The Accountant General, Bihar and another v. N. Bakshi

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

Court: supreme-court

Case Number: Civil Appeal No. 704 of 1957

Decision Date: 21 November 1961

Coram: J.C. Shah, Bhuvneshwar P. Sinha, J.L. Kapur, M. Hidayatullah, J.R. Mudholkar

In this matter, the Supreme Court of India delivered its judgment on twenty‑first November, 1961. The case was styled as The Accountant General, Bihar and another versus N. Bakshi. The bench that heard the appeal comprised Justice J. C. Shah, Justice Bhuvneshwar Prasad Sinha who acted as Chief Justice, Justice J. L. Kapur, Justice M. Hidayatullah, Justice R. J. Mudholkar and Justice J. C. Shah. The petition was instituted by the Accountant General of Bihar together with another respondent, while the respondent was N. Bakshi. The formal citation of the decision appears in the 1962 All India Reporter at page 505 and also in the 1962 Supplement to the Supreme Court Reports, volume one, page 505. The decision has subsequently been referenced in the 1964 Supreme Court Reports at page 787 and is identified under the case number R 1964 SC 787. The judgment discusses several statutory provisions, including the Indian Civil Service – Conditions of Service – Passage Benefits, the concept of a statutory right, the constitutional guarantee, the power of the Central Government to cancel passage benefits by rule‑making, the validity of such cancellation, the meaning of the term “remuneration”, and the Superior Civil Services (Revision of Pay and Pension) Rules, 1924. It also refers to the Government of India Act, 1935 (sections 247 (1)), the Indian Independence Act, 1947 (sections 10 (2) and 19 (4)), the All India Services Act, 1951 (sections 3 and 4), the All India Services (Overseas Pay, Passage and Leave Salary) Rules, 1957 (rule 3), and Article 314 of the Constitution of India.

The headnote of the judgment explains that under the Superior Civil Services (Revision of Pay and Pension) Rules, 1924, which were framed by the Secretary of State for India‑in‑Council pursuant to the Government of India Act, 1919, members of the Indian Civil Service together with their wives and children were entitled to passage benefits that were incorporated as part of their salary or remuneration. An amendment made to those Rules in 1926 altered the character of the passage benefits for reasons of administrative convenience; the benefits ceased to be part of salary and were re‑characterised as separate allowances or privileges. Consequently, the passage benefits were credited to the accounts of the Indian Civil Service members and were debited from the general revenues of the State when actually used. The conditions of service to which these civil servants were entitled under the Government of India Act, 1919, were guaranteed by section 247 (1) of the Government of India Act, 1935, and this guarantee was reaffirmed by section 10 (2) of the Indian Independence Act, 1947. Article 314 of the Constitution of India further provides that persons appointed by the Secretary of State to a civil service of the Crown in India, and who continued to serve after the commencement of the Constitution under the Government of India or a State, were to receive from the respective governments the same conditions of service regarding remuneration, leave and pension that they enjoyed immediately before the Constitution came into force. On the fifth of February, 1957, exercising powers under the All India Services Act, 1951, the Government of India issued the All India Services (Overseas Pay, Passage and Leave Salary) Rules, 1957. By rule 3 of those Rules, the passage benefits previously provided under the 1924 Rules, as amended in 1926, were declared to have ceased, with retrospective effect from the twelfth of July, 1956, and to be applicable henceforth only to members of the Indian Civil Service.

In this case the respondent, who had been admitted to the Indian Civil Service in 1924 and who continued to serve in the State of Bihar after India became independent, challenged the validity of rule 3 of the All India Services (Overseas Pay, Passage and Leave Salary) Rules, 1957. The Court held that rule 3 was beyond the powers of the Government because the right to passage benefits formed part of the remuneration of Indian Civil Service members, and the conditions of remuneration were guaranteed by Article 314 of the Constitution of India. Consequently, the central Government, even while exercising its rule‑making authority, could not abolish or cancel a constitutional guarantee. The Court explained the meaning of the word “remuneration” in Article 314 and relied on the case of R. v. Postmaster General (1876) 1 Q.B.D. 658 for that explanation. The judgment was issued in Civil Appeal No. 704 of 1957, an appeal from the Patna High Court order dated 11 March 1957 in Miscellaneous Judicial Case No. 40 of 1957. The Attorney‑General for India and other counsel represented the appellants, while a counsel for the respondent appeared on his behalf. The decision was delivered on 21 November 1961 by Justice Shah. The appeal contested a High Court order that had directed the Accountant General of Bihar, Ranchi, to pay a passage allowance to the respondent’s wife and children under the Superior Civil Services (Revision of Pay and Pension) Rules, 1924. The respondent, N. Bakshi, had passed the competitive examination held in London in August 1924, was admitted to the service in November 1924, and was posted to the Province of Bihar after arriving in India. He remained in service in Bihar after independence. On 3 February 1956, the respondent asked the Accountant General of Bihar how many passages he and his family were entitled to under the 1924 Rules, hereinafter referred to as the Statutory Rules. The Accountant General replied in a letter dated 6 March 1956, stating that a credit of £284‑6 shillings stood in the respondent’s account, £341‑3‑5d in his wife’s account, and £138 in each of the separate accounts of his four children. The respondent then arranged to travel to the United Kingdom and on 20 June 1956 obtained passage certificates from the Accountant General, Bihar. On 12 July 1956, he was informed that the Government of India considered the passage benefits available to officers of Indian domicile under the Statutory Rules to be inconsistent with the prevailing circumstances and had decided, with effect from the date of that order, that such benefits would cease, the passage accounts of Indian officers who had been members of the former Secretary‑of‑State services would be closed, and any remaining passage credit would lapse to the Government. On 5 February 1957, the Government of India issued further action, which formed the basis of the respondent’s subsequent petition.

India exercised the authority granted by sub‑section (1) of section 3 of the All India Services Act, 1951, to formulate the All India Services (Overseas Pay, Passage and Leave Salary) Rules, 1957. Clause 3 of those Rules stipulated that the passage benefits previously provided under the statutory Rules would cease, and that the cessation would take effect retrospectively from 12 July 1956 for members of the Indian Civil Service. The appellant protested the cancellation of the passage benefits not only for himself but also for his wife and children. The Government of India subsequently set aside the original order dated 12 July 1956 insofar as the appellant himself was concerned, granting him the passage benefit, but it refused to extend the same relief to his wife and children. Consequently, the appellant, together with his wife and children, travelled to the United Kingdom as originally planned and, upon his return, instituted a petition under article 226 of the Constitution seeking a writ of mandamus against the Accountant General, Bihar. The relief sought required the Accountant General to pay the prescribed passage money for the appellant’s wife and children out of the amounts that were standing to their credit in the General Passage Fund Account and to issue the appropriate direction, order or writ to that effect. The High Court admitted the petition and issued the writ of mandamus that had been prayed for. Both the Accountant General and the Union of India appealed to this Court against the High Court’s order, attaching a certificate of fitness. In order to understand the basis on which the impugned order was made, it is necessary to refer to the Statutory Rules for passage benefit that were originally framed in 1924 by the Secretary of State in Council and to consider the subsequent amendments in the light of constitutional developments since that time. The Statutory Rules were framed by the Secretary of State for India‑in‑Council under sections 96B(2) and (3) of the Government of India Act, 1919, on 9 December 1924. Rule 12 of the Statutory Rules provides that, in addition to the pay prescribed by those Rules, passage pay shall be granted at the rates and subject to the conditions laid down in Schedule IV to the members of the services and holders of appointments enumerated in Appendix A to that Schedule. Schedule IV appended to the Regulations set out a detailed scheme for maintaining accounts of the passage pay and for its disbursement. The material regulations that form the core of the scheme are Regulations 3, 5, 6(1), 8, 9 and 14, which read as follows: “3. There shall be payable to every officer, with effect from the first day of April 1924, passage pay at the rate of Rs 50 per mensem or at such different rate as the Governor‑General in Council may by order declare to be necessary or sufficient for the purpose of providing the benefits conferred by these regulations.” “5. A sum equal to the amount received by an officer as passage pay shall be deducted monthly from the officer’s pay or leave salary, as the …” “6(1) The maximum benefits to which an officer shall be entitled shall be passages of a total value equal to the cost of the number of passages between Bombay and London by P. & O., 1st Class B, shown below.” “8. A separate account shall be opened in sterling in the case of each officer and, if such officer is married, for his wife, and, if he has children, for each child. These accounts shall be credited respectively with the cost of the passages to which the officer, his wife and children are entitled under Regulation 6.” “14. No person whatsoever shall have any claim on the General Passage Fund beyond the provision of the benefits, if any, conferred on him by these regulations and any balance remaining at the credit of any person after such person has ceased to be eligible for any such benefits shall lapse to the Fund.” These provisions together defined the manner in which passage benefits were to be accrued, accounted for and ultimately released.

The Court explained that Regulation 6(1) stipulated that the maximum benefit to which an officer could be entitled consisted of passages whose total value equaled the cost of the number of passages between Bombay and London by P. and  O., First‑Class B, as shown in the Schedule. Regulation 8 required that a separate account be opened in sterling for each officer, and, where the officer was married, for his wife, and for each child if he had any. These accounts were to be credited respectively with the cost of the passages to which the officer, his wife and his children were entitled under Regulation 6. Regulation 14 provided that no person could claim any right on the General Passage Fund beyond the benefits conferred by the regulations, and that any balance remaining in a person’s credit after that person ceased to be eligible for benefits would lapse to the Fund. The passage benefit granted under Rule 12 was thus clearly part of the officer’s salary, payable out of a fund called the General Passage Fund, which was created from the passage pay collected.

The Court noted that the Rules had been amended on several occasions, but the matter before it concerned two specific notifications: Notification No. F‑178/11/1/24 dated 5 October 1925 and Notification No. F‑17‑15/26 dated 16 June 1926. After the amendment, Rule 12 read: “In addition to the pay prescribed by these Rules, passages shall be granted, subject to the conditions set out in Schedule IV, to the members of the services and holders of appointments enumerated in Appendix A to that Schedule.” The regulations under Schedule IV were thereafter titled the Revision of Pay, Passage and Pension Regulations. The original regulations 3, 4 and 5 were omitted, and regulations 6, 8, 11 and 14 were amended. The effect of these amendments was that, instead of treating passage pay of Rs 50 per month as part of the officer’s salary and merely crediting that amount to the officer’s balance in the General Passage Fund, Clause 6 now directed the opening of a separate “passage account” for each officer, and, where applicable, separate accounts for his wife and his children. According to the revised regulations, each such account was to be credited with the cost of the passages to which the officer, his wife and his children were entitled. Within the limits of these credits, the officer could draw, for himself, his wife and his children, the fare for a journey from a port in India to a port outside Asia. By contrast, under the original 1924 Rules, an additional salary of Rs 50 per month was awarded to each officer as passage pay, which was then credited to the General Passage Fund from which passage benefits were provided.

According to the scheme of the Rules as amended in 1926, a separate passage account had to be kept for each officer and the account could contain only the maximum benefits prescribed by Rule 3. The funds to meet the disbursements from those accounts were to be drawn from the General Revenue of the State. By the amendment made in 1926 the passage benefit was no longer treated as a component of salary; it was transformed into an allowance or a privilege. The respondent therefore obtained the benefit of these passages in the years 1930, 1950‑51 and 1952‑53 for himself and for the members of his family. In 1957 the respondent alleged that the passage benefit had not been granted for his wife and his children. Consequently, he filed a petition under article 226 of the Constitution, seeking an order that the Union of India and the Accountant General be required to perform the statutory obligations that were owed to him. The conditions of the service to which members of the Indian Civil Service were entitled under the Government of India Act, 1919, were guaranteed to them by section 247(1) of the Government of India Act, 1935. That section provides: “247 (1). The conditions of service of all persons appointed to a civil service or civil post by the Secretary of State shall:‑ (a) as respects pay, leave and pension and general rights in regard to medical attendance, be such as may be prescribed by rules to be made by the Secretary of State; (b) as respects other matters with respect to which express provision is not made by this chapter, be such as may be prescribed by rules to be made by the Secretary of State in so far as he thinks fit to make such rules, and, in so far and so long as provision is not made by such rules, by rules to be made, as respects persons serving in connection with the affairs of the Federation, by the Governor‑General or some person or persons authorised by the Governor‑General to make rule & for the purpose and, as respects persons serving in connection with the affairs of a Province, by the Governor of the Province or some person or persons authorised by the Governor to make rules for the purpose: Provided that no rule made under this sub‑Section shall have effect so as to give to any person appointed to a civil service or civil post by the Secretary of State less favourable terms as respect remuneration or pension than were given to him by the rules is force on the date on which he was first appointed to his service or was appointed to his post.”

The proviso in the same provision makes it abundantly clear that the power to make rules cannot be exercised by the Secretary of State in a manner that would give any officer of the class specified less favourable terms with respect to remuneration or pension than those that were prescribed by the rules in force on the date of his first appointment to the service or to his post. This guarantee of unchanged terms of remuneration and pension was later confirmed by section 10, sub‑section (2) of the Indian Independence Act, 1947.

In the Indian Independence Act of 1947, the legislature provided that, to the extent relevant, every individual who had been appointed by the Secretary of State or the Secretary of State in Council to a civil service of the Crown in India would, after the appointed day, continue to serve under the government of either of the newly formed Dominions or under any province or part thereof. The Act further stipulated that such persons would be entitled to receive from the governments of the Dominions and Provinces or parts in which they were serving, the same conditions of service that had prevailed immediately before the appointed day. These conditions included remuneration, leave and pension, as well as the same rights in disciplinary matters, tenure of office and any similar rights that the circumstances might permit. The term “remuneration” was defined in section 19(4) of the Act to encompass leave pay, allowances and the cost of any privileges or facilities provided in kind.

Article 314 of the Constitution subsequently reinforced this guarantee by providing that individuals who had been appointed by the Secretary of State or Secretary of State in Council to a civil service of the Crown in India and who continued to serve after the commencement of the Constitution, whether under the Government of India or a State, would receive from the appropriate Government the same conditions of service with respect to remuneration, leave and pension as they were entitled to immediately before the Constitution came into force. To give effect to this constitutional provision, Parliament enacted the All‑India Services Act of 1951 (No 61 of 1951) to regulate recruitment and service conditions for persons appointed to the All‑India Services common to the Union and the States. Section 3 of that Act authorised the Central Government to make rules governing recruitment and service conditions for the All‑India Services, while section 4 provided that all rules in force immediately before the Act’s commencement and applicable to an All‑India Service would continue to be effective and would be deemed to have been made under the Act. Accordingly, on 8 September 1954 the Central Government framed the Indian Administrative Services Recruiting Rules, and under Rule 2(d) the members of the Indian Civil Service who continued to serve after the Constitution’s commencement were to be treated, for the purposes of those rules, as members of the Indian Administrative Service. Subsequently, on 15 February 1957, the All‑India Services Overseas Pay, Passage and Leave Salary Rules, 1957, were promulgated under the powers conferred by subsection (1) of section 3 of the All‑India Services Act, 1951, thereby establishing passage benefits for members of the Indian Administrative Service who had originally been members of the Indian Civil Service.

In this appeal, the Court was required to determine whether clause 3 of the All India Services (overseas Pay, Passage and Leave Salary) Rules, 1957, had been validly enacted in view of the guarantee contained in Article 314 of the Constitution concerning the conditions of service—specifically remuneration, leave and pension—of persons who had been appointed by the Secretary of State or the Secretary of State for India in Council to a civil service of the Crown in India. The Court noted that, following the enactment of the All India Services Act, there was no longer any service existing under the name Indian Civil Service. The individuals who had been members of the Indian Civil Service and who had been appointed by the Secretary of State for India were deemed to have become members of the Indian Administrative Service. Nevertheless, the Court observed that the rights of those former Indian Civil Service members with respect to remuneration, leave and pension remained protected by Article 314.

The Court then considered the status of the former Indian Civil Service members after the Indian Independence Act, 1947, and referred to its earlier decision in State of Madras v. K. M. Rajagopalan (1). In that decision, the Court had held four propositions: first, that the grant of independence to India resulted in an automatic and legal termination of service on the date of independence; second, that all persons who had previously held civil posts in India were deemed to have been appointed anew and therefore to continue in service, except where specific general or special orders or arrangements applied to their cases; third, that the guarantee of prior conditions of service and the earlier statutory safeguards relating to disciplinary action continued to apply to those who were deemed to continue in service but not to those who were not so deemed; and fourth, that individuals who had previously held civil posts in India were given the option to decline to “continue in service” under the new constitutional regime, and that if they exercised that option, their service ceased from the date the Constitution came into force.

Turning to the historical statutory framework, the Court recounted that under the Statutory Rules framed in 1924, passage benefits granted to persons employed in the Indian Civil Service, as well as to their wives and children, were expressly included as part of salary or remuneration. The amendment of 1926 altered the character of those passage benefits, converting them into an allowance, privilege or facility of office. The Court further noted that the Act of 1935 (section 247) expressly guaranteed certain privileges, including those relating to remuneration, to members of the Indian civil services under the Government of India Act of 1919. Moreover, the Indian Independence Act 1947 provided a similar guarantee concerning conditions of service with respect to remuneration, and section 19(4) of that Act defined remuneration to include pay, allowances, or privileges or facilities payable in kind.

Finally, the Court emphasized that Article 314 of the Constitution protected the conditions of service—including remuneration, leave and pension—of members of the Indian Civil Service as they existed prior to the Constitution. Although the Constitution does not contain a specific definition of the term “remuneration,” the Court held that the absence of such a definition was not a ground for challenging the validity of the Rules. The Court therefore concluded that the cancellation of the passage benefits previously granted to those originally in the Indian Civil Service must be examined in light of the constitutional guarantee, and that the validity of clause 3 of the 1957 Rules depended on whether it conformed to that guarantee.

The Court observed that the term “remuneration” should not be interpreted in a narrow sense limited only to salary. In ordinary language, remuneration means reward, recompense, pay, wages or salary for services rendered. The Court referred to the decision in R v Postmaster General where Justice Blackburn explained that remuneration denotes a quid‑pro‑quo; when a person furnishes services, any consideration received for those services constitutes remuneration. He further stated that if a person receives a payment, a percentage, or any other form of consideration that is not a direct cash payment, the amount that he receives annually in respect of that consideration would also be regarded as remuneration.

The Court noted that the Constitution employs the word remuneration in this broad meaning. Historically, the right to passage was originally made part of the salary of civil servants. However, the Rules framed in 1926 altered the procedure by setting aside a fixed sum of money from the General Passage Fund as salary, crediting passage benefits to the accounts of members of the civil services and debiting the State’s general revenue when those benefits were actually used. This alteration was made solely for administrative convenience and did not change the character of the benefit. Under the Rules of 1924, passage was part of remuneration, and it continued to be so after the amendment of the Rules in 1926. The passage benefit was a statutory right, and under the Indian Independence Act it was characterised as an allowance, privilege or facility paid in kind, and it was expressly included in the remuneration earned by members of the Indian Civil Service.

Because the conditions of service with respect to remuneration had been guaranteed, the right to this passage benefit remained guaranteed for those members of the Indian Civil Service who were entitled to it before the Constitution came into force. That guarantee continued to operate even after the commencement of the Constitution. In June 1957 the Central Government, by retrospectively amending the statutory rules dated 12 July 1956, attempted to cancel the passage benefit. The Court held that the Central Government, while exercising rule‑making power, was not competent to destroy or cancel a constitutional guarantee. Accordingly, the High Court was correct in holding that Rule 3 of the All India Services (Overseas Pay Passage and Leave Salary) Rules, 1957, was ultra vires. On this basis the appeal failed and was dismissed with costs.