civil appellate jurisdiction civil appeal number
8613 of 1983.
from the judgment and order dated 21.1.1981 of the
delhi high companyrt in civil writ number 41 of 1981.

k.goswamy and kailash vasudev for the appellant. c. mahajan ashok bhan and c.v. subba rao for the
respondent. the judgment of the companyrt was delivered by
sharma j. this appeal was earlier heared by a division
bench and was referred to a companystitution bench for examining
the question whether a candidate whose name appears in the
merit list on the basis of a companypetitive examination
acquires indefeasible right of appointment as a government
servant if a vacancy exists. reference was made to the
decision in state of haryana v. subhash chander marwaha and
others 1974 1 scr 165 miss neelima shangla ph.d.v. state of haryana and others 1986 4 scc 268 and jitendra
kumar and others v. state of punjab and others. 1985 1scr
899.

the appellant was selected in the companybined civil
services examination held by the union public service
commission for appointment to several services including the
indian police service  in short the ips  and the police
services group b. the examination had been held in
october 1977 and the result was annumbernced in may 1978. a
combined merit list for the ips and the police services
group b was annumbernced which included the name of the
appellant. out of the total number of 70 vacancies in the
ips annumbernced to be filled up 54 were of general category
and the remaining 16 reserved for scheduled castes scheduled
tribes candidates. the position of the appellant in the
merit list was number high enumbergh to be included in the ips and
he was offered appointment to the delhi andaman and nicobar
police service  hereinafter referred to as the danip in
police service group b which he accepted. on account of
several candidates allotted to police services group bnumber
joining the position of the appellant improved and
ultimately he was on the top of the list. in june 1979 14 vacancies arose in the ips due to
selected candidates number joining the service. out of the
same 11 were in the general category and 3 in the reserved
category. three vacancies in the reserved category were
filled up by the candidates who had been earlier appointed
in danip service but numberappointments were made to general
category vacancies. the appellant by a representation
prayed that these vacancies also should be filled up. the
request was turned down and the appellant moved the delhi
high companyrt by a writ application under article 226 of the
constitution which was dismissed in limine by the impugned
order. the case of the appellant is that since ultimately
several vacancies in the general category of the ips
remained unfilled he was entitled to be appointed in one of
them and the authorities were number right in rejecting his
representation. it has been companytended that after calculating
the number of vacancies in the ips it was annumbernced that
appointments would be made in 54 vacancies of general
category and steps for recruitment were accordingly taken. the appellant along with others appeared at the elaborate
test held for the purpose and he was found qualified for the
appointment .in that situation the respondent companyld number
refuse to fill up the vacancies and proceed to appoint the
appellant in the police services group b. it has been
argued that the companyrect procedure in similar situation was
followed with respect to the reserved category and the three
vacancies arising in identical situation were filled up from
the candidates selected for danip service and
there was numberjustification to refuse similar benefit to the
appellant in the general category. according to the case of the union of india the
process for the recruitment in question started in 1977 and
the tentative service allocation for ips was companypleted
before the companymencement of the foundational companyrse in july
1978. all the candidates selected for ips excepting those
who were eligible to appear at the examination for the
indian administrative service scheduled to be held in
october -numberember 1978 and such other candidates who had
number been finally cleared on account of pending medical
examination or character verification had to attend the
foundational companyrse. candidates allocated to police services
group b were number required to undergo this companyrse. by june
1978 7 more vacancies arose on account of candidates number
joining ips due to various reasons and 7 persons in order
of merit from the joint list of the ips and the police
services group b were allowed to fill up these
vacancies. the last one in this list of 7 candidates was
shekhar singh at serial number 94. the appellant companyld number get
a chance as his position was 100th. this process of final
service allocation was closed on 24.10.1978 or at the latest
by 4.11.1978 in view of the process for recruitment for the
year 1978 which had already started. the additional
vacancies arising latertherefore remained unfilled.the
entire procedure which is followed for recruitment to the
services has been given in several affidavits of the
respondent and detailed information in this regard was
supplemented by a further affidavit during the hearing of
the hearing of the appeal filed in the light of observations
of the bench. dealing with the appointments to reserved categoryit
has been stated in the companynter affidavit that the process
which was followed in companynection with the general category
and which was being earlier followed for the reserved
category also was relaxed in pursuance of a policy decision
taken after examining all relevant circumstances and
materials in regard to this category including the
strength of the reserve category in the ips the result of
the examinations for the year 19751976 and 1977. the
procedure which was being followed in the past was number
relaxed in regard to the general category on account of
vital differences obtaining in the relevant companyditions in
the two categories and the appellants plea of alleged
discrimination does number have any merit. similarly the case
of one km. vandana srivastava cited by the appellant has
also been distinguished and mr. goswami therefore  did number
pursue this plea any further in his final reply. it is number companyrect to say that if a number of
vacancies are numberified for appointment and adequate number
of candidates are found fit the successful candidates
acquire an indefeasible right to be appointed which cannumber
be legitimately denied. ordinarily the numberification merely
amounts to an invitation to qualified candidates to apply
for recruitment and on their selection they do number acquire
any right to the post. unless the relevant recruitment
rules so indicate the state is under numberlegal duty to fill
up all or any of the vacancies. however it does number mean
that the state has the licence of acting in an arbitrary
manner. the decision number to fill up the vacancies has to be
taken bona fide for appropriate reasons. and if the
vacancies or any of them are filled up the state is bound
to respect the companyparative merit of the candidates as
reflected at the recruitment test and numberdiscrimination can
be permitted. this companyrect position has been companysistently
followed by this companyrt and we do number find any discordant
numbere in the decisions in state of haryana v. subhash chander
marwaha and others 1974 1 scr 165 miss neelima shangla

state of haryana and others 1986 4 scc 268 and
jitendra kumar and others v. state of punjab and others
1985 1 scr 899.

in state of haryana v. subhash chander marwaha and
others  supra  15 vacancies of subordinate judges were
advertised and out of the selection list only 7 who had
secured more than 55 marks were appointed although under
the relevant rules the eligibility companydition required only
45 marks. since the high companyrt had recommended earlier to
the punjab government that only the candidates securing 55
marks or more should be appointed as subordinate judges the
other candidates included in the select list were number
appointed. they filed a writ petition before the high companyrt
claiming a right of being appointed on the ground that
vacancies existed and they were qualified and were found
suitable. the writ application was allowed. while reversing
the decision of the high companyrt it was observed by this
court that it was open to the government to decide how many
appointments should be made and although the high companyrt had
appreciated the position companyrectly it had somehow
persuaded itself to spell out a right in the candidates
because in fact there were 15 vacancies. it was expressly
ruled that the existence of vacancies does number give a legal
right to a selected candidate. similarly the claim of some
of the candidates selected for appointment who were
petitioners in jitendra kumar and others v. state of punjab
and others was turned down holding that it was open to the
government to decide how many appointments would be made. the plea of arbitrariness was rejected in view of the facts
of the case and it was had that the candi-
dates did number acquire any right merely by applying for
selection or even after selection. it is true that the claim
of the petitioner in the case of miss neelima shangla v.
state of haryana was allowed by this companyrt but number on the
ground that she had acquired any right by her selection and
existence of vacancies. the fact was that the matter had
been referred to the public service companymission which sent to
the government only the names of 17 candidates belonging to
the general category on the assumption that only 17 posts
were to be filled up. the government accordingly made only
17 appointments and stated before the companyrt that they were
unable to select and appoint more candidates as the
commission had number recommended any other candidate. in this
background it was observed that it is of companyrse open to
the government number to fill up all the vacancies for a valid
reason but the selection cannumber be arbitrarily restricted
to a few candidates numberwithstanding the number of vacancies
and the availability of qualified candidates and there must
be a companyscious application of mind by the government and the
high companyrt before the number of persons selected for
appointment is restricted. the fact that it was number for the
public service companymission to take a decision in this regard
was emphasised in this judgment. numbere of these decisions
therefore supports the appellant. mr. goswami appearing in support of the appeal has
contended that in view of the relevant statutory rules the
authorities were under a duty to companytinue with the process
of filling up all the vacancies until numbere remained vacant. reference was made to r. 4 of the indian police service
 cadre  rules 1954 rr. 346 and 7 of the indian police
service  recruitment  rules 1954 and rr. 2 1  a  2 1  c
8 and 13 of the indian police service  appointment by
competitive examination  regulations 1965. we do number think
any of these rules companyes to the aid of the appellant. rule 3
of the cadre rules directs companystitution of separate cadres
for states or group of states and r. 4 empowers the central
government to determine the strength in companysultation with
the state governments. the strength has to be re-examined at
intervals of 3 years. rule 3 of recruitment rules deals with
the companystitution of the service and r. 4 the method of
recruitment. rules 6 and 7 give further details in this
regard. the learned companynsel companyld number point out any
provision indicating that all the numberified vacancies have to
be filled up. similar is the position with respect to the
competitive examination regulations. regulation 2 1  a
defines available vacancies as vacancies determined by the
central government to be filled on the results of the
examination described in regulation 2 1  a . regulation 8
prescribes that the candidates would be companysidered for
appointment to the available
vacancies subject to provisions 9 to 12 and regulation 13
clarifies the position that a candidate does number get any
right to appointment by mere inclusion of his name in the
list. the final selection is subject to satisfactory report
on the character antecedent and suitability of the
candidates. we therefore reject that the claim that the
appellant had acquired a right to be appointed against the
vacancy arising later on the basis of any of the rules. the main companytention on behalf of the appellant has
been however that the authorities in keeping the vacancies
arising later unfilled acted arbitrarily. mr. goswami
referred to several documents annexed to the special leave
petition and affidavits filed on behalf of the parties
and companytended that although appointments of many candidates
in the other services were made in the later vacancies the
vacancy in the indian police service which subsequently
became available to the appellant was refused without any
just cause resulting in illegal discrimination. this was
emphatically denied on behalf of the respondent. since the
matter did number appear to be free from ambiguity on the
basis of the affidavits before us we decided to examine the
factual aspects more thoroughly by examining the other
available materials on the records of the union of india
and accordingly the learned companynsel for the respondent got
the relevant departmental files called. two further
affidavits were also filed along with photostat companyies of a
large number of documents which we examined at some length
with the aid of the learned advocates for both sides. from
the materials produced before us it is fully established
that there has number been any arbitrariness whatsover on the
part of the respondent in filling up the vacancies in
question or the other vacancies referred to by the learned
counsel for the appellant. the process of final selection
had to be closed at some stage as was actually done. a
decision in this regard was accordingly taken and the
process for further allotment to any vacancy arising later
was closed. mr. goswami relied upon certain appointments
actually made subsequent to this stage and urged that by
those dates the further vacancies in the indian police
service had arisen to which the appellant and the other
successful candidates should have been adjusted. we do number
find any merit in this companytention. it is number material if in
pursuance of a decision already taken before closing the
process of final selection the formal appointments were
concluded later. what is relevant is to see as to when the
process of final selection was closed. mere companypleting the
formalities cannumber be of any help to the appellant. we do
number companysider it necessary to mention all the details in this
connection available from the large number of documents
which we closely examined during the hearing at companysiderable
length and do number
have any hesitation in rejecting the argument of the learned
counsel in this regard based on the factual aspect.


original jurisdiction writ petitions number. 8367 and
3939 etc. of 1985.  under article 32 of the companystitution of india.  m. ashri rakesh k. khanna and dr. meera aggarwal for
the petitioners. k. bansal and prem malhotra for the respondents. the judgment of the companyrt was delivered by
amarendra nath sen j. the companystitutional validity of
s. 1 3  of the haryana urban  companytrol of rent and eviction
act 1973 has been challenged in these writ petitions. this
question which is companymon to all the writ petitions is the
only question which arises for companysideration and these writ
petitions are accordingly being disposed of by this companymon
judgment. the question has been urged as a pure question of law. in that view of the matter it does number become necessary to
refer the facts of any of the writ petitions. s. 1 3  as originally enacted in the haryana urban
 companytrol of rent and eviction  act 1973  hereinafter
referred to for the sake of brevity as the act  was in the
following terms
numberhing in this act shall apply to

any residential building the companystruction of
which is companypleted on or after the companymencement of
this act for a period of ten years from the date
of its companypletion

any number-residential building companystruction of
which is companypleted after the 31st march 1962.

any rented land let out on or after 31st
march 1962.
this provision was amended by the amending act of 1978
 act 16 of 1978  to read as follows

numberhing in this act shall apply to any
building the companystruction of which is companypleted on
or after the companymencement of this act for a period
of ten years from the date of its companypletion. it is the validity of this amended provision which has
been questioned in these writ petitions. the validity is challenged mainly on the following
grounds

the provision is arbitrary and is violative of
art. 14 of the companystitution. in any event in so far as this provision
operates retrospectively and seeks to take away
the vested rights of the petitioner under the act
prior to this amendment the same must be held to
be illegal and invalid. the argument is that this provision seeks to make an
invidious distinction between buildings companystructed before
the companymencement of this act and building the companystruction
of which was companypleted on or after the companymencement of this
act and on the basis of this invidious distinction this
provision discriminates between the landlords and tenants of
buildings companystructed before the act and after the act. it
is urged that on the basis of this distinction between
building companystructed before and after the companymencement of
the act a landlord enjoys in case of the buildings
construction of which is companypleted on or after the
commencement of the act an exemption from the operation of
the act and the tenant in respect of such building is denied
the protection and the benefits of the act for a period of
10 years from the date of companypletion of the companystruction of
the building whereas the landlord of any building
constructed before the companymencement of the act does number
enjoy any such exemption and the tenant of such building
enjoys the protection and all the benefits of the act. it is
submitted that this discrimination between one class of
landlords and their tenants and the other class of landlords
and their tenants on the basis of the time of companypletion of
the buildings is clearly arbitrary and is violative of art. 14 of the companystitution. the submission is that rent companytrol
legislation is enacted for the purpose of affording
protection to the tenants and the act in question has also
been passed for achieving the same object. reference in this
connection is made to the statement of objects and reasons
for the passing of the act and to the preamble of the act. it is companytended that this classification of buildings on the
basis of the time of companypletion of companystruction has no
reasonable nexus with the object to be achieved and may on
the companytrary frustrate the purpose for which the act has
been passed inasmuch as in respect of the buildings the
construction of which was companypleted on or after the
commencement of the act the tenants are denied the entire
benefit and protection of the act. it is further companytended
that there can be numberrational basis
in fixing the period of the companypletion of the building with
reference to the date of companymencement of the act which
received the assent of the governumber on the 25th of april
1973 and was published in the haryana gazette on the 27th of
april 1973 and also in prescribing a period of 10 years for
exemption from the operation of the act for the buildings
the companystruction of which was companypleted on or after the
commencement of the act. this discrimination it is
submitted is arbitrary and violative of art. 14 of the
constitution and in this companynection reference has been made
to the decision of this companyrt in the case of motor general
traders and others v. state of andhra pradesh and ors. 1984 1 s.c.c. 222 and also to the decision of this companyrt
in the case of m s. punjab tin supply company chandigarh v.
central government and ors. 1984 1 s.c.c. 206.
the next companytention is that the amended provision has
been given retrospective effect inasmuch as the amendment
which was introduced in 1978 has been made applicable to any
building companystruction of which was companypleted on or after the
date of companymencement of the act in 1973 and the
retrospective operation of the act has been effect of taking
away the vested right of the tenant and must therefore be
held to be illegal and bad. it is argued that s. 3 1  of the
act as originally enacted was void and unconstitutional
inasmuch as numberperiod of exemption of any building which may
qualify for exemption had been fixed and it is well settled
that an indefinite or unlimited immunity to any building
from the purview of the act is arbitrary and
unconstitutional. the argument is that as the original
provision companytained in s. 1 3  of the act prior to its
amendment was void and unconstitutional numberbuilding
enjoyed any exemption from the operation of the act and the
tenants of the buildings were entitled to the protection and
the benefit of the act and had acquired a vested right to be
governed by the provision of the act. it is submitted that
this vested right of the tenants is sought to be interferred
with by the amended s. 1  3  which has been made applicable
to all the buildings companystruction of which was companypleted on
or after the date of companymencement of the act. we do number see any force in any of the companytentions. it is true that rent companytrol legislation is usually
enacted and the present act was also passed taking into
account the companyditions prevailing in the state to regulate
the relationship between the landlord and the tenant in the
larger interest of the society and or affording protection
to tenants against exploita-
tion by landlords on account of shortage of accommodation. the statement of objects and reasons for passing the act
recites -
certain provisions of the existing law are number
conclusive to harmonious landlord tenant
relationship and also hamper rapid urban
development. in order to remedy these defects and
to entitle the tenants to the amenities of water
supply electricity and sewerage necessity of
fresh legislation has been felt. opportunity has
also been taken to rationalise the basis for
determination of fair rent and to provide for
eviction of these tenants who companystruct their own
houses in the urban area companycerned sufficient for
their requirement. the preamble to the act reads
an act to companytrol the increase of rent of certain
buildings and rented land situated within the limits of
urban areas and the eviction of tenants therefrom. there cannumber be any doubt that the paramount object of
every rent companytrol legislation including the present act is
to provide safeguards for tenants against exploitation by
landlords who seek to take undue advantage of the pressing
need for accommodation of a large number of people looking
for a house on rent for residence or business in the
background of acute scarcity of accommodation is at the very
root of the problem and if houses were freely available at
reasonable rent there would hardly be any need for rent
control legislation. it is entirely for the legislature to
decide whether any measures are to be adopted for remedying
the situation and for ameliorating the hardship of tenants. the legislature may very well companye to a companyclusion that it
is the shortage of buildings which has resulted in scarcity
of accommodation and has created a situation where the
demand for accommodation is far in excess of the requisite
supply and it is because of such acute scarcity of
accommodation the landlords are in a position to exploit the
situation to the serious detriment of the tenants. the
legislature in its wisdom may properly companysider that in
effecting an improvement of the situation and for mitigating
the hardship of the tenanted class caused mainly due to
shortage of buildings it will be proper to encourage
construction of new buildings as companystruction of new
buildings will provide more accommodation easing the
situation to a large
extent and will ultimately result in benefitting the
tenants. as in view of the rigours of rent companytrol
legislation persons with means may number be inclined to
invest in companystruction of new houses the legislature to
attract investment in companystruction of new houses may
consider it reasonable to provide for adequate incentives so
that new companystructions may companye up. it is an elementary law
of econumberics that anybody who wants to invest his money in
any venture will expect a fair return on the investment
made. as acute scarcity of accommodation is to an extent
responsible for the landlord and tenant problem a measure
adopted by the legislature for seeking to meet the situation
by encouraging the companystruction of new buildings for the
purpose of mitigating the hardship of tenants must be
considered to be a step in the right direction. the
provision for exemption from the operation of the rent
control legislation by way of incentive to persons with
means to companystruct new houses has been made in sec. 1 3  of
the act by the legislature in the legitimate hope that
construction of new buildings will ultimately result in
mitigation of the hardship of the tenants. such incentive
has a clear nexus with the object to be achieved and cannumber
be companysidered to be unreasonable or arbitrary. any such
incentive offered for the purpose of companystruction of new
buildings with the object of easing the situation of
scarcity of accommodation for ameliorating the companyditions of
the tenants cannumber be said to be unreasonable provided the
nature and character of the incentive and the measure of
exemption allowed are number otherwise unreasonable and
arbitrary. the exemption to be allowed must be for a
reasonable and a definite period. an exemption for an
indefinite period or a period which in the facts and
circumstances of any particular case may be companysidered to be
unduly long may be held to be arbitrary. the exemption must
necessarily be effective from a particular date and must be
with the object of promoting new companystructions. with the
commencement of the act the provisions of the rent act with
all the restrictions and rigours become effective. buildings
which have been companystructed before the companymencement of the
act were already there and the question of any kind of
impetus or incentive to such buildings does number arise. the
legislature therefore very appropriately allowed the
benefit of the exemption to the buildings the companystruction
of which companymenced or was companypleted on or after the
commencement of the act. this exemption in respect of
buildings companying up or to companye up on or after the date of
commencement of the act is likely to serve the purpose of
encouraging new buildings to be companystructed. there is
therefore numberhing arbitrary or unreasonable in fixing the
date of companymencement of the act from which the exemption is
to be operative. the exemption for a period of 10 years from the
operation of the act allowed to buildings the companystruction
of which companymenced or was companypleted on or after the date of
commencement of the act is fair and reasonable. it is for a
definite period and that period of exemption cannumber be
considered to be too long and this exemption the
legislature may be of the view will serve the purpose of
encouraging the companystruction of new buildings. it is for the
legislature to decide the period of exemption that may be
allowed and to fix the date from which the period of
exemption should run. this will ordinarily be a matter of
legislative police and this companyrt will number numbermally
interfere unless the companyrt is of the opinion that the period
of exemption or the date from which the exemption is to
operate is unreasonable and arbitrary. the classification of
buildings with reference to the date of companymencement of the
act namely buildings companystructed before the companymencement of
the act and buildings the companystruction of which was
completed on or after the date of the companymencement of he
act has a rational basis and has a clear nexus with the
object to be achieved. for the purpose of achieving the
object and encouraging the companystruction of new houses with a
view to ameliorate the hardship of the tenants by removing
the scarcity of accommodation the classification of the
landlord and the tenant of a house companystructed before the
commencement of the act and the landlord and tenant of a
house the companystruction of which companymences or is companypleted
on or after the companymencement of the act is clearly founded
on an intelligible differentia which has a rational relation
to the object and this classification does number result in any
invidious discrimination between the classes of landlords
and tenants so classified. this classification is number
arbitrary and is number violative of art. 14 of the
constitution. the decisions on which reliance has been placed on
behalf of the petitioners is indeed of numberassistance. in the
case of motor general traders  supra  this companyrt had to
consider the companystitutional validity of s. 32  b  of the
andhra pradesh buildings  lease rent and eviction  companytrol
act 1960. this provision exempted all buildings companystructed
on or after august 26 1957 from the operation of the act. numberperiod had been fixed for which this exemption will be
enjoyed by owners of buildings companystructed on or after 26th
august 1957 and the exemption appeared to be in the nature
of a permanent one. this companyrt after referring to various
authorities naturally declared the said provision to be
invalid holding
after giving our anxious companysideration to the
learned arguments addressed before us we are of
the view that
clause  b  of section 32 of the act should be
declared as violative of article 14 of the
constitution because the companytinuance of that
provision on the statute book will imply the
creation of a privileged class of land lords
without any rational basis as the incentive of
build which provided a nexus for a reasonable
classification of such class of landlords no
longer exists by lapse of time in the case of the
majority of such landlords. there is numberreason why
after all these years they should number be brought
at par with other landlords who are subject to the
restrictions imposed by the act in the matter of
eviction of tenants and companytrol of rents. it is however to be numbered that this companyrt in this
very case observed at pp. 243 244 as follows-
we do relize the adverse effect of this decision
on many who may have recently built houses by
spending their life savings or by borrowing large
funds during these inflationary days at high rates
of interest on the expectation and belief that
they would number be subjected to the restrictions
imposed by the act. the incentive to build
provides a rational basis for classification and
it is necessary to the national interest that
there should be freedom from restrictions for a
limited period of time. it is always open to the
state legislature or the state government to take
action by amending the act itself or under section
26 of the act as the case may be number only to
provide incentive to persons who are desirous of
building new houses as it serves a definite
social purpose but also to mitigate the rigour to
such class of landlords who may have recently
built their houses for a limited period as it has
been done in the union territory of chandigarh as
brought out in our recent judgment in punjab tin
supply company chandigarh v. central government. the
question whether new legislation should be
initiated to exempt newly companystructed buildings
for a limited period of time on the pattern of
similar legislation undertaken by different states
or to exempt such class of buildings for a given
number of years from the provisions of the act by
the issue of a numberification under section 26 of
the act is one for the state government to
decide. in the other decision namely punjab tin supply company
chandigarh  supra  the validity of s. 3 of the east punjab
rent restrictions act 1949 and all three numberifications
issued under the said section provided for exemption of
every building companystructed in the urban area of chandigarh
for a period of 5 years from the respective date applicable
to it from the operation of the act came to be challenged. this companyrt upheld the validity of s. 3 of the act and the
numberifications impugned observing-
in the result we declare that section 3 of the act
and the numberification dated january 31 1973 and
the other numberifications impugned in these cases
are valid and effective. we further declare that
the exemption granted by the numberification dated
january 31 1973 applies only to those buildings
which are given sewerage companynection or electric
connection or which are occupied as the case may
be on or after january 31 1973 and number to those
buildings which satisfied any of the said
conditions before january 31 1973.
the following observations of the companyrt at pp. 216-17 may be
usefully numbered-
the preamble and the provisions of a statute no
doubt assist the companyrt in finding out its object
and policy but its object and policy need number
always be strictly companyfined to its preamble and
the provisions companytained therein. the object and
policy of the act which is number before us appears
to be slightly wider than some of the key
provisions of the act namely fixation of fair rent
and prevention of unreasonable eviction of
tenants. the acute problem of shortage of urban
housing as we all knumber has become a permanent
feature throughout india. it is on account of the
shortage of the number of houses in urban area as
landlords get an opportunity to exploit tenants
who are in need of housing accommodation by
compelling them to enter into unconscionable
bargains. the act is passed as one of the measures
taken to mitigate the hardship caused to the
tenants. the policy and object of the act
generally is mitigation of the hardship of
tenants. such mitigation can be attained by
several measures one of them being creation of
incentive to persons with
capital who are otherwise reluctant to invest in
the companystruction of new buildings in view of the
chilling effect of the rent companytrol laws. as part
of the said scheme in order to persuade them to
invest in the companystruction of new buildings
exemption is granted to them from the operation of
the act for a short period of five years so that
whatever may be the hardship for the time being to
the tenants of the new buildings the new
buildings so companystructed may after the expiry of
the period of exemption be available for the pool
of housing accommodation companytrolled by the act. the impugned numberification is number therefore ultra
vires section 3 of the act as in its true effect
it advances the scheme object and purposes of the
act which are articulated in the preamble and the
substantive provisions of the act. moreover the
classification of buildings into exempted
buildings and unexempted buildings brought about
by the numberification bears a just and reasonable
nexus to the object to be achieved namely the
creation of additional housing accommodation to
meet the growing needs of persons who have no
accommodation to reside or to carry on business
and it cannumber be companysidered as discriminatory or
arbitrary or unreasonable in view of the shortness
of the period of exemption available in the case
of each exempted building. the exemption granted
for a period of five years only serves as an
incentive as stated above and does number create a
class of landlords who are for ever kept outside
the scope of the act. the numberification tries to
balance the interests of the landlords on the one
hand and of the tenants on the other in a
reasonable way. we do number therefore agree with
the submission that the numberification either falls
outside the object and policy of the statute or is
discriminatory. the aforesaid observations in our view clearly
negative the companytentions raised by the petitioners and
conclude the question against them in so far as the validity
of s. 1 3  of the act on the grounds of arbitrariness and
illegal discrimination is companycerned. the other companytention that this provision must be held
to be bad inasmuch as this provision operates
retrospectively and seeks to take away the vested rights of
the petitioners under the act
is equally without any merit. the section on its proper
construction clearly indicates that the section is number
retrospective in operation. merely because the buildings the
construction of which companymenced or was companypleted after the
date of companymencement of the act in 1973 companye within the
purview of this particular provision which was introduced by
amendment in 1978 the provision does number become
retrospective. thus provision operates prospectively and
becomes effective after its incorporation in the act by the
amendment though the buildings companypleted on or after the
commencement of this act in 1973 are brought within the
scope of this section. the argument that the tenants have
acquired a vested right under the act prior to its amendment
is without any substance. prior to the amendment of section
1 3  by the amending act of 1978 the provision as it
originally stood cannumber be said to have companyferred any vested
right on the tenants. the provision as it originally stood
prior to its amendment might number have been companystitutionally
valid as the exemption sought to be granted was for an
indefinite period. that does number necessarily imply that any
vested right in any tenant was thereby created. the right
claimed is the right to be governed by the act prior to its
amendment. if the legislature had thought it fit to repeal
the entire act companyld the tenant have claimed any such right? obviously they companyld number have the question of acquiring any
vested rights really does number arise. even if it companyld be
said that the tenants had acquired any right because of any
invalidity of the earlier provision before amendment it is
always open to the legislature to remove any defect to make
it valid. it is well settled that if any provision made by
the legislature is found companystitutionally invalid for some
lacunae or otherwise such provision can always be validated
by removing the defect or lacuna by passing a validating
act.


civil appellate jurisdiction civil appeal
number 1803 of 1070
from the judgment and order dated 6.8.1968 of patna
high companyrt in first appeal number 444 of 1967.

n. mukherjee ranjan mukherjee a.k. ganguli s.c.
ghosh for the appellant. b. datar and ms. vina tamta for the respondents. the judgment of the companyrt was delivered by
deasi j. appellant an employee of tata iron and steel
company limited  companypany for short  has been chasing a
mirage. to wit to recover a paltry sum of rs 14040 being the
amount of gratuity to which he was entitled for the
continuous service rendered by him from december 31 1929
till august 31 1959 under what are styled as retiring
gratuity rules 1937  gratuity rules for short  from the
company and in this wholly unequal fight he laid down his
life before enjoying the pittance to which he was entitled
after three decades of loyal service. what a dreadful return
for abject loyalty? when the appellant retired by
resignation from service he was paid his provident fund dues
but gratuity which he was entitled to be paid under the
relevant rules was number paid to him. when the appellant
claimed payment of gratuity the respondent turned deal
ears to it. appellant sevred a numberice dated september 6
1981 calling upon the respondent to pay the amount of
gratuity being rs. 14040-. the companypany did number respond to
the numberice. thereupon the appellant filed m.s. number 452 of
1962 in the companyrt of subordinate judge at jamshedpur. the respondent appeared and companytested the suit inter-
alia companytending that in terms of the companytract of service
and particularly having regard to the relevant rules under
which gratuity can be claimed the same is payable on
certification of satisfactory service by the head of the
department and it is payable at the absolute discretion of
the companypany irrespective of whether the employee has or has
number performed all or any of the companyditions stated in the
rules and numberemployee howsoever otherwise eligible is
entitled as of right to any payment under the rules. the learned trial judge framed the issues on which
parties were at variance. the learned judge held that the
plaint does disclose a cause of action and the plaintiff was
entitled to claim and recover the amount of gratuity with
interest thereon. accordingly the suit was decreed against
the. companypany directing it to pay the amount claimed in the
plaint with future interest at 6 per annum with companyts. the respondent companypany preferred first appeal number 444
of 1963 in the high companyrt of judicature at patna. a division
bench of the high companyrt held i  that the service companyditions
of the plaintiff were governed by the works standing orders
and that it was an implied companydition of service that the
plaintiff companyld get gratuity in accordance with the gratuity
rules  ii  that in view of rule 6 an employee governed by
the gratuity rules is number entitled to claim the same as a
matter of right but he merely attains the benefit of
eligibility or suitability for the retiring gratuity and number
the right iii  that until and unless the-company has
decided to pay the gratuity in accordance with rule 7 or
otherwise the mere fact of the employee becoming eligible
to get it under the relevant rules which can be enforced in
a civil companyrt because the matter of payment of gratuity is
at the absolute discretion of the companypany as provided in
rule 10 and the employee howsoever unfortunate the
position may be under the modern stage of the society is number
entitled to claim it as a matter of right because even
though payment of gratuity under the gratuity rules is an
implied companydition of service
yet the companydition is further companyditioned by the provisions
made in the rules and is subject to them iv  that such a
claim may enforced before the industrial tribunal under the
industrial disputes act 1947 but it is number possible to hold
that the law of companytract or the law of master and servant
which is the only law to be enforced in a civil companyrt can
justify on interpretation of the gratuity rules in question
that the plaintiff can be granted decree for payment of
gratuity on the footing that it was the unconditional or
unconditioned companytractual obligation of the employer to pay
such a money v  the payment of gratuity money is number a
gift-pure and simple but under the relevant rules it is in
the nature of an inchoate claim or interest and number a right
enforceable by a suit in companyrt because under the companytract
of service the grant of gratuity has been left to the sole
discretion of the employer as the relevant rules provided
that numberemployee howsoever otherwise eligible shall be
deemed to be entitled as of right to any payment under the
rules. accordingly the appeal was allowed and the judgment
and decree of the trial companyrt were set aside and the
plaintiffs suit was dismissed directing the parties to
bear their companyts. hence this appeal by the plaintiff by special leave. at the outset it is necessary to numberice the relevant
rules relied upon by the respondent in support of its
submission that the gratuity cannumber be claimed as a matter
of right and the claim to gratuity cannumber be enforced in
the civil companyrt. the retiring gratuity rules came into force
with effect from april 1 1937 and at the relevant time the
rules as amended in 1948 were in operation. rule 5 provides
for retirement of every uncovenanted employee of the companypany
on attaining the age of 60 years subject to the right of the
company to grant extension. this rule is a mere
incorporation of s.o. 54 which provides for retirement on
attaining the age of 60. rules 6 7 and 10 may be extracted
6.  a  subject to the companyditions referred to in
these rules every permanent uncovenanted employee of
the companypany whether paid on monthly weekly or on
daily basis including those borne on the pay rolls of
the companypany of the companylieries and at ore mines and
quarries will be eligible for a retiring gratuity
which shall be equal to half a months salary or wages
for every companypleted year of companytinuous service
subject to a maximum of twenty months salary or wages
in all

provided that when an employee dies retires
or is discharged under rule 11 2  ii  and  iii  hereof
before he has served the companypany for a companytinuous
period of 15 years a gratuity ordinarily limited to
half a months salary or wages for each qualifying year
may be paid subject however to a maximum of 6 months
salary or wages in all.  amended vide board resolution number vii dated 2nd
july 1953.  the retiring gratuity will be based on the
rate of the salary or wages applicable to the employee
in the last month of active service or if the employee
has retired while on leave in the last month prior to
the employee going on leave. in the case of an uncovenanted employee who
has been transferred to anumberher tata companycern the
retiring gratuity payable to him under rule  4  8  a
hereunder will be based on the rate of the salary or
wages applicable to the employee in the last month of
service with the companypany
 in force from 1.4.1946 as per board resolution
dated 8.4.1948.  numberwithstanding anything companytained in these
rules a gratuity shall become due and be payable and
shall always have been deemed to have become due and
payable only in such instalments and over such period
or periods as may be fixed by the board of directors of
the companypany or subject to the direction of the board by
the managing agents. until any such instalment shall
become or have become due and payable the employee or
any dependent who qualifies for payment under the
gratuity rules shall number be eligible to receive or be
paid any such instalment of the gratuity. all retiring gratuities granted under these
rules other than special gratuity to be paid under the
provisions of rule 22 hereof shall be at the absolute
discretion of the company-
pany irrespective of whether an employee has or has number
performed all or any of the companyditions herein after
stated and numberemployee howsoever otherwise eligible
shall be deemed to be entitled as of right to any
payment under these rule.  amended vide board resolution number v dated
25.8.1955 . the companytention of the respondent is that the plaintiff
did number retire from service but he left the service of the
company by resigning his post. this aspect to some extent
agitated the mind of the high companyrt. it may be dealt with
first. it is number only number in dispute but is in fact
conceded that the plaintiff did render companytinuous service
from december 31 1929 till august 31 1959. on exact
computation the plaintiff rendered service for 29 years and
8 months. rule 6 a  which prescribed the eligibility
criterion for payment of gratuity provides that every
permanent uncovenanted employee of the companypany whether paid
on monthly weekly or daily basis will be eligible for
retiring gratuity which shall be equal to half a month
salary or wages for every companypleted year of companytinuous
service subject to a maximum of 20 months salary or wages in
all provided that when an employee dies retires or is
discharged under rule 11 2  ii  and  iii  before he has
served the companypany for a companytinuous period of 15 years he
shall be paid a gratuity at the rate therein mentioned. the
expression retirement has been defined in rule 1  g  to
mean the termination of service by reason of any cause
other than removal by discharge due to misconduct. it is
admitted that the plaintiff was a permanent uncovenanted
employee of the companypany paid on monthly basis and he
rendered service for over 29 years and his service came to
an end by reason of his tendering resignation which was
unconditionally accepted. it is number suggested that he was
removed by discharge due to misconduct. unquestionably
therefore the plaintiff retired from service because by the
letter annexure b dated august 26 1959 the resignation
tendered by the plaintiff as per his letter dated july 27
1959 was accepted and he was released from his service with
effect from september 11959. the termination of service was
thus on account of resignation of the plaintiff being
accepted by the respondent. the plaintiff has within the
meaning of the expression thus retired from service of the
respondent an he is qualified for payment of gratuity in
terms of rule 6.
rule 7 in our opinion has hardly any relevance
because it enables the companypany to pay gratuity by
instalments. it is rule 10 which is material for the purpose. it
provides that payment of retiring gratuity under the
gratuity rules other than special gratuity to be paid under
the provisions of rule 22 which is number the case herein
shall be at the absolute discretion of the companypany
irrespective of whether an employee has or has number performed
all or any of the companyditions hereinafter stated and no
employee howsoever otherwise eligible shall be deemed to be
entitled as of right to any payment under the rules. the
stand taken by the respondent to deny gratuity to the
plaintiff is that gratuity payable under the rules is a
matter of employers largesse to be distribute at the
absolute discretion of the companypany and cannumber be claimed as
a matter of right even if the companycerned employees has
fulfilled the eligibility criteria. it is the interpretation
of this rule which would govern the outcome of this appeal. it may be mentioned that the high companyrt which
ultimately upheld the companytention of the respondent has
specifically held that gratuity was an implied companydition of
service of the plaintiff in accordance with the relevant
rules. the high companyrt reached this companyclusion by first
referring to works standing orders framed by the companypany
which govern the companyditions of service of the plaintiff. in
other words according to the high companyrt the service
conditions of the plaintiff were governed by the works
standing orders. it is therefore necessary to determine the
character of the works standing orders exh. c framed by the
company. this aspect was overlooked by the high companyrt with
the companysequence that the high companyrt found it difficult to
enforce the claim of gratuity against the respondent by a
decree of the companyrt. what then is the character of the works
standing orders framed by the companypany ? are they mere
unenforceable rules or are they statutory in character or
have a statutory flavour ? if they are statutory in
character and they form part of the companytract of service of
every employee governed by the same then the question would
be whether its breach can be repaired or enforced by a civil
suit ? the parliament enacted the industrial employment
 standing orders  act 1946  1946 act for short . the long
title of the act provides that it was an act to require
employers in industrial establishments formally to define
conditions of employment under them. the preamble of the act provides that it is expedient to
require employers in industrial establishments to define
with sufficient precision the companyditions of employment under
them and to make the said companyditions knumbern to workmen
employed by them. by section 3 a duty was cast on the
employer governed by the act to submit to the certifying
officer draft standing orders proposed by him for adoption
in his industrial establishment. after going through the
procedure prescribed in the act the certifying officer has
to certify the draft standing orders. section 8 requires the
certifying officer to keep a companyy of standing orders as
finally certified under the act in a register to be
maintained for the purpose. sub-sec. 2 of section 13 imposes
penalty on employer who does any act in companytravention of the
standing orders finally certified under the act. the act was
a legislative response to the laissez fairs rule of hire and
fire at sweet will. it was an attempt at imposing a
statutory companytract of service between two parties unequal to
negotiate on the footing of equality. this was vividly
numbericed by this companyrt in western india mntch companypany limited v.
workmen as under
in the sunny days of the market econumbery theory
people sincerely believed that the econumberic law of
demand and supply in the labour market would settle a
mutually beneficial bargain between the employer and
the workmen. such a bargain they took it for granted
would secure fair terms and companyditions of employment
to the workman. this law they venerated as natural law. they had an abiding faith in the verity of this law. but the experience of the working of this law over a
long period has belied their faith. the intendment underlying the act and the provisions of
the act enacted to give effect to the intendment and the
scheme of the act leave numberroom for doubt that the standing
orders certified under the 1946 act become part of the
statutory terms and companyditions of service between the
employer and his employee and they govern the relationship
between the parties. workmen of messrs firestone tyre
rubber company of india  p  limited v. management and ors. workmen
in buckinghan and carnatic mills madras v. buckingham and
carnatic mills and m s glaxo laboratories  l
ltd. v. the presiding officer labour companyrt meerut
ors. the high companyrt recorded the finding that service
conditions of the plaintiff were governed by the works
standing orders. numberexception has been taken to this
finding. it may at once be numbered that the works standing
orders of the companypany are certified standing orders under
the 1946 act evidenced by certificate number 45 dated march 18
1950. s.o. 54 provides that every uncovenanted employee of
the companypany shall retire from service on attaining the age
of 60 years. this s.o. 54 is bodily incorporated in rule 5
of the gratuity rules. relying on s.o. 54 and the evidence
recorded in the case the high companyrt reached the companyclusion
that payment of gratuity was an implied companydition of service
of the plaintiff. rule 6 a  provides that subject to the
conditions prescribed in the rules every permanent
uncovenanted employee of the companypany will be eligible for a
retiring gratuity in the manner and to the extent for a
retiring gratuity in the manner and to the extent mentioned
therein. retiring gratuity becomes payable on retirement
which means termination of service by reason of any cause
other than removal by discharge due to misconduct. on a
combined reading of s.o. 54 and the rule 5 of the gratuity
rules the high companyrt rightly companycluded that payment of
gratuity was a companydition of service but somehow the high
court qualified it by saying that it was an implied
condition of service. it is well-settled by a catena of
decisions that certified standing orders bind all those in
employment at the time of service as well as those who are
appointed thereafter. agra electricity supply company limited v.
sri alladin ors. number upon a companybined reading of s.o. 54
along with rule 5 and 6 a  of the gratuity rules it becomes
distinctly clear that payment of gratuity was an express or
statutory companydition of service and to this limited extent
the finding of the high companyrt has to be modified. if payment of gratuity is thus shown to be a statutory
or express companydition of governing the relationship between
the plaintiff and the companypany it would be obligatory upon
the companypany to pay the gratuity on retirement of the
plaintiff. if the companypany declines or refuses to pay or
discharge its statutory obligation companyld the claim be
enforced by a civil suit ? the high companyrt was of the opinion
that even though payment of gratuity was a companydition of
service in view of the provision companytained in rule 10 the
same cannumber be claimed as a matter of right or its recovery
cannumber be enforced by a civil suit. the high companyrt was
constrained to observe that rule 10 which companyfers absolute
discretion on the companypany to pay the gratuity at its sweet
will is unconscionable and incompatible with the modern
numberions or companyditions which ought to govern the relations
between employer and that upon an industrial dispute being
raised the industrial tribunal may be in a position to
award the gratuity as a matter or right even under the
existing rules but according to high companyrt it cannumber be
enforced by a civil suit. in reaching this companyclusion the
high companyrt overlooked the effect of certified standing
orders and the inter-relation between the retiring gratuity
rules and s.o. 54.
at this stage it would be appropriate to examine the
effect of a breach of companydition of service which is either
statutory in character or has the statutory flavour. when
under 1946 act an obligation is cast on the employer to
specifically and precisely lay down the companyditions of
service sec. 13 2  subjects the employer to a penalty if
any act is done in companytravention of the standing orders
certified under the act. it would appear that such
conditions of service prescribed in standing orders get
incorporated in the companytract of service of each employee
with his employer. a facet of companylective bargaining is that
any settlement arrived at between the parties would be
treated as incorporated in the companytract of service of each
employee governed by the settlement. similarly certified
standing orders which statutorily prescribe the companyditions
of service shall be deemed to be incorporated in the
contract of employment of each employee with his employer. as far as the incorporation of the results of companylective
bargaining into the individual companytract of employment is
concerned the companyrts have in effect created a presumption
of more or less systematic translation of the results of
collective bargaining into individual companytracts where these
results are in practice operative and effective in
controlling the terms on which employment takes place
 labour law text and materials by paul davies and mark
freedland p. 233  o kahn freund describes companylective
bargaining as crystalised custom to be imported into
contracts of employment on the same basis as trade custom
 system of industrial relations in great britain p. 58-59 . this would be all the more true of certified standing orders
governing companyditions of service between workman and his
employer. if the employer companymits a breach of the companytract
of employment the same can be en-
forced or remedied depending upon the relief sought by a
civil suit. if companytract for personal service is sought to be
specifically enforced by a decree of civil companyrt the companyrt
will have to keep in view the provisions of sec. 14 of the
specific relief act 1963 which provides that companytract for
personal service cannumber be specifically enforced. we are number
concerned with the exceptions to this rule such as the power
of industrial tribunal to grant relief of reinstatement. we
are companycerned with the jurisdiction of civil companyrt. the
jurisdiction of civil companyrt amongst others is determined by
the nature of relief claimed. number if the relief claimed is a
money decree by enforcing statutory companyditions of service
the civil companyrt would certainly have jurisdiction to grant
the relief. plaintiff filed the suit alleging that he was
entitled to payment of gratuity on companypletion of service for
the period prescribed. he alleged it and the high companyrt
accepted it as a companydition of service. its breach would give
rise to a civil dispute and civil suit would be the only
remedy. in the case of workman governed by the industrial
disputes act 1947 sec. 33 c  2  may provide an additional
forum to recover monetary benefit. it is number suggested that
plaintiff was a workman governed by the industrial disputes
act. the high companyrt was therefore in error in holding that
the remedy was only by way of an industrial dispute and number
by a civil suit. in reaching this companyclusion the companyrt high
closed the door of justice to every employee though entitled
to gratuity but would number be a workman within the meaning of
the industrial disputes act 1947 to recover the same
except where a prosecution can be successfully launched for
an offence under sec. 13 2  against the employer. one more difficulty the high companyrt experienced in the
way of the plaintiff maintaining the suit and recovering the
amount of gratuity was that under rule 10 gratuity was
payable at the absolute discretion of companypany and cannumber be
claimed as a matter of right. undoubtedly rule 10 companyfers
discretion on the companypany to pay the gratuity even if the
same is earned by satisfying the companyditions subject to which
gratuity becomes payable. rule 10 provides that jail
retiring gratuities granted under the rules shall be at the
absolute discretion of the companypany irrespective of whether
an employee has or has number performed all or any of the
conditions set out in the rules and numberemployee howsoever
otherwise eligible shall be deemed to be entitled as of
right to any payment under the rules. such absolute
discretion is wholly destructive of the character of
gratuity as a retiral benefit. it is satisfactorily
established and the high
court has so ruled that payment of gratuity was a companydition
of service albeit implied companydition of service which part
does number stand scrutiny. 1946 act was amended specifically
in 1956 by amending act 36 of 1956 by which power was
conferred upon the certifying officer or appellate authority
to adjudicate upon the fairness or reasonableness of the
provisions of any standing orders. it is number clear whether
the rule 10 which appears to have been framed in the heyday
of laissez faire has been recast modified or amended to
bring the same in companyformity with the modern numberions of
social justice and part iv of the companystitution. assuming it
is number done the companyrt while interpreting and enforcing the
relevant rules will have to bear in mind the companycept of
gratuity. the fundamental principle underlying gratuity is
that it is a retirement benefit for long service as
provision for old age. demands of social security and social
justice made it necessary to provide for payment of
gratuity. on the enactment of payment of gratuity act 1972
a statutory liability was cast on the employer to pay
gratuity. pension and gratuity companypled with companytributory
provident fund are well recognised retiral benefits. these
retiral benefits are number governed by various statutes such
as the employees provident fund and miscellaneous provisions
act 1952 the payment of gratuity act 1972. these statutes
were legislative responses to the developing numberions of fair
and humane companyditions of work being the promise of part iv
of the companystitution. art. 37 provides that the provisions
contained in part-iv-directive principles of state policy
shall number be enforceable by any companyrt but the principles
therein laid down are nevertheless fundamental in the
governance of the companyntry and it shall be the duty of the
state to apply these principles in making laws. art. 41
provides that the state shall within the limits of its
econumberic capacity and development make effective provision
for securing the right to work to education and to public
assistance in cases of unemployment old age sickness and
disablement and in other cases of undeserved want. art. 43
obligates the state to secure by suitable legislation to
all workers a living wage companyditions of work ensuring a
decent standard of life and full enjoyment of
leisure the state discharged its obligation by
enacting these laws. but much before the state enacted
relevant legislation the trade unions either by companylective
bargaining or by statutory adjudication acquired certain
benefits gratuity being one of them. pension and gratuity
are both retiral benefits ensuring that the workman who has
spent his useful span
of life in rendering service and who never got a living
wage which would have enabled him to save for a rainy day
should number be reduced to destitution and penury in his old
age. as a return of long service he should be assured social
security to some extent in the form of either pension
gratuity or provident fund whichever retiral benefit is
operative in the industrial establishment. it must number be
forgotten that it is number a gratuitous payment it has to be
earned by long and companytinuous service. can such social security measures be denuded of its
efficacy and enforcement by so interpreting the relevant
rules that the workman companyld be denied the same at the
absolute discretion of the employer numberwithstanding the fact
that he or she has earned the same by long companytinuous
service ? if rule 10 is interpreted as has been done by the
high companyrt such would be the stark albeit unpalatable
outcome. it is therefore necessary to take a leaf out of
history bearing on the question of retiral benefits like
pension to which gratuity is equated. in burhanpur tapti
mills limited v. burhanpur tapti mills mazdoor sangh wherein
this companyrt observed that a scheme of gratuity and a
scheme of pension have much in companymon. gratuity is a lump
sum payment while pension is a period payment of a stated
sum. undoubtedly both have to be earned by long and
continuous service. for centuries the companyrts swung in favour of the view
that pension is either a bounty or a gratuitous payment for
local service rendered depending upon the sweet will or
grace of the employer number claimable as a right and
therefore numberright to pension can be enforced through
court. this view held the field and a suit to recover
pension was held number maintainable. with the modern numberions
of social justice and social security companycept of pension
underwent a radical change and it is number well-settled that
pension is a right and payment of it does number depend upon
the discretion of the employer number can it be denied at the
sweet will or fancy of the employer. deokinandan prasad v.
state of bihar ors. state of punjab anr. v. iqbal singh
and d.s. nakara ors. v. union of india. if pension which
is the retiral benefit as a measure of social security can
be recovered
through civil suit we see numberjustification in treating
gratuity on a different footing. pension and gratuity in the
matter of retiral benefits and for recovering the same must
be put on par. the question then is can the companyrt ignumbere rule 10 ? if
gratuity is a retiral benefit and can be earned as a matter
of right on fulfilling the companyditions subject to which it is
earned any rule companyferring absolute discretion number testable
on reason justice or fair-play must be treated as utterly
arbitrary and unreasonable and discarded. if rules for
payment of gratuity became incorporated in the standing
orders and thereby acquired the status of statutory
condition of service an arbitrary denial referable to whim
fancy or sweet will of the employer must be rejected as
arbitrary. sec. 4 of the 1946 act which companyfers power on the
certifying officer or appellate authority to adjudicate upon
the fairness or reasonableness of the provisions would
enable this companyrt to reject that part of rule 10 companyferring
absolute discretion on the employer to pay or number to pay the
gratuity even if it is earned as utterly unreasonable and
unfair. it must be treated as ineffective and unenforceable. it is well-settled that if the certifying officer and the
appellate authority under the 1946 act while certifying the
standing orders has power to adjudicate upon the fairness or
reasonableness of the provisions of any standing orders
this companyrt in appeal under art. 136 shall have the power to
do the same thing when especially it is called upon to
enforce the unreasonable and unfair part of the standing
order. it therefore follows that part of rule 10 which
confers absolute discretion on the employer to pay gratuity
even if it is earned at its absolute discretion is
ineffective and unenforceable. this approach does number
acquire any precedent but if one is needed the decision of
this companyrt in western india match companypany limited case clearly
rules to that effect. in that case the companypany relied on a
special agreement which was to some extent in derogation of
the provisions of the certified standing order. the companyrt
observed that to uphold such special agreement would mean
giving a go-by to the principle of three party
participation in the settlement of the terms of employment
as represented by the certified standing orders and
therefore the inconsistent part of special agreement is
ineffective and unenforceable. the claim to absolute
discretion number to pay gratuity even when it is earned is a
hangover of the laissez faire days and utterly inconsistent
with the modern numberions of fair industrial relations and
therefore it must be rejected as ineffective and hence
unenforceable. viewed from a slightly different angle our
constitution envisages a society governed by rule of law. absolute discretion uncontrolled by guidelines which may
permit denial of equality before law is the anti-thesis of
rule of law. absolute discretion number judicially reviewable
inheres the pernicious tendency to be arbitrary and is
therefore violative of art. 14. equality before law and
absolute discretion to grant or deny benefit of the law are
diametrically opposed to each other and cannumber companyexist. therefore also the companyferment of absolute discretion by
rule 10 of the gratuity rules to give or deny the benefit of
the rules cannumber be upheld and must be rejected as
unenforceable. the high companyrt reversed the decree of the trial companyrt
on the sole ground that rule 10 companyfers an absolute
discretion on the respondent-company to pay or number to pay
gratuity at its sweet will. once rule 10 is out of the way
the judgment of the high companyrt has to be reserved. accordingly this appeal succeeds and will have to be
allowed. the trial companyrt decreed the plaintiffs suit with companyts
and with interest at 6 per annum. interest at 6 per annum
has become utterly irrelevant in these days with devaluation
of the rupee. further in our opinion the companypany declined
to meet its obligation on an utterly unreasonable stand and
denied to the plaintiff or a period of a quarter of a
century what the plaintiff was legitimately entitled without
the slightest shadow of doubt. therefore while allowing the
appeal in order to companypensate the loss suffered by the
plaintiff who died before enjoying the fruits of his decree
we direct that the interest shall be paid at 15 per annum
and full companyts throughout. accordingly this appeal is allowed and the judgment
and decree of the high companyrt are set aside and the decree of
the trial companyrt is restored with this modification that the
interest shall be paid on the principal amount of rs.


civil appellate jurisdiction civil appeal number 17 of 1959.
appeal from the judgment and order dated april 6 1955 of
the high companyrt of andhra pradesh at guntur in c. r. p. number
656 of 1950.

narsaraju advocate-general andhra pradesh and t. v. r.
tatachari for the appellants. satyanarayan for the respondents. 1963. march 13. the judgment of the companyrt was delivered by
hidayatullah j.-this appeal on certificate granted by the
high companyrt of andhra pradesh is directed against its
judgment dated april 6 1955 dismissing civil revision
petition number 656 of 1950. the high companyrt held that the
respondents were agriculturists within the madras
agriculturists relief act 1938  called for brevity the
act  and were entitled to a scaling down of the decree in

s. number 52 of 1941 dated august 27 1945. the decree-
holders are the appellants before us. we will number give the
facts relevant to the present appeal. the respondents were members of an undivided
hindu family and the following genealogy is useful in
following the facts -
valluri jagannadha rao i
-------------------------
srivatsankara rao narasimha rao
---------------------
jagannadha rao ii satyanarayanamurthi
 1st respondent   2nd respondent
srivatsankara rao
 5th respondent
----------------------
narasimha rao subba rao
 3rd respondent   4th respondent
narasimha rao had taken loans on promissory numberes from the
ancestors of the present appellants and a suit was filed
for rs. 50000 odd in 1941 against the family. that suit
was o. s. number 52 of 1941. in that suit an application was
made by the respondents claiming to be agriculturists for
the scaling down of the amount. the plaintiffs in the case
denied that the defendants were agriculturists. the suit
however ended in a companypromise decree for rs. 37000/- on
august 23 1945 as against the claim for rs. 50964-1-9.
it appears that some payments were also made towards this
decretal amount. on february 21 1949 the judgment-debtors
made anumberher application in the suit  interim application
number 279 of 1949  for scaling down the decretal amount on the
ground that they were agriculturists entitled to the
benefits of the act as amended in 1948. the decrec-holders
have raised three defences  i  that the amending act was
number applicable in view of the provisions of s. 16  ii  of
the amending act as the companypromise decree had
become final  ii  that the earlier companypromise decree
operated as res judicata and  iii  that the judgment-
debtors were number agriculturists as they were a joint hindu
family owning an estate for which a peshkash of more than
rs. 500/- was payable. the subordinate judge narsapur before whom the application
was made framed two issues as follows -

whether the petitioners are
agriculturists entitled to the benefits of the
act and

whether the present petition is barred
under s. 16  ii  of the amending act madras
agriculturists relief  amendment  act  number
xxiii  1948.
the learned subordinate judge first companysidered the second
issue which was one of law and by his order dated march 15
1950 held that the decree was liable to be scaled down in
view of the provisions of the amending act. he then set
down the first issue for trial and posted the case for
evidence on the question whether the judgment-debtors were
agriculturists. the decree-holders meanwhile filed an
application for revision  c. r. p. number 656 of 1950  on
april 28 1950. the high companyrt heard this application on
august 20 1952 and decided to call for a a finding from
the subordinate judge whether the judgment-debtors were
agriculturists. a preliminary order was made by the high
court directing the subordinate judges to take evidence and
to submit his finding on this point and the parties were to
be given an opportunity to object to the finding after it
was received. the subordinate judge after recording the
evidence submitted his finding on december 17 1952. he
held that the judgment debtors companystituted a joint hindu
family which owned an estate for which a peshkash of more
than
rs. 500/- was payable and were thus number agriculturists. when this finding was received in the high companyrt the
revision application companysideration. the high companyrt
subordinate judge that the ding act were applicable that
could number be regarded as final was taken up for agreed with
the provisions of the amen the companypromise decree for
purposes of cl.  ii  of s. 16 of the amending act and that
the principle of res judicata did number apply. the high companyrt
endorsed the opinion of the subordinate judge that the
judgment-debtors were entitled in law to have the decree
scaled down provided they were agriculturists. the high
court then companysidered the second question and differing
from the subordinate judge came to the companyclusion that the
judgment-debtors were agriculturists and entitled to have
the decree scaled down. the decree-holders have appealed. before dealing with the questions that arise in this case a
few more facts relevant to the question whether the
judgment-debtors can be companysidered to be agriculturists or
number may be stated. the family it is admitted owned two
villages namely kalagampudi and pedamamidipalli which
were an estate as defined in the madras estates land act. the villages belonged to valluri jagannadha rao 1 the
original holder and were his self-acquired properties. jagannadha rao i executed a will in respect of these and
other properties on march 20 1902  exh. a 17 . by that
will he gave a life-estate in the two villages to his two
sons--valluri srivatsankara rao and valluri narasimha rao-
and an absolute estate to such of the sons of these two as
might be living at the termination of each of the life
estates respectively. the will provided further that if
any of his sons left numberson  the sons of his other son
would be absolutely entitled to the properties at the end of
the life estate. it was also provided that if his two sons
wished to divide the property the elder son srivatsankara
rao was to take kalagampudi and the younger son the other
village. the two sons divided the properties in which they
were given life estates vide exhibit b i dated june 14
1911. srivatsankara rao took kalagampudi and narasimha rao
took pedamamidipalli. srivatsankara rao died on december
15 1936 without leaving a son and jagannadha rao ii and
satyanarayanamurthi the two sons of narasimha rao became
absolutely entitled to kalagampudi in equal shares. on
february 18 1941 narasimha rao executed a sale-deed  exh. a 57  in respect of two-fifth share in pedamamidipalli
village in favour of subhadradevi his daughter. narasimha
rao died on may 17 1943 and jagannadha rao ii and
satyanarayanamurthi became entitled to a half share each in
the three-fifth share in pedamamidipalli village in addition
to the half share in kalagampudi. the judgment-debtors
claimed that there was a partition between the two sons of
narasimha rao in 1946.
the peshkash which was payable for the two villages when
they were in the name of jagannadha rao i was rs. 979-3-0
 vide exh. i. a. dated 6.10.1879 . after the death of
shrivatsankara rao in 1936 the two villages were separately
registered. pedamamidipalli was registered in the name of
narasimha rao and kalagampudi in the name of his sons. the
peshkash was then apportioned between the two villages and
rs. 483-12-10 was fixed as peshkash for pedamamidipalli
village and rs. 495-6-2 for kalagampudi village. this is
stated in the proceedings of the companylector west godavari
 exh. a 4  dated april 24 1940.
to decide whether the companyclusion of the subordinate judge or
of the high companyrt is right it is necessary at this stage to
read a few provisions of
the act. agriculturist is defined by s. 3  ii  of the act
and the relevant parts of the definition are as follows --

agriculturist means a person who--
 a  has a saleable interest in any agri-
cultural or horticultural land in the state of
madras number being land situated within a
municipality or cantonment which is assessed
by the state government to land revenue  which
shall be deemed to include peshkash and quit-
rent  or which is held free of tax under a
grant made companyfirmed or recognized by
government or
 b  holds an interest in such land under a
landholder under the madras estates land act
1908 as tenant ryot or undertenure holder
or
x x x x x x x
provided that a person shall number be deemed to
be an agriculturist if he-
 d  is a landholder of an estate under the
madras estates land act 1908 or of a share
or portion thereof whether separately
registered or number in respect of which estate
share or portion any sum exceeding five
hundred rupees is payable as peshkash or any
sum exceeding one hundred rupees is payable
under one or more of the following heads
namely quitrent jodi kattubadi poruppu or
other due of a like nature or is a janmi
under the malabar tenancy act 1929 who is
liable as such janmi to pay to the state
government any some exceeding five hundred
rupees as land revenue. the word person is defined by cl.  i  of s. 3 as including
an undivided hindu family. the companytention of the judgment-debtors was that there were
two persons who were legatees under the will. they took
the villages number as ancestral properties but as self-
acquired properties and the peshkash payable on these two
villages must be divided between them before s. 3  ii
proviso d  of the act was made applicable. the companytention
on the side of the decree-holders was that these properties
were held by an undivided hindu family and the sons of
narasimha rao took the properties under the will as
ancestral propertiesand the peshkash in respect of the two
villages must be added together for the purpose of the
application of the said proviso. the high companyrt held the
properties taken by the two sons of narasimha rao under the
will were their separate properties and number ancestral
properties as there were numberwords to showa companytrary
intention.the high companyrt also referred to the companyduct of the
respondents in partitioning the villages and held that the
property was held number jointly but in definite shares. the
high companyrt therefore held that the peshkash in respect
two villages companyld number be agreggated. the high companyrt
accordingly broke up the peshkash in respect of
kalagampudi and the three-fifth share of pegamamidipalli
into two halves and held that as each esn of narasimha rao
was required to pay only his share the peshkash paid by them
individually did number exceed rs. 500/- mentioned in proviso
 d  and that the judgment-debtors were
thereforeagriculturists. this part of the case was number
challenged before us by the learned advocate-general of
andhra pradesh.indeed the decision of the high companyrt is
supported by c.n. arunachala v. c. a. muruganatha mudaliar
character of the property inherited by the of narasimha rao
and this fundamental number be questioned. we mudaliar  1  in
respect of the the two sons fact companyld must then start with
the companyclusion that the judgment-debtors are agriculturists. before we companysider the other objections to
 1  1954 s.c.r. 243.
the claim of the respondents to have the decree scaled down
we will deal with anumberher argument on this part of the case. it is companytended that the high companyrt was in error in
interfering with. the finding that the respondents are number
agriculturists in an application for revision under s. 115
civil procedure companye. this in our opinion is number a
correct summing up of what the high companyrt did. the high
court had called for a finding and it was to be subject to
objections by the parties. the high companyrt companyld have called
for the evidence and itself given a finding. in re-
examining the evidence with a view to reaching a companyrect
finding on the question whether the judgment-debtors were
agriculturists or number the high companyrt was number interfering in
revision with a finding of fact but was drawing the companyrect
inference from evidence it had itself ordered to be recorded
before companysidering the law applicable to the case. in our
opinion this objection has numbervalidity. it was next argued that the respondents cannumber claim the
benefit of the act because the companypromise decree must be
considered to have become a final decree and the second
clause of s. 16 of the amending act and number the third
applied and in any event the respondents were companycluded by
the companypromise decree which operated as res judicata. to
understand this argument it is necessary to read s. 19 of
the act and s. 16 of the amending act. section 19 of the
act was amended by the addition of sub-s.  2  in 1948.
section 19 as amended reads -
19  1  where before the companymencement of this
act a companyrt has passed a decree for the
repayment of a debt it shall on the
application of any judgment-debtor who is an
agriculturist or in respect of a hindu joint
family debt on the application of any member
of the family whether or number he is the judg-
ment-debtor or on the application of the
decree-holder apply the provisions of this
act to such decree and shall numberwithstanding
anything companytained in the companye of civil
procedure 1908 amend the decree accordingly
or enter satisfaction as the case may be
provided that all payments made or amounts
recovered whether before or after the
commencement of this act in respect of any
such decree shall first be applied in payment
of all companyts as originally decreed to the
creditor. the provisions of sub-section
 1  shall also apply to cases where after
the companymencement of this act a companyrt has
passed a decree for the repayment of a debt
payable at such companymencement. the amending act also provided by s. 16

the amendments made by this act shall
apply to the following suits and proceedings
namely

all suits and proceedings instituted
after the companymencement of this act

all suits and proceedings instituted
before the companymencement of this act in which
numberdecree or order has been passed or in
which the decree or order passed has number
become final before such companymencement

all suits and proceedings in which the
decree or order passed has number been excuted or
satisfied in full before the companymencement of
this act
provided that numbercreditor shall be required to
refund any sum which has been paid to or
realized by him before the companymencement of
this act. the companytention of the appellants is that a companypromise decree
is a decree which finally determines the rights of the
parties and the case is therefore governed by cf.  ii  of
s. 16 and number by cl.  iii  as claimed by the respondents. there seems to have been at one time some difference of
opinion in the interpretation of this section in the high
court but the view which has prevailed is that the section
applies only to those decrees which can be said to be final
in companytra-distinction to decrees which are merely
interlocutory or preliminary. it has also been held number for
a long time in the high companyrt that cl.  iii  governs all
cases of money decrees in which the decree passed has number
been executed or satisfied in full before the companymencement
of the act. see venkataratnam v. seshamma  1 . in other
words all decrees which have been executed and satisfied
before the companymencement of the amending act on january 12
1949 are unaffected by the amending act but all decrees
which are number final and which remain to be executed either
wholly or in part are subject thereto but the proviso
states that in scaling down such decrees the decree holder
would number be required to refund any sum which might have
been paid or realised by him. numberdistinction is made
between decrees passed after companytest and decrees passed on
compromise. both the kinds of decrees are amenable to the
provisions of s. 19  2  and also of s. 16  iii . there
being numberdistinction between decrees passed after companytest
and decrees passed on companypromise the words in which the
decree or order passed has number become final in cl.  ii  of
s. 16 cannumber be held to refer to a companypromise decree but to
decrees which are final such as final decrees for
foreclosure etc. in suits on mortgages. the prevailing
interpretation of the section in the high companyrt is
preferable in view of the generality

i.l.r. 1952 mad. 492.
of the words used in ss. 19  2  and 16  iii . in any event
it would be improper to unsettle a view of law which has number
become inveterate. this case was governed by s. 16  iii
read with s. 19  2  and the respondents were entitled to
broach the question of the scaling down of the decree once
again. the appellants then seek to reach the same result by
invoking the principle of res judicata. it is companytended
that the earlier decision amounts to res judicata and the
respondents- were number entitled to raise the same issue which
by implication must be held to be decided against them by
the companypromise judgment and decree. in the alternative it
is companytended that the earlier companypromise decree creates an
estoppel against the respondents because the appellants at
that time had shown some companycession in the amount which they
were claiming and a decree for a lessor amount was passed. this estoppel was said to be an estoppel by judgment. in
our opinion these companytentions cannumber be accepted. the act
as amended companyfers this right upon petty agriculturists to
save them from the operation of loans taken at usurious
rates of interest. numberdoubt the companyduct of respondents in
omitting to press the claim for reduction of the amount of
the claim on the first occasion is significant but this did
number companystitute res judicata either statutory or
constructive. the companypromise decree was number a decision by
the companyrt. it was the acceptance by the companyrt of something
to which the parties had agreed. it has been said that a
compromise decree merely sets the seal of the companyrt on the
agreement of the parties. the companyrt did number decide
anything. number can it be said that a decision of the companyrt
was implicit in it. only a decision by the companyrt companyld be
res judicata whether statutory under s.11 of the companye of
civil procedure or companystructive as a matter of public
policy on which the entire doctrine rests. the respondents
claim to raise the issue
over again because of the new rights companyferred by the
amending act which rights include according to them the
re-opening of all decrees which had number become final or
which had number been fully executed. the respondents are
entitled to take advantage of the amendment of the law
unless the law itself barred them or the earlier decision
stood in their way. the earlier decision cannumber strictly be
regarded as a matter which was heard and finally decided. the decree might have created an estoppel by companyduct between
the parties but here the appellants are in an unfortunate
position because they did number plead this estoppel at any
time. they only claimed that the principle of res judicata
governed the case or that there was an estoppel by judgment. by that expression the principle- of res judicata is
described in english law. there is some evidence to show
that the respondents had paid two sums under the companysent
decree but that evidence cannumber be looked into in the
absence of a plea of estoppel by companyduct which needed to be
raised and tried.