Holding

The termination orders based on the Lokayukt report were illegal as the employees were not afforded notice and hearing, and the appointments were in compliance with the applicable service rules.

Summary

The Madhya Pradesh State Cooperative Bank appointed 60 clerks‑cum‑typists on an ad‑hoc basis, later regularising them after written exams, interviews, probation and a security bond, in accordance with the Staff Service Rules. The Bank later terminated 58 of them on 27‑Oct‑1997, relying on a Lokayukt report that alleged illegal appointments, without issuing notice or hearing to the employees. The employees challenged the termination, arguing that the appointments complied with the Rules and that the Lokayukt lacked jurisdiction to terminate lower‑grade staff without due process. The Supreme Court held that the termination was illegal as the employees were denied natural‑justice rights and that the appointments had been made following the statutory procedure; consequently the termination orders were set aside and the High Court’s direction to remand the matter was overturned. The Court also left the validity of Rule 61 open.

Issues considered

The legality of terminating the clerks‑cum‑typists without notice and hearing under the Madhya Pradesh Cooperative Societies Act and Staff Service Rules.
Whether the appointments complied with the mandatory provisions of the Staff Service Rules, including notification to the employment exchange and reservation requirements.
Whether Rule 61 of the Staff Selection Rules is ultra‑vires or unconstitutional.
Whether the Lokayukt has jurisdiction to examine and direct termination of lower‑grade employees of a cooperative bank.
The appropriateness of the High Court’s order to set aside the terminations and remit the matter to the Cooperative Tribunal.

Legislation cited

Madhya Pradesh Cooperative Societies Act, 1960s. 55(1)
Madhya Pradesh Lokayukt Evam Up-Lokayukt Adhiniyam, 1981s. 10, s. 12

Subjects

public appointmentsterminationnatural justiceLokayukt jurisdictionstaff service rulesregularisationRule 61cooperative societiesemployment exchangeselection processconstitutional breach

Judgment

)

M.P. STATE COOP. BANK LTD., BHOPAL A
V.
NANURAM YADAV AND ORS.

SEPTEMBER 25, 2007
B
[TARUN CHATTERJEE AND P. SATHASIVAM,JJ.]

Service law:
Madhya Pradesh Lokayukt Evam Up-Lokayukt Adhiniyam, C
1981-ss. l 0 and 12-Cooperative Bank-Clerk-cum-typist-
Termination on the ground of illegality in selection process-
Challenged on the ground that show cause notice not issued nor
opportunity of hearing afforded in the enquiry by Lokayukt-Held:
Termination not legal-Employees concerned were subjected to D
written test, interview, execution of security bond and satisfied Staff
Service Rules-Madhya Pradesh Cooperative Societies Act, 1960- .
s. 55(1)-Madhya Pradesh Rajya Sahakari Bank Employees (Terms of,
employment and Working Conditions) Rules, 1976.
Public appointments-Principles to be followed-Reiterated. E

On 24.6.1994, the Managing Director of the appellant-Bank sent
a letter to the Cooperative Commissioner and Registrar, Cooperative
Societies, M.P. requesting for filling up of at least 60 posts against 100
vacant posts of Clerks-cum-Typists. Pursuant to the said request, F
Additional Registrar, by his reply dated 29.6.1994 granted permission
to appoint 40 persons on ad hoc basis for six months mentioning that
meanwhile the Bank would take steps to fill up the vacant posts by issuing
legal advertisement and keeping in view the reservation under
Government Rules and Staff Service Rules. G

On 11.11.1994, permission to fill up 20 more posts was granted.
Pursuant to the aforesaid sanction letters, on 31.01.1995, the Bank
appointed 60 clerks-cum-typists on ad-hoc basis for a period of six
307 H
308 SUPREME COURT REPORTS (2007] 10 S.C.R.

A months. After appointment, two employees left the services of the Bank.
After expiry of six months, as envisaged under Rule 22(a) of the Staff ·~ -
Service Rules, 1976,atl the appointed persons appeared in the written
examination and were successful. Those persons appeared for an
interview before the Selection Committee. The Selection Committee,
B after satisfying itself, recommended their names for appointment on
regular, basis. AU the.·appointed persons were asked by the· Bank to
furnish Security Bond for a period of three years with a deposit of
Rs.5,000/-. All the appointees complied with the said condition. While
they are discharging their duties, taking into consideration their "' -
C perfonnanceetc., the appointing authority, under Rule 14(b), confirmed
their services
. on the post of Clerks-cum.:..typists
. on'30!10.1996.

.On 27.10.1997, without·any notice or assigning any reason, the
Managing Director of the Bank issued termination order under.Rule
D 61 of the Rules. Aggrieved by those orders, the affected persons filed
writ petition before the High Court claiming that the termination order
was issued by the Bank on the basis of the direction dated 01.08.1997
issued by the'Commissioner. Cooperatives-cum"-Registrar,- to· the
Managing Director of the Bank on the foundation that the Lokayukt
E had found 58 clerks-cum-typists were illegally appointed on the post,
hence it was imperative to terminate their services taking aid of Rule
61 ofthe Staff Service Rules. High Court allowed the writ petition. The
Bank and the employees both filed appeals before this ·court.

Allowing the ~ppeal of.enwloyees and di~posing of the Bank's
F appeal, the Court

HELD: 1. It is clear that in the matter of public appointments, the
following principles·are to be followed: (1) .The appointments made
without following the appropriate procedure under·the·Rules/
G Government. Circulars and without advertisement or.inviting
applications from the open market would amount to breach ofArts.14
and 16 ofthe Constitution oflndia. (2) Regularisation cannot be a mode
of appointment. (3) An appointment made in violation ofthe mandatory
provisions of the statute and in particular, ignoring the minimum
H educational qualification and other essential qualification would be wholly
j
M.P. STATE COOP. BANK LTD., BHOPAL v. NANURAM 309
YADAV

illegal. Such illegality cannot be cured by taking recourse to A
regularization. (4) Those who come by back door should go through that
door. (5) No regularization is permissible in exercise of the statutory
power conferred under Art.162 ofthe Constitution ifthe appointments
have been made in contravention of the statutory Rules. (6) The Court
should not exercise its jurisdiction on misplaced sympathy. (7) If the. B
mischief played is so widespread and all pervasive, affecting the result,
so as to make it difficult to pick out the persons who have been unlawfully
benefited or wrongfully deprived of their selection, it will neither be
possible nor necessary to issue individual show-cause notice to each
selectee. The only way out would be to cancel the whole selection. (8) C
When the entire selection is stinking, conceived in fraud and delivered
in deceit, individual innocence has no place and the entire selection has
to be set aside. [Para 20] (322-E, F, G, H; 323-A, B, C, D]
Krishan Yadav & Anr. v. State ofHaryana and Ors., (1994] 4 SCC D
165; Union ofIndia and Ors. v. 0. Chakradhar, [2002] 3 SCC 146; A.
Umarani v. Registrar, Cooperative Societies and Ors., (2004] 7 SCC 112,
referred to.
2.1. The former General Manager of the Bank was examined as
witness No.2 before the Additional Registrar wherein he specifically E
deposed to the effect that all qualified applicants were invited as per
the service rules. They had to undergo written examir,ation and those
who were found successful were required to face interview by the
Selection Committee of the Bank based on the report of the Selection
Committee: According to him, those persons were appointed by the F
competent authority under the service Rules. In r~spect of a specific
question, namely, whether the Bank had written a letter to the
employment exchange for the names to be sent for the vacant posts,
he answered "yes, the letter was sent two months before". When he
was asked whether any list was received from the employment G
exchange, he answered "No". In respect of another question whether
the Bank had given advertisement prior to the regular appointment, he
answered "No, because as per the Rules, it was necessary to write to
the employment exchange and that was done". When he was confronted
H
310 SUPREME COURT REPORTS (2007] IO S.C.R.

A with the letter dated 27.04.1996 of the employment exchange wherein
-~-
it is stated that no such letter calling for a list was ever received,' he
emphatically denied and asserted that "false entry is not done by the
Bank". After verifying the records, he concluded that all those persons
who possess the necessary qualifications as per the service Rules of
B the Bank alone were given appointments after completing the formalities
in accordance with the Rules. [Para 26) (325-A, B, C, D, E]

2.2. The then Assistant Manager (Admn.) in.1~,e Bank deposed
before the same authority that from the year 19JS_;Jlie writ petitioners
C wer~ working with the Bank. According to hipi, initially they were
appointed on ad-hoc basis in the post of clerk-cum-typist, thereafter, in
the month ofJuly, 1995, the employment exch?tnge was informed and
they were appointed on a regular pay-scale. In the cross-examination,
after explaining the procedures to be followed, he asserted that in the
D case of the petitioners also those procedures were adopted and prior
notice was published. He further reiterated that all the candidates who
were successful in the interview were appointed and only then the
Selection Committee selected those persons and all the selected
candidates were kept under probation for a period of one year. He also
E informed before the Addi. Registrar that all the successful candidates
who completed their probation period were asked to execute a bond.
As per the bond, the appointees were to serve the Bank at least for
three years and in fact deposited Rs.5,000/- as security. He also
highlighted that though some of the selectees sought permission to
F pursue higher studies but permission was not granted due to the
undertaking given by them by way of executing a security bond.
[Para 27) [325-E, F, G, H; 326-A, B)
2.3. The above-mentioned statement of General Manager and
Assistant Manager (Admn.) of the Bank cannot be lightly ignored. The
G writ petitioners demonstrated that taking note of large number of
vacancies in the post of clerk-cum-typist and urgency in filling up the
same due to administrative reasons, after getting proper sanction from
the competent authority i.e. Registrar, intimating the same to the
employment exchange. They were initially appointed for a period ofsix
H months on ad-hoc basis and thereafter by conducting written
M.P. STATE COOP. BANK LTD., BHOPAL v. 311
NANURAMYADAV
examination followed by interview, they were selected. After completion A
of probationary period of one year, these persons were posted in the
regular cadre. Though few selectees were related to the then Managing
Director of the Bank, on this ground alone, their appointments cannot
be interfered with. The High Court has lost sight of relevant material
aspects and confirmed the order of termination mainly based on the B
report of the Lokayukt. [Para 28) [326-B, D, E, F, G)

3.1. The Government of Madhya Pradesh in order to make
provision for the appointment and functions of certain authorities for
the enquiry in the allegations against public servants and for matters C
connected therewith, enacted the M.P. Lokayukt Evam Up-Lokayukt
Adhiniyam, 1981. S.10 makes it clear that both Lokayukt or Up-
Lokayukt in each case before it, decide the procedure to be followed
for making the enquiry and in so doing ensure that the principles of
natural justice are satisfied. S.12 mandates that after enquiry into the
D
allegations, the Lokayukt or Up-Lokayukt is satisfied that such
allegation is established, submit a report in writing, communicate his
findings and recommendations along with the relevant documents,
materials and other evidence to the competent authority.
[Para 29) [326-G; 327-G; 328-A) E

3.2. In view of s.2(g)(iv), officers of the apex society or central
society under M.P. Cooperative Societies Act are amenable. After the
appointments of the aforesaid 58 employees, a complaint was lodged
with Lokayukt and the said complaint was investigated by the Lokayukt
Though it is stated that the Lokayukt afforded an opportunity of hearing F
to the Chairman of the Bank as well as officials of the Bank and
Cooperative Department, admittedly the employees were not afforded
notice or opportunity of being heard in the enquiry by the Lokayukt.
On receipt of the report of Lokayukt, the competent authority
forwarded the same to the Registrar of Cooperative Societies who, in G
turn, without taking a decision or an order by following the service rules
or any of the provisions of the M.P. Cooperative Societies Act
mechanically directed the Managing Director of the Bank to terminate
all the appointees. Though the officers of the apex society under M.P.
H
__ ,
312 SUPREME COURT REPORTS [2007] 10 S.C.R.

·4-
A Cooperative SoCieties Act are amenable to thejurisdiction of.the
Lokayukt, the persons concerned who are lower~grade emplOY,.ees i.e.
clerks-cum-typists·cannot be terminated without following the service
rules applicable to them. The elaborate procedures are to be followed
before terminating the service of an emplOyee under the provisions of
B the M.P. Cooperative Societies Act and the service rules.made
thereunder. In those circumstances, in the absence of opportunity to
the employees, the termination order which was sent at the instance of
--1. )>
Commissioner, Cooperative Societies based on the report ofLokayukt
cannot be sustained. (Para 29] [328-A, B, C, D, E, F, G]
c
4. The authorities were not justified in terminating the services of
th'ese workmen. It is unnecessary to go into the correctness or otherwise
of Rule 61 of the Rules and the said issue is left open:Th'ere is no need
to remit th·e matter to the Registrar or any other authority for
D
determination of their status. The said direction of the High Court is
also liable to be set aside. [Para 30] [328-H; 329-A; BJ
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4481 of
2007.
From the Judgment and Order dated 19.4.2006 of the High Court
E
ofM.P. atJabalpurin CWP No. 1421 of2005.
WITH
C.A. Nos. 4482 and 4483 of 2007.
4.

F S.K. Gambhir; S.K. Dubey, Sanjay Kapur, Rajiv Kapur, Arti Singh,
Harsh Pata~ T.G. Narayanan Nair, Krishna Mohan Shukla and Anil
Kumar Jha for the Appellant.
B.S. Banthia, Vikas Upadhyay, Naven Sharma and Ramesh Babu
M.R. for the Respondents.
G
The Judgment of the Court was delivered by
P. SATHASIVAM, J. (1) Leave granted in all the special leave
petitions.
H (2) How public appointments to be made, whether Lokayukt
;
~-

M.P. STATE COOP. BANK LTD., BHOPAL v. 313
NANURAMYADAV [SATHASIVAM,J.]
__ ,_, -
constituted under the M.P. Lokayukt Evam Up-Lokayukt Adhiniyam, A
1981 has jurisdiction to go into the appointment of employees of the M.P.
State Cooperative Bank and whether 60 clerks-cum-typists appointed
by the said Bank were in accordance with the service rules are the
questions to be decided in these appeals?
B
(3) The Madhya Pradesh State Cooperative Bank Ltd., through its
Managing Director challenges the order dated 19.04.2006 passed by the
.. >-- Division Bench of High Court of Madhya Pradesh at Jabalpur in Writ
Petition No. 1421 of2005, by way of Special Leave Petition No. 12236
of2006 before this Court. Questioning the very same order, some of the C
writ petitioners, numbering 26, who earlier approached the High Court,
filed Special Leave Petition No. 19499of2006 before this Court. The
other writ petitioners, numbering 27, who also agitated the matter before
the High Court questioning certain directions filed another special leave
petition No. 3979 of 2007 before this Court. Inasmuch as the issues D
raised and challenge in all these petitions relate to the very same order of
the High Court and are interconnected, they are being disposed of by
the following common judgment.
(4) The brief facts, in nutshell, are as follows:
E
On 24.06.1994, the Managing Director of the M.P. State
Cooperative Bank Ltd., (hereinafter referred to as 'the Bank') requested
the Cooperative Commissioner and Registrar of the Cooperative Societies,
M.P., Bhopal for appointment of 60 ad-hoc clerks-cum-typists in the
Bank. By letter dated 29.06.1994, conditional sanction was granted for F
appointment of 40 clerks-cum-typists on ad-hoc basis for 6 months
mentioning that in the meantime the Bank has to take steps to fill up the
vacant posts by issuing advertisement and comply the Rules keeping in
view the reservation under the Government Rules. Again, by letter dated
25.10.1994, the Managing Director of the Bank requested for sanctioning G
the appointment of another 20 clerks-cum-typists on ad-hoc basis. By
letter dated 11.11.1994, the Cooperative Commissioner and Registrar
sanctioned the appointment of another 20 clerks-cum-typists on ad-hoc
basis for 6 months on the condition as mentioned in the earlier letter dated
29.06.1994. H
314 SUPREME COURT REPORTS [2007] 10 S.C.R.

A (5) Pursuant to the aforesaid sanction letters, on 31.01.1995, the ·..f-
Bank appointed 60 clerks-cum-typists on ad-hoc basis for a period of
six months. After appointment, two employees left_ the services of the
Bank.
B (6) After expiry of six months, as envisaged under Rule 22(a) of
the Staff Service Rules, 1976, all the appointed persons (writ petitioners
before the High Court) were required to appear in the written examination
so that they could be appointed for a period of one year as probationers.
All of them took the written examination and became successful. Those
C persons were required by the Bank to appear for an interview on
21.07.1995 before the Selection Committee. The Selection Committee,
after satisfying itself, recommended their names for appointment on regular
basis. All the appointed persons were asked by the Bank to furnish
service-cum-security Bond for a period of three years with a deposit of
D Rs.5,000/- as security in the form ofFDRs. All the appointees complied
with.the said condition. While they are discharging their duties, taking into
consideratic'Il of their performance etc., the appointing authority, under
Rule 14(b), confirmed their services on the post of clerks-cum-typists on
30.10.1996. When the matter stood thus, according to the writ petitioners,
E all of a sudden, without any notice or assigning any reason, the Managing
Director of the Bank issued termination order under Rule 61 of the Rules
on 27.10.1997. Aggrieved by those orders, the affected persons
approached the High Court. It is also the claim of the affected persons
that after getting the order of termination they came to know that the
F termination order was issued by the Bank on the basis of the direction
dated 01.08. 1997 issued by the Commissioner Cooperatives-cum-
Registrar to the Managing Dire~tor of the Bank on the foundation that
the Lokayukt had found 58 clerks-cum-typists had been illegally appointed
on the post, hence it was imperative to terminate their services taking aid
G of Rule 61 of the Si:aff Service Rules.
(7) The Division Bench of the High Court, by impugned order, while
allowing the writ petition, came to the following conclusion:-
"i. The Rule 61 of the Staff Seiection Rules is ultra-vires and
unconstitutional.
H
I
1-
M.P. STATE COOP. BANK LTD., BHOPAL v. 315
NANURAM YADAV [SATHASIVAM, J.]
(ti) The order dated 04.02.2005 passed by the Tribunal vide A
Annexure.P4 is quashed.
(rit) The issue as to the status earned by the writ petitioners is
remanded to the M.P. Cooperative Tribunal for adjudication.
(iv)-The M.P. Cooperative Tribunal shall finalise the lis within a B
period of four months from the date of order."
Questioning the above-said conclusions/directions, as stated earlier, the
. )-
Bank as well as their employees/writ petitioners filed the above appeals.
(8) We heard Mr. S.K. Gambhir and Mr. S.K. Dubey, learned C
senior counsel and Mr. Krishna Mohan Shukla, learned counsel for the
appellant and Mr. B.S. Banthia and Mr. Ramesh Babu M.R., learned
counsel for the respondents.
(9) Mr. S.K. Gambhir, learned senior counsel, appearing for the D
Bank, raised the following contentions:
(i) The appointment of 58 employees is not only contrary to the
directions of the Commissioner Cooperative and Registrar,
Cooperative Societies dated 29 .6.1994 for holding regular
appointments after adve1tisement etc. but also contrary to Rule E
21 of the Rules;
(ii) The process adopted was a farce as only these candidates
were put to written test and interview in which none of them
was unsuccessful. The selection itself was a result of favourtism
and nepotism and contrary to the provisions of Arts. 14 and F
16 of the Constitution oflndia;
(tii) When the initial appointment itself was illegal and void ab
initio, such appointments could not be made regular and there
was no question to determine their status; G
(iv) Lokayukt, who has jurisdiction upon enquiry, found that all the
appointments were farce, pre-planned and intended to help
the favoured persons. Since the said report has not been set
aside, the recommendation of the Lokayukt is binding on the
Government; H
I
.-f-
316 SUPREME COURT REPORTS [2007] 10 S.C.R.

A (v) The vaHpity of Rule 61 was not· called for because the
employees were not entitled to any notice and their services
deserve to be dispensed with straightaway.
(10) Mr. S.K. Dubey, learned senior counsel and Mr. Krishna Mohan
B Shukla, learned counsel, appearing for the employees, raised the following
contentions:
(i) The High Court having fm.fud Rule 61 invalid, there is no need
to remit the matter to the rabunal to find o~t the status of
employees; ., "
C (Ii) Lokayukt has no jurisdiction to go into the a~pdmtn1ent of these
employees;
(iii) Inasmuch as the employees concerned were subjected to
written test, interview, executed security bond, successful in
D their probation period, satisfied Staff Service Rules, the order
of the Managing Director terminating their services without
notice and enquiry merely based on the direction of the
Registrar of the Cooperative Societies, cannot be sustained;
(iv) In any event, the Registrar is obliged to examine the report of
E the Lokayukt before accepting the recommendations made
therein;
(11) We have considered the rival contentions and the relevant
materials.
F (12) Before analyzing the claim of both the parties, it is useful to
refer to relevant provisions of the Staff Service Rules of Madhya Pradesh
Rajya Sahakari Bank Maryadit which were approved by the Registrar,
Co--operative Societies, M.P. Bhopal and made applicable with effect from
19th November, 1976. Chapter-3 deals with 'Classification of
G Employees'. Rule 3(b) defines "Permanent Employees" which reads as
follows:
")(b) A "Permanent Employee" means an employee who has been
appointed as permanent employee or who has been confirmed on
H a vacant permanent post as such."
I
J-
M.P. STATE COOP. BANK LTD., BHOPAL v. 317
NANURAM YADAV [SATHASIVAM, J.)
--~-
(13) Chapter-6 deals with selection of personnel in the Bartl(. Rules A
21 and 22(a), which are relevant, read as follows:
"21. All vacancies falling within the purview of the employment
exchange (Notification of vacancies) Act, 1959 shall be duly
notified to the employment exchange concerned. The post/posts B
may also be advertised in the local or All India Newspapers at
the option of the appointing authority. The advertisement should
give scales of pay, dearness allowance, the essential and preferential
qualifications, age limit etc."
"22(a) Candidates for the posts in Grade Vth and such other posts C
shall have to undergo a written test in the manner prescribed by
the 'Staff Committee'. C~didates passing at such test shalI be
eligible for appointment only-after the selection at personal interview
by the 'Selection Committee' consisting of Chairman of the Bank
or his nominee Director, Registrar, Cooperative Societies M.P. or D
his nominee not below the rank of Joint Registrar, Cooperative
Societies, M.P. & Managing Director of the Bank for deciding the
selection of employees.
Provided further that for the selection of technical staff Chief E
-Engineer of the Bank shall additional member of the committee. It
is also provided that when elected board ceases to function, by
any reason, Chairman of the Bank shall be replaced by the Officer-
In-Charge of the Bank remaining members of the 'Selection
Committee' will remain the same. The meeting of 'Selection F
Committee' will be presided by the Chairman of the Bank/Officer-
In-Charge of the Bank as the case may be. Presence of all the
members of the committee shall be necessary for the meeting."

(14) As per Rule 23(a)(iv), employees in Grade III, IV and V, the
Selection Authority is Selection Committee and the Appointing Authority G
is Managing Director/General Manager/Deputy General Manager or any
person authorized by the Managing Director. Rule 23(c) makes it clear
that appointment made to fill a vacancy of a permanent post shall be made
on probation unless otherwise speci~cally mentioned in the order of
H
_,._
\

318 SUPREME COURT REPORTS [2007] 10 S.C.R.

A appointment given to the employee.

(15) Under Section 55(1) of the Madhya Pradesh Cooperative
Societies Act, 1960 (hereinafter referred to as "the Act"), the Registrar
of Cooperative Society has been given power to frame Service Rules of
B the employees working under different cooperative institutions and in
furtherance of the powers given under the aforesaid provision, the
Registrar has framed the service conditions for the employees of the
appellant-Bank, which are called Madhya Pradesh Rajya Sahakari Bank
Employees (Terms of Employment and Working Conditions) Rules, 1976.
C It is also brought to our notice that these Staff Service Rules have since
been amended from time to time. We have already referred to the Rules
which are applicable to the issues raised in these appeals.
(16) Mr. S.K. Gambhir,.learned senior counsel appearing for the
appellant-Bank; by drawing our attention to the principles laid down by
D this Court in various decisions in respect to public appointments, submitted
that inasmuch as the entire procedure and the selection made are contrary
to the Rules, first those persons are not entitled to any notice in compliance
with principles of natural justice and secondly all of them are liable to be
sent out without further enquiry. In support of his subir.issicn, he relied
E on the decision of this Court in Krishan Yadav & Anr. v. State of
Haryana & Ors., [1994] 4 SCC 165. While considering fraud, nepotism,
favouritism and arbitrariness in public appointments, this Court, in
paragraphs 19 and 20 of the judgment, laid down the following principles
which read as under:
F
"19. It is highly regrettable tl1at the holders of public offices both
big and small have forgotten that the offices entrusted to them are
sacred trusts. Such offices are meant for use and not abuse. From
a Minister to a menial everyone has been dishonest to gain undue
advantages. The whole examination and the interview have turned
G
out to be farcical exhibiting base character of those who have been
responsible for this sordid episode. It shocks our conscience to
come across such a systematic fraud. It is somewhat surprising the
High Court should have taken the path of least resistance stating
in view of the destruction of records, that it was helpless. It should
H
1
1-
(

M.P. STATE COOP. BANK LTD., BHOPAL v. 319
NANURAM YADAV [SATHASIVAM, J.]
have helped itself. Law is not that powerless. A
-~·

20. In the above circumstances, what are we to do? The only
proper course open to us is to set aside the entire selection. The
plea was made that innocent candidates should not be penalised
for the misdeeds of others. We are unable to accept this argument. B
When the entire selection is stinking, conceived in fraud and
delivered in deceit, individual innocence has no place as "Fraud
unravels everything". To put it in other words, the entire selection
.. -~
is arbitrary. It is that which is faulted and not the individual
candidates. Accordingly we hereby set aside the selection of C
Taxation Inspectors."

(17) In the case of Union of India & Ors. v. 0. Chakradhar,
[2002] 3 SCC 146, this Court following the law laid down in Krishan
Yadav 's case (supra), upheld the Railway Board's decision to cancel the
selection on the ground of fraud committed by the Selection Authorities. D
This Court, in paragraph 12 of the judgment, concluded as under:
"12. As per the report of the CBI whole selection smacks of mala
fides and arbitrariness. All norms are said to have been violated
with impunity at each stage viz. right from the stage of entertaining E
applications, with answer-sheets while in the custody of Chairman,
in holding typing test, in interview and in the end while preparing
the final result. In such circumstances it may not be possible to pick
out or choose any few persons in respect of whom alone the
selection could be cancelled and their services in pursuance thereof F
could be terminated. The illegality and irregularity are so inter-mixed
with the whole process of the selection that it becomes impossible
to sort out the right from the wrong or vice versa. The result of
such a selection cannot be relied or acted upon. It is not a case
where a question of misconduct on the part of a candidate is to G
be gone into but a case where those who conducted the selection
have rendered it wholly unacceptable. Guilt of those who have been
selected is not the question under consideration but the question
is could such selection be acted upon in the matter of public
employment? We are therefore of the view that it is not one of H
320 SUPREME COURT REPORTS [2007] 10 S.C.R.
-+
'

A those cases where it may have been possible to issue any individual
notice of misconduct to each selectee and seek his explanation in
regard to the large scale widespread and all pervasive illegalities
and irregularities committed by those who conducted the selection
which may of course possibly be for the benefit of those who have
B been selected but there may be a few who may have deserved
selection otherwise but it is difficult to separate the cases of some
of the candidates from the rest even if there may be some. The
decision in the case of Krishan Yadav (supra) applies to the facts
of the present case. The Railway Board's decision to cancel the ~· .
c . selection cannot be faulted with. The appeal therefore deserves to
be allowed."

(18) In the case of A. Umarani v. Registrar, Cooperative Societies
& Ors., [2004] 7 SCC 112, this Court has reiterated the principles to
D be followed in the matter of public employment. In that case, in the State
of Tamil Nadu, a large-number of employees of Cooperative Societies
were appointed without notifying the vacancies to the employment
exchange and without following the other mandatory provisions of the Act
and the Rules framed thereunder relevant to recruitment. A large number
E of appointees furthermore did not have the requisite educational
qualification or other qualification like cooperative training, etc. The
reservation policy of the State was not followed by the cooperative
societies. The recruitments were made beyond the permissible cadre
strength. With a view to condone the serious lapses on the part of the
F cooperative societies in making such appointments in illegal and arbitrary ,. .
manner, the State Government issued various orders from time to time,
in terms whereof such appointments were sought to be regularized fixing
a cut-off date therefor. Latest order was G.O. Ms. No. 86 dated
12.3.2001 by which the cut.:off date was extended up to 11.3.2001 and
G which sought to regularize appointments made after 8. 7.1980 without
notifying the employment exchange in respect of those employees who
had completed 480 days of service in two years, purported to be in terms '.I--
of the T.N. Industrial Establishments (Conferment of Permanent Status
to Workmen) Act, 1981. The legality and validity of the said Government
H order was challenged before the High Court. The High Court, inter alia,
j
M.P. STATE COOP. BANK LTD., BHOPAL v. 321
NANURAM YADAV [SATHASIVAM, J.]
held that the said order shall not operate for regularization of any employee A
recruited by the cooperative societies in violation of sub-rule (1) of Rule
149 of the T.N. Cooperative Societies Rules, 1988, as amended by G.O.
Ms. No. 212 dated 4.7.1995. The primal question for consideration in
that appeals before this Court was whether the State had the requisite
authority to direct regularization of services of the employees of the B
cooperative societies by reason of the impugned order. While dismissing
the appeals, this Court, in paragraphs 39, 40, 41, 45, 68 and 69, held as
under:
"39. Regularisation, in our considered opinion, is not and cannot C
be the mode of re~ruitment by any "State" within the meaning of
Article 12 of the Constitution oflndia or any body or authority
~

governed by a Statutory Act or the Rules framed thereunder. It is
also now well-settl~d that an appointment made in violation of the
mandatory provisions of the Sia.tute and in particular ignoring the D
minimum educational qualification ·~d other essential qualification
would be wholly illegal. Such illegality cannot be cured by taking
recourse to regularisation. (See Stat~ ofHP. v. Suresh Kumar
Verma and Anr., [1996] 7 SCC 562):

40. It is equally well-settled that those who come by backdoor E
should go through that door. (See State of UP. and Ors. v. UP.
State Law Officers Association & Ors., [1994] 2 SCC 204).

41. Regularisation: furthermore cannot give permanence to an
employee whose services are ad-hoc in nature.
F
45. No regularisation is, thus, permissible in exercise of the statutory
power conferred under Article 162 of the Constitution if the
appointments have been made in contravention of the statutory
Rules.
G
68. In a case of this nature this court should not even exercise its
jurisdiction under Article 142 of the Constitution of India on
misplaced sympathy.
69. In Teri Oat Estates (P) Ltd. v. UT, Chandigarh and Ors.,
H
322 SUPREME COURT REPORTS [2007] 10 S.C.R.

A [2004] 2 SCC 130, it is stated: . ~
"We have no doubt in our mind that sympathy or sentiment by itself
cannot be a ground for passing an order in relation whereto the
appellants miserably fail to establish a legal right. It is further trite
that despite an extra-ordinary constitutional jurisdiction contained
B
in Article 142 of the Constitution of India, this Court ordinarily
would not pass an order, which would be in contravention of a
statutory provision."

(19). In the case of Indian Drugs & Pharmaceuticals Ltd. v.
C Workmen, Indian Drugs & Pharmaceuticals Ltd., [2007] 1 SCC 408,
after referring the decision in Uma Devi's case (supra) and other decisions,
this Court observed that the appointments made without following the
appropriate procedure under the Rules/Government Circulars and without
advertisement or inviting application from the open market was held to
D be in fragrant breach of Arts. 14 and 16 of the Constitution of India. It
was further held that the Rules of recruitment cannot be relaxed and the
Court/Tribunal cannot direct regularization of temporary appointees de
hors the Rules, nor can it direct continuation of service of a temporary
employee (whether called a casual, ad hoc or daily-rated employee) or
E payment of regular salaries to them.
(20) It is clear that in the matter of public appointments, the
following principles are to be followed:
(1) The appointments made without following the appropriate
F procedure under the Rules/Government .Circulars and without
advertisement or inviting applications from the open market
would amount to breach of Arts. 14 arid 16 of the Constitution
·. oflndia.
(2) Regularisation cannot be a mode of appointment.
G
(3) An appointment made in Violation of the mandatory provisions
of the statute and in particular, ignoring the minimum
educational qualification and other essential qualification would
be wholly illegal. Such Hlegality cannot be cured by taking
H recourse to regularization.
{
)
M.P. STATE COOP. BANK LTD., BHOPAL v. 323
NANURAM YADAV [SATHASIVAM, J.]

"~
(4) Those who come by back door should go through that door. A
(5) No regularization is permissible in exercise of the statutory
power conferred under Art. 162 of the Constitution of India
if the appointments have been made in contravention of the
statutory Rules. B
(6) The Court should not exercise its jurisdiction on misplaced
sympathy.
..,._
(7) If the mischief played so widespread and all pervasive,
'
affecting the result, so as to make it difficult to pick out the c
persons who have been unlawfully benefited or wrongfully
deprived of their selection, it will neither be possible nor
necessary to issue individual show-cause notice to each
selectee. The only way out would be to cancel the whole
selection. D
(8) When the entire selection is stinking, conceived in fraud and
.l delivered in deceit, individual innocence has no place and the
entire selection has to be set aside.
(21) Keeping in mind the abovementioned principles, we have to E
consider whether the appointments were made in accordance with the
Rules by following the procedure? If our answer is in the affirmative, all
appointments have to be upheld and the orders terminating their services
are to be quashed.
F
(22) By letter dated 24.6.1994 (Annexure P-1 ), Mr. Bairam Prasad
Sharma, Managing Director of the Bank requested the Cooperative
Commissioner and Registrar, Cooperative Societies, M.P. that against 100
vacant posts of Clerks-cum-Typist, at least 60 posts should be filled up
from ad hoc appointment of eligible persons so that work of the Bank G
may be executed efficiently. Pursuant to the said request, Mr. RN. Sharda,
Additional Registrar, by his reply dated 29.6.1994 (Annexure P-2), after
considering the request of the Managing Director of the Bank permitted
to appoint 40 persons on ad hoc basis for six months. In the same
proceedings, the Additional Registrar reiterated that the posts should be H
filled up within six months after issuing legal advertisement and according
324 SUPREME COURT REPORTS [2007] IO S.C.R.

A to Rules and keeping in view the reservation under Government Rules.
..
(23) By letter dated 11.11.1994 (Annexure P-3), the Joint Registrar
accorded pennission to fill up 20 more posts for six months on ad hoc
basis under prescribed qualifications.
B (24) Annexures P-1, P-2 and P-3 make it clear that based on the
large number of vacancies in the post of Clerk-cum-Typist, and on the
request.of the Managing Director of the Bank, the Registrar who is
empowered to sanction, pennitted the Bank to fill up 60 vacant posts by
C following the procedure.
(25) Mr. Gambhir, learned senior counsel, submitted that it was the
complaint of the Bank that all the above-mentioned vacant posts were
filled up without following the procedure prescribed in Rules 21, 22, 23
of the Rules. In other words, according to the Bank, without proper
D intimation to the employment exchange and advertisement in the
newspapers mentioning all the details and without following the rule of
reservation, these persons were appointed and subsequently regularized
in the cadre of service. Rule 21 which we have already extracted in the
E paragraphs (supra) makes it clear that the vacancies should be notified
to the employment exchange. In other words, intimation to the
employment exchange and calling for a list of candidates is a mandatory
one. On the other hand, the above Rule makes it clear that advertisement
in the local or all India newspapers is at the option of the appointing
F authority. To put it clear, ifthere is proper intimation to the employment
exchange regarding the vacancy and a request for eligible candidates, that
would satisfy Rule 21. It is the specific case of the Bank that the said
Rule was not fully complied with. In support of his submission, learned
senior counsel appearing for the Bank, heavily relied on the report of
G Lokayukta. We shall deal with the complaint, enquiry and ultimate decision
by the Lokayukt in the later paragraphs.
(26) Insofar as the compliance of the Rules is concerned, learned
counsel appearing for the employees, by drawing our attention to the
. H statement made by the officers of the Bank before the Additional Registrar,
contended that there was no violation of any of the Rules. One Mr. S.
I
)
M.P. STATE COOP. BANK LTD., BHOPAL v. 325
NANURAM YADAV [SATHASIVAM, J.]
Kumar, former General Manager of the Bank was examined as witness A
-~
No.2 before the Additional Registrar wherein he specifically deposed to
the effect that all qualified applicants were invited as per the service rules,
have to undergo written examination and who found successful were
required to face interview by the Selection Committee of the Bank based
on the report of the Selection Committee. According to him, those persons B
were appointed by the competent authority under the service Rules. In
respect of a specific question, namely, whether the Bank had written a
letter to the employment exchange for the names to be sent for the vacant
I '>- posts, he answered "yes, the letter was sent two months before". When
he was asked whether any list was received from the employment c
exchange, he answered "No". In respect of another question whether the
Bank had given advertisement prior to the regular appointment, he
answered "No, because as per the Rules, it was necessary to write to
the employment exchange and that was done". When he was confronted
with the letter dated 27.04.1996 of the employment exchange wherein it D
is stated that no such letter calling for a list was ever received, he
emphatically denied and asserted that "false entry is not done by the
Bank". After verifying the records, he concluded that all those persons
who possess the necessary qualifications as per the service Rules of the
Bank alone were given appointments after completing the formalities in E
accordance with the Rules.
(27) One Mr. A.K.Parsi, then Assistant Manager (Admn.) in the
Bank deposed before the same authority that from the year 1995, the
). writ petitioners were working with the Bank. According to him, initially
F
they were appointed on ad-hoc basis in the post of clerk-cum-typist,
thereafter, in the month of July, 1995, the employment exchange was
informed and they were appointed on a regular pay-scale. In the cross-
examination, after explaining the procedures to be followed, he asserted
that in the case of the petitioners also those procedures were adopted
G
and prior notice was published. He further reiterated that all the candidates
-{
who were successful in the interview were appointed and only then the
Selection Committee selected those persons and all the selected candidates
were kept under probation for a period of one year. He also informed
before the Addi. Registrar that all the successful candidates who completed
H
326 SUPREME COURT REPORTS [2007] 10 S.C.R.

A their probation period were asked to execute a bond. He highlighted that
as per the bond, the appointees are to serve the Bank at least for three ·~ ·
years and in fact deposited Rs.5,000/- as security. He also highlighted
that though some ofthe selectees sought permission to pursue higher studies
but permission was not granted due to the undertaking given by them by
B way of executing a security bond.
(28) The above-mentioned statement of General Manager and
Assistant Manager (Admn.) of the Bank cannot be lightly ignored. If we
consider the correspondence between the Bank and the Registrar in -f

C respect oflarge number of vacancies, permission by the Registrar, who
is none else than the competent authority, coupled with assertion of two
responsible officers, it cannot be said that the procedures have not been
strictly followed. No doubt, the employment exchange had intimated
Lokayukt that there was no such information/request from the Bank,
D however, the fact remains that there was no such communication to the
Registrar and under what circumstance, the same was intim~ted to the
Lokayukt. The above-mentioned particulars show that procedures have
been complied with before selecting those persons in the vacant posts.
The private respondents/writ petitioners demonstrated that taking note of
E large number of vacancies in the post of clerk-cum-typist and urgency in
filling up the same due to administrative reasons, after getting proper
sanction from the competent authority i.e. Registrar, intimating the same
to the employment exchange, they were initially appointed for a period
of six months on ad-hoc basis and thereafter by conducting written
examination followed by interview, they were selected. It is also brought
·F to our notice that after completion of probationary period of one year,
these persons were posted in the regular cadre. Though few selectees
were related to the then Managing Director of the Bank, on this ground
alone, their appointments cannot be interfered with. The High Court has
G lost sight of relevant material aspects and confirmed the order oftermination
mainly based on the report of the Lokayukt.
(29) Now, let us consider complaints, proceedings and the ultimate
decision/recommendation of Lokayukt. The Government of Madhya
Pradesh in order to make provision for the appointment and functions of
H
M.P. STATE COOP. BANK LTD., BHOPAL v. 327
NANURAM YADAV [SATHASIVAM, J.]
·-• · certain authorities for the enquiry in the allegations against public servants A
and for matters connected therewith, enacted the M.P. Lokayukt Evam
Up-Lokayukt Adhiniyam, 1981. As per definition 2(f) Lokayukt means
a person appointed as the Lokayukt under Section 3. Public servant as
defined in Section 2(g) reads thus:
B
"2. (g) "Public servant" means person falling under any of the
following categories, namely,-
(i) Minister;
(ii) a person having the rank of a Minister but shall not include C
Speaker and Deputy Speaker of the Madhya Pradesh Vidhan
Sabha and Neta Pratipaksha;
(iii) an officer referred to in clause (a);
(iv) an officer of an Apex Society or Central Society within the D
meaning of clause (t-1) read with clauses (a-1), (c-1) and (z) of
Section 2 of the Madhya Pradesh Co-operative Societies Ac_t,
1960 (No. 17 of 1961);
(v) Any person holding any office in, or an employee of-
E
(i) a Government company within the meaning of Section 617 of
the Companies Act, 1956; or
(ii) a Corporation or local authority established by State
Government under a Central or State enactment.
F
(vi) xxx xxx xxxx"

Sections 7 and 8 speak about matters which may be enquired into by
Lokayukt or Up-Lokayukt and matters not to be enquired by the said
authorities. Section 10 makes it clear that both Lokayukt or Up-Lokayukt G
in each case before it, decide the procedure to be followed for making
the enquiry and in so doing ensure that the principles of natural justice
are satisfied. Section 12 mandates that after enquiry into the allegations,
the Lokayukt or Up-Lokayukt is satisfied that such allegation is
established, submit a report in writing, communicate his findings and H
328 SUPREME COURT REPORTS [2007] 10 S.C.R.

A recommendations along with the relevant documents, materials and other
evidence to the competent authority. Though detailed arguments were
advanced pointing out that Lokayukt was not competent to go into the
appointments that were made, in view of Section 2(g)(iv), we are of the
view that officers of the apex society or central society under M.P.
B Cooperative Societies Act are amenable and there is no need to elaborate
the said aspect in this matter since we are concerned about the validity
or otherwise of the appointment of the employees in the Bank. It is seen
from the materials that after the appointments of the aforesaid 58
employees, a complaint was lodged with Lokayukt by one Shri N.K.
C Saxena and the said complaint was investigated by the Lokayukt. Though
it is stated that the Lokayukt afforded an opportunity of hearing to the
Chairman of the petitioner Bank as well as officials of the Bank and
Cooperative Department, admittedly the employees were not afforded
notice or opportunity of being heard in the enquiry by the Lokayukt. It is
D not in dispute that on receipt of the report of Lokayukt, the competent
authority forwarded the same to the Registrar of Cooperative Societies
who, m tum, without taking a decision or an order by following the service
rules or any of the provisions of the M.P. Cooperative Societies Act
mechanically directed the Managing Director of the Bank fo terminate all
E the appointees. We are of the view particularly, as observed earlier, though
the officers of the apex society under M.P. Cooperative Societies Act
are amenable to the jurisdiction of the Lokayukt, the persons concerned
who are lower-grade employees i.e. clerks-cum-typists cannot be
terminated without following the service rules applicable to them. It is not
F in dispute that elaborate procedures are to be followed before terminating
the service of an employee under the provisions of the M.P. Cooperative
Societies Act and the service rules made thereunder. In those
circumstances, in the absence of opportunity to the employees, the
termination or.der which was sent at the instance of Commissioner,
G Cooperative Societies based on the report of Lokayukt cannot be
sustained.
(30) In the light of the factual details, while reiterating the ahove-
mentioned principles in the matter of public appointment, we are of the
H considered view that the authorities were not justified in terminating the
' M.P. STATE COOP. BANK LTD., BHOPAL v.
NANURAM YADAV [SATHASIVAM, J.]
329

services of these workmen. In view of our conclusion, it is unnecessary A
to go into the correctness or otherwise of Rule 61 of the Rules and the
said issue is left open. We are also of the view and as rightly pointed out
by counsel appearing for the employees that there is no need to remit the
matter to the Registrar or any other authority for determination of their
status. The said direction of the High Court is also liable to be set aside. B
(31) In the light of the above discussion, we pass the following
order:-
(i) The conclusion with regard to Rule 61 of the Staff Selection
Rules is not warranted and the issue is left open; C
(Ii) The decision of the Bank as well as Registrar of the
Cooperative Societies terminating the services of the employees
based on the report of the Lokayukt cannot be sustained and
the same is liable to be set aside.
D
(iii) In view of our above conclusion, there is no need to remand
the issue to the Registrar or any other authority for adjudication
with regard to the status earned by these employees,
consequently the said direction of the High Court is also set
aside. E
(32) In the result, Civil Appeal No. 4481 of2007 arising out of SLP
(C) No. 12236of2006 filed by the Bank is disposed of on the above
terms. Civil Appeal No. 4483 of2007 arising out ofSLP (C) No. 19499
0£2006 and Civil Appeal No. 4482 of2007 arising out ofSLP (C) No.
3979of2007 filed by the employees are allowed. However, there shall F
be no order as to costs.
D.G. C.A. 448112007 disposed of,
C.A. No. 4483/2007 and C.A. 4482/2007 allowed.