was without any justification.
The petitioner would be entitled to full pay and allowances from 3.9.1959 to 24.5.1970 with increments and other service benefits according to Rules.
The pending departmental proceedings are quashed.
" Aggrieved, the Union of India went up in appeal but a Division Bench by its judgment dated March 24, 1982 declined to interfere.
The appellant had in the meanwhile submitted his bill of arrears and the respondents having failed to comply with the direction of the learned Single Judge, he moved the High Court for contempt.
In response to the notice issued by the High Court, respondent No. 4 Director General of Works entered appearance on September 6, 1982 and tendered a written apology, upon which the High Court dropped the proceedings.
It appears that the Department paid the appellant about Rs.86,000 in compliance with the judgment of the learned Single Judge.
Although there is a healthy trend and the Government of India has set up an independent Ministry Ministry of Personnel, Public Grievances & Pension for settlement of claims in regard to pension, this case is an instance where a civil servant had been subjected to endless harassment for no fault of his own.
While it is true that the charge levelled against the appellant was serious enough to merit the imposition of a major punishment, there was little or no progress for keeping the departmental proceedings pending for over 20 years.
There was persistent effort on behalf of the Department to visit the appellant with civil consequences, first by placing him under suspension under r. 12(2) of the Rules for a period of 11 years and secondly by directing his compulsory retirement when it was realised that the charge levelled could not be substantiated.
Under FR 54 when a Government servant who had been dismissed, removed or suspended is reinstated, the authority competent to order reinstatement has to make a specific order (a) regarding the pay and allowances to be paid 35 to the Government servant for the period of his absence from duty, and (b) directing whether or not the period of suspension shall be treated as a period spent on duty.
Despite repeated representations made by the appellant, the Government failed in its duty to pass an order in terms of FR 54 within a reasonable time.
The Government also failed to comply with the judgment of the learned Single Judge and pay to the appellant the arrears of pay and allowances amounting to about Rs.86,000 till the High Court issued a notice for contempt.
It is regrettable that respondent No. 4 Director General of Works had to enter personal appearance and tender a written apology.
The payment of Rs.86,000 to the appellant was therefore under threat of contempt and does not redound to the credit of the Government.
The miseries of the appellant did not end with this.
The Department apparently never forgave the appellant for having dragged the Government to litigation and compel the personal appearance of the Head of the Department.
It was expected that the Government would act with good grace but just within a fortnight of the termination of the contempt proceedings, the Director General rejected the appellant 's case for crossing of the efficiency bar at the stage of Rs.590 w.e.f. October 5, 1966 as indicated hereinafter.
In the counter affidavit to the contempt proceedings, the Government stated that there were two conditions for an Assistant Engineer to cross the efficiency bar, namely: (1) that he should have passed the departmental examination in Accounts prescribed for Assistant Engineers, and (2) he should have obtained good reports over the last five years.
The increments above the stage of efficiency bar are to be allowed in accordance with the provisions contained in FR 25 and the Government of India 's decisions thereunder.
The appellant 's case for crossing of efficiency bar at the stage of Rs.590 w.e.f. October 5, 1966 was said to have been considered by the Departmental Promotion Committee on the basis of his performance reports.
Evidently, the Departmental Promotion Committee recommended on the basis of such reports that he was not fit to cross the efficiency bar at the stage of Rs.590 from October 5, 1966 or on any subsequent date upto October 5, 1971.
The report of the Departmental Promotion Committee was accepted by the competent authority.
Accordingly, the Director General of Works on September 17, 1982 passed an order to the following effect: "No.32/426/66.EC.III New Delhi, dated 17.9.82 36 OFFICE MEMORANDUM Sub: Crossing of Efficiency Bar by Shri O.P. Gupta, Assistant Engineer (Civil), Retired.
The Executive Engineer, Central Stores Division No. 1, C.P.W.D. New Delhi is informed that the case of crossing of efficiency bar by Shri O.P. Gupta, Assistant Engineer (Retired) at the stage of Rs.590 in the pre revised scale of pay of Rs.350 25 500 30 590 EB 30 800 EB 30 830 35 900 has been considered by the competent authority, who has found him unfit to cross the efficiency bar w.e.f.5.
10.1966 or from any subsequent date upto 5.
10.1971.
" The impugned order is not as innocuous as it looks.
Just as suspension of a government servant pending a departmental inquiry is not by way of punishment, so also the withholding of increments at the efficiency bar pending such inquiry.
But when the High Court quashed the departmental proceedings which were pending for over 20 years with little or no progress as being wholly invalid and unfair, there was no occasion for the Department to have passed an order under FR 24 for withholding increments to the appellant at the stage of Rs.590 w.e.f. October 5, 1966 unless it was with a view to penalise him financially.
As already stated, the authority competent to order reinstatement failed to make an order in terms of FR 54 after the appellant had been reinstated in service on May 25, 1970 within a reasonable time.
Looking to the long lapse of time, the High Court was entitled to go into the question as to whether the appellant upon his reinstatement was entitled to the full pay and allowances to which he would have been entitled had he not been suspended.
Undoubtedly, the High Court gave a direction in terms in FR 54(2) that the appellant would be entitled to his full pay and allowances as also to his increments etc.
but this would be the normal increment prior to the crossing of the efficiency bar for purposes of FR 54(2).
There has to be a specific order in terms of FR 25 before a government servant can be allowed to draw his increments above the efficiency bar.
The Government was justified in withholding increments under FR 25 pending the departmental inquiry but after the High Court had quashed the departmental inquiry, the question whether the appellant could be deprived of his increments under FR 25 was a live issue till the controversy was settled by the Government of India, Ministry of Finance decision dated September 21, 1967.
We shall first reproduce FR 25 and it is in the following terms: 37 "Where an efficiency bar is prescribed in a time scale, the increment next above the bar shall not be given to a Government servant without the specific sanction of the authority empowered to withhold increment under Rule 24 or the relevant disciplinary rules applicable to the Government servant or of any other authority whom the President may,by general or special order, authorise in this behalf.
" The Government of India, Ministry of Finance 's decision dated September 21, 1967 as clarified by Ministry of Home Affairs, Department of Personnel & Administrative Reforms Memorandum dated April 6, 1979, insofar as relevant is reproduced below: "(7) Procedure for consideration of cases (a) When disciplinary proceedings are pending A Government servant against whom proceedings are pending but who is due to cross the efficiency bar prescribed in his time scale of pay, may not be allowed to cross the bar until after the conclusion of the proceedings.
A question was raised as to the date from which a Government servant whose case for crossing the efficiency bar has not been considered on account of the pendency of a disciplinary/vigilance case against him, should be considered for being allowed to cross the efficiency bar, after the enquiry is over.
It has been decided, in consultation with the Ministry of Home Affairs, that if after the conclusion of the proceedings, the Government servant is completely exonerated, he may be allowed to cross the efficiency bar with effect from the due date retrospectively, unless the competent authority decides otherwise.
If however, the Government servant is not completely exonerated, his case for crossing the efficiency bar cannot be considered with retrospective effect from the due date.
Such cases can be considered only with effect from a date following the conclusion of the disciplinary/vigilance case, taking into account the outcome of the disciplinary/vigilance case.
(b) When conduct is under investigation Same procedure as at (a) may be followed after the conclusion of the investigation and where the competent authority on consideration of the results of the investigation, has formed the opinion that a charge sheet may be issued to the Government servant concerned on specific imputations where 38 departmental action is contemplated or that sanction for prosecution may be accorded where prosecution is proposed.
Otherwise, the normal procedure should be followed.
The sealed cover should be opened after conclusion of the proceedings.
If he is fully exonerated, the recommendations in the sealed cover may be considered by the competent authority who may lift the bar retrospectively from the date recommended by the D.P.C.
In that case, the Government servant will be entitled to the arrears of the increment(s).
In case, however, the proceedings do not result in complete exoneration of the Government servant, he cannot be allowed to cross the bar with retrospective effect.
" The relevant provision in r. 2.636 of the C.P.W.D. Manual, Vol. 1, 1956 edn.
at p. 53 is in the following terms: "2.636.
The Government of India have decided (a) that a departmental examination shall be held by the Chief Engineer twice a year and as far as possible in the months of January and July every year, for all Divisional and Sub Divisional Officers in the Central Public Works Department; (f) Divisional and Sub Divisional Officers who fail to pass the departmental examination should not ordinarily be considered either for promotion or for crossing the efficiency bar.
" It is somewhat strange that when the appellant applied to the learned Judge (Wad, J.) for review, he by his order dated February 2, 1983 declined to interfere saying that there was no ground for review inasmuch as the appellant had not been allowed to cross the efficiency G bar under FR 25 for two valid reasons, namely: (1) his failure to pass the departmental examination, and (2) his confidential reports for the preceding five years were not satisfactory.
As to the question of the appellant being afforded an opportunity before an order under FR 54(2) adverse to him was passed by the disciplinary authority, the learned Judge observed that 'the matter was at large when the petition H for contempt was filed ' and further that 'all pros and cons of the matter 39 had been gone into through the affidavits filed by the parties and at the hearing in the Court ' and added: "I do not think that it is necessary to give any further opportunity to the petitioner for this purpose, particularly when he has admitted that he has not passed the examination." The learned Judge failed to appreciate that no prejudicial order under FR 25 could be made without giving the appellant an opportunity of a hearing as it visited him with civil consequences.
The appellant was thus constrained to move another application for review.
This time the learned Judge by his order dated November 30, 1983 dismissed the application observing that no ground for review had been made out and that the earlier order declining to review had been passed after fully hearing the parties and no further relief could be granted.
But he added a rider that if the appellant was not satisfied with the Government decision, his remedy was to file a separate writ petition.
Thereupon, the appellant went up in appeal but a Division Bench by its order dated April 30, 1984 dismissed the same and reiterated that he should file a writ petition.
The appellant accordingly filed a petition under article 226 of the Constitution to enforce his right to increments after the crossing of the efficiency bar under FR 25.
Again, a Division Bench by its order dated October 30, 1984 declined to interfere saying that the appellant should make a representation to the competent authority with the direction that the same should be considered sympathetically.
In accordance therewith, on December 10, 1984 the appellant made a representation to the Director General of Works, Central Public Works Department.
He thereafter addressed several communications to the authorities on the subject.
Eventually, the Deputy Director of Administration by her letter dated April 9, 1985 informed the appellant that his representation had been rejected.
She further intimated the appellant the following order with respect to his crossing of the efficiency bar under FR 25.
"I am further to inform you that your case for crossing the E.B. at the stage of Rs.590 w.e.f. 5.10.1972 in the prerevised scale of Rs.350 25 500 30 590 EB 30 800 EB 30 830 35 900 and also at the stage of Rs.810 in the revised scale of Rs.650 30 740 35 810 EB 35 880 40 1000 EB 40 1200, w.e.f. 5 10.1973 or from any subsequent date upto the date of your superannuation viz. 31.3.1978 has also 40 been considered carefully by the competent authority.
It is regretted that you have not been found fit to cross the E.B. w.e.f. 5.10.1972 at the stage of Rs.590 in the pre revised scale of Rs.350 25 500 30 590 EB 30 800 EB 30 830 35 900, as also at the stage of Rs.810 in the revised scale of Rs.650 30 740 35 810 EB 35 880 40 1000 EB 40 1200, w.e.f. 5.10.1973 or from any subsequent date upto the date of your superannuation viz. 31.3.1978.
" On July 10, 1985 the appellant filed the present petition under article 226 of the Constitution for redressal of his grievance as regards the crossing of the efficiency bar at the stages indicated in the impugned order and also for grant of interest on delayed payment of pension.
A Division Bench (D.K.Kapur and Mahinder Narain, JJ.) by its order dated July 24, 1985 dismissed the writ petition.
It held that the crossing of the efficiency bar depends on satisfaction of the competent authority under FR 25 and also on the passing of the departmental examination under r. 2.636 of the C.P.W.D. Manual, Vol. 1, 1956 edn.
at p. 53.
It further observed that the sanction of the authority competent under FR 25 was not forthcoming and that 'if the authority concerned had chosen not to give the sanction, the Court had no jurisdiction to interfere particularly as the appellant was not actually in office for such a long period of time '.
Curiously enough, the Division Bench also added that it felt, considering the harassment to which the appellant had been subjected during the long years of suspension, it was a fit case in which the authority concerned should have granted the requisite sanction.
We have set out the facts in sufficient detail to show that there is no presumption that the Government always acts in a manner which is just and fair.
There was no occasion whatever to protract the departmental inquiry for a period of 20 years and keeping the appellant under suspension for a period of nearly 11 years unless it was actuated with the mala fide intention of subjecting him to harassment.
The charge framed against the appellant was serious enough to merit his dismissal from service.
Apparently, the departmental authorities were not in a position to substantiate the charge.
But that was no reason for keeping the departmental proceedings alive for a period of 20 years and not to have revoked the order of suspension for over 11 years.
An order of suspension of a government servant does not put an end to his service under the Government.
He continues to be a member of the service in spite of the order of suspension.
The real effect of the order of suspension as explained by this Court in Khem Chand vs Union of 41 India; , is that he continues to be a member of the government service but is not permitted to work and further during the period of suspension he is paid only some allowance generally called subsistence allowance which is normally less than the salary instead of the pay and allowances he would have been entitled to if he had not been suspended.
There is no doubt that an order of suspension unless the departmental inquiry is concluded within a reasonable time, affects a government servant injuriously.
The very expression 'subsistence allowance ' has an undeniable penal significance.
The dictionary meaning of the word 'Subsist ' as given in Shorter Oxford English Dictionary, Vol.
II at p. 2171 is "to remain alive as on food; to continue to exist".
"Subsistence" means means of supporting life, especially a minimum livelihood.
Although suspension is not one of the punishments specified in r. 11 of the rules, an order of suspension is not to be lightly passed against the government servant.
In the case of Board of Trustees of the Port of Bombay vs Dilip Kumar Raghavendranath Nadkarni & Ors., ; the Court held that the expression 'life ' does not merely connote animal existence or a continued drudgery through life.
The expression 'life ' has a much wider meaning.
Suspension in a case like the present where there was no question of inflicting any departmental punishment prima facie tantamounts to imposition of penalty which is manifestly repugnant to the principles of natural justice and fairplay in action.
The conditions of service are within the executive power of the State or its legislative power under the proviso to article 309 of the Constitution, but even so such rules have to be reasonable and fair and not grossly unjust.
It is a clear principle of natural justice that the delinquent officer when placed under suspension is entitled to represent that the departmental proceedings should be concluded with reasonable diligence and within a reasonable period of time.
If such a principle were not to be recognised, it would imply that the Executive is being vested with a totally arbitrary and unfettered power of placing its officers under disability and distress for an indefinite duration.
It is a fundamental rule of law that no decision must be taken which will affect the rights of any person without first giving him an opportunity of putting forward his case.
Both the Privy Council as well as this Court have in a series of cases required strict adherence to the rules of natural justice where a public authority or body has to deal with rights.
There has ever since the judgment of Lord Reid in Ridge vs Baldwin LR ; been considerable fluctuation of judicial opinion in England as to the degree of strictness with which the rules of natural justice should be extended, and there is growing awareness 42 of the problems created by the extended application of principles of natural justice, or the duty to act fairly, which tends to sacrifice the administrative efficiency and despatch, or frustrates the object of the law in question.
Since this Court has held that Lord Reid 's judgment in Ridge vs Baldwin should be of assistance in deciding questions relating to natural justice, there is always 'the duty to act judicially ' whenever the rules of natural justice are applicable.
There is therefore the insistence upon the requirement of a 'fair hearing '.
In the light of these settled principles, we have no doubt whatever that the Government acted in flagrant breach of the rules of natural justice or fairplay in passing the impugned order.
We do not see why the principles enunciated by the Court in M. Gopala Krishna Naidu vs State of Madhya Pradesh, ; should not apply with equal vigour to a case like the present.
There is no reason why the power of the Government to direct the stoppage of increments at the efficiency bar on the ground of unfitness or otherwise after his retirement which prejudicially affects him should not be subject to the same limitations as engrafted by this Court in M. Gopala Krishna Naidu while dealing with the power of the Government in making a prejudicial order under FR 54, namely, the duty to hear the government servant concerned after giving him full opportunity to make out his case.
Under FR 54 when a government servant who had been dismissed, removed or suspended is reinstated, the authority competent to order the reinstatement shall make a specific order (a) regarding the pay and allowances to be paid to the government servant for the period of his absence from duty, and (b) directing whether or not the said period shall be treated as a period spent on duty.
In the present case, the Government failed in its duty to pass an order in terms of FR 54 despite repeated representations made by the appellant in that behalf.
The learned Single Judge was therefore justified in dealing with the question whether or not the period of suspension should be treated as a period spent on duty and to make a direction regarding payment of the full pay and allowances as also to increments to which he would have been entitled to but for the disciplinary proceedings.
In M. Gopala Krishna Naidu 's case the civil servant concerned had been exonerated of the charges framed against him in a departmental inquiry.
The Government however held that the appellant 's suspension in that case and the departmental inquiry instituted against him 'were not wholly unjustified ' and tried to support its action in this Court on the ground that the making of an order under FR 54 was a consequential order.
This Court repelled the contention and held that an order passed under FR 54 is not always a consequential order or a mere 43 continuation of the departmental proceedings against the delinquent civil servant.
Inasmuch as consideration under FR 54 depends on facts and circumstances in their entirety, and since the order may result in pecuniary loss to the government servant, consideration under the rule 'must be held to be an objective rather than a subjective consideration '.
Shelat, J. who delivered the judgment of the Court went on to observe: "The very nature of the function implies the duty to act judicially.
In such a case if an opportunity to show cause against the action proposed is not afforded, as admittedly it was not done in the present case, the order is liable to be struck down as invalid on the ground that it is one in breach of the principles of natural justice.
" There is thus a duty to hear the concerned Government servant under FR 54 before any prejudicial order is made against him.
The same principle was reiterated in B.D. Gupta vs State of Haryana, ; It must follow that when a prejudicial order is made in terms of FR 25 to deprive the government servant like the appellant of his increments above the stage of efficiency bar retrospectively after his retirement, the Government has the duty to hear the concerned government servant before any order is made against him.
There has to be as laid down in M. Gopala Krishna Naidu 's case an objective consideration and assessment of all the relevant facts and circumstances.
We find it difficult to subscribe to the doctrine evolved by the Division Bench that if the competent authority declines to sanction the crossing of the efficiency bar of a government servant under FR 25, the Court has no jurisdiction to grant any relief.
No doubt, there has to be a specific order in terms of FR 25 by the competent authority before the government servant can get the benefit of increments above the stage of efficiency bar.
The stoppage of such increments at the efficiency bar during the pendency of a departmental proceeding is not by way of punishment and therefore the government servant facing a departmental inquiry is not entitled to a hearing.
Ordinarily, therefore, the Court does not come into the picture at that stage.
But in a case like the present where despite the fact that the departmental inquiry against the appellant had been quashed, and it has been held by the High Court that his suspension was wholly without justification.
44 there was no occasion for the competent authority to enforce the bar against him under FR 25, particularly after his retirement, unless it was by way of punishment.
That being so, the order passed by the competent authority under FR 25 prejudicial to the interests of the appellant in such circumstances must be subject to the power of judicial review.
The reasoning of the learned Single Judge that the authority competent was justified in refusing to allow the crossing of the efficiency bar under FR 25 in the case of the appellant on the ground that (1) the appellant did not have good record of service over the last five years preceding his compulsory retirement, and (2) he had not passed the departmental examination in Accounts prescribed for Assistant Engineers, does not bear scrutiny.
In the first place, there was no question of the appellant having an adverse record for five years preceding his compulsory retirement since for three years he was under suspension and, according to the learned Judge himself, for the next two years there was nothing blameworthy against him.
Secondly, the failure to pass a departmental examination under r. 2.636 obviously could not stand in the way of the appellant since he had already been compulsorily retired.
The appellant having compulsorily retired on July 28, 1972 and also having reached his normal age of superannuation on March 31, 1978, his failure to pass the departmental examination under r. 2.636 could not be treated as a ground for denying him the benefit of crossing the efficiency bar under FR 25.
The word 'ordinarily ' in r. 2.636 must be given its plain meaning as 'in normal circumstances '.
It is extremely doubtful whether in a case like the present the Director General of Works, Central Public Works Department, as the competent authority, could at all have taken a decision to enforce the bar under FR 25 against the appellant after his retirement.
That apart, the competent authority acted in flagrant breach of the instructions contained in the Note beneath Government of India, Ministry of Finance Memorandum dated April 23, 1962, as amended from time to time.
It enjoins that the cases of government servants for crossing of the efficiency bar in the time scale of pay should be considered at the appropriate time and in case the decision is to enforce the bar against the government servant, he should be informed of the decision.
This clearly implies that the competent authority must conform to the rules of natural justice.
It would be a denial of justice to remit back the matter to the competent authority to reach a decision afresh under FR 25, in the facts and circumstances of the present case.
45 The public interest in maintaining the efficiency of the services requires that civil servants should not be unfairly dealt with.
The Government must view with concern that a departmental inquiry against the civil servant should have been kept alive for so long as 20 years or more and that he should have been placed under suspension without any lawful justification for as many as 11 years, without any progress being made in the departmental inquiry.
It should also view with concern that a decision should have been taken by the competent authority to enforce the bar under FR 25 against the civil servant long after his retirement with a view to cause him financial loss.
Such a course not only demoralises the services but virtually ruins the career of the delinquent officer as a government servant apart from subjecting him to untold hardship and humiliation.
We hope and trust that the Government in future would ensure that departmental proceedings are concluded with reasonable diligence and not allowed to be protracted unnecessarily.
The Government should also view with concern that there should be an attempt on the part of the competent authority to enforce the bar against a civil servant under FR 25 long after his retirement without affording him an opportunity of a hearing.
It comes of ill grace from the Government to have defeated the just claim of the appellant on technical pleas.
Normally, this Court, as a settled practice, has been making direction for payment of interest at 12% on delayed payment of pension.
There is no reason for us to depart from that practice in the facts of the present case.
The result therefore is that the appeal succeeds and is allowed with costs.
The judgment and order passed by the High Court are set aside and the writ petition is allowed.
The impugned orders passed by the Director General of Works, Central Public Works Department dated September 17, 1982 and April 9, 1985 declining to permit the appellant to cross the efficiency bar at the stage of Rs.590 in the pre revised scale of Rs.350 900 w.e.f. October 5, 1966 as also from October 5, 1972, and also at the stage of Rs.810 in the revised scale of Rs.650 1200 w.e.f. October 5, 1973 or from any subsequent date upto March 31, 1978, the date of his superannuation, are quashed.
We direct the Director General of Works to make an order in terms of FR 25 allowing the appellant to cross the efficiency bar at the stage of Rs.590 w.e.f. October 5, 1966 and at the stage of Rs.810 w.e.f. October 5, 1973 and subsequent dates, according to the decision of the Government of India, Ministry of Finance dated September 21, 1967 46 as later clarified by the Ministry of Home Affairs Memorandum dated April 6, 1979 and to re fix his salary upon that basis and pay the difference, as also re fix his pension accordingly.
The appellant would be entitled to interest at 12% per annum on the difference in salary as well as in pension.
We further direct that the Government of India will make the payment to the appellant within four months from today.
P.S.S. Appeal allowed.

dataset_name: IN-Abs

summary/full:
Fundamental Rule 54 requires that when a Government servant who had been dismissed, removed or suspended is reinstated, the authority competent to order reinstatement has to make a specific order (a) regarding the pay and allowances to be paid to the Government servant for the period of his absence from duty, and (b) directing whether or not the period of suspension shall be treated as a period spent on duty.
Fundamental Rule 25 lays down that the increment next above the efficiency bar in a time scale shall not be given to a Government servant without the specific sanction of the authority empowered to withhold increment under R.24.
The Government of India, Ministry of Finance 's decision dated September 21, 1967, as clarified by Ministry of Home Affairs, Department of Personnel & Administrative Reforms Memorandum dated April 6, 1979, stated that if after the conclusion of the disciplinary proceedings, the Government servant is completely 28 exonerated, he may be allowed to cross the efficiency bar with effect from the due date retrospectively, unless the competent authority decides otherwise.
Rule 2.636 of the C.P.W.D. Manual, Vol.
I, 1956 edn., laid down that Divisional and Sub Divisional Officers who fail to pass the departmental examination should not ordinarily be considered either for promotion or for crossing the efficiency bar.
The appellant, an Assistant Engineer in the Central Public Works Department was placed under suspension on September 3, 1959 pending a departmental enquiry.
That order was revoked by the Chief Engineer on May 8, 1970, and he was reinstated in service on May 25, 1970 but the departmental proceedings were kept alive.
Immediately thereafter, the appellant made a representation to the department to pass an order under FR. 54 for payment of full pay and allowances for the period of suspension, which was rejected on the ground that the departmental enquiry was still pending.
Thereafter, the appellant was compulsorily retired by an order of the Chief Engineer dated April 25, 1972 under FR.
56(j).
In the writ petition filed by the appellant under Article 226 of the Constitution challenging the validity of the order of compulsory retirement, and seeking directions in terms of FR 54 for payment of full pay and allowances for the period of suspension and also for payment of all increments to which he was entitled, a Single Judge of the High Court found the order of compulsory retirement bad in law, quashed it, and held that the appellant shall be deemed to have continued in service till March 31, 1978, the date when he attained the normal age of superannuation.
It was further held that the suspension of the appellant was not justified, and the period of suspension must be regarded as spent on duty and therefore the appellant under FR 54(2) was entitled to full pay and allowances and the increments for that period, and that r.9(2)(b) of the Central Civil Services (Pension) Rules, 1972 was not attracted, and accordingly quashed the departmental proceedings.
The Division Bench declined to interfere.
Thereafter the Director General of Works on September 17, 1982 passed an order on the recommendation of the departmental promotion board declaring the appellant unfit to cross the efficiency bar at the stage of Rs.590 in the grade Rs.350 900 with effect from October 5, 1966.
In the contempt proceedings taken by the appellant, the government stated that there were two conditions for an Assistant Engineer to 29 cross efficiency bar namely, (i) that he should have passed the departmental examination in Accounts, and (ii) he should have obtained good reports for the preceding five years.
The Single Judge declined to interfere with the governmental order.
The Division Bench dismissed the appeal and reiterated that a writ petition should be filed.
The appellant thereupon filed the present writ petition on July 10, 1985 under Article 226 of the Constitution to enforce his right to increments after crossing of the efficiency bar and also for grant of interest on delayed payment of pension.
The High Court held that the crossing of the efficiency bar depends on the satisfaction of the competent authority under FR 25 and also on the passing of the departmental examination under r. 2.636 of the C.P.W.D. Manual, Vol. 1, 1956 edn.
and that if the authority concerned had chosen not to give the sanction under FR 25, the Court had no jurisdiction to interfere particularly as the appellant was not actually in office for such a long period of time.
In this appeal by special leave, on the questions: (i) was the Union of India justified in passing the oder in terms of FR 25 declaring the appellant unfit to cross the efficiency bar, and (ii) was the appellant entitled to interest on the delayed payment of his pension? Allowing the appeal, ^ HELD: 1.1 The order passed by the competent authority under FR 25, prejudicial to the interest of the appellant must be subject to the power of judicial review.
[44AB] 1.2 The stoppage of increment at the efficiency bar during the pendency of a departmental proceeding is not by way of punishment, and therefore the government servant facing a departmental inquiry is not entitled to a hearing.
The court does not come into the picture at that stage.
But where despite the fact that the departmental inquiry against the government officer had been quashed, and it had been held by the High Court that the suspension was wholly without justification, there was no occasion for the competent authority to enforce the bar against him under FR 25, particularly after his retirement, unless it was by way of punishment.
[43G 44A] 1.3 It is a fundamental rule of law that no decision must be taken which will affect the rights of any person without first giving him an opportunity of putting forward his case.
Strict adherence to this rule is mandatory where a public authority or body has to deal with rights.
30 There is always the duty to act judicially in such cases.
There is, therefore, the insistence upon the requirement of a fair hearing.
There is no reason why the power of the Government under FR 25 should not be subject to the same limitations.
[41G, 42B,C] 1.4 The note beneath Government of India, Ministry of Finance Memorandum dated April 23, 1962, as amended from time to time enjoins that the cases of government servants for crossing of the efficiency bar in the time scale of pay should be considered at the appropriate time and in case the decision is to enforce the bar against the government servant, he should be informed of the decision.
In enforcing the bar under FR 25 against the appellant the competent authority acted in flagrant breach of these instructions.
[44FG] 1.5 There was no question of the appellant having adverse record for five years preceding his compulsory retirement since for three years he was under suspension and for the next two years there was nothing blameworthy against him.
Furthermore, he having compulsorily retired on July 28, 1972 and also having reached his normal age of superannuation on March 31, 1978, his failure to pass the departmental examination under r. 2.636 could not be treated as a ground for denying him the benefit of crossing the efficiency bar under FR 25.
The word 'ordinary ' in r. 2.636 must be given its plain meaning as in normal circumstances.
[44CE] 2.1 Suspension where there is no question of inflicting any departmental punishment prima facie tantamounts to imposition of penalty which is manifestly repugnant to the principles of natural justice and fairplay in action.
The conditions of service are within the executive power of the State or its legislative power under the proviso to article 309 of the Constitution, but even so such rules have to be reasonable and fair and not grossly unjust.
It is a clear principle of natural justice that the delinquent officer when placed under suspension is entitled to represent that the departmental proceedings should be concluded with reasonable diligence and within a reasonable period of time.
If such a principle were not recognised, it would imply that the executive is being vested with a totally arbitrary and unfettered power of placing its officers under disability and distress for an indefinite duration.
[41DF] 2.2 There is no presumption that the Government always acts in a manner which is just and fair.
In the instant ease, there was no occasion whatever to protract the departmental inquiry for a period of 20 years 31 and keeping the appellant under suspension for a period of 11 years unless it was actuated with the mala fide intention of subjecting him to harassment.
[40F] 2.3 The public interest in maintaining the efficiency of the services requires that civil servants should not be unfairly dealt with.
The Government must view with concern that a departmental inquiry against the civil servant should have been kept alive for so long as 20 years or more and that he should have been placed under suspension without any lawful justification for as many as 11 years, without any progress being made in the departmental inquiry.
It should also view with concern that a decision should have been taken by the competent authority to enforce the bar under FR 25 against the civil servant long after his retirement without affording him an opportunity of a hearing with a view to cause him financial loss.
[45AB] 3.
The Court, as a settled practice has been making direction for payment of interest at 12% on delayed payment of pension.
There is no reason for it to depart from that practice in the facts of the present case.
[45E] 4.
The Director General of Works is directed to make an order in terms of FR 25 allowing the appellant to cross the efficiency bar according to the decision of the Government of India, Ministry of Finance dated September 21, 1967 as later clarified by the Ministry of Home Affairs Memorandum dated April 6, 1979 and to re fix his pension accordingly.
The appellant would be entitled to interest at 12% per annum on the difference in salary as well as in pension.
[45G 46A] Ridge vs Baldwin, LR [1964] AC40; M. Gopala Krishna Naidu vs State of Madhya Pradesh, ; ; B.D. Gupta vs State of Haryana, ; ; Khem Chand vs Union of India; , and Board of Trustees of the Port of Bombay v Dilip Kumar Raghavendranath Nadkarni & Ors., , referred to.


judgement:
Civil Appeal No. 2286 of 1987.
From the Judgment and Order dated 17.12.1986 of the Madhya Pradesh High Court in S.A. No. 536 of 1985.
V.M. Tarkunde, K.M.K. Nair for the Appellants.
Mukul Mudgal for the Respondents.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J.
Special leave granted.
This is an appeal from the judgment and order of the High Court of Madhya Pradesh dated 17th of December, 1986.
The appeal was 49 filed by the plaintiff whose suit for a declaration that the eight agreements/contracts executed between it and the defendant No. 1 M/s. Jayabharat Credit and Investment Company Ltd. were not 'hire purchase agreements ' but were agreements relating to transaction of loan and for injunction restraining the defendant No. 1.
from enforcing them until the decision of the suit, had been dismissed on the ground that the suit was not maintainable in view of the provisions of section 32 of the (hereinafter called 'the Act ').
Section 32 of the Act stipulates that notwithstanding any law for the time being in force no suit shall lie on any ground whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award, nor shall any arbitration agreement or award be enforced, set aside, amended, modified or in any way affected otherwise than as provided in the said Act.
The execution of documents containing the alleged arbitration clause was not disputed in this case.
The clause was as follows: "All disputes, differences or claims arising out of this agreement shall be settled by arbitration in accordance with the provisions of the or any statutory amendments thereof and shall be referred to the sole arbitration of a person to be nominated by the owners.
In the event of death, refusal, neglect, inability or incapability of the person so appointed to act as arbitrator, the owners may appoint a new arbitrator.
The award of the arbitrator shall be final and binding on all the parties concerned.
" Various issues were framed by the trial court.
The appellate court confirmed the said decision.
There was a second appeal to the High Court.
The High Court framed the question of law in the impugned judgment as follows: "Whether the courts below were right in holding that section 32 of the barred the suit and in dismissing the same on that ground? It was contended before the High Court by the appellant that the so called 'hire purchase agreements ' were nothing else than agreements entered into by the plaintiff and the defendant No. 1 with respect to transaction of loan.
It was the case of the appellant that the alleged arbitration agreement was not entered into as such in the sense though certain documents were executed, these were not properly understood as hire purchase agreements.
Therefore, the main ques 50 tion was whether the existence of the agreement as hire purchase agreement was denied by the appellant and put in issue before the court.
Specific case of the appellant was that this was a transaction of loan and there was in fact no agreement of arbitration.
It appears from the perusal of the plaint as well as the issues framed that the very existence of the agreement described as hire purchase agreements was put in issue.
The execution of the documents was not denied but it was alleged that these were manipulated documents, in other words fraudulent documents and it was further the case of the appellant that there were in fact no agreements which contained the arbitration agreement.
The case of the appellant was that there was no document containing any valid arbitration agreement in existence.
This fact was raised in the plaint and issue to that effect was raised, in other words that the appellant, plaintiff in this case was contended that the agreement described as hire purchase agreements were untrue and void procured fraudulently.
The issues framed by the learned trial judge also included this specific point.
Section 32 of the Act does not contemplate the case suits challenging the validity of a contract because it contains an arbitration clause.
If the intention of the legislature were that all documents containing an arbitration clause should come within the purview of sections 32 and 33, the legislature would have said so in appropriate words.
These sections have a very limited application, namely, where the existence of validity of an arbitration agreement and not the contract containing the arbitration agreement is challenged.
Every person, it has to be borne in mind has a right to bring a suit which was of a civil nature and the court had jurisdiction to try all suits of civil nature under section 9 of the Code of Civil Procedure.
That right has not been taken away by section 32 of the Act.
Such a right can only be taken away by express terms or by necessary implication.
Section 32 of the Act does not have that effect.
We have perused the plaint in this case; one of the issues, namely, issue No. 4 was "Whether the defendant No. 1 obtained disputed hire purchase agreements from the plaintiffs in pursuance of its money lending business?" The existence of the disputed hire purchase agreements were put in issue.
It was suggested that these were obtained by dubious method or that these were fraudulently procured.
It is true that the execution of an alleged document was not in issue but the existence of that document as an arbitration agreement was in issue.
Sections 32 and 33 of the Act on the true construction do not purport to deal with suits for declaration that there was never any contract or that contract is void.
This principle is well settled.
The Division Bench of the Calcutta High Court consisting of Harries, C.J. and Banerjee, J. in State of Bombay vs Adamjee Hajee Dawood and Co., A.I.R. 1951 Calcutta 147 held that 51 section 32 of the Act does not contemplate the case of a suit challenging the validity of a contract merely because it contains an arbitration clause.
This is the correct position in law.
If that is the law then in the facts and circumstances of the case the learned trial court, the learned appellate court and the High Court were in error in this case in dismissing the suit and the appeals respectively.
The appeal is, therefore, allowed and the judgment and order of the High Court and the courts below are set aside.
In the facts and circumstances of the case costs of the parties will be costs in the suit.
The suit will now proceed as expeditiously as possible.
S.L. Appeal allowed.

summary/full:
The appellant/plaintiffs filed a suit for a declaration that the eight agreements/contracts executed between the appellants and the defendant/respondent No. 1, were not 'hire purchase agreements ' but were agreements relating to the transaction of loan.
The suit was dismissed.
The appellate Court confirmed the decision of the Trial Court.
There was a second appeal to the High Court, whereafter the appellants moved this Court by special leave against the judgment and order of the High Court.
Allowing the Appeal, the Court, HELD: The suit had been dismissed on the ground that it was not maintainable in view of the provisions of section 32 of the .
Section 32 of the Act stipulates that notwithstanding any law for the time being in force, no suit shall lie on any ground whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award, nor shall any arbitration agreement or award be enforced, set aside, amended, modified or in any way affected otherwise than as provided in the Act.
[49B C] Specific case of the appellants was that it was a transaction of loan and there was in fact no agreement of arbitration.
It appeared from the plaint as well as the issues framed that the very existence of the agreement described as hire purchase agreement was put in issue.
The execution of the documents was not denied but it was alleged that these were manipulated documents and that there were in fact no agreements which contained the arbitration agreement.
[50A C] Section 32 of the Act does not contemplate the case of suits challenging the validity of a contract because it contains an arbitration 48 clause.
The section has a very limited application, namely, where the existence of the validity of an arbitration agreement and not the contract containing the arbitration agreement is challenged.
[50D E] Every person has a right to bring a suit which is of a Civil nature and the Court has jurisdiction to try all suits of Civil nature under section 9 of the Code of Civil Procedure.
That right has not been taken away by section 32 of the Act.
One of the issues, framed namely.
issue No. 4 was "whether the defendant No. 1 obtained disputed hire purchase agreements from the plaintiffs in pursuance of its money lending business?" The existence of the disputed hire purchase agreements was put in issue.
It is true that the execution of an alleged document was not in issue, but the existence of that document as an arbitration agreement was in issue.
Section 32 of the Act does not purport to deal with suits for declaration that there was never any contract or that the contract is void.
This principle is well settled.
In State of Bombay vs Adamjee Hajee Dawood and Co., A.I.R. 1951 Calcutta 147, the Calcutta High Court held that section 32 of the Act does not contemplate the case of a suit challenging the validity of a contract merely because it contains an arbitration clause.
This is the correct position in law, and in the facts and circumstances of the case, the trial Court, the appellate Court and the High Court in this case were in error.
Their judgments and orders were set aside.
[50E H; 51A C] State of Bombay vs Adamjee Hajee Dawood & Co., A.I.R , referred to.