Bholanath J. Thaker vs State of Saurashtra

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Appeal (civil) 170 of 1954

Decision Date: 04 May 1954

Coram: M.C. Mahajan, B.K. Mukherjea, V. Bose, N.H. Bhagwati, T.L.V. Aiyyur

In this appeal, the Court considered a petition filed under a certificate granted pursuant to Article 133(1)(a) of the Constitution. The petitioner, Bholanath J. Thaker, sought compensation from the State of Saurashtra on the ground that he had been forced into premature retirement. The case was recorded as Appeal (civil) 170 of 1954, and the judgment dated 4 May 1954 was delivered by Justice Bhagwati. The bench comprised Chief Justice M. C. Mahajan, Justices B. K. Mukherjea, V. Bose, N. H. Bhagwati and T. L. V. Aiyar. The judgment appears in the law reports as AIR 1954 SC 680.

The facts leading to the dispute began on 2 August 1936, when the appellant was appointed as an officiating Sarnyayadhi in the service of the Wadhwan State at a monthly remuneration of Rs. 150. He was confirmed in that position on 20 September 1936 and continued in the Wadhwan civil service until the administration of the State was transferred to the Saurashtra Government on 16 March 1948. In 1946 the Ruler of Wadhwan instituted a committee tasked with preparing rules concerning conditions of service, pensions and related matters. The committee submitted its report on 22 November 1947, and based on its recommendations the Ruler issued a proclamation, the Dhara (Act) No. 29 of 2004, on 3 February 1948. This act became effective on 1 January 1948, and Section 5 of the Dhara fixed the statutory retirement age for state civil servants at sixty years. Accordingly, the appellant acquired a legal entitlement to remain in his employment until he attained the age of sixty. Subsequently, on 24 January 1948 the rulers of the Kathiawar States, including the Wadhwan State, entered into a covenant to establish the United States of Kathiawar. Article 6(1) of that covenant required each ruler, as soon as practicable and no later than 15 April 1948, to transfer the administration of his State to the Raj Pramukh, after which all rights, authority and jurisdiction previously vested in the ruler concerning the governance of the State would vest in the United States of Kathiawar, together with the corresponding duties and obligations. The Raj Pramukh took the oath of office on 15 February 1948, and on 1 March 1948 promulgated Ordinance No. 1 of 1948, which continued in force all existing laws, ordinances, acts, rules and regulations of the Covenanting States until such provisions were repealed or amended under the ordinance’s terms. Finally, on 16 March 1948 the Ruler of Wadhwan formally transferred the administration of his State to the Saurashtra Government, and a proclamation issued on that day declared that the powers, jurisdiction and responsibilities previously held by the Thakore Saheb (the ruler) were now vested in the Saurashtra Government, with the government assuming the duties and obligations previously belonging to the ruler.

By a proclamation issued by the Saurashtra Government it was declared that every right, jurisdiction and authority that had previously vested in the Thakore saheb, the ruler of the State, now transferred to the Saurashtra Government. The proclamation further stated that all duties and obligations that had attached to the ruler with respect to his own State were also transferred to the Saurashtra Government, which was thereby responsible for performing those duties and obligations. Under Article 16(1) of the Covenant, the United States of Kathiawar guaranteed that the permanent members of the public services of each Covenanting State would either continue in service on conditions that were not less advantageous than those in force before the administration of the State was transferred to the Raj Pramukh, or that they would receive reasonable compensation. Accordingly, by an order dated 29 June 1948 the appellant was retired by the Saurashtra State on the ground that he had exceeded the prescribed age of superannuation, which the State had fixed at fifty-five years. The order provided that the appellant would receive three months’ leave salary and a monthly pension of Rs 40-13-0. The appellant accepted the leave salary of Rs 716-4-0 and the pension, but he did so under protest and expressly reserved his right to claim compensation. He argued that, under the Wadhwan State Service Rules, he was entitled to remain in service until he attained the age of sixty years. On 21 April 1949 the appellant instituted suit before the Civil Judge at S. D. Surendranagar, claiming a sum of Rs 20,000 as compensation for the premature and compulsory retirement that he alleged had been inflicted upon him.

The defendants contested the appellant’s claim principally on the ground that, after the ruler of Wadhwan State had entered into the Covenant on 24 January 1948, the ruler no longer possessed the competence to enact any law, rule or regulation that could bind the Saurashtra State. They further contended that the suit could not be entertained by the Municipal Courts because the action of the Saurashtra Government represented an act of State. The trial court rejected these defenses and granted a decree in favour of the appellant for Rs 18,409-2-0. The decree was appealed to the High Court, which reversed the trial-court judgment and dismissed the appellant’s suit, awarding costs throughout to the State. The High Court rejected the Saurashtra State’s contention that the State’s action constituted an act of State and therefore fell outside the jurisdiction of the Municipal Courts. It also rejected the argument that the suit was barred by Article 363 of the Constitution. However, the High Court held that, after the ruler entered into the Covenant on 24 January 1948, he no longer possessed legislative competence to promulgate Dhara No. 29 of Statute 2004. Consequently, the High Court concluded that the appellant’s claim for compensation on the basis of his entitlement to serve until the age of sixty years could not be sustained.

In its judgment the High Court held that the proposition that the appellant was entitled to remain in service until the age of sixty years could not be sustained. The Court further expressed the view that, even assuming a retirement age of sixty, the benefits granted to the appellant by the Saurashtra Government were unusually generous and went beyond what he could have obtained from the Wadhwan State, because the ruler of Wadhwan retained at all times the power to retire the appellant at his pleasure and the appellant could not compel the ruler to keep him in service until sixty. The learned Solicitor General appearing for the respondent openly admitted that he could not support the High Court’s finding on the ground that the ruler of the Wadhwan State lacked legislative competence to enact Dhara No. 29 of 2004. Nevertheless, he opposed the appellant’s claim on two separate bases. First, he argued that the guarantee contained in Article 16 of the Covenant, which the appellant sought to enforce, could not be enforced in the Municipal Courts and therefore the suit was legally incompetent. Second, he contended that the quantum of compensation awarded by the Trial Court to the appellant was far higher than the amount to which the appellant was rightfully entitled. Concerning the first ground, the Solicitor General asserted that the Covenant entered into by the Rules of the Kathiawar State constituted an act of State, and consequently the Municipal Courts lacked jurisdiction to entertain any disputes arising out of that Covenant. He also invoked Article 363 of the Constitution, which precludes judicial interference in disputes arising out of certain treaties and covenants. The Court observed that the ruler of the Wadhwan State, exercising his legislative authority, had promulgated Dhara No. 29 of 2004, thereby conferring specific statutory rights upon the appellant. Although the ruler possessed the power to repeal that enactment, he had chosen not to do so; consequently, for as long as the Dhara remained in force, the appellant was entitled to its benefits and could have enforced those rights in the State Courts, either against the State itself or against any officers who had unlawfully withheld his salary or dismissed him. When the Wadhwan State merged with the Saurashtra State and subsequently acceded to the Dominion of India, all existing laws continued in force until they were expressly repealed. Accordingly, the appellant’s rights under the Dhara remained valid and could have been enforced in the Municipal Courts unless the provisions had been repealed or repudiated as an act of State. Those rights were carried over after the adoption of the Constitution of the Indian Republic, with the crucial distinction that, as the appellant had become an Indian citizen, the defence of repudiation as an act of State could no longer be invoked. The only possible means of extinguishing his rights would have been legislation, which did not exist; therefore, his rights persisted and the Municipal Courts were competent to examine his service contract, apply Dhara No. 29 of 2004, and enforce any entitlement arising therefrom.

In this case the Court observed that the appellant’s rights could be displaced only by legislation that was permissible under the Constitution, and that no such legislation had ever been enacted; consequently the appellant’s rights continued to subsist and the Municipal Courts were therefore competent to examine the contract, to apply Dhara No. 29 of St. 2004, and to enforce any right that the appellant possessed under that Dhara and under his service contract, in accordance with article 300(1) and article 372(1) of the Constitution. The Court held that the covenant could be examined to determine whether the new sovereign had waived the appellant’s entitlement to rely on the laws of the former sovereign, and it found that the terms of the covenant expressly provided that the existing laws would remain in force and that any rights of the appellant arising under those laws were available for enforcement; there was no legal impediment to the Municipal Courts entertaining a suit to enforce such rights. Accordingly, the Court ruled that article 363 of the Constitution could not be invoked by the respondent, because there was no dispute arising out of the covenant and the appellant was merely seeking to enforce his rights under the continuing laws until they might be repealed by appropriate legislation, so that ground could not be relied upon by the respondent. Regarding the second ground, the Court noted that the learned Solicitor General had contended that, under the guarantee incorporated in Article 16 of the covenant, the State of Saurashtra was entitled to compulsorily retire the appellant with payment of reasonable compensation, and that such compensation could not exceed what the appellant would have been entitled to receive from the ruler of Wadhwan State had he remained in service at the time of compulsory retirement by Saurashtra. The Court rejected this argument, observing that although the appellant’s service under the ruler of Wadhwan was initially at the ruler’s pleasure, the ruler had imposed a limitation on his power to dismiss the appellant when Dhara No. 29 of St. 2004 was enacted. That limitation transferred to the State of Saurashtra on 15 March 1948 when the administration of Wadhwan State was vested in the Raj Pramukh, and the State of Saurashtra likewise could not dismiss or compulsorily retire the appellant before he reached the age of sixty. If the State of Saurashtra chose to retire the appellant, it could do so only upon payment of reasonable compensation, taking into account the appellant’s tenure with Wadhwan State, which entitled him to continue in service until the age of sixty, as a factor in determining the amount of such compensation.

The Court explained that in determining a reasonable amount of compensation, the State of Saurashtra had to keep in mind the length of the appellant’s service with the former Wadhwan State. That length of service gave the appellant a right to remain in employment until he reached the age of sixty years. The Court treated this right as a relevant circumstance for calculating the compensation that the State might be required to pay. The Court then reviewed the portion of the trial court’s judgment that dealt with the quantum of compensation. After examining that portion, the Court concluded that the figure awarded by the trial court was appropriate in light of the surrounding facts. Consequently, the Court held that the respondent could not rely on this ground to set aside the compensation award.

The Court further observed that the monthly pension of Rs 43-11-0 granted by the State of Saurashtra to the appellant was not the issue raised in the suit. The appellant’s claim for compensation was in addition to the pension, and the trial court had decided only on that additional amount. The Court noted that the appellant’s entitlement to the pension remained intact and was not diminished by the compensation awarded. Accordingly, the appellant would continue to receive his pension together with whatever compensation the trial court had ordered. Finally, the Court held that the appeal succeeded, the decree of the high court was set aside, and the decree of the trial court in favor of the appellant was restored, with costs awarded throughout the proceedings.