Section 147A of Income Tax Act is unconstitutional: Punjab & Haryana High Court

In Jyoti Sareen vs. Union of India & Ors. (2026), Punjab & Haryana High Court's Division Bench of Justics Deepak Sibal and Rupinderjit Chahal delivered a 97-page long judgement dated September 10, 2026, wherein, it concluded that the newly inserted Section 147A of the Income Tax Act, 1961 is unconstitutional. The judgment is reserved on September 8, 2026. The judgement was authored by Justice Sibal. 

A large number of f petitioners approached the High Court seeking therein to declare Section 147A of the Income-tax Act, 1961to be ultra vires Articles 14, 19(1) (g) and 265 of the Indian Constitution. After the grant of declaration as above, the petitioners pray for quashing the notices issued to them under Section 148 of the Act by their respective jurisdictional Assessing Officers (AOs). The petitioners submitted that even if Section 147A of the Act is held to have been legally promulgated by the legislature, the impugned notices, issued under Section 148 of the Act, were liable to be set aside because the petitioners’ respective jurisdictional AOs, who issued the impugned notices, were not chosen randomly through automated allocation which violates Section 151A of the Act read with the scheme dated March 29, 2022 framed thereunder. 

The petitioner is an Advocate practicing in the High Court. She is an Income Tax Assessee and her PAN number is APRPS8105E. The petitioner being a professional is earning income under the head “Business and Profession”. For the Assessment Year 2020-21, the petitioner filed her Income Tax Return on September 30, 2020. The petitioner’s return was processed. Thereafter, an intimation under Section 143(1) of the Act was received by her. On March 28, 2024, the petitioner received a message on her registered mobile number informing her that some proceedings had been initiated against her by the Income Tax Authorities and in this regard she was advised to go on to the Income Tax Business Application Portal. On doing so, the petitioner found that a notice dated March 15, 2024, under Section 148 of the Act, had been issued to her by her jurisdiction AO. As per the said notice the petitioner’s jurisdictional AO had received information that on March 14, 2022 a search had been conducted under Section 132 of the Act in the case of the petitioner or in the case of a person in respect of which the petitioner was assessable. To reassess her income, for the assessment year 2020-21, the petitioner was asked to file a return in the prescribed form. As per the said notice, the same had been issued after obtaining prior approval from the Principal Commissioner of Income Tax, Chandigarh-I but the petitioner claims that no such approval was provided to her. Through the notice dated March 15, 2024, issued under Section 148 of the Act, the petitioner was not informed the reasons as to why such proceedings had been initiated against her. According to the petitioner, since no proceedings under Section 132 of the Act had been conducted on any of her premises, she was also ignorant as to who was the person on whose premises search proceedings under Section 132 of the Act had been conducted leading to the issuance of notice under Section 148 of the Act to her. On June 28, 2024 the petitioner received an intimation informing her that proceedings against her shall be conducted in a faceless manner. The petitioner challenged the notice dated March 15, 2024, issued under Section 148 of the Act, through filing of a petition before this Court being CWP-15791-2024 which petition was allowed by a Division Bench of this Court through judgment dated July 19, 2024 primarily for the reason that the impugned notice issued by the petitioner’s jurisdictional AO violated Section 151A of the Act read with the scheme framed thereunder dated March 29, 2022. The reliance placed upon by the respondent authorities on an office memorandum and other internal communications to justify issuance of the impugned notice by the petitioner’s jurisdictional AO was rejected in the light of the clear mandate under Section 151A read with Section 144B of the Act. To arrive at its afore conclusion, the High Court Court agreed with and relied upon the law laid down, in similar facts, by the Telangana High Court in Kankanala Ravindra Reddy vs. Income-tax Officer and others, 2023 SCC OnLine TS 4476, the Bombay High Court in Hexaware Technologies Ltd. vs. Assistant Commissioner of Income-tax & others, 2024 SCC OnLine Bom 1249 and the Gauhati High Court in Ram Narayan Sah vs. Union of India and others, 2024 SCC OnLine Gau 1424. 

The judgment of the High Court dated July 19, 2024 was challenged by the respondents before the Supreme Court through filing of Special Leave Petition (C) No.000950-2025. However, while the afore Special Leave Petition, along with other Special Leave Petitions, was pending before the Supreme Court, through the Finance Bill, 2026, Section 147A of the Act was promulgated w.e.f. April 1, 2021. Section 147A started with a non-obstante clause that notwithstanding anything contained in any judgment, order or decree of any court or in Section 151A or in any scheme framed under Section 151A, for the removal of doubts, it was clarified through Section 147A that the Assessing Officer, for the purposes of sections 148 and 148A, shall mean and shall always be deemed to have meant to be an Assessing Officer other than the
National Faceless Assessment Centre or any assessment unit referred to in sub- section (3) of section 144B.

In the light of the introduction of Section 147A of the Act, the Supreme Court set aside the judgment(s) impugned before it and remitted the matters to the respective jurisdictional High Courts for fresh consideration. The assessees were granted liberty to amend their writ petitions, if so advised, within four weeks from the date of uploading of the order of the Supreme Court dated April 10, 2026 so as to enable them to lay challenge to Section 147A of the Act. The Supreme Court clarified that it had not expressed any opinion on the merits of the controversy, including the validity, scope, effect, retrospectivity or applicability of the amended provision and that all such questions were left open to be decided by the respective jurisdictional High Courts. The High Courts were requested to decide the matters preferably by September 30, 2026 and in the meanwhile interim stay of further assessment/reassessment proceedings pursuant to the notice impugned by the assessees was granted. However, such grant of interim stay was subject to further terms and conditions, if any, to be imposed by the respective jurisdictional High Courts. Operative part of the order of the Supreme Court dated April 10, 2026 reads as follows: -
“21. It appears to us that the assessees would be entitled to challenge the amending provisions as elaborated upon heretofore, for which it would only be appropriate to relegate them to the jurisdictional High Courts. All contentions raised before us, as well as any other grounds available to them to question the impugned notices, may be urged before the High Courts instead.
22. Since the High Courts have primarily quashed the reassessment notices on the ground that the JAOs lacked competence to initiate such proceedings, and the very foundation of that view now stands altered by the amending legislation, the impugned judgments in favour of the assessees are set aside on this limited ground. The matters areaaccordingly remitted to the respective High Courts for fresh consideration. Ordered accordingly. 
23. The assessees are granted liberty to amend their writ petitions, if so advised, within a period of four (4) weeks from the date of uploading of this order, so as to enable them to lay challenge to Section 147A of the IT Act, as introduced by Act No. 4 of 2026, or to any other connected or consequential provision.
24. Similarly, the Appellant-Revenue shall be at liberty to file their written submissions and affidavits before the jurisdictional High Courts within a period of three (3) weeks thereafter.
25. No additional time shall be granted to the parties beyond what has been granted above.
26. We make it clear that we have not expressed any opinion on the merits of the controversy, including the validity, scope, effect, retrospectively or applicability of the amended provisions, and all such questions are left open to be decided by the High Courts.
27. Finally, during the pendency of the writ petitions before the High Courts, there shall be an interim stay of further assessment/reassessment proceedings pursuant to the impugned notices, subject to such terms and conditions as may be imposed by the High Courts.
28. The High Courts are requested to decide the matters preferably by 30.09.2026. Learned counsel for the parties undertake to extend full cooperation to the High Courts in this regard. No adjournments may be
granted by the High Courts on mere asking of the parties.
29. The Registry shall forthwith transmit a copy of this order to the Registrars General of the concerned High Courts.
30. The appeals are, accordingly, disposed of.”

In terms of the liberty granted by the Supreme Court through its order dated April 10, 2026, the petitioner amended her original petition to include therein the challenge to the newly introduced Section 147A of the Act.

The counsels who appeared on behalf of the petitioners, submitted that the Bombay High Court through its judgments in Hexaware Technologies Ltd.’s case (supra) and Kairos Properties Pvt. Ltd.vs. Assistant Commissioner of Income Tax and others, 2024 SCC OnLine Bom 2571, the Punjab and Haryan High Court through its judgments pronounced in Jatinder Singh Bhangu & another vs. Union of India & others, 2024 SCC OnLine P&H 9337 and Jasjit Singh vs. Union of India and others, 2024 SCC OnLine P&H 9677, the Telangana High Court in Kankanala Ravindra Reddy’s case (supra) and the Gauhati High Court in Ram Narayan Sah’s case (supra), after analyzing the provisions of the Act, categorically held that in the light of Section 151A of the Act read with the scheme framed thereunder dated March 29, 2022, notices under Section 148 of the Act could only be issued by a Faceless Assessment Officer; without amending Section 151A of the Act and/or the scheme framed thereunder dated March 29, 2022 and thus without curing the defect pointed out by the constitutional courts through the afore referred judgments, through the retrospective enactment of Section 147A, the legislature could not nullify the effect of the judgments delivered by the constitutional courts; promulgation of Section 147A of the Act by the legislature, without amending Section 151A and Section 130 of the Act and/or the schemes framed thereunder is a glaring example of legislative outreach and breach of separation of powers between the legislature and the judiciary which the Indian Constitution clearly seeks to maintain; simply because Section 147A of the Act begins with a non-obstante clause, it cannot nullify the effect of law laid down by the constitutional courts; Section 151A of the Act read with the scheme framed thereunder dated March 29, 2022, which still exists in the Act, clearly provides that notices under Section 148 of the Act are required to be issued randomly through automated allocation and in a faceless manner and in the light of such clear mandate of law the “clarification” sought to be made through the introduction of Section 147A of the Act is in direct conflict with such substantive provisions within the same Act. 

It was submitted that Section 147A of the Act is also in conflict with Section 130 of the Act read with the scheme framed thereunder dated 28.03.2022 as per which all the functions and duties by Income Tax authorities are required to be done through the faceless regime in terms of Section 144B of the Act; as per the memorandum attached to the Finance Bill, 2026 through which Section 147A of the Act was introduced, Section 147A was promulgated by the legislature to achieve certainty and clarity as also to avoid litigation but introduction of Section 147A of the Act has resulted in everything to the contrary.

It was also submitted that since there were divergent views expressed by different High Courts as to whether notices under Section 148 of the Act could be issued by the assessees’ jurisdictional AOs, there were cross Special Leave Petitions, filed by the respective aggrieved parties, pending before the Supreme Court at the time when Section 147A was introduced. In  the light of these facts, the revenue should have invited an opinion of the Supreme Court which would have granted a final closure to this issue rather than retrospective enactment of Section 147A which has resulted in breeding of litigation across the length and breadth of this country before different High Courts and which litigation is not likely to end with judgment(s) to be rendered by the jurisdictional High Court(s); partial implementation of the faceless regime at the assessment/ reassessment stage defeats the entire purpose behind introduction of the faceless regime; even the timing of introduction of Section 147A of the Act by the legislature when the issue as to whether an assessee’s jurisdictional AO could issue a notice under Section 148 of the Act was pending adjudication before the Supreme Court was not appropriate because by doing so the respondents have literally stalled an opinion by the Supreme Court which in the afore facts was highly desirable and that Section 147A of the Act is also arbitrary because it artificially bifurcates the different stages of assessment especially when proceedings under Sections 148 and 147 of the Act are statutorily required to be an integral part of the same process. 

The submissions made by the counsels for the petitioner(s) was that even if the High Court does not find favour with the submissions made on behalf of the petitioner(s) with regard to the challenge to the vires of Section 147A of the Act still the impugned notices issued under Section 148 of the Act are liable to be set aside as they have not been issued by AOs chosen randomly by way of automated allocation in terms of Section 151A of the Act read with the scheme framed thereunder dated March 29, 2022. In support of their submissions, reliance was placed by counsel of the petitioners on the following judgments: -

1. NHPC Ltd. Vs. State of Himachal Pradesh Secretary and others, (2023) 17 SCC 1
2. Janapada Sabha Chhindwara Vs. Central Provinces Syndicate Ltd. and another, (1970) 1 SCC 509
3. State of Tamil Nadu Vs. State of Kerala and another, (2014) 12 SCC 696
4. S.R. Bhagwat and others Vs. State of Mysore, (1995) 6 SCC 16 
5. Commissioner of Income Tax (Central)-I, New Delhi Vs. Vatika Township Private Ltd., (2015) 1 SCC 1
6. S.T. Sadiq Vs. State of Kerala and others, (2015) 4 SCC 400
7. Tata Motors Ltd. Vs. State of Maharashtra and others, (2004) 5 SCC 783
8. State of Karnataka and others Vs. Karnataka Pawn Brokers Association and others, (2018) 6 SCC 363
9. Central Provinces Manganese Ore Co. Ltd. Vs. Commissioner of Income-tax (1986), 3 SCC 461
10.M/s Hiralal Rattanlal Vs. State of U.P. and another, (1973) 1 SCC 216

The judgement of the Punjab & Haryana High Court  reads:"....Through and even after the retrospective enactment of Section 147A, Section 151A of the Act and the scheme framed thereunder continue to exist on the statute book and without any amendment. Thus, the primary basis on which the constitutional courts had held that notices issued under Section 148 of the Act could not have been issued by the assessees’ jurisdictional AOs has not been removed through the retrospective enactment of Section 147A. Without amending Section 151A of the Act or the scheme framed thereunder, the “clarification” made by the legislature through the retrospective enactment of Section 147A that Assessing Officers for the purpose of issuance of notices under Section 148 of the Act mean and shall always deemed to have meant to be Assessing Officers other than the faceless AOs is in defiance of and in conflict with the law laid down by the constitutional courts. Through such “clarification”, the legislature visibly seeks to substitute its opinion over and above the findings returned by the constitutional courts which is legally impermissible. Section 147A is also clearly found to be in direct conflict with Section 151A, read with the scheme framed thereunder, all of which provisions simultaneously exist in the same statute. In the absence of any amendment to Section 151A and/or the scheme framed thereunder, simply because Section 147A begins with a non-obstante clause, would not make its retrospective enactment pass the test of a constitutionally enacted validation law. Rather, by the retrospective enactment of Section 147A, in the manner in which it has been done, the legislature has clearly trenched upon judicial power and through the introduction of Section 147A the legislature directly seeks to upset findings returned through judgments of several constitutional courts. The attempt by the legislature is clearly to circumvent unfavourable judicial decisions. Even today, if a matter is listed before the constitutional courts which rendered the afore verdicts as to who is the competent Assessing Officer to issue a notice under Section 148 of the Act, there would be no change in the rendering of the above referred verdicts because such verdicts were primarily based on Section 151A and the scheme framed thereunder dated 29.03.2022 which provision and the scheme still continue to exist on the statute book as they existed at the time when the judgments of the constitutional courts were rendered. In the light of the considered and categoric findings returned by the constitutional courts after carefully analyzing Section 151A of the Act and the scheme framed thereunder that only a faceless AO can issue a notice under Section 148 of the Act, the “clarification” which is in clear defiance of and contrary to the afore findings, made by the legislature through the retrospective enactment of Section 147A of the Act would be of no help to the respondents." 

The judgement added:"The “clarification” made through the retrospective enactment of Section 147A was that an Assessing Officer, for the purpose of issuance of notice under Section 148 of the Act, meant and was always deemed to have meant to be an Assessing Officer other than the faceless AO. Such “clarification” was in conflict with the findings returned by as many as nine constitutional courts of this country to the effect that as per Section 151A of the Act and the scheme framed thereunder only a faceless AO could issue a notice under Section 148 of the Act. Section 151A and/or the scheme framed thereunder continue to exist on the statute book simultaneously with Section 147A. Therefore, introduction of Section 147A of the Act did not bring any clarity or certainty. It only added to the confusion. The other purpose behind enactment of Section 147A of the Act was to avoid litigation but such enactment became the breeding ground of litigation as thousands of petitions on the issue in question are pending in at least in eight different High Courts across the length and breadth of this country and that such litigation is also not likely to end before the respective High Courts because the parties aggrieved by the judgment of the respective jurisdictional High Courts would likely take up the matter before the Supreme Court. If it is a judgment of the Supreme Court which is ultimately going to give a quietus to the entire matter then rather than, for the afore “objects”, retrospectively enacting Section 147A, it was desirable for the respondents to
have invited an early opinion of the Supreme Court at the time when cross petitions were pending before the Supreme Court, filed by the respective parties aggrieved by the divergent views expressed by different jurisdictional High Courts as that would have finally put a lid on this issue. 63. In the light of the afore discussion, we have no hesitation to declare Section 147A of the Act to be unconstitutional. "

The High Court concluded: "79. In the light of the above discussion, after holding Section 147A of the Act to be unconstitutional and directing it to be struck down, we further order setting aside of the notices issued to the petitioner(s) under Section 148 of the Act because such notices have not been issued through the process of randomized allocation of assessing officers and in a faceless manner as is mandated under Section 151A of the Act read with the scheme framed thereunder dated 29.03.2022." 

Notably, Section 147 A provision was introduced retrospectively to clarify the role of the Jurisdictional Assessing Officer (JAO) in reassessment proceedings. Section 147A was inserted with retrospective effect from April 1, 2021. It provides that, for the purposes of reassessment provisions, the expression “Assessing Officer” would mean an Assessing Officer having jurisdiction over the assessee.

The amendment in the Act was in reaction to the JAO-FAO controversy. It arose after the introduction of the faceless assessment framework in 2021. The dispute centred on whether reassessment notices and orders could be validly issued by the Jurisdictional Assessing Officers or whether such proceedings were required to be undertaken through the National Faceless Assessment Centre. The adverse High Court order was appealed in the Supreme Court. While the batch of appeals was pending, Parliament had introduced Section 147A with retrospective effect, seeking to clarify the statutory position and validate reassessment action undertaken by Jurisdictional Assessing Officers.

Bihar State Power (Holding) Company Limited converts advertisement for Additional Finance Consultant into advertisement for Legal Consultant!

Bihar State Power (Holding) Company Limited has converted advertisement for Additional Finance Consultant into advertisement for Legal Consultant. It has changed the qualification, experience and age criteria in an exercise of apparent arbitrariness. The advertisement appears to be in violation of Articles 14 and 16 of the Constitution of India.  It seems Bihar Government has not drawn lessons from the judgement of Justice Chakradhari Sharan Singh of the Patna High Court in Kapil Kumar vs. the State of Bihar & Others.

Bihar State Power (Holding) Company Limited (BSPHCL), a government of Bihar undertaking under Department of General Administration invited application for the post of Additional Finance Consultant through Walk-In-Interview by an advertisement dated October 10, 2024 published in The Times of India, Patna (p.19). The interview was scheduled to be held on October 22, 2024 at BSPHCL, Vidyut Bhavan, Jawaharlal Nehru Marg, Patna at 3.30 PM on Tuesday. The application was to be addressed to Ram Anugrah Narayan Singh, GM, HR & Admin, BSPHCL. The required qualification and experience were: "CA/ ICWA/ MBA (Finance) from a recognized Institute/University and Minimum experience of 10 years in the field of Finance & Accounts." The emolument is "Consolidated pay amounting to 1,05,000/- (One lakh five thousand) per month." The contract period is "for 3 (three) years initially which may be extended for 01 (one) year at a time, as per requirement of the company and his/her satisfactory job performance." The work and responsibility included "Work related to give advice on the matters related to finance and accounts of BSPHCL & its subsidiary companies. Other Works as entrusted by CMD & GM (HR & Adm.), BSPHCL from time to time." This advertisement was with reference to "Job Contract Notice No. - 12/2024 (Contract)". It stated that "Age should be between 35 to 45 years" as one October 1, 2024. This newspaper advertisement was published vide PR-010425 (B&C) 2024-2025.

Subsequently, The Times of India, Patna (p.21) published a Corrigendum on October 11, 2024 from BSPHCL with reference to "Job Contract Notice No.-11/2024 (Contract)" signed by Ram Anugrah Narayan Singh. The Corrigendum reads: The post mentioned as Additional Finance Consultant in the newspaper notice published vide PR-010426 (B&C) 2024-2025 against notice no.-11/2024 may be read as Legal Consultant." It was published vide PR-010432 (B&C) 2024-2025. The reference the Corrigendum appears incorrect because newspaper advertisement was published vide PR-010425 (B&C) 2024-2025. 

For the post of Legal Consultant, the required qualification and experience are: "LLB (Bachelor of Law) from a recognized Institute/ University. Minimum experience of 20 years in the field of Law. Experience in government department/institutions/ P.S.U will be preferred." The mode of selection is through Walk-in-Interview.

The emolument is mentioned as "Consolidated pay amounting to 90,000/- ( Ninety thousand) per month." It stated that "Age as on 01.10.2024: Should be between 50 to 60 years." The contract period "for 2 (two) years initially which may be extended for 01 (one) year at a time, as per requirement of the company and his/her satisfactory job performance. This contractual engagement may be terminated immediately without giving any prior notice, if performance of the candidate is not found satisfactory by the company." The work and responsibility includes "Works related to giving advice in the -Legal matters, Legal issues related to Projects (Including IT/OT/RDSS/ Pre-paid metres) of BSPHCL and its subsidiary companies. Cyber Crime/Fraud in payment of bills by consumers. Implementation, Monitoring & Observation of Legal work related to BSPHCL & its subsidiary companies. Other works as entrusted by CMD & GM (HR/Adm) of BSPHCL from time to time." The interview is scheduled to be held on October 24, 2024 at BSPHCL, Vidyut Bhavan, Jawaharlal Nehru Marg, Patna at 3.30 PM on Thursday. The application is to be addressed to Ram Anugrah Narayan Singh, GM, HR & Admin, BSPHCL.

Bihar Govt complying with High Court's directions to rectify "the manifest illegalities" in the selection process of all District Collectorates

Important Notice regarding selection process of office attendant/attendant(Special) was issued on March 31, 2023 in compliance with Patna High Court's order dated December 18, 2019. Important notice regarding selection process of office attendant/attendant(Special) for all district collectorates was issued on April 10, 2023 in compliance of Patna High Court's order dated December 18, 2019. Similar notices were issued on January 15, 2024, January 22, 2024, August 7, 2024, August 30, 2024, September 9, 2024 and October 9, 2024. It is apparent that High Court's order set right a long standing illegal selection process.

The High Court had directed "the respondents, particularly, the Additional Chief Secretary/ Principal Secretary, General Administration Department, Government of Bihar, Commissioner, Magadh Division, Gaya and the District Magistrate, Gaya to ensure that the process of selection through the advertisement in question is completed by adopting a fair procedure." Notably, General Administration Department, is under the Chief Minister of Bihar. The judgement was delivered on December 18, 2019. It was authored by Justice Chakradhari Sharan Singh. Justice Singh is currently the Chief Justice of Orissa High Court. 

The petitioners had approached Patna High Court to allege that the criteria laid down in the advertisement was not followed in preparing the provisional panel list of candidates for appointment against Class-IV posts in Gaya Collectorate under the signature of the Divisional Commissioner, Magadh Division, Gaya and other members of the Selection Committee constituted for the purpose. The petition was against nine respondents, namely, 1) the State of Bihar, 2) Principal Secretary, General Administrative Department, Government of Bihar, 3) Commissioner,  Gaya, 4) Collector, Gaya cum Chairman, Selection Committee Group, Gaya, 5) Additional Collector, Gaya, 6) District Development Commissioner, Gaya, 7) District Welfare Officer, Gaya, 8) Additional Collector Establishment, Gaya and 9) Deputy Collector Establishment, Gaya. 

Justice Chakradhari Sharan Singh of the High Court has recorded in his judgement in Kapil Kumar vs. the State of Bihar & Others that the affidavit filed on behalf of respondents no. 4 to 6 revealed that no process of selection of any nature was adopted. Besides Kapil Kumar, the other petitioners were: Hardeo Prasad, Raj Kishore Prasad, Ramjivan Prasad, Mahendra Prasad, Raju Thakur and Md. Ishteyak. Similar petitions were tagged with it. In Shambhu Prasad vs. the State of Bihar, the other petitioners were: Ajay Kumar, Dhanwanti Kumari and Surendra Kumar Sinha. In Aftab Hussain vs. the State of Bihar, the other petitioners were: Ravindra Kumar, Md. Shamim and  Satish Kumar.

The Court observed that there was nothing in  the submission of the State to suggest that the persons were engaged on daily wage basis after following any fair procedure by giving equal and fair opportunity to others, equally willing to serve as daily wage employees, more in need of employment/ engagement. The Court noted that such engagements, "are more often back door" and "the very process of selection as adopted by the respondents through the advertisement in question to be wholly illegal, arbitrary and patently in breach of Articles 14 and 16 of the Constitution of India." It added, "no process of selection has at all been adopted which can be said to be fair and impartial, through written examination or interview or some other rational criteria for judging inter se merit of the candidates."

The Court has recorded in its judgement that "in response to a query made by this Court as to whether any selection process has been undertaken for filling up the said posts from open market giving unemployed youths an opportunity to participate in last few decades, nothing positive has been shown." The query was made in the context of a system having emerged for filling up Class-IV posts in the collectorates on the basis of panel of daily wage workers under the collectorate in the State of Bihar.   

The Court found that "Here is a case where the advertisement does not disclose the number of vacancies/ posts in question and it has just been issued to prepare a panel for filling up the posts. Such exercise renders the statutory rules framed for appointment against such posts under proviso to Article 309 of the Constitution, meaningless. The Court relied on Supreme Court's decision in Renu and others vs. District and Sessions Judge, Tis Hazari Courts, Delhi and another reported in (2014)14 SCC 50, to stress the need of disclosing the number of posts available for selection and recruitment.

The Court observed: "The respondents are obliged to follow a fair process of selection in accordance with the statutory rules and constitutional mandate. It is noteworthy that though the rules have been framed for selection and appointment against Class-IV (Group-D) posts, no clear and definite process of selection has been laid down, therein. If no transparent, fair and impartial procedure is adopted for judging the inter se merit of the candidates, who have applied in response to the advertisement made, the eligible candidates cannot get a fair chance to compete, which would be violative of the guarantee enshrined under Article 16 of the Constitution", as held in case of UPSC vs. Girish Jayanti Lal Vaghela reported in (2006)2 SCC 482.

It recollected the Supreme Court’s decision in case of M.P. State Coop. Bank Ltd. vs. Nanuram Yadav reported in (2007) 8 SCC 264 wherein the principles to be adopted in the matter of public appointments has been laid down. The principles enunciated in case of M.P. State Coop. Bank Ltd. which have been taken note of with approval by the Supreme Court in case of Renu  are as under: 

“(1) The appointments made without following the appropriate procedure under the rules/ government circulars and without advertisement or inviting applications from the open market would amount to breach of Articles 14 and 16 of the Constitution of India.
(2) Regularisation cannot be a mode of appointment.
(3) An appointment made in violation of the mandatory provisions of the statute and in particular, ignoring the minimum educational qualification and other essential qualification would be wholly illegal. Such illegality cannot be cured by taking recourse to regularisation.
(4) Those who come by back door should go through that door.
(5) No regularisation is permissible in exercise of the statutory power conferred under Article 162 of the Constitution of India if the appointments have been made in contravention of the statutory rules.
(6) The court should not exercise its jurisdiction on misplaced sympathy.
(7) If the mischief played is so widespread and all pervasive, affecting the result, so as to make it difficult to pick out the persons who have been unlawfully benefited or wrongfully deprived of their selection, it will neither be possible nor necessary to issue individual show-cause notice to each selectee. The only way out would be to cancel the whole selection.
(8) When the entire selection is stinking, conceived in fraud and delivered in deceit, individual innocence has no place and the entire selection has to be set aside.”

In Renu case, the Supreme Court had the occasion to consider power of appointment granted to the Chief Justice of a High Court under Article 229(1) of the Constitution and in no uncertain terms has held that even the said power granted to the Chief Justice is subject to Article 16(1) which guarantees equality of opportunity to all citizens in matters relating to employment. The expression ‘opportunity’ has been explained in case of Renu (supra) as ‘a chance of employment’ and held that what is guaranteed under Article 16(1) is this opportunity of employment ‘equally available to all’. The observations made in case of Renu (supra) in paragraph 27 are significant and is a reminder for all authorities exercising their power and jurisdiction to make appointment against a public post. The Court made the following observations:

“27. To say that the Chief Justice can appoint a person without following the procedure provided under Articles 14 and 16 would lead to an indefinite conclusion that the Chief Justice can dismiss him also without holding any inquiry or following the principles of natural justice/ Rules, etc. for as per Section 16 of the General Clauses Act, 1897, power to appoint includes power to remove/ suspend/ dismiss. (Vide Pradyat Kumar Bose v. High Court of Calcutta and Chief Justice of A.P. vs. L.V.A. Dixitulu) But as no employee can be removed without following the procedure prescribed by law or in violation of the terms of his appointment, such a course would not be available to the Chief Justice. Therefore, the natural corollary of this is that the Chief Justice cannot make any appointment in contravention of the statutory rules, which have to be in consonance with the scheme of our Constitution.”

In Ramana Dayaram Shetty vs. International Airport Authority of India and others reported in (1979) 3 SCC 489, the Supreme Court remarked that every action of the executive Government must be informed with reason and should be free from arbitrariness which is the very essence of Rule of Law and bare minimal requirement. The Court noted with approval the observation of Kerala High Court in case of V. Punnan Thomas vs. State of Kerala, reported in AIR 1969 Ker 81: “The Government, is not and should not be as free as an individual in selecting the recipients for its largesse. Whatever its activity, the Government is still the Government and will be subject to restraints, inherent in its position in a democratic society. A democratic Government cannot lay down arbitrary and capricious standards for the choice of persons with whom alone it will deal."

In Kasturi Lal Lakshmi Reddy vs. State of Jammu & Kashmir & Anr. reported in (1980) 4 SCC 1, the Court has held that interaction of Articles 14, 16 and 19 shows that the requirement of reasonableness runs like a golden thread through the entire fabric of fundamental rights and where any Government action, whether it be under the authority of law or in exercise of executive power without making law, fails to satisfy the test of reasonableness in public interest, it would be liable to be struck down as invalid.

In Secy. State of Karnataka vs. Uma Devi(3), the Supreme Court has held that it is an obligation cast on the State under Article 39(a) of the Constitution to ensure that all citizens ‘equally’ have the right to livelihood. 

In I.R. Coelho vs. State of Tamil Nadu (2007) 2 SCC 1, the Court held that fundamental rights occupy a unique place in the lives of civilized society and has been described as “transcendentally” “inalienable” and “primordial”. 

In Olga Tellis vs. Bombay Municipal Corporation reported in (1985) 3 SCC 545, the Court held that the right to livelihood is a fundamental right under Article 21 of Constitution of India. 

Drawing on these decisions of the Supreme Court and the relevant provisions of the Constitution of India, Patna High Court has held that the advertisement to the extent that it allows preference under sub-clause (1)(2)(3)(4)(5) and (6) of Clause 7 of the advertisement which dealt with work experience of the aspirants has been "held to be illegal, violative of Articles 14 and 16 of the Constitution of India and are struck down accordingly." The terms of advertisement contemplated preparation of a panel of daily wage employees only by giving them first, second and third preference and those who did not have the opportunity to work as daily wage employee are to be placed at the bottom of the panel, whose merit will depend on respective dates of their birth. The appointments against Class-IV posts, in terms of the scheme, was to be made on the basis of such panel.

The Court's order reads: "In my opinion, holding of written examination of the candidates who have applied against the said advertisement would be a fair procedure for preparation of merit-list, in the absence of any provision in the Rules. This, in my opinion, would ensure transparency in the process of selection. Since the advertisement was issued more than six years ago, the respondents are directed to conclude the process of selection and appointment against such posts, which were available on the date of issuance of advertisement, within a period of three months from today. The respondents are further directed to ensure that a fair process of selection, strictly in accordance with statutory rules and in conformity with the mandate of Articles 14 and 16 of the Constitution is undertaken on regular basis, after advertising number of post, so that the persons acquiring eligibility after the initiation of one selection process have a chance to seek and participate in subsequent selection processes. This practice of fairness in the process of selection for filling up public posts generates faith in the hearts and minds of the citizen in the governance, laws and the Constitution."

The advertisement No. 01/2013 had referred to the Bihar Group-D (Recruitment and Service Condition) Rules, 2010 framed by the State of Bihar under the proviso to Article 309 of the Constitution of India. The Rules came into effect from the date of its publication in the official gazette on March 29, 2010. 

 

Temporary employees with characteristics of regular government servants cannot be denied pension: Supreme Court

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.

Bihar law increasing reservation for SCs, STs & OBCs to 65%, violates Articles 14, 15, 16 of Indian Constitution: Patna High Court

Drawing on  the decision of 9-Judge Constitution Bench of the Supreme Court in Indra Sawhney v. Union of India, 1992 Supp (3) SCC 217, Patna High Court's bench of Chief Justice K. Vinod Chandran and Justice Harish Kumar set aside the Bihar Reservation of Vacancies in Posts and Services (for Scheduled Caste, Scheduled Tribes and Other Backward Classes) Amendment Act, 2023 and the Bihar Reservation (in Admission to Educational Institutions) Amendment Act, 2023 as ultra vires the Constitution and violative of the equality clause under Articles 14, 15 and 16 of the Constitution, on June 20, 2024. The 87-page long judgement was authored by Justice Chandran.  

The Court concluded that the enhancement of reservations beyond the 50% limit is bad in law based on the principles of equality emanating from the Constitution, as laid down by the wealth of precedents which are equally binding on the Court and the State. The Court referred to the the 50% rule brought in by the verdict in Indra Sawhney case, which has been accepted by the Union Parliament while introducing clause (4-A) in Article 16, and which has been upheld in K. Krishna Murthy v. Union of India, (2010) 7 SCC 202.

The High Court drew from the decision in Jaishri Laxmanrao Patil v. State of Maharashtra, (2021) 8 SCC 1 is relied on, which reaffirmed the maximum of 50% in reservations as laid down in Indra Sawhney case; binding under Article 141. The prayer for reference of Indra Sawhney case to a larger bench was rejected clearly finding that the thumping majority of five judges out of nine was in favour of the reservations being limited to 50% while three dissenting judges held that reservation can only be lesser than 50%. Only one of the judges differed from this and found it possible even above 50%. 

It was found that M. Nagaraj v. Union of India, (2006) 8 SCC 212 also did not lay down any ratio that ceiling of 50% reservation can be exceeded by showing contemporary data regarding backwardness. The Commission which approved the reservation in excess of 50%, impugned in the cited decision, was found to have completely misconstrued the ratio of a number of Constitution Bench decisions, while taking the view that ceiling of 50% can be breached merely on the basis of quantifiable data. The decision in M. Nagaraj case was factored in where tests were laid down to judge the validity of affirmative action, which the impugned legislation herein fails to pass. The mere existence of power to implement an affirmative measure cannot justify an over-breadth, especially when there is a breach of the 50% limit.

The has recorded that there was absolutely no thought or deliberation, which went into such excessive reservation being granted and there was not even a reference to the Backward Commission constituted by a statute.  The National Backward Commission was not been consulted, which has a mandate as per Article 338 of the Constitution.

It also noted that the 50% reservation has a history of 120 years, it having been first legitimized by Rajarshi Sahoo Maharaj of Kolhapur who brought in quotas in the appointments to the government; a full 48 years before independent India adopted the Constitution. 

It was pointed out that equality forms a basic structure of the Constitution and to breach the 50% limit in granting reservations would cause interference to the basic structure.

Among other things the senior counsel of the petitioner referred to proofing error in the preamble of the amendment Act wherein "The affirmative measure has been wrongly termed a ‘major’ and for data, the word ‘date’ has been used."