# M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR v. RAJNESH KUMAR JAMINDAR & ORS

- **Citation:** [2009] 6 S.C.R. 182
- **Court:** Supreme Court of India
- **Decided:** 2009-04-15
- **Case number:** Civil Appeal No. 2442 of 2009
- **Bench:** S.B. Sinha, Asok Kumar Ganguly
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-p-state-co-op-dairy-fedn-ltd-anr-v-rajnesh-kumar-jamindar-ors-25824
- **Pages:** 40

## Headnote

Constitution of India, 1950 - Article 12 -
Madhya
Pradesh State Co-operative Dairy Federation Limited - Held:
C Is a 'State' within the meaning of Article 12 - Federation is
part of the Government department - It carries on commercial
activities, works for achieving better economic development
and nutritional value, public health of section of people - It
D
monitors functioning of societies under it.
Service Law:
M.P. State Co-operative Dairy Federation Ltd.
Employees Recruitment, Classification and Conditions of
Service Regulations, 1985 - Regulation 13 - Compulsory
E retirement - Re-instatement - Grant of 50% back wages to
16 employees and 20% to 36 employees - On appeal, held:
Federation having adopted rules and circulars by State
Government for passing orders of compulsorily retirement,
was bound by it - It did not act upon the same - There were
F no material to show that employees had become dead wood,
inefficient or corrupt - Order of compulsory retirement was not
passed by way of punishment, thus, regulation 49(2)
governing payment of back wages not applicable - Order
granting 50% back wages to 16 employees was not interfered
G with - It cannot be understood as to why Division Bench
granted 20% back wages to other employees - Thus, 50%
back wages_ should have been granted -
One of the
employees continued in service not as a disabled person
under 1995 Act, thus not entitled to entire back wages -
H
182
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v.
183
RAJNESH KUMAR JAMINDAR & ORS .
•
Disabilities (Equal Opportunities, Protection of Rights and Full
A
Participation) Act, 1995 - Madhya Pradesh Co-operative
Societies Act, 1960.
Appellant-M.P. State Co-operative Dairy Federation
Ltd. is a society registered and incorporated under the
B
Madhya Pradesh Cooperative Societies Act, 1960. It was
constituted to promote sale of milk and its products inter
·-
alia with a view to provide employment to agriculturists,
milk suppliers so as to enable it to implement a World
Bank Scheme effectively. Respondents-employees of the c
Federation, completed 20 years of service. The orders of
compulsory retirement was issued against 52 employees.
16 employees challenged the order. Federation filed
appeals and the same were dismissed but only 50% back
wages was granted to the employees. As regards 36
D
employees, the Division Bench of High Court directed
reinstatement of the said respondents with only 20%
back wages.
The questions which arose for consideration in these
appeals is whether Madhya Pradesh State Co-operative
E
Dairy Federation Limited is a 'State' within the meaning
of Article 12 of the Constitution of India; and whether the
order of High Court was justified.
)
Dismissing the appeals filed by Federation and
F
allowing that of employees, the Court
HELD:1.1. Appellant-M.P. State Co-operative Dairy
'
Federation Ltd. was a part of the Departmept of the
Government. It not only carries on commercial activities,
it works for achieving the better economic development G
f
of a section of the people. It seeks to achieve the
principles laid down in Article 47 of the Constitution of
India, viz., nutritional value and health. It undertakes a
training and research work. Guidelines issued by it are
binding on the societies. It monitors the functioning of the
H
t
184
SUPREME COURT REPORTS
[2009] 6 S.C.R.
A societies under it. It is an apex body. Therefore, the
appellant would come within the purview of the definition
of 'State' as contained in Article 12 of the Constitution of
India. [Paras 28 and 29) [208-E-H]
B
Kuna/ Singh v. Union of India and Another (2003) 4 SCC
524; Dinesh Kumar Sharma v. M.P. Dugdh Mahasangh
Sahakari Samiti Maryadit 1993 MPLJ 786; Ajay Hasia v.
Khalid Mujib Sehravardi (1981) 1 SCC 722; Ramana
Dayaram Sheffy v. International Airport Authority of India
(1979) 3 SCC 489; Chander Mohan Khanna v. National
C Council of Educational Research and Training (1991) 4 SCC
578; M.P. State Co-operative Dairy Federation and Others v.
Madan La

## Text

_Characters 0–39,799 of 70,516. This is a partial read: ask again with offset=39799 for what follows._

A
B
[2009] 6 S.C.R. 182
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR.
v.
RAJNESH KUMAR JAMINDAR & ORS.
(Civil Appeal No. 2442 of 2009)
APRIL 15, 2009
[S.B. SINHA AND ASOK KUMAR GANGULY, JJ.]
Constitution of India, 1950 - Article 12 -
Madhya
Pradesh State Co-operative Dairy Federation Limited - Held:
C Is a 'State' within the meaning of Article 12 - Federation is
part of the Government department - It carries on commercial
activities, works for achieving better economic development
and nutritional value, public health of section of people - It
D
monitors functioning of societies under it.
Service Law:
M.P. State Co-operative Dairy Federation Ltd.
Employees Recruitment, Classification and Conditions of
Service Regulations, 1985 - Regulation 13 - Compulsory
E retirement - Re-instatement - Grant of 50% back wages to
16 employees and 20% to 36 employees - On appeal, held:
Federation having adopted rules and circulars by State
Government for passing orders of compulsorily retirement,
was bound by it - It did not act upon the same - There were
F no material to show that employees had become dead wood,
inefficient or corrupt - Order of compulsory retirement was not
passed by way of punishment, thus, regulation 49(2)
governing payment of back wages not applicable - Order
granting 50% back wages to 16 employees was not interfered
G with - It cannot be understood as to why Division Bench
granted 20% back wages to other employees - Thus, 50%
back wages_ should have been granted -
One of the
employees continued in service not as a disabled person
under 1995 Act, thus not entitled to entire back wages -
H
182
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v.
183
RAJNESH KUMAR JAMINDAR & ORS .
•
Disabilities (Equal Opportunities, Protection of Rights and Full
A
Participation) Act, 1995 - Madhya Pradesh Co-operative
Societies Act, 1960.
Appellant-M.P. State Co-operative Dairy Federation
Ltd. is a society registered and incorporated under the
B
Madhya Pradesh Cooperative Societies Act, 1960. It was
constituted to promote sale of milk and its products inter
·-
alia with a view to provide employment to agriculturists,
milk suppliers so as to enable it to implement a World
Bank Scheme effectively. Respondents-employees of the c
Federation, completed 20 years of service. The orders of
compulsory retirement was issued against 52 employees.
16 employees challenged the order. Federation filed
appeals and the same were dismissed but only 50% back
wages was granted to the employees. As regards 36
D
employees, the Division Bench of High Court directed
reinstatement of the said respondents with only 20%
back wages.
The questions which arose for consideration in these
appeals is whether Madhya Pradesh State Co-operative
E
Dairy Federation Limited is a 'State' within the meaning
of Article 12 of the Constitution of India; and whether the
order of High Court was justified.
)
Dismissing the appeals filed by Federation and
F
allowing that of employees, the Court
HELD:1.1. Appellant-M.P. State Co-operative Dairy
'
Federation Ltd. was a part of the Departmept of the
Government. It not only carries on commercial activities,
it works for achieving the better economic development G
f
of a section of the people. It seeks to achieve the
principles laid down in Article 47 of the Constitution of
India, viz., nutritional value and health. It undertakes a
training and research work. Guidelines issued by it are
binding on the societies. It monitors the functioning of the
H
t
184
SUPREME COURT REPORTS
[2009] 6 S.C.R.
A societies under it. It is an apex body. Therefore, the
appellant would come within the purview of the definition
of 'State' as contained in Article 12 of the Constitution of
India. [Paras 28 and 29) [208-E-H]
B
Kuna/ Singh v. Union of India and Another (2003) 4 SCC
524; Dinesh Kumar Sharma v. M.P. Dugdh Mahasangh
Sahakari Samiti Maryadit 1993 MPLJ 786; Ajay Hasia v.
Khalid Mujib Sehravardi (1981) 1 SCC 722; Ramana
Dayaram Sheffy v. International Airport Authority of India
(1979) 3 SCC 489; Chander Mohan Khanna v. National
C Council of Educational Research and Training (1991) 4 SCC
578; M.P. State Co-operative Dairy Federation and Others v.
Madan Lal Chourasia 2007 (2) M.P.L.J. 594; Pradeep Kumar
Biswas v. Indian Institute of Chemical Biology (2002) 5 SCC
111; Rajasthan State Electricity Board v. Mohan Lal (1967)
D 3 SCR 377; P.K. Ramachandra Iyer and Others. V. Union of
India and others (1984) 2 SCC 141; Sabhajit Tewary v. Union -
of India (1975) 1 SCC 485; Mysore Papers Mills Ltd. v.
Mysore Paper Mills Officers' Association and Another (2002)
2 SCC 167; Sukhdev Singh v. Bhagatram Sardar Singh
· E Raghuvanshi (1975) 1 SCC 421; Virendra Kumar Srivastava
v. U.P. Rajya Karmachari Ka/yan Nigam and Another (2005)
1 SCC 149; Zee Telefilms Ltd. and Another v. Union of India
and Others (2005) 4 SCC 649; State of U.P. v. Neeraj Awasthi
and Others (2006) 1 SCC 667 and S.S. Rana v. Registrar,
F Coop. Societies and Another (2006) 11 SCC 634, referred
to.
2.1. The law relating to compulsory retirement in
public interest is no longer res integra. The provisions
G had been made principally for weeding out dead wood.
An order of compulsory retirement being not penal in
nature can be subject to judicial review inter alia: when
it is based on no material; when it is arbitrary; when it is
without application of mind; and when there is no
H
•
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v.
185
RAJNESH KUMAR JAMINDAR & ORS.
evidence in support of the case. [Para 32] [210-B-D]
Baikunta Nath Das and Another v. Chief District Medical
Officer, Baripada and Another (1992) 2 SCC 299 and State
A
of Gujarat v. Umedbhai M. Patel (2001) 3 SCC 314; Pritam
Singh v. Union of India & Ors. (2005) 9 SCC 748, referred
B
to.
2.2. The power of judicial review of a superior court
although a restricted one, has many facets. Its jurisdiction
is not only limited in the cases where the administrative
orders are perverse or arbitrary but also in the cases
C
where a statutory authority has failed to perform its
statutory duty in accordance with law. An order which is
passed for unauthorized purpose would attract the
principles of malice in law. [Para 37) [215-B-C]
\
Manager, Government Branch., Press and Another v. D.B.
Be//iappa (1979) 1 SCC 477; SriJt. S.R. Venkataraman v.
Union of India and Another (1979) 2 SCC 491 and P.
Mohanan Pillai v. State of Kera/a and Others (2007) 9 SCC
497, referred to.
2.3. An order of compulsory retirement is found to be
stigmatic inter alia, in the event the employer has lost
confidence. However, he can be subjected to compulsory
retirement inter alia if he has outlived his utility. [Para 38)
D
E
[215-D-G]
F
Chandu Lal v. Management of Mis. Pan American world
Airways Inc. (1985) 2 SCC 727; Jagdish Parsad v. Sachiv,
Zila Ganna Committee, Muzaffarnagar and Another (1986) 2
SCC 338; State of Uttar Pradesh v. Madan Mohan Nagar AIR
G
1967 SC 1260; Allahabad Bank Officers' Association and
Another v. Allahabad Bank and Others (1996) 4 SCC 504
and State of Gujarat v. Umedbhai M. Patel (2001) 3 SCC 314,
referred to.
H
186
SUPREME COURT REPORTS
[2009] 6 S.C.R.
•
•
A
2.4. The Scrutiny Committee as also the Review
Committee proceeded to determine each individual case
keeping in view the ACRs of the employees concerned -
from 1980, since when the Federation had started
functioning, to the year 2000, when the decision had
8 been taken to compulsorily retire the employees, by
amending the Regulations. Although criteria adopted by
the State were required to be considered for the purpose
•
of determining the suitability or otherwise of the
employees to continue in service, the necessity to give
c special consideration to the performance of the
employees for the last five years before the order was
passed had been given a complete go-by. [Para 34] [213G-H; 214-A-B]
D
2.5. Each case was required to be considered on its
own merit. The broad criteria, which are not only.
applicable generally for the aforementioned purpose,
were required to be followed but there cannot be any
doubt or dispute that the criteria laid down by the State
was imperative in character. Thus, the Federation
E adopted the rules and circulars made or issued by the
State Government. The Federation itself having
formulated the criteria required to be applied for passing
orders of compulsory retirement was, thus, bound
thereby. The employer would be bound by the rule of
F game. It must follow the standard laid down by itself. If
procedures have been laid down for arriving at some
kinds of decisions, the same should substantially be
complied with even if the same are directory in nature.
[Para 35] [214-C-F]
G
H. V. Nirmala v. Kamataka State Financial Corporation
(2008) 7 sec 639, referred to.
Vitarelfi v. Seaton 359 US 535, referred to.
H
2.6. An authority discharging a public function must
M.P. STATE CO-OP. DAIRY FEON. LTD. & ANR. v.
187
RAJNESH KUMAR JAMINDAR & ORS.
act fairly. It, for the said purpose, cannot take into A
consideration an irrelevant or extraneous matter which
is not germane for the purpose for which the power is
sought to be exercised. The Scrutiny Committee as also
the Review Committee was required to pose unto
themselves a correct question of law so as to enable
B
them to find out a correct answer. It was, therefore,
imperative that the criteria laid down in the circulars
issued by the State of Madhya Pradesh should have been
scrupulously followed. [Para 39] [217-E-G]
2.7. While a power is exercised by an authority, c
ordinarily, the reasons contained in the order should be
supported by the materials on records. Federation,
having regard to the fact that there was no material to
show that the respondents-employees had become dead
D
wood, inefficient or corrupt, must be held to have abused
its power. 'Interest of the Federation' in Regulation 13 of
the Regulations would not mean that services of a large
number of employees should be dispensed with only for
the purpose of cutting administrative expenses. Even
such a power does not exist in terms of the Regulations
E
nor any such ground had been taken in the counteraffidavit before the High Court. [Paras 40, 41 and 43] [217H; 218-A-B, D-E]
•
2.8. The submission that the High Court should not
F
have interfered with the order of compulsory retirement
keeping in view the fact that no malafide has been alleged
in the Scrutiny Committee nor any case of discrimination
has been made out, cannot be accepted. It is one thing
to say that a yardstick has been fixed for the purpose of G
>
taking recourse to the power of compulsory retirement
but there cannot be any doubt or dispute that such
yardstick must be based on relevant criteria. If the
relevant criteria, as laid down by the State, which has
been adopted by the Federation, had not been acted
H
188
SUPREME COURT REPORTS
(2009] 6 S.C.R.
A upon, the order must be held to have been suffering from
jurisdictional error. Therefore, there is no infirmity in the
judgment of the High Court. [Paras 44 and 46] [218-E-G;
219-B]
8
Mundrika Dubey and Ors. State of Bihar and Ors. 2008
(4) SCC 458, referred to. [Para 44]
2.9. A bare perusal of the Regulation 49 (2) would
clearly show that it applies in a case where an order of
dismissal and/ or compulsory retirement by way of
C punishment is set aside. It is not a case where order of
compulsory retirement had been passed by way of
punishment. Respondents-employees were not charged
with any misconduct. The order of compulsory retirement
was issued in terms of the Regulation 13 of the
D Regulations only. Even the Single Judge had granted
50% back wages in favour of 16 employees. The Division
Bench did not interfere therewith. It cannot be
understood as to why the Division Bench thought fit to
grant 20% back wages in respect of other employees.
E Therefore, 50% back wages should have been granted.
[Paras 47 and 48] [219-E-H; 220-A-B]
2. 10. As regard the appellant in civil appeal arising out
of SLP (C) No. 17705 of 2008, his services were continued
not as a disabled person within the provisions of the
F Disabilities (Equal Opportunities, Protection of Rights and
Full Participation) Act, 1995. He was treated equally and,
thus, there is no reason as to why the entire back wages
should be granted in his favour whereas all other
employees would be given 50% of their back wages. It
G is evident from the record that even before the Single
Judge the said contention was not raised at the first
instance. Only in the review petition, the said contention
was raised. But, the said review petition was dismissed.
Furthermore, submission had not been raised before the
H . Division Bench. It may be true that in a given case, this
-
M.P. STATE co.OP. DAIRY FEDN. LTD. & ANR. v.
189
RAJNESH KUMAR JAMINDAR & ORS.
,.
eourt may allow the appellant to raise such a contention.
A
Therefore, it cannot be accepted that in terms of the 1995
Act, the appellant should be given 100% back wages.
[Paras 51 and 52) [221-A-D]
Case Law Reference:
B
1993 MPLJ 786
Referred to.
Para 14
(1981) 1 sec 122
Referred to.
Para 14
(1979) 3 sec 489
Referred to.
Para 14
c
(1991) 4 sec 578
Referred to.
Para 14
2007 (2) M.P.L.J. 594
Referred to.
Para 15
(20021 5 sec 111
Referred to.
Para 15
(1967) 3 SCR 377
Referred to .
Para 20
D
•
(1984) 2 sec 141
Referred to.
Para 21
(1975) 1 sec 485
Referred to.
Para 21
(2002) 2 sec 167
Referred to.
Para 22
E
(1975) f sec 421
Referred to.
Para 23
(2005) 1 sec 149
Referred to.
Para 24
(2005) 4 sec 649
Referred to.
Para 25
F
(2006) 1 sec 667
Referred to.
Para 26
(2006) 11 sec 634
Referred to.
Para 27
(1992) 2 sec 299
Referred to.
Para 32
(20011 3 sec 314
Referred to.
Para 32
G
;
(2005) 9 sec 148
Referred to.
Para 32
359 us 535
Referred to.
Para 36
H
180
SUPREME COURT REPORTS
[2009] 6 S.C.R. -
A
(2008) 1 sec 639
Referred to.
Para 36
..,
.
""'
(1979) 1 sec 477
Referred to.
Para 37
(1979) 2 sec 491
Referred to.
Para 37
B
(2001) 9 sec 497
Referred to.
Para 37
(1985) 2 sec 121
Referred to.
Para 38
(1986) 2 sec 338
Referred to.
Para 38
~
AIR 1967 SC 1260
Referred to.
Para 38
c
(1996) 4 sec 504
Referred to.
Para 38
(2001) 3 sec 314
Referred to.
Para 38
(2008) 4 sec 458
Referred to.
Para 42
D
(2003) 4 sec 524
Referred to.
Para 52
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
•
2442 of 2009.
E
From the Judgment & Order dated 9.10.2007 of the High
Court of Judicature at Jabalpur, Madhya Pradesh in Writ
Appeal No. 1339 of 2006.
WITH
F C.A. Nos. 2443, 2446, 2447, 2449, 2452, 2454, 2456, 2458,
(.
2460,2462,2467,2469,2471,2472,2473,2474,2475,2476,
2477,2478,2480,2481,2482,2483,2484,2485,2486,2487,
2489,2494,2495,2496, 2497,2498,2499,2500,2502,2503,
2504, 2505,2506, 2507,2508-2525,2526,2527,2528,2529,
G 2530-2531, 2532, 2533 of 2009.
C.N. Sreekumar, M.T. George, K.N. Madhusoodanan,
Dushyant Parashar and T.G. Narayanan Nair for the Appellants.
Vivek K. Tankha, Suryanarayan Singh, Pragati Neekhra
H
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M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v.
191
RAJNESH KUMAR JAMINDAR & ORS.
(for AP & J Chambers), Vikas Upadhyay, (B.S. Banthia),
A
Akshat Shrivastava, P.P. Singh, lnderjeet Yadav, Rahul
Shrivastava, Kunal Verma, Arup Jain, Supria Jain, K. Krishan,
B.K. Singh, Arun Kumar Beriwal, Jayant Kumar Mehta for the
Respondents.
The Judgment of the Court was delivered by
S.B. SINHA, J. 1. Leave granted.
B
2. Whether Madhya Pradesh State Co-operative Dairy
Federation Limited (for short "the Federation") is a 'State' within c
the meaning of Article 12 of the Constitution of India is the
question involved in these appeals.
3. Before us, there are 52 matters. Out of 52 concerned
""
employees, 16 Writ Petitions were allowed by a learned Single
D
Judge. Writ appeals filed there against by the Federation were
dismissed but only 50% back wages had been granted to the
employees. Respondents have not questioned the correctness
of the said judgment. Remaining 36 writ petitions were
dismissed by a learned Single Judge. However, writ appeals
filed there against have been allowed directing reinstatement
E
of the concerned respondents with only 20% back wages.
4. Federation is a society registered and incorporated
under the provisions of the Madhya Pradesh Cooperative
Societies Act, 1960 (for short "the Act"). It is an apex society
F
classified as a Central Society. It is registered under Section
9 of the Act. The Government of Madhya Pradesh through its
Veterinary Department had been carrying out in certain areas
of the State activities of supply of milk through its offices
established for the said purpose. A company known as Madhya
G
Pradesh State Dairy Development Corporation Limited was
incorporated on or about 22.03.1975 for carrying out the
business of sale of milk and its products. It was registered
under the Indian Companies Act, 1956. Its object was
development and procurement of milk and for bringing out a
H
192
SUPREME COURT REPORTS
[2009] 6 S.C.R.
A 'white revolution'.
5. Federation was constituted to promote sale of milk and
its products inter alia with a view to providing employment to
agriculturists, milk suppliers so as to enable it to implement a
8 World Bank scheme effectively. The said company underwent
voluntary winding up. Its assets both movable and immovable
were transferred to the Federation as part of shareholdings of
the State Government.
6. Federation is a federal society within the meaning of
C Section 2(k) of the Act. It is also an apex society within the
meaning of Section 2(a-1) of the Act. It has its own bye-laws.
Bye-law No. 3 provides for betterment of the economic
conditions of agriculturists and milk producers by monitoring the
activities as also different programmes relating to production,
D collection, Processing, distribution and marketing of milk and
milk products. From time to time, it helps and provides
technical assistance to the primary societies, independent
bodies which are engaged in the production of milk and its
proper distribution in urban areas. It also issues guidelines.
E Its functions are enumerated in Bye-law Nos. 3.2.1 to 3.2.26.
7. In terms of Section 55 of the Act, the Registrar framed
regulations known as the M.P. State Cooperative Dairy
Federation Ltd. Employees Recruitment, Classification and
Conditions of Service Regulations, 1985 (for short "the
F Regulations"). Indisputably, terms and conditions of
employment of the employees of the Federation are governed
by the said Regulations; Regulation 13 whereof provides for
compulsory retirement of an employee on attaining the age of
55 years or on completion of 25 years of service. Regulation
G 13 was amended with effect from 24.12.2001 providing for
compulsory retirement of an employee of the Federation on
attaining the age of 50 years or completion of 20 years of
service. It reads as under:
H
-
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v.
193
RAJNESH KUMAR JAMINDAR & ORS. [S.B. SINHA, J.]
"13. Compulsory Retirement
A
1.
The appointing officer has the powers that he can
without giving any reason compulsory retire any
employee on completion of twenty years of his
service and on this ground any claim for special
8
compensation would not be rejected, however, this
power would be exercised in those circumstances
when the appointing officer is of the view that it is
in the interest of the Federation and it can be done
by giving 3 months prior intimation otherwise not. c
2.
Any employee who has completed 20 years of
service at any time would be able to retire from the
Federation, however, before retiring at least three
months notice in writing has to be given to the
concerned officer in this regard. If he wants to retire
D ·
before the completion of the period of notice, then
he would be paid the amount equivalent to the
salary and allowances which is less than three
months."
8. The said provision is at par with Rule 42(b) of the
Madhya Pradesh Civil Service (Pension) Rules, 1976
applicable to the government servants .• The said provision is
also at par with the circular letter issued by the State
Government on 22.08.2000.
9. Indisputably, pursuant to or in furtherance of Regulation
13 of the Regulations, a Scrutiny Committee as also a Review
Committee were constituted for the purpose of finding out as
to how many employees can be compulsorily retired in terms
E
F
~~
G
10. It is also not in dispute that during the period 1975 to
1981, no guideline had been laid down in regard to the mode
and manner for recording of annual confidential reports. Such
parameters, however, were introduced in the year 1986-87.
H
194
SUPREME COURT REPORTS
[2009] 6 S.C.R.
A
11. Respondents indisputably have completed 20 years of
service. A Scrutiny Committee constituted therefor scrutinized
the service records of the respondents for about 20 years. The
formula for determination of the fitness of the concerned
employees to continue in the service of the Federation was the
B same which is made applicable to the case of the government
servants; in terms whereof the entire service records of the
employees were required to be considered wherefor the .
grading in the confidential reports was to be made on the
following basis:
c
D
E
F
G
H
"For "Outstanding" category four marks, for "Very Good"
category three marks, for "Good" category two marks, for
"Average" category one mark, and for "Poor" category zero
marks has been allotted. The total marks are to be divided
by the number of years for which the confidential reports
are available and which have been considered. It is further·
stated that in case the average marks are two or more than
two then the employee should not be compulsorily retired
and on the other hand if he gets less than two average
marks he should be compulsorily retired."
12. The circular letter issued by the Government of Madhya
Pradesh dated 22.08.2000 inter alia provides:
"(d) An evaluation of complete service records should
not be below 'good' Cagetory- B. Simultaneously,
it will be seen whether there is any decline in the
working efficiency of the Government servant. It is
to be seen whether the working efficiency,
especially in preceding five years has declined or
not."
Yet again, by a circular letter dated 20.03.2003, it was
directed:
"Under above mentioned subject State Government has
decided accordingly :
,
r
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M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v.
195
RAJNESH KUMAR JAMINDAR & ORS. [S.8. SINHA, J.]
(1)
(2)
referred memorandum dated 12.12.2001 issued by
this Department which was having directions for
drawing average marks on the basis of service
period by showing the classification marks of the
confidential reports of the government employee on
average basis for the purpose of screening, is
being hereby cancelled.
The standards for screening that were fixed by the
referred memorandum dated 22.03.2000 in its para
2(1 ), now deleting its standard No.4 following
standards are now being prescribed :
Standard No. (4)
(one) though at the time of screening whole record
of the employee should be checked, even then any
government employee should not be held retired on
the basis of normal disability, if his previous 5 years
of service has been found satisfactory, or if he has
been promoted on some higher grade in last 5
years and his services on the higher grade have
been found satisfactory.
(two) any of the Government Employee, shall not be
retired from the service on the ground of normal
disability, if within one year of the date of screening
A
B
c ~
D
E
he is going to be retired after completing his age
F
of superannuation. Abovesaid condition shall not
be applicable in cases of employees having
doubtful integrity."
13. The report of the Scrutiny Committee was placed
before the Review Committee, which in its report recorded:
G
" ... During the course of examination, it has also been
observed on perusal of the Confidential Reports that in
some Confidential Reports for certain years, the group/
category have not been marked but the marks have been
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[2009) 6 S.C.R.
awarded. The Confidential Report has the categories of
'poor' and 'very poor' while on the circular for evaluation
issued by the State, there being no category 'very poor',
the 'very poor' category has been treated as 'poor', 'poor'
has been treated as 'average', 'average' has been
considemd as 'good' and 'good' has been considered as
'very good' for the purpose of evciluation.
On making a review, following criteria have been
prescribed by the Government for the purpose of
compulsory retirement:-
1.
Recommendations may be made after considering
complete records of the employee for the purpose
of his honesty and integrity being in doubt.
2.
Depletion in physical capacities.
3.
An evaluation of the goodwill and working efficiency
of a Government servant may be carried out on the
basis of complete service records of the
Government servant. It is not necessary that every
adverse comment and/or such comment which can
be given the nomenclature of adverse comment
must be communicated to the employees.
4.
An all round evaluation of records of total period of
service : must not below "good" category.
Simultaneously, it may also be seen that is there
any decline in the working efficiency of the
Government servant. Especially, whether there is
any decline in the working efficiency in preceding
five years,"
14. The question as to whether the Federation is a 'State'
within the meaning of Article 12 of the Constitution of India or
not came up for consideration before a Full Bench of the
Madhya Pradesh High Court in Dinesh Kumar Sharma v. M.P.
Dugdh Mahasangh Sahakari Samiti Maryadit (1993 MPLJ
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v.
197
RAJNESH KUMAR JAMINDAR & ORS. [S.B. SINHA, J.]
786]. Inter alia relying on or on the basis of the decisions of A
this Court in Ajay Hasia v. Khalid Mujib Sehravardi [(1981) 1
SCC 722], Ramana Dayaram Shetty v. International Airport
Authority of India ((1979) 3 SCC 489] and Chander Mohan
Khanna v. National Council of Educational Research and
Training ((1991) 4 SCC 578 : AIR 1992 SC 76], it was held
B
that the Federation is not a 'State', opining:
(i)
The entire share capital is not held by the State
Government.
(ii)
The entire expenditure of the cooperative societies
C
is not met by the State Government.
(iii)
It does not enjoy a monopoly status.
(iv)
The State Government does not have any deep and
pervasive control over the societies.
D
It was, however, noticed that the Managing Director is
appointed by the State Government but the Chairman of the
Federation has a right to contest election; its functions inter alia
being to encourage the villagers, the persons engaged in the
sale of milk and milk products, to give them employment,
E
·,
primarily resting on the cooperative principles which are not
carried out pursuant to the State requirements in discharge of
State's obligations for health, safety or general welfare of public
generally.
15. The matter, however, was referred to a Special Bench
F
in M.P. State Co-operative Dairy Federation and Others v.
Madan Lal Chourasia (2007 (2) M.P.L.J. 594] for
reconsideration of the said decision. Speaking for the Special
Bench, consisting of five Hon1ble Judges, the Chief Justice of
G
the High Court noticed that the six authoritative tests culled out
in the case of Ajay Hasia (supra) having been reconsidered
in Pradeep Kumar Biswas v. Indian Institute of Chemical
Biology [(2002) 5 SCC 111], the tests laid down therein only
were required to be considered, holding:
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B
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D
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SUPREME COURT REPORTS
[2009] 6 S.C.R.
" ... The Federation was registered as a Co-operative
Society under the M.P. Co-operative Societies Act, 1960
on or about 13-5-1980. Bye-law 3.1 of the Bye-laws of the
Federation states that the main object of the Federation
comprised of conducting various programmes of
manufacture, collection, processing, distribution and sale
of milk and milk products for the economic development
of the farmers and for developing and safeguarding the
milk business, milk producing animals and for the
economic development of the groups engaged in milk
production and spreading and developing other joint
activities ... the main object of the Federation discussed
above clearly show that the work of the Federation relates
to economic development of farmers, who are engaged
in production and sale of milk in the State of Madhya
Pradesh and this work has been taken up by the State
Government through the agency of the Federation
because development of milk and milk products and
economic development of farmers carrying the business
of sale of milk and milk products are part of the functions
of a welfare State."
It was found that the State Government and the Central
Government were having more than 91 % of shares in terms of
Bye-laws 4.0, 4.9 and 4.9.1. It was noticed:
"17. Bye-law 2.2 of the bye-laws of the Federation defines
the Board of Directors of the Federation to mean the
Board constituted, elected and nominated under the byelaws. Bye-law 22 provides for composition of the Board
of Directors and the Council for Federation."
It noticed the composition of the Board of Directors of the
Federation to hold:
"It will be clear from the aforesaid composition of the Board
of Directors of the Federation that out of 13 members of
the Board of Directors as many as 8 members are the
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v.
199
r
RAJNESH KUMAR JAMINDAR & ORS. [S.B. SINHA, J.]
nominees of the State Government, Central Government A
and their agencies.
18. Under bye-law 27 of the bye-laws of the Federation,
vast powers have been vested in the Board of Directors
of the Federation including the power to appoint, dismiss,
B
suspend and regularize the services of the employees of
the Federation such as Managers, Secretaries, Officers,
,
Clerks and to fix their powers, duties, wages and
allowances. The Board of Directors of the Federation
.....
appear to have under the bye-laws of the Federation over
all administrative powers and since the majority of the c
•
Board of Directors are nominees of the State Government
and the Central Government as representatives of their
respective departments and not as experts as contended
by Mr. Singh, we hold that the administrative control of the
D
Federation is with the Government.
19. Bye law 30 of the bye-laws of the Federation is titled
'Managing Director' and bye-law 30.1 states that for
managing the business of the Federation, Managing
Director shall be appointed by the State Government. Bye
E
law 30.2 states that the Managing Director of the
Federation shall be a Chief Executive and will work under
~
the control, direction and guidance of the Board of
Directors. Bye law 30.3 of the bye-laws states that the
Managing Director shall execute the business and work as
F
per powers given to him, from time to time, by the Board
of Directors and he can delegate his powers given by the
Board of Directors to his subordinate officers and he will
place the information of delegation of his powers to
subordinate officers in the next meeting of the Board of G
j.
Directors. It will thus be clear that the Managing Director
is not only appointed by the State Government but is also
under the control, direction and guidance of the Board of
Directors, which is dominated by the Government
nominee. Hence, day to day functioning of the Federation
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[2009] 6 S.C.R.
A
is also controlled by the Government though the Managing
Director and the Board of Directors of the Federation ... "
·B
c
D
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F
G
It was furthermore noticed:
"20. Bye law 17 of the bye-laws is titled 'General Assembly'
and bye law 17.1 states that the General Assembly of the
Federation will have the supremacy under the Act, Rules
and Bye-laws. Bye law 17.2 deals with the composition of
the General Assembly and says that it will comprise of
elected members of the Milk Union and all the nominated
members of Board of Directors. Bye law 17.3 states that
the Federation will call a General Assembly every year,
which will be before three months of the'end of financial
year and bye law 17.4 states that t.he.federation can at
any time call a General Assembly tdt'discuss emergency
work. Bye law 18 states that the General Assembly will
consider the subjects mentioned therein and these are
mainly the budget and programme presented by the Board
of Directors, the annual financial report placed by the
Board of Directors of the Federation, the distribution of
profits and decision on the audit application and audit
removal report of the Board of Directors. These provisions
relating to the General Assembly of the Federation show
that the General Assembly was also dominated by the
Board of Directors. As the Board of Directors is dominated
by the nominees of the Government, the General Assembly
will also take decisions in its meeting in the manner as
desired by the Government. Hence, the Federation is also
dominated and controlled by the Government
administratively and functionally as in the cases of Pradeep
Kumar Biswas and Virendra Kumar Srivastava (supra)."
On the aforementioned findings, the decision of the Full
Bench in Dinesh Kumar Sharma (supra) was overruled.
16. Mr. C.N. Sreekumar, learned counsel appearing on
H behalf of the Federation, in support of the appeals, would
)
A
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v.
201
RAJNESH KUMAR JAMINDAR & ORS. [S.B. SINHA, J.]
-l
i
contend:
A
(i)
The Special Bench of the High Court committed a
serious error in refusing to consider the authoritative
pronouncement of this Court in Ajay Hasia (supra)
as also its earlier decision in Dinesh Kumar B
Sharma (supra) to hold that the Federation is a
'State' within the meaning of Article 12 of the
Constitution of India.
(ii)
The Federation having been running into huge
losses, the conditions precedent for retirement of c
the employees of the Federation as contained in
Regulation 13 of the Regulations having been
<
satisfied, the impugned judgment c~nnot be
'
sustained.
-.<'
D
17. Mr. Vivek K. Tankha, learned senior counsel appearing
on behalf of contesting respondents and Mr. Vikas Upadhyay,
learned counsel appearing on behalf of the appellant in Civil
Appeal arising out of SLP (C) No. 17705 of 2008, on the other
hand, would urge:
E
(i)
The share capital, functional control and the
administrative control being completely in the hands
of the Government of the State, the Federation is
a 'State' within the meaning of Article 12 of the
_.,
Constitution of India.
F
;
(ii)
As the decision of this Court in Pradeep Kumar
Biswas (supra) governs the field and the criteria laid
down therein being satisfied, no exception can be
taken to the impugned judgment.
G
(iii)
Regulations governing the conditions of service
J.
being statutory in character and the Federation,
having adopted the government circulars and rules
for the purpose of implementation of its policy to
retire compulsorily a large number of employees,
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SUPREME COURT REPORT!)
[2009] 6 S.C.R.
A
were bound to follow the sa. ne.
)
B
(iv)
Tl'ie Scrutiny Committet~ and the Review
Committee having not only co1nsisted of the officers
of the State but also the· Registrar of the
Cooperative Societies, it was ·,futile to move to the
Registrar of the Cooperative Societies for setting
aside the impugned circulars issued with regard to
compulsory retirement.
(v)
Having regard to the Regulations governing
C
payment of back wages, as contained in Regulation
49(2) of the Regulations, the entire back wages
should be directed to be paid.
18. An additional contention has been raised in the Civil
Appeal arising out of SLP (C) No. 17705 of 2008 that the
D appellant therein having been suffering from disability within the
meaning of the provisions of the Persons with Disabilities
(Equal Opportunities, Protection of Rights and Full
Participation) Act, 1995 (for short "the 1995 Act"), Section 47
thereof would be attracted and, thus, the appellant was entitled
E to entire back wages.
F
19. Article 12 of the Constitution of India reads as under:
"12. Definition.-ln this part, unless the context otherwise
requires, 'the State' includes the Government and
Parliament of India and the Government and the legislature
of each of the States and all local or other authorities within
the territory of India or under the control of the Government
of India."
G
20. The development of law in this regard in view of the
decisions rendered by this Court begirriing from t11e Rajasthan
State Electricity Board v. Mohan Lal [(H' , 7) 3 SCR 377], Ajay
.,
Hasia (supra) and other decisions including a Seven - Judge
Bench decision of this Court in Pradeep Kumar Biswas (supra),
H is to say the least phenomenal.
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v.
203
RAJNESH KUMAR JAMINDAR & ORS. (S.B. SINHA, J.]
21. We may also notice that P.K. Ramachandra Iyer and A
Others v. Union of India and Others [(1984) 2 SCC 141)
wherein Indian Council for Agricultural Research (ICAR) was
held to be a 'State' within the meaning of Article 12 of the
Constitution of India, was distinguished in Chander Mohan
Khanna (supra). However, Chander Mohan Khanna (supra)
B
was overruled in Pradeep Kumar Biswas (supra) to the extent
it followed the decision in Sabhajit Tewaty v. Union of India
[(1975) 1 sec 485).
22. In Mysore Paper Mills Ltd. v. Mysore Paper Mills
Officers' Association and Another [(2002) 2 SCC 167) Mysore C
Paper Mills Ltd. was held to be a 'State' within the meaning of
Article 12 of the Constitution of India as it was substantially
financed and controlled by the Government, managed by the
Board of Directors nominated and removable at the instance
of the Government and carrying on functions of public interest D
:>
under its control.
23. In Pradeep Kumar Biswas (supra), the following tests
have been laid down by a Seven-Judge Bench of this Court:
(i)
Formation of the body
(ii)
Objects and functions
(iii)
Management and control
(iv)
Financial aid, etc.
The dicta of Mathew, J. in Sukhdev Singh v. Bhagatram
Sardar Singh Raghuvanshi [(1975) 1 SCC 421) was quoted
with approval therein is in the following terms:
"17. For identifying such an agency or instrumentality he
propounded four indicia:
E
F
G
(1) "A finding of the State financial support plus an unusual
degree of control over the management and policies might
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SUPREME COURT REPORTS
[2009] 6 S.C.R.
A
lead one to characterize an operation as State action."
•
(SCC p. 454, para 96)
(2) "Another factor which might be considered is whether
the operation is an important public function." (SCC p. 454,
B
para 97)
(3) "The combination of State aid and the furnishing of an
important public service may result in a conclusion that the
operation should be classified as a State agency. If a given
f unc~ion is of such public importance and so closely related
c
to governmental functions as to be classified as a
governmental agency, then even the presence or absence
of State financial aid might be irrelevant in making a
finding of State action. If the function does not fall within
such a description, then mere addition of State money
D
would not influence the conclusion." (SCC p. 454, para 97)
(4) "The ultimate question which is relevant for our purpose
'
is whether such a corporation is an agency or
instrumentality of the Government for carrying on a
E
business for the benefit of the public. In other words, the
question is, for whose benefit was the corporation carrying
on the business?" (SCC p. 458, para 111 )"
This Court referred to Ajay Hasia (supra) wherein the tests
gathered from the decision of this Court in Ramana Dayaram
F Shetty (supra) were stated in the following terms:
..
"(1) One thing is clear that if the entire share capital of the
corporation is held by Government, it would go a long way
towards indicating that the corporation is an instrumentality
G
or agency of Government. (SCC fl.