Rajkaran Singh vs Union Of India

2024 INSC 621 REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO(S). OF 2024 (Arising out of SLP(Civil) No(s). 30976 of 2017)

RAJKARAN SINGH & ORS. .…APPELLANT(S)

VERSUS

UNION OF INDIA & ORS. ….RESPONDENT(S)

JUDGMENT

Mehta, J.

1. Heard.

2. Leave granted.

3. The present appeal by special leave, is preferred on behalf of

the appellants, assailing the judgment dated 25th April, 2017

passed by the High Court of Delhi in Writ Petition (Civil) No. 3543

of 2017, dismissing the writ petition filed by the appellants and

upholding the judgment dated 4th October, 2016 passed by the

Central Administrative Tribunal, Principal Bench, New Delhi

(hereinafter being referred to as the ‘Tribunal’) in Original Signature Not Verified Digitally signed by geeta ahuja Date: 2024.08.22 17:11:17 IST Reason:

Application Nos. 60 of 2013 and 459 of 2013. The Tribunal had

1 rejected the appellants’ claim for benefits of the replacement scales

of the Revised Pay Rules, 2008 (hereinafter referred to as ‘RP

Rules’) in accordance with the 6th Pay Commission Report, with

effect from 1st January, 2006.

Brief facts: -

4. The facts in a nutshell, are that the appellants (Appellant No.

1 to Appellant No. 6) were appointed to manage the Compulsory

Saving Scheme Deposits (hereinafter referred to as SSD) Fund of

the Special Frontier Force (hereinafter referred to as SFF) in

various positions such as Junior Accountant, Accountant, Upper

Division Clerk (UDC), and Lower Division Clerk (LDC), on running

pay scales. The SSD Fund is a welfare initiative funded through

the personal contributions of the SFF troops from their salaries.

Upon having been engaged as above, the appellants also received

Traveling Allowance (TA), Dearness Allowance (DA), House Rent

Allowance (HRA), Special Security Allowance (SSA), Gratuity,

Bonus, Winter Allowance, and High-Altitude Allowance, etc. along

with salary as per the 4th and 5th Central Pay Commissions (‘CPC’).

5. On 1st January, 2006, the Union of India implemented the 6th

Central Pay Commission and made the same applicable to all

government employees of the SFF. However, these benefits were

2 not extended to the appellants i.e. SSD employees and instead, an

ad-hoc amount of Rs. 3,000/- per month was given to each of

them. For the sake of brevity, the details of the appellants with

reference to their appointments, retirement, length of service, and

their salaries in accordance with the different CPC are illustrated

in a tabular form below: -

Name of Appointment Post Date of Service Salary Salary the Date Retirement rendered paid paid after Appellant initially 2010

Rajkaran 1st January, Lower 31st August 37 years Rs. 220- As per the Singh (‘A1’) 1975 Division 2012 and 8 270 5th CPC Clerk months & Rs.

3,000/-

instead of 6th CPC

Jagat Ram 25th April, 1975 Lower 28th 37 years Rs. 220- As per the Joshi (‘A2’) Division February and 10 270 5th CPC Clerk 2013 months & Rs.

3,000/-

instead of 6th CPC

Vishu Dutt 2nd May, 1978 Lower 31st July 35 years Rs. 260- As per the Tripathi Division 2013 and 3 400 5th CPC (‘A3’) Clerk months & Rs. 3,000/- instead of 6th CPC

HK Naithani 27th Lower 31st August 35 years Rs. 260- As per the (‘A4’) November,1982 Division 2018 and 9 400 5th CPC Clerk months & Rs. 3,000/- instead of 6th CPC

3 Shiv Kumar 25th May, 2005 Junior 18th 8 years Rs. 5000- As per the (‘A5’) Accoun February and 9 8000 5th CPC tant 2014 (VRS) months & Rs. 3,000/- instead of 6th CPC

Surat 16th July, 1977 Lower 1st January 31 years Rs. 260- As per the Singh (‘A6’) Division 2009 (VRS) and 5 290 5th CPC Clerk months & Rs. 3,000/- instead of 6th CPC

6. Upon attaining the age of superannuation i.e., 60 years, the

appellants claimed pensionary benefits under the 6th Central Pay

Commission (‘CPC’). On 28th July, 2011, appellant No. 1 (Rajkaran

Singh) filed a representation to the respondent No. 1 seeking

pensionary benefits under the 6th CPC, however, the same was

rejected vide order dated 15th October, 2012, on the ground that

he was not a government employee and had not been appointed by

following any Recruitment Rules, and therefore, the Central Civil

Services (Pension) Rules, 1972(hereinafter being referred to as

‘CCS Rules’), would not apply to him. The other appellants

(appellant No. 2-appellant No. 6) also filed similar representations

to the respondents which met a similar fate on the same

reasoning.

4 7. Aggrieved by the rejection of their claim for pensionary

benefits under the 6th CPC, the appellants filed Original

Applications before the Tribunal, laying a challenge to the non-

implementation of the benefits of the 6th CPC and also raising a

grievance about the lack of General Provident Fund (GPF)

provisions in the SSD Fund, despite they having been appointed

to posts created under the authorisation of the Cabinet Secretariat

and after following the due process of law in making the

appointments.

8. The Tribunal, vide order dated 4th October, 2016 dismissed

the Original Applications and rejected the appellants' claims

holding that they were not employed in government service. The

Tribunal referred to Rule 2 of the CCS Rules, and held that the

appellants were not entitled to the benefits under the CCS Rules

as their salaries were neither paid from the Consolidated Fund of

India, the Contingent Fund or the Public Accounts Funds, nor

were their services governed by statutory obligations i.e. no

recruitment rules were applicable to them. The Tribunal further

held that the appellants were not recruited under an

advertisement issued where people at large were given the

opportunity of appearing; there was no question of any obligation

5 cast under the Factories Act for running the SSD Fund, as it was

not covered under the definition of a factory; and the services

performed were not statutory in nature because the SSD Fund is

a voluntary contribution made by the SFF employees. The Tribunal

found that the SSD Fund was financed by voluntary contributions

from SFF employees and hence the services rendered therein did

not qualify as government service.

9. The appellants challenged the Tribunal’s order by filing a writ

petition before the Delhi High Court which came to be rejected and

the Tribunal’s order was affirmed, taking note of the fact that the

appellants were appointed for the purpose of maintaining the SSD

Fund, a welfare scheme run through personal contributions made

by the troops of SFF. The High Court held that while the troops of

SFF, undoubtedly, are government servants, however, that by

itself would not clothe the appellants with the status of government

servants. The impugned order dated 25th April, 2017 passed by the

High Court is subjected to challenge in this appeal by special leave.

Submissions on behalf of the appellants: -

10. Ms. Neha Rathi, learned counsel representing the appellants,

vehemently and fervently contended that the appellants had

served the department for more than three decades to maintain 6 the accounts of the SSD Fund and therefore, not granting them

pensionary and other service benefits in accordance with the 6th

CPC on a surmise, that their employment was temporary/non-

governmental in nature, tantamounts to grossly arbitrary action,

violative of the fundamental rights of the appellants as guaranteed

under the Constitution of India.

11. Learned Counsel submitted that the appellants satisfy all the

characteristics of regular government servants, considering the

fact that they were appointed in a regular pay scale and received

increments and promotions at par with those being admitted to

other government employees, along with leave and other benefits

and emoluments. Additionally, they were granted the benefits of

Assured Career Progression (ACP).

12. Learned counsel further contended that the nature of the

work assigned to the appellants was similar to the work of the

regular employees of the Accounts Section of SFF HQ Estt. No.22.

Moreover, permanent employees of the SFF Accounts are also

working with the SSD Staff for maintaining the SSD Fund,

performing the same duties. Learned counsel submitted that

following the transfer of the SSD Funds Accounts to HQ SFF w.e.f.

1st April 2003, the SSD Funds are being managed by the Deputy

7 Director (AG) at HQ SFF, under the overall control of the Inspector

General of SFF. Consequently, the appellants’ services have been

brought within the jurisdiction of HQ SFF and fall under the aegis

of the Inspector General of SFF. It was further contended that for

all other purposes, the appellants have been treated at par with

regular employees of the Accounts Section, which places them at

same level with government employees. Therefore, the appellants

are entitled to receive the same benefits as the regular employees

of the Accounts Section and also to receive the pensionary as well

as consequential benefits flowing from the 6th CPC.

13. Learned counsel also submitted that the denial of pensionary

benefits to the SSD Fund staff, while granting the same to the SFF

personnel and other SFF Accounts staff, constitutes an arbitrary

and discriminatory decision, violating Article 14 of the

Constitution of India. The pensionary benefits were extended to

SFF personnel from 1st January, 2009 and to other SFF Accounts

staff employed through the same procedure at SSF HQ Estt. No.

22, under the Commandant's authority, from the onset of their

employment (initially temporary for six months). Despite being

part of the same establishment and governed by the same

Commandant, the appellants working at the SSD Fund were

8 unjustly excluded from these benefits. This differential treatment

lacks a reasonable basis and is discriminatory. Learned counsel

highlighted the comparative statement of benefits and allowances

granted to SSD Fund and SFF permanent employees as per the

following table:

Particulars SSD Staff SFF Permanent employees

Basic Pay Yes Yes

Dearness allowance Yes Yes

TA/DA (on deputation) Yes Yes

House Rent Allowance Yes Yes

Transport Allowance Yes Yes

Children Education Allowance No Yes

High Altitude Allowance Yes Yes

Winter Allowance Yes Yes

Ration Allowance Yes Yes

Special Security Allowance Yes Yes

Gratuity Yes Yes

Leave Encashment (Not paid at the time No Yes of retirement after 6th CPC)

Yearly Bonus Yes Yes

Yearly increments Yes Yes

LTC Yes Yes

ACR (till 6th CPC) Yes Yes

Maintenance of Service Book (till 6th CPC) Yes Yes

ACP for higher pay scale Yes Yes

Promotions Yes Yes

9 Member of SSD Provident Fund Yes Yes

Member of Group Insurance Policy Yes Yes

CGHS facility (at New Delhi) No Yes

Medical facility at Military Hospital Yes Yes

14. Learned counsel further contended that the responsibility to

devise a suitable scheme for the regularisation of employees who

have served for more than ten years lies with the respondents i.e.,

the State. She submitted that the respondent had rejected the

appellants’ representation on a purely arbitrary ground that they

were not appointed through a rigorous selection process and that

the CCS (Conduct) Rules, 1964 did not apply to them. She urged

that the appointment of the appellants was conducted under due

process of selection, following the rules of the Cabinet Secretariat,

and cannot be deemed irregular or illegal simply for the lack of

statutory recruitment and service rules. Learned counsel in this

regard placed reliance upon the decision of this Court in the case

of the State of Karnataka & Ors. v. M.L. Kesari & Ors1.

15. Learned counsel further submitted that the case of the

appellants is squarely covered by the principle of “equal pay for

equal work” and that the right of equal wages conferred upon

1 (2010) 9 SCC 247

10 temporary employees flows, inter alia, from Article 39 of the

Constitution of India. This principle of “equal pay for equal work”

expounded through various decisions of this Court constitutes the

law, which is binding upon all the Courts in India and

consequently upon the respondents. It also extends to temporary

employees performing the same duties and responsibilities as

regular employees. Learned counsel in this regard placed reliance

upon the decisions of this Court in the cases of Surinder Singh

and Another v. Engineer-in-Chief, C.P.W.D. and Another2,

State of Punjab & Ors. v. Jagjit Singh & Ors.3, Union of India

v. Dineshan K.K.4, and Randhir Singh v. Union of India &

Ors.5.

On these grounds, learned counsel for the appellants

implored the Court to accept the appeal, set aside the impugned

judgments and direct the respondents to release in favour of the

appellants, the benefits of the replacement scales set out in the RP

Rules issued in pursuance of the 6th CPC report with effect from

1st January, 2006.

2 (1986) 1 SCC 639 3 (2017) 1 SCC 148 4 (2008) 1 SCC 586 5 (1982) 1 SCC 618

11 Submissions on behalf of the Respondents: -

16. Mr. K.M. Nataraj, learned ASG, representing the

respondents, vehemently and fervently opposed the submissions

advanced by the learned counsel for the appellant. He submitted

that the SSD Fund is a welfare scheme, introduced with effect from

1st October 1964, for force personnel on the analogy of the Armed

Force Personnel Provident Fund to cater to their welfare measures.

It is a contributory fund subscribed by force personnel for their

better future and no government funds are involved in the SSD

Fund, thereby, establishing a clear alienation from the Central

government. The government has no control what to talk of deep

and pervasive control over the affairs of the fund.

17. Learned ASG further submitted that the appellants were

hired on a temporary basis to manage the SSD Fund, which is

generated from the difference between the interest earned on the

invested amount and the annual interest paid to subscribers. The

recruitment, selection, and promotion process for SSD Fund

employees (i.e. appellants) did not adhere to the procedures

applicable to regular Central government employees. Since the

appellants were hired temporarily, they were not subjected to

probation or given confirmation letters as permanent employees

12 and unlike Central government employees, there was no provision

for the annual evaluation of their performance. The terms of

engagement of these employees explicitly outlined their temporary

status and the associated conditions, including the potential for

termination without prior notice. This aligns with the fundamental

nature of their employment, which does not confer upon them, the

status or entitlements typically associated with regular

government employees.

18. Learned ASG also submitted that the appellants’ salaries,

which were finally increased by Rs. 3,000/- per month in

September 2009, are paid from the SSD Fund, which is

contributed by SFF personnel and involves no government money.

Furthermore, following the 4th and 5th CPC, the Government

examined and extended limited benefits thereof to the SSD Fund

employees (i.e., appellants), but with specific reference to maintain

the fund's objectives. These conditions include not comparing their

pay scales to those recommended by the 4th CPC in future

references and considering pay increments or Dearness Allowance

instalments on an ad hoc basis, when necessary. He urged that

the Commandant, SFF HQ Estt. No. 22, holds discretionary

authority over the SSD Fund in accordance with the Cabinet

13 Secretariat Order No. EA/EF-EST-13/75 dated 11th October,

1976. This order underscores the fact that the fixation of pay for

these employees is not mandated to adhere to scales applicable to

Central government employees.

19. Learned ASG further submitted that the claim of benefits

accorded under the 6th CPC and RP Rules relied upon by the

appellants is totally unfounded. These benefits are expressly

designed for and applicable exclusively to Central government

employees and do not extend to individuals engaged in roles akin

to those overseeing contributory schemes like the SSD Fund. While

certain benefits were extended to the fund employees post the 5th

CPC, the feasibility of aligning their compensation with the 6th CPC

was constrained by the financial limitations of the SSD Fund. Any

enhancements in pay, allowances, or promotions were dispensed

judiciously as welfare measures, guided by the operational

imperatives and financial health of the SSD Fund.

20. Learned counsel further submitted that the appellants'

entitlements, including any financial assistance and promotions,

were provided in consideration of their service and the prevailing

socio-economic conditions, and do not establish a precedent for

future claims. The respondents maintain that these distinctions

14 are essential to uphold the integrity and sustainability of the SSD

Fund, which operates independently of governmental

appropriations and is solely reliant on contributions from

subscribing SFF personnel.

On these grounds, the learned Additional Solicitor General

implored the Court to dismiss the appeal and affirm the impugned

judgments.

Discussion and Conclusion: -

21. We have given our thoughtful consideration to the

submissions advanced at a bar and have perused the impugned

judgments. With the assistance of learned counsel for the parties,

we have thoroughly examined the material available on record.

22. The core issue presented for adjudication by the Court is

whether the appellants herein, despite being classified as

temporary employees of a scheme managed by contributory

pooling of funds, can claim entitlement to pensionary benefits in

accordance with the 6th CPC.

23. To address this issue, we must first consider the legal

framework established by this Court in various landmark

decisions, particularly in Ajay Hasia and Others v. Khalid Mujib

15 Sehravardi and Others6 and Pradeep Kumar Biswas v. Indian

Institute of Chemical Biology and Others7. While Ajay

Hasia(supra) and Pradeep Kumar Biswas(supra) primarily dealt

with determining whether a corporation could be considered an

instrumentality of the state, the principles laid down therein

provide valuable guidance in assessing the nature of employee-

employer relationships. The relevant paragraphs of Ajay

Hasia(supra) are reproduced below: -

“7. …..If a corporation is found to be a mere agency or surrogate of the Government, “in fact owned by the Government, in truth controlled by the Government and in effect an incarnation of the Government”, the court, must not allow the enforcement of fundamental rights to be frustrated by taking the view that it is not the Government and therefore not subject to the constitutional limitations. We are clearly of the view that where a corporation is an instrumentality or agency of the Government, it must be held to be an “authority” within the meaning of Article 12 and hence subject to the same basic obligation to obey the Fundamental rights as the Government.

8. We may point out that this very question as to when a corporation can be regarded as an “authority” within the meaning of Article 12 arose for consideration before this Court in R.D. Shetty v. International Airport Authority of India[(1979) 3 SCC 489]….

The court then addressed itself to the question as to how to determine whether a corporation is acting as an instrumentality or agency of the Government and dealing with that question, observed:

“A corporation may be created in one of two ways. It may be either established by statute or incorporated under a law such as the Companies Act, 1956 or the Societies Registration Act, 1860. Where a corporation

6 (1981) 1 SCC 722 7 (2002) 5 SCC 111

16 is wholly controlled by Government not only in its policy-making but also in carrying out the functions entrusted to it by the law establishing it or by the charter of its incorporation, there can be no doubt that it would be an instrumentality or agency of Government. But ordinarily where a corporation is established by statute, it is autonomous in its working, subject only to a provision, often times made, that it shall be bound by any directions that may be issued from time to time by Government in respect of policy matters. So also a corporation incorporated under law is managed by a board of Directors or committees of management in accordance with the provisions of the statute under which it is incorporated. When does such a corporation become an instrumentality or agency of Government? Is the holding of the entire share capital of the Corporation by Government enough or is it necessary that in addition there should be a certain amount of direct control exercised by Government and, if so, what should be the nature of such control?

Should the functions which the corporation is charged to carry out possess any particular characteristic or feature, or is the nature of the functions immaterial? Now, one thing is clear that if the entire share capital of the corporation is held by Government, it would go a long way towards indicating that the corporation is an instrumentality or agency of Government. But, as is quite often the case, a corporation established by statute may have no shares or shareholders, in which case it would be a relevant factor to consider whether the administration is in the hands of a board of Directors appointed by Government though this consideration also may not be determinative, because even where the Directors are appointed by Government, they may be completely free from Governmental control in the discharge of their functions. What then are the tests to determine whether a corporation established by statute or incorporated under law is an instrumentality or agency of Government? It is not possible to formulate an all-inclusive or exhaustive test which would adequately answer this question. There is no cut and dried formula, which would provide the correct division of corporations into those

17 which are instrumentalities or agencies of Government and those which are not.” The court then proceeded to indicate the different tests, apart from ownership of the entire share capital: (SCC pp. 508 & 509, paras 15 & 16) “…..

……There is also another factor which may be regarded as having a bearing on this issue and it is whether the operation of the corporation is an important public function. It has been held in the United States in a number of cases that the concept of private action must yield to a conception of State action where public functions are being performed. Vide Arthur S. Miller: The Constitutional Law of the ‘Security State’ [5 10 Stanford Law Review 620, 644] …. It may be noted that besides the so-called traditional functions, the modern State operates a multitude of public enterprises and discharges a host of other public functions. If the functions of the corporation are of public importance and closely related to Governmental functions, it would be a relevant factor in classifying the corporation as an instrumentality or agency of Government. This is precisely what was pointed out by Mathew, J., in Sukhdev v. Bhagatram [(1975) 1 SCC 421] where the learned Judge said that ‘institutions engaged in matters of high public interest of performing public functions are by virtue of the nature of the functions performed Government agencies. Activities which are too fundamental to the society are by definition too important not to be considered Government functions'.” ….

These observations of the court in the International Airport Authority case have our full approval.

9. The tests for determining as to when a corporation can be said to be an instrumentality or agency of Government may now be culled out from the judgment in the International Airport Authority case…..We may summarise the relevant tests gathered from the decision in the International Airport Authority case as follows:

18

“(1) One thing is clear that if the entire share capital of the corporation is held by Government, it would go a long way towards indicating that the corporation is an instrumentality or agency of Government. (SCC p. 507, para 14) (2) Where the financial assistance of the State is so much as to meet almost entire expenditure of the corporation, it would afford some indication of the corporation being impregnated with Governmental character. (SCC p. 508, para 15) (3) It may also be a relevant factor … whether the corporation enjoys monopoly status which is State conferred or State protected. (SCC p. 508, para 15) (4) Existence of deep and pervasive State control may afford an indication that the corporation is a State agency or instrumentality. (SCC p. 508, para 15) (5) If the functions of the corporation are of public importance and closely related to Governmental functions, it would be a relevant factor in classifying the corporation as an instrumentality or agency of Government. (SCC p. 509, para 16) (6) ‘Specifically, if a department of Government is transferred to a corporation, it would be a strong factor supportive of this inference’ of the corporation being an instrumentality or agency of Government.” (SCC p. 510, para 18) If on a consideration of these relevant factors it is found that the corporation is an instrumentality or agency of Government, it would, as pointed out in the International Airport Authority case, be an “authority” and, therefore, ‘State’ within the meaning of the expression in Article 12.

….

11. We may point out that it is immaterial for this purpose whether the corporation is created by a statute or under a statute. The test is whether it is an instrumentality or agency of the Government and not as to how it is created. The inquiry has to be not as to how the juristic person is born but why it has been brought into existence. The corporation may be a statutory corporation created by a statute or it may be a government Company or a Company formed under the Companies Act, 1956 or it may be a society registered

19 under the Societies Registration Act, 1860 or any other similar statute. Whatever be its genetical origin, it would be an “authority” within the meaning of Article 12 if it is an instrumentality or agency of the Government and that would have to be decided on a proper assessment of the facts in the light of the relevant factors. The concept of instrumentality or agency of the Government is not limited to a corporation created by a statute but is equally applicable to a Company or society and in a given case it would have to be decided, on a consideration of the relevant factors, whether the Company or society is an instrumentality or agency of the Government so as to come within the meaning of the expression “authority” in Article

12.” (emphasis supplied)

24. This Court in Ajay Hasia(supra) established several tests to

determine whether an entity can be considered an instrumentality

or agency of the Government, and thus an "authority" under Article

12 of the Constitution of India. These tests include but are not

limited to ;

1. Extent of financial support from the government;

2. Deep and pervasive control of the government;

3. Functions performed are of public importance and

closely related to governmental functions;

4. Entity enjoys monopoly status conferred or protected by

the State;

5. The government department has been transferred to the

entity.

20

25. In Pradeep Kumar Bishwas(supra), this Court held that the

tests laid down in Ajay Hasia(supra) are relevant for the purpose

of determining whether an entity is an instrumentality or agency

of the State. Neither all the tests are required to be answered in

positive nor a positive answer to one or two tests would suffice. It

will depend upon a combination of one or more of the relevant

factors depending upon the essentiality and overwhelming nature

of such factors in identifying the real source of governing power, if

need be by removing the mask or piercing the veil disguising the

entity concerned.

26. The relevant paragraphs of Pradeep Kumar Biswas(supra)

are reproduced below: -

“98. We sum up our conclusions as under:

(1) Simply by holding a legal entity to be an instrumentality or agency of the State it does not necessarily become an authority within the meaning of “other authorities” in Article 12. To be an authority, the entity should have been created by a statute or under a statute and functioning with liability and obligations to the public. Further, the statute creating the entity should have vested that entity with power to make law or issue binding directions amounting to law within the meaning of Article 13(2) governing its relationship with other people or the affairs of other people — their rights, duties, liabilities or other legal relations. If created under a statute, then there must exist some other statute conferring on the entity such powers. In either case, it should have been entrusted with such functions as are governmental or closely associated therewith by being of public importance or being fundamental to the life of the people and hence governmental. Such authority would be the State, for, one who enjoys the powers or privileges of the State must also be subjected to limitations and obligations of the State. It is this strong statutory flavour and clear indicia of power —

21 constitutional or statutory, and its potential or capability to act to the detriment of fundamental rights of the people, which makes it an authority; though in a given case, depending on the facts and circumstances, an authority may also be found to be an instrumentality or agency of the State and to that extent they may overlap. Tests 1, 2 and 4 in Ajay Hasia [Ajay Hasia v.

Khalid Mujib Sehravardi, (1981) 1 SCC 722] enable determination of governmental ownership or control. Tests 3, 5 and 6 are “functional” tests. The propounder of the tests himself has used the words suggesting relevancy of those tests for finding out if an entity was instrumentality or agency of the State. Unfortunately thereafter the tests were considered relevant for testing if an authority is the State and this fallacy has occurred because of difference between “instrumentality and agency” of the State and an “authority” having been lost sight of sub silentio, unconsciously and undeliberated. In our opinion, and keeping in view the meaning which “authority” carries, the question whether an entity is an “authority” cannot be answered by applying Ajay Hasia [Ajay Hasia v. Khalid Mujib Sehravardi, (1981) 1 SCC 722] tests.

(2) The tests laid down in Ajay Hasia case [Ajay Hasia v. Khalid Mujib Sehravardi, (1981) 1 SCC 722] are relevant for the purpose of determining whether an entity is an instrumentality or agency of the State. Neither all the tests are required to be answered in the positive nor a positive answer to one or two tests would suffice. It will depend upon a combination of one or more of the relevant factors depending upon the essentiality and overwhelming nature of such factors in identifying the real source of governing power, if need be by removing the mask or piercing the veil disguising the entity concerned. When an entity has an independent legal existence, before it is held to be the State, the person alleging it to be so must satisfy the court of brooding presence of the Government or deep and pervasive control of the Government so as to hold it to be an instrumentality or agency of the State.” (emphasis supplied)

27. Applying these principles to the case at hand, we find

compelling evidence on record which establishes that the

appellants meet the characteristics of regular government

servants. Admittedly, the appellants were appointed on a regular

22 pay scale. This factor strongly indicates a formalised employee-

employer relationship akin to permanent government employees.

In Ajay Hasia(supra), this Court observed that the nature of

financial arrangements can indicate governmental character. The

use of government pay scales for the appellants suggests a level of

integration into the government's financial structure that goes

beyond typical temporary employment. During the course of their

service, the appellants received increments and promotions

comparable to those of other government employees. This pattern

of career progression mirrors that of regular government servants

and suggests a deep and pervasive governmental control over their

employment terms. In Ajay Hasia (supra), the degree of state

control was highlighted as a key factor for identifying State

instrumentalities. The chart(supra) provides positive evidence to

show that the appellants' career paths were managed like

permanent employees indicating a level of governmental oversight

and control consistent with regular government service.

Furthermore, the office order dated 12th March 2003, issued by the

Deputy Director (AG), which transferred the SSD Funds Accounts

to HQ SFF under the overall control of the Inspector General of

SFF, along with the associated documents and clerical staff,

23 demonstrates that administrative recognition of the appellants’

services was made which is integral to the governmental structure.

This transfer of the entire cadre of SSD Fund to the HQ SFF aimed

at ensuring better utilization and monitoring of the fund, fortifies

the concept that the appellants possessed the characteristics of

regular government servants.

28. The provisions of leave and other benefits, including grant of

Assured Career Progression (ACP), further reinforces the similarity

between the appellants' employment conditions and those of

regular government employees. These benefits are typically

associated with formalized, long-term employment relationships

within the government sector. The proceedings of the Board of

Officers dated 23rd June, 2006 unequivocally acknowledged that

the terms and conditions, including the pay and allowances

payable to SSD Fund staff, were fixed in March 1978 in accordance

with those applicable to the ministerial staff employed in the

Accounts Section of SSF HQ Estt. No. 22. The extension of Assured

Carrer Progression (ACP) and alignment of terms and conditions

with regular government employees, in particular, is an affirmative

action indicating that the government viewed and treated these

employees as long-term assets, despite their ostensibly temporary

24 status. Substantially, the appellants' charter of duties involving

the maintenance of accounts for the SSD Fund, can be considered

as an assignment of public importance closely related to

governmental functions. This aligns with another test laid down in Ajay Hasia(supra), which considers the public importance and

governmental nature of the functions performed. The management

of funds generated from the personal provident fund contributions

of the entire SFF cadre is a critical function that has a direct

bearing on the public interest and the effective operation of

government services.

29. Indisputably, the appellants have served SFF HQ Estt. No. 22

for over three decades. While the duration of service alone may not

be determinative, it is a significant factor when considered in

conjunction with the other aspects of their employment. Such

long-term service suggests a level of permanence and integration

into the governmental structure that belies their classification as

temporary employees. The appellants performed duties similar to

those of regular employees in the Accounts Section of SFF HQ Estt.

No.22. This similarity in job functions further blurs the line

between the appellants' status and that of regular government

employees, suggesting that the distinction may be more formal

25 than substantive. The extension of significant elements from the

4th and 5th CPC to the appellants further cements their plea of

being employed in governmental functions.

30. Learned ASG appearing for the respondents has argued that

the recruitment, selection, and promotion processes for SSD Fund

employees did not follow the procedures used for regular

employees and that the appellants were not subjected to probation

or given confirmation letters as permanent employees. However,

this Court finds such argument to be untenable as it fails to

account for the substantive nature of the appellants' employment

over an extended period running into three decades. In this regard,

reference may be made to the judgment of this Court in the case

of Vinod Kumar and Others v. Union of India8, wherein this

Court noted;

“5. Having heard the arguments of both the sides, this Court believes that the essence of employment and the rights thereof cannot be merely determined by the initial terms of appointment when the actual course of employment has evolved significantly over time. The continuous service of the appellants in the capacities of regular employees, performing duties indistinguishable from those in permanent posts, and their selection through a process that mirrors that of regular recruitment, constitute a substantive departure from the temporary and scheme- specific nature of their initial engagement. Moreover, the appellants' promotion process was conducted and overseen by a Departmental Promotional Committee and their sustained

8 2024 SCC OnLine SC 1533

26 service for more than 25 years without any indication of the temporary nature of their roles being reaffirmed or the duration of such temporary engagement being specified, merits a reconsideration of their employment status.

6. The application of the judgment in Uma Devi (supra) by the High Court does not fit squarely with the facts at hand, given the specific circumstances under which the appellants were employed and have continued their service. The reliance on procedural formalities at the outset cannot be used to perpetually deny substantive rights that have accrued over a considerable period through continuous service. Their promotion was based on a specific notification for vacancies and a subsequent circular, followed by a selection process involving written tests and interviews, which distinguishes their case from the appointments through back door entry as discussed in the case of Uma Devi (supra).

7. The judgment in the case Uma Devi (supra) also distinguished between “irregular” and “illegal” appointments underscoring the importance of considering certain appointments even if were not made strictly in accordance with the prescribed Rules and Procedure, cannot be said to have been made illegally if they had followed the procedures of regular appointments such as conduct of written examinations or interviews as in the present case. Paragraph 53 of the Uma Devi (supra) case is reproduced hereunder:

“53. One aspect needs to be clarified. There may be cases where irregular appointments (not illegal appointments) as explained in S.V. Narayanappa [(1967) 1 SCR 128], R.N. Nanjundappa [(1972) 1 SCC 409] and B.N. Nagarajan [(1979) 4 SCC 507] and referred to in para 15 above, of duly qualified persons in duly sanctioned vacant posts might have been made and the employees have continued to work for ten years or more but without the intervention of orders of the courts or of tribunals. The question of regularisation of the services of such employees may have to be considered on merits in the light of the principles settled by this Court in the cases above referred to and in the light of this judgment. In that context, the Union of India, the State Governments and their instrumentalities should take steps to regularise as a one-time measure, the services of such irregularly appointed, who have worked for ten years or more in duly sanctioned posts but not under cover

27 of orders of the courts or of tribunals and should further ensure that regular recruitments are undertaken to fill those vacant sanctioned posts that require to be filled up, in cases where temporary employees or daily wagers are being now employed. The process must be set in motion within six months from this date. We also clarify that regularisation, if any already made, but not sub judice, need not be reopened based on this judgment, but there should be no further bypassing of the constitutional requirement and regularising or making permanent, those not duly appointed as per the constitutional scheme.”

8. In light of the reasons recorded above, this Court finds merit in the appellants' arguments and holds that their service conditions, as evolved over time, warrant a reclassification from temporary to regular status. The failure to recognize the substantive nature of their roles and their continuous service akin to permanent employees runs counter to the principles of equity, fairness, and the intent behind employment regulations.” (emphasis supplied)

31. As held in Vinod Kumar(supra), "the essence of employment

and the rights thereof cannot be merely determined by the initial

terms of appointment when the actual course of employment has

evolved significantly over time."

32. This Court fully associates with this principle and finds it

wholly applicable in the present case, especially in light of the

administrative orders and Board proceedings referred to supra that

have consistently treated the appellants as equivalent to regular

government employees. The mere classification of employees as

'temporary' or 'permanent' is not merely a matter of nomenclature

28 but carries significant legal implications, particularly in terms of

service benefits and protections.

33. In the present case, the totality of circumstances indicates

that despite their formal classification as temporary employees,

the appellants' employment bears substantial hallmarks of regular

government service. The denial of pensionary benefits solely on the

basis of their temporary status, without due consideration of these

factors, appears to be an oversimplification of their employment

relationship with the government. This approach runs the risk of

creating a class of employees who, despite serving the government

for decades in a manner indistinguishable from regular employees,

are deprived of the benefits and protections typically accorded to

government servants.

34. Thus, we are of the opinion that the denial of pensionary

benefits to the appellants is not tenable or justifiable in the eyes of

law as the same is arbitrary and violates the fundamental rights

as guaranteed by Articles 14 and 16 of the Constitution of India. It

is indeed relevant to note that the appellants’ batch seems to be

the last in their genre of SSD Fund temporary employees and thus,

manifestly, the direction to extend the benefits of the 6th CPC and

29 the RP Rules to the appellants shall not form a precedent so as to

have a detrimental effect on the financial health of the SSD Fund.

35. In the wake of the discussion made hereinabove, we are of

the view that the impugned judgment rendered by the High Court

does not stand to scrutiny and the same is unsustainable in the

eyes of law and is set aside.

36. The respondents are directed to extend the benefits of the 6th

Central Pay Commission including the pensionary benefits under

the Revised Pay Scale Rules, 2008 to the appellants herein in the

same terms as are being afforded to their peers in the Accounts

Section of SFF HQ Estt. No. 22.

37. The appeal is allowed in these terms. No costs.

38. Pending application(s), if any, shall stand disposed of.

………………….……….J. (HIMA KOHLI)

………………………….J. (SANDEEP MEHTA) New Delhi;

August 22, 2024

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