MOHD RASHID AHMAD ETC. versus STATE OF U.P. & ANR.

MOHD RASHID AHMAD ETC.

STATE OF U.P. & ANR. December 15, 1978

[R. S. SARKARIA, V. D. TuLZAPURKAR AND A. P. SEN, JJ.J

lj.P. Nagar Mahapalika Adhiniyam, 1959-Act abolished all niunicipal boards and other local authorities-Empowered State Government to constitute Centralised Palika Ser1:ices prescribing method of recruitlnent and conditions o; service of persons appointed to services-Rule 6-Scope of-Rule 6(2)(iv) provided tlzar if no orders of final absorption passed before certain date the officer or seri,.ant concerned deemed to have been finally absorbed-Rule re-trospectively amended from time to time on two occasions extending the date of final absorption to rectify mistakres in dates-State Legislature, if had power to confer power on State Government to amend rule retrospectively.

&le 6(2) (iii)-lf imposed duty on State Government to act in quasi-D iudicial mpnner. Rules of natural iustice-Applicability of.

The U.P. Nagar Mahapalika Adhiniyam 1959 as well as the U.P. Munici-palities Act, 1916 empowered local bodies in the State to appoint their em-ployees subject to certain regulatory control by the State Government. Jn 1964 s. 112A was added to the 1959 Adbiniyam empowering the State Govern-ment to make rules for the creation of one or more service,s to be known as Centralised Palika Services common to all the municipal corporations and municipal boards and prescribe the method for recruitment and conditions of service of persons appointed to any such service. Section 69B which was added to the U.P. Municipalities Act, 1916 was in identical terms as s. 112A. Section 577(e) of the Adhiniyam provided for provisional absorption of officers and servants of the erstwhile municipalities till they were finally absorbed in any centralised services created under the Act. By s. 577 ( ee) the Administrators of Boards etc., were authorised to make temporary appointments of officers and &ervants till substantive appointments, were made and such officers and servants were treated as on deputation with the municipal corporations.

In exercise of the powers conferred under s. 112A the State Government made the U.P. Palika (Centralised) Service Rules, 1966 which came into force on July 9, 1966. Since r. 6 of the Rules was found to be contrary to the provisions of s. 112A and s. 69B, the U.P. Local Self-Governtnent (Amendment) Ordinance, 1966 (which later became an Act) was promulgated to validate the 1966 Rules.1 Section 19 of the Act provided that the amendn1ents made to the Rules might be given retrospective effect, limited to period of one year from the commencement of the Ordinance. Thereafter the U. P. Palika (Centralised) Services (Amendment) Rules, 1966 were passed by which r. 6 was repealed and re-enacted with retrospective effect from July 9, 1966. Clause (ii) of r. 6(2) empowered the State Government to pass final order of absorption in respect of particular officers and servants of the erstwhile municipal boards if they were found suitable. Clause (iii) provided that such orders had to be made on or before March 31, 1967.

Since the work of final absorption could not be completed by March 31, 1967, r. 6(2) (iii) was amended shifting the date to June 30, 1967. But this amendmeat having been made to come into effect from April 1, 1967 the legal fiction created by cl. (iv) of r. 6 that if no orders of final absorption were passed till ~1arch 31, 1967 the officer or servant concerned was to be deemed to have been finally absorbed, came into play. Clause (ill) was, therefore, again amended shifting the date of passing the order from March 31, 1967 to August 31, 1967. The rule was made with retrospective effect from July 9, 1966 .For the purpose of final absorption of all officers and servants who were found suitable in the two categories viz., those appointed under s. 577{e) ands. 577(ee) of the Adhiniyam, the State Government laid down procedure. It constituted Divisional Committees for making necessary recommendations to the Stote Government. On January 11, 1967 the State Government issued the first Circular stating that all officers and servants whose services were proposed to b_e determined on the ground of unsuitability might be given an opportunity of personal interview by the Divisional Committees. The Government Jivided the officers and servants into two categories, those getting salary above Rs. 500/- and those getting salary below Rs. 500/- and provided that cases of each category were to be dealt with at different levels. By this circu~ar the Government re-constituted the composition of the divisional Committees so far as the five municipal corporations which were created under the 1959 Adhiniyam v.·ere concerned and directed that these Divisional Committees should make selections for all Centralised Services except those whoSe starting salary \Vas Rs. 500/- and above. The selection for this c:;;tegory was to be made by the State Selection Committee.

With view to secure reasonable uniformity in the standards to be ap-plied by the Divisional Committees in making the selection, the third Circular dated February 23, 1967 provided that the Committees should interview the official concerned to judge his suitability for absorption in the Centrahscd Services and that if it was proposed to declare an official to be uJ1suitable for absorption on the basis of adverse entries, the Divisional Com111ittees should a:ffon;t an opportunity to the official concerned to appear before it and clear up his position. It was further provided that only those adverse remarks which were found to have been duly communicated to the official concerned might be considered against him.

Thus the procedure laid down was this : The recommendations of the Divi-sional Committees in respect of persons drawing salary less than Rs. 500/ -would be scrutinised by the State Government in the Local Self-Govennnent Department and the necessary orders passed thereon while in respect of the iecond category -officers drawing salary above Rs. 500/- p.m. the Secretary to the Government Local Self-Government Department would obtain the orders of the Minister concerned in passing the final orders.

The appellant RA was permanent Assistant Engineer in the Development Board, Kanpur. Before the coming into force of the Adhiniyam he was appoint-ed as officiating Executive Engineer and since then he continued to function in that capacity on purely temporary arrangement under s. 577(ee). The appe11ant AH was Sanitary Inspector in the Municipal Board •. Kanpnr and

continued to hold that post. He \Vas later promoted temporarily as Assistant Engineer and he stood provisionally absorbed under s. 577(e). \Vrit Petitions filed by the appellants and others challenging the vires of the Rules were dismissed by the High Court.

On· appeal to this Court it was contended that the appellants must be deemed to have been absorbed on March 31, 1967 by virtue· of the fiction con-tained i!'l cl. (iv) of r. 6(2), as originally enacted, because the a111endment made to the Rule shifting the date of final absorption first from J\.farch 31, 1967 to June 30, 1967 and subsequently to August 31, 1967 were legally ineffective and (2) that the impugned orders were vitiated on account of the failure of the State Government to afford to the appellants an opportunity of being heard. HELD : I.

HELD : I. (a) The validity of the two amendments made by the State Governrnent in r. 6(2) cannot be questioned. Although rule cannot be made with retrospective effect, the Legislature by enacting s. 19 of the U.P. Local Self Government (Amendment) Act, 1966 expressly conferred powers on the State Government to make retrospective rules. [837 DJ.

(b) It is well established that retrospective operation is not to be given to statute so as to impain tht existing right or obligation other than as regards matter o.f procedure. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed :is prospective only. But where it is expressly stated that an enactment shall be retrospective, courts will give it such operation. It is competent for the Legislature by retrospective legislation to make the provision contained in an earlier enact-ment ineffective. [838 F-GJ

QIJinn v. Prairiedate [1958] 25 WWR 241; referred to.

( c) In considering the effect of repeal of an enactment followed by re-enactment in the light of s. 6 of the General Clauses Act, 1897 the line of enquiry \vould be not \Vhether the new Act expressly keeps alive old rights and liabilities, but whether it manifests an intention to destroy them. Aay incon1pa1ibility in the provision has to be ascertained from consideration of all the relevant provisions of the new law and the mere absence of saving clause is by itself not conclusive. [839 B-C]

In the instant case by the introduction of the· new fictional date of absorp-tion as August 31, 1967 there was clear intention to destroy the earlier fictional date of March 31, 1967. It would clearly be incompatible, on con-G sideration of subsequent amendments for both the provisions i.e. the original clause (iii) fixing March 31, 1967 and the new clause (iii) fixing 1\ugust 31, 1967 to operate simultaneously. The effect of introduction of the nev.· fictional date was to annihilate the earlier fictional date. The appellants, therefore, di~ not stand automatically absorbed by the failure of the State Government to pass the necessary orders by March 31, 1967, as its powers stood extended by the subsequent amendn1ent to August 31, 1967. Before that date expired the State Government, in both cases, passed the necessary orders terminating the services of the appellants as they were not found fit for absorption. [839 D-F].

2. (a) The entrustment to the State Government of the work of determining the suitability or otherwise of officers and servants of the erstwhile Municipal Boards and other local authorities for absorption in the newly created Cen-tralised Services under s. 112A, imposed corresponding duty or obligation on the Government to hear the officers and servants concerned. All such officers were, therefore, entitled to be heard in the matter of final absorption irrespective of their salary. [841 A; 843 FJ.

(b) By virtue of the repealing provision contained in s. 581 of the Adhiniyam, 1959 the various Municipal Boards and other local authorities constituted under the relevant Acts ceased to exist as result of which the existing posts held by the officers and servants in these bodies stood abolished. Consequent upon the abolition of the posts, all the officers and servants of the erstwhile local bodies lost their right to hold their posts. The Adhiniyam, however, provided by s. 577(e) and (ee) for provisional absorp· tion or ten1porary appointment of these officers and servants till substantive appointments were made and these officers and servants were treated as on deputation with the Municipal Corporations. Therefore, in the very nature of things the officers and servants provisionally absorbed under these sections could not be auton1atically obsorbed in the ntwly created Centralised Servi.:c:s. 1here had to be screening of all of them for determining their suitability for final absorption in the Centralised Services. [840 A; B·F]( c) The very nature of the functions entrusted to . the State ·Governn1ent under ,r. 6(2) (iii) of the Rules implies duty to act in quasi·judicial manner. Unless the State Government's orders conformed to the rules of natural justice, the orders were liable to be struck down as invalid. [840 841 B].

(d) It is not correct to say that it is incumbent only on the Divisional Committees to give an opportunity of personal hearing and that the State Government was absolved of the duty to hear in respect of officers drawing Rs. 500/- and above. The first Circular dated January 11. 1967 was all pervasive and the Government's policy was made quite clear in it. The second Circular dated January 31, 1967 was equally subject to the Govern-ment policy. All the officers and servants of the erstwhile Muncipal Boards and other local authorities were, therefore, entitled to be heard in the matter of final absorption irre·spective of their salary. [843 E, A, D].

In the case of ... A..H on an overall view of the records it cannot be said that the Divisional Con1mittee was wrong in recommending to the Government to tern1inate his services. The Government was within its right in passing the impugned ordtr of termination in regard to him. [844 C]

In regard to RA before passing the impugned order of temination of ser-vices, the Minister for Local Self·Government did not give him an opportunity of hearing. The procedure laid do\vn in the Centralised Services Rules was not followed. The State Government could decide on the question of his absorption only after he was found fit but that has not been done. The order passed by the State Gove1nment, therefore, suffers from serious legal infirmity. [844 D-F].

By separate notifications issued under section 3 of the U.P. Maha-palika Adhiniyam, 1959, the State Government constituted Municipal Corporations In five cities in the State, namely Kanpur, Agra, Varanasi, Allahabad and Lucknow w.e.f. February 1, 1960.

The appellant in the present appeal, Mohd. Rashid Ahmad was permanent As~istant Engineer in the Development Board, Kanpur, constituted under the Cawnpore Urban Area Development Act, 1945. In 1953, an Administrator was appointed of both the Development r Board and the Municipal Board, Kanpur, constituted under the U.P. Municipalities Act, 1916, under the U.P. Local Bodies (Appointment of Administrators) Act, 1953. The two local bodies, however, continued to have separate legal existence and their officers and servants conti-nued as the employees of the respective bodies. The appellant Mohd. Rashid Ahmad was appointed as Offg. Executive Engineer by the Administrator of the Municipal Corporation, Kanpur, for period of one year on September 12, 1960. He has since then continued to function in the same capacity, on purely temporary arrangement under s.577 ( ee), that is, for so long as no substantive appointment could be made to that post under s.106. The Uttar Pradesh Public Service Commission, however, considered that he was not fit for appointment for the post of the Executive Engineer, Municipal Corpo-ration, Kanpur.

The appellant irt the connected appeal, Ashfaq Hussain was per-manent Sanitary Inspector in the Municipal Board, Kanpur. After the constitution of the Municipal Corporation, Kanpur, he continued to hold that post under s. 577(e). On July 24, 1967 he was transferred in the same capacity to the Municipal Corporation, Allahabad, where he was promoted temporarily as an Assistant Engineer. He, therefore, stood provisionally absorbed under s.577 ( e) . Both the U.P. Nagar Mahapalika Adhiniyam, 1959, and the U.P. Municip::lities Act, 1916 empowered these local bodies to appoint their employees subject to certain regulatory control by the State Govern-ment. By s. 12 of the U.P. Nagar Mahapalika (Sanshodhan) Adhi-niyam, 1964, the State Legislature added s. 112A to the U.P. Nagar-Mahapalika Adhiniyam, 1959. Similarly, by s.37 of the U.P. Muni-cipalities (Amendment)· Act, 1964, s.698 was added to the U.P. Municipalities Act, 1916, which was identical in terms to s.112A. Section 112A of the Adhiniyam empowered the State Government to provide by rules for the creation of one or more services to be known as Centralised Palika Services, as it may deem fit and proper, common to all the Municipal Corporations and Municipal Boards, and prescribe the method for recruitment and conditions of service of persons appointed to any such service.

Section 112A of the U.P. Nagar Mahapalika Adhiniyam, 1959, ena-Cts

"112A. Centralization of services.-(1) Notwithstand-ing anything contained in section 106 to 110, the State Gov-. emment may at any time by rules provide for the creation of one or more services of such officers and servants as the State Government may deem fit, common to the Mahapalikas or to the Mahapalikas and Municipal Boards, of the State, and prescribe .the method of recruitment and conditions of service of persons appointed to any such service.

(2) When any such service is created, officers and ser-vants serving on the posts included in the service, as well as officers and servants performing the duties and functions of those posts under sub-clause ( 1) of clause ( ee) of section 577 may, if found suitable, be absorbed in the service, pr<>-visionally or finally, and the services of others shall stand determined, in the prescribed manner.

( 3) Without prejudice to the generality of the provisions of sub-sections (1) and (2), such rules may also provide for

consnltation with the State Public Service Commission in res-pect of any of the matters referred to in the said sub-sec-tions."

The State Govermnent in exercise of the powers conferred by sec-B tion 112A of the U.P. Nagar Mahapalika Adhiniyam, 1959 and s.69B of the U.P. Municipalities Act, 1916, made the U.P. Palika (Centralis-ed) Services Rules, 1966, which came into force on July 9, 1966. Rule 3 created 19 Palika (Centralised) Services, covering 76 posts, common to all the Municipal Corporations and Municipal Boards. The rules provided for regulating the recruitment and conditions of service of the persons appointed to these newly created services. Rule 6 dealt with recruitment to the Centralised Palika Services. Due to inadvertence r.6 was not drafted in conformity with the requirements of s.112A and s.69B. That was because cl.(l) provided for automatic final absorption of officers and servants provisionally absorbed under s.5_77(e), contrary to the provisions of s.112A of the Adhiniyam and s.69B of the Municipalities Act.

On September 5, 1966, the Governor promulgated the U.P. Local Self-Government (Amendment) Ordinance,, 1966, which was replaced by the U.P. Local Self-Government Laws (Amendment) Act J 966. Section 19 of the Act reads as follows:

"19. Deeming, validation, etc. The U ttar Pradesh Palika (Centralised Services Rules, 1966, shall be deemed to have been made under the provisions of the. Uttar Pradesh Nagar Mahapalika Adhiniyam, 1959, and the U.P. Munici-palities Act, 1916, as if the a!llendments made by this Act to the said Acts were always in force and be deemed to be and always to have been valid and shall, subject to any amend-ments made thereto, continue in force, and notwithstanding anything contained in the said Acts, the power to make amendments to the said rules may, during th'e period ending on September 4, 1967, be exercised retrospectively."

It, in effect, amended section 112A of the Adhiniyam and s.69B of the Municipalities Act. Section 4 of the Act provided that the U.P. Palika (Centralised) Services Rules, 1966 shall be deemed to be valid. The Act further provided that the amendments made to the rules may be given retrospective effect. The power of making retrospective rules was, however, limited to period of one year from the commencement of the ordinance.

On October 10, 1966, the State Government passed the U.P. Palika (Centralised) Services (Amendment) Rules, 1966. These rules re-pealed and re-enacted r.6 with retrospective effect from July 9, 1966. Under cl. (ii) of r.6(2) the State Government had to pass final order of absorption, in respect of particular officers and servants of the erst-while Municipal Boards, if they were found suitable, in accordance with' s.112A of the Adhiniyam. Clause (iii) provided that such orders had to be made on or before March 31, 1967. By cl.(iv) if no orders of final absorption were passed till then, the officer or servant concerned was to be deemed to have been finally absorbed. The State Govern-ment was, however, constrained to make the U.P. Palika (Centralised) Services (Amendment) Rules, 1967 on March 30, 1967 and amend cl. (iii) of r.6(2), as the work of final absorption could not be completed by March 31, 1967. The date of passing the necessary orders in that behalf was sought to be shifted to June 30, 1967. new cl. (iii) was accordingly substituted by this amendment effected on March, 30, 1967. But, unfortunately the amendment was made to come into effect from April 1, 1967. This created serious legal infirmity, as on the expiry of March, 31 1967, the legal fiction embodied in cl. (iv) was brought into play.

Thereafter, the State Government made the last amendment to the U.P. Palika (Centralised) Services (Amendment) Rules, 1967 on June 26, 1967, in supersession of the U.P. Palika (Centralised) Ser-vices (Amendment) Ruies, 1967 made on March 30, 1967. This ' '\..... amendment introduced new cl.(iii) to r.6(2), in place of the existing - cl.(iii) of U.P. Pa!ika (Centralised) Services Rules, 1966, by which the date of passing the order was shifted from March 31, 1967 to August 31, 1967, with retrospective effect from July 9, 1966.

Having provided for the creation of Centralised Palika Services, the State Government had, in the meanwhile, laid down the procedure by which an office or servant provisionally absorbed under s. 577 ( e) of temporarily appointed under s.577(ee), were to be finally absorbed, if found suitable, under s.112A. By its three circulars dated January 11, 1967; January 31, 1967 and February 23, 1967, addressed to the Divisional Commissioners, it intimated the constitution of Divisional Committees for making necessary recommendations to the State Gov-ernment in this behalf. The first circular embodied the Government policy in these terms:

"Government desire. that all officers and servants, whose services are proposed to be determined on grounds of unsnita-

83 4 SUPREME COURT REPORTS

bility may be given an opportunity of personal interview by the Committee."

After such interviews, the Committees were to finalise their re-commenda!!ons and furnish the same to the Government. In view of the limited time available to the Government, for finalising action in 8 the matter, it was desired that the first meeting of the Committees should be held in the last week of January or in the first week of February, 1967. The Divisional Commissioner were required to intimate the date to the Secretary to the Government, Local Self-GG>v-emment Department, so that all necessary arrangements could be made to forward the character rolls and service records of the Centralised Services officers and servants.

By the second circular, the State Government re-constitnted the Committees, so far as the five Mnnicipal Corporations were concerned, and directed that these Divisional Co=ittees were to make selections for all C";entrali:sed Services except those whose starting salary was Rs. 500 /- and above. Selection for the posts in the latter category were to be made by the State Selection Committee. Thus, the Gov-ernment divided the officers J!cnd servants into two categories, and their cases were to be dealt with at two different levels for purposes of final absorption under r.6(2)(iii) read with s.112A.

By its third circular, the State Government without disturbing the earlier categorisation of officers and servants into two classes, laid down certain broad criteria with view to secure reasonable uniformity in -the standards to be applied by the Divisional Committees in making the selection. It may, however, be observed that the Government reitera-ted its declared policy that all such officers and servants, whose services were proposed to be determined on the ground of unsuitability be given · an opportunity of personal interview by the Committees stating:

" .. the committee should interview the official concerned to judge his suitability or otherwise for absorption in the centralised services.

... When it is proposed to declare an official to be unsui-table for absorption on the basis of adverse entries, the divi-sional co=ittee should afford an oppof!unity to the official concerned to appear before it and clear up his position."

It was also desired that only those adverse remarks may be consi-dered against the official concerned, which were found to have been duly co=unicated to him.

It must at ouce be stated that though the State Government had by its circular dated January 31, 1967 eJ!trusted the task of determining the suitability or otherwise of officers and servants holding Centralised Services posts drawiDi') less than Rs. 500/-, to Divisional Committees, and reserved such fnnction in respect of officers and servants drawing Rs. 500 /- or more, to the State Selection Committee, and by its subse-quent circular dated February 23, 1967 maintained the classification of such officers and servants for purposes of judging their suitability for absorption in the Centralised Palika Services, the final orders of absorp-tion in each case under s.112A were passed by the State Government. In the former class, the recommendations of Divisional Committees were scrutinised by the State Government in the Local Self-Govern-ment Department, in the light of the service records of the officials concerned, and the necessary orders thereon were passed. In respect of the latter category, the Secretary to the Government, Local Self-Government Department prepared note and put it up for the Minister for passing the final orders.It is also worthy of mention that the delay in completing the work of final absorption by the State Government was mainly due to three factors, namely; (1) due to shortness of the time available at its dis-posal, (2) the number of officers and servants holding the Centralised Services posts under s.577(e) and (ee) was quite large, and (3) because of delay on the part of the erstwhile Mnnicipal Boards to for-ward the character rolls and service records of the officers and servants concerned. On account of this, the task of absorpti011 under s.l 12A could not be completed before March 31, 1967 i.e., the date originally fixed by cl. (iii) of r.6(2) of the U.P. Palika (Centralised) Services Rules 1966. The period was, therefore, subsequently extended from Mqrch 31, 1967 to !une 30, 1967, and thereafter from March 31, 1967 to August 31, 1967.

Eventually, the State Government in exercise of its powers under cl.(iii) of r.6(2) of the U.P. Palika (Centralised) Services Rules, 1966 determined the services of the appellant Mohd. Rashid Ahmad on July 18, 1967 and that of Ashfaq Hussain on August 27, 1967, on the ground that they were not found fit for absorption under s.112A of the Adhiniyam. The two appellants and several other employees of the erstwhile Municipal Boards and District Boards challenged the validity of the various orders passed by the State Government terminating their scr-vices before the Allahabad High Court on several grounds. Amongst others, they challenged the validity of r.6(2) (iii), framed under s. 112A

of the Adhiniyam, on the ground that it was ultra vires the State Gov-ernment as it brings about e,xtinction of the relationship of employer and employees between them and the erstwhile Municipal Boards. It was also urged that the impugned orders were violative of Articles 14 and 16 of the Constitution because the classification made by the State Government by its circular dated January 31, 1967 entrusting the task of determination of the suitability or otherwise of officers and servants holding Centralised Services posts drawing less than Rs. 500/- to Divisional Committees, which were enjoined to give them the right of personal hearing to have their say in the matter of final absorption, and entrusting of such function in respect of officers and servants draw-c ing Rs. 500/- and above to the State Selection Committee without corresponding right of hearing, was without any rational basis. It was also urged that the impugned orders were vitiated being in breach of the rules of natural justice. Division Bench of the Allahabad High Court, however, rejected all these contentions.

In view of the language of Entry 5, List II of the Seventh Schedule, the objection regarding the validity of r.6(2)(iii) was rightly not pres-sed before us. On the view that we take of the various circulars issued l!Jy the State Government laying down the procedure for dealing with the question of suitability or otherwise of officers and servants of the erstwhile Municipal Boards for absorption in the Centralised Services under r.6(2) (iii) the contention based on Articles 14 and 16 of the Constitution also does not arise.

Learned counsel appearing for the appellants assailed the impugned orders of the State Government on two grounds, namely:

1. By reason of the legal fiction contained in cl.(iii) of r.6(2), the services of the appellants stood finally absorbed in the U.P. PaHka Centralised Services on March 31, 1967 due to the failure of the State Government to pass the necessary orders in that behalf before that date. Under the legal fiction contained in cl. (Iv) thereof, and the subsequent amendment made by the U.P. Palika (Centralised) Services (Amendment) Rules, 1967 which came into force on April 1,, 1967, the vested rights acquired by them to hold their res-pective posts could not be affected to their detriment; and

2. The orders of termination of services passed by the State Government were vitiated due to it's failure to give to the. appellants an opportunity of hearing.

... /; •.

With respect to the first contention i! is urged that the appellants stood provisionally absorbed under s. 577{e) read with cl(i) of r.6(2). It is said that they would be deemed to have been finally absorbed on March 31, 1967, if no orders contemplated by cl.(ii) thereof were made with respect to them on or before that date. Tue argnment is that the two subsequent amendments made on March 30, 1967 and June 26, 1967, by which the State Government purported to shift the date first from March 31, 1967 to June 30, 1967 and then from March 31, 1967 to August 31, 1967, were legally ineffective, as the first amendment made to cl.(iii) of r.6(2) came into force on April 1, 1967 by which date the appellants already stood finally absorbed. There was, therefore, no power i!! the State Government to re-open the question of final absorption under s. 112A(2) of the Adhiniyam.

There is fallacy in the argument. The validity of the two amend-ments made by the State Government in r.6(2) from time to time cannot be questioned. While it is true that rule cannot be made with retrospective effect, the legislature by enacting s.19 of the U.P. Local Self-Government (Amendment) Act, 1966, expressly conferred powers on the State Government to make retrospective rules. In-deed, the validity of the amendments was not questioned before us.

Even if the first amendment of March 30, 1967 was ineffective because it was brought into force from April 1, 1967, the second \'- amendment of June 26, 1967, which introduced new clause (iii) to r.6(2) with retrospective effect from July 9, 1966, was fully effective. It shifted the date for passing of the order of final absorption from March 31, 1967 to August 31, 1967. Till the expiry of the date now fixed, i.e. Angus! 31, 1967, the legal fiction contained in cl. (iv) of r.6(2) would not be brought into play. That is the inevitable legal consequence of the subsequent amendment made on June 26, 1967 .

It would be clear .that cl. (iii) of r. 6(2), as amended on October 10, 1966, gave power to the State Government to pass an order of absorp-tion under s. 112A of the Adhiniyam, of an officer or servant of the Municipal Corporations provisionally absorbed under s. 577 ( e) if fonnd suitable, on or before March 31, 1967. If there was failure on the part of the State Government to pass such an order in respect of parti-cular officer or servant by that date, it would, unless there was provi-sion to the contrary, bring into play the legal fiction contained therein, and he would, by its force, be deemed to be finally absorbed in the post held by him. I 5-40SCI /79

[19791 2 s.c.K.

The State Government in their return have candidly stated that due to inadvertence, the subsequent amendment effected on March 30. 1967, wa·s made to take effect on April 1, 1967, by which date the legal fiction under cl. (iv) had already taken effect. It, therefore, became necessary to correct the serious legal infirmity. It was for that reason that the subsequent amendment was made on June 26, 1967 by which new cl. (iii) was substituted in place of the existing cl. (iii) to r.6(2). The amendment substituted new cl. (iii) tor. 6(2) with effect from July 9, 1966 i.e., from the very inception.It was legitimately within the powers of the State Government to give to the amended rule retrospective effect. As re'sult of the amendment, the original cl. (iii) was substituted by new cl. (iii) by which the date for passing an order of absorption by the State Govern-ment was shifted to August 31, 1967, which again introduced another legal fiction. It provided that if there was failure on the part of the State Government to pass an order of absorp•ion by August 31, 1967, the officer or servant concerned shall be deemed to be finally absorbed. This legal fiction was brought into force with effect from July 9, 1966. It is needless for us to stress that both the legal fictions, onu created by the original cl. (iii) fixing the fictional date of absorption as March 31, 1967 and the subsequent legal fiction providing for the fictional date of absorption as August 31, 1967, could not co-exist. With the subse-quent amendment effected on June 26, 1967, the earlier legal fiction ,,r was never brought into play, a's by reason of the amendment, the State · Government had the power to pass the necessary orders till August 31, 1967. The introduction of the second fictional date i.e., August 31, 1967, was to "eclipse" the earlier fictional date of absorption.

Perhaps no rule of construction is more firmly e.stablished than this-that retrospective operation is not to be given to statute so as to impair an existing right or obligation other than as regards the matter of procedure, unless that effect cannot be avoided without doing violence to the language of the enac•ment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only. But where, as here, it is expressly stated that an enactment shall be retrospective, the courts will give it such an operation. It is obviously competent for the legislature, in its wisdom, to make the provisions of an Act of Parliament retrospective .. That is precisely the case here. In Quinn v. Prairiedale(') where subsequent enactment provided that the relevant section 'should be

(I) [1958] 25 W.L.R. 241.

[[,, ]]'·· I

deemed never to have been contained in the earlier statute, it was held to be sufficient to rebut the presumption against retrospectivity. (')

In State of Punjab v. Mohar Singh(') and in lnder Sohan Lal v. Custodian of Evacuee Property Delhi & Ors.(') this Court had to consider the effect of repeal of an enactment followed by re-enactment in the light of s. 6 of the General Clauses Act, 1897. The line of enquiry, as observed in Mohar Singh's case, would be not whether the new Act expressly keeps alive old rights and liabilities, but whether it 'manifests an intention to destroy them'. It was held that s. 6 of the General Clauses Act was not entirely ruled out when there was repeal of the enactment followed by fresh legislation un:ess the new legisla-tion manifested an intention to the contrary. Such incompatibiUy tad to be ascertained from consid:eration of all the relevant provisions of the new law and the mere absence of saving clause was, by itself, not conclusive.In the present case, however,, there can be no doubt that by the in-troduction of the new fictional date of absorption as August 31, 1967, there was clear intention to destroy the earlier fictional date of March 31, 1967. Itwould clearly be incompatible, on consideration of subse-quent amendment, for both the provi'sions, i.e., the original cl. (iii) fixing March 31, 1967 and the new cl. (iii) fixing August 31, 1967 to be the fictional date, to operate simultaneously. The effect of introduc-tion of the new fictional date was to annihilate the earlier fictional date. The appellants, therefore, did not stand automatically absorbed by the failure of the State Government to pass the necessary orders by March 31, 1967, as its powers stood extended by the subsequent amendment to August 31, 1967. Before that date expired, the State Government in both these cases, passed the necessary orders terminating the services of the appellants as they were not found fit for absorption under s. l 12A ( 2) of the Act. The first contention, therefore, fails.

That takes -us to the second contention, namely, whether the im-pugned orders are vitiated on account of the failure of the State Gov-ernment to afford to the appellants an opportunity of hearing.

With the establishment of Municipal Corporations in five cities in the State, namely, Kanpur, Agra,, Varanasi, Allahabad and Lucknow, w.e.f. February 1,_ 1960, the Municipal Boards, Improvement Trusts, Development Boards etc. in these cities, ceased to exist with the

(1) Craie!I on Statute Law, 6th Ed., p. 390, and Maxwell on the Interpretation of Statutes, 12th Ed., p. 216.

(2) [1955) 1 S.C.R. 893 [1955) 2 S.C.R. 1117

[1979] 2 s.c.R.

repeal, by s.581 of the U.P. Nagar Mahapalika Adhiniyam, 1959, of the U.P. Municipalities Act, 1916, the U.P. Town Improvement Act, 1919, the U.P. District Boards Act, 1922, the Cawnpore Urban Area Development Act 1945, the U.P. Local Bodies (iAppointment of Ad-ministral!or) Act 1953, with effect from that date, in relation to these cities. In consequence thereof, the existing posts held by the .officers and servants of these bodies stood abolished. Consequent upon the abolition of the posts, all officers and servants of the erstwhile local bodies lost their right to hold their posts.

The Adhiniyam, however, provided by s.577(e), notwithstanding anything contained in ss.106 and 107, for the provisional ~bsorption of these officers and servants in the Municipal Corporations, till they were finally absorbed in any Centralised Services created by rules made under s. l 12A, or their services did not stand determined in accordance with such rules. By s.577 ( ee) the Administrator was authorised to make temporary appointments of officers and servants against the posts mentioned in s.106 till substantive appointments were not made thereto as provided in the Adhiniyam, and they were to be treated a·s on deputation with the Municipal Corporations.

This was, not doubt, an ad interim arrangement until the State Government by rules framed under s.112A(l) provided for the crea-tion of the Centralised Palika Services, common to all the Municipal Corporations and Municipal Boards, and made final absorption of officers and servants serving on the posts included in such Centralised Services under s.112A(2). In !he very nature of things, the officers and servants provisionally absorbed under s.577(e) or temporarily appointed under s.577 ( ee) could not be automatically absorbed in the newly created Centralised Services. There had to be screening of all such officers and servants with view to determine their suitability or otherwise for final absorption in Centralised Services. It was parti-cularly necessary to weed out the dead-wood to bring about an over-all improvement in the municipal administration in these cities.The very nature of the functions entrusted to the State Govern-ment under r.6(2) (iii) of the U.P. Palika (Centralised) Services Rules, 1966 for purposes of final absorption under s.112A of the Adhiniyam, implies duty to act in quasi-judicial manner. It cannot be denied . that an officer or servant provisionally absorbed under s.577(e) or temporarily appointed under s.577 ( ee) had the right to be considered for purpo'ses of final absorption. Such officers or servants, particularly those in permanent employment who had put in 20 to 25 years of ~ervice in the erstwhile Municipal Boards or Development Boards were vitally affected in the matter of fin:il absorptio,n.

By s.112A of the Act, the legislature created machinery for determining the suitability or otherwise of such officers or servants for absorption in the newly created Centralised Services. The entrustrnent of this work to the State Government under s.112A, imposed corres-ponding duty or obligation on the Government to hear the officers and servants concerned. In view of this, it is rightly urged that the impugn-ed orders, unless they conform to the rules of natural justice, were liable to be struck down as invalid.

It is fundamental rule of law that no decision must be taken which will affect the rights of any person withou\ first giving him an opportu-nity of putting forward his case. In Local Government Board v. Arlidge(') Lord Haldane, L. C. tried to re-<:oncile the procedure of Government department with the legal standards of natural justice. In Ridge v. Baldwin & Ors.(') Lord Reid stated :

"It is not suggested that he holds the position of judge or that the appellant is entitled to insist on the forms used in ordinary judicial procedure, but he had 'a duty of giving to any person agains! whom the complaint is made fair oppor-tunity to make any relevant statement which he may desire to bring forward and fair opportunity to correct or contro-vert any relevant statement brought forward to his prejudice."

These decisions rest on the classical formulation of the "duty to hear" evolved by Lord Loreburn in Board of Education v. Rice.(') The main requirements of fair hearing are two:

(1) person must know the case he is to meet, and (2) he must have an adequate opportunity of meeting that case.

There has, ever since the judgment of Lord Reid in Ridge v. Baldwin (supra), been considerable fluctuation of judicial opinion in England as to the degree of strictness with which the rules of natural justice should be extended, and there is growing awareness of the pro-blems created by the extended application of natural justice, or the duty to act fairly, which tends to sacrifice the administrative efficiency and despatch, or frustrates the object of the law in question. Since this Court has held Lord Reid's judgment in Ridge v. Baldwin would be of assistance in deciding questions relating to natural justice, there is always "the dnty to act judicially". There is, therefoce, the insistence upon the requirement of "fair bearing".

(1) L.R. 1915 A.C. 120 (2) L.R. 1964 A.C. 40 (3) L.R. 1911 A.C. 179

In A. K. Kraipak v. Union of India(') there was reiteration of the principlei;, albeit in different form, laid down by this Court in Dr. (Miss) Binapani Devi v. State of Orissa(') aud by the House of Lords in Padfield v. Minister of Agriculture, Fisheries & Food(') that the executive should not arbitrarily or capriciously act and that the myth of executive discretion is no longer there. Indeed, in Kraipak's case (supra) it was observed: "The dividing line between an administrative power and quasi-judicial power is quite thin and is being gradually obli-terated .... Under our Constitution the rule of law prevades over the entire field of administration. Every organ of the State under our Constitution is regulated and controlled by the rule of law. In welfare State like ours it is inevitable that the jurisdiction of the administrative bodies is increas-ing at rapid rate. The concept of the rule of law would lose its vitality if the instrumentalities of the State are not charged with the duty of discharging their function in fair and just manner. The requirement of acting judicially in essence is nothing but requirement to act justly and fairly and not arbitrarily or capriciously. The procedures which are considered inherent in the exercise of judicial power are merely those which facilitate if not ensure just and fair decision. In recent years the concept of quasi-judicial power has been undergoing radical change. What was considered as an administrative power some years back is now being considered as quasi-judicial power."

This Court pertinently drew attention to the basic concept of natu-ral justice vis-a-vis administrative and quasi-judicial enquiries, and stated that any decision, whether executive, administrative or judicial or quasi-judicial, is no decision if it cannot be "just", i.e. an impartial and objective assessment of all the pros and cons of case, after due hearing of the parties concerned.

In the light of thei;e principles, we have to see whether the State Government acted in breach of the rules of natural justice in passing the impugned orders.

It is, however, strenuously urged on behalf of the State Govern-ment that on true construction of the two circulars in question, while it was incumbent on !he Divisional Committees to give all officers

(I) [1970] I S.C.R. 457,

(2) [1967] 2 S.C.R. 625.

(3) L.R. [1968! AC 997.

:and servants whose services were proposed to be determined on the ground of unsuitability, an opportunity of ~ personal hearing, no such duty was cast on the State Government. We are unable to agree with this line of reasoning. The first circular dated January 11, 1967 was all pervasive, and it covered all categories of officers and servants either provisionally absorbed under s.577(e) or temporarily appointed under s.577(ee), irrespective of their salary. The Government policy was made quite clear in that circular, which we have quoted earlier.At this stage, the functions of the Divisional Committees were to be purely recommendatory in nature. The Committees had to make their selection of officers and servants suitable for absorption after an inter-view of all such officers and servants, and forward their recommenda-tions to the Government, for finalising action in the matter of final absorption under s.112A. The subsequent circular dated January 31, 1967, making categorisation of the officers and servants concerned, into two groups, reserving the power of selection for final absorption to the State Selection Committee in case of all Centralised Services whose starting salary was Rs. 500/- and more, and entrusting the function to the Divisional Committees in case of those whose starting salary was less than Rs.500/-, was still subject to the Government po!ky already laid down. It is, therefore, not right to suggest that the State Gov-ernment was absolved of the "duty to hear" the officers and servants of the erstwhile Municipal Boards and other local authorities drawing Rs. 500/- and above

All the officers and servants of the erstwhile Municipal Boards and other local authorities provisionally absorbed under s.577 ( e) or tem-porarily appointed under s.577 ( ee) were therefore, entitled to be heard in the matter of their final absorption under s.112A read with r.6(2) (iii), irrespective of their salary.

The requirements of fair hearing are fulfilled in the case of offi-cers al)d servants of the erstwhile Municipal Boards and other local authorities drawing salary of less than Rs. 500/- but not in the case of tho5e drawing Rs. 500/- or more.

It is accepted before us that the appellant Ashfaq Hussain was called for an interview by the Divisional Committee. The State Gov-ernment in its return has placed material showing that he had uni-formly bad record and there were adverse entries in his character rolls for several years. It is not disputed that Ashfaq Hussain had been called for an interview by the Divisional Committee. We are not im-pressed by the submission that the adverse remarks were not put to l1in\ when he appeared before the Divisional Committee. It is clear

from the two circulars of the State Government dated J anuarv 11, 1967 and February 23, 1967 that in all cases in which the servi~es of an officer or servant were to be determined on the ground of his; unsuitability, they were to be given an opportunity of personal inter-view by the Committee. The whole purpose of the personal interview was that when it was proposed to declare such a.!l official unsuitable for absorption, the Committee, had to afford an opportunity to appear before it and clear up his position. It is reasonable to presume that when the appellant, Ashfaq Hussain, was called for that purpose, the adverse remarks in his character rolls; must have been put to him. On an overall view of the record of service of Ashfaq Hussain, the Divi-c sional Committee was not wrong in recommending to the Government to terminate his services, and the Government. was within its rights in passing the impugned order of termination in regard to him.

In the case of the appellant Mohd. Rashid Ahmad, it however appears from the return filed by the State Government that no such opportunity was afforded to him before the State Government passed the impugned order dated July 18, 1967 termiuatiug his services. It is. evident, no doubt, from the return filed by the State Government that the service record of the appellant was before the Government, on the basis whereof it was decided that he was unsuitable for being finally absorbed and also that the Secretary for Local Self-Government in his note of July 10, 1967 recommended that he was not suitable for final absorption in the Centralised Services, bnt it is clear that the Minister for Local Self-Government before passing the impugned order of ter-mination dated July 11, 1967 did not give to the appellant an opportu-nity of hearing. The order of termination of his services passed by the State Government, therefore, suffers from serious legal infirmity.

It was said, however, on behalf of the State Government that under s. l 07 (1) of the Adhiniyam no appointment to post carrying arr initial salary of not less than Rs. 500 /- per mensem, could be made except after consultation with the Public Service Commission, and that the Commission did not find the appellant fit for appointment as Executive Engineer, Municipal Corporation, Kanpur. It was also pointed out that under s. 108 the appellant could not hold the post beyond the period of one year. It was, therefore, urged that the State Government was justified in terminating the services of the appellant as he could not be finally absorbed in the post of an Executive Engineer in the Centralised Services. It was said that the post had to be advertised for filling up the vacancy as required under s. 107 of the Adhiniyam. We are afraid, the contention cannot be accepted.

Unl!ler s. 112A(l) of the Adhiniyam, the State Government having by U.P. Palika (Centralised) Services Rules, 1966, constituted the Centralised Palika Services, the appellant Mohd. Rashid Ahmad, who was performing the duties and functions of the post of Executive Engineer under s. 577 ( ee), was entitled to be considered, if found suitable, for absorption under s.112A(2). Admittedly, the appellant was not heard in the matter of his final absorption. It is also not in dispute that the procedure laid down in the U.P. Palika (Centralised) Services. Rules, 1966, was not followed. If the appellant was at all found fit for absorption, it was for the State Government next to decide the suitable post on which be could be absorbed. The method of rec-rnitment provided by r. 20 had to be followed. Evidently, this has not been done.

In view of the fore-going reasons, Civil Appeal No. 1724 of 1969 succeeds and is allowed, while Civil Appeal No. 1732 of 1971 fails and is dismissed. There shall be no order as to costs.

C.A. 1724/69 allowed. C.A. 1732/il dismissed.