N. Subhas Babu and Others vs Government of Andhra Pradesh and Another

P. Venkatarama Reddi, J.—The petitioners are the teaching and non-teaching staff of Kakatiya Medical College, Warangal. In the initial stages, the college was being run by the Regional Medical Education Society, Warangal. The petitioners were appointed when the College was being managed by the said society. The Management of the institution together with its assets was takenover by the Government pursuant to an agreement entered into on 5-1-1977 between the Society and the Governor of A.P. Clause 6 of the said agreement provides :

"The staff employed in the college, immediately before the said day, shall be employed and continued by the Government upon the same terms and conditions and with the same rights and privileges as to pension, gratuity and other matters as the said staff would have had under the Society, until the said remuneration, terms and conditions are duly altered by the Government or until the employment of any member of such staff is duly terminated after giving notice of three months or the salary for three months in lieu thereof.

Provided that...."

The dispute in the present writ petition is about House Rent Allowance (HRA). It is not in dispute that prior to takeover of the College, the petitioners were being given HRA at the prescribed percentage, even though residential quarters were provided to them by the Management. The petitioners were paying the rent for the quarters at a rate which is undoubtedly beyond the normal rate or market rate. We arc told that the petitioners were paying Rs. 100/- in the beginning, later it was revised to Rs. 175/- and presently the petitioners who are in service are paying Rs.225/- per quarter. Thus, the HRA that is being paid to them is far in excess of the house rent for quarters which the petitioners are liable to pay. In the year 1978, there was a move to apply the State Government rules with regard to collection of rent and deduction of HRA. The occupants of staff quarters were notified that from May, 1978 onwards, the rent will be deducted at the rate of 10% of basic pay and the HRA will be disallowed. The staff members then filed Writ Petition No.2125 of 1978. The WP was allowed and the impugned circular issued by the Principal on 6-4-1978 was quashed on the ground that the petitioners were not put to notice before issuing the impugned order and on the further ground that the Principal had no jurisdiction to issue the circular. Thereafter, the Government issued orders in G.O.Ms.No.649 (M&H) dated 29-10-1981. The Government ordered that the staff in occupation of the quarters are not entitled for HRA as they were in the same position as Government Servants and therefore the HRA already drawn has to be recovered from them with effect from 1-2-1977. However, it was further directed that the said orders did not apply to the 50 persons who are petitioners in W.P.No.2125 of 1978 and they shall continue to be paid salary and allowances including HRA in the same manner as they were being paid prior to the date of takeover of the College. Again this order was questioned in W.P.No.968 of 1982. It was allowed on 9-4-1985 on the ground that the action of the Government was in violation of principles of natural justice. Thereafter, on 4-12-1985, the Principal of the Kakatiya Medical College issued notices to the petitioners and other staff occupying the official quarters to show cause why the HRA paid to them should not be recovered with effect from 1-2-1977. It was stated in the notice that the petitioners are not entitled to claim HRA, The petitioners submitted explanation stating that they were provided a quarter with a fixed rent and not a rent free quarter. It was further pointed out that the Government itself granted the benefit to the persons who succeeded in W.P.No.2125 of 1978. Nearly three years thereafter, the impugned order was issued by the Government in G.O.Ms.No-575 (HMFW) dated 3-11-1988 directing the payment of HRA to be stopped to the employees of Kakatiya Medical College, who arc in occupation of the quarters attached to the College and further directing that they should be charged house rent at 10% of the basic pay or standard rent whichever is less with effect from 1-4-1986, The Government further directed that the amounts wrongly paid should be recovered from the employees concerned and credited to the Government account. As a sequel to this G.O. the Principal of the College issued a memo dated 17-2-1988 notifying the petitioners that the excess HRA paid to them from 1-4-1986 to 30-11-1988 will be recovered from their salaries from 1-1-1989 onwards. Challenging G.O.Ms. No.575 and the consequential orders issued by the Principal, the present writ petition is filed. This Court granted interim suspension of the impugned order.

During the pendency of the writ petition it appears that some of the petitioners retired or resigned or vacated the quarters. However, petitioners 1, 4, 6 and 10 who are still in service continue to remain in occupation of Government quarters paying the rent of Rs.225/- per month, while drawing House Rent Allowance at the rate of Rs. 1,000/- or so per month.

The first contention raised by the learned Counsel for the petitioners is that the Government committed the very same illegality once again by passing an order adverse to the interests of the petitioners without affording an opportunity to make representation. The learned Counsel, while conceding that the conditions of service can be altered by the Government as per the terms of the Agreement dated 15-1-1977, argued that such alteration can only be done in conformity with the principles of natural justice. The learned Counsel Mr. M. Ramachandra Rao, relying on the decision of the Supreme Court in H.L. Trehan and Others Vs. Union of India (UOI) and Others, wherein a similar expression "duly altered" was construed by the Supreme Court, has submitted that the principle that conditions of service can be unilaterally altered has no application to a case where there is an agreement between the employer and the employee on the eve of changeover in the management. The learned Counsel further submits that the show-cause notice issued by the Principal of the College does not amount to compliance with the mandatory obligation to give notice to the affected staff members. An allied submission which was made by the learned Counsel is that there was no due consideration of the explanation submitted by the petitioners and the Government proceeded on a wrong premise that rent-free quarters were being provided to the petitioners. It is therefore contended that the impugned order of the Government cannot be construed as a valid order bringing about change in one of the conditions of service guaranteed to the petitioners by virtue of the Agreement dated 15-1-1977.

We find it difficult to accept these contentions of the petitioners'' Counsel, though they appear to be plausible. Even accepting the principle that in an area covered by an Agreement embodying the assurances given to ''the employees at the time of changeover of management, the conditions of service cannot be altered unilaterally without giving notice, we are of the view that the requirement as to notice is substantially satisfied in the instant case. The show-cause notice issued by the Principal of the College invited representations from the petitioners. The petitioners did submit their representations pursuant thereto. It may be that the Principal himself was not competent to take the final decision; but, merely because the show-cause notice was issued by the Principal, the ultimate decision taken by the Government cannot be said to have been vitiated. When the complaint is regarding the violation of principles of natural justice, the Court has to look into the substance of the matter. It was well settled that the principles of natural justice cannot be encompassed in straight-jacket formula. Whether or not there was sufficient compliance with the principles of natural justice depends on the facts and circumstances of each case. It is not as if the petitioners have suffered any disadvantage or prejudice on account of the fact that the show-cause emanated from the Principal instead of from the Government directly. In giving the show-cause notice, the Principal obviously acted on the instructions of the Government and he must be deemed to have acted as an agent to serve the notice to the petitioners. Therefore, we do not find any substance in the plea that the principles of natural justice arc violated.

As regards the contention that there was no due consideration of the petitioners'' representation and the Government failed to apply its mind to the objections of the petitioners, though the order of the Government is somewhat slip-shod, we are not inclined to set aside the impugned order on that fraud (sic ground) especially because in the explanation of the petitioner, no point worth consideration was put forward. The Government did advert to the explanation given by the petitioners and rejected the same. No doubt, the Government misquoted the representation of the petitioners giving an impression that the petitioners had the benefit of Rent-Free Quarters; but, that is a matter of insignificance. The basis of the decision taken in the impugned order did not rest on the alleged fact that the petitioners were enjoying the benefit of Rent Free Quarters. The basis of the order is that the petitioners are not entitled to draw House Rent Allowance over and above that they arc called upon to pay towards rent for the occupation of the Official Quarters. As far as the principle underlying the impugned Government Order, no exception has been taken and could be legitimately taken. By drawing the House Rent Allowance at a much higher scale than the actual house rent paid, the petitioners did get an unintended advantage. This anamolous situation was sought to be rectified by changing the condition of service with regard to payment of HRA so that the petitioners who came within the fold of the Government service could be treated of par with other Government servants. The petitioners cannot be heard to say that the House Rent Allowance should be a source of profit making.

The only other question that remains is about the recovery of the amounts paid to the petitioners as House Rent Allowance from 1-4-1986 to 30-11-1988. This recovery with retrospective effect ordered by the impugned G.O. cannot be legally sustained. The benefit of House Rent Allowance can be withdrawn only prospectively that is to say, from the date the conditions of service were duly altered by the Government in terms of what is provided for by clause-6(a) of the Agreement. The change in the conditions of service was validly brought about for the first time by the impugned Government Order dated 3-11-1988. The excess payments made earlier to that date cannot be recovered by the respondent.

Accordingly, we allow the writ petition to this limited extent. The excess amounts paid to the petitioners i.e. the differences between the actual rent paid for the quarters and the House Rent Allowance drawn can be recovered from the petitioners'' salary or pension payable from 1-1-1989 onwards in fifteen equal instalments.