Judgment S. RATNAVEL PANDIAN, J.- The above batch of Civil Appeals in which common questions of law arise, is preferred, by special leave under Article 136 of the Constitution of India against the judgments dated 20-8-1990, 4-10-1990.and 5-10-1990 of the Central Administrative Tribunal, Principal Bench, New Delhi (hereinafter referred to as Tribunal) rendered in various affiliated groups of original applications (O.As) upholding the validity of the second proviso to Rule 4 of the Civil Services Examination Rules (hereinafter referred to as C.S.E. Rules) introduced by Notification Number 13016/4/86-AIS(I) dated 13-12-1986 (Published in the Gazette of India Extraordinary, Part I Section 1). Be it noted that similar notification has been/is being issued each year for the general information of the candidates setting down the terms and conditions, eligibility etc. to sit for the Civil Service Examination of the concerned year. 2. While a substantial number of O.As filed before the Tribunal at Delhi were pending, a similar number of analogous O.As filed before the Benches of Administrative Tribunals at Patna, Allahabad, Chandigarh, Jabalpur, Hyderabad, Jodhpur and Eranakulam were transferred to the Tribunal at Delhi since common questions of law arose for determination in all the O.As. 3. The Tribunal rendered its main judgment in O.A. No. 206/89 Alok Kumar v. Union of India, and 61 other 0 As. in which the facts appear to be common. The other judgments were passed on the basis of the conclusions arrived in O.A. No. 206/89 and the connected batch of O.As. Since the Tribunal has set out only the facts in the case of Alok Kumar (O. A. No. 206/ 89) treating it as a main application and illustrative of the questions raised, we would like to briefly indicate the facts of Alok Kumars case so that the impelling circumstances which led to the filing of these appeals and the common questions of law involved may be understood in the proper perspective in the light of the judgment of the Tribunal. 4. In this context, it may be noted that though no appeal has been filed against the order in 0. A. No. 206/89, we are given to understand that Alok Kumar who agitated his similar claim along with two others who were all allocated to Group A Services (I.R. P.S.) in O.A. No. 1071/1990 has preferred Civil Appeal No. 5469 of 1990 against the judgment in the said O.A. No. 1071 of 1990. A. No. 206/89, we are given to understand that Alok Kumar who agitated his similar claim along with two others who were all allocated to Group A Services (I.R. P.S.) in O.A. No. 1071/1990 has preferred Civil Appeal No. 5469 of 1990 against the judgment in the said O.A. No. 1071 of 1990. 5.. Shri Alok Kumar filed his application in December 1986 to sit for the preliminary examination in 1987. The preliminary examination was held by the Union Public Service Commission (UPSCfor short) in June 1987 and the result was declared in July 1987. The C.S.E. (Main) Examination was held by the UPSC in November 1987. The interviews took place in April, 1988 and the final results were declared by the UPSC in June, 1988. The applicant, Alok Kumar was selected for appointment to Central Service Group A post. A communication to this effect was sent to him on 30-8-88 in which Alok Kumars attention was drawn to Rule 4 of the C. S. E. Rules 1987 pointing out that if he intended to appear in the Civil Services (Main) Examination in 1988 he would not be allowed to join the Probationary Training along with the candidates of 1987 group but would only be allowed to join the Probationary Training along with the candidates who would be appointed on the basis of the CSE 1988. The said letter also indicated that in the matter of seniority, he would be placed below all the candidates who would join training without postponement. Therefore, he was required to furnish the information about his appearing in the CSE (Main) 1988 to the concerned cadre controlling authorities. He was further informed that only on receipt of the above information, the concerned cadre controlling authority would permit him to abstain from the Probationary Training. The Joint Director, Estt. G (R), Ministry of Railways (Railway Board) informed Alok Kumar about his selection for appointment to the Indian Railway Personnel Service and that the training would commence from 6-3-1989 and that he should report for training at the Railway Staff College, Vadodara. Further he was informed that he once joined the Probationary Training along with 1987 batch, he would not be eligible for consideration of appointment on the basis of subsequent CSE conducted by the UPSC. 6. Further he was informed that he once joined the Probationary Training along with 1987 batch, he would not be eligible for consideration of appointment on the basis of subsequent CSE conducted by the UPSC. 6. The case of Alok Kumar was that he did not intend to appear in the next CSE and he had already appeared for the CSE 1988 even before he received the offer of appointment dated 2-1-1989. He was then intimated that if he had already joined the Probationary Training along with 1987 batch, he would not be eligible for consideration for appointment on the basis of subsequent CSE conducted by the UPSC. Besides the main reliefs, Alok Kumar had prayed for an interim order to join and complete the current Probationary Training without being compelled to sign the undertaking sought to be obtained from him subject to final orders in the O.A. The Division Bench of the Tribunal issued an interim order, as prayed for by Alok Kumar, allowing him to join the requisite training for the service to which he had been allocated and allowed him to appear in the interview as and when he was called by the UPSC on the basis of 1988 Examination. 7. The respondents filed their reply explaining the circumstances under which the second proviso was introduced to Rule 4 of CSE Rules, its scope and ambit and refuted all the contentions raised by Alok Kumar challenging the legality and constitutionality of the impugned proviso. 8. The Tribunal by its detailed and considered judgment has rendered its conclusions thus : "Having considered the matter in the above bunch of cases, we have come to the following conclusions:- 1. The 2nd proviso to Rule 4 of the Civil Services Examination Rules is valid. 2. The provisions of Rule 17 of the above Rules are also valid. 3. The above provisions are not hit by the provisions of Arts. 14 and 16 of the Constitution of India. 4. The restrictions imposed by the 2nd proviso to Rule 4 of the Civil Services Examination Rules are not bad in law. 5. (i) The letter issued by the Ministry of Personnel, Public Grievances and Pensions dated 30th August, 1988 and in particular, paragraph 3 thereof and paragraph 4 of the letter dated 2-1-1989, issued by the Cadre Controlling Authority, Ministry of Railways (Railway Board) are held to be bad in law and unenforceable. 5. (i) The letter issued by the Ministry of Personnel, Public Grievances and Pensions dated 30th August, 1988 and in particular, paragraph 3 thereof and paragraph 4 of the letter dated 2-1-1989, issued by the Cadre Controlling Authority, Ministry of Railways (Railway Board) are held to be bad in law and unenforceable. Similar letters issued on different dates by other Cadre Controlling Authorities are also unenforceable. (ii) A candidate who has been allocated to the I.P.S. or to a Central Services, Group A may be allowed to sit at the next Civil Services Examination, provided he is within the permissible age limit, without having to resign from the service to which he has been allocated, nor would he lose his original seniority in the service to which he is allocated if he is unable to take training with his own Batch. 6. Those applicants who have been allocated to the I.P.S. or any Central Services, Group A, can have one more attempt in the subsequent Civil Services Examination, for the Services indicated in Rule 17 of the C. S. E. Rules. The Cadre Controlling Authorities can grant one opportunity to such candidates. 7. All those candidates who have been allocated to any of the Central Services, Group A, or I.P.S. and who gave app- eared in Civil Services Main Examination of subsequent year under the interim orders of the Tribunal for the Civil Services Examinations 1988 or 1989 and have succeeded, are to be given benefit of their success subject to the, provisions of Rule 17 of the C. S. E. Rules. But this exemption will not be available for any subsequent Civil Services Examination. In the result, therefore, the Applications succeed only in part - viz., quashing of the 3rd paragraph of the letter dated 30-8-1988 and 4th paragraph of the letter dated 2nd January, 1989 and similar paragraphs in the letters issued to the applicants by other cadre controlling authorities. Further, a direction is given to the respondents that all those candidates who have been allocated to any of the Central Services, Group A or I.P.S. and who have appeared in Civil Services Main Examination, 1988 or 1989 under the interim orders of the Tribunal and are within the permissible age limit and have succeeded are to be given benefit of their success subject to the provisions of Rule 17 of the C.S.E. Rules. The O. As are dismissed on all other counts." 9. On the basis of the above directions given in paragraphs5(ii), 6 and 7, we gave some interim directions on 7-12-1990 which are annexed to this judgment as Annexure A 10. Several learned counsel appeared for the respective parties and advanced their. submissions interpreting the rules and cited a plethora of decisions in support of their respective cases. Whilst Mr. P. P. Rao, senior counsel assisted by Mr, C. N. Sreekumar and others, Mr. Gopal Subramaniam, Mrs. C. M. Chopra, Mr. Gopal Singh and Mr. A. M. Khanwilkar appeared for the appellants in the various batches of cases, the learned Additional Solicitor General, Mr. Kapil Sibal assisted by Ms. Kamini Jaiswal and Mr. C. V. S. Rao appeared on behalf of the respondents/ Union of India and others. 11. The common substantial questions of ,law, propounded and posed for consideration in all the above appeals are: (1) Whether the second proviso to Rule 4 of the CSE Rules 1986 is invalid for the reason that it puts an embargo restricting the candidates who are seeking to improve their position vis-a-vis their career in Government service? (2) Whether the second proviso under challenge travels beyond the intent of the main rule namely, Rule 4 of the CSE Rules? (3) Whether the proviso to Rule 17 of the CSE Rules is invalid on the ground that it places restriction on candidates who are seeking to improve their position vis-a-vis their career? (4) Whether the said second proviso to Rule 4 of CSE Rules is ultra vires to clause (iii-a) of Regulation 4 of the Indian Administrative Service (Appointment by Competitive Examination) Regulations, 1955 (for short Regulations) inasmuch as the power to notify exceptions does not include the power to make candidates ineligible who are otherwise eligible in terms of clauses (i), (ii) and (iii) of Regulation 4? (5) Whether the said proviso which is an administrative instruction introduced by the impugned Notification is arbitrary and irrational having no nexus with the object of recruitment to the post of Civil Services? (5) Whether the said proviso which is an administrative instruction introduced by the impugned Notification is arbitrary and irrational having no nexus with the object of recruitment to the post of Civil Services? (6) Whether the impugned second proviso is illegal since it makes a discrimination between the successful candidates of Central Service Group A and Group B as no embargo is placed restricting the candidates of Group B service, as in the case of Group A service and whether the reasons given by the Government to justify the introduction of the impugned proviso have any rational nexus to the object of the scheme of recruitment to the All India Services or/ and whether such reasons are arbitrary, unfair and unjust? (7) Whether the restriction imposed on the number of attempts in pursuance of the impugned proviso, in the case of Scheduled Castes/Scheduled Tribes candidates who were since then availing any number of attempts subject to the eligibility of age limit is unjustifiable and illegal and amounts to deprivation of the right conferred on them by the Constitution of India? (8) Whether the reasons given by the Government to justify the introduction of the impugned proviso have any rational nexus to the object of the scheme of recruitment to the All India Services or/ and whether such reasons are arbitrary, unfair and unjust,? (9) Whether the impugned second proviso is suffering from the vice of hostile discrimination and as such violative of Articles 14 and 16 of the Constitution of India. Recruitment to All India and Central Services - Brief History and Present Position: 12. Before entering into an extensive investigation and fullfledged discussion on the questions formulated above, we feel that in order to have a more comprehensive study of the development of the civil service in India a brief history of the past system of recruitment to All India and Central Services based on the then existing mode of selection and the development of the present scheme of examination and method of recruitment till the introduction of the impugned proviso to Rule 4 of CSE Rules, is necessary so as to have the background of the entire system and to assimilate the compelling necessity warranting the introduction of the new proviso. 13. The Indian Civil Service (ICS) Examination was held only in England by the British Civil Service Commission till 1922 and thereafter in India. 13. The Indian Civil Service (ICS) Examination was held only in England by the British Civil Service Commission till 1922 and thereafter in India. Four years later, the newly formed Public Sepvice Commission (India) began to conduct the ICS Examination on behalf of British Civil Service Commission and this position continued until 1937 when the Public Service Commission (India) was replaced by the Federal Public Service Cornmission under the Government of India Act, 1935. Thereafter, the Indian Civil Service Examination in India was held by the Federal Public Service Commission independent of the British Civil Service Commission. After 1943, recruitments to the Indian Civil Service, Indian Police besides the Indian Audit and Accounts Service and allied services were suspended. In 1947 a combined examination was introduced for recruitment to the Indian Administrative Service, Indian Police Service and non-technical Central Services. Between the years 1947-50 a combined competitive examination was held once a vear for recruitment for- IAS, IFS, IPS and non-technical Central Services. After independence, new services known as the Indian Administrative Service (IAS) and Indian Police Service (IPS) were established as All India Services. In order to meet the countrys requirement for diplomatic personnel another service known as Indian Foreign Service (IFS) was established. The Service Commission was redesignated as the Union Public Service Commission in 1950 when the Constitution came into force. While it was so, the U.P.S.C. appointed a Committee in February 1974 under the Chairmanship of Dr. D. S. Kothari to make Recommendations for further improvement in the system having regard to the needs of various services and accordingly the said Committee undertook a painstaking research and carried on a comprehensive and analytical study and thorough examination of the various aspects of the problems connected with the reform in the existing of examination and selection by going in great depth and detail and submitted its report on March 20, 1976 after taking into consideration of the fact of frequent receipt of complaints from the training centres and the data collected and made its recommendations in evaluating the scheme of civil services by tracing its birth and breadth of the upper tier of this administrative machinery covering its entire field. 14. 14. On the recommendations of the Kothari Committee the current scheme of Civil Services Examination was introduced from 1979, as per which the Civil Services Examination conducted by the U.P.S.C. has been and is catering to the All India Services viz. IAS, IFS and IPS; and 16 Central Group AServices and Group B Services. 15. In order to be eligible to compete at the examination, a candidate must satisfy the conditions of eligibility, namely, nationality, age and requisite qualifications as envisaged under Regulation 4 of the I.A.S. (Appointment by Competitive Examination) Regulation 1955. In addition to the above qualifications, one more condition of eligibility is added under Regulation 4(iii-a) substituted vide Department of Personnel and A. R. Notification No. 11028/1/78-AIS(.1) - A dated 30-12-1978, according to which unless covered by any of the exceptions that may from time to time be notified by the Central Government in this behalf, every candidate appearing for the examination after Ist January 1979, who is otherwise eligible shall be permitted three attempts at the examination. In other words, the number of attempts, a candidate can appear, is also made as one of the conditions of eligibility to sit for the IAS competitive examination. It may be pointed out in this connection that by a subsequent notification dated 23-11-1981, Regulation 4(iii-a) was further clarified that the appearance of a candidate at the examination will be deemed to be an attempt at the examination irrespective of his disqualification or cancellation as the case may be of his candidature. An explanation is added to this, explaining "an attempt at a preliminary examination shall be deemed to be an attempt at the examination, within the meaning of this rule." Civil Services Examination -Present Scheme 16. From the CSE held in 1979, each eligible candidate is permitted three attempts at the examination. This restriction on the number of attempts does not apply to the candidates belonging to SC/ST and other specified categories as may be notified by the Central Government from time to time under Rule 6(b) of the CSE Rules but subject to the relaxation in the upper age limit of those candidates. The scheme of selection of candidates for the Civil Services consists of three sequential stages, each making a significant and specific contribution to the total process. They are:. The scheme of selection of candidates for the Civil Services consists of three sequential stages, each making a significant and specific contribution to the total process. They are:. (1) Preliminary examination serving as a screening test; (2) The main examination which intended to assess the overall intellectual traits and depth of understanding of candidates; And (3) The interview (viva voce test). 17. Hermer Finer in his text book under the caption The Theory and Practice of Modern Government states: "The problem of selection for character is still the pons asinorum of recruitment to the public services everywhere. The British Civil Service experiments with the interview." 18. The purpose of viva voce test for the ICS Examination in 1935 could be best understood from the following extract of the Civil Service Commissions pamphlet: "Viva voce - the examination will be in matters of general interest; it is intended to test the candidates alertness, intelligence and intellectual outlook. The candidate will be accorded an opportunity of furnishing the record of his life and education." 19. It is apposite, in this connection, to have reference to an excerpt from the United Nations Handbook on Civil Service Laws and Practice, which reads thus: "..........the written papers permit an assessment of culture and intellectual competence. This interview permits an assessment of qualities of character which written papers ignore; it attempts to assess the man himself and not his intellectual abilities." 20. This Court in Lila Dhar v. State of Rajasthan, (1981) 4 SCC 159 , while expressing its view about the importance and significance of the two tests, namely, the written and interview has observed thus: "The written examination assesses the mans intellect and the interview test the man himself and the twain shall meet for a proper selection." Age Limit 21. Coming to the eligibility of age, it was initially fixed at 21 to 26 years and then reduced in 1948 to 21 to 25 years. In the following year, the age range was further reduced to 21 to 24 years except for the Indian Railway Traffic Service for which it contained to be 21 to 25 years up to 1955. The lower age limit for IPS was reduced to 20 years in the year 1951 keeping the upper age limit at 24 years. The upper age limit for the Indian Railway Traffic Service was reduced to 24 in 1955. The lower age limit for IPS was reduced to 20 years in the year 1951 keeping the upper age limit at 24 years. The upper age limit for the Indian Railway Traffic Service was reduced to 24 in 1955. The age limits for all other services remained at 21 to 24 years. Thereafter, though the Public Services (Qualification for Recruitment) Committee appointed by the Government of India in 1955 recommended the reduction of the age range from 21-24 to 21-23 years, the Government did not agree with that recommendation and kept the prescribed age limit of 20/21 to 24 years unaltered. The Kothari Committee recommended that a candidate should not be less than 21 years of age and not more than 26 years on the I st July of the year in which the candidate appears at the examination, with the usual relaxation of upper age limit for SC/ST and other categories as may be notified by the Government from time to time. However, the Committee did not recommend lower age limit of 20 years for the IPS, as was permitted. The Government while not completely agreeing with Kotharis Committee recommendations in, regard to some aspects inclusive of age limit while implementing the recommendations increased upper age limit to 28 years keeping the lower age limit of 21 years unaltered. Thus, the age limit of 21-28 years was in operation from 1979 to 1987. Then the Government reconsidered this issue and reduced the upper age limit to 26 years. During the course of the hearing of these appeals, it has been stated at the bar that the Government of India in February/March 1990 amended the CSE Rules and increased the upper age limit from 26 years to 28 and then to 31 years for the CSE to be conducted by the UPSC. During the course of the hearing of these appeals, it has been stated at the bar that the Government of India in February/March 1990 amended the CSE Rules and increased the upper age limit from 26 years to 28 and then to 31 years for the CSE to be conducted by the UPSC. Now by notification No. 13018 / 10/ 90-AIS (1) dated 5th January 1991 issued by the Ministry of Personnel, Public Grievances and Pensions (Deptt of Personnel and Training) published in the Gazette of India in Part 1, Sec. 1 the age eligibility for appearing at the examination in 1991 is that the candidate must have attained the age of 21 years and must not have attained 28 years on 1st August 1991 i.e. he must have been born not earlier than 2nd August 1963 and not later than 1st August 1970 but subject to the relaxation in the upper age limit to SC/ST and other categories specified under Rule 6(b) of the CSE Rules. Number of Permissible Attempts 22. Regarding the number of attempts, a candidate could make, the Public Services (Qualifications for Recruitment) Committee in 1955 recommended that in order to identify the best candidates the number of attempts at the combined examination should be limited to two by reducing the age limit to 21-23 years. The Government accepted the recommendation regarding restriction of the number of attempts to two instead of three, but provided that these were to be counted separately for the following categories of services - Category I - IAS and IFS Category II - IPS and Police Service Class II of the Union Territories Category III - Central Services Class I and Class II 23. In view of the acceptance of the above recommendations, from 1961 onwards, the IAS etc. examination became in effect three examinations. Since the restriction on the number of chances were related not to the examination as a whole, but individual categories, theoretically a candidate could take as many chances as the age limit would permit. Thereafter in 1972 the age limit was raised to 26 years and the reduction of attempts from three to two was not implemented following the recommendation of the Administrative Reforms Commission. In fact since 1973, candidates were permitted to make three attempts for each of the three categories of services within the permissible age range. Thereafter in 1972 the age limit was raised to 26 years and the reduction of attempts from three to two was not implemented following the recommendation of the Administrative Reforms Commission. In fact since 1973, candidates were permitted to make three attempts for each of the three categories of services within the permissible age range. It may be stated in this connection that the Kothari Committee had recommended only two attempts for the Civil Services Examination for not only the general candidates but also candidates belonging to the SC/ST but the, Government did not agree with these recommendations and permitted three attempts to general candidates and did, not impose any restriction on the number of attempts on the candidates belonging to SC/ ST but of course, subject to their upper age limit. It will be worthwhile, in this context, to refer to the Report of the Committee to review the Scheme of Civil Services Examination under the Chairmanship of Dr. Satish Chandra, appointed by the UPSC on 1988 to review and evaluate the scheme of selection to the higher civil services introduced from 1979 in pursuance of the recommendations of the Committee on Recruitment Policy and Selection under the Chairmanship of Dr. D. S. Kothari and to make recommendations for further improvement of the system and the relevant excerpt of the report touching on this aspect is as follows: "We, therefore, recommend that for the general candidates the permissible number of attempts for the Civil Services Examination should continue to be three. For the members of the Scheduled Castes and the Scheduled Tribes, these should be limited to six." 24. We are referring to the report of the committee chaired by Dr. Satish Chandra only for the purpose of showing the views expressed by it regarding the permissible number of attempts for the CSE that a candidate could make though this report was not available at the time of introduction of the impugned proviso. It may be stated that the Government of India has decided to increase the number of attempts from 3 to 4 for the Civil Services Examination 1990. Reference may also be had to the notification dated 5th January 1991 issued by the Department of Personnel and Training by which Rule 4 amended to the fact that "every candidate appearing at the examination who is otherwise eligible shall be permitted 4 attempts at the examination.". Reference may also be had to the notification dated 5th January 1991 issued by the Department of Personnel and Training by which Rule 4 amended to the fact that "every candidate appearing at the examination who is otherwise eligible shall be permitted 4 attempts at the examination.". Salient Features of the New Scheme: 25. Thus, the entire framework of the Civil Services system have undergone a metamorphosis under the Government of India Acts of 1919 and 1935 and thereafter under our present Constitution of India. Further, pursuant to the recommendations made by various Committees as seen earlier, there has been radical change in the system of recruitment to the CSE in regard to the scheme of examination, mode of selection, the number of attempts and the eligibility of age limit since such a system was introduced. 26. It is clear from the discussion that the totality of the above review of the entire system which system is a legacy of and modelled on the British one and a comprehensive survey on the different aspects of the recruitment for the higher civil services manifestly show that this system did not appear suddenly like a dues ex machina created by the legislative test, but it evolved in the direction of political objectivity and underwent a long process of gradual transformation and the rule and functions of this higher civil services in India after the advent of independence irrefragably play an important and crucial role not only in providing an element of commonality in administration in our parliamentary democracy but also in accelerating socio - economic development of our country in the context of our constitutional objective of growth with the social justice. 27. The present time cycle of the CSE is such that it takes almost a year from the date of the preliminary examination to the commencement of the final results. In that the preliminary examination is held in the month of June and the result of the preliminary examination is announced by the UPSC at the end of July. The main examination is held in the first week of November, the result of which is usually announced by the third week of March and the interviews begin in the third week of April to the end of May and the results are announced in the month of June. 28. The main examination is held in the first week of November, the result of which is usually announced by the third week of March and the interviews begin in the third week of April to the end of May and the results are announced in the month of June. 28. The merit list of successful candidates is prepared on the basis of their aggregate marks in the Main Examination and interview test and then the successful candidates are selected and allotted to different services based on their ranks and preference. The top rankers in the merit list join the IAS or IFS and then the IPS. The candidates who get into the merit list with low position are brought and classified either under Group A or Group B as the case may be, but having regard to their ranks in the order of merit and the selection of candidates in Group A or Group B is based within the zone of eligibility. 29. It may be noted that out of total 27services/posts, as per notification dated 30-12-1989, the first three, namely, IAS, IFS and IPS are All India Services. Of the rest, from IV to XIX are Central Services Group A and the remaining XX to XXVII are Group Bservices. For all these services, the recruitment is made by combined competitive CSE. 30. Since the pleadings in all the appeals are substantially of the same patadim and the issues of considerable importance raised are homogeneous and as the principal, arguments were advanced in the same line except with some slight variation with regard to some particular issues relating to certain appeals and also the reply was commonly made, we propose to dispose of all the appeals by this common judgment. 31. We may now in the above background of the history of the scheme of the Civil Services, proceed to consider the various contentions advanced by the respective parties on the validity of the impugned second proviso to Rule 4 of the C. S. E. Rules and for that purpose we, in order to have a proper understanding and appreciation of the scope, object, ambit and intent of the impugned proviso, shall re-produce the relevant Rules 4, 8 and 17 and Regulation 4(iii-a) of the I. A. S. (Appointment by Competitive Examination) Regulations, 1955 CSE RULES 32. Rule 4: "Every candidate appearing at the examination, who is otherwise eligible, shall be permitted three attempts at the examination, irrespective of the number of attempts he has already availed of at the IAS etc. Examination held in previous year. The restriction shall be effective from the Civil Services Examination held in 1979. Any attempts made at the Civil Services (Preliminary) Examination held in 1979 and onwards will count as attempts for this purpose: Provided that this restriction on the number of attempts will not apply in the case of Scheduled Castes and Scheduled Tribes candidates who are otherwise eligible: Provided further that a candidate who on the basis of the results of the previous Civil Services Examination, had been allocated to the I.P.S. or Central Services, Group A but who expressed his intention to appear in the next Civil Services Main Examination for competition for IAS, IFS, IPS or Central Services, Group A and who was permitted to abstain from the probationary training in order to so appear, shall be eligible to do so, subject to the provisions of Rule 17. If the candidate is allocated to a service on the basis of the next Civil Services Main Examination he shall join either that Service or the Service to which he was allocated on the basis of the previous Civil Services Examination failing which his allocation to the service based on one or both examination, as the case may be, shall stand cancelled and notwithstanding anything contained in Rule 6, a candidate who accepts allocation to a Service and is appointed to a service shall not be eligible to appear again in the Civil Services Examination unless he has first resigned from the Service. NOTE:- 1. An attempt at a preliminary examination shall be deemed to be an attempt at the Examination. 2. If a candidate actually appears in any one paper in the preliminary Examination he shall be deemed to have made an attempt at the examination. 3. Notwithstanding the disqualification/ cancellation of candidature the fact of appearance of the candidate at the examination will count as an attempt. Rule 8: A candidate who is appointed to the Indian Administrative Service or the Indian Foreign Service on results of an earlier examination before the commencement of this examination and continues to be a member of that service will not be eligible to compete at this examination. Rule 8: A candidate who is appointed to the Indian Administrative Service or the Indian Foreign Service on results of an earlier examination before the commencement of this examination and continues to be a member of that service will not be eligible to compete at this examination. In case a candidate has been appointed to the IAS / IFS after the Preliminary Examination of this examination but before the Main Examination of this examination and he/she shall also not be eligible to appear in the Main Examination of this examination notwithstanding that he/she has qualified in the Preliminary Examination. Also provided that if a candidate is appointed to IAS/ IFS after the commencement of the Main Examination but before the result thereof and continues to be a member of that service, he/she shall not be considered for appointment to any service/ post on the basis of the results of this examination. Rule 17: Due consideration will be given at the time of making appointments on the results of the examination to the preferences expressed by a candidate for various services at the time of his application. The appointment to various services will also be governed by the Rules/ Regulations in force as applicable to the respective Services at the time of appointment. Provided that a candidate who has been approved for appointment to Indian Police Service/ Central Service, Group A mentioned in Col. 2 below on the results of an earlier examination will be considered only for appointment in services mentioned against that service in Col. 3 below on the results of this examination. Sl.No. Service to which approved for appointment Service for which eligible to compete 1 2 3 1. Indian Police Service. I.A.S., I.F.S., and Central Services, Group A. 2. Central Services, Group A. I.A.S., I.F.S. and I.P.S. Provided further that a candidate who is appointed to a Central Service, Group B on the results of an earlier examination will be considered only for appointment to I.A.S., I.F.S., I.P.S. and Central Services, Group A. IAS (Appointment by Competitive Examination) Regulations, 1955 Regulation 4.: Conditions of Eligibility .- In order to be eligible compete at the examination, a candidate must satisfy the following conditions, namely:- (i) Nationality . ................. (ii) Age .......................... (iii) Educational Qualifications ...... ................. (ii) Age .......................... (iii) Educational Qualifications ...... (iii-a) Attempts at the examination - Unless covered by any of the exceptions that may from time to time be notified by the Central Government in this behalf, every candidate appearing for the examination after 1st January 1979, who is otherwise eligible, shall be permitted three attempts at the examination; and the appearance of a candidate at the examination will be deemed to be an attempt at the examination irrespective of his disqualification or cancellation, as the case may be, of his candidature. Explanation - An attempt at a preliminary examination shall be deemed to be an attempt at the examination, within the meaning of this rule. Reg. questions 1 to 6: 33. At the threshold we will take up the main question about the validity of the second proviso to Rule 4 of the C.S.E. Rules of 1986, which proviso is an additional one to the first proviso to Rule No. 4 and which applies only to the I.P.S. and Central Services, Group A selectees. This proviso consists of two parts of which the first part enumerates certain conditions on the fulfilment of which alone, an allottee to IPS or Central Services Group A on the basis of the results of the previous CSE will become eligible to re-appear in the next CSE (Main) to improve his prospect with the hope of getting better position next year and joining in one of the more preferred services, namely, IAS, IFS, IPS or Central Services Group A subject to the conditions, enumerated in Rule 17 of CSE Rules. 34. As per the first part of the proviso, the prerequisite conditions which are sine qua non are as follows: A candidate who on the basis of the results of the previous CSE; i) should have been allocated to the IPS or Central Services Group A; ii) The said candidate should have expressed his intention to appear in the next Civil Service Main Examination for competing for IAS, IFS, IPS or Central Services Group A subject to the provisions of Rule 17; iii) The said candidate should have been permitted to abstain from the Probationary Training in order to so appear. 35. 35. The conditions in the second part of the proviso are as follows: 1) If a candidate (who is permitted to appear in the next CSE (Main) on fulfilment of the conditions, enumerated in the first part of this proviso) is allocated to a service on the basis of the next Civil Services (Main).Examination, he should either join that service or the service to which he has already been allocated on the basis of the previous CSE; 2) If the candidate fails to join either of the services as mentioned in the first condition of this second part then his allocation to the service based on one or both examinations , as the case may be, shall stand cancelled; and 3) Notwithstanding anything contained in Rule 8, a candidate a) who accepts allocation to the service and b) who is appointed to a service shall not be eligible to appear again in CSE unless he has first resigned from the service. 36. The sum and substance of the above proviso is that a candidate who has already been allocated to the IPS/ Central Services Group A and who in order to improve his efficacy of selection to higher civil service, expresses his intention to appear in the next CSE (Main) for competing for IAS, IFS, IPS or Central Services Group A and who has been permitted to abstain from the Probationary Training in order to do so, will become eligible to appear in the next CSE (Main) but subject to the provisions of Rule 17, and that the said candidate when allocated to a service on the basis of the next Civil Services (Main) Examination can either join that service or the service to which he has already been allocated on the basis of the previous CSE and that if he fails to join either of the services, his allocation based on one or both the examinations, as the case may be, will stand cancelled. Further, notwithstanding anything contained in Rule 8, a candidate who accepts allocation to a service and is appointed to that service shall not be eligible to appear again in the CSE unless he has first resigned from the service. Further, notwithstanding anything contained in Rule 8, a candidate who accepts allocation to a service and is appointed to that service shall not be eligible to appear again in the CSE unless he has first resigned from the service. In other words, a candidate falling within the ambit of this proviso can appear in the CSE for all the permitted attempts subject to his age limit if he intends to appear again in the CSE provided he first resigns from the service which he accepts on allocation and to which he is appointed. The restriction/ embargo contained in Rule 17 is, if a candidate has been approved for appointment to IPS, and expresses his intention to appear in the CSE (Main) for higher civil service, the services for which he is eligible to compete are IAS, IFS and Central Services Group A. Similarly, a candidate who has been approved for appointment to the Central Services Group A and expresses his intention to appear in the next CSE (Main), the services to which he will be eligible to compete are IAS, IFS and IPS. The second proviso to Rule 17 provides that a candidate who is appointed to Central Services Group B on the results of an earlier examination will be considered for appointment to IAS, IFS, IPS and Central Services Group A. 37. The impugned second proviso to Rule 4, as we have already pointed out, has been introduced by notification No. 13016/4/86AIS (1) dated 13-12-1986. 38. The circumstances which necessitated and compelled the introduction of the above second proviso to Rule 4 was due to the receipts of various representations and frequent complaints from. the Academies and Training Institutes by the Government informing that the candidates who, taking advantage of the opportunity of mobility from one service to another, were intending to appear in the next CSE (Main) in the hope of getting a better position and in a more preferred service were neglecting their required training programmes whereunder they had to undergo specialised training and acquire the necessary potential to perform their tasks in the service to which they have been allocated and for which training, the Government incurs huge expenditure. Therefore, the Government in order to overcome the problem of indiscipline amongst the Probationers undergoing training, requested the Kothari Committee for making a comprehensive survey on the different aspects of the recruitment scheme and to submit a report with its recommendations on the requirement policy and selection methods so that the candidates who are selected and allocated to a service and sent for training may not take en masse leave for preparing and appearing in the next CSE by neglecting and preterminating their training programmes and thereby creating a vaccum in the service for considerable time. The said Kothari Committee, after deeply examining this serious problem, submitted its report, the relevant part of which is as follows: "3.59. It may further be observed that the existing system which permits that candidates qualifying for and joining the Police or the Central Services, may appear the Civil Services Examination to improve their career opportunities, has come in for serious criticism from the National Academy of Administration and the respective employing departments. They complain that such probationers neglect their training at both the Academy and the Departmental Training Institutions until they exhaust the admissible number of chances. staggering heights worth several thousand crores of lower middle class persons living mostly in the rural areas. A bogey of employment hazards of several thousand regular employees and still a large number of agents working in the field cannot deter the Reserve Bank to lay down some directions which may act harshly and resulting in lessening of profits of such companies. It was also submitted that according to the affidavit submitted before this Hon'ble Court on behalf of the Reserve Bank of India it has been stated that prior to 1987 directions, there were 747 such companies which were conducting deposit schemes. At present they could classify only 392 such companies as required information for classifying of the remaining companies had not been received. Most of such companies have not designated their banks as it required under paragraph (6) of the directions and in most of such cases amounts invested in bank deposits and approved securities fall much short of deposit liabilities. The companies operating in these areas also at times become untraceable in that a number of show cause notices issued have been returned as "addressee not known" etc. In some cases those who have chosen to reply have given evasive replies. The companies operating in these areas also at times become untraceable in that a number of show cause notices issued have been returned as "addressee not known" etc. In some cases those who have chosen to reply have given evasive replies. It has been further stated in the affidavit that most of these companies did not comply with the financial discipline sought to be imposed upon them and have avoided and abhorred any scrutiny into their accounts. 19. It has thus been submitted that to get over these difficulties, the directions of 1987 attempt to provide a steady, stable, identifiable and monitory method by which the companies will be able to disclose all their true liabilities and also utilise the money raised from the depositors for investment in safe identifiable and quantifiable securities instead of investing them in other ventures. This will ensure complete security to the depositors at all times and will also make the accounts of the companies comprehensible and easy to monitor. As regards the formula laid down by the High Court it has been submitted that if a variable as against a fixed and definite percentage of investment with respect to amounts collected by way of each instalment is permitted it would be impossible to find out and verify whether the amounts invested are in accordance with the directions at any given point of time when there are thousands of certificates with different and varying maturity periods. In the circumstances, the formula laid down by the High Court is self-defeating and also deprives the depositor of the security envisaged under the directions. 20. It was also submitted on behalf of the Reserve Bank that it is an admitted position that the business of RNBCs is to collect funds from the public and invest the same in Government securities and bank deposits. In the application forms and in the advertisements issued by these companies it is expressly held out to the public that their moneys are safe with the banks and in Government securities. It is the very nature of their business which makes it non-viable if they are to give fair return to the, depositors and private security for the repayment of their moneys. It is the very nature of their business which makes it non-viable if they are to give fair return to the, depositors and private security for the repayment of their moneys. The scheme of control as provided in the directions of 1987 might be harsh but the same is in conformity with the assertions held out by these companies to the public at large. These directions subject the companies to proper discipline by monitoring their actions and such directions cannot be considered as unreasonable. The reasonableness of the directions when looked at from the point of view of the depositors for whose safeguard they have been issued, is beyond question. Return provided and the security to be given through proper investment cannot be faulted on any ground. Thus what seems to be an impossible situation for these companies is not due to the impugned directions but because of the nature of business itself. The funds are collected at exorbitant costs and on that account it becomes difficult for the companies to give a fair return to the depositors. These companies are not genuine investment companies. If they want to do genuine investment business, they can do so by choosing freely their investment, but in that case Reserve Bank of India directions applicable to such companies would permit them to accept deposits not exceeding 25 per cent of paid up capital and reserve. The directions of 1987 had not imposed any restriction on the right to carry on business but those directions only place a restriction with respect to one of the modes of raising reserves i.e. through public deposits. 21. It has been further argued that the reasonableness of the directions has not to be looked into from the point of view of the company to whom any such restrictions will be irksome and may therefore be regarded as unreasonable. The framing of the directions are only regulatory in nature keeping in view the interest of the depositors without unduly jeopardising the interest of the employees. Keeping this in mind it has been provided that the minimum return would be at 10 per cent, though there are Govt. and public sector bonds which pay interest at a much higher rate. Even presently bank deposits and other company deposits give return varying between 13 to 15 per cent. Keeping this in mind it has been provided that the minimum return would be at 10 per cent, though there are Govt. and public sector bonds which pay interest at a much higher rate. Even presently bank deposits and other company deposits give return varying between 13 to 15 per cent. There is no limitation on the quantum of deposits with reference to the overall capital as shown in the case of companies governed by the Companies (Acceptance of Deposits) Rules 1975, Non-Banking Financial Companies (Reserve Bank) Directions, 1977 and Miscellaneous Non-Banking Companies (Reserve Bank) Directions, 1977. The linking of deposits with capital as in the case of other regulations is a measure to secure the interest of the depositors namely e.g. Companies (Acceptance of Deposit) Rules, 1975, ensure that the assets are at least three times the deposits received. In view of the low or total non-existent capital of the RNBCS, it was not possible to secure the deposits in this manner. Instead, it has been provided that the entire liability towards the depositors should be invested and no part of the deposits be utilised for payment of commission etc. or incurring other expenses. In any event, even if, the directions do not prescribe existence of owners capital as security does not imply that it is permissible to use the deposits received to bridge the time gap between income and expenditure. Merely because the directions do not fix a ceiling on the rate of commissions it does not imply that the Reserve Bank has granted its permission to payment of high commission or incurring of large expenses on management etc. The RNBCs are free to incur such expenses and organise their business as they desire as long as the depositors are fully secured at all times. The contention that the business of the RNBCs will close down if the directions of 1987 are to be adhered to is not based on facts and misconceived in law. A perusal of the Directors' Report of Peerless for the years 1988, 1989 and 1990 clearly go to show that they did not consider the company in any financial difficulty and in fact paid larger dividends even after complying with the impugned directions of 1987. 22. A perusal of the Directors' Report of Peerless for the years 1988, 1989 and 1990 clearly go to show that they did not consider the company in any financial difficulty and in fact paid larger dividends even after complying with the impugned directions of 1987. 22. It has thus been submitted that given a wide latitude in judging the validity of economic legislation on the touchstone of reasonableness, in the absence of patent arbitrariness but having nexus with the public objective sought to be attained, the directions cannot be condemned as being violative of Art. 19(1)(g). The result of the contentions put forward on behalf of RNBCs would be that in the case of endowments repayable after, say 10 years, there will be nothing. due and payable in the first nine years and as such there would be no need of investing any sums for the first nine years. The interpretation placed by the respondent companies upon the judgment of the High Court is that it is now open to them to determine as per their own peculiar estimate, what would be sufficient to meet the liabilities towards the deposits and accordingly such amount would be their aggregate liability". According to the Peerless Company if it deposits 75 per cent of the first year's subscription, it is adequate to cover its liabilities to the depositors. On the other hand as per Timex Company a deposit of only 50 per cent of the first year's subscription would be adequate to cover its liabilities to the depositors. Whereas the Favourite Company contends that investment of 40 per cent of the first year's subscription will be adequate to cover the liabilities to the depositors. It has been submitted that according to well accepted accounting practice where any sum is received as a loan or as a deposit it has to be shown as a liability together with accrued interest irrespective of when it is due. The amount contributed by the depositors being a capital receipt and not a revenue receipt cannot under any circumstances be shown in the balance sheet otherwise than at its full value. The amount contributed by the depositors being a capital receipt and not a revenue receipt cannot under any circumstances be shown in the balance sheet otherwise than at its full value. Moreover, being a capital receipt, it cannot be credited to the profit and loss account since Part II of Schedule VI to the Companies Act, 1956 requires that the amounts to be shown in the profit and loss account should be confined to the income and expenditure of the company. Thus, crediting a part of the first and subsequent year's deposit instalments to the profit and loss account and not showing them fully as a liability in the balance sheet would be a contravention of the provisions of the Companies Act. 23. It has been further submitted on behalf of the Reserve Bank that the question which arises for consideration is whether liability to the depositors can be calculated on an actual basis. It may be noted that actuarial basis is normally adopted (a) in respect of items of income and expenditure, (b) where there is a significant element of uncertainty. Thus, in so far as the liability arising out of the repayment to the depositors of the amount capitalised by him is considered, the actuarial basis cannot be adopted and this liability must always be stated at its full value. The principle of actuarial valuation is apposite for the business of RNBCs. It has also been submitted that the formula laid down by the High Court about the quantum of investments to be made by RNBCs is incapable of effectively monitoring and hence the provisions made in the directions of 1987 regarding security to depositors would be rendered wholly illusory. Such impossibility in the monitoring has been demonstrated as follows: (A) These companies do not fix a definite but variable percentage of investment with respect to amounts collected by way of each instalment under the certificates of deposits; e.g. Peerless would invest 75 of the collections made out of Ist instalment (retaining and taking to P&L A/ c. 25 ) and 82 out of 2nd instalment and so on. At any given point of time, there will be thousands of deposit certificates with varying maturity and the amounts collected would be an impossibility to find out and verify whether the amounts invested are in accordance, with the proportion fixed by the companies with respect to each instalment. At any given point of time, there will be thousands of deposit certificates with varying maturity and the amounts collected would be an impossibility to find out and verify whether the amounts invested are in accordance, with the proportion fixed by the companies with respect to each instalment. Regulatory authority would have to depend entirely on these companies for doing its monitoring exercise. (B) Each company fixes its own proportion of investment with respect to each instalment based on the projected yield from its investment, e.g. Favourite Finance Company claims that it needed to invest only 40 of the amounts collected by way of Ist instalment claiming that the projected yield from its investment would be 14.8 . This would compound the impossibility of monitoring further. 24. It has thus been argued that the formula laid down by the High Court is self-defeating and depriving altogether benefits of security provisions given to depositors under the directions of 1987. 25. Mr. Somnath Chatterjee, learned senior counsel appearing on behalf of Peerless Company contended that the Peerless being the largest RNBC in India having an impeccable record of public service decided to give effect to the directions of 1987 as it wanted to avoid any confrontation with Reserve Bank and further not to give an impression of seeking to avoid "regulatory control" tried its best to comply with the said directions w.e.f. 15th May, 1997 till 31st March, 1989. However, from it, working results it appeared bona fide to the Board of Directors of Peerless that it was impossible to carry on its traditional business for any longer period without incurring huge losses. The company as such decided to approach the High Court for obtaining the benefit of judgment delivered in the Timex case. The Peerless has only challenged a part of Paragraph 6 of the directions of 1987 and the consequential direction contained in para 12 which shows that Peerless does not wish to remain outside of the regulatory controls of Reserve Bank but challenges only those directions which make the business totally unworkable. There has been no attempt on the part of Peerless to carry on its business in a manner which may jeopardise the interest of any depositor or which will not protect fully every paisa deposited with Peerless at all points of time. There has been no attempt on the part of Peerless to carry on its business in a manner which may jeopardise the interest of any depositor or which will not protect fully every paisa deposited with Peerless at all points of time. No real complaint was made by or on behalf of Reserve Bank as to any depositor of Peerless running a risk of loss of any amount or that it has carried on or is carrying on the business in an undesirable manner. It has been submitted that Peerless should not be made to suffer for the illegality or improprieties, if any, committed by any other RNBC and neither Peerless nor its 14 lac field agents, 3 thousand field officers and 4 thousand direct employees should be made to suffer. The result of following directions of 1987 would be that all the above agents, officers and employees of the Peerless could loose their jobs and their family members will be thrown on the streets. The Peerless had abolished the provision of forfeiture, in all its schemes as early as in 1986 that is even prior to coming into force of the directions of 1987. The Peerless has been compelled to challenge paragraphs 6 and 12 of the directions of 1987 since enforcement of these provisions would result in complete annihilation of the undertaking of Peerless in the near future. 26. It was further contended that it is inherent in the business carried on by Peerless and other similar RNBCs that the working capital is generated out of the subscriptions received from the certificate holders. Such business comprises in collecting subscriptions from depositors either in lump sum or in instalments and such deposits are paid back with the guaranteed accretions, bonus, interest etc. in terms of the contract at the end of the stipulated term. Through this business such companies have rendered great and commendable service to the nation in mobilising small savings and giving a boost to the movement of capital formation in the country. Such companies have placed at the disposal of Governmental institutions including public sector banks and other financial institutions huge deposits which could not be collected by the said financial institutions themselves or by anybody in the organised sector. Such companies have placed at the disposal of Governmental institutions including public sector banks and other financial institutions huge deposits which could not be collected by the said financial institutions themselves or by anybody in the organised sector. The method followed by the companies in carrying on the aforesaid business is that a certain portion of the subscriptions received by it is transferred to the profit and loss account, shown as income, and the same is used to defray inevitable working capital requirements of the company, namely, payment of agent's commission, management expenses, staff salaries and other overheads. However, the balance of the subscriptions (excluding the appropriated part) is transferred to a fund each year and the corpus of the fund is invested in turn in interest bearing investment. The Peerless company initially used to transfer approximately 95 of the first year's subscriptions to the profit and loss account and used to invest the subscriptions received from the second year onwards. However, at present, Peerless is appropriating 25 of the first year's subscription to the profit and loss account and investing the balance 75 in the manner and mode prescribed by paragraph 6 of the directions of 1987. It has been contended that the investment is planned in such a manner that at the end of the contractually stipulated maturity period or at any other point of time when any sum of money may become contractually payable to a depositor, a RNBC is always in a position to pay all its contractual dues to the certificate holder. There is thus no threat to the safety of the depositors money in spite of the aforesaid transfer of a portion of the subscription received to the profit and loss account showing it as income and utilising it for meeting the working capital requirements. It was pointed out that Peerless had been assessed to income-tax on the basis of above method of accounting and no objection has ever been taken by the revenue authorities or by the auditors of Peerless or even by R.B.I. before the issuance of the directions of 1987. It was submitted that the Peerless was incorporated in the year 1932 when it used to carry on life insurance business. It was submitted that the Peerless was incorporated in the year 1932 when it used to carry on life insurance business. It changed over to the present form of business from 1956 and since then it has been carrying on such business with the full knowledge of R.B.I. as well as other concerned authorities. The R.B.I. never objected to the accounting system followed by the Peerless. In view of the abolition of the forfeiture clause the alleged risk to the depositors has become totally non existent. It was further argued that the R.B.I. framed regulatory measures in 1973 such Miscellaneous Non-banking Companies (Reserve Bank) Directions, 1973. The Reserve Bank granted exemption to Peerless from the provisions of the said Directions of 1973, by an order dated 3rd December, 1973. The Favourite Small Investments Limited filed a writ petition challenging the refusal of Reserve Bank to grant exemption to them from the provisions of the said 1973 Directions to granting such exemption to Peerless. In the said writ petition the R.B.I. filed an affidavit justifying the denial of exemption to Favourite Small Investments Ltd. and in the aforesaid affidavit submitted in detail the accounting procedure of Peerless including the fact that Peerless was transferring a portion of the subscriptions to the profit and loss account as income and it also certified that the said method was a permissible business method and by following the said method Peerless would be in a position to pay all contractual dues of the certificate holders at the end of the maturity period. Thus the said system of accouting which is called an actuarial system of accounting was found satisfactory by the R.B.I. The said affidavit filed in the Favourite's case has been quoted in the Peerless case in (1987) 1 SCC 424 and the said actuarial system of accounting was not held as impermissible or against any recognised method of accounting. 27. It was also contended on behalf of the Peerless that the interest of depositors is certainly an important consideration but the interest of the depositors is not impaired in any manner whatsoever by the method of accountancy now being followed by Peerless and in fact by all similar companies, namely, appropriation of a part of the subscription to the profit and loss account and meeting the working capital requirements out of the same. In respect of the above contention certain charts were also produced during the course of arguments and from such charts it was sought to establish that except for the first two years the principal amount paid by a subscriber is always covered by matching investment. Further, on the date on which a deposit becomes contractually repayable, there is full coverage of such liability. 28. It was submitted on behalf of All India Peerless Field Officers Association that the said association represents about 14 lac field workers. These 14 lac persons are engaged by Peerless on the basis of individual contracts of engagement and earn their livelihood solely by collecting business for Peerless. For collecting such business Peerless pays to them commission at a contractual agreed percentage on the value of business collected. The said field officers have to meet all expenses for procuring such business such as travelling expenses, boarding, lodging, office and administrative expenses etc. out of such commission. Field officers have to undertake long tours and have to travel into remote villages to reach the small depositors. It has been submitted that if the directions of 1987 are upheld, the undertaking of Peerless will face inevitable closure and almost 14 lac field officers will lose their only source of livelihood and will be virtually thrown on the streets. The field officers and their families will face starvation and extreme penury in case the validity of such directions is upheld. Thus any restriction which would be prohibitive or which would result in closure of the undertaking of Peerless would be against public interest. 29. We have heard the arguments of learned counsel for the parties. It may be made clear at the outset that questions raised in these cases regarding the validity of paragraphs 6 and 12 of the directions of 1987 cannot be determined by taking into consideration the working of the financial soundness of the one company alone like Peerless but the matter has to be examined in a broader perspective of all RNBCs. We have to keep in mind, while deciding the controversies raised in the arguments of such RNBCs which are doing the same kind of business of taking deposits and returning the same to the certificate holders after a gap of 7 to 10 years along with interest, bonus etc. We have to keep in mind, while deciding the controversies raised in the arguments of such RNBCs which are doing the same kind of business of taking deposits and returning the same to the certificate holders after a gap of 7 to 10 years along with interest, bonus etc. In the affidavit submitted before this Court on behalf of Reserve Bank of India it has been stated that prior to 1987 directions, there were 747 such companies which were conducting this business under various deposit schemes. At present they could classify 392 such companies spread over across the entire country. According to the above affidavit, as on 31st March, 1990 in the eastern zone out of 185 companies, only 35 have filed the annual returns and out of which only 30 have filed the balance sheet. Similarly, out of 140 companies in the northern zone only 28 have filed annual returns and 32 have filed balance sheet. A perusal of the returns given by 51 of these companies discloses that 35 companies have a negative net worth (i.e. their losses far exceed their share capital and reserves) which necessarily means that they have not only wiped out the share capital and reserves but their liabilities are far in excess. Only 16 companies have a positive net worth including Peerless. It has been further pointed out in the affidavit that apart from Peerless the aggregate capital investment by 15 companies is Rs. 158 lacs only. As against this, the negative net worth of the 35 companies aggregated to Rs. 3.6 crores. Despite large accumulated losses (in some cases with meager or nominal capital) these companies apart from Peerless, have realised deposits to the tune of Rs. 86 crores. Apart from the financial parameters most of these small companies are family concerns. Most of such companies have not designated their banks as is required under paragraph 6 of the directions and in most of such cases amounts deposited in banks and approved securities fall much short of deposit liabilities. It has also been pointed in the affidavit that the companies out operating in these areas also at times become untraceable in that a number of show cause notices issued have been returned as "addressee not known" etc. Thus we have to keep in mind the above mushroom of companies also which have set foot in this sort of business. 30. Thus we have to keep in mind the above mushroom of companies also which have set foot in this sort of business. 30. It would also be important to note that most of the depositors in such companies belong to the rural areas and who are persons belonging to lower middle class, small agriculturists and small traders, pensioners etc. These companies advertise their schemes widely in beguiling terms. Through such advertisements they lure the small savings of the poor ignorant villagers through a special structure of agents, special agents, different kinds of organisers and so on. The agents commission for the first years subscription is very high and which offers incentive to the agents on securing a fresh business and a disincentive to collect subscriptions of subsequent years. It is a matter of common experience and knowledge that most rural folk particularly those belonging to the lower strata of society will not pay their subscriptions regularly unless somebody takes the trouble of collecting their subscription with the same enthusiasm as may be shown in enrolling the subscribers in the beginning. It is no doubt correct that these companies do tap and collect the deposits from such areas where the agents of public sector banks or public sector companies or instrumentalities of the state are unable to reach. Thus these companies mop up a large amount of money for ultimately investing in the nationalised banks or other Govt. owned corporations or companies. However, the Reserve Bank considered the safety of the money of the depositors as the paramount consideration in issuing the directions of 1987. It cannot be disputed that the interest of the employees as well as the field officers and agents have also to be taken into consideration while deciding the reasonableness of the impugned directions. It may be further noted that in the Reserve Bank of India v. Peerless Company case ( AIR 1987 SC 1023 ) (supra) this Court though came to the conclusion that the Endowment Certificate Scheme of the Peerless company was outside the Prize Chit and Money Circulation Schemes (Banning) Act, still it was observed that it would be open to the Reserve Bank to take such steps as are open to them in law to regulate schemes such as those run by the Peerless company to prevent exploitation of ignorant subscribers though care must also be taken to protect the thousands of employees. The court expressed grave concern with regard to the mushroom growth of 'financial investment companies' offering staggeringly high rates of interests to depositors leading to the suspicion whether these companies are not speculative ventures floated to attract unwary and credulous investors and capture their savings. It was clearly pointed out that if the Reserve Bank of India considers, the Peerless company with 800 cross invested in Govt. securities, fixed deposits with national banks etc. unsafe for depositors one wonders what they have to say about the mushroom non banking companies which are accepting deposits promising most unlikely returns and as such what action was proposed to be taken by the R.B.I. to protect the investors. In the above background the Reserve Bank came forward with the impugned directions of 1987. 31. Before examining the scope and effect of the impugned paragraphs 6 and 12 of the directions of 1987, it is also important to note that Reserve Bank of India which is banker's bank is a creature of Statute. It has large contingent of expert advice relating to matters affecting the economy of the entire country and nobody can doubt the bona fides of the Reserve Bank in issuing the impugned directions of 1987. The Reserve Bank plays an important role in the economy and financial affairs of India and one of its important functions is to regulate the banking system in the country. It is the duty of the Reserve Bank to safeguard the economy and financial stability of the country. While examining the power conferred by Sec. 58A of the Companies Act, 1956 on the Central Govt. to prescribe the limits up to which, the manner in which and the conditions subject to which deposits may be invited or accepted by non banking companies, this Court in Delhi Cloth and General Mills v. Union of India, (1983) 3 SCR, 438 observed as under: "Mischief was known and the regulatory measure was introduced to remedy the mischief. The conditions which can be prescribed to effectuate this purpose must a fortiori, to be valid, fairly and reasonably, relate to checkmate the abuse of juggling with the depositors/ investors' hard earned money by the corporate sector and to confer upon them a measure of protection namely availability of liquid assets to meet the obligation of repayment of deposit which is implicit in acceptance of deposit. Can it be said that the conditions prescribed by the Deposit Rules are so irrelevant or have no reasonable nexus to the objects sought to be achieved as to be arbitrary ? The answer is emphatically in the negative. Even at the cost of repetition, it can be stated with confidence that the rules which prescribed conditions subject to which deposits can be invited and accepted do operate to extend a measure of protection against the notorious abuses of economic power by the corporate sector, to the detriment of depositors/ investors, a segment of the society which can be appropriately described as weaker in relation to the mighty corporation. One need not go so far with Ralph Nadar in 'America Incorporated' to establish that political institutions may fail to arrest and control this ever-widening power of corporations. And can one wish away the degree of sickness in private sector companies? To the extent companies develop sickness, in direct proportion the controllers of such companies become healthy. In a welfare State, it is the constitutional obligation of the State to protect socially and economically weaker segments of the society against the exploitation by corporations. We, therefore, see no merit in the submission that the conditions prescribed bear no relevance to the object or the purpose for which the power was conferred under Sec. 58A on the Central Government." 32. The function of the Court is to see that lawful authority is not abused but not to attain itself the task entrusted to that authority. It is well settled that a public body invested with statutory powers must take care not to exceed or abuse its power. It must keep within the limits of the authority committed to it. It must act in good faith and it must act reasonably. Courts are not to interfere with economic policy which is the function of experts. It is not the function of the Courts to sit in judgment over matters of economic policy and it must necessarily be left to the expert bodies. In such matters even experts can seriously and doubtlessly differ. Courts cannot be expected to decide them without even the aid of experts. 33. It is not the function of the Courts to sit in judgment over matters of economic policy and it must necessarily be left to the expert bodies. In such matters even experts can seriously and doubtlessly differ. Courts cannot be expected to decide them without even the aid of experts. 33. The main grievance raised on behalf of respondent companies is that if the provisions of paragraphs 6 and 12 of the directions of 1987 are complied with, the companies will be left without any fund to meet their working capital. It would be impossible to run the business without a working capital and to meet even reasonable expenses incurred for payment of agents' commission, management expenses and other overhead expenses. During the course of hearing the counsel for the companies had relied on some charts to show the unworkability and unreasonableness of the impugned paragraphs 6 and 12 of the directions. It was also pointed out that the arguments made on behalf of the Reserve Bank overlooked the fact that in case of investments in long term schemes such as Indira Vikas Patra and Kisan Vikas Patra the companies will not be able to utilise its return from such investments before the end of the minimum period for which these schemes operate. The respondent companies will thus be left without any income during the period of operation of such schemes and cannot meet its working capital requirements. It has been submitted that the directions of 1987 really amount to prohibition of the business in a commercial sense without reasonable basis and are thus violative of Art. 19(1)(g) of the Constitution. In support of the above contention reliance has been placed on Mohammad Yasin v. Town Area Committee, Jalalabad, 1952 SCR 572 : ( AIR 1952 SC 115 ), Premier Automobiles Ltd. v. Union of India, AIR 1972 SC 1690 and on Shree Meenakshi Mills Ltd. v. Union of India, AIR 1974 SC 366 . It has also been contended that it is now well settled by plethora of judicial pronouncements that the restrictions on any business caused by regulations should not be more than what would be necessary in the interest of the general public and such restrictions should not overreach the scope of the objects achieved by the regulations. 34. It has also been contended that it is now well settled by plethora of judicial pronouncements that the restrictions on any business caused by regulations should not be more than what would be necessary in the interest of the general public and such restrictions should not overreach the scope of the objects achieved by the regulations. 34. The contention on behalf of the Reserve Bank is that the directions have been made in public interest of safeguarding the interest of millions of depositors and the Reserve Bank is not concerned and while doing so it was rightly thought necessary by the Reserve Bank that the companies cannot be permitted to incur the expenses out of the corpus of the depositors' money. The business carried on by the companies is that of only a middleman or of commission agents and it is for the companies to restructure their organisation by curtailing its expenses. If such middlemen or brokers are, not able to earn a large profit as was done before the enforcement of the impugned directions, it lies with the companies to continue or not such business when the margin of profit is curtailed. These companies want to do the business without having any stake of their own. The companies doing such business cannot be subjected to the scheme of control applied to other financial and non-financial companies for the simple reason that they have no capital and their schemes are for a period much longer than three years. After the decision of the SC in Peerless case ( AIR 1987 SC 1023 ) these directions of 1987 were issued after mature consideration with the help and 1052 advice of experts. 35. Paragraph 6 of the impugned directions according to the Reserve Bank lays down provisions for security of depositors. It prescribes the mode of investment of funds collected by the companies. It cannot be disputed that while collecting deposits the companies clearly hold out to the members of the public that the moneys so collected by them shall be invested in Government securities or kept deposited with the banks and they also assure the depositors that their moneys are safe and secure. It cannot be disputed that while collecting deposits the companies clearly hold out to the members of the public that the moneys so collected by them shall be invested in Government securities or kept deposited with the banks and they also assure the depositors that their moneys are safe and secure. On the basis of such representations and on the strength of exaggerated and misleading advertisements these companies collect huge amounts of deposits from a large number of small, poor and uninformed depositors and that too in such investment spread over a long period. The contention on behalf of the Reserve Bank of India is that in the above context these companies carry on their activities wholly with the funds provided by the public by way of deposits and hardly have any capital of their own. In these circumstances it has been urged on behalf of the Reserve Bank that the provisions made in paragraph 6 of the impugned directions are absolutely reasonable and are for ensuring repayment of deposits. It has been submitted that it is common knowledge that small depositors cannot have recourse to courts for recovering their amounts if the companies do not repay the deposits. The direction in paragraph 6 enjoins on these companies to deposit in fixed deposits with public sector banks or unencumbered approved securities or in other investments, a sum which shall not, at the close of business on 31st December, 1987 and thereafter at the end of each half year i.e. 30th June and 31st December not less than the aggregate amounts of the liabilities to the depositors whether or not such amount have become payable. Thus according to the above provision whole of the aggregate amounts of the liabilities to the depositors whether or not such amounts have become repayable is required to be deposited or invested. 10 of such amount is required to be deposited in public sector banks and 70 in approved securities and 20 has been allowed to be invested by the company according to its own choice. 36. In order to understand the rigour of the directions laid down in paragraph 6', it would be necessary to understand the scope of other directions as well. 36. In order to understand the rigour of the directions laid down in paragraph 6', it would be necessary to understand the scope of other directions as well. Paragraph 4 of the directions lays down that the deposit shall not be accepted for a period of less than 12 months or more than 120 months i.e. one year to ten years from the date of receipt of such deposits. The normal standard applied to non financial and financial companies is that they cannot accept deposits for a period of more than 36 months (except housing finance company). Thus the companies before us have been permitted to conduct their schemes extending over to a long period up to 120 months. This is a special kind of concession provided to the companies of the kind before us. 37. Paragraph 5 of the directions relates to the minimum rate of return fixed at 10 per annum for a deposit with a maturity of 10 years. It is a matter of common knowledge that in the present times even the public sector corporations and banks and other financial and non-financial companies pay interest at much more higher rates ranging from 14 to 18 . Thus according to the above scheme the respondent companies and the other doing such business can easily earn a profit of 4 to 5 on their investments. In case of a request of the depositors for repayment of the deposit before maturity then the amount payable by the company by way of interest etc., shall be 2 less than what could have been ordinarily paid by the company by way of interest if the deposit had. run the full contractual period. However, the question of repayment before maturity or after how many years will depend entirely on the terms and conditions of the contract of such deposit. Paragraph 12 of the directions of 1987 enjoins upon the company to disclose as liabilities in its books of accounts and balance sheets the total amount of deposits received together with interest, bonus, premium or other advantage, accrued or payable to the depositors. Under Clause (a) to the explanation to clause 3 of paragraph 6' "Aggregate Amounts of Liabilities" shall mean total amount of deposits received together with interest, premium, bonus or other advantage by whatever name called, accrued on the amount of deposits according to the terms of contract. Under Clause (a) to the explanation to clause 3 of paragraph 6' "Aggregate Amounts of Liabilities" shall mean total amount of deposits received together with interest, premium, bonus or other advantage by whatever name called, accrued on the amount of deposits according to the terms of contract. Thus the company is required to deposit or invest the aggregate amounts of its liabilities having accrued on the amount of deposits according to the terms of contract. Without going into the figures shown in the various charts, it is clear that if the directions contained in paragraphs 6 and 12 of the directions of 1987 are to be carried out, the companies are not left to utilise any amount out of the deposits as working capital to meet the expenses. In our view the Reserve Bank is right in taking the stand that if these companies want to do their business, they should invest their own working capital and find such resources elsewhere with which the Reserve Bank has no concern. If we look at the Annual Report and Accounts of Peerless for the years 1988, 1989 and 1990 it is clear that it had conducted its business following the impugned directions of 1987 and still had earned substantial profits in these years. It is clear that Peerless is a company having established as back as in 1932 and had substantial funds to invest the entire amount of deposits and had met the expenses out of its accummulated profits of the past years. This shows that the business can be run and profit can be earned even after complying with the impugned directions of 1987 issued by the Reserve Bank. It is not the concern of this court to find out as to whether actuarial method of accounting or any other method would be feasible or possible to adopt by the companies while carrying out the conditions contained in paragraphs 6 and 12 of the directions of 1987. The companies are tree to adopt any mode of accounting permissible under the law but it is certain that they will have to follow the entire terms and conditions contained in the impugned directions of 1987 including those contained in paras 6 and 12. It is not the function of the Court to amend and lay down some other directions and the High Court was totally wrong in doing so. It is not the function of the Court to amend and lay down some other directions and the High Court was totally wrong in doing so. The function of the Court is not to advise in matters relating to financial and economic policies for which bodies like Reserve Bank are fully competent. The Court can only strike down some or entire directions issued by the Reserve Bank in case the Court is satisfied that the directions were wholly unreasonable or violative of any provisions of the Constitution or any statute. It would be hazardous and risky for the courts to tread an unknown path and should leave such task to the expert bodies. This court has repeatedly said that matters of economic policy ought to be left to the Government. While dealing with the validity of an order passed on September 30, 1977 fixing a retail price of mustard oil not exceeding Rs. 1 0 /-per kilogram in exercise of powers conferred by S. 3 of the Essential Commodities Act, a Bench of 7 Judges of this Court in M/ s. Prag Ice & Oil Mills v. Union of India and Nav Bharat Oil Mills v. Union of India (1978) 3 SCC 459 observed as under (para 23 of AIR): "We have listened to long arguments directed at showing us that producers and sellers of oil in various parts of the country will suffer so that they would give up producing or dealing in mustard oil. It was urged that this would, quite naturally, have its repercussions on consumers for whom mustard oil will become even more scarce than ever ultimately .We do not think that it is the function of this Court or of any Court to sit in judgment over such matters of economic policy as must necessarily be left to the Government of the day to decide. Many of them, as a measure of price fixation must necessarily be, are matters of prediction of ultimate results on which even experts can seriously err and doubtlessly differ. Courts can certainly not be expected to decide them without even the aid of experts". 38. In Shri Sitaram Sugar Company Limited v. Union of India with U. P. State Sugar Corporation Ltd. v. Union of India, (1990) 3 SCC 223 this Court observed as under: "Judicial review is not concerned with matters of economic policy. Courts can certainly not be expected to decide them without even the aid of experts". 38. In Shri Sitaram Sugar Company Limited v. Union of India with U. P. State Sugar Corporation Ltd. v. Union of India, (1990) 3 SCC 223 this Court observed as under: "Judicial review is not concerned with matters of economic policy. The Court d0oes not substitute its judgment for that of the legislature or its agents as to matters within the province of either. The Court does not supplant the "feel of expert" by its own views. When the legislature acts within the sphere of its authority and delegates power to an agent, it may empower the agent to make findings of fact which are conclusive provided such findings satisfy the test of reasonableness. In all such cases, judicial inquiry is confined to the question whether the findings of fact are reasonably on evidence and whether such findings are consistent with the laws of the land. 39. In R. K. Garg v. Union of India, (1981) 4 SCC 675 at p. 690 a Constitution Bench of this Court observed as under: Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. It has been said by no less a person than Holmes, J. that the legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire of strait-jacket formula and this is particularly true in case of legislation dealing with economic matters where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. The Court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. Nowhere has this admonition been more felicitously expressed than in Morey v. Doud, ((1957) 354 US 457) where Frankfurter, J. said in his inimitable style: "In the utilities, tax and economic regulation cases, there are good reasons for judicial self restraint if not judicial deference to legislative judgment. The legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. The legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error the bewildering conflict of the experts, and the number of times the judges have been overruled by events - self limitation can be seen to be the path to judicial wisdom and institutional prestige and stability". 40. It may also be noted that it is not possible for the Court to determine as to how possible for the Court to how much percentage of deposit of first instalment should be allowed towards expenses which may consist of commission to agents, office expenses etc. Even amongst the three companies - viz. Peerless, Timex and Favourite, there is a difference in this regard. According to the Peerless 25 , Timex 50 and Favourite 60 of the deposits of the first instalment would be necessary for generating the working capital for meeting the genuine expenses. Thus, it would depend from company to company based on various factors such as paid up capital, percentage of commission paid to the agents, rate of interest paid to the depositors, period of maturity for repayment, office expenses and various other factors necessary to mop up working capital out of the depositors money. We cannot ignore the possibility of persons having no stake of their own starting such business and after collecting huge deposits from the investors belonging to the poor and weaker sections of the society residing in rural areas, and to stop such business after a few years and thus devouring the hard earned money of the small investors. It cannot be lost sight that in such kind of business, the agents always take interest in finding new depositors because they get a high rate of commission out of the first instalment, but they do not have same enthusiasm in respect of deposit of subsequent instalments. In these circumstances, if the Reserve Bank has issued the directions of 1987 to safeguard the larger interest of the public and small depositors it cannot be said that the directions are so unreasonable as to be declared constitutionally invalid. 41. In these circumstances, if the Reserve Bank has issued the directions of 1987 to safeguard the larger interest of the public and small depositors it cannot be said that the directions are so unreasonable as to be declared constitutionally invalid. 41. It has been vehemently contended before us on behalf of the Peerless employees and field agents that in case the impugned directions are not struck down, the Peerless will have to close down its business and several thousands of employees and their family and several lakhs of field agents would be thrown on the street and left with no employment. We do not find any force in the above contention. So far as Peerless is concerned there is no possibility of its closing down such business. It has already large accumulated funds collected by making profits in the past several years. Thus it has enough working capital in order to meet the expenses. We are not impressed with the argument of Mr. Somnath Chatterjee, learned senior Advocate for the Peerless that after some years the Peerless will have to close down its business if directions contained in paragraphs 6 and 12 are to be followed. The working capital is not needed every year as it can be rotated after having invested once. If the entire amount of the subscribers is deposited or invested in the proportion of 10 in public sector banks, 70 in approved securities and 20 in other investments, such amounts will also start earning interest which can be added and adjusted while depositing or investing the subsequent years of deposits of the subscribers. In any case it lies with the new entrepreneurs while entering such field of business to make arrangement of their own resources for working capital and for meeting the expenses and they cannot insist in utilising the money of the depositors for this purpose. So far as the companies already in this field they must have earned profits in the past years which can be utilised as their working capital. It is important to note that the impugned directions of 1987 have been made applicable from 15th May, 1987 prospectively and not retrospectively. Thus under these directions the question of depositing the entire amount of subscriptions would only apply to the deposits made after 15th May, 1987. 42. It is important to note that the impugned directions of 1987 have been made applicable from 15th May, 1987 prospectively and not retrospectively. Thus under these directions the question of depositing the entire amount of subscriptions would only apply to the deposits made after 15th May, 1987. 42. We may also observe that the impugned directions of 1987 as well as any other directions issued from time to time by the Reserve Bank relating to economic or financial policy are never so sacrosanct that the same cannot be changed. Even the financial budget for every year depends on the economic and financial policy of the Government existing at the relevant time. So far as the impugned directions are concerned if it is found in future that the same are not workable or working against the public interest, the Reserve Bank is always free to change its policy and scrap or amend the directions as and when necessary. We have no doubt that if in times to come the Reserve Bank feels that business of the kind run at present by the Peerless and other companies, in terms of the directions of 1987 are not yielding the result as envisaged by the Reserve Bank, it will always be prepared to consider any new proposals which may be conducive both in the interest of the large multitude of the investors as well as the employees of such companies. Mr. Shanti Bhushan, learned senior counsel appearing on behalf of the Reserve Bank made a candid statement on behalf of the Reserve Bank that the Reserve Bank would always be prepared to consider any new proposal which would subserve the public interest. 43. In the result I set aside the orders of the High Court and allow the appeals arising out of SLP Nos. 6930-30A of 1991, 7140 of 1991 and 3676 of 1991 filed by the Reserve Bank of India and dismiss the writ petition No. 677 of 1991. No order as to costs. K.RAMASWAMY, J.:- 44. While respectfully agreeing with my learned brother since the issues bear far reaching semital importance, I propose to express my views as well. 45. This Court in Reserve Bank of India v. Peerless General Finance and Investment Co. No order as to costs. K.RAMASWAMY, J.:- 44. While respectfully agreeing with my learned brother since the issues bear far reaching semital importance, I propose to express my views as well. 45. This Court in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. (1987) 2 SCR 1 for short 'first Peerless case' while holding that Prize Chits and Money Circulation Schemes (Banning) Act, 1978 does not attract "Recurring Deposits Schemes", pointed out that the schemes harshly operate against the poor sections of the society who require security and 'protection; urgent action ' appeared to be called for and was imperative to protect the public and emphasized to evolve fool proof scheme to prevent fraud being played upon persons not conversant with practices of the financial enter rises who pose themselves as benefactors of the people. In pursuance thereof the appellant, Reserve Bank of India, for short 'RBI' issued Residuary Non-Banking Companies (Reserve Bank) Directions, 1987 for short 'the Directions'. The short shift with avid eye into the relevant provisions of the Reserve Bank of India Act 2 of 1934 for short 'the Act' and "the directions" would enable us to come to grip of the scope of the scheme of the directions, its purpose and operation. Chapter III (B) of the Act deals with the power of RBI to regulate non-banking institutions receiving deposits. Section 45 (1) (bb) defines deposit includes and shall be deemed always to have included "any receipt or money by way of deposit or loan or in any other form but does not include exceptions are not relevant and hence are omitted. Section 45 (1)(c) defines 'financial institution' to mean any non-banking institution which carries on its business, or part of its business, in any of the following activities; clauses (i) to (v) are omitted, clause (vi) collecting for any purpose of any scheme or arrangement by whatever name called, monies in lump-sum or otherwise by way of subscription.... or in any other manner by awarding prizes or gifts whether in cash or kind or disbursing monies in any other way to persons from whom monies are collected or to any other persons but does not include the exclusions are not relevant and hence omitted. or in any other manner by awarding prizes or gifts whether in cash or kind or disbursing monies in any other way to persons from whom monies are collected or to any other persons but does not include the exclusions are not relevant and hence omitted. Section 45 J empowers that RBI may, if it considers necessary in the public interest so to do, by general or special order, (a) regulate or prohibit the issue by any non-banking institution of any prospectus or advertisement soliciting deposits of money from the public; and (b) specify the conditions, subject to which any such prospectus or advertisement, if not prohibited, may be issued. Section 45K empowers the RBI to collect information from non-banking institution as to deposit and to give directions that every non-banking institution shall furnish to the Bank, in such form, at such intervals and within such time, such statements, information or particulars relating to or connected with deposits received by the non-banking institution, as may be specified by RBI by general or special order including the rates of interest and other terms and conditions on which they are received. Under sub-section (3) thereof the RBI is entitled to issue in the public interest directions to non-banking institution in respect of any matter relating to or connected with the receipt of deposits including the rates of interest payable on such deposits and the periods for which deposits may be received. The use of the adjective 'any' matter relating to or connected with the receipt of deposits is wide and comprehensive to empower the RBI to issue directions in connection therewith or relating to the receipt of deposits. But exercise of the power is hedged with and should be "in the public interest". 46. The use of the adjective 'any' matter relating to or connected with the receipt of deposits is wide and comprehensive to empower the RBI to issue directions in connection therewith or relating to the receipt of deposits. But exercise of the power is hedged with and should be "in the public interest". 46. Section 45L provides that if the RBI is satisfied that for the purpose of enabling it "to regulate the credit system of the country to its advantage it is necessary so to do"; it may give to such institutions either generally or to any such institution, in particular, "directions relating to the conduct of business' by them or by it as financial institution or institutions including furnishing of information of particulars "relating to paid up capital, reserves or other liabilities", the "investments" whether in the Government securities" or "otherwise", the persons to whom, and the purposes and periods for which, finance is provided and "the terms and conditions", including the rates of interest", on which it is provided. Section 45Q provides that the provisions of this chapter shall have effect "notwithstanding, anything inconsistent therewith contained in any other law" for the time being in force or any instrument having effect by virtue of any such law. 47. The directions became operative from May 15, 1987. They would apply to every Residuary Non-Banking Company for short 'R.N.B.C' which receives any deposit scheme in lump sum or in instalment by way of contribution or subscription or by sale of units of certificates or other instruments or "in any other manner" vide Cl. II of the definition. Cl. III(a) defines deposits as defined in S. 45(1)(bb) of the Act. Para 4 regulates receipt of deposits for a period not less than 12 months and not more than 120 months from the first day of the receipt of the deposit. Paragraph 5 prescribes minimum rate of return of 10 per cent per annum (to be compounded annually) on the amount deposited. The proviso empowers R.N.B.C. at the request of the depositor to make repayment of the deposit, after the expiry of a period of one year from the date of the deposit 1057 but before the expiry of the period the deposit with two per cent reduced rate of interest from 10 interest. Paragraph 6, the heart of the directions consists of three sub-paragraphs with explanations. Paragraph 6, the heart of the directions consists of three sub-paragraphs with explanations. The marginal note expresses "security for depositors". Sub-paragraph (1) thereof provides that on and from May 15, 1987 every R.N.B.C. shall deposit and keep deposited in fixed deposits with public sector banks or invest and keep invested in unencumbered approved securities (such securities being valued at their market value for the time being), or in other investments, which in the opinion of the company are safe, a sum which shall not, at the close of business on 31st December, 1987 and thereafter at the end of each half year that is, 30th June and 31st December be less than the aggregate amounts of the liabilities to the depositors whether or not such amounts have become payable. The proviso specifies that the sum so deposited or invested (a) not less than 10 per cent shall be in fixed deposits with any of the public sector banks; (b) not less than 70 per cent shall be in approved securities; and (c) not more than 20 per cent or 10 times the net owned funds of the company, whichever amount is less, shall be in other investments. Provided that such investments shall be with the approval of the Board of Directors of the Company. The explanation "Net owned funds" shall mean the aggregate of the paid-up-capital and free reserves as appearing in the latest audited balance-sheet of the company as reduced by the amount of accumulated balance of loss, deferred revenue expenditure and other intangible assets, if any, as disclosed in the said balance-sheet. Sub-paragraph (2) enjoins the R.N.B.C. to entrust to one of the public sector banks designated in that behalf, deposits and securities referred to in Cls. (a) and (b) of the proviso to sub-paragraph (1) to be held by such designated bank is for the benefit of the depositors. Such securities and deposits shall not be withdrawn by the R.N.B.C. or otherwise dealt with, except for repayment to the depositors. (a) and (b) of the proviso to sub-paragraph (1) to be held by such designated bank is for the benefit of the depositors. Such securities and deposits shall not be withdrawn by the R.N.B.C. or otherwise dealt with, except for repayment to the depositors. Sub-paragraph (3) obligates it to furnish to the R.B.I. within 30 days from the close of business on 31st December, 1987 and thereafter at the end of each half year i.e., as on 30th June and 31st December, a certificate from its auditors, being member of institute of Chartered Accountants, to the effect that the amounts deposited in fixed deposits and the investments made are not less than "the aggregate amounts of liabilities to the depositors" as on 30th June and 31st December of that year. Explanation thereto makes explicit what the "aggregate amount of liabilities"; "approved securities"; and "public sector banks" and "unencumbered approved securities" are meant to be, the details of which are not necessary for the purpose of this case. Paragraph 7 abolishes the power of the R.N.B.C. of forfeiture of deposits; paragraph 8 prescribes particulars to be mentioned in the form soliciting deposits; paragraph 9 enjoins issuance of the receipts to the depositors and paragraph 10 obligates to maintain the register with particulars of depositors mentioned therein. Paragraph 11 enjoins its Board of Directors to furnish the information in their report as envisaged therein. Paragraph 12 which is also material for the purpose of this case provides that every R.N.B.C. shall disclose as liabilities in its books of accounts and balance-sheets, the total amount of deposits received together with interest, bonus, premium or other advantage, accrued or payable to the depositors. Paragraph 13 enjoins to supply to R.B.I. copies of the balance-sheets and accounts together with Directors report. Paragraph 14 obligates the company to submit returns to the R.B.I. in the manner envisaged thereunder. R.N.B.C. has to submit balance-sheet, returns etc. to the department of the Financial Companies as per paragraph 15. Paragraph 16 obligates R.N.B.C. to comply with the requirement of the Non-banking Financial Companies and Miscellaneous Non-banking Companies (Advertisement) Rules, 1977 etc. and actual rate of interest etc. to the depositor. R.N.B.C. has to submit balance-sheet, returns etc. to the department of the Financial Companies as per paragraph 15. Paragraph 16 obligates R.N.B.C. to comply with the requirement of the Non-banking Financial Companies and Miscellaneous Non-banking Companies (Advertisement) Rules, 1977 etc. and actual rate of interest etc. to the depositor. Paragraph applies to the prospective R.N.B.C. to furnish information in Schedule C. Paragraph accords transitory power and paragraph empowers the R.B.I., if it considers necessary to avoid any hardship or for any other just and sufficient reasons, to grant extensions of time to comply with or exempt, any company or class of companies, from all or any of the provisions of the directions either generally or for any specified period, subject to such conditions as the RBI may impose and paragraph excludes the applicability of paragraph 19 of the Non-Banking Financial Companies (Reserve Bank) Directions, 1977. 100. It was brought to the notice of the Government that the probationers who have been allocated to the IPS and Group 'A' service were more often than not completely neglecting their training in the academies/ Training Institutes and also have gone on en masse leave thereby creating a complete vacuum in the academy and the Training Institutes for the purpose of preparing for the next CSE (Main) in the hope of getting a better position and a more preferred service like IAS, IFS etc. without having a sense of involvement with the service to which they have been allocated and appointed on the basis of the earlier examination. It seems that the Government had been facing this disturbed problem of indiscipline and inattentiveness among the probationers undergoing training who were busy themselves with the preparation for the ensuing CSE. As a result of this bent on preparation for the CSE the training imparted was not seriously taken and the concentration of the probationers was only in the preparation of the next CSE. Consequently, the standard of officers turned out of the academy on completion of their training declined very much. Therefore, in order to overcome this problem it was suggested and considered that the probationers selected and allocated to a service and sent for training should be debarred from appearing in the ensuing CSE so that they can fully devote themselves to the training and take it more seriously. Therefore, in order to overcome this problem it was suggested and considered that the probationers selected and allocated to a service and sent for training should be debarred from appearing in the ensuing CSE so that they can fully devote themselves to the training and take it more seriously. Resultantly, the matter was considered in consultation with the Department of Personnel and Training and it was agreed that the relevant rules should be amended so as to prevent the IPS and Group 'A' probationers from joining training at the ,academy in case they intend to take another CSE. These measures are taken for,making probationers training more effective and meaningful. 101. Hence for the aforementioned reasons, we hold that there is a dynamic nexus between the impugned second proviso and the object to be achieved. Reg. Question No. 9 102. We shall now pass on to the the real and pivotal point in issue which has been hotly debated and eloquently articulated by all the learned counsel contending that the impugned proviso is discriminatory and violative of Articles 14 and 16 of the Constitution resulting in a disastrous effect. 103. All the learned counsel appearing in all the batches of the appeals amplified the above contention stating thus:- 104. In all there are 46 Group 'A' Central Services listed in the CCS Rules of which only for 16 Group 'A' Services, recruitment made through the Civil Services Examination conducted by UPSC annually and it is only in respect of the candidates already allocated and appointed to the IPS or to one or other of these 16 Group 'A' services, the impugned proviso imposes an onerous restriction that they should first resign in order to appear at the next Civil Service Examination whereas there is no such restriction so far as candidates recruited through the same open competition to the remaining Group 'B' services despite the fact that the level of responsibility is the same and the qualifications prescribed are comparable. This kind of classification between these two groups has no rational nexus.with the object of selection. This kind of classification between these two groups has no rational nexus.with the object of selection. The reasons attributed for such a classification on the ground of neglect of training, financial loss, unemployment situation, loss to service are all common to all the Central Services Group 'A' listed in the CCS Rules and, therefore, the impugned second proviso is held to be discriminatory against the candidates appointed to the IPS and 16 Group 'A'services and as such it is violative of Article 14. The impugned proviso makes a further discrimination vis-a-vis candidates appointed to Group 'B'services, in that the said proviso by placing the onerous condition of resignation from service of candidates appointed to the IPS and Group 'A' service in substance and effect and it precludes them from competing for higher civil service with the candidates appointed to Group 'B' service and thereby facilitates the selection of candidates with relatively inferior merit to posts of superior Group 'A' services. In other words, the impugned proviso excludes the candidates appointed to group 'A' services from competition on the one hand and on the other facilitates selection from amongst less meritorious candidates appointed to Group 'B' services to the highest and prestigious All India Services. This defeats the very object of securing the services of most meritorious candidates to the most important All India Services and it is arbitrary for want of rational nexus between the classification of candidates with the proven superior merit and those of inferior merit and consequently the object of recruiting the most meritorious candidates to the top-most All India Services is frustrated. 105. In addition to the above submission, reliance was placed on the dictum laid down in R. K. Dalmia v. Justice Tendolkar 1959 SCR 279 at pages 296-297 holding, "In order to pass the test of permissible classifications two conditions must be fulfilled, namely (i) that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and, (ii) that that differentia must have a rational relation to the object, sought to be achieved by the statute in question." 106. According to Mr. According to Mr. P. P. Rao, the recommendations of the Kothari Committee and the Estimates Committee are not enforceable proprio vigore and the executive authorities who are expected to act justly and reasonably, cannot usurp the functions of the Parliament and arbitrarily put a restriction through the impugned proviso which restriction is highly tainted with hostility and discrimination subjecting the candidates allocated and appointed to the IPS and Group 'A' services to a harassing and oppressive treatment. 107. Mr. Gopal Singh appearing for some of the appellants besides stating that he is adopting the submissions made by other learned counsel cited some decisions in support of his arguments that the discrimination now existing consequent upon the introduction of the second proviso offends Article 14 of the Constitution. 108. At the risk of repetition, it may be stated that under the present system of civil services, all candidates are selected through one common examination-preliminary and main and interview test. A list of selected candidates in the order of merit is published and thereafter the successful candidates are allocated to different services namely IAS, IFS, IPS Group 'A' and Group 'B' services based on their ranks and preferences. Of the candidates, IAS and IFS are top rankers in the merit list. 109. In the notification dated 13-12-1986 issued by the Ministry of Personnel, there were only 28 services/ posts of which the first three were IAS, IFS and IPS and of the remaining (iv) to (xviii) were Group 'A' services and (xix) to (xxviii) were Group 'B' services. In the list of Group 'A'services, items (xvii) and (xviii) were Grade II and III respectively. In notification dated 19-12-1987, there were in total 27 services/ posts of which the first three were the same and the services under (iv) to (xix) were Group 'A' services and (xx) to (xxvii) were Group 'B' services. In the nomenclature of Group 'A' and Group 'B' services, there was slight variation. in the subsequent notification issued on 17-12-1988, besides the first three services being the same, the total number of services in group 'A' was 16 and in Group 'B the number of services was reduced to 7. In 1989, the first three services remaining the same, there were 16 services under items (iv) to (xix) in Group 'A' services and 8 services/posts in Group 'B' Services under items (xx) to (xxvii). In 1989, the first three services remaining the same, there were 16 services under items (iv) to (xix) in Group 'A' services and 8 services/posts in Group 'B' Services under items (xx) to (xxvii). In the notification issued on Sth January 1991, the total services were reduced from 27 to 26 and items (i) to (iii) remaining the same, there were 16 Group 'A' services (iv to xix) and 7 services in Group 'B' (xx to xxvii). Thus, it is seen that there was inclusion or exclusion of one service or other besides the change of nomenclature in one or two services in the notifications for the CSE every year. 110. As envisaged in Rule 17, due consideration is given at the time of making appointments on the results of the examination to the preferences expressed by a candidate for various services at the time of his application and the said appointments will be governed by the rules/ regulations in force as applicable to the respective services at the time of appointment. As pointed out in detail in the preceding part of this judgment, under the first proviso to Rule 17, a candidate who has been approved and appointed to IPS or Central Services Group 'A'will be eligible to compete for appointment in services mentioned against that service in column No. 3 of the table given in the said rule. As per the second proviso appended to the said rule, a candidate who is appointed to a Central Service Group 'B' on the results of an earlier examination will be eligible to compete for IAS, IFS, IPS and Central Services Group 'A' and considered only for those appointments. The intent of the above proviso proceeds on the footing that all Central Services of Group 'A' stand on equal footing and likewise all Group 'B' services also stand on equal footing within their respective group of services/ posts and that there is no point in competing for any one of the services by a candidate within the same Group 'A'' or Group 'B' services as the case may be when he has already been allocated and appointed to one of those services in either of the groups to which he has been selected on his merit. 111. It cannot be disputed that the candidates allocated to Group 'A' services are more meritorious compared to candidates. allocated to Group 'B' services. 111. It cannot be disputed that the candidates allocated to Group 'A' services are more meritorious compared to candidates. allocated to Group 'B' services. Consequently, those allocated to Group 'B' services get lower position compared to those allocated to Group 'A' services. The pay scales in Group 'B' services are comparatively less than those meant for IAS, IFS and IPS and Central Services Group 'A'. There is a clear cut separation on the basis of ranking and merit and, therefore, it cannot be said by any stretch of imagination that both Group 'A' and Group 'B' services fall under one and the same category but on the other, these services are two distinct and separate categories falling under two different classifications. 112. The Additional Solicitor General refuting the arguments of Mr. P. P. Rao that there is a discrimination between Group 'A' and Group 'B' services, in that whilst an Under Secretary, selected in Group 'A' services, is not allowed to sit for examination by availing his third chance, a Section Officer coming, under Group 'B' services is permitted to sit for examination availing his chance without resigning from service, emphatically stated that this argument has no merit since in Group 'A' services, there is a vertical movement. The learned ASG further clarified that Group 'A' and Group 'B' services are two separate services, having different status, prospects, conditions of services and pay scales and both the services under the two groups are not similarly situated, besides the candidates in Group 'A' services standing in higher rank and merit. 113. The Tribunal after deeply considering the similar contention raised before it has concluded as follows: .".... We do not see any reasonable basis to urge that Group 'A' and Group 'B' Services should be treated at par. Even their pay scales and conditions of service are not the same as in the Group 'A' Services. It is, therefore, not a question of comparing these two services and placing them at par. In our opinion, there is no discrimination. It will be noticed that the alleged discrimination is not on the basis of religion, race, caste, sex, descent, place of birth, residence or any of them. The discrimination, if any, has a reasonable nexus with the objective for which it has been made. In our opinion, there is no discrimination. It will be noticed that the alleged discrimination is not on the basis of religion, race, caste, sex, descent, place of birth, residence or any of them. The discrimination, if any, has a reasonable nexus with the objective for which it has been made. The objective is to create five categories of Services consisting of IAS, IFS, IPS, Central Services Group 'A' and Central Services Group 'B'. We are further of the opinion that the Government having come across certain difficulties and problems in the matter of probationary training and the filling up of the vacancies in various services made these rules. We do not find the argument of discrimination between Group 'A' and Group 'B' Services to be valid. We, therefore, reject these arguments". 114. One other argument advanced on behalf of the appellants was that the candidates who have been allocated in Group 'A' services and whose training is postponed at their request have to lose their seniority whereas the candidates who have been appointed to Group 'B' services do not suffer such kind of disability and that they can even after their training retain their original seniority which they had at the time of initial selection. This serious setback suffered by a candidate selected in Group 'A' services, according to the counsel for the appellants, indicates that there is an apparent discrimination between the two sets of candidates. This contention of the appellants, according to ASG, cannot be countenanced because the services under Group 'A' and Group 'B' are different services and, therefore, the conditions of service of a particular service cannot be compared with other service especially when the services are not at par and more so when the other service, namely Group 'B' service is less in rank and merit to that of Group 'A'service. 115. In passing, all the learned counsel in assailing the validity of the impugned second proviso drew our attention to various Service Rules, such as Central Secretariat Service Rules, Indian Revenue Service Rules, 1988, Indian Customs and Central Excise Service Group 'A' Rules 1987, Department of Revenue (Customs Appraiser) Recruitment Rules. 115. In passing, all the learned counsel in assailing the validity of the impugned second proviso drew our attention to various Service Rules, such as Central Secretariat Service Rules, Indian Revenue Service Rules, 1988, Indian Customs and Central Excise Service Group 'A' Rules 1987, Department of Revenue (Customs Appraiser) Recruitment Rules. 1988, Indian Railway Personnel Service (Recruitment) Rules, 1975 and Delhi and Andaman and Nicobar Islands Civil Service Rules, 1971 - all made under Article 309 of the Constitution of India and attempted to show that various provisions of those rules relating to the recruitment and service conditions go in support of their submissions that there is a hostile discrimination between the candidates of Group 'A' services and Group 'B' services. In our considered opinion, this abortive attempt made by the learned counsel does not loom large and assume any significance in examining the broad aspect of the main issues involved and in testing the contitutionality of the said proviso. 116. Now, it necessarily follows whether the classification of these two services, one falling under Group 'A' and another falling. under Group 'B' are based on intelligible differentia. 117. The Constitution Bench of this Court in R. K. Dalmia's case ( AIR 1958 SC 538 ) (supra) after reiterating the legal principle enunciated by a Constitution Bench of Seven Judges of this Court in Budhan Choudhry v. State of Bihar, (1955) 1 SCR 1045 , has ruled thus: "It is now well established that while Article 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation." 118. Having regard to the objective in that case, it has been held: "In determining whether there is any intelligible differentia on the basis of which the petitioners and their companies have been grouped together it is permissible to look not only at the facts appearing in the notification but also the facts brought to the notice of the Court upon affidavits. The facts in the present case afford sufficient support to the presumption of constitutionality of the notification and the petitioners have failed to discharge the onus which was on them to prove that other people or companies similarly situated have been left out and that the petitioners and their companies have been singled out for discriminatory and hostile treatment." 119-120. The facts in the present case afford sufficient support to the presumption of constitutionality of the notification and the petitioners have failed to discharge the onus which was on them to prove that other people or companies similarly situated have been left out and that the petitioners and their companies have been singled out for discriminatory and hostile treatment." 119-120. In Kumari Chitra Ghosh v. Union of India, (1969) 2 SCC 228 , the facts were thus: The appellants filed a Writ Petition in the High Court challenging the authority of the Central Government to select candidates for certain reserved seats on the ground that they having secured 62.5 per cent marks would have got admission but for the reservation of seats which were filled by nominations by the Central Government. The High Court dismissed the Writ Petition as well as the Review Petition. Aggrieved by the judgment of the High Court, the appellants appealed to this Court. Grover, J. speaking for the Constitution Bench approved the dictum in R. K Dalmia's case ( AIR 1958 SC 538 ) (cited above) laying down the fulfilment of the two conditions as the test of permissible classification and held that the classification in that case was based on intelligible differentia, observing thus: "It is the Central Government which bears the financial burden of running the medical college. It is for it to lay down the criteria for eligibility. From the very nature of things it is not possible to throw the admission open to students from all over the country. The Government cannot be denied the right to decide from what sources the admission will be made. That essentially is a question of policy and depends inter alia on an overall assessment and survey of the requirements of residents of particular territories and other categories of persons for whom it is necessary to provide facilities for medical education. If the sources are properly classified whether on territorial, geographical or other reasonable basis it is not for the Courts to interfere with the manner and method of making the classification." 121. In the above case, the Court has distinguished the decision in Rajendran's case (AIR 68 SC 507) (referred to above). 122. If the sources are properly classified whether on territorial, geographical or other reasonable basis it is not for the Courts to interfere with the manner and method of making the classification." 121. In the above case, the Court has distinguished the decision in Rajendran's case (AIR 68 SC 507) (referred to above). 122. Y. V. Chandrachud, J. as he then was, speaking for the Constitution Bench in State of Jammu & Kashmir v. Triloki Nath Khosa, (1974) 1 SCR 771 in which it was contended on behalf of the State that it is always open to the Government to classify its employees so long as the classification is reasonable and has nexus with the object thereto, stated as follows: "Thus, it is no part of the appellants' burden to justify the classification or to establish its constitutionality. Formal education may not always produce excellence but a classification founded on variant educational qualifications is, for purposes of promotion to the post of an Executive Engineer, to say the least, not unjust on the fact of it and the onus therefore cannot shift from where it originally lay............................................................Classification is primarily for the legislature or for the statutory authority charged with the duty of framing the terms and 'Conditions of service; and if, looked at from the stand point of ' the authority making it, the classification is found to rest on a reasonable basis, it has to be upheld ............................................ Discrimination is the essence of classification and does violence to the constitutional guarantee of equality only if it rests on an unreasonable basis......... Equality is for equals. That is to say that those who are similarly circumstanced are entitled to an equal treatment..............Judicial scrutiny can therefore extend only to the consideration whether the classification rests on a reasonable basis whether it bears nexus with the object in view. It cannot extend to embarking upon a nice or mathematical evaluation of the basis of classification, for were such an inquiry permissible it would be open to the Courts to substitute their own judgment for that of the legislature or the rule-making authority on the need to classify or the desirability of achieving a particular object." 123. P. N. Bhagwati, J. and Krishna Iyer, J. have concurred with the view expressed by Chandrachud, J. though they have added some more concurring observations of their own. 124. P. N. Bhagwati, J. and Krishna Iyer, J. have concurred with the view expressed by Chandrachud, J. though they have added some more concurring observations of their own. 124. It will be apposite to recall an observation of this Court in A. S. Sangwan v. Union of India, 1980 Supp. SCC 559 at p. 561 reading as follows: "A policy once formulated is not good forever; it is perfectly within the competence of the Union of India to change it, rechange it, adjust it and readjust it according to the compulsions of circumstances and the imperatives of national considerations. We, cannot, as Court, give directives as to how the Defence Ministry should function except to state that the obligation not to act arbitrarily and to treat employees equally is binding on the Union of India because it functions under the Constitution and not over it ................ It is entirely within the reasonable discretion of the Union of India. It may stick to the earlier policy or give it up. But one imperative of the constitution implicit in Article 14 is that if it does change its policy, it must do so fairly and should not give the impression that it is acting by any ulterior criteria or arbitrarily." 125. See also Akhil Bhartiya Soshit Karamchari Sangh (Railway's) case ( AIR 1981 SC 298 ) (already referred to). 126. In Deepak Sibal v. Punjab University, (1989) 2 SCC 145 M. M. Dutt, J. speaking for the Court has held thus : "In order to consider the question as to the reasonableness of the classification, it is necessary to take into account the objective for such classification. If the objective be illogical, unfair and unjust, necessarily the classification will have to be held as unreasonable. Surrounding circumstances may be taken into consideration in support of the constitutionality of a law which is otherwise hostile or discriminatory in nature. But the circumstances must be such as to justify the discriminatory treatment or the classification sub-serving the object sought to be achieved. A classification by the identification of a source must not be arbitrary, but should be on a reasonable basis having a nexus with the object sought to be achieved by the rules for such admission. But the circumstances must be such as to justify the discriminatory treatment or the classification sub-serving the object sought to be achieved. A classification by the identification of a source must not be arbitrary, but should be on a reasonable basis having a nexus with the object sought to be achieved by the rules for such admission. A classification need not be made with mathematical precision but, if there be little or no difference between the person or things which have been grouped together and those left out of the group, the classification cannot be said to be a reasonable one..................................... It is true that a classification need not be made with mathematical precision but, if there be little or no difference between the persons or things which have been grouped together and those left out of the group, in that case, the classification cannot be said to be a reasonable one......................................................It is submitted that in making the classification, the surrounding circumstances may be taken into account.........................................It follows from the observation that surrounding circumstances may be taken into consideration in support of the constitutionality of a law which is otherwise hostile or discriminatory in nature. But the circumstances must be such as to justify the discriminatory treatment or the classification subserving the object sought to be achieved. In the instant case the circumstances which have been relied on by the respondents, namely, the possibility of production by them of bogus certificates and insecurity of their services are not, in our opinion, such circumstances as will justify the exclusion of the employees of private establishments from the evening classes." 127. What falls instantly for determination is whether the differentia on which the classification is sought to be made has a rational relation with the object to be achived. We have already discussed this question in detail when we have separately examined the question as to whether the second proviso is related to the purposes stated therein. 128. Whereas Mr. What falls instantly for determination is whether the differentia on which the classification is sought to be made has a rational relation with the object to be achived. We have already discussed this question in detail when we have separately examined the question as to whether the second proviso is related to the purposes stated therein. 128. Whereas Mr. Kapil Sibal has urged that it is always open to the Government to classify its employees as long as the classification is reasonable and has nexus to the object thereto, the rival contention is that there is no nexus between the classification and the object to be achieved thereby, that in fact the classification defeated that object, that if chances of sitting for examination are denied to a few with equals, there is inherent vice attached to such classification and that in such circumstances, the unreasonableness of the classification becomes patent. It is further urged on behalf of the appellants that this classification foments frustration amongst the selectees of group 'A' services and produces inefficiency by placing men of 1ower efficiency in a very advantageous position, Mr. P. P. Rao would urge that if there is a vertical movement in group 'A' services as stated by Mr. Kapil Sibal, how can candidates in group 'B' services be permitted to sit for examination of IAS, IFS and IPS by passing the meritorious candidates under group 'A' and therefore the classification is per se irrational, unjust and discriminatory and as such ultra vires Article 14. 129. We shall now bestow our judicious thought over this matter and carefully examine the rival contentions of the parties in the light of the guiding principles, lucidly laid down by this Court in a series of decisions, a few of which we have already referred to hereinbefore. The selections for IAS, IFS and IPS group 'A' services and group 'B' services are made by a combined competitive examination and viva voce test. There cannot therefore be any dispute that each service is a distinct and separate cadre, having its separate field of operation, with different status, prospects, pay scales, the nature of duties, the responsibilities to the post and conditions of service etc. There cannot therefore be any dispute that each service is a distinct and separate cadre, having its separate field of operation, with different status, prospects, pay scales, the nature of duties, the responsibilities to the post and conditions of service etc. Therefore, once a candidate is selected and appointed to a particular cadre, he cannot be allowed to say that he is at par with the others on the ground that all of them appeared and were selected by a combined competitive examination and viva voce test and that the qualifications prescribed are comparable. In our considered view, the classification of the present case is not based on artificial inequalities but is hedged within the salient features and truly founded on substantial differences. Judged from this point of view, it seems to us impossible to accept the submission that the classification rests on an unreal and unreasonable basis and that it is arbitrary or absurd. 130. In this connection, it may be noted that in fact the civil services in foreign countries too, such as United States of America, Great Britain, France and Canada grew up by degrees from time to time in tune with the concept of new ideas under the pressure of some necessity or influence of particular theories linked with the changing political ideology and social conditions and with a view to trimming the civil service scheme and this process of development is by way of evolution rather than revolution. 131. We may again hark back to the case of the appellants and examine whether this classification offends Articles 14 and 16 of the Constitution of India. 132. Article 14 declares that the State shall not deny to any person equality before the law or the equal protection of the law within the territory of India. The cherished principle underlying the above Article is that there should be no discrimination between one person and another if as regards the subject matter of the legislation, their position is the same. The cherished principle underlying the above Article is that there should be no discrimination between one person and another if as regards the subject matter of the legislation, their position is the same. (Vide Chiranjit Lal v. Union of India (1950) 1 SCR 869: AIR 1951 SC 41 ) or in other words its action must not be arbitrary, but must be based on some valid principle, which in itself must not be irrational or discriminatory (vide Kasturi v. State of J&K ( AIR 1980 SC 1992 ) (albeit) As ruled by this Court in Ameeroonissa v. Mahboob, 1953 SCR 404 (405): ( AIR 1953 SC 91 ) and Gopi Chand v. Delhi Administration, AIR 1959 SC 609 that differential treatment does not per se constitute violation of Article 14 and it denies equal protection only when there is no rational or reasonable basis for the differentiation. Thus Article 14 condemns discrimination and forbids class legislation but permits classification founded on intelligible differentia having a rational relationship with the object sought to be achieved by the Act/Rule/Regulation in question. The Government is legitimately empowered to frame rules of classification for securing the requisite standard of efficiency in services and the classification need not scientifically be perfect or logically complete. As observed by this Court more than once, every classification is likely in some degree to produce some inequality. 133. The provisions of Article 14 of the Constitution have come up for discussion before this Court in a number of cases but we feel that in the present case, it is not necessary to go in for any lengthy discussion as to the origin, meaning and the gradual development of the concept of principles and enlargement of the scope and effect of this Article. Suffice to mention a few decisions of this Court relating to the issue under consideration, namely- (1) Chiranjit Lal Chowdhury v. Union of India, ( AIR 1951 SC 41 ); (2) Budhan Choudhry v. State of Bihar, ( AIR 1955 SC 191 ); (3) R. K. Dalmia v. Justice Tendolkar, ( AIR 1958 SC 538 ) (all cited above); (4) E. P. Royappe v. State of Tamil Madu, (1974) 2 SCR 348 ; (5) Maneka Gandhi v. Union of India, (1978), 1 SCC 248; (6) Ramana v. International Airport Authority of India AIR 1979 SC 1628 ; (7) Union of India v. Tulsiram Patel, (1985) 3 SCC 398 ; (8) Swadeshi Cotton Mills v. Union of India, (1981) 2 SCR 533 ; and (9) Central Inland Water Transport Corporation v. Brojo Nath, AIR 1986 SC 1571 . 134. In Devadasan v. Union of India, (1964) 4 SCR 680 herein Subba Rao, J. as he then was, has dissented from the majority and pointed out that the expression "equality before the law or the equal protection of the laws" means equality among equals and that Article 14 does not provide for an absolute equality of treatment to all persons in utter disregard in every conceivable circumstance of the differences. 135. In Birendra Kumar Nigam v. Union of India (Writ Petition Nos. 220-222 of 1963 decided on 13-3-1964 (reported in 1964 SC (Notes) 70), three writ petitions were filed under Article 32 of the Constitution raising a common question regarding the constitutional validity of certain rules framed by the Union Ministry of Home Affairs and certain directions issued by it relative to the appearance of Assistants employed in the Central Secretariat Service in the competitive examination held by the Union Public Service Commission for recruitment to certain All India Services. In each of the above three petitions, grounds of challenge was same viz., at the impugned rules and directions were violative of Articles 14 and 16(1) of the Constitution. 136. The facts in relation to the three petitions were slightly different. Therefore, by way of illustration we will tersely state the facts in Writ Petition No. 220 of 1963. 137. The petitioner in that case was appointed to the post of an Assistant in the Central Secretariat Service from 1956 and he joined the same on 29-8-56. 136. The facts in relation to the three petitions were slightly different. Therefore, by way of illustration we will tersely state the facts in Writ Petition No. 220 of 1963. 137. The petitioner in that case was appointed to the post of an Assistant in the Central Secretariat Service from 1956 and he joined the same on 29-8-56. But in March of that year, he had already submitted his application to be included as a candidate for competing in the combined examination for the several All India Services - IAS, IFS, IPS and the several categories of the All India Central Services, the examination for which was held in September, 1956 but before,that date he received an information from the Home Ministry that he could not appear for that examination because he was still on probation. Prior to the date on which he completed his probation and was confirmed as an Assistant, the Ministry of Home Affairs issued the impugned notification on 14-3-1957 pointing out that there was an acute shortage of Grade IV Assistants in the Secretariat Service and that the Assistants would not be permitted to complete at the examination to be held in 1957 and that those who were desirous of competing, their candidature would be restricted to an appointment to Grade III of the Central Secretariat alone. 138. We are not giving the facts of other two writ petitions since the common question decided was the same. 139. Rajagopala Ayyangar, J. while speaking for the Constitution Bench in that case has held: "If, as must be, it is conceded that the exigencies, convenience, or necessity of a particular department might justify the imposition of a total ban on the employees in that department from seeking employment in other departments, a partial ban which permits them to seek only certain posts in the same department cannot be characterised as illegal as being discriminatory. The mere fact therefore that under the rules officers in certain other departments are permitted to compete for a Class I post is no ground by itself for considering such a variation as an unreasonable discrimination, violative of Articles 14 and 16(1) of the Constitution as not based on a classification having a rational and reasonable relation to the object to be attained. Of course, no rule imposes a ban on these employees resigning their posts and competing for posts in the open competition along with 'open market' candidates." 140. As we have repeatedly held that each of the civil services, namely IAS, IFS, IPS, Group 'A' Services and Group 'B' Services is a separate and determinate service forming a distinct cadre and that each of the services is founded on intelligible differentia which on rational grounds distinguishes persons grouped together from those left out and that "he differences are real and substantial having a rational and reasonable nexus to the objects sought to be achieved and that there is. no question of unfairness or arbitrariness in the executive action in adding the second proviso to the substantive Rule 4 of CSE Rules. When the submission of the learned counsel for the appellants is carefully examined in the backdrop of the legal principles and the factual position, we are in full agreement with the conclusion arrived at by the Tribunal that the impugned second -proviso to Rule 4 is not violative of Article 14 or 16 of the Constitution of India. In Summation: 141. The impugned second proviso to Rule 4 of the CSE Rules introduced by Notification No. 13016/4/86-AIS (1) dated 13-12-1986 is legally and constitutionally valid and sustainable in law and the said proviso neither travels beyond, the intent of the main rule 'namely, Rule 4 of the CSE Rules nor it is ultra vires Regulation 4 (iii-a) of Regulations, 1955, that it is neither arbitrary nor unreasonable and that there is a dynamic and rational nexus between the impugned second proviso and the object to be achieved. There is no discrimination whatsoever involved on account of the introduction of the second proviso in question and the said proviso is not ultra vires Article 14 or Article 16 of the Constitution of India. 142. Before parting with the judgment, we feel that it has become necessary to give a specific direction to the respondents inclusive of the Union Public Service Commission in pursuance of the earlier directions given in our order dated 7-12-1990 (Vide Annexure 'A), which directions were given in pursuance of various interim orders passed by the Central Administrative Tribunal, Principal Bench, New Delhi and thereafter finally in its final judgments dated 20-8-90, 4-10-90 and 5-10-90. For ready reference and to have a proper perspective, we would like to proliferate the following passage from our earlier order dated 7-12-1990: "Hence we permit all those candidates falling under Paras Nos. 5(ii), 6 and 7 to sit for the main examination subject to the condition that each candidate satisfies the Secretary, Union Public Service Commission that he/ she falls within these categories and that the concerned candidates have passed the preliminary examination of 1990 and have also applied for the main examination within the due date. This permission is only for the ensuing examination. As we are now permitting those who have passed the preliminary examination of 1990 and have applied for the main examination on the basis of the unquestioned and unchallenged directions given under paras 5(ii), 6 and 7 of the judgment of the CAT, Principal Bench, New Delhi, the same benefit is extended to the other appellants also who satisfy those conditions as mentioned under paras 5(ii), 6 and 7." 143. On the strength of the above order, we direct the respondents inclusive of the Union Public Service Commission that all those candidates who have appeared for the Civil Services (Main) Examination, 1990, pursuant to our permission given in the order dated 7-12-90 and who have come out successfully in the said examination and thereby have qualified themselves for the interview, that if those candidates completely and satisfactorily qualify themselves by getting through the written examinations as well as the interview shall be given proper allocation and appointment on the basis of their rank in the merit list, notwithstanding the restriction imposed by the second proviso and our present judgment upholding the validity of the said proviso since the respondents have not questioned and challenged the directions given by CAT, Principal Bench Delhi in paragraphs 5(ii), 6 and 6 of its judgment dated 20-8-1990. We would like to make it clear that the unchallenged directions given by the CAT in its judgment as well as directions given by us in our order dated 7-12-90 are not controlled by any rider in the sense that the said directions were subject to the result of the cases and hence those directions would be confined only to those candidates who appeared for CSE, 1990 and no further. The seniority of those successful candidates in CSE, 1990 would depend on the service to which they have qualified. The seniority of those successful candidates in CSE, 1990 would depend on the service to which they have qualified. The seniority of the left out candidates would be maintained in case they have joined the services to which they have been allocated on the result of previous CSE and such candidates will not be subjected to suffer loss of seniority as held by the CAT, Delhi in its judgment. 144. In the result, for the reasons aforementioned, the judgments of the Tribunal are confirmed subject to the above directions and all the appeals are dismissed accordingly. No order as to costs. Annexure 'A' ORDER:- We have heard all the learned counsel appearing in their respective appeals and also the learned Additional Solicitor for respondents for a very considerable length of time. The main thrust of the argument advanced on behalf of all the appellants is that the second proviso to Rule 4 of the Civil Services Examination Rules (published in the Gazette of India, Extraordinary, Part I Section, dated December 17, 1988) is offending Article 14 of the Constitution of India and is contrary to law. As the above question requires a careful examination with regard to the individual cases listed for consideration and as we are informed that the Central Services Examination commences on 17-12-1990, we are constrained to give the following directions on the basis of the conclusions arrived at by the Central Administrative Tribunal, Principal Bench, New Dehi in its judgment dated 20th August, 1990. The relevant conclusions as they appear from the concluding portion of the judgment of the Tribunal are as follows:- 5(ii). A candidate who has been allocated to the I.P.S. or to a Central Services, Group 'A' may be allowed to sit at the next Civil Service Examination, provided he is within the permissible age limit, without having to resign from the service to which he has been allocated, nor would he lose his original seniority in the service to which he is allocated if he is.unable to take training with his own Batch. 6. Those applicants who have been allocated to the I.P.S. or any Central Services, Group 'A', can have one more attempt in the subsequent Civil Services Examination for the services indicated in Rule 17 of the C.S.E. Rules. The Cadre Controlling Authorities can grant one opportunity to such candidates. 7. 6. Those applicants who have been allocated to the I.P.S. or any Central Services, Group 'A', can have one more attempt in the subsequent Civil Services Examination for the services indicated in Rule 17 of the C.S.E. Rules. The Cadre Controlling Authorities can grant one opportunity to such candidates. 7. All these candidates who have been allocated to any of the Central Services, Group 'A', or I.P.S. and who have appeared ,in Civil Services Main Examination, of a subsequent year under the interim orders of the Tribunal for the Civil Services Examination in 1988 or 1989 and have succeeded are to be given benefit of their success subject to the provisions of Rule 17 of the C.S.E. Rules. But this exemption will not be available for any subsequent Civil Services Examination. It is pertinent to note that the respondent has not challenged the above directions given in the concluding part of the judgment. So far as the conclusions under paras Nos. 6 and 7 reproduced above, the learned Additional Solicitor General states that the respondent has no objection to have them sustained. So far as the directions under para No 5(ii) are concerned, the Tribunal has allowed the candidates who have been allocated to the I.P.S. or the Central Services, Group 'A' to sit at the next Civil Service Examination subject to the condition that they must be within the permissible age limit and without having to resign from the service to which they have been allocated nor would they lose their original seniority in the service to which they are allocated if they are unable to take training with their own Batch. The Tribunal has used the expression "may be allowed to sit at the next Civil Service Examination but it did not restrict it only with regard to the preliminary examination as now contended by the learned Additional Solicitor, according to whom those candidates are not eligible to sit for the main examination since the Tribunal has upheld the validity of the second proviso to Rule 4 of the CSE Rules. In order to properly understand and appreciate the conclusions arrived at by the Tribunal under para 5(ii), we shall reproduce some interim orders made by the Tribunal during the hearing of the O.As. In M. P. No. 1269/ 90 in OA No. 1074/ 90 dated 31-5-1990 which has given rise to SLP (Civil) Nos. In order to properly understand and appreciate the conclusions arrived at by the Tribunal under para 5(ii), we shall reproduce some interim orders made by the Tribunal during the hearing of the O.As. In M. P. No. 1269/ 90 in OA No. 1074/ 90 dated 31-5-1990 which has given rise to SLP (Civil) Nos. 13525-38/ 90, the C.A.T., New Delhi has passed the following order:- "We have heard the learned counsel for the parties and considered the matter. In our opinion, a direction should be issued to the respondents to permit the applicants to appear in the Preliminary C.S.E. 1990 without pressing for their resignations from the service and respondents may also grant the necessary leave etc. This interim order will be subject to the order in O.A. 206/1989 and connected cases." Interim order passed on 4-6-1990 in Regn. No. OA/ 160/ 90 by CAT, New Delhi which has given rise to Civil Appeal No. 5470/90 reads thus:- "The learned counsel for the applicant states that the applicant has applied for the 1990 Civil Services Preliminary Examination well in time and has also received Roll Number from the Union Public Service Commission and that he is not being allowed to appear in the Examination in view of the power conferred by the second proviso to Rule 4 of the Civil Services Examination 1987. The examination is going to be held on 10-6-1990. In view of this, we direct that if it is convenient and administratively possible, the respondents shall allow the applicant provisionally to appear in the said examination. Respondents may also consider granting him necessary leave etc. for the purpose. Issue dasti." In M. P. No. 1251/90 in O.A. No. 944/ 1989 which has given rise to Civil Appeal No. 5471/ 90, CAT, New Delhi has passed the following order:- "We have heard learned counsel for the parties and we think it will be in the interest of justice to allow the prayer for interim order to enable the petitioner to sit in the preliminary C.S.E. 1990. Learned counsel for the petitioner states that the petitioner has received the admission card. He is directed to give the Registration No./ Roll No. to the Secretary, UPSC by 4-6-1990. We direct the respondents to permit the petitioner to appear in the preliminary C. S. E. 1990 without pressing for his resignation from the service and also grant him necessary leave etc. He is directed to give the Registration No./ Roll No. to the Secretary, UPSC by 4-6-1990. We direct the respondents to permit the petitioner to appear in the preliminary C. S. E. 1990 without pressing for his resignation from the service and also grant him necessary leave etc. for appearing in the allocated would not operate against them for said examination. This interim order will be subject to the order in OA 944/1989. The Misc. Petition is accordingly disposed of. Order dasti." In OA 913/90 (MP 1133 90) and OA No. 914/90 (MP 1134/90), which have given rise to Civil Appeals Nos. 5506-5525/90 the Tribunal has passed the following order on 17-5-1990:- "As regards interim relief, the respondents are directed to permit the applicants to appear in the Civil Services Examination 1990 and to provide necessary facilities like leave etc. to enable them to appear in the ensuing Civil Services Examination, 1990 subject to the decisions in the bunch of cases including (IA. No. 206/ 89 Alok Kumar v. U.0. I. List the matter on 29-5-1990. Orders (Dasti)". It seems no clarification has been sought for from the Tribunal by the respondents as to whether the expression "next Civil Service Examination" is confined only to the preliminary or whether it includes the main 'examination also. Though-some of the interim orders passed by the Tribunal which we have extracted above show that the said interim orders were passed permitting the candidates to sit for the preliminary Central Service Examination of 1990 subject to the decisions of the O.As, in the final judgment, no restriction is shown. In other words, the conclusion under para 5(ii) is not limited subject to any contingency, but on the other hand, it is absolute. Therefore, that expression in the absence ,of any specific restriction has to include both the preliminary as well as the main examinations. Hence in the absence of any challenge to the directions embodied in the impugned judgment, we hold that all those candidates falling under para No. 5(ii) can sit both for the preliminary as well as the main examinations subject to their eligibility otherwise. The condition incorporated in the later part of the impugned proviso that they should, resign from the service to which they have been allocated would not operate against them for the main examination of 1990 lest that direction would be meaningless. The condition incorporated in the later part of the impugned proviso that they should, resign from the service to which they have been allocated would not operate against them for the main examination of 1990 lest that direction would be meaningless. Hence we permit all those candidates falling under Paras. Nos. 5(ii), 6 and 7 to sit for the main examination subject to the condition that each candidate satisfies the Secretary, Union Public Service Commission that he/ she falls within these categories and that the concerned candidates have passed the preliminary examination of 1990 and have also applied for the main examination within the due date. This permission is only for the ensuing examination. As we are now permitting those who have passed the preliminary examination of 1990 and have applied for the main examination on the basis of the unquestioned and unchallenged directions given under paras 5(ii), 6 and 7 of the judgment of the CAT, Principal Bench, New Delhi, the same benefit is extended to the other appellants also who satisfy those conditions as mentioned under paras 5(ii), 6 and 7. The Secretary, Union Public Service Commission will make the necessary arrangements enabling the candidates to sit for the main examination of 1990. We will give the judgment touching on the constitutionality of the second proviso to Rule 4 of CSE Rules later. We would once again like to state that the above directions are given only on the basis of the unchallenged conclusions arrived at by the Central Administrative Tribunal, Principal Bench, New Delhi. Appeals dismissed.. For Citation : AIR 1992 SC 1