State of Uttar Pradesh and Anr. vs Audh Narain Singh and Anr.

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

Court: supreme-court

Case Number: Civil Appeal No. 120 of 1963

Decision Date: 9 March 1964

Coram: J.C. Shah, P.B. Gajendragadkar, K.N. Wanchoo, N. Rajagopala Ayyangar, S.M. Sikri

In the matter titled State of Uttar Pradesh and anr. versus Audh Narain Singh and anr., the Supreme Court of India delivered its judgment on 9 March 1964. The opinion was authored by Justice J. C. Shah and was pronounced by a Bench comprising Justice J. C. Shah, Chief Justice P. B. Gajendragadkar, Justice K. N. Wanchoo, Justice N. Rajagopala Ayyangar and Justice S. M. Sikri. The case is reported in the 1965 volume of the All India Reporter at page 360 and also appears in the 1964 Supreme Court Reporter (Series 7) on page 89, with a later citator reference in 1984 at page 161 of the Supreme Court Cases. The issues presented for decision concerned whether a Tahvildar, employed in the cash department of a district treasury in the State of Uttar Pradesh, should be regarded as a Government servant or a civil servant within the meaning of Article 311 (2) of the Constitution of India, and consequently whether the procedural safeguards of that article applied to his removal from service.

The respondent, Audh Narain Singh, had been appointed in 1949 as a Tahvildar in the district of Azamgarh, Uttar Pradesh, where he worked in the cash department of the Government Treasury. His appointment was effected by the Government Treasurer subject to the approval of the District Collector. In 1956, following instructions from the Collector, the respondent was removed from his position. He challenged the legality of this removal by filing a writ petition before the High Court, contending that he was a member of the civil service of Uttar Pradesh or, at the very least, held a civil post under the State, and therefore could not be dismissed without being given a reasonable opportunity to show cause as required by Article 311 (2). The High Court held that the respondent was indeed an employee of the State Government and that the order of termination was illegal because the statutory requirements of Article 311 (2) had not been observed. The State obtained special leave to appeal to the Supreme Court, raising the singular question of whether a Tahvildar appointed in the Cash Department of Uttar Pradesh qualifies as a civil servant of the State or holds a civil post within the State. The Supreme Court dismissed the appeal, holding that the respondent was a civil servant of Uttar Pradesh and that the failure to comply with the safeguards of Article 311 (2) rendered his removal invalid. The Court explained that the Government Treasurer, himself a civil servant holding a specific State post, was authorised by his terms of employment to engage Tahvildars to assist in discharging his duties. Remuneration for Tahvildars was paid directly by the State for services rendered in the district treasury’s cash department, and the Tahvildars were subject to the control of District Officers with respect to transfer, removal and disciplinary matters. Consequently, their employment served the purpose of carrying out State functions, and despite the degree of control exercised by the Treasurer and the initial appointment being made by the Treasurer subject to the District Officer’s approval, the Tahvildar was entitled to the protection afforded by Article 311 (2).

In this case, the Court explained that when a Tahvildar is appointed initially by the Treasurer and subsequently approved by the District Officers, the Tahvildar enjoys the protection of Article 311 of the Constitution. The Court observed that determining whether a master‑servant relationship exists requires an examination of all material and relevant circumstances. Generally, the presence of selection by the employer, payment of wages by the employer, the right to control the method of work, and the authority to suspend or remove the employee are strong indicators of a master‑servant relationship. However, the Court cautioned that the coexistence of all these indicia is not mandatory in every case to establish such a relationship. In certain special categories of employment, a contract of service may exist even if one or more of these indicia are absent. Nevertheless, the Court stressed that ordinarily the employer’s power to direct both the work to be performed and the manner in which it is performed is a compelling sign of a master‑servant relationship, because that power entails the ability not only to assign tasks but also to supervise the method of execution. Consequently, where the employer possesses such power, the relationship is prima facie one of master and servant. The Court referred to earlier decisions, including Shivanandan Sharma v. The Punjab National Bank Ltd. [1955] 1 S.C.R. 1427, Dharangadhara Chemical Works Ltd. v. State of Saurashtra [1957] S.C.R. 152, and M/s Piyare Lal Adisivar Lal v. Commissioner of Income‑tax, Delhi [1960] 3 S.C.R. 669, to support this reasoning.

The appeal before the Court was Civil Appeal No. 120 of 1963, filed by special leave against the judgment and decree dated 13 December 1960 of the Allahabad High Court in Special Appeal No. 204 of 1957. The appellants were represented by counsel for the State, while the respondents were represented by counsel for the individual concerned. The judgment was delivered on 9 March 1964. The factual background disclosed that Audh Narain Singh, hereafter referred to as “Singh,” had been appointed in 1949 as a Tahvildar in the District of Azamgarh, Uttar Pradesh, serving in the Cash Department of the district treasury. Singh’s appointment was made by Dhanpat Singh Tandon, the Government Treasurer, with the approval of the District Magistrate. By an order dated 20 April 1956, Singh, who was then posted as Tahvildar in the sub‑treasury at Tahsil Lalganj, District of Azamgarh, received notice of removal from service pursuant to instructions from the Collector. Singh appealed the removal order to the Collector, but the appeal was dismissed. A subsequent representation to the Commissioner of the Banaras Division also failed. Consequently, Singh filed a petition under Article 226 of the Constitution in the Allahabad High Court, seeking a writ of certiorari to set aside the removal order and a writ of mandamus or an appropriate order directing the Collector of Azamgarh, the State Treasurer, and the Commissioner of Banaras Division to recognize him as a Tahvildar in the sub‑treasury at Lalganj, District of Azamgarh.

The petition sought an order directing the Collector of Azamgarh, the State of Uttar Pradesh, the Government Treasurer Dhanpat Singh Tandon, and the Commissioner of the Banaras Division to recognise Audh Narain Singh as a Tahvildar in the sub‑treasury at Lalganj in the District of Azamgarh. Singh asserted that he was either a member of the civil service of the State of Uttar Pradesh or that he held a civil post under the State, and therefore he could not be removed from service without being given a reasonable opportunity to show cause against the proposed action, as required by article 311 (2) of the Constitution. Justice Mehrotra, who heard the petition, held that the Government Treasurer, being an employee of the State, employed a Tahvildar to perform work entrusted by the State and subject to the control of the State Government; consequently the Tahvildar was also an employee of the State Government. Justice Mehrotra concluded that the order of removal was invalid because Singh had not been afforded a reasonable opportunity to show cause. The order of Justice Mehrotra was affirmed by the High Court of Allahabad on appeal. The High Court observed that although no direct master‑servant relationship existed between Singh and the State because Singh had been appointed by the Treasurer, the Treasurer possessed the authority to employ Singh for the performance of State work. Accordingly, Singh was as much under the control of the State as he was under the control of the Treasurer, and he could therefore claim to hold a civil post under the State and to enjoy the protection of article 311 of the Constitution. Against the High Court’s decision, this appeal was filed with special leave. The central issue for determination was whether a Tahvildar appointed in the Cash Department of Uttar Pradesh is a civil servant of the State or merely holds a civil post within the State.

In Uttar Pradesh, the administration of the Cash Department of district treasuries is contractually entrusted to individuals known as Government Treasurers. The Treasurer’s post is a specifically created position within each District Treasury and the appointment is made by the Collector, subject to the approval of the Finance Secretary. Upon appointment, the Treasurer enters into an engagement to perform the duties of the office and executes a bond in favour of the State. The tenure of a Government Treasurer is temporary; the Treasurer is not entitled to the privileges of leave or pension, yet he performs a variety of duties that are integral to the executive functions of the State. The appointment is therefore effected by the Collector with the Finance Secretary’s approval. The Treasurer is required to maintain a true and faithful account of the property entrusted to him, to conduct all dealings with that property honestly, and to submit prescribed returns. He is also bound by the conditions, rules and regulations applicable to Government officers, as well as by departmental rules and regulations governing his conduct.

The Court observed that a Government Treasurer was required to obey all orders that were in force, particularly those concerning his relationship with subordinate staff and the rights of those subordinates. He was mandated to be present at the Government Treasury whenever his duties demanded it and to produce, upon request of his superiors, the accounts and property that had been placed under his charge. The Court emphasized that a Government Treasurer did not function as an independent contractor who merely delivered a specified result while operating outside the control of his employer. Instead, he performed his functions under the direct supervision and direction of the State Government, adhering to the prescribed manner, method and mode of work dictated by that authority.

The Court further explained that a Government Treasurer possessed the authority to appoint Tahvildars to assist him in carrying out his responsibilities, but such appointments could only be made with the approval of the District Collector. Historically, Tahvildars had been appointed directly by the provincial Government to specific posts within District Treasuries. However, a Government Order dated 25 July 1927, issued by the Secretary to the Government of Uttar Pradesh, Finance Department, altered that practice. That Order declared that Tahvildars serving in sub‑treasuries were to be appointed on the nomination of the Treasurer of the District Treasury, who would be held accountable for their work and honesty. The purpose of the Order was to enable a Treasurer to dismiss a Tahvildar as soon as he lost confidence in him. In practice this proved impossible because Tahvildars received their salaries from the general revenue, were full‑time Government servants, and enjoyed the protections afforded to all civil servants under the Classification Rules. Consequently, the customary inquiry required for removal of a Government servant could not be expediently completed, and failure to remove a disfavoured Tahvildar would impair the Treasurer’s responsibility to the Government.

In response to these difficulties, the Court noted that the Government decided to abolish the post of Tahvildar altogether. The remuneration of the Treasurer was increased by an amount equal to the former pay of the Tahvildars, and the Treasurer was made directly responsible for supervising the work at sub‑treasuries through his own staff. Nevertheless, a reservation was expressly included: the Treasurer was prohibited from employing any person in the treasury or sub‑treasury without the prior approval of the District Officer, and he was obliged to remove any such employee without delay whenever the District Officer so required. Pursuant to that Order, paragraph 1561 was inserted into the Manual of Orders, which provided that Tahvildars at sub‑treasuries were no longer Government servants. They were to be employed by the Treasurer, who received an allowance from the Government to meet their salaries and leave pay. The paragraph further stipulated that the Treasurer could not appoint any person as a Tahvildar without District Officer approval, and that the Treasurer must remove or transfer a Tahvildar from one Tahsil to another if the District Officer, on any ground that in his opinion justified such action, directed him to do so.

In the period after the post of Tahvildar had been abolished, the Government of Uttar Pradesh did not maintain a uniform policy. Instead, it continued to issue orders that showed the District Officers still exercised considerable control over individuals who performed the functions of former Tahvildars. This control extended to matters of appointment, removal, suspension, transfer, payment of salary, payment of dearness allowance and the provision of certain medical benefits, and the former Tahvildars were treated in the same manner as other civil servants of the State.

On 9 December 1939 a Government Order directed that the remuneration of the former Tahvildars should be paid directly from the Government Treasury. The Government had learned that Treasurers were paying the cashier staff of the treasuries a smaller amount than the full sum they themselves received from the Government, even though they had obtained receipts for the full amount. Accordingly the Order required the Treasurer to prepare a detailed statement of the emoluments of the staff, and to make the payment of those emoluments personally as Treasury Officer, obtaining an acknowledgment from each person paid.

In 1945 the Government of Uttar Pradesh raised, with effect from 1 April 1945, the allowance payable to Government Treasurers for covering the pay of the cashier staff of the treasuries. Paragraph 3(a) of that order also introduced a scheme for granting gratuity on retirement to permanent Tahvildars. The scheme provided that a permanent Tahvildar retiring after completing each year of service would receive a gratuity equal to one month’s pay for that year, subject to a maximum of twenty‑five years of completed service. The gratuity was to be paid in the same manner as the salary of the Tahvildars. The gratuity would not be payable where the service of a Tahvildar was found unsatisfactory, or where the Tahvildar had resigned, been removed or dismissed. The financial provisions for the increase in the Treasurers’ allowance, the allowance for the cashier staff, and the gratuity for the cashier staff were recorded in the budget under the heads “25‑General Administration‑B‑District Administration (a) General Establishment, Pay of Establishment‑Contract and Extra Contract Establishment” and “55‑Superannuation Allowances and Pensions and Gratuities Voted”.

A letter dated 17 June 1953, issued by the Joint Secretary to the Government, was sent to the Collectors of Districts. The letter reported that Government Treasurers had frequently dismissed the services of former Tahvildars working under them without providing sufficient justification, and that such arbitrary actions had caused hardship to those employees. The Government therefore instructed the Collectors to give the Treasurers notice that any further adverse action of this kind would attract appropriate Government action. The letter also warned that the Treasurers should be cautioned against any high‑handed conduct in dealing with their staff.

The Court observed that any adverse notice that the Government might issue in the future would be justified if it were established that Government Treasurers had behaved in a high‑handed manner in their dealings with subordinate staff. The Collector of Azamgarh recorded that he had become aware of several instances where employees of the Cash Department of the treasuries had been dismissed arbitrarily, without specific charges being framed against them or without giving them an opportunity to explain themselves. Accordingly, the Collector ordered that, in the future, when the services of any employee of the Cash Department were to be terminated, a formal report recommending suspension must be prepared, specific charges must be framed, and the employee must be afforded a reasonable period to respond to those charges. The order further directed that dismissal or suspension could not be effected on the basis of arbitrary action by either the subordinate staff or the Treasurer. In 1959, the Government issued orders revising the dearness allowance scale for Tahvildars and also introduced certain facilities for free medical attendance for them. The record also shows that, on some occasions, Tahvildars who had been dismissed or suspended were reinstated by order of the Collector. For example, an order dated 14 August 1948 issued by the Treasury Officer of Azamgarh recorded that, under the Collector’s directive, Naunidh Prasad, a Tahvildar of Phulpur who was under suspension, was reinstated with effect from the date he resumed charge. Another order issued by the District Magistrate of Allahabad in 1952 deputed Ganesh Prasad, who was serving as a Tahvildar in the Handia sub‑treasury, to perform duties at the Kumbha Mela. The same record also notes a disciplinary proceeding held by the District Magistrate on 12 April 1948 against Tahvildar Ganesh Prasad for alleged improper conduct. From these entries the Court concluded that Tahvildars were appointed to perform the duties of cashiers in Government treasuries. Their appointment was made by the Government Treasurer, subject to the approval of the District Collector, and was intended for the performance of public duties; their salaries were paid directly by the State. The Tahvildars could be transferred, suspended, or removed from service by orders of the Collector. The earlier cited instance of a Tahvildar who had been suspended by the Treasurer but subsequently reinstated by the Collector further illustrates this authority. The Court therefore stated that the nature of the relationship between the Government of Uttar Pradesh and the Tahvildars must be examined in each case to determine whether a master‑servant relationship exists. Such a determination is a factual question that requires consideration of all material and relevant circumstances. Generally, the combination of selection by the employer, payment of wages by the employer, the employer’s right to control the manner of work, and the power to suspend or dismiss an employee are indicative of a master‑servant relationship. However, the presence of all these factors is not indispensable in every case; in certain special classes of employment a contract of service may exist even if one or more of these indicia are absent.

In the present discussion, the Court observed that even in certain classes of employment a contract of service could be established although one or more of the usual indicia of such a relationship might be absent. Nevertheless, the Court explained that, as a general rule, an employer’s right to determine the manner in which work is performed and the employer’s power of superintendence and control were regarded as strong indicators of a master‑servant relationship. Such a relationship, the Court noted, involved not only the authority to command that a particular piece of work be done, but also the authority to prescribe the specific way in which that work should be carried out. Consequently, if an employer possessed, on the face of the matter, the power to control the method of performance, the Court held that the relationship could be characterised prima facie as that of master and servant. Applying this principle to the public function of the Government Treasurer, the Court stated that the Treasurer’s duties had to be performed in accordance with the Rules and Regulations framed by the Government and with directions issued from time to time. The Treasurer occupied a public post and was assisted in discharging his duties by individuals known as Tahvildars. The Court clarified that a Tahvildar did not act on behalf of the Treasurer personally, but rather acted on behalf of the State itself. While the Treasurer accepted responsibility for any loss that might arise from the acts of a Tahvildar, the Court emphasized that this fact alone did not render the Tahvildar merely an appointee of the Treasurer or exclude the possibility that the Tahvildar was a servant of the State. The selection of a Tahvildar, although formally made by the Treasurer, was subject to the control of the Collector; remuneration was paid by the State; the method of the Tahvildar’s work was regulated by the State; and the State possessed the authority to suspend, dismiss, or reinstate the Tahvildar. The Court then referred to the decision in Shivanandan Sharma v. The Punjab National Bank Ltd. (1), where it was held that a head cashier appointed by the Treasurer of the Cash Department under an agreement with the Bank was an employee of the Bank, because direction and control over the cashier and the ministerial staff of the Cash Department were wholly vested in the Bank. Citing Sinha J. at page 1442, the Court reiterated that “If a master employs a servant and authorizes him to employ a number of persons to do a particular job and to guarantee their fidelity and efficiency for a cash consideration, the employees thus appointed by the servant would be equally with the employer, servants of the master.” In a similar vein, the Court quoted the judgment in Dharangadhara Chemical Works Ltd. v. State of Saurashtra (2), which described the prima facie test of the master‑servant relationship as the existence of the right in the employer not merely to direct what work is to be done but also to control the manner in which it is to be done, noting that the nature and extent of such control varied across different industries and could not be precisely defined. The Court also mentioned the case of M/s Piyare Lal Adishwar Lal v. The Commissioner, underscoring the consistent application of these principles.

In the decision of the Income‑Tax Court in Delhi, the Court observed that the Treasurer who was appointed by the Bank and who performed the duties assigned to him by the Bank was to be treated as a servant of the Bank rather than as an independent contractor. The Court explained that the Government Treasurer occupied a civil‑service post of the State and that, under the conditions of his employment, he was authorised to engage Tahvildars to assist him in discharging his official responsibilities. The remuneration that was paid to the Tahvildars was for services rendered within the cashier department of the District treasury of the State. The Tahvildars received their salaries directly from the State and were subject to the authority of the District Officers with respect to matters of transfer, removal and disciplinary action. Because the employment of the Tahvildars was intended to facilitate the work of the State, the Court held that, although a degree of control was exercised by the Government Treasurer and although the initial appointment was made by the Treasurer subject to the approval of the District Officers, the Tahvildar nevertheless fell within the protection guaranteed by Article 311 of the Constitution. Accordingly, the order that removed Singh from service, which had been issued on the initiative of the Collector, did not satisfy the procedural requirements laid down in Article 311(2) and was therefore invalid. On this basis the Court agreed with the view of the High Court that the impugned order must be set aside. The appeal was consequently dismissed and costs were awarded to the respondents. (1) [1960] 3 S.C.R. 669.