Research › Search › Judgment

Himachal Pradesh High Court · body

2011 DIGILAW 1220 (HP)

A. N. Gupta v. State of Himachal Pradesh

2011-03-11

RAJIV SHARMA

body2011
JUDGMENT Rajiv Sharma, Judge. Since common questions of law and facts are involved in all these petitions, the same were taken up together for hearing and are being disposed of by a common judgment. 2. Material facts necessary for the adjudication of these petitions are that all the petitioners were appointed on temporary basis in the Animal Husbandry Department. Respondent-State took a conscious decision vide notification dated 14.9.1983 to transfer dairy development activities of Animal Husbandry Department in six districts ( Shimla, Mandi, Solan, Bilaspur, Sirmaur and Hamirpur) of Himachal Pradesh to the Himachal Pradesh State Cooperative Milk Producers Federation Limited. The State was pleased to enforce the following administrative arrangement in the public interest: 1. The Himachal Pradesh State Cooperative Milk procedures’’ Federation Ltd. hereinafter referred to as Milkfed will take over the staff and management of the existing Dairy Development Schemes in the 6 districts (Shimla, Mandi, Sirmour, Solan, Bilaspur and Hamirpur) of Himachal Pradesh. a. All property and assets vested in the Animal Husbandry Department in respect of the above Dairy Development Schemes as detailed at Annexure ‘B’ shall vest in the Milkfed provided that the State Government may by notification in the official gazette exclude from the operation of the provision of this clause such property or assets as may be specified in the notification. b. The said property and the assets including land, buildings, services like water and electrical installation, vehicles, fixtures, fittings, stores and spare parts, plants and Machinery, securities and advances, and all the office equipment etc. to be evaluated by the evaluation committee constituted separately for the purpose shall be transferred to the Federation on nominal annual lease of Rs. 100/- with effect from the actual date of switch over. 3. The services of all Government employees of the Animal Husbandry Department mentioned at Annexure ‘A’ shall be temporally placed at the disposal of the said Milkfed on deputation for a period of 6 months on terms and conditions governing at present till the Milkfed frames its own rules and regulations in respect of services of its employees which shall not be less advantageous than the terms and conditions application to them at present including provision for absorption in the services of the Milkfed of Government employees of Animal Husbandry Department. Provided that no deputation allowance will be given to the Government employees for the deputation period. 4. Provided that no deputation allowance will be given to the Government employees for the deputation period. 4. All licences/permits/registrations granted/made on behalf of the said schemes of the Animal Husbandry Department shall be deemed to have been granted/made on behalf of the H.P. State Cooperative Milk Producers Federation Ltd., and shall have effect accordingly. 5. This order will come into force on 2nd October, 1983” 3. The Director, Animal Husbandry, i.e. respondent No.2 issued notice of option to be exercised by the employees, who were serving in the Himachal Pradesh Animal Husbandry Department and were ready and willing to be absorbed in the Himachal Pradesh State Cooperative Milk Producers Federation Limited on 26.12.1983. Thereafter, petitioners were appointed vide letter 16.4.1984. Petitioners and similarly situate persons made representations for granting them pension. Case of petitioner No.1 was rejected by the respondent-State on 27.3.2001. The contents of letter dated 27.3.2001 reads thus: “I am directed to refer to your representation dated 3.7.2001, on the subject cited above and to say that your earlier representation dated 7.10.2000 was examined at Government level and it has been gathered that you were not confirmed employee at the time of your transfer to H.P. Milk Federation. Therefore, you are not entitled to pro-rata pension. You had rightly been allowed the benefit of terminal gratuity.” 4. The Himachal Pradesh State Cooperative Milk Producers Federation Limited also initiated the process for framing the Rules to govern the conditions of service of its employees. These Rules are called “H.P. State Cooperative Milk Producer’s Federation Limited Employees Service Rules, 1983”. These Rules were approved by the Registrar, Cooperative Societies only on 12.3.1985. 5. Mr. Vikas Bhardwaj has strenuously argued that the conditions of service of the petitioners and similarly situate persons were to be regulated on the basis of promise held out to them as per condition No.3 of notification dated 14.9.1983 and notice of option dated 26.12.1983. He also contended that as far as the employees of the erstwhile Himachal Government Transport were concerned, they were granted pension and gratuity on the basis of Annexure A-2 dated 22.8.1975. In other words, his submission is that in the present case also the petitioners are entitled to get pension to be paid by the State Government since there is no pension scheme in the respondent-federation on the basis of letter dated 22.8.1975. In other words, his submission is that in the present case also the petitioners are entitled to get pension to be paid by the State Government since there is no pension scheme in the respondent-federation on the basis of letter dated 22.8.1975. He also placed strong reliance on the judgment rendered by a Division Bench of this Court in CWP No. 1781/2002, tilted as Principal Secretary (AH) to the Government of H.P. andanotherversus Mohan Lal decided on 4.7.2008 and CWP No. 1635/2002, titled as State of H.P. and another versus Ramesh Chand and another, decided on 24.2.2009. He lastly contended that the case of the petitioners for pension has only been rejected on the ground that his clients were not confirmed at the time when they were absorbed in the Himachal Pradesh State Cooperative Milk Producers Federation Limited. During the course of arguments, Mr. Vikash Bhardwaj has given up his relief as far as vires of the rules is concerned and has only argued on the question of pensionary/retiral benefits of the petitioners on the basis of services rendered by the petitioner with the State Government in the Animal Husbandry Department followed by the services rendered in respondent-federation. 6. Mr. P.M. Negi has vehemently argued that once the petitioners have exercised their option as per letter dated 26.12.1983, they are estopped from claiming retiral benefits at par with the Government employees. He also argued on the basis of contents of the reply that petitioners have been given their terminal benefits at the time of their absorption and no right of pension was available to them unless or until they were confirmed employees of the Animal Husbandry Department. He also argued that the copy of the Rules of the Himachal Pradesh State Cooperative Milk Producers Federation Limited was supplied to the employees at the time of their absorption. 7. Mr. M.R. Verma, appearing on behalf of respondents No. 4 and 5, has argued on the basis of the reply filed that petitioners were well aware of the service rules of the respondent-federation and according to him, the Rules were framed in the year 1983 and the petitioners had opted for the service conditions of Himachal Pradesh State Cooperative Milk Producers Federation Limited with their eyes wide open. 8. I have heard the learned counsel for the parties and have perused the pleadings carefully. 9. 8. I have heard the learned counsel for the parties and have perused the pleadings carefully. 9. It is undisputed that the petitioners were temporary employees of the Himachal Pradesh Animal Husbandry Department. The State Government has taken a conscious decision and has evolved administrative arrangement, as per notification dated 14.9.1983 to transfer diary development activities in the 6 districts to Himachal Pradesh State Cooperative Milk Producers Federation Limited. It is abundantly clear from the plain language employed in condition No.3 of notification dated 14.9.1983 that the services of the Government employees of the Animal Husbandry Department were to be temporarily placed at the disposal of the Milk Federation on deputation for a period of 6 months on terms and conditions, governing at that time, till the Milk Federation framed its own rules and regulations in respect of the services of its employees, which were not to be less advantageous than the terms and conditions applicable to them at that time, including provision for absorption in the services of Milk Federation of Government employees of Animal Husbandry Department. Similarly, in the notice of option dated 26.12.1983, it was prescribed that the transfer of services to the Milk Federation will not amount to interruption of service and will not entail any loss of seniority previously held by the employees and the terms and conditions of service applicable to the employees after such transfer would be those applicable in the federation. It was mentioned, as per Annexure RA-1 that the appointment shall be subject to the service rules of the Milk Federation, as amended from time to time and the other conditions of the employees were to be governed by the Rules/Regulations as framed by the Milk Federation and made applicable from time to time and the existing salary was protected. 10. Now, as far as the question of exercising option is concerned, the respondents cannot be permitted to take advantage of their superior bargaining power. Petitioners and similarly situate persons had no option but to accept the terms and conditions as offered though contrary to express provisions of notification dated 14.9.1983 to earn their livelihood. In case they had not opted to unquestionable terms, they would have been out of employment. Such like unquestionable contracts have been declared to be violative of Articles 14 and 16 of the Constitution of India. 11. In case they had not opted to unquestionable terms, they would have been out of employment. Such like unquestionable contracts have been declared to be violative of Articles 14 and 16 of the Constitution of India. 11. Their Lordships of the Hon’ble Supreme Court of India in Central Inland Water Transport Corporation Limited and another versus Brojo Nath Ganguly and another, (1986) 3 SCC 156 have held as under: "81. It would appear from certain recent English cases that the Courts in that country have also begun to recognize the possibility of an unconscionable bargain which could be brought about by economic duress even between parties who may not in economic terms be situate differently (See, for instance, Occidental Worldwide Investment Corpn. V. Skibs A/S Avanti (1976), 1 Lloyd's Rep. 293, North Ocean Shipping Co. Lid. v. Hyundai Construction Co. Ltd. (1979) QB 705, Pao On v. Lau Yin Long (1980) AC 614 and Universe Tankships of Monrovia v. International Transport Workers Federation (1981) ICR 129, reversed in (1982) 2 WLR 803, and the commentary on these cases in Chitty on Contracts, Twenty-fifth Edition, Volume 1, paragraph 486). 82. Another jurisprudential concept of comparatively modern origin which has affected the law of contracts is the theory of distributive justice". According to this doctrine, distributive fairness and justice" in the possession of wealth and property can be achieved not only by taxation but also by regulatory control of private and contractual transactions. even though this might involve some sacrifice of individual liberty. In Lingappa Pochanna Appelwar v. State of Maharashtra, (1985) 1 SCC 479 : (AIR 1985 SC 389), this Court, while upholding the constitutionality of the Maharashtra Restoration of Lands to Scheduled Tribes Act 1974, said (at page 493) (of SCC) : (at p. 398 of AIR): "The present legislation is a typical illustration of the concept of distributive justice, as modern jurisprudents know it. Legislators, Judges and administrators are now familiar with the concept of distributive justice. Our Constitution permits and even directs the State to administer what may be termed distributive justice'. The concept of distributive justice in the sphere of law-making connotes, inter alia, the removal of economic inequalities and rectifying the injustice resulting from dealings or transactions between unequals in society. Legislators, Judges and administrators are now familiar with the concept of distributive justice. Our Constitution permits and even directs the State to administer what may be termed distributive justice'. The concept of distributive justice in the sphere of law-making connotes, inter alia, the removal of economic inequalities and rectifying the injustice resulting from dealings or transactions between unequals in society. Law should be used as an instrument of distributive justice to achieve a fair division of wealth among the members of society based upon the principle: 'From each according to his capacity, to each according to his needs'. Distributive justice comprehends more than achieving lessening of inequalities by differential taxation, giving debt relief or distribution of property owned by one to many who have none by imposing ceiling on holdings, both agricultural and urban, or by direct regulation of contractual transactions by forbidding certain transactions and, perhaps, by requiring others. It also means that those who have been deprived of their properties by unconscionable bargains should be restored their property. It also means that those who have been deprived of their properties by unconscionable bargains should be restored their property. All such laws may take the form of forced redistribution of wealth as a means of achieving a fair division of material resources among the members of society or there may be legislative control of unfair agreements." (Emphasis supplied) When our Constitution states that it is being enacted in order to give to all the citizens of India "JUSTICE social, economic and political", when clause (1) of Art. 38 of the Constitution directs the State to strive to promote the welfare of the people by securing and protecting as effectively as it may be social order in which social, economic and political justice shall inform all the institutions of the national life, when clause (2) of Art. 38 directs the State, in particular, to minimize the inequalities in income, not only amongst individuals but also amongst groups of people residing in different areas or engaged in different vocations, and when Art. 39 directs the State that it shall, in particular, direct its policy towards securing that the citizens, men and women equally, have the right to an adequate means of livelihood and that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment and that there should be equal pay for equal work for both men and women, it is the doctrine of distributive justice which is speaking through these words of the Constitution. 83. Yet another theory which has made its emergence in recent years in the sphere of the law of contracts is the test of reasonableness or fairness of a clause in a contract where there is inequality of bargaining power. Lord Denning M.R., appears to have been the propounder, and perhaps the originator - at least in England, of this theory. In Gillespie Brothers & Co. Ltd. v. Roy Bowles Transport Ltd., (1973) 1 QB 400. Where the question was whether an indemnity clause in a contract, on its true construction, relieved the indemnifier from liability arising to the indemnified from his own negligence, Lord Denning said (at pages 415-6) : "The time may come when this process of construing the contract can be pursued no further. The words are too clear to permit of it. Are the courts then powerless? The words are too clear to permit of it. Are the courts then powerless? Are they to permit the party to enforce his unreasonable clause, even when it is so unreasonable, or applied so unreasonably, as to unconscionable? When it gets to this point, I would say, as I said many years ago : "there is the vigilance of the common law which, while allowing freedom of contract, watches to see that it is not abused' : John Lee & Son (Grantham) Ltd. v. Railway Executive (1949) 2 All ER 581, 584. It will not allow a party to exempt himself from his liability at common law when it would be quite unconscionable for him to do so." (Emphasis supplied) In the above case the Court of Appeal negatived the defence of the indemnifier that the indemnity clause did not cover the negligence of the indemnified. It was in Lloyds Bank Ltd. v. Bundy, (1974) 3 All ER 757 that Lord Denning first clearly enunciated his theory of "inequality of bargaining power". He began his discussion on this part of the Me by stating (at page 763): "There are cases in our books in which the courts will set aside a contract, or a transfer of property, when the parties have not met on equal terms, when the one is so strong in bargaining power and the other so weak that, as a matter of common fairness, it is not right that the strong should be allowed to push the weak to the wall. Hitherto those exceptional cases have been treated each as a separate category in itself. But I think the time has come when we should seek to find a principle to unite them. I put on one side contracts or transactions which are voidable for fraud or misrepresentation or mistake. All those are governed by settled principles. I go only to those where there has been inequality of bargaining power, such as to merit the intervention of the Court." (Emphasis supplied) He then referred to various categories of cases and ultimately deduced therefrom a general principle in these words (at page 765) : "Gathering all together, I would suggest that through all these instances there runs a single thread. They rest on 'inequality of bargaining power'. They rest on 'inequality of bargaining power'. By virtue of it, the English law gives relief to one who, without independent advice, enters into a contract on terms which are very unfair or transfers property for a consideration which is grossly inadequate, when his bargaining power is grievously impaired by reason of his own needs or desires, or by his own ignorance or infirmity, coupled with undue influences or pressures brought to bear on him by or for the benefit of. the other. When I use the word 'undue' I do not mean to suggest that the principle depends on proof of any wrongdoing. The one who stipulates for an unfair advantage may be moved solely by his own self-interest, unconscious of the distress he is bringing to the other. I have also avoided any reference to the will of the one being 'dominated' or .overcome' by the other. One who is in extreme need may knowingly consent to a most improvident bargain, solely to relieve the straits in which he finds himself. Again, I do not mean to suggest that every transaction is saved by independent advice: But the absence of it may be fatal. With these explanations, I hope this principle will be found to reconcile the cases." (Emphasis supplied) 89. Should then our courts not advance with the times? Should they still continue to cling to outmoded concepts and outworn ideologies? Should we not adjust our thinking caps to match the fashion of the day? Should all jurisprudential development pass us by, leaving us floundering in the sloughs of nineteenth-century theories? Should the strong be permitted to push the weak to the wall? Should they be allowed to ride roughshod over the weak? Should the courts sit back and watch supinely while the strong trample under foot the rights of the weak? We have a Constitution for our country. Our judges are bound by their oath to "uphold the Constitution and the laws". The Constitution was enacted to secure to all the citizens of this country social and economic justice. Article 14 of the Constitution guarantees to all persons equality before the law and the equal protection of the laws. We have a Constitution for our country. Our judges are bound by their oath to "uphold the Constitution and the laws". The Constitution was enacted to secure to all the citizens of this country social and economic justice. Article 14 of the Constitution guarantees to all persons equality before the law and the equal protection of the laws. The principle deducible from the above discussions on this part of the case is in consonance with right and reason, intended to secure social and economic justice and conforms to the mandate of the great equality clause in Art. 14. This principle is that, the courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between parties who are not equal in bargaining power. It is difficult to give an exhaustive list of all bargains of this type. No court can visualize the different situations which can arise in the affairs of men. One can only attempt to give some illustrations. For instance, the above principle will apply where the inequality of bargaining power is the result of the great disparity in the economic strength of the contracting parties. It will apply where the inequality is the result of circumstances, whether of the creation of the parties or not. It will apply to situations in which the weaker party is in a position in which he can obtain goods or services or means of livelihood only upon the terms imposed by the stronger party or go without them. It will also apply where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of rules as part of the contract, however unfair, unreasonable and unconscionable a clause in that contract or form or rules may be. This principle, however, will not apply where the bargaining power of the. contracting parties is equal or almost equal. This principle may not apply where both parties are businessmen and the contract is a commercial transaction. This principle, however, will not apply where the bargaining power of the. contracting parties is equal or almost equal. This principle may not apply where both parties are businessmen and the contract is a commercial transaction. In today's complex world of giant corporations with their vast infra-structural organizations and with the State through its instrumentalities and agencies entering into almost every branch of industry and commerce, there can be myriad situations which result in unfair and unreasonable bargains between parties possessing wholly disproportionate and unequal bargaining power. These cases can neither be enumerated nor fully illustrated. The court must judge each case on its, own facts and circumstances. 91. Is a contract of the type mentioned above to be adjudged voidable or void? If it was induced by undue influence, then under section 19A of the Indian Contract Act, it would be voidable. It is, however, rarely that contracts of the types to which the principle formulated by us above applies are induced by undue influence as defined by S. 16(1) of the Contract Act, even though at times they are between parties one of whom holds a real or apparent authority over the other. In the vast majority of cases, however, such contracts are entered into by the weaker party under pressure of circumstances, generally economic, which results in inequality of bargaining power. Such contracts will not fall within the four corners of the definition of "undue influence" given in section 16(1). Further, the majority of such contracts are in a standard or prescribed form or consist of a set of rules. They are not contracts between individuals containing terms meant for those individuals alone. Contracts in prescribed or standard forms or which embody a set of rules as part of the contract are entered into by the party with superior bargaining power with a large number of persons who have far less bargaining power or no bargaining power at all. Such contracts which affect a large number of persons or a group or groups of persons, if they are unconscionable, unfair and unreasonable, are injurious to the public interest. To say that such a contract is only voidable would be to compel each person with whom the party with superior bargaining power had contracted to go to court to have the contract adjudged voidable. To say that such a contract is only voidable would be to compel each person with whom the party with superior bargaining power had contracted to go to court to have the contract adjudged voidable. This would only result in multiplicity of litigation which no court should encourage and would also not be in the public Interest. Such a contract or such a clause in a contract ought, therefore, to be adjudged void. While the law of contracts in England is mostly judge-made, the law of contracts in India is enacted in a statute, namely, the Indian Contract Act, 1872. In order that such a contract should be void, it must fall under one of the relevant sections of the Indian Contract Act. The only relevant provision in the Indian Contract Act which can apply is S. 23 when it states that "The consideration or object of an agreement is lawful, unless ... the court regards it as ......opposed to public policy." 92. The Contract Act does not define the expression "public policy" or "opposed to public policy". From the very nature of things, the expressions "public policy", "opposed to public policy", or "contrary to public policy" are incapable of precise definition. Public policy, however, is not the policy of a particular government. It connotes some matter which concerns the public good and the public interest. The concept of what is for the public good or in the public interest or what would be injurious or harmful to the public good or the public interest has varied from time to time. As new concepts take the place of old, transactions which, were once considered against public policy are now being upheld by the courts and similarly where there has been a well-recognized head of public, policy, -the courts have not shirked from extending it to new transactions and changed circumstances and have at times not even flinched from Inventing a new head of public policy. There are two schools of thought - "the narrow view" school and "the broad view" school. According to the former, courts cannot create new heads of public policy whereas the latter countenances judicial law-making in this area. The adherents of "the narrow view" school would not invalidate a contract on the ground of public policy unless that particular ground had been well established by authorities. According to the former, courts cannot create new heads of public policy whereas the latter countenances judicial law-making in this area. The adherents of "the narrow view" school would not invalidate a contract on the ground of public policy unless that particular ground had been well established by authorities. Hardly ever has the voice of the timorous spoken more clearly and loudly than in these words of Lord Davey in Janson v. Driefontein Consolidated Mines, Limited (1902) AC 484, 500, "Public policy is always an unsafe and treacherous ground for legal decision." That was in the year 1902. Seventy-eight years" earlier, Burrough, J., in Richardson v. Mellish (1824) 2 Bing 229, 252 SC 130 ER 294, 303, and (182434) All ER Reprint 258, 266. described public policy as "a very unruly horse, and when once you get astride it you never know where it will carry you." The Master of the Rolls, Lord Denning, however, was not a man to shy away from unmanageable horses and in words which' conjure up before our eyes the picture of the young Alexander the Great Taming Bucephalus, he said in Enderby Town Football Club Ltd. v. Football Association Ltd. (1971) Ch 591, 606, "With a good man in the saddle, the unruly horse can be kept in control. It can jump over obstacles." Had the timorous always held "the field, not only the doctrine of public policy but even the Common Law or the principles of Equity would never have evolved. Sir William Holdsworth in his "History of English Law", Volume III, page 55, has said : "In fact, a body of law like the common law, which has grown up gradually with the growth of the nation, necessarily acquires some fixed principles, and if it is to maintain these principles it must be able, on the ground of public policy or some other like ground, to suppress practices which, under ever new disguises, seek to weaken or negative them." It is thus clear that the principles. governing public policy must be and are capable, on proper occasion, of expansion or modification. Practices which were considered perfectly normal at one time have today become obnoxious and oppressive to public conscience. governing public policy must be and are capable, on proper occasion, of expansion or modification. Practices which were considered perfectly normal at one time have today become obnoxious and oppressive to public conscience. If there is no head of public policy which covers a case, then the court must in consonance with public conscience and in keeping with public good and public interest declare such practice to be opposed to public policy. Above all, in deciding any case which may not be covered by authority our courts have before them the beacon light of the Preamble to the Constitution. Lacking precedent, the court can always be guided by that light and the principles underlying the Fundamental Rights and the Directive Principles enshrined in our Constitution. 93. The normal rule of Common Law has been that a party who seeks to enforce an agreement which is opposed to public policy will be non-suited. The case of A. Schroeder Music Publishing Co. Ltd. v. Macaulay (1974 1 WLR 1308), however, establishes that where a contract is vitiated as being contrary to public policy, the party adversely affected by it can sue to have it declared void. The case may be different where the purpose of the contract is illegal or immoral. In Kedar Nath Motani v. Prahlad Rai (1960) 1 SCR 861 : (AIR 1960 SC 213) reversing the High Court and restoring the decree passed by the trial court declaring the appellants' title to the lands in suit and directing the respondents who were the appellants' benamidars to restore possession, this Court, after discussing the English and Indian law on the subject, said (at page 873) (of SCR) : (at Pp. 218-219 of AIR) : "The correct position in law, in our opinion, is that what one has to see is whether the illegality goes so much to the root of the matter that the plaintiff cannot bring his action without relying upon the illegal transaction into which he had entered. If the illegality be trivial or venial, as stated by Williston and the plaintiff is not required to rest his case upon that illegality, then public policy demands that the defendant should not be allowed to take advantage of the position. If the illegality be trivial or venial, as stated by Williston and the plaintiff is not required to rest his case upon that illegality, then public policy demands that the defendant should not be allowed to take advantage of the position. A strict view, of course, must be taken of the plaintiff's conduct, and he should not be allowed to circumvent the illegality by resorting to some subterfuge or by misstating the facts. It however, the matter is clear and the illegality is not required to be pleaded or proved as part of the cause of action and the plaintiff recanted before the illegal purpose was achieved, then, unless it be of such a gross nature as to outrage the conscience of the Court, the. plea of the defendant should not prevail." The types of contracts to which the principle formulated by us above applies are not contracts which are tainted with illegality but are contracts which contain terms which are so unfair and unreasonable that they shock the conscience of the court. They are opposed to public policy and require to be adjudged void. 94. We will now test the validity of R. 9(i) by applying to it the principle formulated above. Each of the contesting Respondents was in the service of the Rivers Steam Navigation Company Limited and on the said Scheme of Arrangement being sanctioned by the Calcutta High Court, he was offered employment in the Corporation which he had accepted. Even had these Respondents not liked to work for the Corporation, they had not much of a choice because all that they would have got was "all legitimate and legal compensation payable to them either under the Industrial Disputes Act or otherwise legally admissible". These Respondents were not covered by the Industrial Disputes Act for they were not workmen but were officers of the said company. It is, therefore, difficult to visualize what compensation they would have been entitled to get unless their contract of employment with their previous employers contained any provision in that behalf. So far as the original terms of employment with the Corporation are concerned, they are contained in the letters of appointment issued to the contesting Respondents. These letters of appointment are in a stereotype form. So far as the original terms of employment with the Corporation are concerned, they are contained in the letters of appointment issued to the contesting Respondents. These letters of appointment are in a stereotype form. Under these letters of appointment, the Corporation could without any previous notice terminate their service, if the Corporation is satisfied on medical evidence that the employee was unfit and was likely for a considerable time to continue to be unfit for the discharge of his duties. The Corporation could also 'without any previous notice dismiss either of than, if he was guilty of any insubordination, intemperance or other misconduct, or of any breach of any rules pertaining to his service or conduct or non-performance of his duties. The above terms are. followed by a set of terms under the heading "Other Conditions". One of these terms stated that "You shall be subject to the service rules and regulations including the conduct rules". Undoubtedly, the contesting Respondents accepted appointment with the Corporation upon these terms. They had, however, no real choice before them. Had they not accepted the appointments, they would have at the highest received some compensation which would have been probably meagre and would certainly have exposed themselves to the hazard of finding another job. 95. It was argued before us on behalf of the contesting Respondents that the term that these Respondents would be subject to the service rules and regulations including the conduct rules, since it came under the heading "Other Conditions" which followed the clauses which related to the termination of service, referred only to service rules and regulations other than those providing for termination of service and, therefore, Rule 9(i) did not apply to them. It is unnecessary to decide this question in the view which we are inclined to take with respect to the validity of Rule 9(i). 96. The said Rules as also the earlier rules of 1970 were accepted by the contesting Respondents without demur. Here again they had no real choice before them. They had risen higher in the hierarchy of the Corporation. If they had refused to accept the said Rules it would have resulted in termination of their services' and the consequent anxiety, harassment and uncertainty of finding alternative employment. 97. Here again they had no real choice before them. They had risen higher in the hierarchy of the Corporation. If they had refused to accept the said Rules it would have resulted in termination of their services' and the consequent anxiety, harassment and uncertainty of finding alternative employment. 97. Rule 9(i) confers upon the Corporation the power to terminate the service of a permanent employee by giving him three months' notice in writing or in lieu thereof to pay him the equivalent of three months' basic pay and dearness allowance. A similar regulation framed by the West Bengal State Electricity Board was described by this Court in West Bengal State Electricity Board v. Desh Bandhu Ghosh, (1985) 3 SCC 116: (AIR 1985 SC 722) (at page 118) (of SCC : (at p. 723 of AIR) as: "...a naked 'hire and fire' rule, the time for banishing which altogether from employer-employee relationship is fast approaching. Its only parallel is to be found in the Henry VIII clause so familiar to administrative lawyers." As all lawyers may not be familiar with administrative law, we may as well explain that "the Henry VIII clause" is a provision occasionally found in legislation conferring delegated legislative power, giving the delegate the power to amend the delegating Act in order to bring that Act into full operation or otherwise by Order to remove any difficulty, and at times giving power to modify the provisions of other Acts also. The Committee on Ministers' Powers in its report submitted in 1932 (Cmd. 4060) pointed out that such a provision had been nicknamed the Henry VIII clause" because "that King is regarded popularly as the impersonation of executive autocracy". The Committee's Report (at page 61) criticised these clauses as a temptation to slipshod work in the preparation of bills and recommended that such provisions should be used only where they were justified before Parliament on compelling grounds. Legislation enacted by Parliament in the United Kingdom after 1932 does not show that this recommendation had any particular effect. 98. No apter description of Rule 9(i) can be given than to call it "the Henry VIII Clause". It confers absolute and arbitrary power upon the Corporation. It does not even state who on behalf of the Corporation is to exercise that power. It was submitted on behalf of the Appellants that it would be the Board of Directors. 98. No apter description of Rule 9(i) can be given than to call it "the Henry VIII Clause". It confers absolute and arbitrary power upon the Corporation. It does not even state who on behalf of the Corporation is to exercise that power. It was submitted on behalf of the Appellants that it would be the Board of Directors. The impugned letters of termination, however, do not refer to any resolution or decision of the Board and even if they did, it would be irrelevant to the validity of Rule 9(i). There are no guidelines whatever laid down to indicate in what circumstances the power given by Rule 9(i) is to be exercised by the Corporation. No opportunity whatever of a hearing is at all to be afforded to the permanent employee whose service is being terminated in the exercise of this power. It was urged that the Board of Directors would not exercise. this power arbitrarily , or capriciously as it consists of responsible and highly placed persons. This submission ignores the fact that however highly placed a person may be, he must necessarily possess human frailties. It also overlooks the well-known saying of Lord Acton, which has now almost become a maxim, in the Appendix to his "Historical Essays and Studies", that " power tends to corrupt, and absolute power corrupts absolutely." As we have pointed out earlier, the said Rules provide for four different modes in which the services of a permanent employee can be terminated earlier than his attaining the age of superannuation, namely, R. 9(i), R. 9(ii), subcl. (iv) of Cl. (b) of R. 36 read with R. 38 and R. 37. Under R. 9(ii) the termination of service is to be on the ground of "services no longer required in the interest of the Company." Sub-cl. (iv) of Cl. (v) of R. 36 read with R. 38 provides for dismissal on the ground of misconduct. Rule 37 provides for, termination of service at any time without any notice if the employee is found guilty of any of the acts mentioned in that Rule. Rule 9(i) is the only Rule which does not state in what circumstances the power conferred by that Rule is to be exercised. Rule 37 provides for, termination of service at any time without any notice if the employee is found guilty of any of the acts mentioned in that Rule. Rule 9(i) is the only Rule which does not state in what circumstances the power conferred by that Rule is to be exercised. Thus, even where the Corporation could proceed under Rule 36 and dismiss an employee on the ground of misconduct after holding a regular disciplinary inquiry, it is free to resort instead to R. 9(i) in order to avoid the hustle of an inquiry. Rule 9(i) thus confers an absolute, arbitrary and unguided power upon the Corporation. It violates one of the two great rules of natural justice - the audi alteram partem rule. It is not only in cases to which Art. 14 applies that the rules of natural justice come into play. As pointed out in Union of India v. Tulsiram Patel, (1985) 3 SCC 398 (at page 46-3) : (AIR 1985 SC 1416 at p. 1451). "The principles of natural justice are not the creation of Art. 14. Art. 14 is not their begetter but their constitutional guardian." That case has traced in some detail the origin and development of the concept of principles of natural justice and of the audi alteram partem rule (at pages 463-480) (of (1985) 3 SCC : (at pp. 1451-1463 of AIR) They apply in diverse situations and not only to cases of State action. As pointed out by 0. Chinnappa, Reddy, J., in Swadeshi Cotton Mills v. Union of India, (1981) 2 SCR 533, 591 : (AIR 1981 SC 818, 846-47) they are implicit in every decision-making function, whether judicial or quasi-judicial or administrative. Undoubtedly, in certain circumstances the principles of natural justice can be modified and, in exceptional cases, can even be excluded as pointed out in Tulsiram Patel's case (AIR 1985 SC 1416). Rule 9(i), however, is not covered by any of the situations which would justify the total exclusion of the audi alteram partem rule.” 12. The State has to deal with its employees in a just and fair manner. They cannot be permitted to exploit its employees by forcing and coercing them to agree to something, which on the face of it, is violative of Articles 14, 16 and 21 of the Constitution of India as well as public policy. 13. The State has to deal with its employees in a just and fair manner. They cannot be permitted to exploit its employees by forcing and coercing them to agree to something, which on the face of it, is violative of Articles 14, 16 and 21 of the Constitution of India as well as public policy. 13. There is no merit in the contention of Mr. P.M. Negi, learned Deputy Advocate General and Mr. M.R. Verma that the petitioners were apprised of the service rules at the time of their absorption. Petitioners and similarly situate persons have been absorbed in the year 1984. H.P. State Cooperative Milk Producer’s Federation Limited Employees Service Rules, 1983 came into existence when the same were approved by the Registrar, Cooperative Societies on 12.3.1985. In view of this there was no occasion for the Milk Federation to bring to the notice of the petitioners and similarly situate persons the Rules governing their conditions of service when the Rules were approved by the Registrar, Cooperative Societies only on 12.3.1985. 14. Now, the Court will advert to the submission made by Mr. P.M. Negi and Mr. M.R. Verma that the petitioners could not be granted pensionary benefits since they were temporary employees. It is not in dispute that the petitioners though were appointed on temporary basis, became confirmed employees of the respondent-federation. It is also borne out from letter dated 27.3.2001 that the case of the petitioners and similarly situate persons for pension has been rejected only on the ground that they were not confirmed employees. This question is no more res integra in view of the judgment rendered by this Court in CWP No. 1781/2002, tilted as Principal Secretary (AH) to the Government of H.P. and another versus Mohan Lal decided on 4.7.2008 pertaining to the similarly situate employees, who were the employees of Animal Husbandry and were absorbed in the respondent-federation. The Division Bench of this Court after interpreting rules 13, 14 (3) and 37 of the Central Civil Services (Pension) Rules, 1965 and after considering circular dated 31.3.1982 and Appendix 11 of the Central Civil Services (Pension) Rules, 1965, came to the conclusion that even temporary service followed by absorption and substantive appointment in a Government Undertaking would entitle the employee to claim pension for the period he rendered services in the Government Department. The ratio of judgment CWP No. 1781/2002 was followed by the Division Bench of this Court in CWP No. 1635/2002. 15. Thus, the stand taken by the respondents in their replies, in the case in hand, that the petitioners could not be granted pension of pro-rata basis since they were not confirmed merits rejection. 16. The matter is required to be considered from another angle. A clear promise has been held out to the petitioners, as per condition No.3 of notification dated 14.9.1983 that the rules to be framed by the respondent-federation shall not be less advantageous than the terms and conditions applicable to them at present, including provision for absorption in the services of the respondent-federation of Government Employees of Animal Husbandry Department. In Animal Husbandry Department, petitioners were the holders of civil posts since they were serving under the State Government and they were entitled to pensionary/retiral benefits, including benefits under Articles 309 and 311 of the Constitution of India. When the petitioners were absorbed in respondent-federation, which had no scheme for pension, a promise that the terms and conditions of the petitioners shall not be less advantageous even if the respondent-federation frames its own rules, was held out by the Secretary, Animal Husbandry to the Government of Himachal Pradesh. However, promise held out in Annexure A-1 dated 14.9.1983 was diluted in condition No.5 of the notice of option dated 26.12.1983 and the appointment letters issued to the petitioners and similarly situate persons in the year 1994. The Court is of the considered view that this was not permissible under law. The petitioners have acted under the promise held out to them in letter dated 14.9.1983 and have changed their position to their detriment by getting absorbed in the respondent-federation. They were legitimately expecting at the time of their absorption that their service conditions, which were applicable in the State Government at the time, will be protected. 17. Their Lordships of the Hon’ble Supreme Court in Surya Narain Yadav and others versus Bihar State Electricity Board and others, (1985) 3 SCC 38 while dealing with the absorption of Trainee Engineers have held that the Board was bound to honour its representations and assurances and regularize the appointments of the trainees and the same could not be avoided on the ground of any rules to the contrary as the trainees formed a special class. Their Lordships have further held that statutory bodies are bound by representations made by them to their employees relying upon which the employees acted to their own prejudice. Their Lordships have held as under: “4. We have referred to these two documents out of several of them available on the record to show that the Board was aware of the position that these trainee engineers formed a special class and very peculiar circumstances warranted a definitely special treatment in regard to them. Yet it is unfortunate that a statutory body like the Board has failed to stand up to its representations made from time to time to a group of engineers who had spent years of their valuable life for qualifying themselves as engineers and who believing the representation of the Board and acting upon the same continued to remain in the employment of the Board as trainee engineers foregoing opportunities available to seek other employments and in the process have become age-barred for any public employment. This Court almost. a score of years back in clear language indicated in Union of India v. Indo-Afghan Agencies (1968) 2 SCR 366 : (AIR 1968 SC 718) (Para 23) : "Under our jurisprudence, the Government is not exempt from liability to carry out the representation made by it as to its future conduct and it cannot on some undefined and undisclosed ground of necessity or expediency fail to carry out the promise solemnly made by it, nor claim to be the judge of its own obligation to the citizen on an ex parte appraisement of the circumstances in which the obigation has arisen." Shah, J. as the learned Judge then was, quoted with approval what Chandrasekhara Aiyar, J. had said in Collector of Bombay v. Municipal Corporation (1952) 3 SCR 43 : (AIR 1951, SC 469) (Para 22) : "Whether it is the equity recognised in Ransden's case (1866 LR 1 HL129) or it is some other form of equity, is not of much importance. Courts must do justice by the promotion of honesty and good faith, as far as it lies in their power." The legal position was reiterated by this Court in Century Spinning & Manufacturing Co. Courts must do justice by the promotion of honesty and good faith, as far as it lies in their power." The legal position was reiterated by this Court in Century Spinning & Manufacturing Co. Ltd. v. Ulhasnagar Municipal Council (1970) 3 SCR 854 : (AIR 1971 SC 1021), where it was said (Paras 11 & 12) : "Public bodies are as much bound as private individuals to carry out representations of facts and promises made by them relying on which other persons have altered their position to their prejudice. The obligation arising against an individual out of his representation amounting to a promise may be enforced ex contractu by a person who acts upon the promise; when the law requires that a contract enforceable at law against a public body shall be in certain form or be executed in the manner prescribed by statute, the obligation may be, if the contract be not in that form, enforced against it in appropriate cases in equity ............" This Court added a pithy observation : "If our nascent democracy is to thrive different standards of conduct for the people and the public bodies cannot be permitted. A public body is, in our judgment, not exempt from liability to carry out its obligations arising out of representations made by it relying upon which a citizen has altered his position to his prejudice." In Motilal Padampat Sugar Mill Co. Ltd. v. State of Uttar Pradesh (1979) 2 SCC 409 : (AIR 1979 SC 621), this Court went ahead to state that the doctrine of promissory estoppel is not really based on the principle of estoppel, but it is a doctrine evolved by equity in order to prevent injustice and it can be, basis of a cause of action. 5. In our view, the principle relied upon in these cases has full application to the facts before us. The Board is a statutory authority and is 'State' within the meaning of Art. 12 of the Constitution. The Board has tried to seek shelter under a set of rules framed by it in exercise of the powers vested under S. 79 of the Electricity (Supply) Act of 1948. In the peculiar facts of the case we are of the view that the defence is illplaced and cannot hold as a shield against the application of the equitable doctrine. In the peculiar facts of the case we are of the view that the defence is illplaced and cannot hold as a shield against the application of the equitable doctrine. Admittedly, the trainee engineers before us formed a specific class and from time to time the Board treated them as members of a class and in its resolution of April 26, 1979, recognised this fact and swore to the position that such treatment should never be repeated even if apprentice engineers were appointed.” 18. In the instant case also, though the petitioners were Government employees, had opted for their absorption in the respondent-federation to their prejudice. They were given assurances, as per Annexure A-1 dated 14.9.1983 that the terms and conditions of their service shall not be less advantageous than the rules framed by the respondent-federation. Petitioners were also confirmed in the respondent-federation. 19. Mr. Vikas Bhardwaj has drawn the attention of this Court to Annexure A-2 dated 22.8.1975. It is clear from the contents of this letter that after formation of the Himachal Road Transport Corporation with effect from 2.10.1974, the employees of the erstwhile Himachal Government Transport were treated on foreign service with the Corporation. The question arose whether the employees, who had been sent on temporary service and had been absorbed, were entitled to pension and gratuity or not. The State Government on the basis of Government of India’s decision No.10 of Appendix-13 of Chaudhari’s Compilation of the Civil Service Regulations, Vol.II visualized that where a Government servant has opted to retain the service conditions as under Government, which provide for pensionary benefits and the corporation has no pension scheme on their side, it will be the liability of the Government to pay them pension but will recover the capitalized value (commuted value of pension plus the proportionate death-cum-retirement gratuity) of autonomous body’s share of pension from that body on the retirement of the individual concerned determined on the basis of service rendered with that body. In the instant case also, the petitioners had opted and have been given assurance that their terms and conditions will not be less advantageous than that of the State Government employees. In fact, the petitioners had given their options on the basis of express promise held out to them as per letter dated 14.9.1983 keeping in mind their service conditions, including pensionary/retiral benefits as well as. In fact, the petitioners had given their options on the basis of express promise held out to them as per letter dated 14.9.1983 keeping in mind their service conditions, including pensionary/retiral benefits as well as. The respondents have not denied that this decision was not taken by the State Government with regard to the employees of the Himachal Government Transport, who were treated on foreign service with the respondent-corporation and they were held entitled to pensionary benefits. In this case also, the promise was held out to the petitioners by the State Government. The decision taken by the State Government with regard to one set of employees should also be applicable to similar situate employees. In the case in hand, petitioners were also the employees of the Animal Husbandry Department and had been initially sent for 6 months on deputation, that too without deputation allowance, and thereafter they were absorbed in the respondent-federation. The respondent-federation has no pension scheme and in these circumstances, as per decision No. 10 of Appendix-13 of Chaudhari’s Compilation of the Civil Service Regulations, Vol.II, which has been made applicable to the employees of the erstwhile Himachal Government Transport was to be made applicable mutatis mutandi to the petitioners and similarly situate persons by granting them pension by the State Government. 20. Respondents cannot be permitted to treat equals as unquals. Respondent-State is a welfare State and is required to take welfare measures to grant pensionary benefits to the employees to mitigate their hardship in old age. Similarly, respondent-federation is also a State within the meaning of Article 12 of the Constitution of India and should have taken necessary steps to mitigate the hardship of the petitioners by taking their plea with the State Government. 21. Mr. P.M. Negi has also faintly argued towards the end of arguments that the petitions suffer from delay and laches. There is no merit in the contention raised by Mr. P.M. Negi. We are dealing with a case of pension, which is property within the meaning of Article 300-A of the Constitution of India. Petitioners get cause of action every month since they had been deprived of their valuable right of pensionary benefits. In other words, they had continuous cause of action. 22. The action of the respondents of not granting the pension to the petitioner is also arbitrary and unreasonable. Petitioners get cause of action every month since they had been deprived of their valuable right of pensionary benefits. In other words, they had continuous cause of action. 22. The action of the respondents of not granting the pension to the petitioner is also arbitrary and unreasonable. What is arbitrary has been explained succinctly by their Lordships of the Hon’ble Supreme Court in East Coast Railway and anotherversus Mahadev Appa Rao and others, (2010) 7 SCC 678 as under: “19. Black's Law Dictionary describes the term "arbitrary" in the following words: "1. Depending on individual discretion; specif., determined by a judge rather than by fixed rules, procedures, or law. 2. (Of a judicial decision) founded on prejudice or preference rather than on reason or fact. This type of decision is often termed arbitrary and capricious." 20. To the same effect is the meaning given to the expression "arbitrary" by Corpus Juris Secundum which explains the term in the following words: "ARBITRARY - Based alone upon one's will, and not upon any course of reasoning and exercise of judgment; bound by no law; capricious; exercised according to one's own will or caprice and therefore conveying a notion of a tendency to abuse possession of power; fixed or done capriciously or at pleasure, without adequate determining principle, nonrational, or not done or acting according to reason or judgment; not based upon actuality but beyond a reasonable extent; not founded in the nature of things; not governed by any fixed rules or standard; also, in a somewhat different sense, absolute in power, despotic, or tyrannical; harsh and unforbearing. When applied to acts, "arbitrary" has been held to connote a disregard of evidence or of the proper weight thereof; to express an idea opposed to administrative, executive, judicial, or legislative discretion; and to imply at least an element of bad faith, and has been compared with "willful". 21. There is no precise statutory or other definition of the term "arbitrary". In Kumari Shrilekha Vidyarthi and Ors. v. State of U.P. and Ors. (AIR 1991 SC 537), this Court explained that the true import of the expression "arbitrariness" is more easily visualized than precisely stated or defined and that whether or not an act is arbitrary would be determined on the facts and circumstances of a given case. In Kumari Shrilekha Vidyarthi and Ors. v. State of U.P. and Ors. (AIR 1991 SC 537), this Court explained that the true import of the expression "arbitrariness" is more easily visualized than precisely stated or defined and that whether or not an act is arbitrary would be determined on the facts and circumstances of a given case. This Court observed: "The meaning and true import of arbitrariness is more easily visualized than precisely stated or defined. The question, whether an impugned act is arbitrary or not, is ultimately to be answered on the facts and in the circumstances of a given case. An obvious test to apply is to see whether there is any discernible principle emerging from the impugned act and if so, does it satisfy the test of reasonableness. Where a mode is prescribed for doing an act and there is no impediment in following that procedure, performance of the act otherwise and in a manner which does not disclose any discernible principle which is reasonable, may itself attract the vice of arbitrariness. Every State action must be informed by reason and it follows that an act uninformed by reason, is arbitrary. Rule of law contemplates governance by laws and not by humour, whims or caprices of the men to whom the governance is entrusted for the time being. It is trite that `be you ever so high, the laws are above you'. This is what men in power must remember, always." 22. Dealing with the principle governing exercise of official power Prof. De Smith, Woolf & Jowell in their celebrated book on "Judicial Review of Administrative Action" emphasized how the decision-maker invested with the wide discretion is expected to exercise that discretion in accordance with the general principles governing exercise of power in a constitutional democracy unless of course the statute under which such power is exercisable indicates otherwise. One of the most fundamental principles of rule of law recognized in all democratic systems is that the power vested in any competent authority shall not be exercised arbitrarily and that the power is exercised that it does not lead to any unfair discrimination. The following passage from the above is in this regard apposite: "We have seen in a number of situations how the scope of an official power cannot be interpreted in isolation from general principles governing the exercise of power in a constitutional democracy. The following passage from the above is in this regard apposite: "We have seen in a number of situations how the scope of an official power cannot be interpreted in isolation from general principles governing the exercise of power in a constitutional democracy. The courts presume that these principles apply to the exercise of all powers and that even where the decision-maker is invested with wide discretion, that discretion is to be exercised in accordance with those principles unless Parliament clearly indicates otherwise. One such principle, the rule of law, contains within it a number of requirements such as the right of the individual to access to the law and that power should not be arbitrarily exercised. The rule of law above all rests upon the principle of legal certainty, which will be considered here, along with a principle which is partly but not wholly contained within the rule of law, namely, the principle of equality, or equal treatment without unfair discrimination." 23. Arbitrariness in the making of an order by an authority can manifest itself in different forms. Non-application of mind by the authority making the order is only one of them. Every order passed by a public authority must disclose due and proper application of mind by the person making the order. This may be evident from the order itself or the record contemporaneously maintained. Application of mind is best demonstrated by disclosure of mind by the authority making the order. And disclosure is best done by recording the reasons that led the authority to pass the order in question. Absence of reasons either in the order passed by the authority or in the record contemporaneously maintained is clearly suggestive of the order being arbitrary hence legally unsustainable.” 23. Accordingly, in view of the observations and discussions made hereinabove, all the petitions are allowed. Annexures A-7 and A-9 dated 23.7.2001 are quashed and set aside. Respondents No.1 and 2 are directed to pay and release the pension to the petitioners and similarly situate persons, alongwith interest @ 6% per annum, within a period of three months, after the production of certified copy of this judgment by either of the parties. No costs.