Ram Autar Pandey v. State of U. P. and another

Judgement

OAK, J.:-

By this petition under Art.226 of the Constitution, validity of a Government notification lowering the age of superannuation has been challenged. Ram Autar Pandey is the petitioner. The State of Uttar Pradesh and the District Judge, Mainpuri are the two opposite Parties.

2. The petitioner was born on the 4th of May 1906. He joined service in 1929 in Mainpuri judgeship. He is at present occupying the post of Record Keeper in the said judgeship. Under R.56 of the U.P. Fundamental Rules, it was laid down that the date of compulsory retirement of a Government servant is the date on which he attains the age of 55 years. By a Government notification issued on 27-11-1957 (hereafter referred to as 1957 notification) the figure 58 was substituted for the figure 55 in fundamental rule 56. According to this notification, the petitioner could remain in service till the completion of 58 years. It was expected that he would not retire from service till May 1964.

3. On 25-5-1961, the Governor of Uttar Pradesh issued two notifications. By the first notification dated 25-5-1961 (hereafter referred to as the principal notification), it was laid down that the figure 55 shall be substituted for the figure 58 in fundamental rule 56. It was further laid down in the said notification that, a Government servant shall be deemed to have been retained in service beyond the date of compulsory retirement till the date of the notification.

4. By the second notification dated 25-5-1961 (hereafter referred to as the subsidiary notification), it was provided that Government servants falling in certain classes would be able to continue in service up to the 31st December 1961. The petitioners case falls under one of the classes mentioned in the subsidiary notification. The combined result of the two notifications is that the petitioner will have to retire from service on 31-12-1961.

5. The petitioners contention is that, he is entitled to remain in service till May 1964, when he would complete 58 years. According to him, the two notifications, dated 25-5-1961 are invalid. He has, therefore, prayed for the issue of a writ of mandamus restraining the opposite parties from enforcing the two notifications against the petitioner.

6. The petitioner filed an affidavit. The Joint Secretary to U.P. Government in the Judicial Department has filed a counter-affidavit on behalf of opposite party No.1, the petitioner filed a rejoinder affidavit.

7. When the writ petition was admitted by a learned Single Judge of this Court, he referred the case to a Division Bench. It appears that the petition has been referred to a Full Bench, as questions of general importance are involved in the case.

8. In paragraph 9 of the rejoinder affidavit, it is stated that the real reason for reducing the age of retirement from 58 years to 55 years is not to increase the efficiency of public services, but; political reasons. No such allegation was made in the original affidavit filed by the petitioner. As many as thirteen grounds have been enumerated in the writ petition. But none of the thirteen grounds levies a charge of mala fides against opposite party No.1. I, therefore, decline to consider the charge made in the rejoinder affidavit that the principal notification was issued by the State Government for political reasons.

9. The writ petition is directed against the two Government notifications, dated 25-5-1961. The two notifications may be reproduced here. The first notification runs thus:

"Whereas by Government of Uttar Pradesh, Finance Department Notification No. G-I-1733/X-534(19)-57, dated November 27, 1957, rule 56 of the fundamental rules contained in Financial Handbook, Volume II, Parts II to IV was amended with effect from June 17, 1957 (hereinafter called the said date) by substituting the figure "58" for the figure "55" wherever the same occurred;

And whereas the Governor of Uttar Pradesh has, with a view to increasing efficiency in public administration and for subserving the common good, decided that the age at which Government servants to whom the said Rule 56 applies including servants who had not been compulsorily retired on or before the said date and have not attained the age of 58 years on the date of this Notification and servants who have been recruited or appointed on or after the date first referred to that is June 17, 1957 and to be recruited or appointed hereafter, shall, subject as hereafter provided be compulsorily retired, be the date on which the servant attains the age of 55 years.

Now, therefore, in exercise of the power conferred by the proviso to Art.309 of the Constitution and all other powers in that behalf, and in supersession of Finance Department Notification No.G-I.1733/X-534(19)-57 dated November 27, 1957, the Governor of Uttar Pradesh is pleased to amend the said rule as under:

(a) For the figure "58" wherever it occurs the figure "55" shall be substituted.

(b) The following shall be added as proviso at the end of cl. (a) of the said Rule:

"Provided that a Government servant who had not retired on or before June 17, 1957 but has subsequently attained the age of 55 years and has on May 25, 1961 not attained the age of 58 years, shall for the period he has continued to serve after attaining the age of 55 years be deemed to have been retained in service beyond the date of compulsory retirement i.e. the age of 55 years, within the meaning of the Rule aforesaid."

The second notification, dated 25-5-1961 runs thus:

"The Governor has carefully considered the question regarding the retention beyond the age of compulsory retirement under and in accordance with fundamental rule 56, financial handbook, vol.ii parts ii to IV, as amended by Finance Department Notification No. G-I-1233/X-534(19)-1957, dated May 25, 1961 of the Government servants mentioned in column 1 of the Schedule hereof, and has keeping in view the interest of public service and the demands of administration decided and in exercise of all the powers in that behalf is hereby pleased to grant, sanction and order that the said Government servants shall on public grounds be retained in services up to the date mentioned opposite them in column II of the Schedule hereto. This order, whenever so necessary, shall be read and construed to have been passed in the case of each Government servant hereby affected.

The Governor further directs that any Government servant who has, on or before the date of this order, already been directed in pursuance of order of sanction made or given under fundamental rule 56 to be retained in service beyond the age of compulsory retirement, shall be so retained, notwithstanding anything in this Schedule hereto.

SCHEDULE

Column I Column II

1. Government servants who have on May 25, 1961 crossed the age of 57 years. Upto the date on which be attains the age of 58 years or upto December 31, 1961 whichever is earlier.

2. Government servants who have on May 25, 1961 crossed the age of 55 years but have not crossed the age of 57 years. Upto December 31, 1961.

"3. Government servants who will cross the age of 55 years between May 25, 1961 and December 30, 1961. Upto December 31, 1961."

10. It will be convenient to give an outline of the statutory provisions which existed from time to time for regulating conditions of service of Government servants in India, with special reference to Government servants in Uttar Pradesh. Under S.96-B of Government of India Act, 1915, the Secretary of State-in-Council could make rules for regulating conditions of service. Sub-section (2) of S.241 of Government of India Act, 1935, empowered Governors of Provinces to make rules for conditions of service in the case of persons serving in connection with the affairs of provinces. In or about the year 1942, the Governor of United Provinces (now Uttar Pradesh) framed certain rules, which have been described as fundamental rules. clause (a) of fundamental rule 56 ran thus:

"Except as otherwise provided in cl. (b) the date of compulsory retirement of a government servant is the date on which he attains the age of 55 years. He may be retained in service after the date of compulsory retirement with the sanction of the Government on public grounds which must be recorded in writing, but he must not be retained after the age of 60 years except in very special circumstances."

11. article 309 of the constitution of india empowers the Governor of a State to make rules regulating the conditions of service of persons appointed in the State.

12. It will be noticed that, according to fundamental rule 56 as originally framed, the age of superannuation of Government servants in this State was 55 years. By the 1957 notification, the age of superannuation was raised to 58 years. By the principal notification dated 25-5-1961, the age of superannuation was again reduced to 55 years. The petitioner relies upon the 1957 notification. Opposite party No.1 relies upon the two notifications, dated 25-5-1961.

13. It was urged by Mr. P.C. Chaturvedi appearing for the petitioner that, the principal notification is invalid, because it purports to have retrospective effect. There is some force in this contention. The principal notification was issued on 25-5-1961. Clause (b) of the principal notification implies that, the petitioner virtually retired from service on the 3rd of May 1961, but he was given extension of service from the 4th of May 1961 till the 24th of May 1961. It is doubtful whether the Governor could make on 25-5-1961 a rule providing that, the petitioner should be deemed to have retired from service on 3-5-1961.

14. But it is not necessary to pursue the point. Under cl. (b) of the principal notification, the petitioners service from 4-5-1961 to 24-5-1961 was recognised. The subsidiary notification makes provision for continuation of the petitioners service up to 31-12-1961. The combined result of the two notifications is that, the petitioner will be able to remain in service till 31-12-1961 without any break. Since the petitioner will be able to remain in service till 31-12-1961, the question whether he could be compulsorily retired on 3-5-1961 has no practical importance.

15. The proviso to Art.309 of the Constitution of India empowers the Governor of Uttar Pradesh to make rules regulating conditions of service of Government servants in this State.

16. By Art.367 of the constitution, the general clauses act, 1897 has been made applicable for the interpretation of the constitution. section 21, general clauses act, 1897 runs thus: "Where, by any Central Act or regulation, a power to issue notifications, orders, rules or bye-laws is conferred, then that power includes a power, exercisable in the like manner and subject to the like sanction and conditions (if any), to add. to, amend, vary or rescind any notifications, orders, rules or bye-laws so issued."

17. Under art.309 of the constitution read with section 21, general clauses act, the Governor of Uttar Pradesh is competent to alter rules regulating conditions of service from time to time. In November 1957, the Governor issued a notification under Art.309 of the Constitution raising the age of superannuation from 55 years to 58 years. In May 1961, the Government issued the principal notification reducing the age of superannuation from 58 years to 55 years. The Governor was competent to issue these notifications in 1957 and 1961 under Art.309 of the Constitution.

18. Mr. Chaturvedi contended that, if the Governor proposed to lower the age of superannuation, he had to obtain the consent of Government servants concerned. For this contention, Mr. Chaturvedi relied upon the expression "exercisable in the like manner and subject to the like sanction and conditions (if any)" appearing in S.21 of the general clauses act. The expression relied upon by Mr. Chaturvedi merely means that, alterations of rules have to be carried out under the same conditions, under which original rules can be framed. Now, for framing new rules under Art.309 of the Constitution, the Governor is not required to obtain consent of Government servants. There is, therefore, no good reason why such consent should be obtained by the Governor at the time of altering the rules. Mr. Chaturvedi pointed out that, when a rule likely to adversely affect Government servants is framed by an authority, it is the usual practice to give an option to the Government servants concerned. But under Art.309 of the Constitution, there is no obligation on the Governor to give an option to a Government servant, when the Governor proceeds to amend a rule. In the present case, it was open to the Governor to reduce the age of superannuation without giving any option to the Government servants likely to be affected by the alteration in fundamental rule 56.

19. Mr. Chaturvedis main contention was that, the petitioners compulsory retirement in 1961 is invalid, because it involves contravention of Art.311 of the Constitution. Mr. Chaturvedi contended that the petitioner is entitled to remain in service till the completion of 58 years. He is being retired in 1961 without giving him a reasonable opportunity of showing cause against premature retirement. It is, therefore contended that, cl. (2) of Art.311 of the Constitution is being contravened.

20. Mr. Chaturvedi strongly relied upon the case of Parshotam Lal Dhingra v. Union Of India, AIR 1958 SC 36. In that case, their Lordships of the Supreme Court observed on page 48 thus:

"When a servant has a right to a post or to a rank either under the terms of the contract of employment, express or implied, or under the rules governing the conditions of his service, the termination of the service of such a servant or his reduction to a lower post is by itself and prima facie a punishment, for it operates as forfeiture of his right to hold that post or that rank and to get the emoluments and other benefits attached thereto."

21. It may, however, be pointed out that, in same case, it was observed on p.49 that, termination of service by compulsory retirement in terms of a specific rule regulating the conditions of service is not tantamount to infliction of a punishment, and does not attract Art.311(2) of the Constitution.

22. In Shyamlal v. State of U.P. AIR 1954 SC 369 it was explained that, removal generally implies that the officer is regarded in some manner blameworthy or deficient that is to say that he has been guilty of some misconduct or is lacking in ability or capacity or the will to discharge his duties as he should do. The action of removal taken against him in such circumstances is thus founded and justified on some ground personal to the officer. Such grounds, therefore involve the levelling of some imputation or charge against the officer which may conceivably be controverted or explained by the officer. There is no such element of charge or imputation in the case of compulsory retirement. Dismissal or removal is a punishment. This is imposed on an officer as a penalty. It involves loss of benefit already earned. But an officer who is compulsorily retired does not lose any part of the benefit that he has earned. On compulsory retirement, he will be entitled to the pension etc. that he has actually earned. There is no diminution of the accrued benefit. Compulsory retirement, therefore, does not amount to dismissal or removal and therefore does not attract the provision of Art.311 of the Constitution.

23. In Dalip Singh v. State Of Punjab , AIR 1960 SC 1305, it was held that, retirement under a service rule which provided for compulsory retirement at any stage whatsoever irrespective of the length of service put in, cannot necessarily be regarded as dismissal or removal within the meaning of Art.311.

24. The broad principle laid down by these decisions is this. Compulsory retirement from service would be in the nature of removal from service, if termination of service is ordered by way of penalty. There are two tests for deciding whether termination of service was by way of penalty or not. The two tests are:

(1) Whether there was a charge or imputation against the officer? and

(2) Whether there is loss of benefit already accrued?

25. In the principal notification, there is a recital that, action was being taken with a view to increase efficiency in public administration and for subserving the common good. There was no charge or imputation against the petitioner. In fact, the petitioner was not named in the notification. In paragraph 7 of the counter-affidavit, it is stated that, the Governors order does not affect the petitioner so far as his leave, pension and contributory provident fund are concerned. It means that the petitioner is not likely to lose benefits, which have already accrued to him. So neither of the two tests for deciding whether termination of service amounts to punishment or not applies to the petitioners case.

26. Mr. Chaturvedi contended that there is a third test for deciding whether the termination of service was in the nature of punishment. He described the third test as that of per se punishment. It was recognised in P.L. Dhingras case, AIR 1958 SC 36, that, a substantive appointment to a permanent post in public service normally confers on the servant so appointed, a substantive right to the post. When a Government servant has right to a post, termination of the service is by itself prima facie a punishment. The petitioner is in permanent service. According to the 1957 notification, he would have remained in service till May 1964. On 24-5-1961, the petitioner could properly urge that he was entitled to remain in service till May 1964. The position was altered as a result of the principal notification, dated 25-5-1961. By the principal notification, the age of superannuation was reduced from 58 years to 55 years. The petitioner completed 55 years on the 4th May 1961. In view of the principal notification, the petitioner could not urge on 25-5-1961 that he was entitled to remain in service till May 1964. If the petitioner had no right to the post on 25-5-1961, he could not rely upon the rule laid down in P.L. Dhingras case, AIR 1958 SC 36.

27. Mr. Chaturvedi recognised that, if the principal notification is valid, the petitioner has not got much of a case. Mr. Chaturvedi, therefore, contended that, the principal notification is unconstitutional. He contended that, under the principal notification, the petitioner was being retired from service without giving him a reasonable opportunity of showing cause against the retirement. It was contended that, the principal notification offends against Art.311 (2) of the Constitution.

28. It is true that Art.309 is subject to the provisions of the Constitution. In other words, Art.309 is subject to Art.311. But that principle merely means that, the Governor cannot frame under Art.309 a rule contravening Art.311. The Governor is not competent to frame a rule laying down that a Government servant may be dismissed or removed from service without giving him a reasonable opportunity of showing cause against the proposed action. If such a rule is framed under Art.309, the rule would be ultra vires. But in the instant case, the Governor has not framed any such rule. In terms, the principal notification does not mention dismissal or removal from service. The main provision of the principal notification was to reduce the age of superannuation from 58 years to 55 years. The provision was nothing more than alteration of one condition of service.

Suppose, there is a service rule to the effect that, a Government servant is entitled to get privilege leave for one month for one years active service. The rule may be amended so as to provide for privilege leave for 15 days only for one years active service. Such an amendment in the rule would no doubt adversely affect Government servants. But it cannot be reasonably contended that, an alteration of this nature would be by way of punishment of Government servants. The impugned alteration in fundamental rule 56 is of the same character. The alteration seriously affects a large number of Government servants. But the amendment in the rule is not by way of punishment. No doubt the petitioner will have to retire from service in 1961, as a consequence of the principal notification. But the notification by itself is not by way of punishment. In terms, the principal notification was not in the nature of dismissal or removal of Government servants. The amendment of Fundamental R.56 was not by way of punishment. So the principal notification is not hit by Art.311 of the Constitution. The principal notification is valid.

29. In passing, I may point out that, the petitioner joined service in 1929. It appears that at that time the age of superannuation was 55 years. In 1957, the age of superannuation was raised to 58 years. In 1961, the age of superannuation was again reduced to 55 years. It will thus be seen that, today the age of superannuation is the same in 1929, when the petitioner joined service. This is not a case where a Government servants right existing at the time of his joining service is being taken away.

30. Now, I proceed to consider validity of the subsidiary notification. Under the principal notification, the petitioner had to retire on 25-5-1961. By virtue of the subsidiary notification, the petitioner will be able to remain in service till 31-12-1961. Considering that the subsidiary notification is in favour of the petitioner, it is difficult to see how he can challenge it.

31. Mr. Chaturvedi contended that the subsidiary notification violates arts.14 and 16 of the constitution. article 14 provides for equality before law. Mr. Chaturvedi pointed out that, under the subsidiary notification, there is a provision for different dates of retirement for different government servants. The subsidiary notification deals with Government servants, who have recently retired, or who are likely to retire in the near future. Such persons have been divided into three groups. The first group covers Government servants, who had completed 57 years by 25-5-1961. Such Government servants may remain in service "upto the date on which they attain the age of 58 years or up to December 31, 1961, whichever is earlier." It means that if a Government servant was likely to complete 58 years during 1961 before 31-12-1961, he would retire on completing 58 years, and would not remain in service till 31-12-1961.

Under 1957 notification, the age of superannuation was 58 years. If a Government servant is kept in service till he completes 58 years, he can have no grievance. There is no reason why he should continue in service after completing 58 years. Although discrimination is prohibited under Art.14, reasonable classification is permissible.

The classification made by the subsidiary notification in dealing with Government servants falling in the first group appears reasonable. Government servants falling in the second group and the third group will continue in service till 31-12-1961. The petitioners case falls under the second group mentioned in the subsidiary notification. He will, therefore, remain in service till 31-12-1961. No one falling in any of the three groups will be able to continue in service beyond 31-12-1961. The subsidiary notification does not involve any discrimination against the petitioner.

32. Cl. (1) of Art.16 of the Constitution states:

"There shall be equality of opportunity for all citizens in matters relating to employment or appointment to any office under the State."

33. The petitioner joined service in 1929. He had an opportunity to serve the State for more than 32 years. There is no infringement of Art.16 of the Constitution. The subsidiary notification is also valid.

34. Lastly, it was contended by Mr. Chaturvedi that, in view of the successive extensions granted by the principal notification and the subsidiary notification, the petitioner is entitled to remain in service till he completes 60 years. For this contention, reliance was placed upon the latter part of cl. (a) of R.56 of Fundamental Rules. The relevant provision is:

"He may be retained in service after the date of compulsory retirement with the sanction of the Government on public grounds, which must be recorded in writing but he must not be retained after the age of 60 years except in very special circumstances."

This provision enables the Government to retain a Government servant after the completion of 55 years. The Government servant cannot claim extension of service as a matter of right. Retention in service beyond 55 years is in the discretion of Government. The petitioner cannot claim extension in Government service up to 60 years, simply because he got extensions of service by a few months after completing 55 years.

35. Thus all the contentions advanced on behalf of the petitioner fail. I would, therefore, dismiss the writ petition with costs to opposite party No.1.

36.SRIVASTAVA, J.:- I agree that the petition must fail. In view however, of their importance I would like to indicate my approach to some of the problems involved.

37. The petitioner was born on the 4th May 1906 and entered Government service as a clerk in the Judgeship of Mainpuri on the 1st May, 1929. At the time when he entered service the age of superannuation as provided in rule 56 of the fundamental rules to be found in Part I of the Second Volume of the Financial Handbook issued by the authority of the Government of the United Provinces was 55. The fundamental rules of which R.56 was one were first framed under s.96-b of the government of india act of 1919 and came into force with effect from January 1, 1922. After the repeal of the Government of India Act, 1919 by the Government of India Act, 1935 the rules including R.56 continued in force by virtue of S.276 of the Act of 1935 and were to be deemed to have been made under the appropriate provisions of that Act. The rules thus continued in force till immediately before the enforcement of the Constitution and continued to remain in force by virtue of Art.372 of the Constitution even after its enforcement.

Clause (a) of R. 56 which is the only relevant clause for our present purposes reads like this:

"Except as otherwise provided in the other clauses of this rule the date of compulsory retirement of a government servant is the date on which he attains the age of 55 years. He may be retained in service after the date of compulsory retirement with the sanction of the local Government on public grounds which must be recorded in writing but he must not be retained after the age of 60 years except in any special circumstances."

Under that clause as it stood on the date on which the petitioner entered Government service he was to retire compulsorily on the date on which he attained the age of 55 years but could be retained in service with the sanction of the local Government on public grounds until he attained the age of sixty. Beyond that age he could be retained only in very special circumstances.

38. In 1957 by a Finance Department Notification No.G-I-1733/X-534(19)-57 dated the 27th November, 1957 R.56 was amended with effect from the 17th June, 1957 by substituting the figure 58 for the figure 55 wherever the same occurred in the rule. On account of this amendment the age of superannuation applicable to the petitioner became 58 instead of 55 and having been born on the 4th May 1906 the petitioner was due to retire under the amended rule on the 4th May, 1964.

39. By Notification No.G-I-1233/X-534(19)-1957 dated the 25th May, 1961 published in the Government Gazette Extraordinary of the same date R.56 was amended for a second time. Purporting to act in the exercise of his powers under the proviso to Art.309 of the Constitution and all other powers in that behalf the Governor amended the rule by again substituting the figure 55 for the figure 58 wherever it occurred. The purpose of the amendment was stated as

"Increasing efficiency in public administration and for subserving the common good".

The Governor also directed the addition of a proviso at the end of cl. (a) of R.56 which reads:

"Provided that Government servant who had not retired on or before June 17, 1957 but has subsequently attained the age of 55 years and has on May 25, 1961 not attained the age of 58 years, shall, for the period he has continued to serve after attaining the age of 55 years be deemed to have been retained in service beyond the date of compulsory retirement i.e. the age of 55 years within the meaning of the Rule aforesaid."

40. On the same date the Governor issued another order published in the same issue of the Gazette bearing No.G-1-1234/X-534(19)-1957. This order was issued in exercise of the power of retention of government servants conferred by R.56 itself and directed that:

"Any Government servant who has, on or before the date of this order, already been directed in pursuance of order of sanction made or given under fundamental rule 56 to be retained in service beyond the age of compulsory retirement, shall be so retained, notwithstanding anything in this Schedule hereto.

SCHEDULE

Column I Column II

1. Government servants who have on May 25,1961crossed the age of 57 years. Upto the date on which he attains the age of 58 years or upto December 31, 1961, whichever is earlier.

2. Government servants who have on May 25,1961 crossed the age of 55 years but have not crossed the age of 57 years. Upto December 31,1961.

3. Government servants who will cross the age of 55 years between May 25,1961 and December 30,1961. Upto December 31.1961.

The effect of this order was that the petitioner though he was deemed to have retired on attaining the age of 55 under the amended rule but had been retained in service till the 25th May 1961 under the newly added proviso to cl. (a) of R.56 was to be further retained in service till the 31st December, 1961 as he fell in the second category of the first column of the Schedule appended to the order. The petitioner is, therefore, now due to retire on the 31st December, 1961.

41. By the present petition the petitioner challenges the validity of the two notifications issued on the 25th May, 1961 on various grounds and contends that they are invalid and ineffective. He, therefore, prays for a writ of mandamus or such other writ or order as the Court deems fit restraining the State of Uttar Pradesh and the District and Sessions Judge, Mainpuri, the two respondents impleaded in the petition, from enforcing the orders contained in the notifications and retiring the petitioner before he attains the age of 58 years.

42. The petition is opposed on behalf of the respondents and it is urged that the impugned notifications are perfectly valid and intra vires and that the petition is on that account not maintainable.

43. Alterations in the age of superannuation like those ordered in 1957 and again in 1961 are received by the employees concerned with mixed feelings. When the age of superannuation was increased to 58 those employees who on account of that increase became entitled to put in a further period of service felt jubilant. Those employees on the other hand who were expecting a rise or promotion on the impending retirement of their seniors felt disappointed. The change having been made every one accepted it and began to plan accordingly. When, therefore, the position was changed again and the age of superannuation was reduced to 55 the employees who had expected to continue in service till the age of 58 and had made commitments accordingly naturally began to feel that they had not been treated fairly and unnecessary hardships had been created for them. Other employees whose promotion has been expedited on account of the change, however, naturally welcomed it. The employees like the petitioner affected adversely by the change will certainly have to suffer some hardship and inconvenience on account of it. They cannot, however, avoid the change or challenge it on that account. The present petition can succeed only if it can be shown that the amendment effected on the 25th May 1961 is invalid or beyond the competence of the Governor who has directed it.

44. The validity or vires of the two impugned notifications is challenged mainly on two grounds. It is urged in the first place that the amendment in fundamental. R.56 has been made with retrospective effect and that is beyond the competence of the Governor. The second ground urged is that the amendment virtually amounts to an order of removal of the petitioner from his post with effect from the 31st December, 1961 and as it has been passed in contravention of Art.311 of the Constitution it is invalid.

45. In connection with the first contention it is not disputed that provisions relating to superannuation are covered by the expression conditions of service of Government employees and that the Governor has power under the Constitution to make rules regarding the conditions of service of the employees serving under the State Government. The contention, however is that the age of superannuation having been extended to 58 in the year 1957 the petitioner got a right (learned counsel for the petitioner called it a vested right) to remain in service till the age of 58 and by the amendment now made that right of the petitioner has been affected because the age of superannuation has been reduced to 55 and the petitioner is to be deemed to have retired on the date on which he attained that age. The amendment has thus been given retrospective effect. The Governor, it is urged, had no power to do that. The argument is that he could make a rule and make the age of superannuation 55 only for persons who were employed after that rule had been made. He could not make the change applicable to persons already in employment. It is stressed that under the former rule the petitioner had served even after he had attained the age of 55 from the 4th May, 1961 to the 25th May, 1961. That period could not be converted by a deeming clause in the rule from a period put in the ordinary course of service to a period put in as a matter of grace, i.e., retention in service after superannuation.

46. Under the Government of India Act, 1919 power to make rules applicable to members of service was vested under S.96-B of the Act in the Secretary of State for India in Council and R.56 was originally framed by the Secretary of State under that provision. The Act of 1919 was, however, repealed by the Government of India Act, 1935. Under S.276 of the Act the rules which were in force immediately before the commencement of part 3 of that Act continued in force notwithstanding the repeal and were deemed to be rules made under the appropriate provisions of the 1935 Act. Under S.241 of the latter Act rules regulating the conditions of service of persons serving in connection with the affairs of a province were to be made by the Governor. One of the limitations on the rule-making power, however, was that a right of appeal was conferred in case an order altered any rule by which the conditions of service were regulated to the disadvantage of the person concerned.

The Government of India Act, 1935 was replaced by the Constitution in 1950. The rules framed under the 1935 Act, however, continued to be in force under Art.372 till they were replaced. article 309 of the constitution empowered the appropriate Legislature to regulate the recruitment and conditions of service of persons appointed to public services and posts in connection with the affairs of the Union or the State. It thus took the place of S.241 of the Government of India Act, 1935. Under the proviso to that Article, till the appropriate Legislature had passed the necessary legislation the power to make rules regulating the recruitment and the conditions of service of persons appointed to services and posts in connection with the affairs of a State was conferred on the Governor of the State or such person as he may direct. It was in the exercise of the power conferred by this proviso that the Governor first made the amendment in R.56 in 1957 and then made the amendment now in question.

47. It will be noticed that there was nothing in the constitution acts of 1919 and 1935 indicating that the rule-making power conferred by those Acts could be exercised only prospectively and not retrospectively. The restriction is conspicuous by its absence in Art.309 of the Constitution also. In the Act of 1935 if a rule was altered to the disadvantage of an employee he had a right of appeal. Even this restriction was removed when Art.309 replaced S.241 of the 1935 Act. The rule-making power conferred by Art.309 on the Governor or his nominee is, therefore, not confined to prospective rule making and appears to be wide enough to include the making of rules with retrospective effect. In fact, if rules regulating conditions of service can be made only with prospective effect and cannot be made applicable to persons already in Government employment administration may sometimes become impossible.

A comparison of the language used in the main part of Art.309 with that used in the proviso will show that the power given to the Legislature for regulating the recruitment and conditions of service of persons is identical with the power given to the Governor or such person as he may direct in regulating the recruitment or conditions of service employed in services and posts in connection with the affairs of the State. The only difference is that the Legislature can make the regulation for all times and the Governor can do so only till the Act of the Legislature under the main part of the Article as passed. The Legislature, it is well settled, can legislate prospectively as well as retrospectively vide J.K. Jute Mills Co., Ltd. v. State of Uttar Pradesh, AIR 1961 SC 1534. The powers of the Governor under the proviso to Article 309 being identical with that of the legislation under the main Article there is no valid reason why the Governor should not be able to make rules with similar effect.

48. Instances are not wanting of rules having been framed and amendments in rules having been made which were applicable to persons already in service. In P. Balakotaiah v. Union of India, AIR 1958 SC 232 the petitioner had started service in 1939 in the Bengal Nagpur Railway. In 1946 he had opted to become the employee of the Railway Administration of India. In 1949 acting in the exercise of the powers conferred by sections 241 (2), 247 and 266 (3) of the Government of India Act, 1935 the Governor General had promulgated certain rules called the Railway Services (Safeguarding of National Security) Rules, 1949 which came into force on the 14th May, 1949. The rules were made applicable to employees already in the service of the Railway also and it was under one of these rules that the petitioners services were terminated. The promulgation was upheld by the Supreme Court, without any objection being taken on the ground that the subsequently framed rule could not apply to persons already in service.

In Anil Nath De v. Collector of Central Excise, Calcutta, AIR 1958 Cal 407 also a rule which had been amended after the applicant had entered service was applied to him and his services were terminated in accordance with that rule. It was contended that the rule introduced subsequent to the appointment of the petitioner in service could not be applied to him. Dealing with that contention it was remarked:

"I am unable to agree with the contention. The service in this case means that the Government servant accepts as part of his conditions of service these Rules as they from time to time are made and modified. In fact, rule 2 of the revised leave rules says expressly that these Rules shall apply with retrospective effect. A part of the obligations of a Government servant, as I understand under these Rules, is that he takes the risk of the amendments made in these Rules from time to time. So long as these Rule or their amendments do not violate any provisions of the Constitution or of any relevant Statute, mutability of these Rules forms part of the contract and the conditions of service are to be deemed as engrafted therein as and when they or their amendments are made, unless expressly or by necessary implication, they say otherwise."

49. The rule in that case was expressly given retrospective effect but was not held invalid valid on that account. The amendment of R.56 in the present case has retrospective effect by necessary implication and on parity of reasoning cannot be held to be invalid simply because of that feature.

50. Relying on article 367 of the constitution, learned counsel for the petitioner urged that Article 309 should be interpreted keeping in view section 21 of the general clauses act. That section, according to him, clearly provided that the Governors power to amend Rule 56 could be exercised only in the manner and subject to the sanctions and conditions under which he could make the rule itself. Learned counsel urged that if the Governor could not make a rule with retrospective effect he could not amend a rule with similar effect. The simple answer to his contention is that there is nothing in the proviso to Article 309 to justify the contention that the Governor has no power to make a rule with retrospective effect. It is true that the powers of the Governor to amend a rule are subject to some conditions and limitations as his power to frame a rule but if, as it appears in the present case, there is no restriction to his making a rule with retrospective effect there can be no restriction on his power to amend a rule with that effect.

51. The argument that a Government employee can claim a vested right under any rule relating to his conditions of service and that on that account it is not permissible for the rule-making authority to amend the rule so as to affect that right does not appear to be acceptable at all. It may be pointed out in this connection that certain audit instructions have been issued regarding Rule 56 which are printed just below the rule in the Financial Handbook, Volume II, Part I. Instruction No.1-B reads:

"The purpose of fundamental rule 56 is not to confer upon Government servants any right to be retained in service up to a particular age, but to prescribe the age beyond which they may not be retained in service."

This shows the intention with which the rule was framed. What to say of a vested right, not even a right was intended to be conferred by Rule 56. The petitioner could not, therefore, say that because at one stage 58 was the age of superannuation according to the rule a right was conferred upon him under which he could insist that he should be retained in service till that age and that the rule-making authority had lost its right to change the rule and to reduce the age of superannuation to a lower figure.

52. The power to amend a rule and to change it, whether to the detriment or to the advantage of the employees concerned, appears to be inherent in the rule-making power of the authority concerned. The circumstances in which the power can be exercised cannot be catalogued exhaustively. It all depends on what the exigencies demand. No one can say that because a particular rule exists in a particular form on a particular date it should remain in that form for all times to come and should not be changed even if as a matter of policy the change is necessary.

53. It was also argued that in any case the deeming clause in the first notification issued on the 25th May, 1961, by which the petitioner was to be deemed to have retired with effect from the 4th May, 1961, is bad. If the two notifications are read together, as in my opinion they ought to be read, the practical effect is that the petitioner is to continue in service for all material purposes till the 31st December, 1961. We have to look to the substance and not to the mere form. If that is done no particular significance can be attached to the deeming clause to which objection is being taken.

54. The objection that the Governor could not change the age of superannuation because he had no power to do so or that the change is invalid because it has been made with repospective effect is, therefore, clearly untenable.

55. The second ground on which the validity of the notification in question is impugned is that the rule-making power of the Governor conferred by Article 309 is subject to the limitation contained in article 311 (2) of the constitution. under clause (2) of article 311 no person in civil employ of the State can be removed, dismissed or reduced in rank until he has been given a reasonable opportunity of showing cause against the action proposed to be taken against him. Under rule 56 of the fundamental rules as it stood after its amendment in 1957 the petitioner was entitled to continue in service till he attained the age of 58. The effect of the change now made in the rule by the Governor, it is contended, is that the petitioner is going to be removed from service before attaining that age. He is really being removed without any fault of his and without being given a reasonable opportunity of showing cause against the order of his removal. This removal, it is argued, per se amounts to punishment.

Under the cloak of changing the rule it is urged the Governor has virtually by the notification in question directed the removal of the petitioner from service. The rule is, therefore, hit by clause (2) of article 311 and the rule making power being subject to that Article the rule is invalid. Reliance is placed in support of this contention on certain observations made by the Supreme Court in State of Bombay v. Saubhagchand M. Doshi, (S) AIR 1957 SC 892, AIR 1958 SC 36 and AIR 1958 SC 232 (supra).

56. It is not disputed on behalf of the respondents than the rule making power conferred by Article 309 is subject to the provisions of article 311 of the constitution. It is, however, contended that the petitioner is not being "removed" within the meaning of the terms as used in article 311 of the constitution. It is denied that the amendment of fundamental rule 56 to which objection is being taken is a cloak for an unauthorised removal of the petitioner from service. It is argued that the petitioner is really begging the question when he contends that he is entitled to continue in service in spite of the amendment of the rule of superannuation because the amendment amounts to his removal and is, therefore, void as it contravenes Article 311.

57. It is thus common ground that the rule-making power conferred on the Governor by Article 309 is subject to the provisions of article 311 and no rule can, therefore, be framed by the Legislature or the Governor which has the effect of whittling down the right of security of tenure conferred on a civil employee by Article 311. The two questions which arise for consideration in this connection are

(1) Whether the amendment of fundamental Rule 58 changing the age of superannuation from 58 to 55 is in any way inconsistent with the provisions of article 311; and

(2) Whether the order directing the petitioners retirement with effect from the 31st December, 1961, amounts to an order of removal within the meaning of the term as used in cl. (2) of Article 311.

58. It is conceded that the order does not amount to dismissal or reduction in rank.

59. The two safeguards which Article 311 provides for persons holding a civil post under the Union or a State are

(i) No employee shall be dismissed or removed by an authority subordinate to that by which he was appointed; and

(ii) Such an employee shall not be dismissed or removed or reduced in rank until he has been given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him.

In Parshotam Lal Dhingras case, AIR 1958 SC 36 (supra), after tracing the history of the service rules S.R. Das, C.J., pointed out that the terms dismissed, removed or reduced in rank used in clause (2) of article 311 of the constitution had been taken from the service rules and were intended to have the same meaning which they had in those rules.

The learned Judge says:-

"In other words the substance of the protection provided by rule 55 of the 1930 classification rules which required a special procedure to be followed before the three major punishments of dismissal, removal or reduction in rank out of the several punishments enumerated in Rule 49 was bodily lifted, as it were, out of the Rules and embodied in the statute itself so as to give a statutory protection to the Government servants. These statutory protections have now become constitutional protections as a result of the reproduction of the provisions of section 240 in articles 310 and 311 of our constitution.

It follows from the above discussion that both at the date of the commencement of the 1935 Act and of our Constitution the words "dismissed", "removed" and "reduced in rank", as used in the service rules, were well understood as signifying or denoting the three major punishments which could be inflicted on Government servants. The protection given by the rules to the Government servants against dismissal, removal or reduction in rank, which could not be enforced by action, was incorporated in sub-sections (1) and (2) of Sec.240 to give them a statutory protection by indicating a procedure which had to be followed before the punishments of dismissal, removal or reduction in rank could be imposed on them and which could be enforced in law. These protections have now been incorporated in Article 311 of our Constitution."

60. The Chief Justice also recognises in Dhingras case, AIR 1958 SC 36 (Supra):

"The cases cited before us also indicate that the preponderance of view is that only a dismissal or removal or reduction in rank by way of penalty attracts the operation of Article 311 (2), but that a termination of service brought about otherwise than by way of punishment, e.g., by the exercise of the right under the terms of employment or under the relevant rules regulating the conditions of service which form part of the terms of employment does not."

61. The protection granted by clause (2) of Article 311 was, therefore, granted only against dismissal, removal or reduction in rank by way of punishment or penalty. Every termination of service though it must necessarily result in some disadvantage, inconvenience or loss of future prospects cannot necessarily be said to be by way of punishment or penalty and is, therefore, not removal or dismissal within the meaning of Article 311 (2).

62. The change in the age of superannuation by amending fundamental rule 56 does not appear to affect the right guaranteed by article 311 of the constitution at all. The first safeguard provided by that Article that no one shall be dismissed or removed by an authority lower than the one which appointed him remains entirely unaffected by the amendment. So far as the second safeguard is concerned, no question of affecting it in respect of reduction in rank can arise. As the terms removal and dismissal used in Article 311 were intended to mean removal or dismissal by way of penalty or punishment and did not cover all cases of termination of services the change in fundamental rule 56 does not affect that safeguard also because it does not mitigate or take away from the civil servant concerned his right to have a reasonable opportunity of showing cause against the proposed punishment of removal or dismissal (by way of punishment).

63. Learned counsel for the petitioner, however, urged that in (S) AIR 1957 SC 892 (supra), it had been stated in paragraph 11:

"But where there is no rule fixing the age of compulsory retirement, or if there is one and the servant is retired before the age prescribed therein, than that can be regarded only as dismissal or removal within Article 311 (2)".

The idea, it is pointed out, was amplified in Dhingras case, AIR 1958 SC 36 (supra), where while laying down the tests which were to be used for deciding whether an employees services had been terminated by way of punishment or not Das, C.J., observed:

"It has already been said that where a person is appointed substantively to a permanent post in Government service, he normally acquires a right to hold the post until under the rules, he attains the age of superannuation or is compulsorily retired and in the absence of a contract, express or implied, or a service rule, he cannot be turned out of his post unless the post itself is abolished or unless he is guilty of misconduct, negligence, inefficiency or other disqualifications and appropriate proceedings are taken under the service rules read with Art.311 (2). Termination of service of such a servant so appointed must per se be a punishment, for it operates as a forfeiture of the servants rights and brings about a premature end of his employment.

Again where a person is appointed to a temporary post for a fixed term of say five years his service cannot, in the absence of a contract or a service rule permitting its premature termination be terminated before the expiry of that period unless he has been guilty of some misconduct, negligence, inefficiency or other disqualifications and appropriate proceedings are taken under the rules read with Art.311(2). The premature termination of the service of a servant so appointed will prima facie be a dismissal or removal from service by way of punishment and so within the purview of Art.311(2)."

The same view was reiterated, it is pointed out, in AIR 1958 SC 232 (Supra) at p.238 where Venkatarama Aiyar, J. said:

"The question as to what would amount to punishment for purposes of Art.311 was also fully considered in Parshotam Lal Dhingras case, AIR 1958 SC 36 (supra). It was therein held that if a person had a right to continue in office either under the service rules or under a special agreement, a premature termination of his services would be a punishment."

64. On the basis of these observations it is argued that under fundamental rule 56 as it stood amended in 1957 the petitioner had a right to continue in service till he attained the age of 58. He is now being asked to retire before attaining that age. This premature retirement per se amounts to punishment and attracts Art.311(2) of the Constitution. No opportunity to show cause having been given to him the order is invalid.

65. The fallacy in the argument appears to be twofold. In the first place the distinction between a rule and an order in pursuance of the rule to give effect to it is overlooked. In all the three cases in which the observations relied upon were made there was a rule under which the employee concerned was entitled to continue in his post for some time. By an independent separate order in AIR 1858 SC 36 (supra) he had been reduced in rank and in the other two cases the services of the employees concerned had been terminated under another rule.

The orders were being questioned on the ground that they contravened Art.311 (2). In the present case the rule itself under which the petitioner could claim to be entitled to continue to the age of 58 has been altered and under the rule as it stands he is not entitled to continue till that age. The rule on which he relies is no longer there as it has been amended and under the amended rule he was bound to retire at the age of 55. The observations relied upon would have been applicable if the authorities had asked the petitioner to retire at the age of 55 without amending fundamental rule 56 and reducing the age of superannuation to 55. If as has been shown the amendment cannot be challenged on the ground of its incompetence the rule applicable to the petitioner is the amended rule and not the unamended rule. Under the amended rule he cannot claim any right to continue in service till the age of 58.

66. Secondly, in final analysis the argument really amounts to begging the question. The amendment of the rule reducing the age of superannuation from 58 to 55 is said to be bad as it contravenes Art.311 (2). When asked how it contravenes that Article the answer given is,

Because it reduces the age of superannuation and requires the petitioner to retire at 55 instead of 58.

The same assumption (the correctness or otherwise of which is to be decided in the case) is the basis, of both the branches of the argument.

67. Since the Constitution came into effect a number of cases have been gone to the Supreme Court with reference to Art.311. The cases to which our attention was drawn are Satish Chandra v. Union of India, AIR 1953 SC 250, AIR 1954 SC 369, (S) AIR 1957 SC 892, AIR 1958 SC 36, AIR 1953 SC 232, P. Balakotaiah v. Union of India, AIR 1960 SC 1305, State of Orissa v. Ram Narayan Das, AIR 1961 SC 177, State of Uttar Pradesh v. Babu Ram Upadhya, AIR 1961 SC 751 and Jagannath Prasad Sharma v. State of Uttar Pradesh, AIR 1951 SC 1245. The one common feature shared by all these cases except one which related to reduction in rank is that in each of them a particular order terminating the services of a Government employee concerned was in question. None of these cases related to a change in the rule itself according to which the employee concerned had become liable to retire. This particular feature distinguishes the present case from all of them. Analysing the facts of those cases it is possible to classify them in several categories.

The case of AIR 1953 SC 250 (Supra) forms a class by itself because it is a case where the civil servant concerned had been engaged on the basis of a special contract for a certain term. As he was being discharged in pursuance of the terms of the contract it was held that the discharge could not amount to a dismissal or removal within the meaning of Art.311. The cases of AIR 1954 SC 369 (supra), (S) AIR 1957 SC 892 (supra), AIR 1958 SC 232 (supra), and AIR 1960 SC 1305 (supra), fall into one class because they share the common feature that there was a rule under which the employee concerned could continue to serve for some time more but there was another rule under which his services could be terminated earlier. It was in pursuance of the latter rule that the services of the persons concerned in those cases had been terminated. The termination was upheld and Art.311 was held inapplicable because the termination having been made under an existing rule was not held to be by way of punishment so as to amount to dismissal or removal.

68. The case of AIR 1958 SC 36 (supra), stands on a separate footing because that case did not relate to dismissal or removal at all. It was a case of reduction in rank. In that case, however, all the implications of Arts.309, 310 and 311 were considered and certain general observations relating to the rights conferred by Article 311 were also made.

69. Out of the remaining three cases the case of AIR 1961 SC 177 (supra), related to a probationer who had been discharged in the manner provided by rule 55-b of the civil services (classification, control, and appeals) rules. It was held that he was not entitled as of right to continue in service and Art.311 (2) of the Constitution, therefore, did not apply. In AIR 1961 SC 1245 (supra), the officer concerned was a police officer and an enquiry against him under the U.P. Disciplinary Proceedings (Administrative Tribunal) Rules, 1947 was made. The Tribunal had recommended a particular punishment which under rule 10 of the rules was binding on the Governor. It was held that as that rule was in conflict with articles 310 and 311 of the constitution it was partially invalid. The Governor had, however, in that case served a notice requiring the employee concerned to show cause why he should not be dismissed and had ordered his dismissal after considering the explanation. The order was, therefore, upheld. In AIR 1961 SC 751 (supra), there was no question of the application of Article 311 at all. The trial in that case had been held under section 7 of the police act and the dismissal of the police officer concerned had been ordered under that act. articles 309 and 310 of the constitution came up for consideration only because it was urged that the Police Act and the Regulations framed thereunder were in conflict with those Articles and void to that extent.

70. It thus appears to be settled beyond controversy that the word removal used in Article 311 (2) has been used not in the general sense of termination of service but in the special sense of termination by way of penalty or punishment. The usual tests to be applied for finding out whether the termination is by way of punishment are, (1) where it has been ordered in pursuance of some imputation or charge and (2) whether it has resulted in the deprivation of rights which have already accrued, e.g., right of pension or provident fund. These tests are, however, not exhaustive and a third test which it may sometimes become necessary to apply is whether under the contract or rules of his employment the employee in question was entitled to remain in service and had been deprived of that right in the absence of a term in the contract or a rule in the rules permitting such deprivation. In such a case without showing that the termination involved an imputation or charge or deprivation of rights already accrued the person concerned can say that the premature termination of his service amounted to punishment. It is necessary in such cases, however, that there should be a rule or term in the contract under which the employee is entitled to continue in service and there should be no rule or term under which his services can be terminated at an earlier date.

71. The petitioners case does not fulfil any of the three tests abovementioned. He is not being asked to retire because there is charge or imputation of misconduct, inefficiency or negligence against him. It is pointed out that in the preamble of the second notififcation issued on the 25th May, it is said that it was being issued with a view to increasing the efficiency in public administration. The argument is that from that it can be inferred that the persons who were being required to retire were inefficient. The premise, however, does not support the conclusion. Only because improvement in efficiency is necessary it does not follow that the existing staff is inefficient. It is also conceded that the petitioner is not being deprived of any rights which have already accrued to him. As the rule of superannuation itself has been amended it is not possible for him to say that he is entitled to continue in service beyond the age of 55. He has not succeeded in showing that the rule altering the age of superannuation is incompetent. The contention that the rule is in conflict with Article 311 is, therefore, not correct.

72. There remains the contention that the notification amending fundamental rule 56 is really a camouflage and is cloak to cover an order of the petitioners removal. It is argued that it has been passed in that form only to avoid the rigours of article 311 (2) of the constitution. There are no materials before us to support this contention. The petitioner is not the only person who is affected by the change in the age of superannuation or who is being directed to retire in pursuance of that change. It is not suggested that against the petitioner or any of the other persons who are likely to be affected by this change in the rule the respondent No.1 has any particular reason to require them to retire. It is really as a master of policy that respodent has decided that the age of superannuation of all employees should be 55 and not 58. The change in the rule has been effected in order to carry out that policy. There can, in the circumstances, be no question of the termination of the services of the petitioner or any one else affected by the rule by way of punishment or penalty. Article 311 is, therefore, not attracted at all and the change in the rule cannot be questioned on the ground that that Article has not been complied with.

73. Two other points were mentioned by the learned counsel for the petitioner in his opening address but no serious attempt was made to substantiate them. One was that the change in the fundamental rule 56 had been made for political reasons and was on that account mala fide. This was not one of the grounds on which the petition was based and in the affidavit filed in support of the petition no averments were made in this respect. It was only in the rejoinder affidavit which was filed later that allegations were made in this connection. The respondents could not in the circumstances have any opportunity of refusing these allegations and the petitioner could not be permitted to rely upon them. The second point was that both notifications published on the 25th May 1961 were hit by Arts.14 and 16 of the Constitution.

No attempt was made to show how any discrimination was involved in the amendment of rule 56. The amendment is general in nature and affects all employees under the State without exception. The classification involved in the second notification has a rational basis. The only purpose of the notification is to implement the policy which has led to the reduction of the age of superannuation from 58 to 55. The three categories mentioned in the first column of the Schedule of the notification are based on age which could form a reasonable basis of distinction. It is also difficult to see in respect of either of the two notifications how it is affected by article 16 of the constitution which guarantees equality of opportunity of employment.

74. Learned Attorney-General who appeared on behalf of the State referred to Art.310 of the Constitution also and placed his alternative stand on that Article. He contended that even if the impugned rule was not found to be valid with reference to Art.309 of the Constitution under which it had been framed the notifications in question could be supported on the ground that under Art.310 the petitioner held his office during the pleasure of the Governor and the Governor could, therefore, require him to retire at any time he liked. For two reasons I do not feel called upon to consider this argument. In the first place, as has been shown the impugned rule is valid and could be framed under the proviso to article 309 of the constitution. It is, therefore, not necessary to consider the alternative basis suggested to support its validity.

Secondly, it appears to me that in the present case the Governor has not purported to exercise his pleasure under Art.310 of the Constitution. There is no mention of the Article in the preamble to either of the two notifications. In the former, besides Art.309 reference has been made to "all other powers in that behalf" but the words "in that behalf" show clearly that the powers referred to were the powers under which rules could be framed. Art.310 of the Constitution does not confer on the Governor the power to frame any rules. The change in the rule cannot, therefore, be held to have been ordered in the exercise of the powers conferred by Art.310. The other notification too has not been issued in exercise of those powers. It has really been issued in the exercise of the powers reserved in fundamental rule 56 itself.

75. All the grounds on which the petitioner challenged the validity of the notifications in question are, therefore, unacceptable and the petition cannot succeed. It must, as a result, be dismissed.

76.DWIVEDI, J.:- I agree with Oak, J. that the impugned rule and notification are valid, and would shortly state and supplement my own reasons.

77. The notification, being incidental to the rule, would stand or fall with it. So I turn to the rule.

78. The impugned rule was enacted by the Governor in exercise of the powers conferred by proviso to Art.309 of the Constitution and all other powers in that behalf, on May 25, 1961; it has sundered, admittedly at a premature stage and with retro-operative effect, "the service-bond of all employees of the State who have crossed the age of 55 before that date. The retrospective nature of the rule would not however condemn it, as the Governor is competent to enact a retrospective rule under the proviso to Art.309. If, as is not debatable, the U.P. Legislature could regulate conditions of service of State employees by a retrospective measure, otherwise legitimate, it is difficult to comprehend that the Constitution denies the Governor that means in the same field and for a similar end. Neither principle nor precedents would warrant the asserted denial of power to the Governor. At the outset it may be well to bear in mind that we are expounding the Constitution and that considering is character, scheme and structure that construction of the proviso to Art.309 should be preferred which is most beneficial to the widest amplitude of power in the Governor.

The proviso is expressed in broad strokes. The scheme and setting of it both suggest that the Governor is constituted a co-ordinate authority with the State Legislature, and is invested with as extensive powers as the Legislature itself for effective regulation of service conditions of State servants for public weal. According to Shorter Oxford English Dictionary (3rd Edn.) the word regulate inter alia means to control, govern, or direct by rule or regulations; to adjust, in respect of time, quantity, etc., with reference to some standard or purpose....... It would therefore not be an unfair construction of Art.309 that it clothes the Governor with all necessary means to effect any readjustment of rights and duties of State employees as may appear to be necessary or expedient for the common weal. A welfare State depends enormously on an ever-expanding Public Service. Political administrators come and go periodically, but they do not change. They thus keep running the machinery of Government in constant good gear as also provide for wholesome continuity of basic policeis and ideals. Their vital duties and architectonic responsibilities of course demand of them utmost vigilance and excellent efficiency, masculine, moral and mental.

Efficient Public Service conduces to good government; good government augments the sum-total of human happiness. There is no denying that Public Service is a vital spot in the body politic. Ex necessitate the Governor must have been endowed by the Constitution makers with wide regulatory powers to ensure an efficient Public Service. The observations of Gwyer, C.J., may be apposite here:

"We hope that no responsible Legislature or Government would ever treat as of no account solemn pledges given by their predecessors; but the readjustment of rights and duties is an inevitable process, and one of the functions of the Legislature in a modern State is to effect that readjustment, where circumstances have made it necessary, with justice so all concerned". Jagannath Baksh Singh v. United Provinces, AIR 1943 FC 29 at p.35.

79. It may be that some conditions of service, by their very nature, may not admit of retrospective readjustment, but a term about the age of compulsory retirement would not apparently fall in that category in particular when, as here, a rule fixing a retrospective date for compulsory retirement does not touch any accrued rights or benefits of employees.

80. The argument that the Governor may authorise any subordinate officer to regulate conditions of sendee should not terrorise the court to cut down the wide scope of the proviso. Delegation by the Governor of his rule-making power to a subordinate officer does not denude him of his organic power, and he remains responsible for the action of his subordinates taken in his name. (Emperor v. Sibnath Banerji, AIR 1945 PC 156 at p.162).

81. The nomenclature of the law-maker and the mode of law-making a service-rule is a law: vide Art.313 make no essential difference. The crucial question and it is one of construction is whether the people of India by their Constitution have authorised the Governor to adopt the means, pursued here for regulating conditions of service. If the answer is in the affirmative, as the foregoing discussion shows, then the Court is concerned no further (See Attorney-General for Canada v. Cain, 1906 AC 542 at p.546. In that case, repelling the challenge to the constitutionality of Sec.6 of the Alien Labour Act which authorised Government, inter alia, to expel an alien from the territory of Canada, Lord Atkinson said,

"The Imperial Government might delegate those powers to the Governor or the Government of one of the Colonies....If this delegation has taken place, the depository or depositories of the executive and legislative powers and authority of the Crown can exercise those powers and that authority to the extent delegated as effectively as the Crown could itself have exercised them."

82. This, I think, lends support to my approach. Precedents, though meagre, also tend to strengthen the construction suggested here. (Kewal Mal Singh v. Hetram, AIR 1952 Raj 17 at p.19; State of Saurashtra v. Bhola Nath Jatashankar, AIR 1952 Sau 49 at p.57; Varadaraja Iyer v. State of Travancore-Cochin, AIR 1953 Trav-Co. 140 at pp.142 and 143; AIR 1958 Cal 407 at p.410, S.V.G. Iyengar v. State of Mysore, 1961 Mys 37 at p.(41); Raj Kishore v. State of U.P., AIR 1954 All 343 at p.347, AIR 1958 SC 232.

83. It has been argued that the powers of the Governor should not be assimilated to those of the State Legislature with respect to regulation of conditions of service, as the latter, unlike the former, is sovereign. The argument seems to me to proceed from misapprehension of the status of the State Legislature in our country and of the source spring of its powers. The State Legislature, I venture to think, is not a Sovereign Legislature for it does not possess unlimited powers, and its acts are not uncontrollable. Its powers are conditioned, both affirmatively and negatively, by the Constitution; its acts may be set at naught by courts if they are found by them to be inconsistent with the Constitution. The true fountain of its powers is thus the Constitution. It derives power to enact a retrospective rule as ancillary to its power of law-making for the peace, order and good government of the State for the principle that grant of a specific power necessarily carries with it the grant of all power which are necessary for effective execution of the granted power. Under the Constitution a true characterisation of the State Legislature would, I think, be: It is limited as to choice of matters; but unlimited as to choice of means in most matters.

84. Expressions, such as plenary powers of legislation, as large as those of Parliament itself (The Queen v. Burah, (1878) 3 AC 889) authority as plenary - as the Imperial Parliament in the plenitude of its power possessed and Supreme (Hodge v. The Queen, (1883) 9 AC 117), a prime element is Canadian Sovereignty (British Coal Corporation v. The King, 1935 AC 500: (AIR 1935 PC 158)), in the decisions of the Judicial Committee of the Privy Council are perhaps reminiscent of Parliamentary Sovereignty, but they would not conclusively prove that the Judicial Committee, who were familiar with, and wedded to, the theory of Parliamentary Sovereignty as first evolved by Austin and later expounded by Dicey, had really supposed that the British Parliament became incarnate in Colonial Legislature. A careful reading of their decisions would suggest that those expressions were not intended to portray a verisimilitude, and as time went on, the Judicial Committee began to lay greater emphasis on constitutional reality.

85. It seems to me that decisions of the Judicial Committee really turned on a true construction, in each case, of the text of various constituent Acts. In Burahs case (1878) 3 AC 889 (supra) they said,

"The established Courts of Justice, when a question arises whether the prescribed limits have been exceeded, must of necessity determine that question and the only way in which they can properly do so, is by looking to the terms of the instrument by which, affirmatively, the legislative powers were created, and by which, negatively, they are restricted."

86. In Riel v. The Queen, (1885) 10 AC 675 Lord Halsbury, referring to the British North America Act, said,

"The words of the statute are apt to authorise the utmost discretion of enactment for the attainment of the objects pointed to."

87. In British Coal Corporations case, 1935 AC 500 (supra), Viscount Sankey said,

"What is the extent of the legislative competence in the relevant regard conferred on the Canadian Parliament, - must be ascertained from the words of the Constitutent Act."

88. On a survey of authorities it would appear that the State Legislature derives power to enact a retrospective rule from its power of law-making. So does the Governor; he also derives power to enact a retrospective rule from his power of law-making. Although the Federal Court had said,

"It seems to us misleading to assume that the Ordinance-making authority enjoys plenary powers of legislation and then seek to deduce therefrom the inference that it must have the power to enact a provision with retrospective operation. As regards "subject-matter" its powers may be co-extensive with those of the ordinary Legislature but,.......there are at least two limitations upon its powers." (Emperor v. Sibnath Banerji, AIR 1943 FC 75 at p.81), no person would now question the right of the Governor to enact by an Ordinance a retrospective rule (See Hirji Laxmidas v. Francis Fernandez, AIR 1945 Bom 352; Jnan Prosanna Das Gupta v. Province of West Bengal, AIR 1949 Cal 1 (FB); In re Velayudam, AIR 1950 Mad 324).

The true explanation for this power of his is, I think, to be found in his power of law-making, as Viscount, Simon said,

"There is not, of course, the slightest doubt that the Parliament of Westiminster could validly enact that the choice of Courts should rest with an Executive Authority, and their Lordships are unable to discover any valid reason why the same discretion should not be conferred in India by the law-making authority, whether that authority is the Legislature or the Governor-General, as an exercise of the discretion conferred on the authority to make laws for the peace, order, and good government of India." (See Emperor v. Benoari Lal Sharma, AIR 1945 PC 48 at p.54). Earlier, at page 53, he has said,

"......Whether the Ordinance is intra vires or ultra vires does not depend upon considerations of jurisprudence or of policy. It depends simply on examining the language of the Govt. of India Act and of comparing the legislative authority conferred on the Goveror General with the provisions of the Ordinance by which he is purporting to exercise that authority."

89. The Bihar Regulation IV of 1942, though made to operate retrospectively by the Governor of Bihar, was not challenged before the Supreme Court for that reason. Chatturam Horiram Ltd. v. Commr. of Income-tax, B. and O., (1955) 2 SCR 290: ((S) AIR 1955 SC 619).

90. Summing up, in exercise of his power under Art.213 read with Art.246 and Item 41 of List II of Schedule VII of the Constitution the Governor could make an Ordinance incorporating the impugned rule. He can also enact it as ancillary to his constitutionl rule making power.

91. The impugned rule does not seek to determine the service of an employee in violation of the rule of opportunity of hearing embodied in Cl. (2) of Art.311 of the Constitution. In its nature it is normative, not punitive. It does not cast a blot on the escutcheon of any service man; nor does it forfeit any of his accrued benefits. It has been strenuously pressed upon us that the rule fails to stand the per se punishment test evolved by the Sureme Court in Dhingras case, AIR 1958 SC 36.

There, at pp.47-48 S.R. Das, C.J. observed,

"......where a person is appointed substanlively to a permanent post in Government service, he normally acquires a right to hold the post until under the rules, he attains the age of superannuation or is compulsorily retired and in the absence of a contract, express or implied, or a service rule, he cannot be turned out of his post unless the post itself is abolished or unless he is guilty of misconduct, negligence, inefficiency or other disqualifications and appropriate proceedings are taken under the service rules read with Art.311 (2). Termination of service of such a servant so appointed must per se be a punishment, for it operates as a forfeiture of the servants rights and brings about a premature end of his employment."

91a. A little downwards, in the same context, his Lordship was pursuaded to conjunct prima facie with per se. With great respect, the per se punishment test does not seem to operate in the circumstances and facts of this case. The impugned rule does not punish any employee or group of employees; it fixes the age of compulsory retirement for all employees as a matter of policy and irrespective of their merits or demerits. It does not affect their earned benefits. It is a universal rule designed professedly to increase efficiency in public administration and to subserve the common good.

92. It seems to me that the per se punishment test would not ordinarily circumscribe the choice of the Governor for framing for his guidance a general rule for compulsory retirememt. All services, except the entrenched posts, are held during pleasure of the Governor. No rule framed under Art.309 which is subject to the provisions of Art.310, may carve out a tenure of any other kind. Accordingly the old rule, fixing 58 years as the age of compulsory retirement and framed under Art.309, would not avail against the Governor, even though it may bind his subordinates (R. Venkata Rao v. Secy. of State, AIR 1937 PC 31; AIR 1961 SC 751 at pp.758 761 762, AIR 1961 SC 1245 at p.1252.

No employee could claim against the Governor a right to hold his post till 58 years, as he would be free to frame a general rule reducing the age of compulsory retirement as a matter of policy. It is theoretically true that, if I am right in what is stated here, a Government servant is left with a precarious tenure of service as against the Governor. But there seems to be no getting away from it, for even the protective armour of the "opportunity of showing cause against the action proposed to be taken "would, in view of Cl. (c) of the proviso to Cl. (2) of Art.311, wear thin against the Governor. But that is theory and has no relation to realities. It is certain that in practice security of office would be largely determined by the equation between the Governor and an articulate democracy.

93. BY THE COURT: The petition is dismissed with costs to Opposite Party No.1.

Petition dismissed. AIR 1962 ALLAHABAD 344 (V 49 C 86) "Raghu Nath v. Rajendra Kumar"

ALLAHABAD HIGH COURT

FULL BENCH

Coram : 3 V. BHARGAVA, A. P. SRIVASTAVA AND BISHAMBHAR DAYAL, JJ. ( Full Bench )

Raghu Nath Dass and others, Appellants v. Rajendra Kumar and others, Respondents.

First Appeals Nos.67 and 329 of 1948, D/- 19 -12 -1961., against decree of Civil J., Jaunpur, D/- 30 -8 -1947.

(A) u.p. agriculturists relief act (27 of 1934), S.28, S.30 and S.2(10)(a) - DEBT RELIEF - LOAN - Loan - Renewals are included in term "loan" - Debtor cannot insist that transaction of renewal be reopened.

There is no reason why the word loan in Sec.28 should be interpreted differently from that word in Sec.30. (Para 3)

Renewals are included in the term loan as used in Sec.28 of the u.p. agriculturists relief act. AIR 1942 All 50 (FB) and AIR 1945 Oudh 242 (FB) and AIR 1950 All 152 and AIR 1942 All 390 (FB), Rel. on, AIR 1949 All 179, Expl. Case law Ref. (Para 7)

(B) u.p. agriculturists relief act (27 of 1934), S.28 - DEBT RELIEF - REPEAL AND SAVINGS - Debt Laws - Renewals after commencement of Act cannot be reopened.

The debtor cannot insist that the transactions of the renewals after commencement of the Act should be reopened on the ground that the renewals do not represent new loans and that the subsequent renewals should be ignored but, even treating each renewal as a new loan, the courts must reopen all previous transactions of renewals for the purpose of determining the notional amount of advance to be treated as the consideration for the loan represented by each renewal. (Para 7)

Cases Referred : Courtwise Chronological Paras

(38) AIR 1938 All 1 (V 25) : 1937 All LJ 882, Dharamsingh v. Bishan Sarup 3

(42) AIR 1942 All 50 (V 29) : 1942 All LJ 3 (FB), Pratap Singh v. Gulzari Lal 3, 10, 11, 12, 13, 15

(42) AIR 1942 All 390 (V 29) : 1942 All LJ 578 (FB), Mt. Ketki Kunwai v. Ram Saroop 3, 10

(49) AIR 1949 All 179 (V 36) : 1948 All LJ 431, Badri Prasad v. Nirmal Singh 3, 11

(50) AIR 1950 All 152 (V 37), Lachmi Lal v. Narain Das 3, 10

(57) (S) AIR 1957 All 391 (V 44) : ILR (1958) All 1 (FB), Board of Revenue Uttar Pradesh v. Padum Bahadur Singh 6, 14

(45) AIR 1945 Oudh 242 (V 32) : ILR 20 Luck 291 (FB), Baldoo v. Inder Bikram Singh 3, 10

H.N. Seth, K.C. Saxena, J. Swarup and Laxmi Saran, for Appellants; Shambhoo Prasad, for Respondents.

Judgement

V. BHARGAVA, J.:-

The following question has been referred for opinion of the Full Bench:-

"Are renewals included in the term loan as used in section 28 of the u.p. agriculturists relief act and/or a debtor can insist that transactions of renewals should be reopened and interest allowed according to the Scheduled rate of the Act on the amount of the first transaction of renewal after coming into force of the u.p. agriculturists relief act and that the subsequent renewals should be ignored?" The facts which have given rise to this reference may be briefly stated. The respondents filed a suit for recovery of a sum of Rs.16,270/14/- on the basis of a promissory note. There were money lending transactions between the parties to the suit and after an accounting which took place on Aghan Badi 12 Sambat 1991, a sum of Rs.9,178/11/3 was found due to the plaintiff from the defendants. The defendants executed a promissory note for this amount in favour of the plaintiff on the 3rd of December 1934 and at the same time executed a receipt explaining how the whole of the consideration money for the pronote had been received by them. This receipt stated that the executants had money lending dealings with the plaintiff and, on account being taken, a sum of Rs.9,178/11/3 was found due on account of principal and interest and it was in lieu of this sum due that the pronote was being executed. This promissory note was renewed on the 30th of November 1937, for a sum of Rs.11,150/-. Once again a receipt for consideration was also executed in which it was stated that accounts have been taken in respect of the earlier pronote of December 1934 and after setting off the payments made, a sum of Rs.11,150/- was found due which was acknowledged and in respect of which the fresh pronote was executed.

There was a second renewal on the 29th of November, 1940 and on this occasion also a similar receipt was executed showing that the consideration for this pronote was also represented by the amount found due on accounts being taken in respect of the pronote of the 30th of November 1937. The last renewal took place by execution of a pronote dated the 28th of November 1943 and this time also the receipt of consideration was similarly acknowledged by stating that accounts had been taken in respect of the pronote of the 29th of November 1940 and after setting off the payments made a sum of Rs.13,550/11/9 was found due. This last pronote was, therefore, executed for this amount.

The suit was instituted by the plaintiffs on the basis of this pronote claiming this amount as the principal money due and interest on this amount from the date of this pronote viz. the 28th of November 1943 upto the date of suit at the stipulated rate of 8 per cent per annum. It may be mentioned that the agreed rate of interest in the first pronote dated the 3rd of December 1934 was 9 per cent per annum compoundable yearly and in all the three subsequent pronotes it was 8 per cent per annum compoundabie yearly. It was also the admitted case of both the parties that, at the time of each renewal of the pronotes the accounts were made on the basis of the payments actually made and on the basis of the rate of interest stipulated in the pronotes without taking into account the provisions of the u.p. agriculturists relief act (hereinafter referred to as the act).

2. The suit was contested by the defendant appellants on various grounds but the only plea with which we are concerned relates to the claim of the defendants to obtain benefit under the provisions of Sec.28 of the Act.

It is contended that interest, should be allowed at the reduced rate provided by that provision of law on the two pronotes executed in 1940 and 1943. The plaintiff resisted this plea on the contention that each transaction of renewal really amounted to a fresh loan and consequently for the purpose of applying the provisions of sec.28 or the act the earlier renewals were of no effect so that the plaintiff should be allowed Rs.13,550-11-9 as principal amount deemed to have been taken as a loan on the 28th November 1943 and interest on that amount at the rate laid down in the Act. It is in these circumstances that the Division Bench, before which the appeal came up for hearing, framed the question of law reproduced above and referred it to the Full Bench for opinion.

3. The question that has been referred to the Full Bench is clearly divisible into two parts and, in fact, the Bench framing the question has itself divided that question into two parts though incorporating both the parts in one single question. The first part of the question is as to whether renewals are included in the term loan as used in Sec.28 of the Act. On this question it does not appear to me to be necessary to go into any deep discussion about the purpose and the language of the Act as there is already a Full Bench decision of this Court with which I respectfully agree.

The first decision on this point was given by a Division Bench in Dharam Singh v. Bishan Sarup, 1937 All LJ 882: (AIR 1938 All 1) which case came up to this Court as arising out of proceedings under Sec.33 of the Act. In that case, a usufructuary mortgage was executed in lieu of two previous hypothecation bonds and it was held that, as there was no fresh advance of any money under the usufructuary mortgage the transaction could not be regarded as a fresh advance so that the applicant was entitled under S.30(1) of the Act to have the interest reduced for the period of Jan. 1, 1930, till August 1933 when the new mortgage deed was executed.

This decision of the Division Bench was, however, overruled by a five-Judge Bench of this Court in Pratap Singh v. Gulzari Lal, 1942 All LJ 3: (AIR 1942 All 50) (FB). The majority judgment in that case was delivered by Bajpai, Hamilton and Dar, JJ. It will be enough to quote from the judgment of Dar, J. for the purpose of explaining the reasons for the view arrived at by majority in that case. Dealing with this point Dar, J. held:-

"Is there anything in the express language of the agriculturists relief act which confines the term loan to the original loan and excludes renewed loan from its operation? Is there anything in the express language of the statute which declares a perfectly legitimate transaction on the basis of which one loan was closed and another loan started as inoperative? Is there anything in the express language of the Act which says that a well-recognized doctrine of law in moneylending transactions, viz. renewal of bonds on the basis of notional payment and as a result of which transactions were closed and settled years ago in this case before us, the first more than twenty years and the second more than eight years ago, will all be reopened and declared as not binding on the parties? I cannot find any express language in the statute which will compel me to adopt such an interpretation. For the moment I turn again to the interpretation clauses in sec.2(10) of the u.p. agriculturists relief act. It is said that the definition of the words loan and interest as given in Sec.2 justified the interpretation, that loan in Sec.2. (10) means money actually lent and not what is noionally lent. I can only take Sec.2(10) as an interpretation clause which defines and not one which under the guise of definition enacts. Now, Sec.2(10) defines loan as an advance to agriculturist whether money or in kind and it includes any transaction which is in substance a loan. I should say that an original loan, when accounts have been settled and on the basis of settlement of accounts it is renewed by a fresh mortgage bond, is in substance a loan within the meaning of the definition and there is no reason to interpret the words which is in substance a loan in any sense so as to destroy the validity of past transactions and in my opinion, where an earlier transaction of loan is renewed, the new transaction itself is a loan for purposes of Sec.2(10) of the u.p. agriculturists relief act."

The learned Judge thereafter proceeded to take notice of the fact that the word loan occurs in four different sections of Ch.IV of the Act and did not rule out the possibility that, in each of these sections, it may have a somewhat different meaning for the reason that differences may arise on account of the different language of the sections and the context in which it occurs.

In this connection, the learned Judge went on to say that

"It may be that the payment referred to in Sec.29 of the Act may mean an actual payment and not a notional payment and it may further be that for purposes of Secs.28 and 31, that is, for loans taken after the Act, renewal may be permissible or it may be subject to limitation that interest realised or accrued cannot exceed the principal sum of the original loan."

Due to this doubt expressed by the learned Judge, it was urged before us that the view, expressed by the Full Bench to the effect that, where an earlier transaction is renewed, the new transaction itself is a loan, should not be held to be applicable to the interpretation of the word loan in Sec.28 of the Act. I am, however, unable to find any reason why the word loan in Section 28 of the Act should be interpreted differently from that word as used in Sec.30 of the Act. The word loan has been defined in Sec.2(10) (a) of the Act and the meaning given in the definition has been made applicable to the word loan as used in all the sections of the Act unless a contrary intention may appear from the context. The meaning given to the word loan in Sec.30 by the Full Bench should, therefore, apply to that word used in Sec.28 of the Act also unless it is held that there is something in the context in Sec.28 which compels the courts to give a different meaning to the word loan in that section. I have not been able to find any particular reason why the word loan in Sec.28 of the Act requires to be interpreted differently from that word as used in Sec.30 of the Act.

In this connection, notice may be taken of the various decisions in which it has been held that apart from Sec.30 of the Act, even in other sections of the Act or in other laws, where the word loan is similarly defined, a renewed loan is to be treated as a new loan.

A Full Bench of the Oudh Chief Court in Badloo v. Inder Bikram Singh, AIR 1945 Oudh 242 held that a debt originally advanced before the Act came into force and renewed by a pronote after the Act, is in substance a loan under Sec.2(10) (a) of the Act and the provisions of Sec.39 of the Act would apply if they are not excluded on account of other considerations.

A Division Bench of this Court in Lachmi Lal v. Narain Das, AIR 1950 All 152 also held that a renewal is a fresh loan as it is in substance a loan and, if it came into existence for the first time after the Act came into force, it is clearly governed by Sec.39 of the Act.

A Full Bench of this Court in Ketki Kunwar v. Ram Swarup, 1942 All LJ 578: (AIR 1942 All 390) had occasion to deal with the word loan as defined in the U.P. Debt Redemption Act. The definition of the word loan in that Act is in terms almost identical with the definition given in Sec.2(10) (a) of the Act and the Full Bench held that a renewed loan is a transaction which amounts to an advance within the meaning of Sec.2(9) of the U.P. Debt Redemption Act.

A contrary view, however, appears to have been taken by a Division Bench of this Court in Badri Prasad v. Nirmal Singh, 1948 All LJ 431: (AIR 1949 All 179) where it was held that a loan renewed before the Act came into force would no doubt be regarded as a loan for the purpose of the Act but loans renewed by an agriculturist after the coming into force of the Act, could not be treated as fresh loans for purposes of Sec.28 of the Act. I may say with respect that the learned Judges, who decided that case, rightly held that the decision of the five-judge Full Bench in 1942 All LJ 3: (AIR 1942 All 50) (FB) did not in terms apply to the case before them as they were dealing with a case of renewal after the enforcement of the Act, while the Bench in the case of 1942 All LJ 3: (AIR 1942 All 50) (FB) had before it a case where the renewal to be considered was one made prior to the enforcement of the Act. After noticing this distinction between the two cases, the learned Judges, however, proceeded to hold that the language of Sec.30 of the Act was substantially different from that used in Sec.28 of the Act and the considerations, which applied to the interpretation of Sec.30, would not be the same as are applicable to the other section.

Relying on the language of sub-Sec. (1) of Sec.28 of the Act, they expressed the view that this section prohibits the taking of a loan by an agriculturist after the coming into force of the Act bearing interest at a rate higher than that specified in Sch.II and, consequently, a loan renewed after the enforcement of the Act cannot be treated as a new loan. It appears that, in giving this interpretation to the word loan in Sec.28 of the Act, the learned Judges were considerably influenced by the fact that if, a renewed loan is treated as a new loan, it would permit unscrupulous creditors to evade the provisions of Sec.28 of the Act and take advantage of the renewal to claim validly interest at a rate higher than that permitted by Sec.28 of the Act.

It has appeared to me that the interpretation put on the word loan by the five-Judge Full Bench in 1942 All LJ 3: (AIR 1942 All 50) (FB) can be applied to the word loan used in Sec.28 of the Act without creating any such anomaly provided it is kept in view that, at the time of each renewal, the amount, for which the fresh loan is deemed to have been taken, is represented by only a notional amount equated with the amount due on the previous loan and no actual advance in cash or kind takes place on the occasion of such a renewal. This aspect of the case, I consider, needs a little more detailed explanation, particularly because it is this aspect which is covered by the second part of the question referred to our Bench for opinion. Consequently I proceed to deal with this aspect as being involved in the first part of the question as well as the point for consideration in the second part of the question.

4. In the second part of the question, we have been asked to express our opinion on the point whether a debtor can insist that transactions of renewals should be reopened and interest allowed according to the scheduled rate of the Act on the amount of the first transaction of renewal after coming into force of the Act and that the subsequent renewals should be ignored.

At first sight, on the view, I have expressed above, that a renewal must be treated as a new and fresh loan even though the renewal may have taken place after the Act came into force, it would appear that this question should be answered against the debtor. There is, however, the aspect which I have emphasised above that, in the case of a renewal, there is actually no advance in cash or kind and the consideration of the renewed loan is only a notional amount. This notional amount need not necessarily be the amount shown as consideration for the renewed loan. In cases where there is an actual advance of money for transaction of a loan, there can be no difficulty in holding that the actual amount advanced as the amount of loan, on which interest would be payable, would be the amount payable as principal money in addition to the interest.

A different consideration, however, arises where no cash is actually advanced but the advance is notional and is deemed to be represented by the actual amount due on the earlier loan. In such a case, where the consideration is notional, the notional amount should not be held to be the amount mentioned at the time of the renewed loan as the consideration for it simply because the parties consider that that was the amount which should be treated as consideration for the renewed loan.

The courts should go behind the recitation in the terms of the contract by the parties and should determine what the notional amount is by applying the correct principles of law applicable to the facts of each case. If the renewal is of another loan taken earlier but after the Act had come into force, the principal amount for the renewed loan should be determined by calculating the correct amount due on the earlier loan in accordance with the provisions of the Act.

As an example, supposing an unsecured loan is taken by an advance in cash of a sum of Rs.1000/- after the Act came into force, bearing interest at the rate of 12 per cent. per annum and then there is a renewal of the loan on the expiry of one year. Ordinarily, the parties, at the time of the renewal, if they ignore the benefit conferred on the debtor by Sec.28 of the Act, would agree that the amount due on the loan so taken would be Rs.1,120/- and this would be the amount that would be shown in the renewed loan as the consideration for that loan. The prescribed rate of interest chargeable under Sec.28 of the Act would, however be 9¼ per cent. so that, if the provisions of Sec.28 of the Act were to be applied to the original loan taken, the amount due after one year in respect of that loan would be Rs.1092/8/-. When, on the expiry of a year, the loan is renewed and the parties enter a sum of Rs.1,120/- as the principal amount of the renewed loan, the courts should, in my opinion go behind the terms contained in the document and hold that the sum legally due on the earlier loan being Rs.1,092/8/- only and no actual cash having passed at the time of the renewal, the notional amount advanced for the renewed loan is the sum of Rs.1,092/8/- and not the sum of Rs.1,120/-. In a case where the notional amount is to be determined, the fact that the parties under some mistake or ignorance of fact or law arrive at a particular figure for the notional advance cannot stand in the way of the courts determining the notional amount correctly in accordance with law. In such a case, therefore if a loan is advanced after the Act came into force and is subsequently renewed, the amount of the principal for the renewed loan represented by the notional amount due under the previous loan must be worked out by applying the provisions of Section 28 of the Act and, consequently calculating interest at the rate permitted by that provision of law.

The effect of this principle would be that the provisions of Sec.28 of the Act would not be evaded merely by the circumstance that a renewed loan is to be treated as a new loan. Even if there are successive renewals, on each occasion of renewal, the amount of consideration shown in the renewed loan would have to be reduced to the figure of the amount due in the earlier loan worked out in accordance with the provisions of S.28 of the Act and, consequently, the debtor would in effect got the full benefit of Sec.28 of the Act in respect of all the renewals. If this principle is applied, it seems to me that the creditor would not be able to evade the provisions of Sec.28 of the Act and the word loan would bear an uniform meaning in all the provisions of the Act including Sec.28.

5. In the case before us, the claim in the suit was based on a pronote dated the 28th of November, 1943. Even though that loan had to be treated as a fresh loan made on that date, we must determine what was the notional amount which must be deemed to have been advanced by the plaintiff to the defendants on that date. That notional amount would be the amount which was legally due from the defendants to the plaintiff on the basis of the earlier pronote dated the 29th of November, 1940 and that amount must be worked out by calculating interest on that earlier pronote at the rate prescribed by Sec.28 of the Act.

Similarly, in order to work out the amount due on the pronote dated the 29th of November 1940, it would be necessary to determine what was the principal amount which must be deemed to have been notionally advanced on that date and that sum being equal to the amount deemed to have been notionally paid as being due on the pronote dated the 30th of November 1937, the courts would have to work out the amount due under the pronote of 1937 at the rate of interest permitted under S.28 of the Act. Going back still earlier the amount of notional advance under the pronote of the 30th of November 1937, must be held to be the amount legally due under the pronote of 1934 which was a pronote executed before the Act came into force. On that pronote the interest would have to be calculated in accordance with the provisions of Sec.30 of the Act. This interest would, however, have to be calculated on the amount shown as the consideration for the pronote without going back further and reconsidering the earlier pronote if this pronote of 1934 was also a renewal of an earlier loan. If in this case, for example it had been found that the pronote of 1934 was itself a renewal of an earlier loan, the courts would not be competent to apply the principle explained by me above in respect of that renewal because, when the renewal took place in 1934, the Act had not come into force at all. The renewal on that date for the amount shown in the pronote was therefore, a valid renewal and the fact that the consideration was equated with the amount found due on the previous loan in accordance with the terms of the contract between the parties at the time of the renewal does not effect the validity because that amount was legally due from the debtors to the creditors at the time of the renewal in view of non-existence of the Act.

It is immaterial that subsequently the Act came into force and laid down under Sec.30 of the Act that no debtor was liable to pay interest on a loan taken before the Act came into force at a rate higher than that specified in the Schedule for a period from. January 1,1930. I say this is immaterial because Sec.30 in terms is a prospective section and only determines the liability of interest of a debtor which liabilty is to be discharged after the Act had come into force. A liability that had been discharged before the Act came into force would not be affected by the provisions of Sec.30 of the Act.

In the case of renewal in 1934, the earlier loan, even though it might have been taken after January 1, 1930, ceased to exist as a result of that renewal and a fresh loan came into existence in that year. A previously discharged liability on the earlier loan would not, therefore, be affected by the provisions of Sec.30 of the Act. The liability, which subsequently came into existence in 1934 and continued to remain in existence as a fresh liability started in that year, when this Act came into force, would be the liability governed by Sec.30 of the Act.

Consequently, in my opinion, if there were any renewals before the Act came into force in respect of any original loan taken earlier, the provisions of S.30 of the Act would apply treating the loan last renewed before the Act came into force as a new loan.

In respect of the loans taken after the Act came into force, however, Sec.28 of the Act would apply to all renewals and in applying Sec.28 of the Act the principle to be enforced by the courts will be that explained by me above, viz. that for each loan the courts would determine the notional amount deemed to have been paid in discharge of the previous loan in accordance with law applying the provisions of the Act applicable at that time and would then deem that amount to be the amount notionally advanced in respect of the renewed loan. This principle would continue to be applied to each subsequent renewal. The result would be that in effect all the loans would have to be reopened and ultimately the creditor would receive interest only at the scheduled rate laid down in Sec.28 of the Act.

6. In this connection a point that was canvassed before us was whether in view of S.92 of the indian evidence act the courts are competent to examine what was the real notional advance in respect of each renewed loan and whether the courts were not bound by the figure admitted as consideration in the various pronotes at the time of renewals.

It appears to me that this question can very simply be answered on the principle laid down by a Full Bench in Board of Revenue, Uttar Pradesh v. Padum Bahadur Singh, ILR 1958 All 1: ((S) AIR 1957 All 391) (FB). It was held that the amount of consideration to be paid as agreed in a contract reduced to writing is a term of contract but the actual amount of consideration paid or received is not a term of the contract so that oral evidence can be given to prove what was the actual amount paid or received. In fact, it is well known that in suits for recovery of money on pronotes it has been held by all the courts that a debtor is entitled to show that he did not receive the entire amount of consideration as entered in the pronote and the conditions of the loan contained in the pronote do not debar him from giving oral evidence on this point by virtue of Sec.92 or the indian evidence act. In a case where the amount of consideration is not the actual amount advanced in cash but is a notional amount which the courts deem to be the advance, this principle must apply with greater force and it must be held that the courts must deem that amount to be notionally advanced which represents the notional payment on the earlier loan determined in accordance with the law applicable.

7. For the reasons given above, I would answer the first part of the question referred to the Full Bench in the affirmative. So far as the second part of the question is concerned, my answer is that the debtor cannot insist that the transactions of the renewals should be reopened on the ground that the renewals do not represent new loans and that the subsequent renewals should be ignored but, even treating each renewal as a new loan, the courts must reopen all previous transactions of renewals for the purpose of determining the notional amount of advance to be treated as the consideration for the loan represented by each renewal.

8. BISHAMBHAR DAYAL, J.: I agree.

9. A. P. SRIVASTAVA, J.:-I agree that the question referred to us should be answered in the manner indicated by my learned brother V. Bhargava, J.

10. About the first part of the question authority appears to be overwhelming in support of the view that renewals must be considered to be loans for the purposes of the various sections of the u.p. agriculturists relief act (hereinafter referred to as the act). A Full Bench of five Judges in 1942 All LJ 3: (AIR 1942 All 50) (FB) by a majority of three to two held that for the purposes of Sec.30 of the Act renewals could be considered to be loans. A Full Bench of the Oudh Chief Court in AIR 1945 Oudh 242 came to the same conclusion with reference to Sec.39 of the Act. The opinion was shared by a Division Bench of this Court in AIR 1950 All 152. In 1942 All LJ 578: (AIR 1942 All 390) (FB) a renewal was treated as a loan for the purposes of the U.P. Debt Redemption Act. It is true that Dar, J., who delivered the leading judgment in the case of 1942 All LJ 3: (AIR 1942 All 50) (FB) (Supra) made it clear that he was dealing with the word loan only as used in Sec.30 of the Act. He did not rule out the possibility that the word may have different meanings in different sections of the Act. It is also true that the language used in Sec.28 is not identical with that of Sec.30 of the Act. While Sec.30 enacts,

"No debtor shall be liable to pay interest on a loan taken before this Act comes into force at a rate......................" the words used in S.28 are:

"No loan taken by an agriculturist after this Act comes into force shall bear interest at a rate......."

But this difference in language does not appear to be enough to justify putting a meaning on the word loan as used in Sec.28 different from that which is to be attributed to that word for the purpose of Sec.30. The definition of the word loan given in Sec.2(10) is, unless there is anything repugnant in the subject or context, meant for all the sections of the Act and in Sec.28 there appears to be nothing to indicate that notional advances could not be intended to be covered by the word for the purposes of that section.

11. It is, however, suggested that the case of 1948 All LJ 431: (AIR 1949 All 179) is an authority for the view that a renewed loan is not to be treated as a loan for the purposes of Sec.20 of the Act and is in that sense a departure from the principle laid down by the Full Bench in Pratap Singhs case, 1942 All LJ 3: (AIR 1942 All 50) (FB). This is, however, not strictly correct. In Badri Prasads case, 1948 All LJ 431: (AIR 1949 All 179) a loan of Rs.350/- was originally advanced in cash on the 7th April 1932. The promissory note was renewed on the 21st March 1935, on the 4th October 1935 and again on the 3rd October 1938. The suit was filed on the basis of the last mentioned promissory note which had been executed for a sum of Rs.700/-as representing the principal amount of the previous promissory note and interest thereon. The defendant wanted all the previous renewals to be reopened and contended that the plaintiff could get interest on the original advance of Rs.350/- made in 1931 only at the rate mentioned in Sch.III of the Act. The trial Court gave the plaintiff a decree for a sum of Rs.700/- as principal and interest at the rate of 11¼ per cent. per annum up to the date of the suit. Thereafter the interest was allowed at the rate of three per cent. per annum. The lower appellate Court reopened the previous transactions and gave the plaintiff a decree for the principal amount of the original promissory note of 1931 together with interest calculated according to Sch.III of the Act. The plaintiff then filed a second appeal and relied on the Full Bench decision in Pratap Singhs case, 1942 All LJ 3: (AIR 1942 All 50) (FB) (Supra).

The learned Judges accepted the Full Bench decision and applied it to the extent to which it could be applied. They pointed out that it had been given only with reference to Sec.30 of the Act (that had been made clear by Mr. Justice Dar himself in Pratap Singhs case, 1942 All LJ 3: (AIR 1942 All 50) (FB)) and precluded the defendant from getting the renewals made before the coming into force of the Act re-opened. The defendant, it was held, could not in view of the Full Bench decision go behind the renewal made on the 21st March 1934 immediately before the Act came into force. It cannot, therefore, be said that the learned Judges differed in any way from the principle laid down in Pratap Singhs case, 1942 All LJ 3: (AIR 1942 All 50) (FB) or that they intended to lay down any different principle.

With reference to the renewals made after the coming into force of the Act, viz. in 1935 and 1938, they did say "that different considerations will apply and held that the plaintiff was entitled to a decree for the principal amount of the promissory note dated 1934 and interest thereafter up to the date of the suit in accordance with Schs.II and III." They did not expressly mention the considerations which led them to this conclusion. As has been pointed out by my learned brother Bhargava, J., the same conclusion would follow if the principle of Pratap Singhs case, 1942 All LJ 3: (AIR 1942 All 50) (FB) is correctly applied to the renewals of 1935 and 1938 also. It cannot, therefore, be said that in Badri Prasads case, 1948 All LJ 431: (AIR 1949 All 179) it was laid down that renewals made after the coming into force of the Act are not loans for the purposes of Sec.28.

12. The principle laid down in Pratap Singhs case, 1942 All LJ 3: (AIR 1942 All 50) (FB) appears to be of a general application and there is no valid reason why it should not be applied for interpreting the word loan as used in Sec.28.

13. The decision in Pratap Singhs case, 1942 All LJ 3: (AIR 1942 All 50) (FB) that renewals could be considered to be loans was really based on that portion of the definition of the word loan given in Section 2 (10) of the Act which provided that loans would include any transaction which was in substance a loan. The view taken was that the idea behind a renewal was that accounts were settled, there was a notional payment of what was found due and there was a notional fresh advance of the amount for which the renewal was being made. The consideration for the renewed promissory note or bond was the amount which was to be deemed to have been notionally advanced though it had not been advanced in reality.

While applying this principle it should not, and cannot, be overlooked that a sort of legal fiction was sought to be utilised and what had not actually been done was being deemed to have been done. In all such cases of renewals the full amount calculated as due is never actually paid; nor is the full consideration, in fact, advanced for the renewed promissory note or bond. Such renewals may be of three kinds:-

(1) When the full amount due in respect of the past debt is handed over to the creditors and he in his own turn gives it back to the debtor after obtaining from him a renewed promissory note or bond. This is often done in respect of loans borrowed in villages from co-operative societies.

(2) When a part of the amount due in respect of the past loan has either been paid before or is paid at the time of the renewal and a fresh bond or promissory note is executed either for the balance or for the balance and something which is advanced in cash.

(3) When no prior payment is to be taken into account, the whole amount due in respect of the past loan is calculated, acknowledged as due and the fresh promissory note or bond is executed for that amount without anything being advanced in cash.

14. Strictly speaking, renewals of the first kind are not renewals at all unless it is shown that the payment and the actual advance are fake and not intended to be real in which case the case will fall in the third category. Renewals of the second and third kinds are cases of notional payment and notional advance either in part or in full. In all such cases the amount actually paid or advanced has certainly to be taken into consideration. In respect of the amount of notional payment and notional advance which is deemed to have been paid or advanced it is always open to the debtor to contend that he can be deemed to have been notionally paid only what was legally due and also that only that amount can be deemed notionally to have been advanced to him as consideration for the renewed promissory note or bond which could have been claimed by the creditor in law. He can show that the amount which could not be legally claimed could not be included in the consideration of renewed promissory note or bond and to that extent the promissory note or bond was without consideration. In respect of promissory notes sec.44 of the negotiable instruments act clearly authorises the debtor to show that the consideration shown as pre-existing liability under the prior loan was really less than what was shown in the instrument.

In respect of transactions in which the negotiable instruments act does not apply also the debtor is entitled to lead evidence and prove that the full consideration had not been received and could not be deemed to have been received (vide ILR (1958) All 1: ((S) AIR 1957 All 391) (FB). Where the debtor is an agriculturist for the purposes of the Act while showing that the amount which could be deemed to have been notionally advanced to him at the time of the renewed transaction the debtor can also show that the only amount which could be due from him and which could be taken to have been advanced was the amount which could be claimed by the creditor under the provisions of the Act. The words "notwithstanding anything in any contract to the contrary" have been used both in Secs.28 and 30 of the Act.

The obvious effect of these words is that the creditor cannot evade the provisions of these sections on the ground of any contract arrived at between him and the debtor. If, therefore he has got any amounts included in the consideration of the renewals which he could not have claimed in view of the provisions of the Act, to the extent of those amounts the renewed instruments become without consideration and the creditors claim in respect of the amounts will not be allowed to succeed. For example, in case of a loan borrowed after the coming into force of the Act if interest can be claimed only at the rate of nine per cent. per annum simple or six per cent. per annum compoundable yearly, if the creditor obtains any renewals for amounts calculated at a higher rate of interest or obtains renewals at intervals of less than a year on account of which the rate charged exceeds the compound rate of interest allowed the debtor can insist that the amount should be correctly calculated and that the instrument should be deemed to have been executed only for the amount which could legally be claimed. Any payments made will, of course, have to be adjusted towards the amount which was legally due and calculations must be made on that basis.

15. The practical effect of the correct application of the principle of notional advance laid down in Pratap Singhs case 1942 All LJ 3: (AIR 1942 All 50) (FB) therefore, is that even in respect of the renewals made after the coming into force of the Act though the debtor cannot insist on the renewals being re-opened on the ground that they could not be considered to be loans he can in appropriate cases get the amount due from him re-calculated in accordance with the provision of the Act and insist that the claim of the creditor should be decreed only to that extent. The creditor cannot in such cases maintain a claim for amounts which could not be claimed by him under the provisions of the Act only on the ground that at an earlier stage renewals had been made for a larger amount.

Answer accordingly.