PAYMENT OF BONUS ACT, 1965

Insights into the regulatory framework with case

studies
 “The Principle (based on the Separation of Powers Concept) limiting
DOCTRINE OF Legislature’s ability to transfer its legislative power to another Governmental
DELEGATION Branch, especially the Executive Branch.”

Conditional Legislation
Such Legislation is usually complete in itself Thus Conditional Legislation
but its operation is made to depend on contains no element of delegation
fulfillment of certain conditions; and what is of legislative power and is,
delegated to an outside authority, is the power therefore, not open to attack on
to determine according to its own judgment the ground of Excessive
whether those conditions are fulfilled. Delegation.

Delegated Legislation ISSUES

In such cases, some portion of the Legislative
Power of the Legislature is delegated to the
outside authority in that, the Legislature,
though competent to perform both the
Essential and Ancillary Legislative Functions,
performs only the former and parts with the
latter.
Thus Delegated Legislation
confers some legislative power on
some legislative authority and is
therefore open to attack on the
ground of Excessive Delegation.
 1
Essential Legislative Functions include the power to repeal or modify a law and cannot be delegated.

2
I

In the absence of an express or implied power to that effect, Delegated Legislation, be it a rule,
S bye-law or a notification, cannot have retrospective operation.
S

[India Sugar Refineries Ltd. v. State of Mysore, AIR 1960]
U
E 3
S 
Delegated Legislation may be declared invalid on the following grounds:
 Violation of the Constitution of the India.
 Violation of the Enabling Act.
 Violation of Principles of Natural Justice when the Statute itself provides of such requirement.
 1
Is the conferment of power of exemption under s. 36 is ultra vires CASE
leading to excessive delegation of legislative powers?
SECTION 36
2
Is it violative of Article 14 of Constitution? Jalan Trading
POWER OF
Co (P) Ltd vs
EXEMPTION
Mill Mazdoor
3
Does the appropriate government need to follow the principles of natural Union 1966
justice before issuing a notification under section 36?

Questions
Jalan Trading Co (P) Ltd vs Mill Mazdoor Union 1966

• Representatives of workmen claimed that even if the employees had a loss in the years of
1961, 1962 they had to pay a bonus of 4% of wages or 40 Rs whichever is higher
• The Industrial Tribunal upheld the plea of the workmen and directed the employers subject
to the provisions of PBA 1965 to pay the bonus
• The employers appealed to the Supreme Court and challenged the validity of Payment of
Bonus Act
• Contended that Section 10 (Provision for Minimum bonus) offends Article 14 of the
constitution as it makes no difference between companies making profits and making losses
Jalan Trading Co (P) Ltd vs Mill Mazdoor Union 1966
•
In Jalan Trading Co. (Private Ltd.) vs Mill Mazdoor Union, 1966 the
Constitution Bench of Supreme Court declared:

Parliament has clearly laid down principles and has given adequate guidance to the
appropriate Government in implementing the provisions of s. 36. Section 36 amounts to
conditional legislation, and is not void.

Unless the enactment fails to satisfy the dual test of intelligible classification and
rationality of the relation with the object of the law, it will not be subject to judicial
interference under Art-14.

Equal treatment of unequal objects, transactions or persons in not liable to be struck
down as discriminatory unless there is simultaneously absence of a rational relation to the
object intended to be achieved by the law.
 State Of Tamil Nadu vs K. Sabanayagam & Anr., 1997
Supreme Court

• Following were the points of consideration in the matter:

●
Whether the exemption order dated 23rd November 1982 is bad inasmuch as it seeks to retrospectively apply
to earlier accounting years 1978-79, 1979-80, 1980-81 and 1981-82.
●
Whether the provisions of the Act are not applicable to the Housing Board in view of Section 32(v) (c) of the
Act.
●
Whether the exemption orders issued by the State of Tamil Nadu from time to time during the relevant years
as per Section 36 of the Act are null and void as no hearing was admittedly given by the State of Tamil Nadu to
the employees likely to be affected by such exercise of power of exemption before issuing such orders.
 State Of Tamil Nadu vs K. Sabanayagam & Anr., 1997
Supreme Court

 When a delegate merely determines either subjectively or objectively - depending

upon the "conditions" imposed in the statute permitting exercise of power by the
delegate - there is no legislation involved in the real sense and therefore, in our
opinion, applicability of principles of fair play, consultation or natural justice to the
extent necessary cannot be said to be foreclosed. Of course, the fact that in such cases
of `conditional legislation' these principles are not foreclosed does not necessarily
mean that they are always mandated.
 In appropriate cases representation of aggrieved parties can be considered by the
statutory authorities for arriving at a just and balanced conclusion on relevant facts.
Explanation of Supreme Court rule
Calculation of Bonus
SECTION 16 (2)
Alloy Steel Project vs The Workmen, February, 1971
Case facts:
 Alloy Steel Project was an undertaking
controlled and managed by a government
company, namely, the Hindustan Steel Ltd.
 Alloy Steel was started in 1961 and went into
production in 1964-65.
 No profit was earned up to 1967-68
 Workmen claimed bonus at the minimum rate
prescribed under the Payment of Bonus Act, 21
of 1965 in respect of the year 1965-66
 Alloy Steel Project exemption from payment of
bonus was claimed under S. 16(1) of the Act
on the ground that it was a new establishment
and had not made profits
Industrial Tribunal decision:
 Industrial Tribunal held that Alloy Steel could not
be treated as a separate establishment because
under the Act a company is itself an establishment
so that all units of a company like Hindustan Steel
Ltd. will constitute one establishment
 Not earning profits so pay bonus at the minimum
rate of 4% of wages as prescribed by the Act
Basis of Industrial Tribunal’s decision:
 The main basis of the decision of the Tribunal is
that 'the word establishment' has been used in
this Act to indicate a "Company" as called in
common parlance."
Alloy Steel Project vs The Workmen, February, 1971
Question:
Difference between in a ‘Company’ &
‘Establishment’ as per Section 2 (15) & (16) of
PBA, 1965
Decision:
 Alloy steel was allowed to have exemption
under Section 16 (1)
 As per Section 16(2), Alloy Steel Project was
treated as a new undertaking set up by the
existing establishments of Hindustan Steel Ltd
the exemption under S. 16(1) would be
available to it
Supreme Court Judgement:
 The Tribunal erred in holding the word
'establishment' to be synonymous with 'company‘
 It ignored the indications which are manifest from
the language of the Act as per Section 2 (16) &
(15)
 The word 'establishment' is intended to indicate
something different from a company as defined in
the Companies Act
 Alloy Steel was a separate establishment by virtue
of the proviso to S. 3 of the PBA Act, because for
each of the undertakings of Hindustan Steel Ltd.
including Alloy Steel separate accounts were kept
 For the purpose of compliance with the provisions
of the Companies Act a consolidated balance-
sheet and profit and loss account were also
prepared
Final Outcome:

Companies ACT Payment of Bonus Act,1965

A Consolidated balance Separate balance sheets for separate

sheet for the Company establishments for the calculation of
under the Companies Act the Bonus under Payment of Bonus
can be maintained Act, 1965 can be maintained.
 Asia Publishing House (Pvt) Ltd Vs Its Workmen

Asia Publishing House

(Pvt) Ltd is a successor The matter was
to Asia Publishing referred to the
House. Incorporated Industrial Tribunal on
on 31 August 1961 31st January 1964

The Workmen Pending Tribunal, the

( Publishers and ordinance for PBA,
Booksellers’ 1965 came into effect
Employees’ Union ) which resulted in the
demanded bonus for dispute being
the year of 1962 on governed by the
March 6th 1963 Ordinance
 Asia Publishing House (Pvt) Ltd Vs Its Workmen
Employer
Need not pay even the minimum bonus citing 16(1) of
the act “Where an establishment is newly set up, the
employees of such establishment shall be entitled to
be paid bonus
a) From the accounting year in which the
employer derives profit from such
establishment;
Prior Settlement (2nd august 1962) between employer
and Asia Publishing House Employees’ Union
representing the workmen and workmen abandoned
the claim for bonus for the year of 1962
Employee
Present employer is a successor-in-interest to Asia
Publishing House and section 16 is not applicable
here as per the explanation to Section 16
Explanation1: For the purpose of this section, an
establishment shall not be deemed to be newly
setup merely by reason of a change in its location,
management, name or ownership
The settlement won’t hold under section 34 of PBA “
notwithstanding anything inconsistent in terms of
any award, settlement, agreement”
Asia Publishing House (Pvt) Ltd Vs Its Workmen

AWARD

• Asia Publishing House is not a newly setup organization as

per Section 16(1) and is covered by the explanation1 to
Section 16
• Each of the employees who worked for not less than 30 days
in the year 1962 will be paid as bonus an amount equivalent
to 4% of the wages per year or Rs. 40 whichever is higher.
• The amount of bonus shall be paid within a period of one
month from the publication of this award
Sanghvi Jeevraj v. Madras Chillies, Craws and Kirana Merchant
Workers’ Union, 1969

1
Workmen working in certain Chillies and Kirana shops in Madras for demanded ISSUE
bonus for the year 1964-65
CASE FACTS

Due to the non

2 applicability of bonus
The appellants are:
act 1965, whether the
An establishment with less than 20 employees
employees are
An establishment in public sector
entitled to receive
3 bonus
Conciliation meetings failed and the case was referred to Industrial Tribunal
Sanghvi Jeevraj v. Madras Chillies, Craws and Kirana Merchant
Workers’ Union, 1969

VERDICT Appeal is held

1
Before PBA was enacted, bonus was claimed under ID Act.

2
Payment of Bonus became a statutory requirement with this Act

3
According to Section 39, “the provisions of this act shall be in addition to but not in derogation to ID Act”

4
 “exemption under sec. 32 excludes those employees from claiming bonus under the Act only and not from
claiming bonus under the Industrial Disputes Act or such other Act is not correct.
Central Inland Water Transport Corporation Ltd. v. Their
Workmen, 1975

BACKGROUND
• In 1966, the financial position of River Steam Nagivation Co. Ltd. became so
precarious that an application was made for its winding up. A scheme was
proposed and majority shares were purchased by its biggest creditor, the
Govt of India.
• It was incorporated as Central Inland Water Transport Corporation Ltd. 5173
out of the 8000 employees were given fresh appointments by the
Corporation on new terms and conditions.
Central Inland Water Transport Corporation Ltd. v. Their
Workmen, 1975

POINT OF CONTENTION
• The workmen working in Rajabagan Dockyard demanded payment of bonus for the years
1967-68 and 1968-69, but the Corporation claimed to be a new establishment since 5-6-
1967. Having incurred losses for both years, it claimed the workmen were not entitled to
bonus as per section 16 of the Payment of Bonus Act, 1965.
• The Industrial Tribunal held that the workmen were entitled to bonus on the ground that
the appellant was the successor-in-interest of the company in respect of the business
carried on in the establishment of Rajabagan Dockyard.
Central Inland Water Transport Corporation Ltd. v. Their
Workmen, 1975

JUDGEMENT
• The court felt that the Industrial Tribunal’s line of enquiry was not relevant. The real
question which arises is whether the Rajabagan Dockyard in the hands of the Corporation
could be said to be an establishment newly set up since 5-6-1967.
• The court held that the Dockyard was not a new establishment in the hands of the
Corporation. The establishment went by the same name of Rajabagan Dockyard; its address
remained the same and some of the old plant and machinery also continued to be used by
the Corporation. The Registration number of the establishment under the Factories Act also
remained the same.
• The workers who were given fresh employment on different terms and conditions suffered a
break in continuity of service of over a month. Thus,they should be entitled to closure
compensation under section 25FFF or at any rate compensation under section 25FF of the
Industrial Disputes Act, 1947.
Delhi Cloth and General Mills Co. Ltd. v. Their Workmen, 1971

BACKGROUND
• The appellant is a public limited company owning various industrial units including the
Delhi Cloth Mills and the Swatantra Bharat Mills.
• Although separate balance-sheet and profit and loss accounts were prepared for each
of these two mills for many years, their workmen have always been paid bonus
calculated on the basis of pooled profits of the two units treating them as one.
Delhi Cloth and General Mills Co. Ltd. v. Their Workmen, 1971

POINT OF CONTENTION
• 2 major questions: whether in calculating the bonus table for the accounting year
ending 30-6-1965, the allocation separately made towards the Capital and Reserves of
the two units is fair and reasonable; and whether the workmen of these Mills are
entitled to bonus at a rate higher than 6 per cent of the wages for the said accounting
year.
• Direct taxes deductible for computation of allocable surplus were much lower
according to the workmen. Rate of bonus was 7.30% and 16.64% according to the
computation of the management and workmen respectively.
• The tribunal gave its award in favour of the workmen
Delhi Cloth and General Mills Co. Ltd. v. Their Workmen, 1971

JUDGEMENT
• The court held that where a branch or undertaking is taken as a separate
establishment under the proviso to s. 3 for the purpose of the Act, there the gross
profits, prior charges, the available surplus and the allocable surplus all are to be found
out by applying that fiction to the branch or establishment.
• Sections 4 to 7 are to have effect in respect of that establishment by themselves
without the impact or connection with other branches.
• The gross profits, sums deductible & available surplus thus calculated would be
notional amounts in that they would not be the amounts which would be computed
under the Companies Act for submission to the shareholders or for assessment under
the Income-tax Act to the taxing authorities.
Delhi Cloth and General Mills Co. Ltd. v. Their Workmen, 1971

JUDGEMENT
• S. 7(a) of the Act further illustrates the point that the direct taxes which are to be
deducted as prior charges are not to be the same as would be assessed by the income-
tax authorities under the Income-tax Act. That the calculation of direct taxes would be
on a notional basis is also emphasised by cls. (b), (c).
• The court held that the direct taxes under s.6(c) of the Act were properly quantified by
the company. It set aside the Tribunal’s award and modified it to provide for bonus
being given to the workers @ 7.31% of the annual wage bill
• The company renewed the offer to pay ten per cent of the wages of the employees as
bonus for the relevant year. The offer was accepted by the employees and the award
accordingly stood modified.
Dharangadhara Chemical National Workers’ Union v.
Industrial Tribunal, 1975
BACKGROUND
• The workmen of the Sahurampur caustic soda unit were paid 4% minimum bonus as
provided under the Payment of Bonus Act, 1965. They contended that they were
entitled to additional bonus for the year 1967-68.
• The Tribunal by its award dated 31st May, 1974, held that the petitioners were not
entitled to any additional bonus.
• The workmen filed a writ petition to quash this award.
• The parties proceeded on the basis that the caustic soda unit at Sahupuram falls
within the proviso to Section 3 of the Act and therefore, they treated it as a
separate establishment for the purpose of computation of bonus under this Act, for
the year in question.
Dharangadhara Chemical National Workers’ Union v.
Industrial Tribunal, 1975
POINT OF CONTENTION
• The balance sheet and profit and loss account prepared for the relevant year in
question allocated the share capital, reserves and the common liabilities of the
company
• The contention of the petitioners was that this unit as such did not have a separate
share capital and therefore, deductions provided under Section 6(d) read with the
Third Schedule ought not to be made.
• The Tribunal rejected this contention, relying on the judgement in K.C.P. Ltd. v. K.C.P.
Employees' Association, Madras, 1969: “Share structure and common items of asset
and liability of the establishment will have a bearing on the computation of the
gross profits of its branch. That is a matter for proportionate allocation...”
Dharangadhara Chemical National Workers’ Union v.
Industrial Tribunal, 1975
JUDGEMENT
• The court dismissed the writ petition, agreeing with the Tribunal’s award
• It cited the Supreme Court’s decision in Delhi Cloth and General Mills Co. Ltd. v.
Their Workmen, 1971: “Under Section 5 of the Act, the available surplus in respect
of the two units would be the gross profits computed under Section 4 as reduced
by the prior charges mentioned in Sub-clause (a) to (d) of Section 6. All these
amounts would be notional amounts…”
• The deductions provided for in the Third Schedule as per Section 6(d) of the Act
have to be made with reference to profit and loss account and balance sheet of the
separate establishment. They are notional, so it does not matter that there was no
separate capital for the unit in question.
Management Of Central Coal Washeries Ltd. vs Workmen
& Anr on 21 July, 1978
BACKGROUND
• Establishment of the appellant was set up in June 1962
• The appellant disputed the claim of the workmen and contended that by reason of
subsection (1) of section 16, the workmen were not entitled to be paid bonus under the
Act for the years 1964-65 to 1968-69
• The Industrial Tribunal accordingly awarded minimum bonus at 4 per cent of the wages to
the workmen for the years 1964-65 to 1968-69
• The appellant being aggrieved by the award of the Industrial Tribunal, preferred an appeal
to this Court after obtaining special leave. Whilst the appeal was pending, a settlement was
arrived between the appellant and the Hindustan Steel Coal Washeries Workers' Union
which was binding on all workmen
• However, another Union called the Hindustan Steel Coal Washeries Employees Union,
which is a minority Union, claimed that the workmen represented by it were not party to
the settlement & hence wanted rehearing of the pending case
Management Of Central Coal Washeries Ltd. vs Workmen & Anr on 21 July, 1978

POINT OF CONTENTION
• The appellant claimed that in arriving at the net profit shown in the Balance Sheets and
Profit and Loss Accounts, depreciation had been calculated according to the straight line
method
• According to Explanation II to subsection (1) of section 16, depreciation which was liable
to be taken into account in arriving at the net profit for determining liability for payment
of bonus was that admissible in accordance with the provisions of sub- section (1)
of section 32 of the Income-tax Act
• If depreciation calculated in accordance with the provisions of sub-section (1) of section
32 of the Income-tax Act were taken into account, not only there would no profit but
there would be actually loss in each of the years 1964-65 to 1968-69
Management Of Central Coal Washeries Ltd. vs
Workmen & Anr on 21 July, 1978

JUDGEMENT
• The appellant did not derive profit from the three coal washeries in any of the years
1964-65 to 1968-69
• Workmen were not entitled to be paid bonus under the Act for any of these
accounting years
State Of Bombay vs K.P. Krishnan And Ors. on 18 August, 1960

BACKGROUND
• Industrial dispute between the Firestone Tyre and Rubber Co. of India Ltd., and its
workmen
• Workmen demanded payment of an unconditional bonus for the financial year ended Oct
31, 1953
• The company declared a bonus equivalent to 1/4 of the basic earnings for the year 1952-53
• The respondents then informed the company that they were entitled to a much higher
bonus having regard to the profits made by the company during the relevant year
• The management told the conciliator that the said employees had received very liberal
increments and had reached the maximum of their scales and so the management saw no
reason to accede to the demand for classification
State Of Bombay vs K.P. Krishnan And Ors. on 18 August,
1960
BACKGROUND
• The conciliation proceedings initiated by the conciliator, however, proved infructuous
with the result that on July 5, 1954, the conciliator made his failure report under s.
12(4) of the Act
• On receipt of this report the Government of Bombay (now the Government of
Maharashtra) considered the matter and came to the conclusion that the dispute in
question should not be referred to an industrial tribunal for its adjudication
• On February 18, 1955, the respondents filed in the Bombay High Court a petition under
Art. 226 of the Constitution praying for the issue of a writ of mandamus or a writ in the
nature of mandamus or other writ, direction or order against the State of Maharashtra
(hereafter called the appellant) calling upon it to refer the said dispute for industrial
adjudication under s. 10(1) and s. 12(5) of the Act
State Of Bombay vs K.P. Krishnan And Ors. on 18 August,
1960
POINT OF CONTENTION
• The conciliation proceedings initiated by the conciliator, however, proved infructuous with
the result that on July 5, 1954, the conciliator made his failure report under s. 12(4) of the
Act
• On receipt of this report the Government of Bombay considered the matter and came to
the conclusion that the dispute in question should not be referred to an industrial tribunal
for its adjudication for the reason that the workmen resorted to go slow during the year
1952-53
• According to the company the period of go-slow attitude was seven months whereas
according to the respondents it was about five months
• On February 18, 1955, the respondents filed in the Bombay High Court a petition under
Art. 226 of the Constitution praying for the issue of a writ of mandamus or a writ in the
nature of mandamus or other writ, direction or order against the State of Maharashtra
State Of Bombay vs K.P. Krishnan And Ors. on 18 August,
1960
JUDGEMENT
• It is admitted that under clause 23(c) of the standing orders of the company willful
slowing-down in performance of work, or abatement, or instigation thereof, amounts to
misconduct, and it is not denied that as a result of the go-slow tactics adopted by the
respondents disciplinary action was taken against 58 workmen employed by the
company
• The claim which would have benefited the employees in future and the order passed by
the appellant deprives them of that benefit in future. Any considerations of discipline
cannot, in our opinion, be legitimately allowed to impose such a punishment on the
employees
• Even in regard to the claim for bonus, if the respondents are able to show that the profits
earned by the company during the relevant year compared to the profits earned during
the preceding years justified their demand for additional bonus, it would plainly be a
punitive action to refuse to refer such a dispute solely on the ground of their misconduct
State Of Bombay vs K.P. Krishnan And Ors. on 18 August,
1960

JUDGEMENT
• In this connection it may be relevant to remember that for the said misconduct the
company did take disciplinary action as it thought fit and necessary, and yet it paid the
respondents bonus to which it thought they were entitled
• A claim for bonus is based on the consideration that by their contribution to the profits of
the employer the employees are entitled to claim a share in the said profits, and so any
punitive action taken by the Government by refusing to refer for adjudication an
industrial dispute for bonus would, in our opinion, be wholly inconsistent with the object
of the Act.
Amal Kr. Ghatak And Srinathpur Tea ... vs State Of West Bengal And Ors. on 26 March, 1971

BACKGROUND
• The petitioners' case is that they had been carrying on the business of producing tea
under very adverse circumstances and are heavily indebted
• According to them in the reports of the National Council of Applied Economic Research
it had been found that the petitioners are carrying on their business under heavy
indebtedness and under adverse circumstances.
• The petitioners applied to the State Government for being exempted from the
obligations under the said Bonus Act, 1965
• The State Government sat over this application for more than one and a half years and
ultimately disposed of the application by recording the following order:
• With reference to your letter No. 1092/M-41 dated 15-9-1965 on the above subject, I
am directed to say that Government do not consider your prayer for exemption from
the provision of the Payment of Bonus Act, 1965 to be justified.
Amal Kr. Ghatak And Srinathpur Tea ... vs State Of West Bengal And Ors. on 26 March, 1971

POINT OF CONTENTION
• Section 36 contemplates an adjudication and whether such adjudication is
administrative or quasi judicial in character
JUDGEMENT
• The decision by the State Govt. was never arrived at in conformity with the power
which was exercised mechanically without application of mind at all far less to the
considerations required under the statute
• The impugned orders, passed by the State of West Bengal dismissing the petitioners'
prayer for exemption under Section 36 of the Payment of Bonus Act, 1965, were set
aside and the said respondent was directed to dispose of the said applications
afresh after giving the parties interested including the petitioners an opportunity to
be heard in accordance with law
Mahalaxmi Textile Mills v. Govt. of Madras, 1969 IILLJ,
133

Case facts:
• Petitioner (Mills) incurred losses in 1965 and 1966
• Mills unable to pay minimum bonus (4%) under Sec. 10, PBA
• Mills applied (and re-applied) for partial exemption under Sec 36, PBA
• Govt. refused and finally rejected application, without stating reasons
• Mills challenged this, attacking govt.’s failure to give reasons
• Also, mills signed agreement with majority workmen to pay 3% bonus subject to
exemption given by govt.
Mahalaxmi Textile Mills v. Govt. of Madras, 1969 IILLJ, 133
Question:
Can the appropriate government refuse exemption (Sec 36, PBA) from bonus (Sec 10, PBA)
without considering financial position and other relevant circumstances?
Government’s arguments:
• Govt. has absolute discretion to refuse to grant exemption
• Can’t be challenged by petitioner
• Agreement between Mills and workers for bonus (3%) is contrary to Sec 34 (3)
Madras HC arguments:
• Read Sec 10 & Sec 36 together
• Section 10- Pay minimum bonus (4% of salary) to every employee, irrespective of profit/ loss
• Section 36- Partial exemption from Act for establishments, if govt. deems fit (financial, etc.)
• Employer bound to pay minimum bonus (4%)
• Govt.’s duty to take all considerations (financial, other relevant) for exemption
• Govt. must pass a conclusive order which must be backed with reasons
Mahalaxmi Textile Mills v. Govt. of Madras, 1969 IILLJ, 133

Judgement:
• Whether this is contrary to the provisions of Section 34(3) of the Act or not, the
decision of the Government in deciding the question as to whether exemption
under Section 36 should be granted or not is affected.
• Government is bound to exercise its powers conferred under Section 36 and pass
such order as it thinks fit giving reasons for the same.
• The writ petitions are allowed and the order of the Government is quashed. The
Government will consider the application of the petitioner afresh and proceed
according to law.
State of Orissa v. Dr. (Miss) Binapani Dei, 1967 II LLJ 266

Case facts:
• Dr. Dei, a govt. servant joined Orissa Medical service in 1938
• Superannuation date due in 1965 (revised to 1968- age changed from 55 to 58 years)
• Discrepancies in DOB (4 different dates) of Dr. Dei, a government servant
• Preliminary enquiry held into DOB by Orissa govt.
• Date of Birth re-fixed by Orissa govt. and compulsory retirement ordered
• Report and evidence not disclosed
• Opportunity to meet evidence not given
• So superannuation date set in 1962 (extended to 1963)
• Dr. Dei filed a writ petition in High Court which was allowed
• Orissa govt. appealed in Supreme Court
State of Orissa v. Dr. (Miss) Binapani Dei, 1967 II LLJ 266
Question:

Whether Orissa govt.’s order (re-fixing date of birth and compulsory retirement) is sustainable?
Whether High Court's has the discretion (Constitution of India, Art. 226) to go into questions of fact?
Dr Dei’s contention:

• Order amounted to “compulsory retirement” and hence contrary to rules governing her service
• Also amounted to punishment (loss of pay, status and deprivation of service) and hence contrary to Art
311 of Constitution
• Order was arbitrary, mala fide and was passed maliciously
• It is contrary to law, against principles of natural justice and hence liable to be quashed as invalid
Orissa Govt. contention:

• The High Court in dealing with a petition under Art. 226 of the Constitution ought not to have proceeded
to determine disputed questions of fact
• Order re-fixing the date of birth of the respondent was an administrative order and the High
Court had no power to sit in appeal over the decision of the State authorities
• Art. 311 is not applicable to this case because she has not been dismissed from service
State of Orissa v. Dr. (Miss) Binapani Dei, 1967 II LLJ 266

SC contention (upholding Orissa HC judgement) :

• Order amounted to compulsory retirement before she attained superannuation age
• Since she held office she could not be removed from office before superannuation except “for good
and sufficient reasons”
• The state should have conducted enquiry and called upon her to explain the discrepancies and to
tender evidence about her DOB
• Dr. Dei was not given a reasonable opportunity to of showing cause against action proposed to be
taken
• Decision of state was not based on an enquiry and respondent was not given a chance for a hearing
• This goes against basic rules of natural justice and fair play and cannot have any value
State of Orissa v. Dr. (Miss) Binapani Dei, 1967 II LLJ 266

SC Judgement:
• Under Art. 226 of the Constitution the High Court is not precluded from entering upon a decision
on questions of fact raised by the petition. But the question is one of discretion and not of
the jurisdiction of the Court.
• Even an administrative order which involves civil consequences must be made consistently
with the rules of natural justice. The person concerned must be given a fair opportunity to meet
the case before an adverse decision is taken.
• Appeal dismissed.