Holding

Despite their formal temporary designation, the appellants' employment bore the hallmarks of regular government service, making them entitled to pensionary benefits under the 6th CPC and the Revised Pay Scale Rules, 2008.

Summary

The appellants, who were employed as Junior Accountant, Accountant, Upper Division Clerk and Lower Division Clerk to manage the Special Frontier Force's Compulsory Saving Scheme Deposits (SSD) Fund, claimed pensionary benefits under the 6th Central Pay Commission and the Revised Pay Scale Rules, 2008. Their service, spanning over three decades, was on a regular pay scale with increments, promotions, leave, and other allowances similar to regular government employees, but they were formally classified as temporary employees. The respondents argued that the SSD Fund is a welfare scheme funded solely by contributions of SFF personnel, and that the appellants were not recruited under standard government rules, thus ineligible for pension benefits. The Supreme Court applied the tests from Ajay Hasia and Pradeep Kumar Biswas to determine whether the appellants' employment constituted an instrumentality of the State, finding that the nature of their duties, financial integration, deep governmental control, and long‑term service indicated regular government service. Consequently, the Court held that denying pension benefits violated Articles 14 and 16 of the Constitution. The Court set aside the High Court and Tribunal orders and directed the Union of India to extend the 6th CPC pensionary benefits to the appellants.

Issues considered

Whether employees of the SSD Fund, classified as temporary, qualify as government servants for purposes of pensionary benefits under the 6th Central Pay Commission.
Whether the SSD Fund and its employees constitute an "authority" under Article 12 of the Constitution, invoking the instrumentality/agency tests.
Whether the denial of pension benefits to the appellants violates the equality provisions of Articles 14 and 16 of the Constitution.
Whether the Central Civil Services (Pension) Rules, 1972 apply to the appellants despite the absence of recruitment under standard rules.

Legislation cited

Central Civil Services (Pension) Rules, 1972s. Rule 2
Constitution of Indias. Article 12, s. Article 14, s. Article 16
Revised Pay Scale Rules, 2008

Subjects

Special Frontier Force (SFF)Compulsory Saving Scheme Deposits (SSD) FundMaintenance of accounts for SSD FundTemporary employeesTemporary statusClassified as temporary employeesFormal classification as temporary employeesRegular employeesDuties similar to regular employeesInstrumentality or agency of the GovernmentAuthority under Article 12 of the Constitution of IndiaEmployee-employer relationshipsPensionary benefitsPensionary benefits deniedRegular government servantsRegular government employees4th Central Pay Commission5th Central Pay Commission6th Central Pay CommissionRevised Pay Scale Rules

Judgment

[2024] 8 S.C.R. 516 : 2024 INSC 621

Rajkaran Singh & Ors.
v.
Union of India & Ors.
(Civil Appeal Nos. 9721 of 2024)
22 August 2024
[Hima Kohli and Sandeep Mehta,* JJ.]

Issue for Consideration
Whether the appellants despite being classified as temporary
employees of a scheme managed by contributory pooling of funds,
can claim entitlement to pensionary benefits in accordance with
the 6th Central Pay Commission (CPC).

Headnotes†
Service Law – Revised Pay Scale Rules, 2008 – Constitution of
India – Article 12, 14, 16 – “authority” under Article 12 – Claim
for pensionary benefits under the 6th CPC, by the appellants-
Saving Scheme Deposits (SSD) employees appointed as
Junior Accountant, Accountant, UDC, LDC on running pay
scales to manage the Compulsory SSD Fund of the Special
Frontier Force (SFF) – Denied – Duties of the appellants, if
were similar to those of regular employees in the Accounts
Section of SFF HQ Estt.No.22 and thus, were they entitled to
the pensionary benefits under the 6th CPC and denial thereof
was unjustified:
Held: Yes – Appellants’ employment bears substantial hallmarks
of regular government service, despite their formal classification
as temporary employees – Appellants were admittedly appointed
on a regular pay scale indicating a formalised employee-
employer relationship akin to permanent government employee –
Appellants’ career paths were managed like permanent
employees indicating a level of governmental oversight and
control consistent with regular government service – Provisions
of leave and other benefits, including grant of Assured Career
Progression reinforces the similarity between the appellants’
employment conditions and those of regular government
employees – Their charter of duties involving the maintenance

* Author
[2024] 8 S.C.R. 517

Rajkaran Singh & Ors. v. Union of India & Ors.

of accounts for the SSD Fund is an assignment of public
importance closely related to governmental functions – Applying
the principles laid down in Ajay Hasia case which established
various tests to determine whether an entity can be considered
an instrumentality or agency of the Government and thus an
“authority” under Article 12 of the Constitution of India to the
present case, the appellants meet the characteristics of regular
government servants – Appellants served SFF HQ Estt. No. 22
for over three decades – While the duration of service alone may
not be determinative, it is a significant factor when considered in
conjunction with the other aspects of their employment – Such
long-term service suggests a level of permanence and integration
into the governmental structure that belies their classification as
temporary employees – Appellants performed duties similar to
those of regular employees in the Accounts Section of SFF HQ
Estt. No.22 and served the government for decades in a manner
indistinguishable from regular employees – Administrative orders
and Board proceedings also consistently treated the appellants
as equivalent to regular government employees – Denial of
pensionary benefits solely on the basis of their temporary status
not justifiable and is arbitrary and violates the fundamental rights
guaranteed by Articles 14 and 16 – Impugned judgment of the
High Court unsustainable, set aside – Appellants entitled to
the benefits of the 6th CPC including the pensionary benefits
under the Revised Pay Scale Rules, 2008 in the same terms
as afforded to their peers in the Accounts Section of SFF HQ
Estt. No. 22. [Paras 27-29, 32-36]
Constitution of India – Article 12 – “authority” under – An entity,
when is an instrumentality/agency of the Government – Tests
laid down in Ajay Hasia and Others v. Khalid Mujib Sehravardi
and Others – Assessment of nature of employee-employer
relationships – Discussed.

Case Law Cited
Ajay Hasia and Others v. Khalid Mujib Sehravardi and Others
[1981] 2 SCR 79 : (1981) 1 SCC 722; Pradeep Kumar
Biswas v. Indian Institute of Chemical Biology and Others
[2002] 3 SCR 100 : (2002) 5 SCC 111; Vinod Kumar and Others
v. Union of India [2024] 1 SCR 1230 : (2024) SCC OnLine SC
1533 – relied on.
518 [2024] 8 S.C.R.

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State of Karnataka & Ors. v. M.L. Kesari & Ors. [2010] 9
SCR 543 : (2010) 9 SCC 247; Surinder Singh and Another v.
Engineer-in-Chief, C.P.W.D. and Another (1986) 1 SCC 639; State
of Punjab & Ors. v. Jagjit Singh & Ors. [2016] 7 SCR 350 : (2017)
1 SCC 148; Union of India v. Dineshan K.K. [2008] 1 SCR 100 :
(2008) 1 SCC 586; Randhir Singh v. Union of India & Ors. [1982] 3
SCR 298 : (1982) 1 SCC 618 – referred to.

List of Acts

Revised Pay Scale Rules, 2008; Constitution of India; Central Civil
Services (Pension) Rules, 1972.

List of Keywords

Special Frontier Force (SFF); Compulsory Saving Scheme Deposits
(SSD) Fund; Maintenance of accounts for SSD Fund; Temporary
employees; Temporary status; Classified as temporary employees;
Formal classification as temporary employees; Regular employees;
Duties similar to regular employees; Instrumentality or agency of
the Government, “Authority” under Article 12 of the Constitution
of India; Employee-employer relationships; Pensionary benefits;
Pensionary benefits denied; Regular government servants; Regular
government employees; 4th, 5th, 6th Central Pay Commissions;
Revised Pay Scale Rules.

Case Arising From

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 9721 of 2024

From the Judgment and Order dated 25.04.2017 of the High Court
of Delhi at New Delhi in WP No. 3543 of 2017

Appearances for Parties

Ms. Neha Rathi, Kamal Kishore, Ms. Kajal Giri, Sanyam Jain,
Kislay Panday, Hariom Yaduvanshi, Ms. S. Harini, Avi Dhankar,
Ms. Gyanvi Roy, Arjun Yaduvanshi, Dr. Monika Gusain, Advs. for
the Appellants.

K M Nataraj, A.S.G., Vatsal Joshi, B K Satija, Sharath Nambiar,
Divyanshu Kumar Srivastava, Siddharth Venkatesh Thakur, Arvind
Kumar Sharma, Advs. for the Respondents.
[2024] 8 S.C.R. 519

Rajkaran Singh & Ors. v. Union of India & Ors.

Judgment / Order of the Supreme Court

Judgment
Mehta, J.
1. Heard.
2. Leave granted.
3. The present appeal by special leave, is preferred on behalf of the
appellants, assailing the judgment dated 25th April, 2017 passed by
the High Court of Delhi in Writ Petition (Civil) No. 3543 of 2017,
dismissing the writ petition filed by the appellants and upholding the
judgment dated 4th October, 2016 passed by the Central Administrative
Tribunal, Principal Bench, New Delhi (hereinafter being referred to
as the ‘Tribunal’) in Original Application Nos. 60 of 2013 and 459 of
2013. The Tribunal had rejected the appellants’ claim for benefits of
the replacement scales of the Revised Pay Rules, 2008 (hereinafter
referred to as ‘RP Rules’) in accordance with the 6th Pay Commission
Report, with effect from 1st January, 2006.
Brief facts: -
4. The facts in a nutshell, are that the appellants (Appellant No. 1 to
Appellant No. 6) were appointed to manage the Compulsory Saving
Scheme Deposits (hereinafter referred to as SSD) Fund of the Special
Frontier Force (hereinafter referred to as SFF) in various positions
such as Junior Accountant, Accountant, Upper Division Clerk (UDC),
and Lower Division Clerk (LDC), on running pay scales. The SSD
Fund is a welfare initiative funded through the personal contributions
of the SFF troops from their salaries. Upon having been engaged
as above, the appellants also received Traveling Allowance (TA),
Dearness Allowance (DA), House Rent Allowance (HRA), Special
Security Allowance (SSA), Gratuity, Bonus, Winter Allowance, and
High-Altitude Allowance, etc. along with salary as per the 4th and 5th
Central Pay Commissions (‘CPC’).
5. On 1st January, 2006, the Union of India implemented the 6th Central
Pay Commission and made the same applicable to all government
employees of the SFF. However, these benefits were not extended
to the appellants i.e. SSD employees and instead, an ad-hoc
amount of Rs. 3,000/- per month was given to each of them. For
520 [2024] 8 S.C.R.

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the sake of brevity, the details of the appellants with reference to
their appointments, retirement, length of service, and their salaries
in accordance with the different CPC are illustrated in a tabular
form below: -
Name Appointment Post Date of Service Salary Salary paid after
of the Date Retirement rendered paid 2010
Appellant initially
Rajkaran 1st January, Lower 31st August 37 years Rs. As per the 5th
Singh 1975 Division 2012 and 8 220- CPC & Rs.
(‘A1’) Clerk months 270 3,000/- instead of
6th CPC
Jagat 25th April, 1975 Lower 28th 37 years Rs. As per the 5th
Ram Division February and 10 220- CPC & Rs.
Joshi Clerk 2013 months 270 3,000/- instead of
(‘A2’) 6th CPC
Vishu Dutt 2nd May, 1978 Lower 31st July 35 years Rs. As per the 5th
Tripathi Division 2013 and 3 260- CPC & Rs.
(‘A3’) Clerk months 400 3,000/- instead of
6th CPC
HK 27th Lower 31st August 35 years Rs. As per the 5th
Naithani November,1982 Division 2018 and 9 260- CPC & Rs.
(‘A4’) Clerk months 400 3,000/- instead of
6th CPC
Shiv 25th May, 2005 Junior 18th 8 years Rs. As per the 5th
Kumar Accountant February and 9 5000- CPC & Rs.
(‘A5’) 2014 months 8000 3,000/- instead of
(VRS) 6th CPC
Surat 16th July, 1977 Lower 1st January 31 years Rs. As per the 5th
Singh Division 2009 and 5 260- CPC & Rs.
(‘A6’) Clerk (VRS) months 290 3,000/- instead of
6th CPC

6. Upon attaining the age of superannuation i.e., 60 years, the appellants
claimed pensionary benefits under the 6th Central Pay Commission
(‘CPC’). On 28th July, 2011, appellant No. 1 (Rajkaran Singh) filed a
representation to the respondent No. 1 seeking pensionary benefits
under the 6th CPC, however, the same was rejected vide order dated
15th October, 2012, on the ground that he was not a government
employee and had not been appointed by following any Recruitment
Rules, and therefore, the Central Civil Services (Pension) Rules,
1972(hereinafter being referred to as ‘CCS Rules’), would not apply
to him. The other appellants (appellant No. 2-appellant No. 6) also
filed similar representations to the respondents which met a similar
fate on the same reasoning.
[2024] 8 S.C.R. 521

Rajkaran Singh & Ors. v. Union of India & Ors.

7. Aggrieved by the rejection of their claim for pensionary benefits
under the 6th CPC, the appellants filed Original Applications before
the Tribunal, laying a challenge to the non-implementation of the
benefits of the 6th CPC and also raising a grievance about the lack of
General Provident Fund (GPF) provisions in the SSD Fund, despite
they having been appointed to posts created under the authorisation
of the Cabinet Secretariat and after following the due process of law
in making the appointments.
8. The Tribunal, vide order dated 4th October, 2016 dismissed the Original
Applications and rejected the appellants’ claims holding that they were
not employed in government service. The Tribunal referred to Rule
2 of the CCS Rules, and held that the appellants were not entitled
to the benefits under the CCS Rules as their salaries were neither
paid from the Consolidated Fund of India, the Contingent Fund or the
Public Accounts Funds, nor were their services governed by statutory
obligations i.e. no recruitment rules were applicable to them. The
Tribunal further held that the appellants were not recruited under an
advertisement issued where people at large were given the opportunity
of appearing; there was no question of any obligation cast under the
Factories Act for running the SSD Fund, as it was not covered under
the definition of a factory; and the services performed were not statutory
in nature because the SSD Fund is a voluntary contribution made
by the SFF employees. The Tribunal found that the SSD Fund was
financed by voluntary contributions from SFF employees and hence
the services rendered therein did not qualify as government service.
9. The appellants challenged the Tribunal’s order by filing a writ
petition before the Delhi High Court which came to be rejected and
the Tribunal’s order was affirmed, taking note of the fact that the
appellants were appointed for the purpose of maintaining the SSD
Fund, a welfare scheme run through personal contributions made by
the troops of SFF. The High Court held that while the troops of SFF,
undoubtedly, are government servants, however, that by itself would
not clothe the appellants with the status of government servants. The
impugned order dated 25th April, 2017 passed by the High Court is
subjected to challenge in this appeal by special leave.
Submissions on behalf of the appellants: -
10. Ms. Neha Rathi, learned counsel representing the appellants,
vehemently and fervently contended that the appellants had served
522 [2024] 8 S.C.R.

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the department for more than three decades to maintain the accounts
of the SSD Fund and therefore, not granting them pensionary and
other service benefits in accordance with the 6th CPC on a surmise,
that their employment was temporary/non-governmental in nature,
tantamounts to grossly arbitrary action, violative of the fundamental
rights of the appellants as guaranteed under the Constitution of India.
11. Learned Counsel submitted that the appellants satisfy all the
characteristics of regular government servants, considering the
fact that they were appointed in a regular pay scale and received
increments and promotions at par with those being admitted to other
government employees, along with leave and other benefits and
emoluments. Additionally, they were granted the benefits of Assured
Career Progression (ACP).
12. Learned counsel further contended that the nature of the work assigned
to the appellants was similar to the work of the regular employees of
the Accounts Section of SFF HQ Estt. No.22. Moreover, permanent
employees of the SFF Accounts are also working with the SSD
Staff for maintaining the SSD Fund, performing the same duties.
Learned counsel submitted that following the transfer of the SSD
Funds Accounts to HQ SFF w.e.f. 1st April 2003, the SSD Funds are
being managed by the Deputy Director (AG) at HQ SFF, under the
overall control of the Inspector General of SFF. Consequently, the
appellants’ services have been brought within the jurisdiction of HQ
SFF and fall under the aegis of the Inspector General of SFF. It was
further contended that for all other purposes, the appellants have been
treated at par with regular employees of the Accounts Section, which
places them at same level with government employees. Therefore,
the appellants are entitled to receive the same benefits as the regular
employees of the Accounts Section and also to receive the pensionary
as well as consequential benefits flowing from the 6th CPC.
13. Learned counsel also submitted that the denial of pensionary
benefits to the SSD Fund staff, while granting the same to the SFF
personnel and other SFF Accounts staff, constitutes an arbitrary and
discriminatory decision, violating Article 14 of the Constitution of India.
The pensionary benefits were extended to SFF personnel from 1st
January, 2009 and to other SFF Accounts staff employed through the
same procedure at SSF HQ Estt. No. 22, under the Commandant’s
authority, from the onset of their employment (initially temporary
[2024] 8 S.C.R. 523

Rajkaran Singh & Ors. v. Union of India & Ors.

for six months). Despite being part of the same establishment and
governed by the same Commandant, the appellants working at the
SSD Fund were unjustly excluded from these benefits. This differential
treatment lacks a reasonable basis and is discriminatory. Learned
counsel highlighted the comparative statement of benefits and
allowances granted to SSD Fund and SFF permanent employees
as per the following table:

Particulars SSD Staff SFF Permanent
employees
Basic Pay Yes Yes
Dearness allowance Yes Yes
TA/DA (on deputation) Yes Yes
House Rent Allowance Yes Yes
Transport Allowance Yes Yes
Children Education Allowance No Yes
High Altitude Allowance Yes Yes
Winter Allowance Yes Yes
Ration Allowance Yes Yes
Special Security Allowance Yes Yes
Gratuity Yes Yes
Leave Encashment (Not paid at No Yes
the time of retirement after 6th
CPC)
Yearly Bonus Yes Yes
Yearly increments Yes Yes
LTC Yes Yes
ACR (till 6th CPC) Yes Yes
Maintenance of Service Book (till 6th Yes Yes
CPC)
ACP for higher pay scale Yes Yes
Promotions Yes Yes
Member of SSD Provident Fund Yes Yes
Member of Group Insurance Policy Yes Yes
CGHS facility (at New Delhi) No Yes
Medical facility at Military Hospital Yes Yes
524 [2024] 8 S.C.R.

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14. Learned counsel further contended that the responsibility to devise
a suitable scheme for the regularisation of employees who have
served for more than ten years lies with the respondents i.e., the
State. She submitted that the respondent had rejected the appellants’
representation on a purely arbitrary ground that they were not
appointed through a rigorous selection process and that the CCS
(Conduct) Rules, 1964 did not apply to them. She urged that the
appointment of the appellants was conducted under due process
of selection, following the rules of the Cabinet Secretariat, and
cannot be deemed irregular or illegal simply for the lack of statutory
recruitment and service rules. Learned counsel in this regard placed
reliance upon the decision of this Court in the case of the State of
Karnataka & Ors. v. M.L. Kesari & Ors.1
15. Learned counsel further submitted that the case of the appellants is
squarely covered by the principle of “equal pay for equal work” and
that the right of equal wages conferred upon temporary employees
flows, inter alia, from Article 39 of the Constitution of India. This
principle of “equal pay for equal work” expounded through various
decisions of this Court constitutes the law, which is binding upon
all the Courts in India and consequently upon the respondents. It
also extends to temporary employees performing the same duties
and responsibilities as regular employees. Learned counsel in this
regard placed reliance upon the decisions of this Court in the cases
of Surinder Singh and Another v. Engineer-in-Chief, C.P.W.D.
and Another,2 State of Punjab & Ors. v. Jagjit Singh & Ors.,3
Union of India v. Dineshan K.K.,4 and Randhir Singh v. Union
of India & Ors.5
On these grounds, learned counsel for the appellants implored the
Court to accept the appeal, set aside the impugned judgments and
direct the respondents to release in favour of the appellants, the
benefits of the replacement scales set out in the RP Rules issued in
pursuance of the 6th CPC report with effect from 1st January, 2006.

1 [2010] 9 SCR 543 : (2010) 9 SCC 247
2 (1986) 1 SCC 639
3 [2016] 7 SCR 350 : (2017) 1 SCC 148
4 [2008] 1 SCR 100 : (2008) 1 SCC 586
5 [1982] 3 SCR 298 : (1982) 1 SCC 618
[2024] 8 S.C.R. 525

Rajkaran Singh & Ors. v. Union of India & Ors.

Submissions on behalf of the Respondents: -
16. Mr. K.M. Nataraj, learned ASG, representing the respondents,
vehemently and fervently opposed the submissions advanced by the
learned counsel for the appellant. He submitted that the SSD Fund
is a welfare scheme, introduced with effect from 1st October 1964,
for force personnel on the analogy of the Armed Force Personnel
Provident Fund to cater to their welfare measures. It is a contributory
fund subscribed by force personnel for their better future and no
government funds are involved in the SSD Fund, thereby, establishing
a clear alienation from the Central government. The government
has no control what to talk of deep and pervasive control over the
affairs of the fund.
17. Learned ASG further submitted that the appellants were hired on a
temporary basis to manage the SSD Fund, which is generated from
the difference between the interest earned on the invested amount
and the annual interest paid to subscribers. The recruitment, selection,
and promotion process for SSD Fund employees (i.e. appellants) did
not adhere to the procedures applicable to regular Central government
employees. Since the appellants were hired temporarily, they were
not subjected to probation or given confirmation letters as permanent
employees and unlike Central government employees, there was no
provision for the annual evaluation of their performance. The terms
of engagement of these employees explicitly outlined their temporary
status and the associated conditions, including the potential for
termination without prior notice. This aligns with the fundamental
nature of their employment, which does not confer upon them, the
status or entitlements typically associated with regular government
employees.
18. Learned ASG also submitted that the appellants’ salaries, which were
finally increased by Rs. 3,000/- per month in September 2009, are
paid from the SSD Fund, which is contributed by SFF personnel and
involves no government money. Furthermore, following the 4th and
5th CPC, the Government examined and extended limited benefits
thereof to the SSD Fund employees (i.e., appellants), but with
specific reference to maintain the fund’s objectives. These conditions
include not comparing their pay scales to those recommended by
the 4th CPC in future references and considering pay increments
or Dearness Allowance instalments on an ad hoc basis, when
526 [2024] 8 S.C.R.

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necessary. He urged that the Commandant, SFF HQ Estt. No. 22,
holds discretionary authority over the SSD Fund in accordance
with the Cabinet Secretariat Order No. EA/EF-EST-13/75 dated 11th
October, 1976. This order underscores the fact that the fixation of pay
for these employees is not mandated to adhere to scales applicable
to Central government employees.
19. Learned ASG further submitted that the claim of benefits accorded
under the 6th CPC and RP Rules relied upon by the appellants is
totally unfounded. These benefits are expressly designed for and
applicable exclusively to Central government employees and do
not extend to individuals engaged in roles akin to those overseeing
contributory schemes like the SSD Fund. While certain benefits were
extended to the fund employees post the 5th CPC, the feasibility of
aligning their compensation with the 6th CPC was constrained by
the financial limitations of the SSD Fund. Any enhancements in pay,
allowances, or promotions were dispensed judiciously as welfare
measures, guided by the operational imperatives and financial health
of the SSD Fund.
20. Learned counsel further submitted that the appellants’ entitlements,
including any financial assistance and promotions, were provided
in consideration of their service and the prevailing socio-economic
conditions, and do not establish a precedent for future claims. The
respondents maintain that these distinctions are essential to uphold
the integrity and sustainability of the SSD Fund, which operates
independently of governmental appropriations and is solely reliant
on contributions from subscribing SFF personnel.
On these grounds, the learned Additional Solicitor General implored
the Court to dismiss the appeal and affirm the impugned judgments.
Discussion and Conclusion: -
21. We have given our thoughtful consideration to the submissions
advanced at a bar and have perused the impugned judgments. With
the assistance of learned counsel for the parties, we have thoroughly
examined the material available on record.
22. The core issue presented for adjudication by the Court is whether the
appellants herein, despite being classified as temporary employees
of a scheme managed by contributory pooling of funds, can claim
entitlement to pensionary benefits in accordance with the 6th CPC.
[2024] 8 S.C.R. 527

Rajkaran Singh & Ors. v. Union of India & Ors.

23. To address this issue, we must first consider the legal framework
established by this Court in various landmark decisions, particularly
in Ajay Hasia and Others v. Khalid Mujib Sehravardi and Others6
and Pradeep Kumar Biswas v. Indian Institute of Chemical Biology
and Others.7 While Ajay Hasia (supra) and Pradeep Kumar Biswas
(supra) primarily dealt with determining whether a corporation could
be considered an instrumentality of the state, the principles laid
down therein provide valuable guidance in assessing the nature
of employee-employer relationships. The relevant paragraphs of
Ajay Hasia (supra) are reproduced below: -
“7. …..If a corporation is found to be a mere agency
or surrogate of the Government, “in fact owned by the
Government, in truth controlled by the Government and in
effect an incarnation of the Government”, the court, must
not allow the enforcement of fundamental rights to be
frustrated by taking the view that it is not the Government
and therefore not subject to the constitutional limitations.
We are clearly of the view that where a corporation is an
instrumentality or agency of the Government, it must be
held to be an “authority” within the meaning of Article 12
and hence subject to the same basic obligation to obey
the Fundamental rights as the Government.
8. We may point out that this very question as to when a
corporation can be regarded as an “authority” within the
meaning of Article 12 arose for consideration before this
Court in R.D. Shetty v. International Airport Authority of
India [(1979) 3 SCC 489]….
The court then addressed itself to the question as to
how to determine whether a corporation is acting as an
instrumentality or agency of the Government and dealing
with that question, observed:
“A corporation may be created in one of
two ways. It may be either established by
statute or incorporated under a law such as

6 [1981] 2 SCR 79 : (1981) 1 SCC 722
7 [2002] 3 SCR 100 : (2002) 5 SCC 111
528 [2024] 8 S.C.R.

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the Companies Act, 1956 or the Societies
Registration Act, 1860. Where a corporation
is wholly controlled by Government not only in
its policy-making but also in carrying out the
functions entrusted to it by the law establishing
it or by the charter of its incorporation, there can
be no doubt that it would be an instrumentality
or agency of Government. But ordinarily where
a corporation is established by statute, it is
autonomous in its working, subject only to a
provision, often times made, that it shall be
bound by any directions that may be issued
from time to time by Government in respect
of policy matters. So also a corporation
incorporated under law is managed by a board
of Directors or committees of management in
accordance with the provisions of the statute
under which it is incorporated. When does
such a corporation become an instrumentality
or agency of Government? Is the holding of
the entire share capital of the Corporation by
Government enough or is it necessary that in
addition there should be a certain amount of
direct control exercised by Government and, if
so, what should be the nature of such control?
Should the functions which the corporation is
charged to carry out possess any particular
characteristic or feature, or is the nature of
the functions immaterial? Now, one thing is
clear that if the entire share capital of the
corporation is held by Government, it would
go a long way towards indicating that the
corporation is an instrumentality or agency of
Government. But, as is quite often the case,
a corporation established by statute may have
no shares or shareholders, in which case it
would be a relevant factor to consider whether
the administration is in the hands of a board of
Directors appointed by Government though this
[2024] 8 S.C.R. 529

Rajkaran Singh & Ors. v. Union of India & Ors.

consideration also may not be determinative,
because even where the Directors are appointed
by Government, they may be completely free
from Governmental control in the discharge
of their functions. What then are the tests to
determine whether a corporation established
by statute or incorporated under law is an
instrumentality or agency of Government? It
is not possible to formulate an all-inclusive
or exhaustive test which would adequately
answer this question. There is no cut and
dried formula, which would provide the correct
division of corporations into those which are
instrumentalities or agencies of Government
and those which are not.”
The court then proceeded to indicate the different tests,
apart from ownership of the entire share capital: (SCC pp.
508 & 509, paras 15 & 16)
“…..
……There is also another factor which may be
regarded as having a bearing on this issue and
it is whether the operation of the corporation
is an important public function. It has been
held in the United States in a number of cases
that the concept of private action must yield
to a conception of State action where public
functions are being performed. Vide Arthur S.
Miller: The Constitutional Law of the ‘Security
State’ [5 10 Stanford Law Review 620, 644]
…. It may be noted that besides the so-called
traditional functions, the modern State operates
a multitude of public enterprises and discharges
a host of other public functions. If the functions
of the corporation are of public importance and
closely related to Governmental functions, it
would be a relevant factor in classifying the
corporation as an instrumentality or agency of
Government. This is precisely what was pointed
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out by Mathew, J., in Sukhdev v. Bhagatram
[(1975) 1 SCC 421] where the learned Judge
said that ‘institutions engaged in matters of high
public interest of performing public functions are
by virtue of the nature of the functions performed
Government agencies. Activities which are too
fundamental to the society are by definition too
important not to be considered Government
functions’.”
….
These observations of the court in the International Airport
Authority case have our full approval.
9. The tests for determining as to when a corporation can be
said to be an instrumentality or agency of Government may
now be culled out from the judgment in the International
Airport Authority case…..We may summarise the relevant
tests gathered from the decision in the International Airport
Authority case as follows:
“(1) One thing is clear that if the entire share
capital of the corporation is held by Government,
it would go a long way towards indicating that
the corporation is an instrumentality or agency
of Government. (SCC p. 507, para 14)
(2) Where the financial assistance of the State is
so much as to meet almost entire expenditure of
the corporation, it would afford some indication
of the corporation being impregnated with
Governmental character. (SCC p. 508, para 15)
(3) It may also be a relevant factor … whether
the corporation enjoys monopoly status which
is State conferred or State protected. (SCC p.
508, para 15)
(4) Existence of deep and pervasive State control
may afford an indication that the corporation is
a State agency or instrumentality. (SCC p. 508,
para 15)
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(5) If the functions of the corporation are
of public importance and closely related to
Governmental functions, it would be a relevant
factor in classifying the corporation as an
instrumentality or agency of Government.
(SCC p. 509, para 16)
(6) ‘Specifically, if a department of Government
is transferred to a corporation, it would be a
strong factor supportive of this inference’ of the
corporation being an instrumentality or agency
of Government.” (SCC p. 510, para 18)
If on a consideration of these relevant factors it is found
that the corporation is an instrumentality or agency of
Government, it would, as pointed out in the International
Airport Authority case, be an “authority” and, therefore,
‘State’ within the meaning of the expression in Article 12.
….
11. We may point out that it is immaterial for this purpose
whether the corporation is created by a statute or under
a statute. The test is whether it is an instrumentality or
agency of the Government and not as to how it is created.
The inquiry has to be not as to how the juristic person
is born but why it has been brought into existence. The
corporation may be a statutory corporation created
by a statute or it may be a government Company or
a Company formed under the Companies Act, 1956
or it may be a society registered under the Societies
Registration Act, 1860 or any other similar statute.
Whatever be its genetical origin, it would be an
“authority” within the meaning of Article 12 if it is an
instrumentality or agency of the Government and that
would have to be decided on a proper assessment of
the facts in the light of the relevant factors. The concept
of instrumentality or agency of the Government is
not limited to a corporation created by a statute but
is equally applicable to a Company or society and
in a given case it would have to be decided, on a
consideration of the relevant factors, whether the
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Company or society is an instrumentality or agency
of the Government so as to come within the meaning
of the expression “authority” in Article 12.”
(emphasis supplied)
24. This Court in Ajay Hasia (supra) established several tests to
determine whether an entity can be considered an instrumentality
or agency of the Government, and thus an “authority” under Article
12 of the Constitution of India. These tests include but are not
limited to ;
1. Extent of financial support from the government;
2. Deep and pervasive control of the government;
3. Functions performed are of public importance and closely related
to governmental functions;
4. Entity enjoys monopoly status conferred or protected by the
State;
5. The government department has been transferred to the entity.
25. In Pradeep Kumar Bishwas (supra), this Court held that the tests
laid down in Ajay Hasia (supra) are relevant for the purpose of
determining whether an entity is an instrumentality or agency of the
State. Neither all the tests are required to be answered in positive
nor a positive answer to one or two tests would suffice. It will depend
upon a combination of one or more of the relevant factors depending
upon the essentiality and overwhelming nature of such factors in
identifying the real source of governing power, if need be by removing
the mask or piercing the veil disguising the entity concerned.
26. The relevant paragraphs of Pradeep Kumar Biswas (supra) are
reproduced below: -
“98. We sum up our conclusions as under:
(1) Simply by holding a legal entity to be an instrumentality
or agency of the State it does not necessarily become an
authority within the meaning of “other authorities” in Article
12. To be an authority, the entity should have been created
by a statute or under a statute and functioning with liability
and obligations to the public. Further, the statute creating
the entity should have vested that entity with power to make
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law or issue binding directions amounting to law within
the meaning of Article 13(2) governing its relationship
with other people or the affairs of other people — their
rights, duties, liabilities or other legal relations. If created
under a statute, then there must exist some other statute
conferring on the entity such powers. In either case, it
should have been entrusted with such functions as are
governmental or closely associated therewith by being of
public importance or being fundamental to the life of the
people and hence governmental. Such authority would be
the State, for, one who enjoys the powers or privileges
of the State must also be subjected to limitations and
obligations of the State. It is this strong statutory flavour
and clear indicia of power — constitutional or statutory,
and its potential or capability to act to the detriment of
fundamental rights of the people, which makes it an
authority; though in a given case, depending on the facts
and circumstances, an authority may also be found to be
an instrumentality or agency of the State and to that extent
they may overlap. Tests 1, 2 and 4 in Ajay Hasia [Ajay
Hasia v. Khalid Mujib Sehravardi (1981) 1 SCC 722] enable
determination of governmental ownership or control. Tests
3, 5 and 6 are “functional” tests. The propounder of the
tests himself has used the words suggesting relevancy of
those tests for finding out if an entity was instrumentality
or agency of the State. Unfortunately thereafter the tests
were considered relevant for testing if an authority is the
State and this fallacy has occurred because of difference
between “instrumentality and agency” of the State and
an “authority” having been lost sight of sub silentio,
unconsciously and undeliberated. In our opinion, and
keeping in view the meaning which “authority” carries,
the question whether an entity is an “authority” cannot be
answered by applying Ajay Hasia [Ajay Hasia v. Khalid
Mujib Sehravardi, (1981) 1 SCC 722] tests.
(2) The tests laid down in Ajay Hasia case [Ajay Hasia v.
Khalid Mujib Sehravardi (1981) 1 SCC 722] are relevant
for the purpose of determining whether an entity is an
instrumentality or agency of the State. Neither all the
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tests are required to be answered in the positive nor
a positive answer to one or two tests would suffice.
It will depend upon a combination of one or more of
the relevant factors depending upon the essentiality
and overwhelming nature of such factors in identifying
the real source of governing power, if need be by
removing the mask or piercing the veil disguising the
entity concerned. When an entity has an independent
legal existence, before it is held to be the State, the
person alleging it to be so must satisfy the court of
brooding presence of the Government or deep and
pervasive control of the Government so as to hold it
to be an instrumentality or agency of the State.”
(emphasis supplied)
27. Applying these principles to the case at hand, we find compelling
evidence on record which establishes that the appellants meet
the characteristics of regular government servants. Admittedly,
the appellants were appointed on a regular pay scale. This factor
strongly indicates a formalised employee-employer relationship akin
to permanent government employees. In Ajay Hasia (supra), this
Court observed that the nature of financial arrangements can indicate
governmental character. The use of government pay scales for the
appellants suggests a level of integration into the government’s
financial structure that goes beyond typical temporary employment.
During the course of their service, the appellants received increments
and promotions comparable to those of other government employees.
This pattern of career progression mirrors that of regular government
servants and suggests a deep and pervasive governmental control
over their employment terms. In Ajay Hasia (supra), the degree of
state control was highlighted as a key factor for identifying State
instrumentalities. The chart(supra) provides positive evidence to
show that the appellants’ career paths were managed like permanent
employees indicating a level of governmental oversight and control
consistent with regular government service. Furthermore, the office
order dated 12th March 2003, issued by the Deputy Director (AG),
which transferred the SSD Funds Accounts to HQ SFF under
the overall control of the Inspector General of SFF, along with
the associated documents and clerical staff, demonstrates that
[2024] 8 S.C.R. 535

Rajkaran Singh & Ors. v. Union of India & Ors.

administrative recognition of the appellants’ services was made which
is integral to the governmental structure. This transfer of the entire
cadre of SSD Fund to the HQ SFF aimed at ensuring better utilization
and monitoring of the fund, fortifies the concept that the appellants
possessed the characteristics of regular government servants.
28. The provisions of leave and other benefits, including grant of
Assured Career Progression (ACP), further reinforces the similarity
between the appellants’ employment conditions and those of regular
government employees. These benefits are typically associated
with formalized, long-term employment relationships within the
government sector. The proceedings of the Board of Officers dated
23rd June, 2006 unequivocally acknowledged that the terms and
conditions, including the pay and allowances payable to SSD Fund
staff, were fixed in March 1978 in accordance with those applicable
to the ministerial staff employed in the Accounts Section of SSF HQ
Estt. No. 22. The extension of Assured Carrer Progression (ACP)
and alignment of terms and conditions with regular government
employees, in particular, is an affirmative action indicating that the
government viewed and treated these employees as long-term
assets, despite their ostensibly temporary status. Substantially, the
appellants’ charter of duties involving the maintenance of accounts
for the SSD Fund, can be considered as an assignment of public
importance closely related to governmental functions. This aligns
with another test laid down in Ajay Hasia (supra), which considers
the public importance and governmental nature of the functions
performed. The management of funds generated from the personal
provident fund contributions of the entire SFF cadre is a critical
function that has a direct bearing on the public interest and the
effective operation of government services.
29. Indisputably, the appellants have served SFF HQ Estt. No. 22 for
over three decades. While the duration of service alone may not be
determinative, it is a significant factor when considered in conjunction
with the other aspects of their employment. Such long-term service
suggests a level of permanence and integration into the governmental
structure that belies their classification as temporary employees. The
appellants performed duties similar to those of regular employees in
the Accounts Section of SFF HQ Estt. No.22. This similarity in job
functions further blurs the line between the appellants’ status and
that of regular government employees, suggesting that the distinction
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may be more formal than substantive. The extension of significant
elements from the 4th and 5th CPC to the appellants further cements
their plea of being employed in governmental functions.
30. Learned ASG appearing for the respondents has argued that the
recruitment, selection, and promotion processes for SSD Fund
employees did not follow the procedures used for regular employees
and that the appellants were not subjected to probation or given
confirmation letters as permanent employees. However, this Court
finds such argument to be untenable as it fails to account for the
substantive nature of the appellants’ employment over an extended
period running into three decades. In this regard, reference may be
made to the judgment of this Court in the case of Vinod Kumar and
Others v. Union of India,8 wherein this Court noted;
“5. Having heard the arguments of both the sides, this
Court believes that the essence of employment and
the rights thereof cannot be merely determined by
the initial terms of appointment when the actual
course of employment has evolved significantly over
time. The continuous service of the appellants in the
capacities of regular employees, performing duties
indistinguishable from those in permanent posts, and
their selection through a process that mirrors that of
regular recruitment, constitute a substantive departure
from the temporary and scheme-specific nature of their
initial engagement. Moreover, the appellants’ promotion
process was conducted and overseen by a Departmental
Promotional Committee and their sustained service for
more than 25 years without any indication of the temporary
nature of their roles being reaffirmed or the duration of
such temporary engagement being specified, merits a
reconsideration of their employment status.
6. The application of the judgment in Uma Devi (supra)
by the High Court does not fit squarely with the facts
at hand, given the specific circumstances under which
the appellants were employed and have continued their
service. The reliance on procedural formalities at the

8 [2024] 1 SCR 1230 : 2024 SCC OnLine SC 1533
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Rajkaran Singh & Ors. v. Union of India & Ors.

outset cannot be used to perpetually deny substantive
rights that have accrued over a considerable period
through continuous service. Their promotion was based
on a specific notification for vacancies and a subsequent
circular, followed by a selection process involving written
tests and interviews, which distinguishes their case from
the appointments through back door entry as discussed
in the case of Uma Devi (supra).
7. The judgment in the case Uma Devi (supra) also
distinguished between “irregular” and “illegal” appointments
underscoring the importance of considering certain
appointments even if were not made strictly in accordance
with the prescribed Rules and Procedure, cannot be
said to have been made illegally if they had followed the
procedures of regular appointments such as conduct of
written examinations or interviews as in the present case.
Paragraph 53 of the Uma Devi (supra) case is reproduced
hereunder:
“53. One aspect needs to be clarified. There
may be cases where irregular appointments
(not illegal appointments) as explained in
S.V. Narayanappa [(1967) 1 SCR 128], R.N.
Nanjundappa [(1972) 1 SCC 409] and B.N.
Nagarajan [(1979) 4 SCC 507] and referred to
in para 15 above, of duly qualified persons in
duly sanctioned vacant posts might have been
made and the employees have continued to
work for ten years or more but without the
intervention of orders of the courts or of tribunals.
The question of regularisation of the services
of such employees may have to be considered
on merits in the light of the principles settled by
this Court in the cases above referred to and
in the light of this judgment. In that context, the
Union of India, the State Governments and their
instrumentalities should take steps to regularise
as a one-time measure, the services of such
irregularly appointed, who have worked for ten
years or more in duly sanctioned posts but
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not under cover of orders of the courts or of
tribunals and should further ensure that regular
recruitments are undertaken to fill those vacant
sanctioned posts that require to be filled up,
in cases where temporary employees or daily
wagers are being now employed. The process
must be set in motion within six months from
this date. We also clarify that regularisation,
if any already made, but not sub judice, need
not be reopened based on this judgment, but
there should be no further bypassing of the
constitutional requirement and regularising or
making permanent, those not duly appointed
as per the constitutional scheme.”
8. In light of the reasons recorded above, this Court
finds merit in the appellants’ arguments and holds that
their service conditions, as evolved over time, warrant
a reclassification from temporary to regular status. The
failure to recognize the substantive nature of their roles
and their continuous service akin to permanent employees
runs counter to the principles of equity, fairness, and the
intent behind employment regulations.”
(emphasis supplied)
31. As held in Vinod Kumar (supra), “the essence of employment and
the rights thereof cannot be merely determined by the initial terms
of appointment when the actual course of employment has evolved
significantly over time.”
32. This Court fully associates with this principle and finds it wholly
applicable in the present case, especially in light of the administrative
orders and Board proceedings referred to supra that have consistently
treated the appellants as equivalent to regular government employees.
The mere classification of employees as ‘temporary’ or ‘permanent’
is not merely a matter of nomenclature but carries significant legal
implications, particularly in terms of service benefits and protections.
33. In the present case, the totality of circumstances indicates that despite
their formal classification as temporary employees, the appellants’
employment bears substantial hallmarks of regular government
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Rajkaran Singh & Ors. v. Union of India & Ors.

service. The denial of pensionary benefits solely on the basis of
their temporary status, without due consideration of these factors,
appears to be an oversimplification of their employment relationship
with the government. This approach runs the risk of creating a class
of employees who, despite serving the government for decades in a
manner indistinguishable from regular employees, are deprived of the
benefits and protections typically accorded to government servants.
34. Thus, we are of the opinion that the denial of pensionary benefits to
the appellants is not tenable or justifiable in the eyes of law as the
same is arbitrary and violates the fundamental rights as guaranteed
by Articles 14 and 16 of the Constitution of India. It is indeed relevant
to note that the appellants’ batch seems to be the last in their
genre of SSD Fund temporary employees and thus, manifestly, the
direction to extend the benefits of the 6th CPC and the RP Rules to
the appellants shall not form a precedent so as to have a detrimental
effect on the financial health of the SSD Fund.
35. In the wake of the discussion made hereinabove, we are of the view
that the impugned judgment rendered by the High Court does not
stand to scrutiny and the same is unsustainable in the eyes of law
and is set aside.
36. The respondents are directed to extend the benefits of the 6th Central
Pay Commission including the pensionary benefits under the Revised
Pay Scale Rules, 2008 to the appellants herein in the same terms
as are being afforded to their peers in the Accounts Section of SFF
HQ Estt. No. 22.
37. The appeal is allowed in these terms. No costs.
38. Pending application(s), if any, shall stand disposed of.

Result of the case: Appeal allowed.

†
Headnotes prepared by: Divya Pandey