Full Judgment
Vishwanatha Shetty, J.
1. The appellant in this appeal has called in question the correctnessof the order dated 3rd August 2000 made in Writ Petition No. 30751of 1995.
2. The respondent in this appeal is a former Wing Commanderin the Indian Airforce. On his retirement, his services were taken oncontract basis by the appellant by means of an appointment orderdated 29th September 1992, a copy of which has been producedas Annexure-B to this appeal. Along with the appointment order, theterms and conditions of the appointment were also issued to therespondent, a copy of which has been produced as Annexure-A tothis appeal. While paying the salary to the respondent in terms ofthe order of Appointment, the appellant deducted the amountequivalent to the pension paid to the respondent on his retirementfrom service from the Indian Air force. Aggrieved by the said actionof the appellant, the respondent filed Writ Petition No. 30751 of 1995before this Court out of which this appeal arises. In the impugnedorder, the learned Single Judge, on consideration of the appointmentorder and the Bye-laws governing the service conditions of therespondent, took the view that the appellant was not entitled to deductthe amount equivalent to the pension received by the respondentout of the salary payable to him. Aggrieved by the said order, asnoticed by us earlier, this appeal is filed.
3. Mrs. K. Shuba Ananthi, learned Counsel appearing for theappellant challenging the correctness of the impugned order madetwo submissions. Firstly, she submitted that the learned Single Judgeought to have rejected the Writ Petition on the ground that theappellant neither being a State nor an instrumentality of the State,the Writ Petition was not maintainable. In support of this submission,she relied upon the decision of this Court in the case of Ms.GEETHA AND OTHERS vs UNION OF INDIA AND ANOTHER, W.P. No. 24125 to 24127 of 1990 dated 9.3.1994wherein this Court has taken the view that the appellant was not aninstrumentality of the State. Secondly, she submitted that since inthe appointment order it is made clear that the respondent would bebound by the terms of the Bye-laws and the Recruitment Rules ofthe appellant; and since the bye-laws and the Recruitment rulesprovide that the terms and conditions of service will be on the patternof Government of India in respect of the matters not specificallyprovided in the Bye-laws, the appellant was justified in deductingthe amount equivalent of the pension received while disbursing thesalary payable to the respondent. In support of this submission, shealso relied upon the decision of the Supreme Court in the case ofV.S. MALLIMATH vs UNION OF INDIA & ANOTHER, : [2001]2SCR567
4. In the light of the rival submissions made by the learnedCounsel appearing for the appellant, the two questions that wouldarise for consideration in this appeal are:
(i) Whether the conclusion reached by the learned SingleJudge that the appellant is an instrumentality of the State,is erroneous in law?
(ii) Whether the appellant was justified in deducting the amountequivalent to the pension paid to the respondent whiledisbursing his salary?
Regarding First Question:
It is not in dispute that the appellant is an autonomous bodyconstituted under the Societies. Registration Act, 1860. The objectsof the appellant-Society as set out in Clauses 3.1.and 3.2 of theMemorandum of Association read as hereunder:
3.1 To undertake initially design, development and engineeringof digital electronic switching system technology and subsequentlyof Telematic technology, products and services by :-
(i) its own direct effort at the national level;
(ii) consultancy, advice, raw technology procurement etc., fromwithin the country and abroad, and
(iii) following, assisting, working with, co-operating and makinguse of activities in the related fields at other R and Dinstitutions, universities and industries in the country andabroad.
3.2 To undertake as part of its own direct effort at the nationallevel, the development of the next generation of digital ElectronicSwitching system (ESS) as per the requirements of Governmentof India using state-of-the-art concepts which are (i) relevant andappropriate to our country, and (ii) internationally competitive andsubsequently to undertake further R and D for introduction ofintegrated Services Digital Network. The system to be developedshall initially cater to the present needs of the country for theplain ordinary telephone services, but will have in . built flexibilityfor the future introduction in a phased manner of the emergingTelematic services like . integrated voice and data, conferencing,telex, videotex, facsimile, electronic mail, voice mail etc. Theindigenous digital ESS technology so developed will be used toestablish the third and subsequent. Switching factories proposedby the Government..
Clause 4 provides that all the incomes, earnings, movable and/or immovable properties of the Society shall be solely utilised andapplied towards the promotion of the objects only as set forth in theMemorandum of Association and no portion thereof shall be paidor transferred directly or indirectly by way of dividends, bonus, profitor any manner, whatsoever to the members of the Society or to anyperson or persons claiming through any one or more of the members.No member of the Society shall have any personal claim on anymovable and/ or immovable properties of the Society or make anyprofit, whatsoever, by virtue of his membership. Clause 5 of theMemorandum of Association sets out the first members of theGoverning Council on whom the management of the society wasentrusted. As it could be seen from Clause 5, the Minister forCommunications and the Minister for Electronics were made as theChairman and Vice-Chairman respectively of the Governing Council.The Cabinet Secretary, the Secretary for Finance, the Secretary forElectronics and the Secretary for Communications were made asMembers of the Governing Council. Further, in addition to theMembers of the Governing Council referred to above, the AdditionalDirector, Telecom Research Centre, the Joint Secretary, Departmentof Electronics, Government of India and the Senior ResearchScientist, T.I.F.R., have subscribed their signature to the Memorandumof Association. The Rules known as .the Rules and Regulations ofCentre for Development of Telematics. (hereinafter referred to as.the Rules.) framed by the appellant also clearly indicate that theentire management of the appellant is entrusted to the officers ofthe Government of India. A reading of the Memorandum ofAssociation and the Rules of the appellant clearly show that theappellant came to be established as a wing of the Government ofIndia by giving it an autonomous status. The management of theappellant is entrusted as noticed by us earlier to the GoverningCouncil consisting of the Ministers in the Union Ministry and variousSecretaries of the Government of India. Rule 21 of the Rulesprovides that the properties and funds of the Centre shall vest inthe Council and shall consist of . (a) Recurring grants made by theGovernment of India through the Ministry of Communications andDepartment of Electronics jointly on equal basis; (b) Any other grantsmade by the Government of India/State Governments. Clause 24 ofthe Rules further mandates that the Council shall frame the AnnualBudget before the end of March and forward copies thereof to theGovernment of India. Clause 25 of the said Rules provides that theCouncil shall submit a report on the working of the Center annuallyto the Government of India; and such Report shall contain particularsregarding the work of the Centre during the previous year and shallbe accompanied by a balance sheet duly audited showing the incomeand expenditure of the Centre during the said year. Rule 26 of theRules which provides for alteration of the existing rules providesthat the modification of the Rules would come into effect only fromthe date notified by the Government of India. Rule 27 of the Ruleswhich provides for dissolution of the Society provides that theappellant could be dissolved in accordance with the provisions ofthe Societies, Registration Act after obtaining previous sanction fromthe Government of India. As noticed by us earlier, the severalprovisions in the Memorandum of Association and the Rules clearlyshow that the entire control of the Appellant is being exercisedeither through the Ministers of the Union Ministry or the Secretariesof the Government of India who are entrusted with the responsibilityof managing the society. Therefore, from the nature of the control,the authorities who are entrusted with the management of theappellant and the nature of duty it discharges, we are of the viewthat the appellant is undoubtedly an instrumentality of the State.Therefore, we are of the view that the learned Judge was fullyjustified in taking the view that the appellant is an instrumentality ofthe State. The Hon.ble Supreme Court in the case of AJAY HASIAvs KHALID MUJIB SEHRAVARDI AND OTHERS, : (1981)ILLJ103SC has laid downthe criteria to decide whether an institution is an authority or aninstrumentality or agency of the State. It is useful to refer to theobservation made by the Hon.ble Supreme Court at paragraphs 11and 15 of the judgment which read as follows:
'11. We may point out that it is immaterial for this purposewhether the corporation is created by a statute or under a statute.The test is whether it is an instrumentality or agency of theGovernment and not as to how it is created. The inquiry has tobe not as to how the juristic person is born but why it has beenbrought into existence. The Corporation may be a statutorycorporation created by a statute or it may be a Governmentcompany or a company formed under the companies Act, 1956or it may be a society registered under the Societies RegistrationAct,. 1960 or any other similar statute. Whatever be its geneticallyorigin, it would be an .authority. within the meaning of Article 12if it is an instrumentality or agency of the Government and thatwould have to be decided on a proper assessment of the factsin the light of the relevant factors. The concept of instrumentalityor agency of the Government is not limited to a corporationcreated by a statute but is equally applicable to a company orsociety and in a given case it would have to be decided, on aconsideration of the relevant factors, whether the company orsociety is an instrumentality or agency of the Government so asto come within the meaning of the expression .authority. inArticle 12.
15. It is in the light of this discussion that we must nowproceed to examine whether the Society in the present case isan .authority. falling within the definition of .State. in Article 12.Is it an instrumentality or agency of the Government? The answermust obviously be in the affirmative if we have regard to theMemorandum of Association and the Rules of the Society. Thecomposition of the Society is dominated by the representativesappointed by the Central Government and the Government ofJammu and Kashmir, Punjab, Rajasthan and Uttar Pradesh withthe approval of the Central Government. The monies requiredfor running the college are provided entirely by the CentralGovernment and the Government of Jammu and Kashmir andeven if any other monies are to be received by the Society, itcan be done only with the approval of the State and the CentralGovernment. The Rules to be made by the Society are alsorequired to have the prior approval of the State and the CentralGovernments and the Accounts of the Society have also to besubmitted to both the Governments for their scrutiny andsatisfaction. The Society is also to comply with all such directionsas may be issued by the State Government with the approval ofthe Central Government in respect of any matters dealt withinthe report of the Reviewing Committee. The control of the Stateand the Central Governments is indeed so deep and pervasivethat no immovable property of the Society can be dispose of inany manner without the approval of both the Governments. TheState and the Central Governments have even the power toappoint any other person or persons to be members of the Societyand any member of the Society other than a memberrepresenting the State or Central Government can be removedfrom the membership of the Society by the State Governmentwith the approval of the Central Government. The Board ofGovernors, which is in-charge of general superintendence,direction and control of the affairs of Society and of its incomeand property is also largely controlled by nominees of the Stateand the Central Governments. It will thus be seen that the StateGovernment and by reason of the provision for approval, theCentral Government also, have full control of the working of theSociety and it would not be incorrect to say that the Society ismerely a projection of the State and the Central Governmentsand to use the words of Ray, C.J., in Sukhdev Singh.s case : (1975)ILLJ399SC (supra) the voice is that of the State andthe Central Governments and the hands are also of the Stateand the Central Governments. We must, therefore, hold that theSociety is an instrumentality or the agency of the State and theCentral Governments and it is an `authority. within the meaningof Article 12..
5. In the light of the above conclusion , we are of the view thatthe decision rendered by the learned Single Judge of this Court inthe case of Ms. GEETHA AND OTHERS vs UNION OF INDIA ANDANOTHER (Supra) , does not lay down the correct law. In the saiddecision, the learned Single Judge has not considered theMemorandum of Association and the rules of the appellant and hasnot assigned any reason in support of his conclusion that theappellant is not an instrumentality of the State. Therefore, we are,of the view that the learned Counsel for the appellant cannot deriveany assistance from the said decision and we have no hesitation tohold that the view taken by the learned Single Judge in the case ofMs. Geetha and Others (supra) does not lay down the correct law.
Regarding Second Questions:
Now, the next question that would arise for consideration is asto whether the appellant was justified in deducting the amountequivalent to the pension paid to the respondent out of the salarypayable to him. As noticed by us earlier, the only contention urgedby the learned Counsel for the appellant challenging the correctnessof the order impugned is that since the appointment of the respondentis made subject to the Bye-laws, Rules and Regulations andadministrative orders of the Society; and Rule 12 of the RecruitmentRules provides that all the terms and conditions of service of theemployees of the appellant will be on the pattern of Government ofIndia Regulations, the appellant was entitled to deduct the amountequivalent to the pension received by the respondent out of thesalary payable to him. In our view, this contention is devoid of anymerit for reasons more than one. Firstly, as found by the learnedSingle Judge the terms and conditions of the appointment orderclearly specifies that the respondent was appointed in the pay-scaleof Rs. 4500-150-5700 with Basic Pay of Rs. 5,550/- along withDearness Allowance of Rs. 2,905/- p.m. City CompensatoryAllowance of Rs. 100/- p.m. House Rent Allowance of Rs. 1,000/-p.m. etc., and therefore, the respondent is entitled to the remunerationfixed in the appointment order. It is useful to extract the relevantportion of the appointment order where the emoluments payable tothe respondent is set out, which reads as hereunder.
'TERMS AND CONDITIONSPAY SCALE AND ALLOWANCES
Scale of Pay
Basic Pay
Dearness Allowance
4500-150-5700
Rs. 5550
Rs. 2905 p.m.
(varies with price index)
City Compensatory Allowance
House Rent Allowance
LeasedAccommodation
Rs. 100 p.m.
Rs. 1000 pm.
Rentallimit Rs. 3900 p.m. on recovery of Rs. 300 p.m. (subject to lease agreement and its terms and conditions)
Other benefits
1. You will be entitled to benefits such as reimbursement ofmedical expenses, leave travel concession, house building/conveyance advance subsidy, reimbursement formembership of professional bodies, long term advance,subsidized transport/conveyance reimbursement gratuity,contributory provident fund, leave and encashment thereofetc. as per rules of the centre.'
6. Therefore, when the appointment order specifies theemoluments including the salary payable to the respondent, in ourview, it is not permissible for the appellant to contend that the pensionamount received by the respondent should be excluded out of thesalary payable to him. The appointment of the respondent is acontract appointment. When the terms of the appointment orderissued clearly specifies the terms regarding the emoluments payableto the respondent, it would be highly unjust, unfair and unreasonableto deny the benefit of the emoluments fixed in the appointment orderon the ground that the terms of the appointment order states thatthe appointment of the respondent is made subject to the Bye-laws,Rules and Regulations and administrative orders of the Centre andsuch other Rules or orders that may be in force from time to time.While the respondent may be bound by the Bye-laws, Rules andRegulations and administrative orders of the Centre that may beissued from time to time, so far as his other service conditions areconcerned, however, with regard to the emoluments payable to him,the appellant is bound by the stipulations set out in the appointmentorder issued to the respondent. If the intention of the appellant wasto deduct the pension amount received by the respondent out of thesalary payable to him, nothing would have been easier than to statethe same in the appointment order issued to him. Secondly, Rule 12of the Recruitment Rules of the appellant relied upon by the learnedCounsel for the appellant, in our view, cannot override the termsand conditions of the appointment order issued to the respondent,wherein the emoluments payable to the respondent was specified.In this connection, it is useful to refer to Clause 5 of the appointmentorder-Annexure-A relied upon by the learned Counsel for theappellant and also Rule 12 of the Recruitment Rules of the centre,which read as hereunder:
'Clause 5 of the Appointment Order:
5. You will be governed by the Bye-laws, Rules andregulations and administrative orders of the Centre and any suchother rules/orders that may be in force from time to time..
'Rule 12.
All other terms and conditions of service will be on the patternof Government of India'
No doubt, Clause 5 of the appointment order provides that theappellant is governed by the Bye-laws, Rules and Regulations andadministrative orders of the Centre and such other Rules/orders thatmay be in force from time to time. In our considered view, the saidclause cannot be understood as meaning it would have the effect ofreducing the emoluments fixed in the appointment order on theground Rule 12 of the Recruitment Rules extracted above providesthat the terms and conditions of the respondent would be on thepattern of Government of India, in the absence of appointment orderspecifically providing that the pension amount received by therespondent would be deducted out of the salary payable to him.Clause 5 has to be understood as meaning the other terms andconditions not specifically provided in the appointment order wouldbe governed by the Bye-laws and the Rules and Regulations of theappellant. Further, Rule 12 of the Recruitment Rules extracted aboveis meant to be followed by the appellant while recruiting its staff andproviding for terms and conditions while making such recruitment. Inthe absence of a specific stipulation in the appointment order thatout of the salary payable to the respondent, the amount equivalentto the pension received by him is entitled to be deducted by theappellant, in our view, the appellant cannot deduct the amountequivalent to pension received by the respondent only on the basisof Rule 12 of the Recruitment Rules referred to above. In the lightof the above conclusion reached by us, we are of the view that thedecision of the Hon.ble Supreme Court in the Case of V.S. Mallimath(Supra) has no application to the facts of the present case. In thesaid decision, the question that came up for consideration waswhether the pension received by Justice Mallimath as a retired Chiefof Kerala High Court could be deducted from his salary as a memberof the National Human Rights Commission. Proviso given to Rule3(b) of the National Human Rights Commission Chairperson andMembers (Salaries, Allowance and other conditions of Service) Rules,1993 provides that a Member of the Commission, if he is in receiptof pension other than disability or wound pension in respect of anyprevious service under the Government of the Union or of aGovernment of the State, then salary in respect of service as aMember is reduced. While considering the said question, theHon. ble Supreme Court took the view that service rendered by himas a Chief Justice of a High Court should be treated as servicerendered in connection with the affairs of the Union and as such,the pension received by Justice Mallimath in respect of the servicerendered by him as Chief Justice was required to be deducted outof his salary as a Member of the Human Rights commission in viewof the proviso given to Rule 3(b) of the Rules referred to above. Inour view the said decision has no application to the facts of thepresent case.
7. Further, it is also necessary to point out that it is not the caseof the appellant that the remuneration of the respondent fixed isequivalent to the last salary drawn by the respondent at the time ofhis retirement. Under these circumstances, if the appellant took theservices of the respondent in terms of the emoluments fixed in theappointment order . Annexure-A, it is not permissible for the appellantto refuse to pay the actual emoluments fixed in the appointmentorder on the ground that the appellant is entitled to deduct thepension amount received by the respondent. Therefore, we do notfind any error in the order passed by the learned Single Judge.
8. Therefore, this appeal is liable to be rejected. Accordingly, itis rejected. However, no order is made as to costs.