CASE NO.: Appeal (civil) 5781 of 1999 PETITIONER: STATE OF UTTAR PRADESH AND ANR. ETC. RESPONDENT: UNION OF INDIA AND ANR. ETC. ETC. DATE OF JUDGMENT: 04/02/2003 BENCH: SYED SHAH MOHAMMED QUADRI & <NAME> JUDGMENT:

JUDGMENT 2003 (1) SCR 785 The Judgment of the Court was delivered by <NAME>, J. The State of Uttar Pradesh and the <ORG> (referred to in this judgment as, 'the State') are in appeal against the common judgment of a Division Bench of <ORG> at Allahabad in Writ Petition No.l 15 of 1995 <CITATION> : and batch dated September 1, 1998.

The <ORG>, being of the opinion that the second respondent (The Manager, <ORG>, of the first respondent hereinafter collectively referred to as the '<ORG>') failed to file return of the turnover of the rentals collected from the subscribers for 'the transfer of right to use' the telephone system during the year 1988, under the provisions of the Uttar Pradesh Trade Tax Act. 1948 (for short, 'the U.P. Act '), called upon the '<ORG> to file return therefor. However, no return was filed by the <ORG>. The <ORG> assessed the tax payable by the <ORG> in exercise of the power conferred under sub-section (3) of Section 7 of the U.P. Act. The <ORG> challenged the validity of the orders of assessment in the writ petitions before <ORG> on various grounds. The <ORG> pleaded justification for passing the order of assessment in view of the extended definition of the expression 'Tax on the sale or purchase of goods' in clause 29-A** of Article 366 of the Constitution of India and the relevant provisions of the U.P. Act . <ORG>, by the impugned judgment and order, allowed the writ petitions taking the view that (i) the <ORG> (<ORG>) is not a 'dealer' within the meaning [Reported in  114 STC 288] By the Constitution (Forty-sixth Amendment) Act.1982] of the Act; (ii) Section 3-F of the Act applies to work contracts only and not to the rental charges collected by the <ORG>; (iii) there is no legislative competence in the <ORG> to levy Trade Tax in view of the fact that the <ORG> authorised imposition of service tax under the Finance Act , 1994 on the use of the telephone service by the subscribers; (iv) Article 285(1) of the Constitution of India prohibits the <ORG> from imposing any tax on the property of <ORG>; and (v) in providing telephone service through the <ORG>, <ORG> is discharging its sovereign function which cannot be subjected to trade tax.

Mr. <NAME>, the learned senior counsel appearing for the appellants- State, assailed the validity of the reasoning and conclusions of <ORG> on all the points, referred to above.

Mr. <NAME>, the learned Additional Solicitor General, appearing for the respondents-<ORG>, conceded in our view rightly, that he would not be supporting the judgment of <ORG> on the grounds (iv) and (v) mentioned above. But he contended, rather vehemently, that the <ORG> would not fall within the definition of 'dealer' under the U.P. Act and that the activity of providing telephone service would not answer the definition of 'the transfer of right to use the goods' and, therefore, <ORG> rightly quashed the impugned orders of assessment.

Mr. <NAME>, the learned senior counsel appearing for the intervenor contended that the contract of the subscribers with the <ORG> for installation of telephone was an indivisible contract for providing service which cannot be split into two separate contracts - one for transfer of the right to use any goods and the other for the service provided. He elaborated the contention by pointing out that under the Indian Telegraph Act , 1885 and the Rules made thereunder, no agreement can be spelt out to transfer the right to use any goods by the <ORG> to the subscriber. In any event, submitted the learned senior counsel, supply of goods, if any, was incidental to the performance of the contract of service. Relying on the decision of this Court in <CITATION> .  I SCC 472 he argued that such composite contracts are indivisible as the parties never contracted to sell/supply any goods; such incidental sale/supply, being merely concomitant of the performance of the service contracted for, would equally apply to a telephone service contract which incidentally involved supply of instrument. He further contended that in providing telephone service, it could not be said that the right to use the whole system of the telephone exchange was transferred as the possession and control of the whole system was being shared by all the subscribers and it remained in the possession and under the control of the <ORG>.

The short but question of substantial importance arises for consideration: can rentals collected by the <ORG> from the subscribers of telephone in the State, be assessed to tax under the U.P. Act ?

There can be. no dispute that Entry 54 of List II of the 7th Schedule to the Constitution of India authorises a <ORG> to impose tax on the sale or purchase of goods other than newspapers, subject of course, to the provisions only of Entry 92-A of List I which deals with taxes on sale or purchase of goods where such sale or purchase takes place in the course of inter-<ORG> trade or commerce. However, levy of tax on the sale or purchase of newspapers is not within the legislative competence of either the <ORG> or the <ORG>. The expression 'Tax on the sale or purchase of goods' is given extended meaning by inserting clause 29-A in Article 366 of the Constitution, which, to the extent relevant, reads as under :

"29 A. 'Tax on the sale or purchase of goods' includes -(a) to (c) xxx xxx xxx

(d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;

(e) to (f) xxx xxx xxx"

After insertion of the aforementioned clause in regard to tax on the sale or purchase of goods, the State Act s, including the U.P. Act , were amended to fall in line with the above definition.

The charging section in the U.P. Act is Section 3 , which, insofar as it is relevant for our purposes, is quoted here under :

" Section 3 - Liability to tax under the Act - (1) Subject to the provisions of this Act, every dealer shall for each assessment year, pay a tax at the rates provided by or under Section 3-A or Section 3-D on his turnover of sales or purchases or both, as the case may be. which shall be determined in such manner as may be prescribed."

The liability under Section 3 is on every dealer, for each assessment year, to pay a tax at the rates provided by or under various sections of the U.P. Act . Here, it would be useful to refer to Section 3-F which, inter alia, prescribes rate of tax on 'transfer of the right to use any goods':

"3-F. Tax on the right to use any goods or goods involved in the execution of works contract - (Notwithstanding anything contained in Section 3-A or Section 3-AAA or Section 3-D but subject to the provisions of Sections 14 and 15 of the Central Sales Tax Act, 1956, every dealer shall, for each assessment year, pay a tax on the net turnover of -

(a) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; or

(b) transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract, at such rate not exceeding [twenty per cent] as <ORG> may, by notification, declare and different rates may be declared for different goods or different classes of dealers.

(2) For the purposes of determining the net turnover referred to in sub- section (1), the following amounts shall be deducted from the total amount received or receivable by a dealer in respect of a -

(a) transfer referred to in clause (a) of sub-section (1) whether such transfer was agreed to during that assessment year or earlier. -

(i) to (iii) xxx xxx xxx (b) xxx xxx xxx"

A perusal of the provision, extracted above, shows that sub-section (1) of Section 3F commences with a non-obstante clause, excludes the operation of Section 3A , Section 3-AAA and Section 3-D but is subject to the provisions of Sections 14 and 15 of the Central Sales Tax Act, 1956. It imposes on every dealer, for each assessment year, the liability to pay a tax inter alia, on the net turnover of transfer of 'the right to use any goods', for any purpose, whether or not for a specified period, for cash, deferred payment or other valuable consideration at such rate, as may be prescribed by the State Substituted by U.P Act No 31 of 1985 w.e.f. 139 1985 Government. The prescribed rate cannot exceed twenty five per cent but the State Government may, by notification, declare different rates for different goods or different classes of dealers. The net turnover in respect of a transfer referred to in clause (a) of sub-section (1), has to be determined after making deductions enumerated in sub-section (2) read with Rule 44C of the Tax Rules, Unfortunately, <ORG> failed to notice Section 3F in its entirety and erred in confining it only to "goods involved in the execution of works contract'.

For understanding the true import of the aforementioned provisions, it would be appropriate to notice the definitions of the terms 'business', 'dealer', 'goods', and 'sale' defined in clauses (aa), (c), (d) and (h) respectively, of Section 2 of the U.P. Act, which read as under:

"(aa)'business'. in relation to business of buying or selling goods, includes -

(i) xxx xxx xxx

(ii) the execution of any works contract or the transfer of the right to use any goods for any purpose (whether or not for a specified period.

(iii) xxx xxx x.xx

but does not include any activity in the nature of mere service or profession which does not involve the purchase or sale of goods."

(c) 'dealer' means any person who carries on in Uttar Pradesh (whether regularly or otherwise) the business of buying, selling, supplying or distributing goods directly or indirectly, for cash or deferred payment or for commission, remuneration or other valuable consideration and includes -

(i) to (iii) xxx xxx xxx

(iv) a Government which, whether in the course' of business or otherwise buys, sells, supplies or- distributes goods, directly or otherwise for cash or for deferred payment or for commission, remuneration or other valuable consideration;

(v) every person who acts within the <ORG>, as an agent of a dealer residing outside the <ORG>, and buys, sells, supplies or distributes goods in the <ORG> or acts on behalf of such dealer as -

(a) a mercantile agent as defined in the Sale of Goods Act , 1930; or

(b) an agent for handling of goods or documents of title relating to goods; or

(c) an agent for the collection or the payment of the sale price of goods or as a guarantor for such collection or such payment;

(vi) a firm or a company or other body corporate, the principal office or headquarters whereof is outside the <ORG> having a branch or office in the <ORG>, in respect of purchases or sales, supplies or distribution of goods through such branch or office.

(vii) xxx xxx xxx

(viii)every person who carries on business of transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration.

Provided xxx xxx"

"(d) 'goods' means every kind or class of movable property and includes all material commodities and articles involved in the execution of a works contract, and growing crops, grass, trees and things attached to or fastened to anything permanently attached to the earth which under the contract of sale are agreed to be severed but does not include actionable claims, stocks, shares, securities or postal stationery sold by <ORG>."

"(h) 'sale' with its grammatical variations and cognate expressions, means any transfer of property in goods (otherwise than by way of a mortgage, hypothecation, charge or pledge) for cash or deferred payment or other valuable consideration, and include -

(i) to (iii) xxx xxx xxx

(iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration:"

Inasmuch as under Section 3 read with Section 3F of the U.P. Act the liability to pay tax, inter alia, on 'the transfer of the right to use any goods' at the specified rate is on a dealer, as defined in Section 2(c) thereof, extracted above, we shall examine the scope of the definition to ascertain - is the <ORG> a dealer?

The word 'dealer' means a person who (whether regularly or otherwise) carries on the business in U.P. and includes, inter alia, a government [sub-clause (iv)] which (whether in the course of business or otherwise) undertakes buying, selling, supplying or distributing goods directly or indirectly for cash or deferred payment or for commission, remuneration or other valuable consideration. Now it becomes necessary to look into the definition of 'buy' and 'sell'. The word 'buy' is not defined. It is an antonym of 'sell' and has to be construed accordingly in the light of the definition of 'sale' in clause (h), quoted above, It is an inclusive definition. It means any transfer of property in goods and includes among other transactions, a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. It is thus clear that in regard to a transfer of the right to use any goods both a person and a government will be within the ambit of the definition of 'dealer' subject to the following distinction: A person to be a 'dealer' should carry on the business of buying selling etc., whether regularly or otherwise, but a government which buys, sells etc. (whether in the course of business or otherwise) will be a 'dealer' for purposes of the U.P. Act . Inasmuch as the definition of 'sale' includes any transfer of property in the goods and a transfer of the right to use any goods for any purpose, the <ORG> which engages in transfer of right to use any goods will be a 'dealer' within the meaning of sub-clause

(iv) of clause (c) of Section 2 of the U.P. Act.

<CITATION> .,  Supp. SCC 201, this Court considered the meaning of Explanation II to Section 2 (d) of the Madhya Pradesh General Sales Tax Act, 1959, which was similar in terms to sub-clause (iv) of clause (c) of Section 2 of the U.P. Act and held: "The language of Explanation II shows that its purpose is to create a legal fiction, and that while under the main clause, for a person to be a dealer, he must carry on the business of buying, selling, supplying or distributing goods, even if <ORG> or <ORG> or any of their departments or offices does not carry on such business, if it buys, sells, supplies or distributes goods, it is to be deemed to be a dealer for the purposes of the M.P. Sales Tax Act, that is. for the purposes of the levy and collection of tax under M.P. Sales Tax Act. After the amendment of clause (d) by the 1971 Act, it is irrelevant for the purposes of the levy of tax under the M.P. Sales Tax Act whether <ORG> or <ORG> or any of their departments or offices have bought or sold goods in the course of business."

While so, by U.P. Act 31 of 1995, sub-clauses (vii) and (viii) which deal with 'person' were inserted in clause (c) of Section 2 with effect from September 3, 1985. Sub-Clause (vii) incorporates business of transfer of property in goods involved in the execution of a work contract and sub- clause (viii) incorporates business of transfer of the right to use any goods for any purpose.

In the present discussion, we are concerned with the effect of insertion of sub-clause (viii) in clause (c) of Section 2 on the aforementioned conclusion that the <ORG> is a 'dealer falling in sub-clause (iv) of the said clause. It was contended by the learned Additional Solicitor General that in sub-clause (iv) about 'a government,' it was not specifically provided as was done in sub-clause (viii) in regard to a person, that he must be carrying on the business of a transfer of the right to use any goods for any purpose; in the absence of those words in clause (iv), the <ORG>, even if it transferred a right to use any goods for any purpose for rentals, would not fall within the meaning of the term 'dealer'. He urged that every section, every clause and every word in a legislation should be given some meaning; it could not be presumed that the legislature carried out the exercise in futility in adding sub-clause (viii) to Section 2(c) . The intention of the legislature, it was submitted, in adding sub-clause (viii) to Section 2(c) was only to make it clear that 'a government' would not be a 'dealer' in regard to the extended meaning of 'sale' which included the transfer of a right to use any goods but only in regard to sale of goods in its traditional meaning. Mr. <NAME> countered that contention by inviting our attention to the Statement of Objects and Reasons of U.P. Act 31 of 1995 that the sub-clauses (vii) and (viii) were added in the definition of the term 'dealer' to remove difficulties in the assessment of tax in the transaction relating to transfer of a right to use any goods. The legislature, submitted the learned counsel, earlier amended the definition of 'sale' in Section 2(h) leaving the definition of 'dealer' static but later is was thought that ex abundanti cautela the definition of 'dealer' might also be amended like the definition of 'sale' and by U.P. Act No. 31 of 1995 a new package of amendments was introduced relating to the transfer of a right to use any goods by adding sub-clause (viii) to clause (c) of Section 2 . He argued that addition of sub-clause (viii) in the definition of 'dealer' did not mean that prior to 1995, in various Ordinances and the U.P. Act , having regard to the extended definition of 'sale', did not include a person or a government 'transferring the right to use any goods' within the meaning of 'dealer'. It was emphasised that if 'the <ORG>', whether in the course of business or otherwise, transferred a right to use any goods, it was covered by the definition of 'dealer' even before the 1995 amendment inserted sub-clause (viii) in clause (c) of Section 2 and that position continued even thereafter.

We are afraid, we cannot accede to the contentions of the learned Additional Solicitor General. After insertion of clause 29-A in Article 366 of the Constitution and consequential amendments of the term 'sale' in the U.P. Act , if 'sale' is construed in the sense it was understood before the said amendments, it will be a clear negation of the constitutional and statutory provisions, therefore, such a contention cannot be accepted. We have already held above that before insertion of sub-clause (viii) in Section 2(c) of the U.P. Act, the activity of a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration, fell within the meaning of 'sale' in clause (h) so the <ORG> while so doing could not but be a 'dealer' within the meaning of Section 2(c) of the U.P. Act. If that was the position before the enactment of U.P. Act 31 of 1 995 which inserted, inter alia, sub-clause (viii), then unless a contrary intention appears from the amended provisions, in our view, the pre-amendment position shall continue. Had the intention of the legislature been to change that position and exclude 'a government' from the definition of 'dealer' in regard to a transfer of the right to use the goods, it would have said so specifically. It follows that in view of the extended meaning of sale of goods, the <ORG> would continue to be within the ambit of a 'dealer' under the U.P. Act even in regard to transfer of a right to use any goods after insertion of sub- clause (viii) in clause (c) of Section 2 by U.P. Act 31 of 1995. We are, therefore, unable to uphold the reasoning of <ORG> that in view of amendment of Section 2(c) in 1995, adding sub-clause (viii). sub-clauses

(vi) had to be interpreted differently so as to exclude the <ORG> from the meaning of 'dealer' and also the contention of the learned Additional Solicitor General. In our view, insertion of sub-clauses (vi) and (vii) in clause (c) of Section 2 was, as submitted by Mr. <NAME>, by way of abundant caution. This is not an unusual feature of the legislation. As long back as in 1865 in <ORG> v. <ORG>, LR (1865) QB 84, Cockburn, <NAME> held:

"I am opinion that the objection raised by the respondents was untenable. I think the words inserted at the end of the definition in the interpretation clause, section 3 of the 8 Vict.c.20, were interested, as Mr. <NAME> argues, from excess of caution, in the apprehension that justices, if not warned of what the law is, might act although inserted; and the legislature thought that, if they did not actually include what would be virtually implied, it might be assumed that it was excluded."

In Re: Sir <NAME>. (1913) Appeal Cases 514, <ORG> observed:

"It is desirable to notice an argument derived from s.4 of 41 Geo.3,c.52, passed in 1801. This section disqualifies for a seat in <ORG> any one who makes a contract with a Commissioner of His Majesty's Treasury in Ireland or with any other person whomsoever for or on account of the public service in Ireland. This was surplusage (such is the argument) if the Act of 1782 had already made such contracts, irrespective of place, a ground of disqualification for <ORG>, since all persons disqualified for <ORG> were by s.l of the Act of 1801 already disabled from sitting in <ORG>, at all events for British constituencies. There are several answers to this contention. It is not a conclusive argument as to the construction of an earlier Act to say that unless it be construed in a particular way a later enactment would be surplusage. The later Act may have been designed, ex abundante cautela, to remove possible doubts."

To the same effects are the views expressed by this Court in <CITATION> ,  2 SCR 977:

"The operative portion of the section which confers power on the <ORG> to cancel a lease is unqualified and absolute and could not be abridged by reference to the non-obstante clause which was only inserted ex abundanti cautela with a view to repel a possible contention that the section does not by implication repeal statutes conferring rights on lessees."

And in <NAME> (dead) by Lrs. and <CITATION> .,  1 SCC 680. This Court held :

"It appears to us that the said paragraph was introduced by way of abundant caution to get over the possible objection raised on the basis of the decision in the case of <CITATION> , AIR (1970) Bom.

144. The said paragraph is merely declaratory of what the true legal position had always been even from the commencement of the Act. The introduction of an express provision to the above effect does not have the effect of altering the true legal position as explained by us above even without the aid of such express provision. This becomes further clear from the observations found in the decision of this Court in <CITATION> ,  3 SCC 391."

It may be that the same amount of precaution was not taken by the legislature in defining 'dealer' with respect to ' a government, in sub- clause (iv) as was done regarding 'a person' by inserting sub-clauses (vii) and (viii) in clause (c) of Section 2 ; but that, in our view, in the light of the above discussion, would hardly make any difference in construing the provisions of sub-clause (iv) of clause (c) in Section 2 of the U.P. Act.

Before taking up the other contentions we may conveniently dispose of a short point - ambit of the definition of the term 'goods' - quoted above. It is defined in very wide terms so as to bring in both tangible and intangible objects. It takes in its fold every kind or class of movables, including all material commodities and articles involved in the execution of a works contract and growing crops, grass, trees and things attached to or fastened to anything permanently attached to the earth which under the contract of sale are agreed to be severed but excluding actionable claims, stocks, shares, securities or postal stationery sold by <ORG>. According to the <ORG>, what is being supplied as service is a telephone connection with an instrument which is connected with permanent telephone lines laid up to the subscriber's place where the telephone system is installed and the same is connected with the exchange. Telephone instruments and other movables, including wiring, cable etc., are undoubtedly goods. However, the position of telephone exchange was not without demur on the ground that they were housed in immovable properties. That objection need not detain us because intangible object, like electricity which is generated in projects and transmitted through sub- stations, housed in buildings, has been held to be goods. <CITATION> ,  I SCC 200, a Bench of three learned Judges of this Court took the view that the electricity falls within the meaning of 'goods' under the Madhya Pradesh General Sales Tax Act, 1959. That view was affirmed in a recent judgment of a Constitution Bench of this Court in <ORG> v. <ORG> and <ORG>,  5 SCC 203 holding that electricity though an intangible object is [good] covered by Entry 54 of List II of Schedule VII to the Constitution as also Section 2(d) of the Central Sales Tax Act, 1956. <ORG> Wisconsin (U.S.A.) in <CITATION> , [152 Wis. 359; 140 N.W. 38; 1913 Wise. Lexis 77] held the view that the furnishing of telephone service might be classed as the supplying of a commodity constituting a subject of commerce. We, therefore, have no hesitation in holding that telephone connection and all other accessories which give access to the telephone exchange with or without instruments are 'goods' within the meaning of Section 2(d) of the U.P. Act.

The next question, that generated lengthy debates, is : Does the supply of telephone connection involve a transfer of the right to use any goods or amount to providing a service?

We have noticed above that the liability to pay tax under the U.P. Act is on every dealer on his turnover of sales of purchases; it is also concluded that telephone connection along with all accessories falls within the meaning of 'goods'; we have also opined that the definition of 'sale' in clause (h) of Section 2 is an inclusive definition and includes a transfer of the right to use any goods for any purpose.

It is necessary to notice here certain provisions governing supply of telephone connection provided by the <ORG> which alone has exclusive privilege and control. We have perused 'the General Rules Governing the Provision of Telephone Connections, Telex Connections and Accessories, Etc.' (for short, 'the general rules'). Rule 3 of the general rules says that all telephone connections and other similar services provided or authorised by the department shall, unless governed by a separate contract, be subject to the conditions set forth in the Indian Telegraph Rules. It further says that the Divisional Engineer shall install and, subject to observance of the Indian Telegraph Rules or the specific Hiring Contract by the subscriber, maintain in good working order the equipment and apparatus provided by the department and when necessary, substitute a different apparatus in accordance with departmental instructions issued from time to time. The Indian Telegraph Act , 1885 (for short, 'the ITA 1885') defines 'telegraph' to mean, any appliance, instrument, material or apparatus used or capable of use for transmission or reception of signs, signals writing images and sounds or intelligence of any nature by wire, visual or other electro-magnetic emissions, Radio waves or Herzian waves, galvanic, electric or magnetic means. Telegraph line' defined in Section 3(4) of the ITA 1885, means a wire or wires used for the purpose of a telegraph, with any casing, coating, tube or pipe enclosing the same, and any appliances and apparatus connected therewith for the purpose of fixing or insulating the same. <CITATION> .,  3 SCR 146, a Bench of three learned Judges held that 'Telegraph line, is comprehensive enough and means a wire or wires used for the purpose of an appliance or apparatus for receiving telegraphic or other communications by means of electricity, and it need not be a continuous physical channel from the point of transmission to the point of reception. A wireless transmitter transmits sound as electro-magnetic waves and the said waves are detected by the aerial and fed into the receiving apparatus by wires. So the wires of the aerial as well as of the apparatus are used for the purpose of the apparatus receiving communications. Thus, the receiving apparatus employs 'telegraph lines' within the meaning of Section 3(4) of the ITA 1885 Section 4 of the ITA 1885 declares that <ORG> shall have the exclusive privilege of establishing, maintaining and working telegraphs. <CITATION> ,  I SCR 148. this Court was inclined to approve that Section 4 applied to telephone. The same view is reiterated in <ORG> v. <ORG> and <ORG>,  2 SCC 405. Under Section 7 of the ITA 1885, <ORG> is empowered to make rules consistent with the Act for the conduct of all or any telegraphs, established, maintained or worked by the <ORG> or by persons licensed under this Act. Clause (e) thereof provides that the rules may also be framed in regard to the conditions and restrictions, subject to which any telegraph line, appliance or apparatus for telegraphic communication shall be established, maintained, worked, repaired, transferred, shifted, withdrawn or disconnected. Sections 20 and 21 make unauthorised use of telegraph an offence.

The Indian <ORG> Rules. 1951 (for short, 'the Rules') were framed in exercise of the power under Section 7 of the ITA 1885. Rules in Part-V thereof deal with telephones. Under the Rules, the subscribers are required to take care of the telephone apparatus and in the event of the apparatus, in the premises of the subscribers, being damaged or lost, they are obliged to pay the cost of replacing and repairing. Rule 413 says that all services will be subject to the said Rules. Rule 411 gives classification of the connections under various Heads. Rule 412 provides for supply and maintenance of equipment by <ORG>, <ORG>. The Rules also provide for disconnection of service in certain conditions. Rule 434 prescribes charges for various services, like installation and additional facilities, reconnection, transfer, shifting, etc. For 'Measured Rate System' bi-monthly rentals have to be paid by the subscriber at the prescribed rate as also the fees. Different rate is provided for 'Flat Rate System'. The Rules, referred to above, show complete control of the <ORG> in regard to all matters connected with the installation of the telephone by providing apparatus and matters connected therewith including the charges payable by the subscribers for the service provided. Rule 437 says that the rental for a period shall be payable before the commencement of that period. Rule 438 defined the term 'Rental periods' - Monthly, bi-monthly and annual rental periods shall commence from the first of a month or from such other day as the <ORG> Authority may fix: rentals for broken periods of a month shall be charged proportionately. Though calls whether local, STD or ISD are charged separately, rentals give allowance for certain number of free calls.

The case of the <ORG> is that in supplying instruments, accompaniments and the telephone connection to a subscriber, the <ORG> which is having exclusive privilege, is transferring the right to use those goods. The <ORG> maintains that it is providing a service which does not involve transfer of a right to use any goods and that by the Finance Act , 1997, the <ORG> has imposed service tax, as such the <ORG> cannot levy any tax under the U.P. Act . The <ORG>, however, did not dispute that providing a telephone to a subscriber was a service, but what was pressed was that in providing service, 'transfer of the right to use the instrument, appliance and the whole exchange system was involved'. Now, it is clear that when the <ORG> provides a telephone to a subscriber, it installs instrument, accessories and gives necessary connection which enables him to access the whole system to avail of the service by making out-going calls and receiving incoming calls whether local, STD or ISD and that is compendiously termed as 'service'.

The question whether a given activity is one of sale or service is a vexed question. The terminology employed to describe an activity as sale or service is not conclusive in itself. By calling sale as service or vice- versa, the substance of the transaction will not get altered. The question has to be determined by discerning the substance of the transaction in the context of the contract between the parties or in a case of statutory contract in the light of the relevant provisions of the Act and the Rules. If an activity or activities are comprehensively termed as 'service' but they answer the description of 'sale' within the meaning of a Statute, they can nonetheless be regarded sale for the purpose of that Statute. In other words, it is possible, an activity may be service for purposes of one Act and sale for purposes of another Act. It may also be that in a given case, on the facts of that case, a particular activity can be treated as 'service' but in a different fact situation the same could be sale under the same Statute. In M/s. Northern India Caterers (India) Ltd. v. it. Governor of Delhi, [1980] 2 SCC 167 the question that fell for consideration of <ORG> of this Court was, whether the service of meals to casual visitors in the restaurant was taxable as a 'sale', (i) when the charges were lump sum per meal or (ii) when they were calculated per dish? It was held that in both the above situations it would be 'service'. On an application filed to review the said judgment while dismissing the review petition it was observed that the judgment had rested on the factual foundation and must be understood in that light. Rejecting the contention that the respondent therein as well as the States were apprehensive that the judgment would be invoked by the restaurant-owners in cases where there was a sale of food and title in the food passes to the customers, as one which could not be reasonably entertained, it was held:

"Indeed, we have no hesitation in saying that where food is supplied in an eating-house or restaurant, and it is established upon the facts that the substance of the transactions, evidenced by its dominant object, is a sale of food and the rendering of services is merely incidental, the transaction would undoubtedly be exigible to sales tax."

The learned Additional Solicitor General in support of his contention submitted that the <ORG> was providing service so it is not liable to tax under the U.P. Act and invited our attention to the second part of the definition of the word 'business' in clause (aa) of Section 2 . The definition is extracted above. The word 'business' is defined in relation to business of buying or selling goods. The definition is in two parts. The first part includes among others transfer of the right to use any goods for any purpose (whether or not for a specified period). The second part which excludes any activity in the nature of mere service not involving purchase or sale of goods reads, "but does not include any activity in the nature of mere service or profession which does not involve the purchase or sale of goods." "It was argued that any activity in the nature of mere service or profession is excluded from the definition of the term 'business' and as the <ORG> is providing service, the same cannot be subjected to tax. In our view, the contention though attractive, is devoid of any substance. There are more answers than one to this contention. The first is that the definition of a 'dealer' takes in 'a <ORG>', when it sells, supplies, etc. whether in the course of business or otherwise. Therefore, it is not necessary that the activity of sale, etc. by the <ORG> should be in the course of business. Even assuming that the supply of the telephone to a subscriber, being, a service, falls outside the meaning of the term 'business', the <ORG> would nonetheless be liable to pay tax under the U.P. Act as a 'dealer' for the simple reason of transferring the right to use the telephone instrument/apparatus and the whole system as that falls within the extended meaning of 'sale' under clause (h) of Section 2 of the U.P. Act. And the second is, only such service is excluded from the definition of the term 'business' which does not involve the purchase or sale of goods. In the instant case, it cannot be legitimately disputed that the service involves installation of instrument and access to the exchange and telephone system as a whole which has been found to fall within the meaning of the term 'sale'. Therefore, the second part of the definition of the term business is of no help to the <ORG>.

It was then urged that in providing telephone service by the <ORG>, installation of instrument/apparatus and appliances is insignificant and in many cases subscribers themselves have their own instruments; the more important part is access to the area exchange and the whole system connected thereto without which the installation is of no consequence and the same remains under the possession and full control of the <ORG> so there was no transfer of the right to use any goods so as to attract liability under the U.P. Act . We are not persuaded to accept this submission. It is true that under the Rules, referred to above, as service, a number is allotted, an instrument/ apparatus and other appliances are installed at the premises of a subscriber and the same are connected with the area exchange to enable him to have access to the whole system, to dial and to receive calls. In our view, it makes no difference whether any subscriber replaces instruments of the <ORG> with his own instrument because the most important thing is the connection of the subscriber's telephone number with the area exchange and that was provided by the <ORG>. Insofar as the contention of giving possession or control of the whole system of <ORG> is concerned, which is said to comprise mostly of immovable property, it needs to be borne in mind that handing over of the possession is not sine qua non completing the transfer of the right to use any goods. It was so held by a Constitution Bench of this Court in 20th Century Finance Corporation Ltd. and Am: v. <NAME> of <ORG>,  6 SCC 12. A 'transfer of the right to use any goods' will be complete according to the law laid down by the majority in that case, on completion of the contract to transfer of the right to use the goods. The contention that the area telephone exchanges and other systems would remain under the control of the <ORG>, are irrelevant to complete such a transfer. Even otherwise, after installation of the instrument and other appliances, once the <ORG> connects the telephone line of the assigned number of the subscriber to the area exchange, access to other telephones is established. There cannot be denial of the fact that giving such an access would complete the transfer of the right to use the goods. However, reliance is placed on the decision of <ORG> of Andhra Pradesh in <CITATION> ,  77 STC 182 which was affirmed by this Court in <CITATION> .,  126 STC 114. It is unnecessary to deal with these cases in any detail; suffice it to say, in that case there was a finding of fact that the transaction did not involve transfer of the right to use the machinery in favour of contractors and that determined the issue.

It may be mentioned that during the relevant period (1988) no service tax was enforced. It was in 1994 that service tax was levied for the first time as per Chapter V of the Finance Act, 1994. Section 66 thereof created charge of service tax in regard to taxable services. 'Service tax' is defined in clause (34) of Section 65 to mean tax chargeable under the provisions of that Chapter. 'Taxable service' is defined (under sub-clause

(b) of clause 41 of Section 65 ) to mean any service provided to. inter alia, a subscriber by the telegraph authority in relation to a telephone connection. No provision of the U.P. Act or the said Finance Act , 1994 or the Constitution of India is brought to our notice to hold that rentals collected by the <ORG> from the subscriber cannot be subjected to tax as is done under the U.P. Act . Merely because service tax is imposed by the <ORG> under the said Finance Act in respect of telephone connection to a subscriber, is no ground to hold that the.<ORG> cannot levy tax under the U.P. Act .

For the aforementioned reasons, we hold that providing telephone service by the <ORG> which comprises of allotment of number, installation of an instrument/apparatus and other appliances at the premises of a subscriber, which are connected with a telephone line to the area exchange to enable him to have access to the whole system, to dial and to receive calls, in effect, falls within the meaning of the extended definition of 'sale', viz. within the meaning of 'the transfer of the right to use any goods' and the fact that it is described as service under the ITA 1885 and the Rules made thereunder or under the Finance Act . 1994 would not militate against the same being a 'sale' within the meaning of the U.P. Act .

The contention that remains to be considered is that in a contract providing telephone by the <ORG> the service and sale - transfer of the right to use the goods - are so inter-twined that the rentals cannot be attributed to one or the other part and, therefore, such a composite contract cannot be dissected so as to attribute one part of the rentals to service and the other part to the transfer of the right to use the goods and accordingly assess that part of rentals to tax. Reliance was placed on a decision of this Court in Northern India Caterers, (supra) and it was added that it had resulted in insertion of sub-clause (f) in clause 29-A of Article 366 of the Constitution; the argument proceeded that as there was no such provision to tax service in sub-clause (d) of clause 29-A, no tax could be levied by the <ORG>. We shall deal with this argument with the contentions of Mr. <NAME>, learned senior counsel appearing for the intervenors. He focussed on the fact that the instrument could be used only when access to the whole system is provided by the <ORG> and argued that when the contract was a composite contract involving service and the transfer of the right to use any goods, in the absence of any provision in the Constitution enabling the <ORG> to levy tax for service separately, no tax could be levied and collected under the U.P. Act . Mr. <NAME> submitted that in a case of composite contract, the dominant object test will have to be applied.

The following three situations were adverted to in the submissions:

(1) where the service is the main object of the contract and the supply of other things are merely incidental to enable the enjoyment of the service itself;

(2) where the service is incidental and the real contract is to sell the goods; and (3) where both the service as well as the sale of goods are equally prominent and they have been clubbed in one contract.

Whether a given contract falls under one or the other category is essentially a question of fact to be determined on the terms of the contract between the parties or, in case of a statutory contract, the rules governing such a contract.

Whereas in the case of a composite contract falling under the first category, where the service is the dominant object of the contract, the supply of goods is incidental to the enjoyment of the service; for example, in a hotel, where a room is hired, the supply of ornamental objects in the room, like chandelier, scenery, decoration pieces in the room or items, like linen, soap, shampoo etc. are incidental to make the service more useful, effective and attractive. In such a case, it is not possible to separate service from the supply of goods. This principle was laid down by this Court in <CITATION> ., (1972) 29 STC 474 SC and affirmed in <ORG>, (supra).

The insertion of clause 29-A in Article 366 of the Constitution of India did not altogether obliterate the distinction between sale and service, except in a case falling under sub-clause (f) thereof which enables levy of tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration. In such a case, the transfer, delivery or supply of any goods shall be deemed to be a 'sale' of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made. In other respects the distinction between sale and service for imposing tax is maintained.

In regard to sale of goods where the service is incidental, the principle of non-separatability will apply in the absence of a specific valid statutory provision; for example, in a restaurant/hotel, where food or other articles are sold, the supply of service like providing cutlery washing liquid, towels, music, etc., is merely incidental and it would not be permissible to treat such service as a transfer of right to use the goods for the purpose of taxation under the relevant Sales Tax Act . Where, however, the supply of service as well as supply of goods are prominent objectives and they have been clubbed together under a composite contract it would be possible to treat them separately; for example, where in a holiday package, transportation, boarding and lodging are separately treated, it would be possible to assess them separately, though covered under the same contract.

In <ORG> <CITATION> 's Tax Cases, 1977 (page 221)] the question before <ORG> was : whether the supply of a student identity card constituted the supply of service of a description which qualified for zero-rating. In that case, <ORG> provided special facilities for rail travel by Students. A student could purchase an identity card for pound 1.50 to enable him to obtain rail ticket at reduced rates. It was held that sale of identity card and the subsequent sale to the card-holder of a ticket for a particular journey at a reduced price could not be treated as separate and isolated transactions and, therefore, pound 1.50 paid for the identity card was properly to be regarded as a part payment in advance for the supply of transport service.

<ORG> v. <ORG> [Simon Tax Case. [1990] page 643; is a case wherein in the flights operated by <ORG> to transport passengers by air, food was served to the passengers, the price was the same whether or not a passenger availed the facility of food. <ORG> observed that the question was : whether <ORG> had made one supply or two supplies. It was held that in flights catering was part of and integral to the supply of transportation and, accordingly, <ORG> had made only one supply, that of air transportation.

To the same effect is the view in <ORG> v. <ORG> [Simon Tax Cases, [1999] (page 758). In that case <ORG> purchased new cars for its fleet of vehicles. The question that arose was : whether the sale of cars and their transportation to the agreed delivery point comprised two distinct supplies. The <ORG> found that the two are different and distinct services. <ORG> held that the supply of the service of delivery was physically and economically distinct from the supply of the car. On appeal, <ORG> held:

"In order to identify the supply it was necessary to consider whether the delivery was ancillary or incidental to the supply of the car or was a distinct supply. The fact that separate charges were identified in a contract or on an invoice did not on a consideration of all the circumstances necessarily prevent the various supplies from constituting one composite transaction nor did it prevent one supply from being ancillary to another supply which for value added tax (VAT) purpose was the dominant supply. Although each supply in a composite transaction might be an independent separate supply, the essential features of a transaction might show that one supply was ancillary to another and that it was the latter that for VAT purposes was to be treated as the supply. In the instant case it was artificial to split the various parts of the transaction into different supplies for VAT purposes. What <ORG> wanted was a delivered car; the delivery was incidental or ancillary to the supply of the car and it was only on or after delivery that property in the car passed. Accordingly, if the transaction was looked at as a matter of commercial reality, there was one contract for a delivered car and one supply for VAT purposes."

Having given our anxious consideration to the submissions made in regard to the composite contract of service of goods and the classification, above referred, we are of the view that they will not apply to the present case. Here the service of telephone connection cannot be artificially split into various categories - supply of instruments and accompaniment on the one hand and supply of telegraphic line/connection on the other, to name the former as 'sale' and the latter as 'service' . The analogy of composite contract will apply where 'sale' and 'service' are to different independent objects.

Inasmuch as we have found that the <ORG> is a 'dealer' as defined in Section 2(c) of the U.P. Act and it collects rentals for the supply of transfer of use of telephone connection, which is compendiously called 'service' and that the supply of telephone satisfies the requirements of a transfer of the right to use the goods within the meaning of 'sale' in Section 2(h) ; it also receives consideration, therefore, the requirements of charging Section 3 read with Section 3 F are satisfied. The jugdments and orders under challenge in these appeals are, therefore, set aside.

<CITATION> ., (1999) 113 STC 203, <ORG> of Andhra Pradesh took the view that the rentals are not subject to sales tax within the meaning of provisions of the Andhra Pradesh General Sales Tax Act, 1957. This judgment and the judgment under appeal was followed by <ORG> of Punjab & Haryana in <CITATION> .,  123 STC 539 to hold that the rentals collected by the <ORG> cannot be equated with sale of goods or deemed sale of goods by way of transfer of the right to use goods within the meaning of the Haryana General Sales Tax Act, 1973. For the aforementioned reasons we overrule those judgments. We must, however, consider the last submission that the impugned demands relate to not only rentals but also to various other charges and, therefore, for working out the correct demand, the cases have to go back to the assessing officer for raising fresh demand. We find considerable force in that submission. We set aside the demand in question and direct the <ORG> (the respondent) to file the 'Returns' within three months from today. <ORG> shall make order of assessment and raise fresh demand in accordance with law.

The appeals are accordingly allowed with costs.


PETITIONER: UNION OF INDIA AND <NAME>. Vs. RESPONDENT: <NAME> DATE OF JUDGMENT04/09/1991 BENCH: RAMASWAMI, V. (J) II BENCH: RAMASWAMI, V. (J) II SHETTY, K.J. (J) YOGESHWAR DAYAL (J) CITATION: 1992 AIR 96 1991 SCR (3) 873 1992 SCC Supl. (1) 323 JT 1991 (3) 608 1991 SCALE (2)481 CITATOR INFO : E&D 1992 SC2014 (23) ACT: <ORG> Judges (Conditions of Service) Act , 1954: Paragraphs 2, 9, Part I of First Schedule, Section 17-A --Pension payable to retired Judge of <ORG>--Fixing of minimum service of seven years-Fixing of lesser pension to those not eligible--Whether discriminatory- Amending Act of 1986--Whether applicable to all Judges irrespective of their dates of retirement. Judicial Act ivism: Invoking of judicial activism to set at naught legislative judgment--Whether subversive of the constitutional harmony and comity of instrumentalities--<ORG> to carry out the obvious intention of legislature--not to legislate itself. HEADNOTE: The Respondent retired as Judge of <ORG> on 3.10.1983 on superannuation and elected to receive his pension under Part I of the First SChedule to the <ORG> Judges (Conditions of Service) Act , 1954. As a Judge of the <ORG>, he had put in service of 5 years 10 months and 17 days and his pension was determined at Rs.8,400 p.a. and family pension at Rs.250 p.m. In 1986, the Act was amended providing for an increased pension from 1.11.1986. Thereafter, the Respondent filed a Writ Petition before the <ORG> praying for directions that he was entitled to refixation of his pension from the date of his retirement at Rs.9,600 per annum on the basis that the period of his service for pension was fit to be enlarged to six years, by addition of 1 month and 13 days; that from November 1, 1986 his pension may be refixed at Rs.20,580 per annum at the rate of Rs.3,430 for six complet- ed years of service; and that the family pension admissible to his wife be calculated on the basis that he had completed six years of service. During the pendency of the Writ Petition the Respondent made representations to <ORG> that since the respondent fell short of 6 completed years of service only by 1 month and 13 days, the President may be pleased to allow him to add the period so as to 874 caluclate the pension, gratuity and family pension on the basis of 6 completed years of service as a Judge. By its order dated April 16, 1987 <ORG> rejected the representation of the respondent among other grounds that the request was belated. By its judgment dated March 15, 1988 the <ORG> allowed the Writ Petition directing the <ORG> to retix his pension, family pension and gratuity treating him as having put in six completed years of service. <ORG> has preferred the present appeal, by special leave against the <ORG>'s order. It was contended on behalf of the appellants that the <ORG> has re-written the retirement benefit provisions of the First Schedule to the Act which it was not entitled to and hence the refxation of the pension on that basis was wholly illegal and unconstitutional- However, during the pendency of the appeal this <ORG> in its proceedings dated December 15, 1988 the <ORG> directed, after obtaining the necessary sanction from the President under Section 16 of the Act, the addition of 1 month and 13 days subject to the final decision of this <ORG> in the appeal. However, it was added that the period shall be disregarded in calculating additional pension. if any, under Part I, Part II and Part III of the First Sched- ule of the said Act. Allowing the appeal, this <ORG>. HELD: 1. It is a well-known practice in pensionary schemes to fix a minimum period for purposes of pension. What shall be the minimum period for such pension will depend on the particular service, the age at which a person could enter into such service. the normal period which he is expected to serve before his retirement on superannuation, and various other factors. There is nothing in evidence to suggest that the period of seven completed years of service fixed for pension is arbitrary. So far as the Judges of the <ORG> are concerned even under <ORG> Act a period of seven completed years of service before superannuation was prescribed for eligibility for pension. In fact no pension was provided for those who had not com- pleted seven years of service under pre-constitutional scheme. Thus there are historical grounds or reasons for fixing not less than seven years of service for pension. Part I deals with pensionary scheme. Prescribing a minimum period of service before retirement on superannuation, for pension is the very scheme itself and not a classification. It is a qualification for eligibility. It is different from computation of pension. All those who 875 satisfy that condition are eligible to get pension. [885G-H; 886A-C] 2. Even those who had completed seven years of service were not given pension for all the completed years of serv- ice at the rate of Rs.1,600 per annum and a maximum limit has been fixed for purposes of pension. If one calculates the maximum amount provided with reference to the rate per year roughly in about 14 years of service one would have reached the maximum amount. Any service above that period is not taken into account. Thus a person who had put in the minimum period for getting the maximum pension could be said to be favourably treated against the person who had put in more number of years of service than needed for the maximum pension and thereby discriminated. [886D-E] 3. It is not correct to state that the amount of pension provided in paragraph 9 is minimum pension. The said para- graph does not use the word 'minimum' but only states that if a Judge retires without being eligible for pension under any of the provisions. notwithstanding anything contained in the other provisions. the pension of a particular amount mentioned therein shall be paid to the Judge. This amount is not calculated or has any reference to any period of serv- ice. A Judge who had put in only two years of service before retirement will also receive the same amount as that of a Judge who has completed six years of service. If the provision is struck down as unconstitutional the condition relating to completion of seven years of service in para- graph 2, all those who had put in less than six completed years of service would be seriously affected and paragraph 9 also would become inapplicable. Further, it may be open to those who have put in more than five years or more than four years as the case may be. to contend that they are discrimi- nated against because persons who had put in less than that period will get pension at much higher rate. [886F-H: 887A] 4. The Amending Act 38 of 1980 provided that the amend- ed liberalised pension scheme would apply only to a Judge who has retired on or after the commencement of the <ORG> and Supreme <ORG> Judges (Conditions of Service) Amendment Act . 1986. A similar provision which made the amendment 01 1976 applicable only to those Judges who have retired on or after October 1. 1974 was struck down as ultra vires and it was decided that the benefit of the amendment was available to. all the retired Judges irrespective of the date of retirement but subject to the condition that the enhanced pension was payable only with effect from October 1, 1974. The Amending Act of 1986 could not restrict the applicability of the amended provision to only those who have retired on or after the commencement of the Amending Act . It 876 would be applicable to all the Judges irrespective of the dates of retirement and they would be entitled to be paid pension at the rates provided therein with effect from November 1, 1986. [883A- <CITATION> .  3 SCR 550; <CITATION> ,  3 SCR 552 and <CITATION> ,  2 SCR 165, referred to. 5. In the instant case. <ORG> had exceeded its jurisdiction and power in amending and altering the provi- sions of paragraph 2 by substituting different minimum period for eligibility for pension in paragraph 2 of Part I. Since the respondent has not put in seven completed years of service for pension he will be eligible for pension at the rates provided in paragraph 9 of Part I of the First Sched- ule to the Act, that is to say for the period from 4.10.1983 to 31.10.1986 at the rate of Rs.8,400 per annum and for the period on and from November 1, 1986 at the rate of Rs. 15,750 per annum. [887B-C] 6. Since in compliance with the mandamus issued by the <ORG>, the President of India was pleased to sanction the addition of one month and 13 days to the service of the respondent to make it six years of completed service subject to the final decision in this appeal, this <ORG> does not go into the question whether the <ORG> was right in set- ting aside the earlier rejection for addition of the period. The addition of one month and 13 days does not make any difference in calculation of pension it is relevant only for the purpose of calculating the gratuity under section 17A(3) of the Act. As the period was less than three months and as the President was pleased to sanction the addition in exer- cise of his power under Section 16 of the Act though subject to the final decision of this <ORG> it is just and necessary to allow this addition to remain for the purposes of calcu- lation of gratuity, and family pension only though not for pension. The respondent will be entitled to fixation of family pension and for payment of gratuity calculated on the basis of his having completed six years of service. [887D-H] 7.1. It is not the duty of the <ORG> either to enlarge the scope of the legislation or the intention of the legis- lature when the language of the provision is plain and unambiguous. The <ORG> cannot rewrite, recast or reframe the legislation for the very good reason that it has no power to legislate. The power to legislate has not been conferred on the courts. The <ORG> cannot add words to a statute or read words into it which are not there. Assuming there is a defect or an omission in the 877 words used by the legislature the <ORG> could not go to its aid to correct or make up the deficiency. <ORG>s shall decide what the law iS. and not what it should be. The <ORG> of course adopts a construction which will carry out the obvious intention of the legislature but could not legislate itself. But to invoke judicial activism to set at naught legislative judgment is subversive of the constitutional harmony and comity of instrumentalities. [885A-D] 7.2 Modifying and altering the scheme and applying it to others who are not otherwise entitled to under the scheme, will not also come under the principle of affirmative action adopted by courts some times in order to avoid discrimina- tion. What the <ORG> has done in this case is a clear and naked usurpation of legislative power. [885F] <CITATION> ,  1 SCR 482; <CITATION> ,  5 SCR 239; <CITATION> ,  Supp. 1 SCR 489; <CITATION> , Shahjahanpur,  SCR 1122; <CITATION> .,  SCR 533; <CITATION> ,  2 SCR 146; S. Narayanaswa- mi v.G. Pannerselvam & Ors.,  1 SCR 172; N.S. Varda- chari v. G. Vasantha Pai & Anr.,  1 SCR 886; <CITATION> .,  1 SCR 423 and <CITATION> ,  2 SCR 430, relied on. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3674 of 1988.

From the Judgment and Order dated 15.3.1988 of <ORG> in Civil Misc. Writ Petition No. 20328 of 1986.

<NAME>, <NAME> and <NAME> for the Appel- lants.

<NAME>-in-person and Mrs. <NAME> for the Respondents.

The Judgment of the Court was delivered by <NAME>, J. The respondent was elevated as Judge of <ORG> on November 17, 1977. He retired on October 3, 1983 on superannuation at the age of 62. He had elected to receive his pension under Part I of the First Schedule to the High  Court Judges (Conditions of Service) Act , 1954. As he had put in only a period of five years 10 months and 17 days service as a Judge. of <ORG>, under paragraph 9 Part I of the First Schedule pension payable was determined at the rate of Rs.8,400 per annum and the family pension in the event of his death earlier than his wife at Rs.250 per month in the letter of Accountant General, Allahabad dated December 2, 1983. The gratuity was worked out at Rs. 11,665.66 P. in lump-sum under Section 17A(3) also on the ground that he had put in only five completed years of service. The pension was payable with effect from October 4, 1983. The Act was amended by the Amending Act No. 38 of 1986 providing for an increased pension with effect from November 1, 1986. On December 10, 1986 the petitioner filed a writ petition before <ORG> under Article 226 of the Constitution praying for an order or directions declaring (i) that he was entitled to refixation of his pension from the date of his retirement, namely, October 4, 1983 to October 31, 1986 at Rs.9,600 per annum plus dearness allowance admissible under the rules from 'time to time on the basis that the period of his service for pension was fit to be enlarged to six years, by addition of 1 month and 13 days to the 5 years 10 months and 17 days; (ii) for refixa- tion of pension for the period from November 1, 1986 at Rs.20,580 per annum plus dearness allowance or other allow- ances as may be admissible under the rules from time to time, at the rate of Rs.3,430 per annum for six completed years of service as stated above; (iii) to retix the family pension admissible to his wife on the scale allowed under Section 17A as amended by Act 38 of 1986 again taking the period of completed years of service as 6 years and not as total service of 5 years, 10 months, and 17 days. During the pendency of the writ petition the respondent made representations to <ORG> stating that since the respondent fell short for 6 completed years of service only by one month and 13 days, the President may be pleased to allow him to add the period so as to calculate the pension, gratuity and family pension on the basis of 6 completed years of service as a Judge. By its order dated April 16, 1987 <ORG> rejected the repre- sentation of the respondent among other grounds that the request was belated. By its judgment dated March 15, 1988 <ORG> allowed the writ petition directing the <ORG> to retix his pension, his family pension and gratuity treating him as having put in six completed years of service and in the manner provided in the judgment. The main grievance of <ORG> in this appeal is that <ORG> has rewritten the retirement benefit provisions of the First Schedule to tile Act which it was not entitled to and the refixation of the pension on that basis was wholly illegal and unconstitutional. Since <ORG> issued the manda- mus directing the <ORG> to add one month and 13 days to the total length of service renderred by the re- spondent as Judge of <ORG> for the com- puting the pension under Section 16 of the Act, during the pendency of the appeal in this Court in the proceedings dated December 15, 1988 the <ORG> directed, after obtaining the necessary sanction from the President under Section 16 of the Act, the addition of one month and 13 days "subject to the final decision of this Court in Special Leave Petition 6798 of 1988 (CA No. 3674 of 1988)." However, they added that the period shall be disregarded in calculat- ing additional pension, if any, under Part I and Part II and Part HI of the First Schedule of the Said Act. In order to appreciate the argument of the learned counsel for the appellant-<ORG> it is necessary to set out certain provisions relating to pension payable to a Judge of <ORG> on his retirement. Clause 17 of <ORG> (High Court Judges) Order, 1937 relating to pension payable to a Judge on his retirement which was in force prior to the coming into force of the Constitution provided that "a pension shall be payable to a Judge on his retirement if, but only if, either:

"(a) he has completed not less than 12 years' service for pension; or

(b) he has completed not less than 7 years' service for pension and has attained the age of sixty; or

(c) he has completed not less than 7 years' service for pension and his retirement is medically certified to be necessitated by ill-health."

Thus it may be seen that under the provisions then existing a Judge who had completed less than seven years of service was not allowed any pension.

As we are concerned in this case to the provisions applicable to a Judge to whom Part I of the First Schedule of <ORG> Judges (Conditions of Service) Act, 1954 is applicable either by reason of his appointment directly to <ORG> from the <ORG> or who has elected to receive pension payable under that part we need to set out only relevant provisions relating to pension in Part I of the First Schedule. Paragraphs 2, 3, 4, 5, and 9 as stood prior to its amendment by Act 35 of 1976 read as follows:

"2. Subject to the other provisions of this part, the pension payable to a Judge to whom this Part applies and who has completed not less than seven years of service for pension shall be the basic pension specified in para- graph 3 increased by the additional pension, if any, to which he is entitled under para- graph 5.

3. The basic pension to which such a Judge shall be entitled shall be--

(a) for the first seven completed years of service for pension, Rs.5,000 per annum; and

(b) for each subsequent completed year of service for pension, a further sum of Rs. 1,000 per annum:

provided that the basic pension shall in no case exceed Rs. 10,000 per annum.

4. For the purpose of calculating additional pensions, service as a Judge shall be classi- fied as follows:-

Grade I. Service as Chief Justice in any <ORG>;

Grade II. Service as any other Judge in any <ORG>.

5. For each completed year of service for pension in either of the grades mentioned in paragraph 4, the Judge who is eligible for a basic pension under this Part shall be enti- tled to the additional pension specified in relation to that grade in the second column of the table annexed hereto.

provided that the aggregate amount of his basic and additional pension shall not exceed the amount specified in the third column of the said table in relation to the higher grade in which he has rendered service for not less than one completed year.

TABLE Service Additional pension Maximum aggregate per annum pension per annum Rs. Rs. Grade I 740 20,000 Grade II 740 16,000

9. Where a Judge to whom this Part applies, retire or has retired at any time after the 26th January, 1950 without being eligible for a pension under any other provision of this Part, then, notwithstanding anything contained in the foregoing provisions, a pension of Rs.6,000 per annum shall be payable to such a Judge.

(a) to an additional Judge or acting Judge; or

(b) to a Judge who at the time of his appoint- ment is in receipt of a pension (other than a disability or wound pension) in respect of any previous service under the <ORG> or a <ORG>. Note: The <ORG> was added by Act No. 46 of 1958."

By the Amending Act 35 of 1976 the First Schedule was amended by substituting paragraphs 2 and 9 and deleting paragraphs 3, 4 and 5. The substituted paragraphs 2 and 9 read as follows:

"2. Subject to the other provisions of this Part, the pension payable to a Judge to whom this Part applies and who has completed not less than seven years of service for pension shall be--

(a) for service as Chief Justice in any High Court, Rs.2,400 per annum; and

(b) for service as any other Judge in any High Court, Rs. 1,600 per annum:

provided that the pension shall in no case exceed Rs.28,000 per annum in the case of a Chief Justice and Rs.22,400 per annum in the case of any other Judge.

9. Where a Judge to whom this Part ap- plies, retires or has retired at any time after the 26th January, 1950 without being eligible for pension under any other provision of this part, then, notwithstanding any- thing contained in the foregoing provi- sions, a pension of Rs.8,400 per annum shall be payable to such a Judge. Provided that nothing in this paragraph shall apply--

(b) to a Judge who at the time of his appoint- ment is in receipt of a pension (other than a disability or wound pension) in respect of any previous service under the <ORG> or a <ORG>."

These amended provisions Were held applicable in respect of all the Judges of <ORG> who have retired irre- spective of their dates of retirement in the decisions of this Court in <CITATION> ,  3 SCR 550 and <CITATION> ,  3 SCR 552. However the increased pension was payable only with effect from October 1, 1974, Part I of the First Schedule was further amended by Act 38 of 1986 with effect from November 1, 1986 and the amended paragraph 2 reads as follows:

"2. Subject to the other provisions of this Part, the pension payable to a Judge to whom this Part applies, and who has completed not less than seven years of service for pension shall be---

(a) for service as Chief Justice in any High Court, Rs.4,500 per annum for each completed year of service;

(b) for service as any other Judge in any <ORG>, RS.3,430 per annum for each completed year of service:

provided that the pension shall in no case exceed Rs.54,000 per annum in the case of a Chief Justice and Rs.48,000 per annum in the case of any other Judge."

The Act further amended paragraph 9 by substituting Rs.

15,750 for the figure Rs.6,000-

At this stage itself, we may note that this Amending Act 38 of 1986 provided that the amended liberalised pension scheme would apply only to a Judge "who has retired on or after the commencement of <ORG> and <ORG> Judges (Conditions of Service) Amendment Act , 1986." A similar provision which made the amendment by Act 35 of 1976 applicable Only to those judges who have retired on or after October 1, 1974 was held ultra vires and struck down in the two decisions of this Court above referred to and it was held that the benefit of the amendment was available to all the retired judges irrespective of the date of retirement but subject to the condition that the enhanced pension was payable only with effect from October 1, 1974. That was also ratio of the decision of <ORG> of this Court in <CITATION> ,  2 SCR 165. On the same reasoning and logic we have to hold that Amending Act . 38 of 1986 could not restrict the applicability of the amended provision to only those who have retired on or after the commencement of the Amending Act . The resultant position would be that the provisions of pension in Part I of First Schedule as amended by Act 38 of 1986 would be applicable to all the Judges irrespective of the dates of retirement and they would be entitled to be paid pension at the rates provided therein with effect from NOvember 1, 1986, As already stated, the respondent retired from service on October 3, 1983. For the period from October 4, 1983 till October 31, 1986 the respondent claimed that he is entitled to be paid at the rate of Rs.9,600 and at the rate of Rs.20,580 per year from November 1, 1986 when the Amending Act 38 of 1986 came into force, plus the usual dearness allowance admissible from time to time. This claim was made on the ground that the power of the President under Section 16 of the Act though discretionary could not be exercised arbitrarily or on extraneous or other unsupportable grounds that on the facts and circumstances the refusal to include the period of one month and 13 days to the length of his service by the order of 'the <ORG> dated April 16, 1987 was illegal and on the facts and circumstances, his case is a fit one for enlarging the period of his service to six years. On the assumption that he is entitled for such en- largement and the had completed six years of service, the further case of the respondent was that he is entitled for calculation on the pension at the rate of Rs. 1,600 for each completed year of service and for six.years at Rs.9.600 per annum for the period prior to November 1, 1986. He further contended that in paragraph 2 of Part I of the First Sched- ule the words "who has completed not less than seven years of service for pension'' shall be read as "who has completed more than five years of service for pension" on the ground that while a Judge who has completed seven years of service is permitted to calculate at the rate of Rs. 1,600 for each completed years of service, a person who had not completed seven years of service could not be denied that benefit. But finding that a person who had completed only five years of service or less than five years of serv- ice, if the pension is to be calculated at the rate of Rs. 1,600, would get Rs.8,000 or less than Rs.8,000 though Rule 9 provided for a fixed pension of Rs.8,400 per annum for those who had not completed seven years of service, he wanted to read "not less than five years" of service in paragraph 2 as "more than five years" of service. This argument was accepted by <ORG> on the ground that there is no rational basis for depriving a Judge who had put in six completed years of service to calculate the benefit of pension at the rate of Rs. 1,600 per year of service which was provided for those who had completed seven years of service. <ORG> was of the view denying the benefit of calculation at the rate of Rs. 1,600 per year would lead to the striking down of the provision as a dis- criminatory piece of legislation and that however the provi- sion can be saved by "reading down paragraph 2 of Part I of the First Schedule to the Act and reading 'more than five years' in the place of not less than seven years." In that view <ORG> amended paragraph 2 so to say by substi- tuting the words "not less than 7 years" as "more than 5 years" and allowed the claim for payment of pension at Rs.9,600 per annum for the period from 4.10.1983 to 31.10.1986.

As already stated as per the Amending Act 38 of 1986 the pension payable for those who have completed 7 years of service was to be calculated at the rate of Rs.3,430 for each completed year of service and for those who have not completed 7 years of service a sum of Rs.15,750 was payable as pension. On the same reasoning which prompted <ORG> to read "less than seven years" as "more than five years" in the provision which was in force prior to November 1, 1986 <ORG> further held that since in four years service the Judge would have earned Rs. 13,720 and on com- pletion of five years service he would have earned Rs.17,150 calculated at the rate of Rs.3430 per annum as against a sum of Rs.15,750 provided in paragraph 9, necessarily paragraph 2 will have to be read down by providing instead of "not less than seven years" as "more than four years". The learned Judges read the provisions in the manner as was amended by them and calculated the pension payable to the respondent at Rs.20,580 per annum for the period November 1, 1986. Consequential relief relating to the payment of the gratuity and family pension in the light of the relief granted relating to pension was also directed to be given.

We are at a loss to understand the reasoning of the learned Judges in reading down the provisions in paragraph 2 in force prior to November 1, 1986 as "more than five years" and as "more than four years" in the same paragraph for the period subsequent to November 1, 1986. It is not the duty of the <ORG> either to enlarge the scope of the legislation or the intention of the legislature when the language of the provision is plain and unambiguous. The <ORG> cannot re- write, recast or reframe the legislation for the very good reason that it has no power to legislate. The power to legislate has not been conferred on the courts. The <ORG> cannot add words to a statute or read words into it which are not there. Assuming there is a defect or an omission in the words used by the legislature the <ORG> could not go to its aid to correct or make up the deficiency. <ORG>s shall decide what the law is and not what it should be. The <ORG> of course adopts a construction which will carry out the obvious intention of the legislature but could not legislate itself. But to invoke judicial activism to set at naught legislative judgment is subversive of the constitutional harmony and comity of instrumentalities. <CITATION> , 1990 1 SCR 482 at 488; <CITATION> ,  5 SCR 239; <CITATION> ,  Supp. 1 SCR 489; <CITATION> ,  SCR 1122 at 113 1; <CITATION> .,  SCR 533 at 545; <CITATION> ,  2 SCR 146; S. Narayanaswa- mi v. G. Pannerselvam & Ors.,  1 SCR 172 at 182; <CITATION> .,  1 SCR 886; <CITATION> .,  1 SCR 423 and <CITATION> ,  2 SCR 430 at 438. Modifying and altering the scheme and applying it to others who are not otherwise entitled to under the scheme, will not also come under the principle of affirmative action adopted by courts some times in order to avoid discrimination. If we may say so, what the High <ORG> has done in this case is a clear and naked usurpation of legislative power. The view of the High <ORG> that paragraph 2 discrimi- nates between those who have completed seven years of serv- ice and those who have not completed that much service is in our opinion not correct. It is a well-known practice in pensionary schemes to fix a minimum period for purposes of pension. What shall be the minimum period for such pension will depend on the particular service, the age at which a person could enter into such service, the normal period which he is expected to serve before his retirement on superannuation, and vari-

ous other factors. There is nothing in evidence to suggest that the period of seven completed years of service fixed for pension is arbitrary. So far as the Judges of the High Court is concerned as we have noticed earlier even under the Government of India Act a period of seven completed years of service before superannuation was prescribed for eligibility for pension. In fact no pension was provided for those who had not completed seven years of service under preconstitu- tion scheme. Thus we have history or historical grounds or reasons for fixing not less than seven years of service for pension. Part I deals with a pensionary scheme. Prescribing a minimum period of service before retirement on superannua- tion, for pension is the very scheme itself and not a clas- sification. It is so to say a qualification for eligibility. It is different from computation of pension. All those who satisfy that condition are eligible to get pension.

Even those who had completed seven years of service were not given pension for all the completed years of serv- ice at the rate Rs. 1,600 per annum and a maximum limit has been fixed for purposes of pension. If we calculate the maximum amount provided with reference to the rate per year roughly in about 14 years of service one would have reached the maximum amount. Any service above that period is not taken into account. Thus a person who had put in the minimum period for getting the maximum pension could be said to be favourably treated against the person who had put in more number of years of service than needed for the maximum pension and thereby discriminated. Thus the reasonableness of the provision in the pensionary scheme cannot be consid- ered in this line of reasonings. It is not impossible to visualise a case where the pension payable would be more than the last drawn pay if the maximum limit had not been fixed.

It is also not correct to state that the amount of pension provided in paragraph 9 is minimum pension. The said paragraph does not use the word 'minimum' but only state that if a Judge retires without being eligible for pension under any of the provisions, notwithstanding anything con- tained in the other provisions, the pension of a particular amount mentioned therein shall be paid to the Judge.. This amount is not calculated or has any reference to any period of service. For instance a Judge who had put in only two years of service before retirement will also receive the same amount as that of a Judge who have completed six years of service. Again if we run down the provision and strike as unconstitutional the condition relating to completion of seven years of service in paragraph 2 all those who had put in less than six completed years of service would be seri- ously affected and paragraph 9 also would become inapplicable. Further if we amend paragraph 2 of Part I of the First Schedule of the Act as done by <ORG> it may be open to those who have' put in more than five years or more than four years as the case may be to, contend that they are discriminated against because persons who had put in less than that period will get pension at much higher rate.

We have, therefore, no doubt that <ORG> had exceeded its jurisdiction and power in amending and altering the provisions of paragraph 2 by substituting different minimum period for eligibility of pension in paragraph 2 of Part I. Since the respondent has not put in seven completed years of service for pension he will be eligible for pension at the rates provided in paragraph 9 of Part I of the First Schedule to the Act, that is to say for the period from 4.10.1983 to 31.10.1986 at the rate of Rs.8,400 per annum and for the period on and from November 1, 1986 at the rate of Rs. 15,750 per annum.

We have already noticed that during the pendency of the appeal in this Court in the proceedings dated December 15, 1988 the Government of India communicated to the Chief Secretary, Government of Lucknow, in compliance with the mandamus issued by <ORG>, that the President of India was pleased to sanction the addition of one month and 13 days to the service of the respondent to make it six years of completed service subject to the final decision in this appeal. In the circumstances however and in the view we have expressed earlier on the question of pension, we do not want to go into the question whether <ORG> was right in setting aside the earlier rejection for addition of the period. Since the addition of one month and 13 days does not make any difference in calculation of pension as we have already stated, this Presidential sanction has become rele- vant only for the purpose of calculating the gratuity under section 17A(3) of the Act. As the period is less than three months and as the President was pleased to sanction the addition in exercise of his power under Section 16 of the Act though subject to the final decision of this Court we would consider it just and necessary to allow this addition remain in force for the purposes of calculation of gratuity, and family pension only though not for pension. The appeal is accordingly allowed and the order of <ORG> is set aside. The respondent will however be entitled to fixation of family pension and for payment of gratuity calculated on the basis of his having completed six years of service. There will be no orders as to costs.

<NAME> al- lowed.


JUDGMENT

1. <ORG> has preferred these writ appeals against the order of the learned Single Judge ( <CITATION> ., 2000(2) Kar. L.J. Sh. N. 36

2. The respondents were all employees of <ORG> working as <NAME> in the <ORG> from some time in the year 1980. They did not according to the <ORG> turn up for work after 1983.

3. It is common ground that the <ORG> lodged a criminal complaint against the respondents under Sections 471 and 420 of the  for producing alleged forged School Transfer Certificates. Two criminal cases were registered as Cri. Case Nos. 5517 and 5518 of 1984. The case after a prolong trial ended in an acquittal at the hands of the Additional Chief Metropolitan Magistrate, Bangalore by its judgment dated 24-9-1987. After the acquittal the respondents sought to resume work as <ORG>. They were denied employment.

4. Subsequently the matter went before <ORG>. <ORG> in Cri. Case Nos. 1 to 11 of 1992 passed a common award directing reinstatement of all the respondents and also for payment of back wages from the date of termination till the date of reinstatement within a period of six months. Aggrieved by the award the <ORG> rushed to <ORG> without approaching <ORG>.

5. <ORG> directed the <ORG> to approach <ORG>. Consequently writ petitions were filed before the learned Single Judge against the order of the <ORG>. The learned Single Judge dismissed the writ petitions.

6. Aggrieved by the order of the learned Single Judge the <ORG> is before us in these writ appeals.

7. Mr. <NAME>, learned Senior Counsel for the <ORG> submitted that it was the stand of the <ORG> right at the outset that the workmen, respondents could not be regularised as they had given alleged forged School Transfer Certificates and the question of Section 25-F of the Industrial Disputes Act does not arise for consideration since they were not regularised on account of the alleged misconduct.

8. Some other workmen had approached <ORG>. <ORG> in <CITATION> , 2001-II-LLJ-487 (SC) at paragraph 4 held as follows:

"4. This Court in somewhat identical matter, though not arising out of a reference made to <ORG> considered the very question referred to the <ORG> with reference to certain mazdoors who had been appointed on daily wages since 1984. After examining various aspects of the matter including the effect of the settlement dated July 23, 1993 held that it would not be appropriate to adopt different standards in different sectors in the country and the workmen of the appellant will have to be treated as having been regularised with effect from May 31, 1994 from which date they have been regularised as per the settlement dated July 23, 1993 and disposed off the case accordingly".

9. In fact Mr. <NAME> sought to distinguish the judgment rendered by <ORG> in Chief General Manager's case, supra, by submitting that the respondents-workmen are on a different footing since they faced serious allegation of misconduct.

10. Mr. <NAME>, the learned Counsel for the respondents-workmen submitted that the workmen after they were acquitted by <ORG> gave a number of representations for reinstatement and that the management promised the workmen that they would be reinstated. Since they were honourably acquitted by <ORG> they were not reinstated. Consequently, they were forced to raise a dispute. He relied on the evidence of M.W. 3. M.W. 3 was the Bank Officer in the department of financial companies. He has stated in the cross-examination as follows.--

"The workmen have given a number of representations to the management praying for reinstatement. I verified the subsequent T.Cs at the instruction of the manager. The office has written a letter to <ORG> recommending that these workmen should be reinstated. I am not aware whether manager is the appointing authority for Class IV.

Re-examination.--The office wrote for reinstatement on compassionate grounds".

From the evidence of the Management it is clear that the <ORG> intended to reinstate the workmen.

11. The submission of Mr. <NAME>, learned Senior Counsel for the <ORG> has some force insofar as both the orders of the <ORG> and the learned Single Judge proceeded on the footing that the termination was contrary to Section 25-F of the Industrial Disputes Act.

12. On a perusal of the record the stand of the management was that the workmen were not regularised for the alleged misconduct. The stand of the <ORG> in our opinion will not in any way help the <ORG>.

13. If a workman was to be regularised and was not regularised only because of a serious allegation of misconduct, the workman cannot be denied the right of regularisation without a domestic enquiry. The reason for not regularising the workmen was because of serious allegations of misconduct. But for the alleged misconduct it is the stand of the <ORG> that the respondents would have been regularised. A stigma is attached to the conduct of the workmen since they were denied regularisation only on the ground of alleged serious misconduct.

14. <ORG> in <CITATION> ., held as follows.-

"6. Though new life was injected into the appellant's case by the ratio of decision in the case of <CITATION> ., at the hearing learned Counsel for the appellant focussed his attention to show that the foundation of the judgment of this Court in <NAME> appeal was based upon an untenable view. According to learned Counsel, termination of service for loss of confidence amounted to retrenchment and nothing more.

7. Having heard learned Counsel, we are inclined to reiterate the view taken in <NAME> case, supra, that the plea of loss of confidence in the employee indeed casts a stigma. As was pointed out in <NAME> v. <NAME>', (1985)2 Q.B. 315 the employee is expected to promote the employer's interests in connection with which he has been employed and a necessary implication which must be engrafted on such a contract is that the servant undertook to serve his master with good faith and fidelity. This view has been accepted by several <ORG> in India and meets with our approval. In the absence of a statutory definition of the word 'stigma', we shall refer to its meaning as available in dictionaries.

8. According to Webster's New World Dictionary it is something that detracts from the character or reputation of a person, a mark, sign, etc., indicating that something is not considered normal or standard. The Legal Thesaurus by <NAME> gives the meaning of the word to be blemish, defect, disgrace, disrepute, imputation, mark of disgrace or shame. The Webster's III New International Dictionary gives the meaning as a mark or label indicating a deviation from a norm. According to yet another Dictionary 'stigma' is a matter for moral reproach.

9. Loss of confidence by the employer in the employee is a feature which certainly affects the character or reputation of the employee and, therefore, this Court correctly held in <NAME> case, supra, that allegation of loss of confidence amounted to a stigma. The ratio in <CITATION> , also supports this conclusion.

10. Retrenchment as defined in Section 2(oo) of the Industrial Disputes Act and as held by this Court in several cases means termination of service for any reason whatsoever otherwise than punishment inflicted by way of disciplinary action and the other exceptions indicated therein. In the present case though no formal domestic inquiry had been held, the employer took the stand in the adjudication that termination was grounded upon loss of confidence and substantiated that allegation by leading evidence. The legal position firmly established is that if there has been no appropriate domestic enquiry or no enquiry at all before disciplinary action is taken, it is open to the employer to ask for such opportunity in the course of adjudication. In the facts of the present case, the order of separation grounded upon loss of confidence has been justified before <ORG> and <ORG> has come to that conclusion upon assessment of the evidence".

15. In that view of the matter we have no doubt that the discontinuance of employment of the workmen is bad in law.

16. On the question of relief we are guided by the <ORG> judgment in similar case in Chief General Manager's case, supra. Accordingly, the orders of the <ORG> and the learned Single Judge are modified to the extent that the workmen shall be reinstated in service with continuity of service and with back wages from 23-7-1993.

17. Time granted for implementation of the <ORG> order is three months from the date of receipt of the order. This will not preclude the <ORG> from holding a domestic enquiry on the alleged misconduct, if they so wish.

18. Accordingly, these writ appeals are disposed off. No order as to costs.