judgement:
l Appeals Nos. 181 and 181 A of 1955.
Appeals from the judgment and decree dated September 30, 1952, of the former Nagpur High Court in Second Appeals Nos. 699 and 700 of 1946, arising out of the judgment and decree dated February 21, 1946, of the court of First Additional District Judge, Nagpur, in Civil Appeals Nos.
22 A and 23 A of 1946, against the judgment and decree dated January 2, 1945, of the Court of Second Subordinate Judge, Nagpur, in Civil Suit No. 143 A of 1944.
H. J. Umrigar, Ratnaparkhi A. O and Shankar Anand Zinj arde,for the appellants.
W. section Barlingay and B. H. Dhebar, for the respondent.
February 2.
The Judgment of Jafer Imam and section K. Das, JJ., was delivered by section K. Das, J. Kapur, J., delivered a separate judgment.
section K. DAS, J.
These two appeals arise out of a litigation which has had a chequered career in the courts below.
The short facts are these.
The suit out of which the appeals arise was instituted on January 13, 1941, but the plaint was amended on May 4, 1942.
The amended plaint was to the effect that in or about the year 1905 the defendant, the then Provincial Government of the Central Provinces and Berar, Nagpur, " opened up " an area known as the Craddock Town Area which was originally called the Sitabuldi Extension Area or Dhantoli Area.
Due to the scarcity of residential accommodation in the city of Nagpur, the then Provincial Government along with some prominent members of the Nagpur Municipal Committee devised a scheme to extend residential accommodation by acquiring agricultural land and making it available for residential purposes.
With that object in view, the area in question was acquired and building sites of the average size of about 10,000 sq.
each were carved out.
These were leased out on a premium of Rs. 350 and an annual rent of Rs. 3 8 0 each.
The indenture of lease in each case contained a clause to the following effect: 183 " III.
And the lessor does further covenant that he will at the end of the term of 30 years hereby granted and so on from time to time thereafter at the end of each successive further term of years as shall be granted at the request of the lessee execute to him a renewed lease of the land hereby demised for the term of 30 years; Provided that the rent of the land hereby demised shall be subject to such fair and equitable enhancement as the lessor shall determine on the grant of every renewal: Provided also that every such renewed lease of the land shall contain such of the covenants, provisions and conditions in these presents contained as shall be applicable and shall always contain a covenant for further renewal of the lease.
" One of the leases was executed on May 24, 1909, and some other leases near about that year.
By the year 1939 the first 30 years ' period of some of the leases came to an end.
The original plaintiffs, who were two in number and who sued in their individual right as also representing the members of an association known as the Craddock Town Plot holders Association alleged that on the expiry of the terms of the leases in question, during which period some of the lessees had built houses on the leasehold property, the then Provincial Government proposed an enhancement of Rs. 21 14 0 from Rs. 3 8 0 as annual rent and also the insertion of some new terms in the renewed deeds of lease.
The plaintiffs, on the contrary, said that Rs. 7 per plot was the fair and equitable enhancement.
Various representations to the relevant authorities having proved unavailing, the plaintiffs instituted the suit in which they prayed (a) that the enhancement of rent from Rs. 3 8 0 to Rs. 21 14 0 per plot was not fair and equitable within the meaning of el.
III of the deed of lease; (b) that the offer of Rs. 7 as annual rent made by the association was fair and reasonable; (c) that the defendant do insert in the renewed deeds of lease only such conditions as were to be found in the original deed and not to add to them to the detriment of the lessees ' interest; and (d) that in the event of this Court not agreeing that 184 Rs. 7 was a fair and, reasonable rent, a fair and equitable rent should be fixed by it.
The suit was contested by the defendant on several grounds, with most of Which we are not now concerned.
The learned Subordinate Judge of Nagpur, who dealt with the suit in the first instance, took up certain preliminary issues for decision and by a judgment dated April 13, 1942, he disposed of those preliminary issues.
One such issue material for our purpose was in these terms: ,In case of dispute as to what is fair and equitable rent, has the civil court no right to, determine what is fair rent?" On this preliminary issue, he found " that under the terms of cl.
III of the indenture of lease, the defendant was entitled to fix a fair and equitable rent; but the civil court has jurisdiction to enquire whether the rent fixed by the defendant is fair and equitable within the meaning of cl.
III ".
We need not refer to the other preliminary issues on which the learned Subordinate Judge gave his decision, because those issues no longer survive.
On the disposal of the aforesaid preliminary issue, the plaint was amended and some more lessees were added, the 30 years ' period of whose leases had also expired ; therefore the position was that the plaintiffs were those lessees, the 30 years ' period of whose leases had expired and as respects the renewal of whose leases the defendant had proposed an enhancement of Rs. 21 14 0.
The defendant claimed that it had been very reasonable in fixing the enhanced rent and it further claimed the right of withdrawing the offer of Rs. 21 14 0 and of making a fresh demand at a much higher rent if the lessees did not agree to the terms originally proposed by the defendant.
The defendant further denied that the offer of Rs. 7, that is, twice the original rent, made by the lessees was a reasonable and fair enhancement.
After the disposal of the preliminary issues the learned Subordinate Judge proceeded to try the suit on merits and on January 2, 1945, he found on issue No. 4 that Rs. 14 per year would be the fair and equitable enhanced rent for each plot of about 10,000 sq.
and he fixed that rent for the next term of 30 years to 185 which the lessees were entitled under cl.
III; he further directed the grant of a rebate of 25 per cent.
to those lessees who agreed to a renewal for a term ending in 1948.
From the decision of the learned Subordinate Judge two appeals, one by the plaintiffs, and the other by the defendant, were taken to the District Judge and they were heard by the Additional District Judge of Nagpur, who by his Judgment dated February 21, 1946, affirmed the decision of the learned Subordinate Judge that under cl.
III of the indenture of lease it was open to the Subordinate Judge to determine what was the fair and equitable rent.
The learned Additional District Judge, however, reversed the finding of the learned Subordinate Judge as to the quantum of the fair and equitable rent.
He came to the conclusion that the enhancement of rent should not exceed Rs. 7, as any increase over that amount would not be a fair and equitable one within the meaning of cl.
III of the indenture of lease.
From the decision of the learned Additional District Judge, two appeals were taken to the then High Court of Judicature at Nagpur by the defendant Government.
The appeals were first placed before a single Judge who directed that they should be heard by a Division Bench.
The appeals were then heard by B. P. Sinha, C. J. (as he then was) and Mudholkar, J.
The learned Chief Justice came to the conclusion that the suit must fail on the ground that the authority of the court had been invoked in a matter which really lay in contract and the civil court had no jurisdiction to determine the fair and equitable rent.
Mudholkar, J., came to a contrary conclusion and held that the suit was maintainable and the courts below could determine the fair and equitable rent.
On the question of what should be the fair and equitable rent, the learned Chief Justice gave no finding except saying that " the decision of the lower appellate, court on the question of assessment of fair and equitable rent was not satisfactory, because it had gone more by the rule of the thumb than upon the evidence adduced in the 24 186 case or upon any other sound basis.
" Mudholkar, J., however, said that he saw no adequate ground for differing from the view taken by the lower appellate court with regard to the quantum of fair and equitable rent.
On this difference of opinion between the learned Chief Justice and Mudholkar, J., the case was referred to a third Judge, namely, Hemeon, J., who agreed with the view of the learned Chief Justice that, on a proper construction of cl.
III of the indenture of lease, the civil court had no jurisdiction to determine the fair and equitable rent and the parties had consciously and deliberately stipulated to abide by the lessor 's fixation of a fair and equitable enhancement of rent; and in that view of the matter, he expressed no opinion as to what should be the fair and equitable rent.
In accordance with the opinion of the majority of Judges, the appeals in the High Court were allowed and the suit was dismissed with costs.
The plaintiffs, who are the appellants here, then asked for a certificate of fitness under article 133(1)(c) of the Constitution of India.
The High Court granted the necessary certificate by an order dated October 23, 1953, and the present appeals have been filed in pursuance of that certificate.
The area in question being now within the State of Bombay, the State of Bombay has been substituted as the respondent before us.
The principal question before us is one of construction of el.
III of the indenture of lease.
On behalf of the appellants it has been argued that the construction put upon the clause by the majority of Judges in the High Court is not correct inasmuch as it gives no effect to the words " fair and equitable enhancement " occurring therein.
On behalf of the respondent, it has been submitted that the expression " subject to such fair and equitable enhancement as the lessor shall determine " is tantamount to saying " subject to such enhancement as the lessor shall determine to be fair and equitable " ; in other words, the argument of learned counsel for the respondent is that the parties had deliberately chosen to abide by whatever was determined to be fair and equitable enhancement by 187 the lessor.
Mudholkar, J., had proceeded on the footing that the primary intention of the parties was that the enhancement must be fair and equitable and the adjectival clause ,as the lessor shall determine " following the word I enhancement ' being subordinate to the primary intention of the parties could be ignored.
Learned counsel for the respondent has very strongly submitted that this view is not correct.
We think that the clause should be read as a whole and every effort should be made to give effect to all the words used therein.
The relevant portion of the clause states " such fair and equitable enhancement as the lessor shall determine ".
If the construction is that whatever the lessor determines as fair and equitable enhancement must be treated as binding on the lessee, then the words 'fair and equitable ' are not given the meaning and sense which they have according to the ordinary acceptation of those words.
I Fair ' and I equitable ' mean fair and equitable in fact, and not what the lessor subjectively considered to be fair and equitable.
The words I fair ' and 'equitable ' both mean I just or unbiased ' (see the Concise Oxford Dictionary, 4th Edn., p. 426 and p. 402).
If the intention was to leave the enhancement to the subjective determination of the lessor, the clause would have more aptly said 'such enhancement as the lessor shall determine '.
We consider that the words I fair and equitable ' must be given their due meaning and proper effect.
The question then asked is what meaning is to be given to the words 'such. as the lessor shall determine '.
It is indeed true that these words constitute an adjectival clause to the expression ' fair and equitable enhancement ', but we consider that the meaning of the adjectival clause is merely this: the lessor must first determine what it considers to be fair and equitable enhancement; but if in fact it is not so, it is open to the lessee to ask the Court to determine what is fair and equitable enhancement.
We do not think that on a proper construction of the clause, the intention was to oust the jurisdiction of the Court and make the determination of the enhancement by the lessor final and binding on the lessee.
We think that 188 the conclusion at which Mudholkar, J., arrived on this point was correct, though not exactly for the reasons given by him.
If the construction stated above is the correct con struction, then no further difficulty is presented by cl. 111.
The learned Judges of the High Court unanimously expressed the view that the lease 'Was not void for uncertainty, and in that view we concur.
There is authority in support of the view that a covenant to settle land I at a proper rate ' or I upon such terms and conditions as should be judged reasonable ' is not void for uncertainty (see The New Beerbhoom Coal Company Limited vs Boloram Mahata and others (1) and Secretary of State, for India in Council vs Volkart Brothers (2)).
In the former case, Sir Barnes Peacock who delivered the judgment of their Lordships said : " The High Court affirmed the decision, but not for reasons which their Lordships consider to be correct.
They affirmed it upon the ground that it was impossible to determine what was a reasonable rate.
Their Lordships cannot think that in the present case the Court, upon a proper inquiry, would have been unable to determine it.
There might have been considerable difficulty in fixing the rate; but difficulties often occur in determining what is a reasonable price or a reasonable rate, or in fixing the amount of damages which a man has sustained under particular circumstances.
These are difficulties which the Court is bound to overcome.
" Our attention has been drawn to some English decisions in which the point arose if a contract which appoints a way of determining the price can be specifically enforced.
There are two lines of decisions.
In Milnes V. Grey (3) the contract provided that the price shall be valued by two different persons to be nominated and if they happened to disagree then those two persons shall choose a third person whose determination shall be final.
The question was whether such a contract could be specifically performed and the (1) (1880) L.R. 7 I.A. 107.
(2) Mad.
(3) (18O7) ; ; 189 answer given by the Master of the Rolls can be best put in his own words: " The more I have considered this case, the more I am satisfied, that, independently of all other objections, there is no such agreement between the parties, as can be carried into execution.
The only agreement, into which the Defendant entered, was to purchase at a price, ' to be ascertained in a specified mode.
No price having ever been fixed in that mode, the parties have not agreed upon any price.
Where then is the complete and concluded contract, which this Court is called upon to execute ? " In Taylor vs Brewer (1) a claim to compensation was founded on the resolution of a committee which provided that" such remuneration be made as should be deemed right ".
It was held that the engagement was merely an engagement of honour and no claim could be made on it.
An example of the other line of decisions is furnished by Gourlay vs The Duke of Somerset (2).
In that case the agreement provided for " all such usual and proper conditions, reservations, and agreements, as shall be judged reasonable and proper by John Gale, land surveyor, and in case of his death, by some other proper and competent person to be mutually agreed upon by the said parties ".
The plaintiff came to court and the question arose whether the reference to settle the lease to be made by the defendant to the plaintiff should be to the Master or to Mr. Gale, the defendant contending that the court decreeing specific performance will take the whole subject to itself and determine by its own officer, not by a particular individual, what are usual and proper covenants.
Sir William Grant, Master of the Rolls, said: " When the agreement is, that the price of the estate shall be fixed by arbitrators, and they do not fix it, there is no contract as the price is of the essence of a contract of sale, and the Court cannot make a contract, where there is none; but, where the Court has determined, that the agreement is binding and (1) ; ; (2) ; ; 190 concluded and such as ought to be executed, it does not require foreign aid to carry the details into execution.
Gale 's agency is not of the essence of this con tract. .
If the parties had gone to Gale, and got him to settle a lease, and one of them had objected to the covenants as improper, and the Bill had been filed by the other, the Court would have inspected the lease; and if it were found unreasonable, would not have decreed an execution of the agreement.
" We consider that the present case comes within the rule laid down in Gourlay vs The Duke of Somerset (1).
Learned counsel for the respondent placed strong reliance on Collier vs Mason (2 ).
That was a case in which the defendant had agreed to purchase a property at a valuation to be made by AB; the Court, though it considered AB 's valuation very high and perhaps exorbitant, 'decreed specific performance, there appearing neither fraud, mistake or miscarriage.
The case was decided on the footing that the contract provided that the property shall be purchased at such a price or sum as should be fixed by reference to AB, and it was pointed out that there being no evidence of fraud, mistake or miscarriage the parties were bound by the contract they had made.
There was no question in that case of the court stepping in, under the terms of the contract, to determine what was fair and reasonable.
Learned counsel for the respondent also relied on Tekchand Kapurchand vs Mt. Birzabai (3).
The principle laid down therein was that a contract binds the parties to it and their representatives and the court 's power to interfere with contracts is limited to such cases as fraud, undue influence or mistake and relief against penalty or forfeiture.
Indeed, we agree that if the contract in the present case was that whatever the lessor determined as the enhanced rent would be binding on the parties, then the court has no power to interfere with that contract unless it is vitiated by fraud, undue influence, mistake, etc.
If, however, the proper construction of el.
III of the contract is what (1) ; ; (2) ; ; (3) A.I.R. 1942 Nag.
191 we have held it to be, then the contract itself provides that the enhanced rent though determined by the lessor in the first instance, must be fair and equitable.
On such a construction the determination of the enhancement by the lessor would not be final and it would be open to the court to determine what is fair and equitable enhancement.
We say this with respect, but the Patna decisions (Secretary of State for India in Council vs Nistarini Annie Mitter (1) and Secretary of State vs Babu Rajendra Prasad (2)), referred to by the learned Chief Justice in his judgment are not in point.
Those decisions were not concerned with interpreting a clause in the agreement like the one before us and it was rightly held that in the absence of a contract between the parties, the court had no power to impose upon the parties a bargain not of their own making.
For the reasons given above, we hold that the decision of the majority of the learned Judges of the High Court with regard to the interpretation of cl.
III of the indenture of lease is not correct and these appeals must go back for a fresh hearing by the High Court in accordance with law for determination of what should be the fair and equitable enhancement.
On that point there was no concluded finding by the majority of the learned Judges of the High Court, but learned counsel for the appellants submitted that the finding of the learned Additional District Judge on the quantum of fair and equitable enhancement was a finding of fact and therefore binding in second appeal.
At this stage we express no opinion on such a submission, nor do we express any opinion whether the courts below or any of them have gone wrong in principle in determining what should be the fair and equitable enhancement and whether on merits it should be Rs. 7 or Rs. 14 or Rs. 21 14 0, or even a higher sum.
All these points must be considered afresh by the High Court.
There is a further point which must also be dealt with in the High Court.
The learned Subordinate Judge decided on issue No. 7 with regard to the conditions for a renewal of the lease that the Government (8) Pat. 446.
(9) A.I.R. 1937 Pat.
192 were not entitled to make any alterations in the clauses relating to re entry and notice of demand as contained in cl.
II of the original lease.
The learned Addl.
District Judge said: " As regards the new form of lease, it is clear that the clause regarding building would be deleted if it is found to be superfluous or redundant.
While that in respect of right of lessor to enter on the land without a demand of ground rent (in case of failure to pay it on the appointed date) it is not necessary to interfere as it would amount to making a contract for the parties.
It is better to leave the matter to the parties and their legal advisers.
" Whether the view of the learned Subordinate Judge or of the District Judge is correct or not was not considered by the High Court and as the appeals are going back on remand this point should also be dealt with by the High Court.
Accordingly, we allow the appeals and set aside the judgment and decree of the High Court dated September 30, 1952.
The appeals must go back for a fresh hearing by the High Court in accordance with law and in the light of the observations made above.
In the peculiar circumstances of this case, there will be no order for costs of the hearing of the appeals in this Court.
Costs incurred in the two courts below and costs incurred in the High Court, both before and after remand, will be dealt with by the High Court when finally disposing of the appeals.
KAPUR, J.
I regret I am unable to agree in the proposed judgment that it is open to the Court in the circumstances of this case to go into the question of the valuation and to determine as to what, in its opinion would be fair and equitable enhancement in rent and to interfere with the enhancement as determined by the lessor under the terms of the indenture of lease executed on May 24, 1909.
The original lease was for a term of 30 years with a provision for renewal for another 30 years with the proviso that the rent of the land demised was " subject to such fair and equitable enhancement as the lessor shall determine 193 The facts are set out in the judgment of my learned brother, section K. Das, J., and it is not necessary to repeat them.
Plots of land measuring about 10,000 sq.
ft. were given on lease by the Government to the appellants and others, for which the premium to be paid was Rs. 350 and the rent Rs. 3 8 0 per annum or Re. 1 per cent.
of the premium.
Lease deeds were executed in 1909 under clause III of which the lessor determined the enhanced rent at Rs. 21 14 0 and thus raised it from Rs. 3 8 0 per plot to Rs. 21 14 0.
The appellants brought a suit for declaration that the enhancement proposed was excessive and the fair and equitable rent should be Rs. 7 per plot and if the Court was of the opinion that Rs. 7 was not a fair and equitable rent then it should fix such sum as it considered fair and equitable.
The respondent pleaded that such a suit was incompetent.
The question for decision is what is the effect of using the adjectival words " fair and equitable ".
For the appellants it was argued that because in the lease deed the enhancement contemplated was qualified by the words " fair and equitable " the determination became clothed with a qualification which made it subject to judicial review and determination because it was for the Court to say whether the determined enhancement conformed to the standard prescribed in the disputed clause or not.
The respondent contended on the other hand that the rule applicable to determinations by valuers is that it is conclusive and cannot be overhauled except upon proof of fraud and imposition of gross misconduct.
Thus according to the submission of the appellant the clause in dispute means such enhancement as the lessor shall determine and which determination shall, in the opinion of the Court, be fair and equitable and according to the respondent it means that the amount of enhancement shall be fair and equitable but what is fair and equitable shall be determined by the lessor, such determination being conclusive.
The appellants do not contend that the lessor is not a valuer and that if the qualifying words " fair and equitable " had not been used then 25 194 the enhancement determined would not be conclusive but the contention is that by using these words the quality and the quantity of enhancement is no longer in the sole determination of the lessor but the final determination must be of the Court because otherwise any fanciful amount would have to be accepted as fair and equitable and that the parties intended that the lessor was not the final determiner of the quality and quantity of enhancement and his determination was not conclusive but the lessee if dissatisfied could get the matter reviewed by the Court.
In my view the correct interpretation to be put on this clause of the lease deed is what is contended for by the respondent.
The lessor was given the authority to determine the enhancement but such enhancement was to be fair and equitable and what would be fair and equitable in any particular case was also to be determined by the lessor.
The lease deed entered into between the parties is dated May 24, 1909.
In the first clause are given the usual obligations of the lessee as to payment of rent, the purpose of the building to be constructed, the period in which it was to be completed, the design of the building and keeping it in proper condition.
In the second clause of the agreement the lessor covenanted peaceful possession subject to the right of the lessor to recover rent as arrears of land revenue and other remedies for non observance of the obligations contained in the first clause with a provision for re entry upon failure of certain conditions.
I In the third clause the lessor covenanted for grant of lease for further periods of 30 years at the request of the lessee with the following proviso : " Provided that the rent of the land hereby demised shall be subject to such fair and equitable enhancement as the lessor shall determine on the grant of every renewal ".
This is the disputed clause.
Now it appears that this further covenant was for the benefit of the lessee and the reservations made are couched in such language which left the discretion in regard to enhancement of rent to the lessor.
What the enhancement was to be and what would be fair and equitable was left to the 195 determination of the lessor.
It is not an unusual provision in a lease for a long term of years with provision for renewal to leave the question of rent to be determined by the lessor or an outside valuer and it s would not, in my respectful opinion, be a correct interpretation to say that the enhancement by a valuer would be unchallengeable if the adjectival words " fair and equitable " are not used but would be subject to court 's review if these words are employed.
That is going contrary to the very notion of valuations and their legal incidence.
The extent of the power of courts over valuations by valuers has been stated in text books and in certain decided cases.
In Williston on Contracts, Vol. 3, section 802, at p. 2252 the law is stated thus: " In the absence of fraud or mistake, the price fixed by aGreed valuers is conclusive upon the parties.
Though an excessively large or an unreasonably small price involves some element of penalty or forfeiture, the possibility of this is not enough to overcome the express terms of the contract in the absence at least of fraud, gross mistake, or such arbitrary conduct as is outside what the parties could have reasonably contemplated ".
And it is not a far step to say that in all cases of valuation the parties do contemplate a fair and equitable amount to be fixed or determined and not any price fanciful or otherwise.
In Collier vs mason (1) the defendant agreed to purchase a property at a valuation to be made by a third party.
The defendant repudiated the value as exorbitant and refused to complete his contract and the plaintiff vendor instituted a suit for specific performance.
The Court held that the valuation was very high and perhaps exorbitant but it decreed specific performance of the contract as there appeared no fraud, mistake or miscarriage.
It was said by the Master of the Rolls " It may have been improvident as between these parties to enter into a contract to buy and sell property at a price to be fixed by another person, but that cannot avoid the contract.
(1) ; ; 196 Here the referee has fixed the price, which is said to be evidence of miscarriage, but this Court, upon the principle laid down by Lord Eldon, must act on that valuation, unless there be proof of some mistake, or some improper motive, I do not say a fraudulent one; as if the valuer had valued something not included, or had valued it on a wholly erroneous principle, or had desired to injure one of the parties to the contract ; or even, in the absence of any proof of any of these things, if the price were so excessive or so small as only to be explainable by reference to some such cause; in any one of these cases the Court would refuse to act on the valuation ".
It does not appear that in that case the words "fair and equitable " were used but that is implied in every reference for valuation to be made by an agreed referee.
He cannot act in a fanciful or a corrupt manner or with puerile motives nor can he make a valuation which be (toes not consider to be fair and equitable.
In cases of transfer of property the form of contract to buy and sell may make a provision and very often such a provision is made that the price payable shall be that which a certain valuer shall fix.
Such a requirement is an express condition or a condition implied in fact qualifying the obligation of the buyer to pay the price and such a contract cannot be performed unless the valuation first takes place.
Such a condition is a necessary condition or an inherent condition.
Williston on Contracts, Vol. 3, section 800 ; Firth vs Midland Railway Co. (1).
In such contracts it must be assumed that the parties laid weight on the parti cular individuality of the valuer.
Accordingly if the valuer dies or refuses to act the buyer cannot be compelled to pay the price.
A similar condition is common in long term leases and in provisions for renewal of leases and where the parties choose to abide by the determination of a valuer and that valuation is not acceptable to one of the parties, Courts will not interfere, the only exception being fraud, mistake or misconduct.
In Vickers vs Vickers (2) which was a suit for specific (1) , 112.
(2) 197 performance of a contract enforcing an option of purchase where the stock was to be valued in the usual way by two valuers and one of the valuers was not allowed to proceed, it was held that there was no contract between the parties which the Court could specifically enforce.
Sir W. Page Wood, V. C., said at p. 535: " If a nomination of that kind fails, or if the two persons named do not make their award, this Court has said there is no constat of the price; the contract is not a complete contract, and there is nothing on which it can act ".
In Weekes vs Gallard (1) where a contract was entered into for the sale of certain property, the price to be fixed by two valuers who afterwards valued the property at inadequate price, it was held that in the abence of fraud or collusion on the part of the valuer, the buyer was entitled to specific performance of the contract.
Lord Romilly said : " The court has really no discretion in the matter.
The discretion of the court is bound, as Lord Ellenborough says, by fixed rules.
In one case of this kind a house and furniture were valued at three times their value, and yet there was a decree for specific performance.
The only defence to such a suit would be fraud or collusion ".
A valuer may, in one sense, be called an arbitrator but not in the proper legal sense of the term.
Per Lindley, L. J., In re Carus Wilson & Greene (2).
But there is this difference between arbitration and valuation that the object of the former is to settle a dispute which has arisen and of the latter to avoid a dispute arising.
The arbitrator is called in to settle judicially any matter in controversy between the parties and the valuer by the exercise of his knowledge and skill has to make a valuation the object being to prevent disputes from arising.
A valuer like an arbitrator is required to act fairly and diligently.
He cannot act in a fanciful or a perverse manner and his determination must be fair and equitable whether the authority given to him uses these words or not.
But once a (1) (2) 198 valuation is properly made the valuation is conclusive as between the parties and the Court in the absence of fraud, mistake or collusion can no more go into whether it is fair and equitable than a Court can sit in appeal against the award of an arbitrator as to what would be fair amount of damages in a particular case of breach of contract.
See also Emery vs Wase (1).
The decision in Gourlay vs Somerset (Duke of) (2) was relied upon by the appellants in support of their case.
That does not, in my opinion, deal with the matter now before us.
There the suit was for specific performance of an agreement to grant a lease.
One of the conditions of the contract was that the farm was to be let on conditions, reservations and agreements " as shall be judged reasonable and proper by John Gale .
" The Court was of the opinion that Gale 's agency was not of the essence of the contract and that it could not be contended that the contract was to end if Gale refused to settle a lease.
The Court said : " Suppose the reference is made to Gale ; is his decision liable to exception ? If it is, the decision with regard to the propriety of the lease will ultimately be that of the Court.
If not, the Court may be carrying into execution a lease, which it may think extremely unreasonable and improper.
If the parties had gone to Gale, and got him to settle a lease, and one of them had objected to the covenants as improper and the Bill had been filed by the other, the Court would have inspected the lease; and if it were found unreasonable, would not have decreed an execution of the agreement ".
That was a case relating to covenants other than fixation of price.
With regard to the valuation or fixation of price it was said that if an agreement was that the price of the estate would be fixed by arbitrators and they did not fix it there was no contract of sale as the contract as to the mode of fixing the price was of the essence of the contract of sale and the Court could not make a contract where there is none.
Similarly it may be said that where the valuation is fixed by a valuer (1) , 847, 848 ; ; (2) ; ; 199 the court will hold it conclusive in the absence of fraud or mistake or misconduct.
The Court will not enter into the propriety of the valuation made or substitute its own valuation in place of that determined by the valuer because that will not be an execution of the contract of the parties but making a contract for them.
The Transfer of Property Act contains no provision by which the Court is empowered to fix rent of premises demised although by legislation in the case of agricultural holdings certain tribunals have been set up to make such determinations.
The appellant relied on The New Beerbhoom Coal Company vs Boloram Mahata (1).
The covenant between the parties was: Within that aforesaid mouzah we will not give a pottah, let give settlement to anybody.
If you take possession according to your requirement of extra land over and above this pottah, and we shall settle any such lands with you at a proper rate ".
A suit was brought by the lessees against the lessor to obtain specific performance to execute a permanent lease of a large area of land claiming benefit of the covenant above given and contended that the defendants were bound to let them the land whenever called upon to do so.
The appellant company stated that they had negotiated with the lessor for lease of the adjoining land (not of land which they had agreed to lease) upon the terms that they were to pay Rs. 1 8 0 for waste land and Rs. 3 for cultivable land and the suit was for the grant of specific performance of the agreement by compelling the lessor to grant them the lease at those rates and if the Court would not order the lease at those rates then at such rates as the Court shall think reasonable.
The trial Court held that apart from 51 bighas mentioned in the covenant the lessor could not be compelled to grant a lease for the remaining land of the mouzah.
The High Court affirmed this decision but on the ground that it was impossible to determine what was the reasonable rate.
Sir Barnes Peacock said: (1) (1880) L.R. 7 I.A. 107.
200 " Their Lordships cannot think that in the present case the court, upon a proper inquiry, would have been unable to determine it (proper rent).
There might have been considerable difficulty in fixing the rate ; but difficulties often occur in determining what is a reasonable price or a reasonable rate, or in fixing the amount of damages which a man has sustained under particular circumstances.
These are difficulties which the Court is bound to overcome ".
These observations of the Privy Council are relied upon by the appellants to support the argument that it is open to the Court to determine what the reasonable rate would be.
This was not a case where any question of valuation arose nor was it a case where a valuation made by a valuer was sought to be reviewed as not being proper and apart from the fact that the observations are mere obiter this case is no authority for saying that the determination of a valuer is subject to review by courts.
Another case which the appellant relied upon was The Secretary of State for India vs Volkart Brothers (1).
There, in a deed of lease granted for 99 years by the East India Company there was a clause for renewal for another like period on the lessee paying a sum of money and " upon such terms and conditions as should be judged reasonable ".
The Secretary of State assigned a major portion of the holding to a third party and Volkart Brothers before the expiry of the original lease period tendered the due amount and asked for renewal of the lease which the Secretary of State refused to renew and sued to eject the lessees and the latter sued for specific performance of the covenant for renewal.
It was held by a majority that the covenant was not unenforceable on account of uncertainty.
Krishnan, J., was of the opinion that such a covenant was too vague and uncertain and unenforceable because the clauses to be inserted in the contract were themselves uncertain and the contract could not be enforced.
Venkatasubba Rao, J., was of the opinion that if the parties would not agree to a reasonable rent the Court will intervene and fix it; The New Beerbhoom (1) Mad.
201 Coal Company vs Boloram Mahata (1) was relied upon.
Courts Trotter, C. J., was also of the opinion that the covenant was not too vague to be enforced.
But this again was a case not of interfering with the determination of a valuer but of specific performance of a contract of renewal and it was held that by taking evidence even a vague and indefinite covenant relating to renewal could be made definite.
In my opinion, therefore, the Court cannot go into the question of correctness or otherwise of the determination of the lease and the appeal should therefore be dismissed with costs.
By COURT.
In view of the opinion of the majority, the appeals are allowed, setting aside the judgment and decree of the High Court dated September 30, 1952.
No order as to costs of the hearing in this Court.

summary/full:
In 1909, for the purpose of residential accommodation, plots of land were given on lease by the Government to the appellants and others for which a premium of Rs. 350 and an annual rent of Rs. 3 8 0 for each plot had to be paid.
Clause III of the deed of lease in each case provided: " And the lessor does further covenant that lie will at the end of the term Of 30 years hereby granted and so on from time to time thereafter at the end of each successive further term of years as shall be granted at the request of the lessee execute to him a renewed lease of the land hereby demised for the term Of 30 years: Provided that the rent of the land hereby demised shall be subject to such fair and equitable enhancement as the lessor shall determine on the grant of every renewal: Provided also that every such renewed lease of the land shall contain such of the covenants, provisions and conditions in these presents contained as shall be applicable and shall always contain a covenant for further renewal of the lease." 181 By the year 1939 the first 30 years ' period of some of the leases came to an end, and the Government sought to enhance the annual rent from Rs. 3 8 0 to Rs. 21 14 0 per plot and also to insert some new terms in the renewed deeds of lease.
The appellants brought a suit inter alia for a declaration that the enhancement proposed was not, fair and equitable within the meaning of Clause III of the deed of lease, that the fair and equitable rent should be Rs. 7 per plot and that if the court was of the opinion that Rs. 7 was not a fair and equitable rent then it should fix such sum as it considered fair and equitable.
The respondent pleaded that such a suit was incompetent.
The question was whether the civil court had jurisdiction to enquire whether the enhancement of the rent determined by the lessor was fair and equitable within the meaning of cl.
III of the deed of lease, and whether, in any case, the lease was void for un certainty.
Held, (per jafer Imam and section K. Das, jj.), that the lease is not void for uncertainty; that the expression " fair and equitable " in the clause in question means fair and equitable in fact, and not what the lessor subjectively considered to be fair and equitable; and, that reading the clause as a whole and giving effect to all the words used therein, the meaning is that the lessor must first determine what it considers to be fair and equitable enhancement, but, if in fact it is not so, it is open to the lessee to ask the court to determine what is fair and equitable enhancement.
Accordingly, the suit was maintainable.
The rule laid down in Gourlay vs The Duke of Somerset, (18I5) ; ; , held applicable.
The New Beerbhom Coal Company Limited V. Boloram Mahata and others, (1880) L.R. 7 I.A. 107 and Secretary of State for India in Council vs Volkart Brothers, Mad.
595, relied on.
Collier vs Mason, ; ; and Tekchand Kapurchand vs Mt. Birzabai, A.I.R. 1942, Nag. 119, distinguished.
Per Kapur, J. The correct interpretation to be put on cl.
III of the deed of lease is that the lessor was given the authority to determine the enhancement of rent but such enhancement was to be fair and equitable and what would be fair and equitable in any particular case was also to be determined by the lessor.
The rule applicable to the present case is that relating to valuation or fixation of prices that where the valuation is fixed by a valuer the court will hold it conclusive in the absence of fraud or mistake or misconduct and the court will not enter into the propriety of the valuation made or substitute its own valuation in place of that determined by the valuer because that will not be an execution of the contract of the parties but making a contract for them.
Case law discussed.


judgement:
Appeal No. 869 of 1987.
From the Judgment and Order dated 22.12.1981 of the Orissa High Court in Original Judicature Case No. 412 of 1976.
WITH CA No. 870 of 1987 R.K. Garg and A.K. Panda for the Appellants.
C.S. Srinivasa Rao for the Respondent.
The Judgment of the Court was delivered by B.P. JEEVAN REDDY,J.
1.
These appeals raise the question whether it is permissible to the government to order compulsory retirement of a government servant on the basis of material which includes uncommunicated adverse remarks.
While the appellants (government servants, compulsory retired) rely upon the decisions of this court in Brij Mohan Singh Chopra, and Baidyanath Mahapatra; , , in support of their contention that it is not permissible, the respondent government relies upon the decision in M.E. Reddy. ; to contend that it is permissible to the government to take into consideration uncommunicated adverse remarks also while taking a decision to retire a government servant compulsorily.
The appellants in both the appeals have been compulsorily retired by the government of Orissa in exercise of the power conferred upon it by the first proviso to Rule 71 (a) of the Orissa Service Code.
Since the relevant facts in both the appeals are similar, it would be sufficient if we set out the facts in Civil Appeal No. 869 of 1987.
841 3.
The appellant, Sri Baikuntha Nath Das was appointed as a Pharmacist (then designated as Compounder) by the Civil Surgeon, Mayurbhanj on 15.3.1951.
By an order dated 13.2.1976 the government of Orissa retired him compulsorily under the first proviso to sub rule of Rule 71 of the Orissa Service Code.
The order reads as follows: ``In exercise of the powers conferred under the first proviso to sub rule (a) of rule 71 of Orissa Service Code, the Government of Orissa is pleased to order the retirement of Sri Baikunthanath Das, Pharmacist now working under the Chief District Medical Officer, Mayurbhanj on the expiry of three months from the date of service of this order on him.
By order of the Governor. ' ' 4.
The petitioner challenged the same in the High Court of Orissa by way of a writ petition, being O.J.C.No.
412 of 1976.
His case was that the order was based on no material and that it was the result of ill will and malice the Chief District Medical Officer bore towards him.
The petitioner was transferred by the said officer from place to place and was also placed under suspension at one stage.
He submitted that his entire service has been spot less and that at no time were any adverse entries in his confidential character rolls communicated to him.
In the counter affidavit filed on behalf of the government, it was submitted that the decision to retire the petitioner compulsorily was taken by the Review Committee and not by the Chief Medical Officer.
It was submitted that besides the remarks made in the confidential character rolls, other material was also taken into consideration by the Review Committee and that it arrived at its decision bonafide and in public interest which decision was accepted and approved by the government.
The allegation of malafides was denied.
The High Court looked into the proceedings of the Review Committee and the confidential character rolls of the petitioner and dismissed the writ petition on the following reasoning: An order of compulsory retirement after putting in the prescribed qualifying period of service does not amount to punishment as has been repeatedly held by this court.
The order in question was passed by the State Government and not by the Chief Medical Officer.
It is true that the confidential character roll of the petitioner contained several remarks adverse to him which were, no doubt, not communicated to him, but the decision of this court in Union of India 842 vs M.E.Reddy; , , holds that uncommunicated adverse remarks can also be relied upon while passing an order of compulsory retirement.
The said adverse remarks have been made by successive Civil Surgeons and not by the particular Chief District Medical Officer against whom the petitioner has alleged malafides.
It is unlikely that all the Chief District Medical Officers were prejudiced against the petitioner.
In particular, the court observed, "the materials placed before us do not justify a conclusion that the remarks in the confidential character rolls had not duly and properly been recorded." The decision to retire has been taken by the Review Committee on proper material and there are no grounds to interfere with its decision, it opined. 6.
The adverse remarks made against the petitioner in the words of the High Court are to the following effect: ". most insincere, irregular in habits and negligent and besides being a person of doubtful integrity, he had been quarrelsome with his colleagues and superior officers and had been creating problems for the administration.
Rule 71 (a) alongwith the first proviso appended thereto which alone is relevant for our purpose reads thus: "71.
(a) Except as otherwise provided in the other clauses of this rule the date of compulsory retirement of a Government servant, except a ministerial servant who was in Government service on the 31st March, 1939 and Class IV Government servant, is the date on which he or she attains the age of 58 years subject to the condition that a review shall be conducted in respect of the Government servant in the 55th year of age in order to determine whether he/she should be allowed to remain in service upto the date of the completion of the age of 58 years or retired on completing the age of 55 years in the public interest: Provided that a Government servant may retire from service any time after completing thirty years qualifying service or on attaining the age of fifty years, by giving a notice in writing to the appropriate authority at least three months before the date on which he wishes to retire or by giving the said notice to the 843 said authority before such shorter period as Government may allow in any case.
It shall be open to the appropriate authority to withhold permission to a Government servant who seeks to retire under this rule, if he is under suspension or if inquires against him are in progress.
The appropriate authority may also require any officer to retire in public interest any time after he has completed thirty years qualifying service or attained the age of fifty years, by giving a notice in writing to the Government servant at least three months before the date on which he is required to retire or by giving three months pay and allowances in lieu of such notice.
xx xx xx" 8.
It is evident that the latter half of the proviso which empowers the government to retire a government servant in public interest after he completes 30 years of qualifying service or after attaining the age of 50 years is in pari materia with the Fundamental Rule 56(j).
The Government of Orissa had issued certain instructions in this behalf.
According to these instructions, the Review Committee, if it is of the opinion that a particular government servant should be retired compulsorily, must make a proposal recording its full reasons therefor.
The administrative department controlling the services to which the particular government servant belongs, will then process the proposal and put it up to the government for final orders.
In Shyam Lal vs State of Uttar Pradesh, ; , a Constitution Bench of this court held that an order of compulsory retirement is not a punishment nor is there any stigma attached to it.
It said: "There is no such element of charge or imputation in the case of compulsory retirement.
The two requirements for compulsory retirement are that the officer has completed twenty five years ' service and that it is in the public interest to dispense with his further services.
It is true that this power of compulsory retirement may be used when the authority exercising this power cannot substantiate the misconduct which may be the real cause for taking the action but what is important to note is that the directions in the last sentence of Note 1 to Article 465 A make it abundantly clear that an imputation or charge is not in terms made a condition for the exercise of the power.
844 In other words, a compulsory retirement has no stigma or implication of misbehaviour or incapacity.
In Shivacharana vs State of Mysore, A.I.R. 1965 S.C. 280, another Constitution Bench reaffirmed the said principle and held that "Whether or not the petitioner 's retirement was in the public interest, is a matter for the State Government to consider and as to the plea that the order is arbitrary and illegal, it is impossible to hold on the material placed by the petitioner before us that the said order suffers from the vice of malafides.
As far back as 1970, a Division Bench of this court comprising J.C. Shah and K.S. Hegde, JJ. held in Union of India vs J.N Sinha, [1971] 1 S.C.R. 791, that an order of compulsory retirement made under F.R. 56 (j) does not involve any civil consequences, that the employee retired thereunder does not lose any of the rights acquired by him before retirement and that the said rule is not intended for taking any penal action against the government servant.
It was pointed out that the said rule embodies one of the facets of the pleasure doctrine embodied in Article 310 of the Constitution and that the rule holds the balance between the rights of the individual Government servant and the interest of the public.
The rule is intended it was explained, to enable the Government to energise its machinery and to make it efficient by compulsory retiring those who in its opinion should not be there in public interest.
It was also held that rules of natural justice are not attracted in such a case.
If the appropriate authority forms the requisite opinion bonafide, it was held, its opinion cannot be challenged before the courts though it is open to an aggrieved party to contend that the requisite opinion has not been formed or that it is based on collateral grounds or that it is an arbitrary decision.
It is significant to notice that this decision was rendered after the decisions of this court in State of Orissa vs Dr.
Binapani Devi; , and A.K.Kraipak vs Union of India, A.I.R. 1970 S.C. 150.Indeed, the said decisions were relied upon to contend that even in such a case the principles of natural justice required an opportunity to be given to the government servant to show cause against the proposed action.
The contention, was not accepted as stated above.
The principles enunciated in the decision have been accepted and followed in many a later decision.
There has never been a dissent not until 1987.
In R.L. Butial vs Union of India, relied upon by the appellant 's 845 counsel, the Constitution Bench considered a case where the government servant was denied the promotion and later retired compulsorily under F.R. 56(j) on the basis of adverse entries in his confidential records.
The appellant, an electrical engineer, entered the service of Simla Electricity Board in 1934.
In 1940, he was transferred to Central Electricity Commission later designated as Central Water and Power Commission (Power Wing).
In 1955 he was promoted to the post of Director wherein he was confirmed in the year 1960.
In his confidential reports relating to the years 1964 and 1965, certain adverse remarks were made.
They were communicated to him.
He made a representation asking for specific instances on the basis of which the said adverse remarks were made.
These representations were rejected.
Meanwhile, a vacancy arose in the higher post.
The appellant was overlooked both in the year 1964 as well as in 1965 by the Departmental Promotion Committee and the U.P.S.C.
On August 15, 1967, on his completing 55 years of age, he was compulsorily retired under F.R. 56(j).
Thereupon he filed three writ petitions in the High Court challenging the said adverse entries as also the order of compulsory retirement.
The writ petitions were dismissed whereupon the matters were brought to this court on the basis of a certificate.
The Constitution Bench enunciated the following propositions: 1.
The rules framed by the Central Water and Power Commission on the subject of maintenance of confidential reports show that a confidential report is intended to be a general assessment of work performed by the government servant and that the said reports are maintained to serve as a data of operative merit when question of promotion, confirmation etc.
arose.
Ordinarily, they are not to contain specific instances except where a specific instance has led to a censure or a warning.
In such situation alone, a reasonable opportunity has to be afforded to the government servant to present his case.
No opportunity need be given before the entries are made.
Making of an adverse entry does not amount to inflicting a penalty.
When the petitioner was overlooked for promotion his representations against the adverse remarks were still pending.
But inasmuch as the said representations were rejected later there was no occasion for reviewing the decision not to promote the appellant.
Withholding a promotion is not a penalty under the Central Service Rules.
Hence, no enquiry was required to be held before deciding not to promote the 846 appellant more so, when the promotion was on the basis of selection and not on the basis of seniority alone.
So far as the order of compulsory retirement was concerned, it was based upon a consideration of his entire service record including his confidential reports.
The adverse remarks in such reports, were communicated from time to time and the representations made by the appellant were rejected.
It is only thereafter that the decision to retire him compulsorily was taken and, therefore, there was no ground to interfere with the said order.
It is evident that in this case, the question arising for our consideration viz, whether uncommunicated adverse remarks can be taken into consideration alongwith other material for compulsorily retiring a government servant did not arise for consideration.
That question arose directly in Union of India vs M.E.Reddy. 15.
The respondent, M.E. Reddy belonged to Indian Police Services.
He was retired compulsorily under Rule 16 (3) of All India Service (Death cum Retirement Rules) 1958 corresponding to F.R. 56 (j).
The contention of the respondent was that the order was passed on non existing material inasmuch as at no time were any adverse remarks communicated to him.
His contention was that had there been any adverse entries they ought to have been communicated to him under the rules.
The said contention was dealt with in the following words: ".
This argument, in our opinion, appears to be based on a serious misconception.
In the first place, under the various rules on the subject it is not every adverse entry or remarks that has to be communicated to the officer concerned.
The superior officer may make certain remarks while assessing the work and conduct of subordinate officer based on his personal supervision or contract.
Some of these remarks may be purely innocuous, or may be connected with general reputation of honesty or integrity that a particular officer enjoys.
It will indeed be difficult if not impossible to prove by positive evidence that a particular officer is dishonest but those who have had the opportunity to watch the performance of the said officer from close quarters are in a position to know the nature and character not only of his performance but also of the 847 reputation that he enjoys".
The Learned Judges referred to the decisions in R.L.Butail,J.N.Sinha and several other decisions of this court and held that the confidential reports, even though not communicated to the officer concerned, can certainly be considered by the appointing authority while passing the order of compulsory retirement.
in this connection, they relied upon the principle in J.N. Sinha that principles of natural justices are not attracted in the case of compulsory retirement since it is neither a punishment nor does it involve any civil consequences.
the principle of the above decision was followed in Dr. N.V.Puttabhatta vs
State of Mysore; , , a decision rendered by A.N.Grover and G.K.Mitter , J.J. Indeed, the contention of the appellant in this case was that since an order of compulsory retirement has adverse effects upon the career and prospects of the government servant, the order must be passed in accordance with principles of natural justice.
It was contended that before passing the order, a notice to show cause against the order proposed must be given to the government servant .
Reliance was placed upon the decisions in Binapani Devi and Kraipak.
This contention was negatived following the decision in J.N.Sinha.
It was also pointed out, applying the principles of Shivacharana that an order of compulsory retirement is not a punishment nor does it involve any stigma or implication or misbehaviour.
Another contention urged in this case was that the order of compulsory retirement was based upon uncommunicated adverse remarks and that the appellant was also not afforded an opportunity to make a representation against the same.
At the relevant time, no appeal lay against the orders passed upon the representation.
Dealing with the said contention, the court observed: "as the confidential reports rules stood at the relevant time, the appellant could not have appealed against the adverse remarks and if the opinion of the government to retire him compulsorily was based primarily on the said report, he could only challange the order if he was in a position to show that the remarks were arbitrary and malafide." 18.
Yet another contention which is relevant to the present case is this : the retirement of the appellant therein was ordered under Rule 235 of Mysore Civil Services Rules.
The language of the said rule corresponded to 848 F.R.56(j) but it did not contain the word "absolute" as is found in F.R.56(j).
An argument was sought to be built up on the said difference in language but the same was rejected holding that even in the absence of the word "absolute" the position remains the same.
We are refering to the said aspect in as much as the proviso to Rule 71 (a) of the Orissa Service Code, concerned in the appeals before us, also does not contain the word "absolute".
In (A.I.R.1980 S.C.1894) Gian Singh Mann vs Punjab and Haryana High Court, a Bench consisting of Krishna Iyer and Pathak, JJ. reiterated the principle that an order of compulsory retirement does not amount to punishment and that no stigma or implication of misbehaviour is intended or attached to such an order.
In O.N.G.C vs Iskandar Ali, a probationer was terminated on the basis of adverse remarks made in his assessment roll.
A Bench comprising three learned Judges (Fazal Ali, A.C. Gupta and Kailasam, JJ.) held that the order of termination in that case was an order of termination simpliciter without involving any stigma or any civil consequences.
Since the respondent was a probationer, he had no right to the post.
The remarks in his assessment roll disclosed that the respondent was not found suitable for being retained in service and even though some sort of enquiry was commenced, it was not proceeded with.
The appointing authority considered it expedient to terminate the service of the respondent in the circumstances and such an order was beyond challenge on the ground of violation of Article 311.
This court has taken the view in certain cases that while taking a decision to retire a government servant under Rule 56(j), more importance should be attached to the confidential records of the later years and that much importance should not be attached to the record relating to earlier years or to the early years of service.
In Brij Bihari Lal Agarwal vs High Court of Madhya Pradesh, , upon which strong reliance is placed by the appellant 's counsel a Bench comprising Pathak and Chinappa Reddy,JJ.
observed thus: ". .What we would like to add is that when considering the question of compulsory retirement, while it is not doubt desirable to make an overall assessment of the Government servant 's record, more than ordinary value should be attached to the confidential reports pertaining to the years immediately 849 preceding such consideration.
It is possible that a Government servant may possess a somewhat erratic record in the early years of service, but with the passage of time he may have so greatly improved that it would be of advantage to continue him in service up to the statutory age of superannuation.
Whatever value the confidential reports of earlier years may possess, those pertaining to the later years are not only of direct relevance but also of utmost importance.
We may mention that the order of compulsory retirement in the above case is dated 28th September, 1979.
The High Court took into account the confidential reports relating to the period prior to 1966 which were also not communicated to the concerned officer.
However, the decision is based not upon the non communication of adverse remarks but on the ground that they were too far in the past.
It was observed that reliance on such record has the effect of denying an opportunity of improvement to the officer concerned.
The decision in Baldev Raj Chaddha vs Union of India, ; , is to the same effect.
In J.D. Srivastava vs State of Madhya Pradesh, ; , it was held by a Bench of three learned Judges that adverse reports prior to the promotion of the officer cannot reasonably form a basis for forming an opinion to retire him.
The reports relied upon for retiring the appellant were more than 20 years old and there was no other material upon which the said decision could be based.
It was held that reliance on such stale entries cannot be placed for retiring a person compulsorily, particularly when the officer concerned was promoted subsequent to such entries.
We now come to the decision in Brij Mohan Singh Chopra vs State of Punjab, relied upon by the learned counsel for the petitioner.
In this case, there were no adverse entries in the confidential records of the appellant for a period of five years prior to the impugned order.
Within five years, there were two adverse entries.
In neither of them, however, was his integrity doubted.
These adverse remarks were not communicated to him.
The Bench consisting of E.S. Venkataramiah and K.N. Singh JJ.
quashed it on two grounds viz., 1.
It would not be reasonable and just to consider adverse entries of remote past and to ignore good entries of recent past.
If entries for a period of more than 10 years past are taken into account it would be an act of 850 digging out past to get some material to make an order against the employee.
In Gurdyal Singh Fiji vs State of Punjab, and Amarkant Chaudhary vs State of Bihar, ; , it was held that unless an adverse report is communicated and representation, if any, made by the employee is considered, it may not be acted upon to deny the promotion.
The same consideration applies where the adverse entries are taken into account in retiring an employee pre maturely from service.
K.N. Singh, J. speaking for the Bench observed: "it would be unjust and unfair and contrary to principles of natural justice to retire pre maturely a government employee on the basis of adverse entries which are either not communicated to him or if communicated, representations made against those entries are not considered and disposed of".
This is the first case in which the principles of natural justice were imported in the case of compulsory retirement even though it was held expressly in J.N. Sinha that the said principles are not attracted.
This view was reiterated by K.N. Singh, J. again in ; Baidyanath Mahapatra vs State of Orissa, (Bench comprising of K.N. Singh and M.H. Kania, JJ.).
In this case, the Review Committee took into account the entire service record of the employee including the adverse remarks relating to the year 1969 to 1982 (barring certain intervening years for which no adverse remarks were made).
The employee had joined the Orissa Government service as an Assistant Engineer in 1955.
In 1961 he was promoted to the post of Executive Engineer and in 1976 to the post of Superintending Engineer.
In 1979 he was allowed to cross the efficiency bar with effect from 1.1.1979.
He was compulsorily retired by an order dated 10.11.1983.
The Bench held in the first instance that the adverse entries for the period prior to his promotion as Superintending Engineer cannot be taken into account.
It was held that if the officer was promoted to a higher post, and that too a selection post, notwithstanding such adverse entries, it must be presumed that the said entries lost their significance and cannot be revived to retire the officer compulsorily.
Regarding the adverse entries for the subsequent years and in particular relating to the years 1981 82 and 1982 83 it was found that though the said adverse remarks were communicated, the period prescribed for making a representation had not expired.
The Bench observed: ". .These facts make it amply clear that the appellant 's 851 representation against the aforesaid adverse remarks for the years 1981 82 and 1982 83 was pending and the same had not been considered or disposed of on the date of impugned order was issued.
It is settled view that it is not permissible to prematurely retire a government servant on the basis of adverse entries, representations against which are not considered and disposed of.
See Brij Mohan Singh Chopra vs State of Punjab.
On the above basis, it was held that the Review Committee ought to have waited till the expiry of the period prescribed for making representation against the said remarks and if any representation was made it should have been considered and disposed of before they could be taken into consideration for forming the requisite opinion.
In other words, it was held that it was not open to the Review Committee and the government to rely upon the said adverse entries relating to the years 1981 82 and 1982 83, in the circumstances.
Unfortunately, the decision in J.N. Sinha was not brought to the notice of the learned Judges when deciding the above two cases.
The basis of the decisions in Brij Mohan Singh Chopra and Baidyanath Mahapatra, it appears, is that while passing an order of compulsory retirement, the authority must act consistent with the principles of natural justice.
It is said to expressly in Brij Mohan Singh Chopra.
This premise, if carried to its logical end, would also mean affording an opportunity to the concerned government servant to show cause against the action proposed and all that it involves.
It is true that these decisions do not go to that extent but limit their holding to only one facet of the rule viz., `acting upon undisclosed material to the prejudice of a man is a violation of the principle of natural justice. ' This holding is in direct conflict with the decision in J.N.Sinha which excludes application of principles of natural justice.
As pointed out above, J.N. Sinha was decided after, and expressly refers to the decisions in, Binapani Devi and Kraipak and yet holds that principles of natural justice are not attracted in a case of compulsory retirement.
The question is which of the two views is the correct one.
While answering this question, it is necessary to keep the following factors in mind: (a) Compulsory retirement provided by F.R. 56 (j) or other corresponding rules, is not a punishment.
It does not involve any stigma nor any implication of misbehaviour or incapacity.
Three Constitution Benches have said so vide Shyam Lal Shivacharana and R.L. 852 Butail.
(b) F.R. 56 (j) as also the first proviso to Rule 71(a) of the Orissa Service Code, empower the government to order compulsory retirement of a government servant if in their "opinion", it is in the public interest so to do.
This means that the action has to be taken on the subjective satisfaction of the government.
In R.L. Butail, the Constitution Bench observed: ".
In Union of India vs Col J.N. Sinha this Court stated that F.R. 56(j) in express terms confers on the appropriate authority an absolute right to retire a Government servant on his attaining the age of 55 years if such authority is of the opinion that it is in public interest so to do.
The decision further states: "If that authority, bona fide forms that opinion, the correctness of that opinion cannot be challenged before courts.
It is open to an aggrieved party to contend that the requisite opinion has not been formed or the decision is based on collateral grounds or that it is an arbitrary decision.
The law on the subjective satisfaction has been dealt with elaborately in Barium Chemicals vs Company Law Board, ; At page 323, Shelat, J., after referring to several decisions dealing with action taken on subjective satisfaction, observed thus: "Bearing in mind these principles the provisions of section 237 (b) may now be examined.
The clause empowers the Central Government and by reason of delegation of its powers the Board to appoint inspectors to investigate the affairs of the company, if "in the opinion of the Central Government" (now the Board) there are circumstances "suggesting" what is stated in the three sub clauses.
The power is executive and the opinion requisite before an order can be made is of the Central Government or the Board as the case may be and not of a Court.
Therefore, the Court cannot substitute its own opinion for the opinion of the authority.
But the question is, whether the entire action under the section is subjective?" 27.
The learned Judges then referred to certain other decisions including the decision in Vallukunnel vs Reserve Bank of India, ; and concluded as follows: 853 "Therefore, the words, "reason to believe" or "in the opinion of"do not always lead to the construction that the process of entertaining "reason to believe" or "the opinion" is an altogether subjective process not lending itself even to a limited scrutiny by the court that such "reason to believe" or "opinion" was not formed on relevant facts or within the limits or as Lord Radcliffe and Lord Reid called the restraints of the statute as an alternative safeguard to rule of natural justice where the function is administrative.
The blurring of the dividing line between a quasi judicial order and an administrative order, pointed out in Kraipak has no effect upon the above position, more so when compulsory retirement is not a punishment nor does it imply any stigma.
Kraipak or for that matter, Maneka Gandhi cannot be understood as doing away with the concept of subjective satisfaction.
On the above premises, it follows, in our respectful opinion that the view taken in J.N. Sinha is the correct one viz., principles of natural justice are not attracted in a case of compulsory retirement under F.R. 56(j) or a rule corresponding to it.
In this context, we may point out a practical difficulty arising from the simultaneous operation of two rules enunciated in Brij Mohan Singh Chopra.
On one hand, it is stated that only the entries of last ten years should be seen and on the other hand, it is stated that if there are any adverse remarks therein, they must not only be communicated but the representations made against them should be considered and disposed of before they can be taken into consideration.
Where do we draw the line in the matter of disposal of representation.
Does it mean, disposal by the appropriate authority alone or does it include appeal as well.
Even if the appeal is dismissed, the government servant may file a revision or make a representation to a still higher authority.
He may also approach a court or Tribunal for expunging those remarks.
Should the government wait until all these stages are over.
All that would naturally take a long time by which time, these reports would also have become stale.
A government servant so minded can adopt one or the other proceeding to keep the matter alive.
This is an additional reason for holding that the principle of M.E. Reddy should be preferred over Brij Mohan Singh Chopra and Baidyanath Mahapatra, on the question of taking into consideration uncommunicated adverse remarks.
854 30.
Another factor to be borne in mind is this: most often, the authority which made the adverse remarks and the authority competent to retire him compulsorily are not the same.
There is no reason to presume that the authority competent to retire him will not act bonafide or will not consider the entire record dispassionately.
As the decided cases show, very often, a Review Committee consisting of more than one responsible official is constituted to examine the cases and make their recommendation to the government.
The Review Committee, or the government, would not naturally be swayed by one or two remarks, favourable or adverse.
They would form an opinion on a totality of consideration of the entire record including representations, if any, made by the government servant against the above remarks of course attaching more importance to later period of his service.
Another circumstance to be borne in mind is the unlikelihood of succession of officers making unfounded remarks against a government servant.
We may not be understood as saying either that adverse remarks need not be communicated or that the representations, if any, submitted by the government servant (against such remarks) need not be considered or disposed of.
The adverse remarks ought to be communicated in the normal course, as required by the Rules/orders in that behalf.
Any representations made against them would and should also be dealt with in the normal course, with reasonable promptitude.
All that we are saying is that the action under F.R.56(j) (or the Rule corresponding to it) need not await the disposal or final disposal of such representation or representations, as the case may be.
In some cases, it may happen that some adverse remarks of the recent years are not communicated or if communicated, the representation received in that behalf are pending consideration.
On this account alone, the action under F.R.56(j) need not be held back.
There is reason to presume that the Review Committee or the government, if it chooses to take into consideration such uncommunicated remarks, would not be conscious or cognizant of the fact that they are not communicated to the government servant and that he was not given an opportunity to explain or rebut the same.
Similarly, if any representation made by the government servant is there, it shall also be taken into consideration.
We may reiterate that not only the Review Committee is generally composed of high and responsible officers, the power is vested in government alone and not in a minor official.
It is unlikely that adverse remarks over a number of years remain uncommunicated and yet they are made the primary basis of action.
Such an unlikely situation if indeed present, may be indicative of malice in law.
We may 855 mention in this connection that the remedy provided by Article 226 of the Constitution is no less an important safeguard.
Even with its well known constraints, the remedy is an effective check against mala fide, perverse or arbitrary action.
At this stage, we think it appropriate to append a note of clarification.
What is normally required to be communicated is adverse remarks not every remark, comment or observation made in the confidential rolls.
There may be any number of remarks, observations and comments, which do not constitute adverse remarks, but are yet relevant for the purpose of F.R. 56(j) or a Rule corresponding to it.
The object and purposes for which this power is to be exercised are well stated in J.N. Sinha and other decisions referred supra.
The following principles emerge from the above discussion: (i) An order of compulsory retirement is not a punishment.
It implies no stigma nor any suggestion of misbehaviour.
(ii) The order has to be passed by the government on forming the opinion that it is in the public interest to retire a government servant compulsorily.
The order is passed on the subjective satisfaction of the government.
(iii) Principles of natural justice have no place in the context of an order of compulsory retirement.
This does not mean that judicial scrutiny is excluded altogether.
While the High Court or this Court would not examine the matter as an appellate court, they may interfere if they are satisfied that the order is passed (a) mala fide or (b) that it is based on no evidence or (c) that it is arbitrary in the sense that no reasonable person would form the requisite opinion on the given material; in short, if it is found to be perverse order.
(iv) The government (or the Review Committee, as the case may be) shall have to consider the entire record of service before taking a decision in the matter of course attaching more importance to record of and performance during the later years.
The record to be so considered would naturally include the entries in the confidential records/character rolls, both favourable and adverse.
If a government servant is promoted to a higher post notwithstanding the adverse remarks, such remarks lose their 856 sting, more so, if the promotion is based upon merit (selection) and not upon seniority.
(v) An order of compulsory retirement is not liable to be quashed by a Court merely on the showing that while passing it uncommunicated adverse remarks were also taken into consideration.
That circumstance by itself cannot be a basis for interfere.
Interference is permissible only on the grounds mentioned in (iii) above.
This aspect has been discussed in paras 29 to 31 above.
Before parting with the case, we must refer to an argument urged by Sri R.K. Garg.
He stressed what is called, the new concept of Article 14 as adumberated in Maneka Gandhi (A.I.R. 1978 S.C. 579) and submitted on that basis that any and every arbitrary action is open to judicial scrutiny.
The general principle evolved in the said decision is not in issue here.
We are concerned mainly with the question whether a facet of principle of natural justice audi alteram partem is attracted in the case of compulsory retirement.
In other words, the question is whether acting upon undisclosed material is a ground for quashing the order of compulsory retirement.
Since we have held that the nature of the function is not quasi judicial in nature and because the action has to be taken on the subjective satisfaction of the Government, there is no room for importing the said facet of natural justice in such a case, more particularly when an order of compulsory retirement is not a punishment nor does it involve any stigma.
So far as the appeals before us are concerned, the High Court which has looked into the relevant record and confidential records has opined that the order of compulsory retirement was based not merely upon the said adverse remarks but other material as well.
Secondly, it has also found that the material placed before them does not justify the conclusion that the said remarks were not recorded duly or properly.
In the circumstances, it cannot be said that the order of compulsory retirement suffers from mala fides or that it is based on no evidence or that it is arbitrary.
For the above reason, both the appeals are dismissed but in circumstances of the case, we make no order as to costs.
V.P.R. Appeals dismissed.

dataset_name: IN-Abs

summary/full:
C.A.No.869 of 1987 On 15.3.1951, the appellant was appointed as a Pharmacist, which was then designated as compounder.
On 13.2.1976 he was retired compulsorily by the Government under the first proviso to Sub rule of Rule 71 of the Orissa Service Code.
The appellant challenged the order by way of a writ petition in the High Court contending that the order was the result of ill will and malice the Chief District Medical Officer bore towards him; that his entire service was spot less and that at no time were any adverse entries in his confidential character rolls communicated to him.
The respondent Government submitted that the decision to retire 837 the petitioner compulsorily was taken by the Review Committee and not by the Chief Medical Officer; that besides the remarks made in the confidential character rolls, other material was also taken into consideration by the Review Committee that it arrived at its decision bonafide and in public interest which decision was accepted and approved by the Government.
The allegation of malafides was denied.
The High Court looked into the proceedings of the Review Committee and the confidential character rolls of the appellant and dismissed the writ petition on the reasoning, that an order of compulsory retirement after putting in the prescribed qualifying period of service did not amount to punishment; that the order was passed by the state Government and not by the Chief Medical Officer and that the petitioner has failed to establish that remarks in the confidential character rolls were not duly and properly recorded.
It held that the adverse remarks though not communicated, can yet be relied upon.
Accordingly it held that the decision to retire was taken by the Review Committee on proper material and there were no grounds to interfere with its decision.
The present appeal by special leave was filed by the government servant against the decision of the High Court on the question, whether acting upon undisclosed material was a ground for quashing the order of compulsory retirement C.A. No. 870 of 1987 was also filed on similar facts.
It was contended by the appellant that since an order of compulsory retirement had adverse effects upon the career and prospects of the government servant, the order should be passed in accordance with principles of natural justice; that before passing the order, a notice to show cause against the order proposed should be given to the government servant; that the order of compulsory retirement was based upon uncommunicated adverse remarks and that the appellant was also not afforded an opportunity to make a representation against the same; and that as per the new concept of Article 14 adumbrated Maneka Gandhi case, AIR 1978 SC 579, any and every arbitrary action was open to judicial scrutiny.
Dismissing the appeals, this Court, HELD: 1.01.
What is normally required to be communicated is adverse remarks not every remark, comment or observation made in the confidential rolls.
There may be any number of remarks, observations and 838 comments, which do not constitute adverse remarks, but are yet relevant for the purpose of F.R. 56(j) or a Rule corresponding to it.
[855B C] 1.02.
The adverse remarks ought to be communicated in the normal course, as required by the Rules/ orders in that behalf.
Any representations made against them would and should also be dealt with in the normal course, with reasonable promptitude.
[854D E] 1.03.
The action under F.R.56(j) (or the Rule corresponding to it) need not await the disposal or final disposal of such representation or representations, as the case may be.
In some cases, it may happen that some adverse remarks of the recent years are not communicated or if communicated, the representation received in that behalf are pending consideration.
On this account alone, the action under F.R.56(j) need not be held back.
[854E F] 1.04.
There is no reason to presume that the Review Committee or the government, if it chooses to take into consideration such uncommunicated remarks, would not be conscious or cognizant of the fact that they are not communicated to the government servant and that he was not given an opportunity to explain or rebut the same.
Similarly, if any representation made by the government servant is there, it shall also be taken into consideration.
[854F G] 1.05.
Not only the Review Committee is generally composed of high and responsible officers, the power is vested in government alone and not in a minor official.
It is unlikely that adverse remarks over a number of years remain uncommunicated and yet they are made the primary basis of action.
Such an unlikely situation, if indeed present, may be indicative of malice in law.
[854G H] 2.01.
An order of compulsory retirement is not a punishment.
It implies no stigma nor any suggestion of misbehaviour.
[855D] 2.02.
The order has to be passed by the government on forming the opinion that it is in the public interest to retire a government servant compulsorily.
The order is passed on the subjective satisfaction of the government.
[855D E] 2.03.
Principles of natural justice have no place in the context of an order of compulsory retirement.
This does not mean that judicial scrutiny 839 is excluded altogether.
While the High Court or this Court would not examine the matter as an appellate court, they may interfere if they are satisfied that the order is passed (a) mala fide or (b) that it is based on no evidence or (c) that it is arbitrary in the sense that no reasonable person would form the requisite opinion on the given material; in short, if it is found to be a perverse order.
[855E F] 2.04.
The remedy provided by Article 226 of the Constitution is no less an important safeguard.
Even with its well known constraints, the remedy is an effective check against mala fide, perverse or arbitrary action.
[855A] 2.05.
An order of compulsory retirement is not liable to be quashed by a court merely on the showing that while passing it, uncommunicated adverse remarks were also taken into consideration.
That circumstance by itself cannot be a basis for interference.
[856B] 2.06.
The government (or the Review Committee, as the case may be) shall have to consider the entire record of service before taking a decision in the matter, of course, attaching more importance to the record of and performance during the later years.
The record to be so considered would naturally include the entries in the confidential records/character rolls, both favourable and adverse.
If a government servant is promoted to a higher post notwithstanding the adverse remarks, such remarks lose their sting, more so, if the promotion is based upon merit (selection) and not upon seniority.
[855G 856A] 2.07.
The nature of the function is not quasi judicial in nature and because the action has to be taken on the subjective satisfaction of the Government, there is no room for importing any facet of natural justice particularly because an order of compulsory retirement is not a punishment nor does it involve any stigma.
[856E] Union Of India vs M.E.Reddy, ; ; Union of India vs J.N.Sinha, [1971] 1 SCR 791, Applied.
Shyam Lal vs State of Uttar Pradesh, ; ; Shivacharana vs State of Mysore, AIR (1965) SC 280; State of Orissa vs Dr. Binapani Devi, ; ; A.K. kraipak vs Union of India, AIR 1970 SC 150; R.L. Butail vs Union of India, ; Dr. N.V. Puttabhatta vs State of Mysore; , ; Gian Singh Mann vs Punjab and Haryana 840 High Court; , ; O.N.G.C. vs Iskandar Ali, Brij Bihari Lal Agarwal vs High Court Of Madhya Pradesh, ; Baldev Raj Chaddha vs Union Of India, ; ; J.D. Srivastava vs State of Madhya Pradesh, ; ; Brij Mohan Singh Chopra vs State of Punjab, ; Gurdyal Singh Fiji vs State of Punjab, ;m Amarkant Chaudhary vs State of Bihar, ; ; Baidyanath Mahapatra vs State of Orissa, ; ; Barium Chemicals vs Company Law Board, ; ; Vallukunnel vs Reserve Bank of India, ; ; Maneka Gandhi 's case, AIR 1978 SC 579, Referred to.