Retrospective service-rule amendment displaces automatic absorption, while termination without hearing is invalid for breach of natural justice.

The Supreme Court held that an expressly authorised retrospective amendment to the Centralised Services Rules validly displaced the earlier deemed date of automatic final absorption, so the employees could not claim absorption as of 31 March 1967. It also held that determinations of suitability affecting service rights had to comply with natural justice. On the facts, one employee had been given an interview and his termination was sustained, but the other was terminated without any hearing, which vitiated the order. The judgment therefore upheld the retrospective validation of the absorption scheme, rejected automatic absorption, sustained one termination, and set aside the other for breach of fair hearing.

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Issues: (i) Whether the retrospective amendment to the Centralised Services Rules validly extended the time for final absorption so that the employees could not claim automatic final absorption on 31 March 1967; (ii) whether the orders terminating service were invalid for breach of natural justice, and if so, in respect of which employee.

Issue (i): Whether the retrospective amendment to the Centralised Services Rules validly extended the time for final absorption so that the employees could not claim automatic final absorption on 31 March 1967.

Analysis: The scheme under section 112A of the U.P. Nagar Mahapalika Adhiniyam, 1959 contemplated creation of Centralised Palika Services and final absorption only after suitability was determined in the manner prescribed. The subsequent amendment made under the validating legislative power expressly gave retrospective effect to the altered rule and substituted a new date for passing absorption orders. Because retrospective operation was clearly authorised, the earlier fictional date of automatic absorption was displaced and could not survive alongside the later amendment. The employees therefore could not rely on failure to pass orders by 31 March 1967 as creating an indefeasible right to automatic absorption.

Conclusion: The retrospective amendment was effective, and no automatic final absorption arose on 31 March 1967.

Issue (ii): Whether the orders terminating service were invalid for breach of natural justice, and if so, in respect of which employee.

Analysis: The process of final absorption under section 112A involved determination of suitability affecting valuable service rights, and therefore attracted the duty to act fairly and to afford a hearing. The Government's circulars required personal interview of officials proposed to be found unsuitable. On the facts, one employee had been called for interview before the Divisional Committee and the record showed no denial of a fair hearing, so the order against him could stand. In the other case, no opportunity of hearing was afforded before the termination order was made by the Government, and that omission vitiated the order.

Conclusion: The termination order against Ashfaq Hussain was sustained, but the termination order against Mohd. Rashid Ahmad was invalid for breach of natural justice.

Final Conclusion: The common judgment upheld the retrospective validation of the absorption rules, rejected the challenge based on automatic absorption, sustained one termination order, and set aside the other for want of hearing.

Ratio Decidendi: Where retrospective rule-making power is expressly conferred, a later retrospective amendment may displace an earlier deemed consequence, and any administrative determination affecting service rights must comply with the duty to act fairly by affording a hearing where the scheme and circumstances require it.

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