In Rajkaran Singh Vs. Union of India, Supreme Court's bench of Justices Hima Kohli and Sandeep Mehta set aside the judgement of the Delhi High Court's Division Bench of Justices Vipin Sanghi and Deepa Sharma whereby it had dismissed the appellants' writ petition and had upheld the judgement of the Central Administrative Tribunal (CAT), Principal Bench, New Delhi. The Tribunal had rejected the appellants’ claim for benefits of the replacement scales of the Revised Pay Rules, 2008 in accordance with the 6th Pay Commission Report, with effect from January 1, 2006. The High Court's judgement was authored by Justice Sanghi. Prior to that the case was heard by Tribunal's bench of V. Ajay Kumar, the Judicial Member and Dr. B.K. Sinha, the Administrative Member. Its judgement was authored by Dr. Sinha.
Applying the principles laid down by the Supreme Court in several cases to the case at hand, the Supreme Court found "compelling evidence on record which establishes that the appellants meet the characteristics of regular government servants. Admittedly, the appellants were appointed on a regular pay scale. This factor strongly indicates a formalised employee-employer relationship akin to permanent government employees." Its judgement reads: "The mere classification of employees as
'temporary' or 'permanent' is not merely a matter of nomenclature but
carries significant legal implications, particularly in terms of service
benefits and protections." The judgement was authored by Justice Mehta.
It found that "In the present case, the totality of circumstances indicates that despite their formal classification as temporary employees, the appellants' employment bears substantial hallmarks of regular government service. The denial of pensionary benefits solely on the basis of their temporary status, without due consideration of these factors, appears to be an oversimplification of their employment relationship with the government. This approach runs the risk of creating a class of employees who, despite serving the government for decades in a manner indistinguishable from regular employees, are deprived of the benefits and protections typically accorded to government servants." It concluded: "we are of the opinion that the denial of pensionary benefits to the appellants is not tenable or justifiable in the eyes of law as the same is arbitrary and violates the fundamental rights as guaranteed by Articles 14 and 16 of the Constitution of India. It is indeed relevant to note that the appellants’ batch seems to be the last in their genre of SSD Fund temporary employees and thus, manifestly, the direction to extend the benefits of the 630 the RP Rules to the appellants shall not form a precedent so as to have a detrimental effect on the financial health of the SSD Fund."
The Court observed: "we are of the view that the impugned judgment rendered by the High Court does not stand to scrutiny and the same is unsustainable in the eyes of law and is set aside. The respondents are directed to extend the benefits of the 6th Central Pay Commission including the pensionary benefits under the Revised Pay Scale Rules, 2008 to the appellants herein in the same terms as are being afforded to their peers in the Accounts Section of SFF HQ Estt. No. 22."
Upon attaining the age of superannuation i.e., 60 years, the six appellants claimed pensionary benefits under the 6th Central Pay Commission. Rajkaran Singh, appellant No. 1 filed a representation to the Union of India through the Special Secretary, Cabinet Secretariat, New Delhi, the respondent No. 1 seeking pensionary benefits under the 6th Central Pay Commission on July 28, 2011. The pensionary benefit was rejected on October 15, 2012, on the ground that he was not a government employee and had not been appointed by following any Recruitment Rules. Therefore, the Central Civil Services (Pension) Rules, 1972 would not apply to him. Similar representations of the other appellants were also rejected based on the same reasoning. All the appellants were appointed to manage the Compulsory Saving Scheme Deposits (SSD) Fund of the Special Frontier Force (SFF) in various positions.
Notably, the SFF was raised by the Intelligence Bureau in the immediate aftermath of the 1962 China-India war. An unavailable thesis by Kalsang Ringchen entitled "Special Frontier Force---Unveiling the Secrets" (2011) throws some light on SFF.
Supreme Court's Division bench relied on the legal framework established by the Court in various landmark decisions in Ajay Hasia and Others Vs. Khaled Mujib Sehravardi and Others (1981) 1 SCC 722 and Pradeep Kumar Biswas Vs. Indian Institute of Chemical Biology and Others (2002) 5 SCC 111. In Ajay Hasia and Pradeep Kumar Biswas cases, the Court dealt with determining whether a corporation could be considered an instrumentality of the state, the principles laid down therein provide valuable guidance in assessing the nature of employee-employer relationships.
In Ajay Hasia case, the Court observed: “7. If a corporation is found to be a mere agency or surrogate
of the Government, “in fact owned by the Government, in truth controlled by the Government and in effect an incarnation of the Government”, the court, must not allow the enforcement of fundamental rights to be frustrated by taking the view that it is not the Government and therefore not subject to the constitutional limitations. We are clearly of the view that where a corporation is an instrumentality or agency of the Government, it must be held to be an “authority” within the meaning of Article 12 and hence subject to the same basic obligation to obey the Fundamental rights as the Government. "
It drew on the Court's decision in R.D. Shetty v. International Airport Authority of India (1979) 3 SCC 489 wherein the Court examined the question as to when a corporation can be regarded as an “authority” within the meaning of Article 12. The Court addressed itself to the question as to how to determine whether a corporation is acting as an instrumentality or agency of the Government and dealing with that question. It observed: “A corporation may be created in one of two ways. It may be either established by statute or incorporated under a law such as the Companies Act, 1956 or the Societies Registration Act, 1860. Where a corporation is wholly controlled by Government not only in its policy-making but also in carrying out the functions entrusted to it by the law establishing it or by the charter of its incorporation, there can be no doubt that it would be an instrumentality or agency of Government. But ordinarily where a corporation is established by statute, it is autonomous in its working, subject only to a provision, often times made, that it shall be bound by any directions that may be issued from time to time by Government in respect of policy matters. So also a corporation incorporated under law is managed by a board of Directors or committees of management in accordance with the provisions of the statute under which it is incorporated. When does such a corporation become an instrumentality or agency of Government? Is the holding of the entire share capital of the Corporation by Government enough or is it necessary that in addition there should be a certain amount of direct control exercised by Government and, if so, what should be the nature of such control? Should the functions which the corporation is charged to carry out possess any particular characteristic or feature, or is the nature of the functions immaterial? Now, one thing is clear that if the entire share capital of the corporation is held by Government, it would go a long way towards indicating that the corporation is an instrumentality or agency of Government. But, as is quite often the case, a corporation established by statute may have no shares or shareholders, in which case it would be a relevant factor to consider whether the administration is in the hands of a board of Directors appointed by Government though this consideration also may not be determinative, because even where the Directors are appointed by Government, they may be completely free from Governmental control in the discharge of their functions. What then are the tests to determine whether a corporation established by statute or incorporated under law is an instrumentality or agency of Government? It is not possible to formulate an all-inclusive or exhaustive test which would adequately answer this question. There is no cut and dried formula, which would provide the correct division of corporations into those which are instrumentalities or agencies of Government and those which are not.”
The Court proceeded to indicate the different tests, apart from ownership of the entire share capital. It observed: "There is also another factor which may be regarded as having a bearing on this issue and it is whether the operation of the corporation is an important public function. It has been held in the United States in a number of cases that the concept of private action must yield to a conception of State action where public functions are being performed. Vide Arthur S. Miller: The Constitutional Law of the ‘Security State’ [5 10 Stanford Law Review 620, 644]…. It may be noted that besides the so-called traditional functions, the modern State operates a multitude of public enterprises and discharges a host of other public functions. If the functions of the corporation are of public importance and closely related to Governmental functions, it would be a relevant factor in classifying the corporation as an instrumentality or agency of Government. This is precisely what was pointed out by Mathew, J., in Sukhdev v. Bhagatram [(1975) 1 SCC 421] where the learned Judge said that ‘institutions engaged in matters of high public interest of performing public functions are by virtue of the nature of the functions performed Government agencies. Activities which are too fundamental to the society are by definition too important not to be considered Government functions'.”
The relevant tests gathered from the decision in the International Airport Authority case as follows:
“(1) One thing is clear that if the entire share capital of the corporation is held by Government, it would go a long way towards indicating that the corporation is an instrumentality or agency of Government. (SCC p.507, para 14)
(2) Where the financial assistance of the State is so much as to meet almost entire expenditure of the corporation, it would afford some indication of the corporation being impregnated with Governmental character. (SCC p. 508, para 15)
(3) It may also be a relevant factor … whether the corporation enjoys monopoly status which is State conferred or State protected. (SCC p. 508, para 15)
(4) Existence of deep and pervasive State control may afford an indication that the corporation is a State agency or instrumentality. (SCC p. 508, para 15)
(5) If the functions of the corporation are of public importance and closely related to Governmental functions, it would be a relevant factor in classifying the corporation as an instrumentality or agency of Government. (SCC p. 509, para 16)
(6) ‘Specifically, if a department of Government is transferred to a corporation, it would be a strong factor supportive of this inference’ of the corporation being an instrumentality or agency of Government.” (SCC p. 510, para 18)
The Court has established several tests to determine whether an entity can be considered an instrumentality or agency of the Government, and thus an "authority" under Article 12 of the Constitution of India in Ajay Hasia case. These tests include but are not limited to:
1. Extent of financial support from the government;
2. Deep and pervasive control of the government;
3. Functions performed are of public importance and closely related to governmental functions;
4. Entity enjoys monopoly status conferred or protected by the State;
5. The government department has been transferred to the entity.
In Pradeep Kumar Bishwas case, the Court has held that the tests laid down in Ajay Hasia case are relevant for the purpose of determining whether an entity is an instrumentality or agency of the State. Neither all the tests are required to be answered in positive nor a positive answer to one or two tests would suffice. It will depend upon a combination of one or more of the relevant factors depending upon the essentiality and overwhelming nature of such factors in identifying the real source of governing power, if need be by removing the mask or piercing the veil disguising the entity concerned.
In Vinod Kumar case, the Court observed: "the essence of employment and the rights thereof cannot be merely determined by the initial terms of appointment when the actual course of employment has evolved significantly over time."
The Division Bench of the Supreme Court fully associated itself with this principle. It found that it was
wholly applicable in the present case.
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