Through L.R.S. Vs. Commanding Officer HQ S.A.C.(U)& Ors.  INSC 845
(28 April 2009)
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 3495 OF 2005 R.R. Pillai
(dead) through Lrs. ...Appellants Versus Commanding Officer HQ S.A.C. (U) and
Ors. ...Respondents (With Civil Appeals Nos. 3557-3559, 3560 and 3561 of 2005)
Dr. ARIJIT PASAYAT,
correctness of the view of this Court in Union of India v. Mohd. Aslam (2001
(1) SCC 720) reference has been made to a three-Judge Bench and that is how
these appeals are before this Bench. The controversy lies within a very narrow
issue is as to the status of an employee of Unit Run Canteen in Armed Forces.
While admitting Civil Appeal No.3495/2005 the matter was referred to a larger
Bench as noted above and other cases were tagged with Civil Appeal No.3495 of
2005. We shall deal with the factual scenario in Civil Appeal No.3495 of 2005
and after deciding the legal issues involved, apply the decision to the other
Shri R.R. Pillai was recruited as Airman in the Indian Air force on 7.10.1967
and was discharged from service on 31.10.1988 as Junior Warrant Officer as he
sought for premature retirement from service. Before his discharge he had been
looking after the affairs of the Unit-Run-Canteen (in short the `URC'). After
discharge he was engaged as Manager of URC at Southern Air Command on an
honorarium of Rs.1,000/-P.M. w.e.f 1.2.1989.
Para 6 of the
appointment letter clearly stated that the appointment was governed by the
terms and conditions as laid down in Air HQ letter No.20728/P/Org dated 31st
January, 1984 issued under the relevant Regulations. The terms and conditions
of service of canteen employees are covered by the rules called "The Rules
regulating the Terms and Conditions of Service of' Civilian Employees of Air Force
Unit Run Canteen paid out of Non Public Funds".
to the appellant the view taken in Mohd Aslam's case (supra) is the correct
view, it is stated that even if Canteen Store Department (in short the `CSD')
was not the source of funding, other parameters clearly cover the employees in
question of Government service.
is made to certain decisions to support the stand, e.g., Kona Prabhakara Rao v.
M. Seshagiri Rao and Anr. (1982 (1) SCC 442 (para 9) and Satrucharla
Chandrasekhar Raju v. Vyricherla Pradeep Kumar Dev and Anr. (1992 (4) SCC 404
at 412). Even if full funding is not there partial funding by quality discount
is there which is the test for determining as to which employee is a government
servant. Reference is also made to certain subsequent decisions in which
Aslam's case (supra) has been referred to. It is pointed out that on the date
the OAs were decided, Aslam's case (supra) was applicable and therefore de
facto doctrine would apply. In any event, it is stated that Rule 24 cannot take
out the benefits in the manner done. The High Court had not considered the
challenge to Rule 24. It is pointed out that the decision which has been given
can only be re-considered for compelling reasons and the view taken in Aslam's
case (supra) is a possible view. In any event, the appointing body is an
instrumentality of State and, therefore, Articles 14 and 16 of the Constitution
of India, 1950 (in short the `Constitution') are applicable. With reference to
Section 23 of the Indian Contract Act, 1923 (in short the `Contract Act') it is
stated that Section 23 of the Contract Act clearly prohibits the appointments
in the manner done.
counsel for the Union on the other hand submitted that Aslam's case (supra)
proceeded on erroneous factual basis. It proceeded on the basis as if the
canteen or the establishment in question was funded by the CSD. The issue is
not whether it is an instrumentality of the State. Issue is whether the
concerned employees are government employees. It is submitted that Union of
India and Anr. v. Chote Lal (1999 (1) SCC 554) clearly applies to the facts of
is submitted that unit run canteen is amenable to Shops and Commercial
Establishments Statutes because the appointment cannot be made dehors the
Rules. There is no prescribed qualification or age limit.
Similarly there is no
grade or cadre. Therefore, it cannot be said that the concerned employees are
holders of civil posts.
the case of Aslam's case (supra) a Bench of this court proceeded on incorrect
factual premises inasmuch as after noticing that the URCs are not funded from
the Consolidated Fund of India, it went wrong in concluding that the URCs are
funded by CSD as well as the articles were supplied by the CSD. Unfortunately,
it did not notice that no such funding is made by the CSD. Further, only
refundable loans can be granted by the CSD to URCs at the rate of interest laid
down by it from time to time upon the application of URCs seeking financial
assistance. URCs can also take from other Non- Public Funds. Further
observation regarding supply is also not correct.
URCs, in fact,
purchase articles from CSD depots and it is not an automatic supply and
relation between URCs and CSDs is that of buyer and seller and not of principal
and the agent. This Court further went wrong in holding that URCs are parts of
CSDs when it has been clearly stated that URCs are purely private ventures and
their employees are by no stretch of imagination employees of the Government or
CSD. Additionally, in Aslam's case (supra) reference was made to Chandra Raha
and Ors. V. Life Insurance Corporation of India (1995 Supp (2) SCC 611). The
Bench hearing the matter unfortunately did not notice that there was no
statutory obligation on the part of the Central Government to provide canteen
services to its employees. The profits generated from the URCs are not credited
to the Consolidated Funds, but are distributed to the Non Public Funds which
are used by the units for the welfare of the troops. As per para 1454 of the Regulations
for the Air Force, 1964 the losses incurred by the non public funds are not to
be borne by the State.
factors highlighted to distinguish Chotelal's case (supra) in our considered
opinion are without any material. There was no scope for making any distinction
factually between Aslam's case (supra) and Chotelelal's case (supra). In our
view, therefore, Aslam's case (supra) was not correctly decided.
question whether the URC can be treated as an instrumentality of the State does
not fall for consideration as that aspect has not been considered by CAT or the
High Court. Apparently, on that score alone we could have dismissed the appeal.
But we find that the High Court placed reliance on Rule 24 to deny the effect
of the appointment. From Rule 4 read with Rule 2 it is clear classification
that all employees are first on probation and they shall be treated as
temporary employees. After completion of five years they might be declared as
permanent employees. They do not get the status of the Government employees at
any stage. In Aslam's case (supra) CAT's order was passed in 1995. By that time
1999 Rules were not in existence and 1984 rules were operative.
is to be noted that financial assistance is given, but interest and penal
interest are charged. The URCs can also borrow from financial institutions. The
reference is answered by holding that employees of URCs are not government
High Court has come to an abrupt conclusion about validity of Rule 24,
distinguishing the decision of this Court in Delhi Transport Corporation v.
D.T.C. Mazdoor Congress and others (AIR 1991 SC 101).
Present appellant had
questioned validity of Rule 24. High Court should have considered that
challenge in the proper perspective. But it is not necessary to examine that
question as the original employee R.R. Pillai has already expired. But, in the
peculiar facts of the case we direct that a sum of Rs.2 lakhs be paid to his
legal representatives within a period of three months in full and final
settlement of all his claims.
applications for intervention are dismissed.
order shall operate in respect of the appeal filed by the deceased through his
legal heirs and other appeals by the Union of India.
appeals are disposed of accordingly.
(Dr. ARIJIT PASAYAT)