Gujarat Panchayat Act, 1961-As amended by the Gujarat Panchayat (Third Amendment) Act, 1978-Officers and servants of the panchayats-Whether Government servants.

Master and servant relations-Tests for the determination of.

Constitution of India, 1950, Articles 14 and 311-Status of Government servant-If could be determined retrospectively.

Interpretation-Legislature, if has power to take away or impair a constitutional right retrospectively.

The Gujarat Panchayats Act, 1961 was enacted to consolidate and amend the law relating to village panchayats and district local boards with a view to reorganise the administration pertaining to local Government in furtherance of the object of democratic decentralisation of powers in favour of different classes of panchayats. It was provided that the state Government should exercise control over panchayats either directly or through such officer or officers as it may appoint for that purpose. The Panchayat Organisation consisted of Gram Panchayats, Taluqa Panchayats and District Panchayats which are bodies corporate with perpetual succession and common seal. Notwithstanding that they were separate bodies corporate, the panchayats formed part of the panchayat organisation set up for securing a greater measure of participation by the people in the local governmental functions. They were enjoined to perform functions and duties assigned by or under the Act so as to conform to the State plans, National plans and the State policy in general. The State Government was empowered to cause inspection to be made and to call for and examine the record of the proceedings of any panchayat. On the enactment of the 1961 Act, the District Local Boards, village panchayats and municipalities constituted under earlier Acts stood transformed as District Panchayats, gram or nagar panchayats, depending on population. Officers and servants of the District Local Boards were deemed to be transferred to the service of the district panchayats, Secretaries, officers and servants in the employ of the old village panchayats became Secretaries, officers and servants of the new gram panchayats and officers and servants in the employ of municipalities became officers and servants of the interim panchayats. 

The gram panchayats were entrusted with the work of looking after sanitation and health, public works, community development, agriculture, preservation of forests and a number of other subjects. They were entrusted with the work of collection of land revenue and do any or all the functions and duties of village Accountant or Patel or other similar functions of any other person in relation to the collection of land revenue and dues recoverable as arrears of land revenue. Provision had been made in the Act for the transfer to the District Panchayats of such powers, functions and duties relating to any matters as are exercised or performed by the State Government or any officer of the Government under any enactment which the State Legislature is competent to enact or otherwise in the executive power of the State. The Act also provided that any functions and duties relating to any of the matters specified in the panchayat functions list, previously being performed by the State Government, shall be transferred to the District Panchayats together with the funds provided and the staff employed therefor. On such transfer, the District Panchayat may delegate, with the approval of the Government, to any panchayat subordinate to it any of the functions and duties so transferred. A fund called the Gram Fund or Nagar Fund was created and the proceeds of any tax or fee imposed by or assigned to the Panchayat under the Act, sums contributed to the fund by the State Government and all other sums received by the Panchayat wore to be credited in the fund. The Act provided for appointment of a Secretary and such other servants as may be determined for every Gram Panchayat and Nagar Panchayat in accordance with rates prescribed by the Government. Depending on the facts and circumstances of a case, the State Government may direct that a group of Panchayats shall have one Secretary only. The Secretary and other servants were required to do all the administrative functions as may be conferred on them by the Panchayat. The Act provided that there shall be a Secretary for every Taluqa Panchayat and that the Taluqa Development Officer who shall be an officer belonging to the State service and posted under the panchayat, shall be ex-officio Secretary of the panchayat. The District Development Officer posted under the District Panchayat was to be the ex-officio Secretary of the District Panchayat.

For the purpose of bringing about uniform scales of pay and uniform conditions of service for persons employed in the panchayats, the Act provided for the constitution of a panchayat service which was declared to be distinct from the State service. Power was given to the State Government to determine from time to time classes, cadres and posts of officers and their strength. A servant belonging to district cadre was liable to be posted, whether by promotion or transfer, to any post in any other cadre as provided in the rules. The State Government was empowered to make rules regulating the mode of recruitment either by holding examinations or otherwise and their conditions of service Appointments to posts in the panchayat service were to be made by direct recruitment or by promotion or by transfer of a member of the State service to the panchayat service. The State Government was empowered to allocate to the panchayat service the requisite number of officers and servants who shall be taken over by the panchayat in such cadre and on such tenure, remuneration and other conditions of service as the State Government may determine and the expenditure on account of pay and allowances of officer and servants of the panchayat was to be met from the funds of the panchayat. The Act enabled the State Government to direct the posting of officers of the Indian Administrative Service and of Class-II services of the State Government in panchayat institutions. Provision was made for the constitution of a Panchayat Service Selection Board and District Panchayat Service Selection Committees for selection of officers and other members of staff.

After the coming into force of the 1961 Act the State Government made several sets of rules, one of which was the Gujarat Panchayat Service (Absorption, Seniority, Pay and Allowances) Rules, 1965. The Rules provided for the equation of posts, fixation of seniority, scales of pay and allowances of "allocated employees". An "allocated employee" meant a person allocated to the panchayats service. Under the rules every allocated employee holding a corresponding post immediately before the appointed day shall be appointed to the equivalent post, that is, a post in the panchayat service, which the State Government may, by order, determine to be generally corresponding to a post held by an allocated employee immediately before the appointed day (called corresponding post) having regard to the pay scales, minimum educational and other qualifications prescribed for the equivalent post and the corresponding post and the nature and magnitude of responsibilities attached to such posts. Therefore, unless equivalence of posts was first determined by order of the State Government, the 1965 Rules could not be applied The State Government did not make any order regarding the equation of posts of the staff in the local cadre and the fixation of their scales of pay, although such orders were made in respect of posts of other cadres. The Government did not extend to the staff borne on the local cadre, the benefit of revision of scales of pay made on the basis of the recommendations of the two Pay Commissions, though such benefit was extended to the District and Taluqa Cadres; nor did the Government make any order providing for promotional avenues to employees of the local cadre.

Aggrieved by the inaction of the Government, the employees of the local cadre of the panchayat service filed a writ petition in the High Court seeking various reliefs. The Government contended that members of the panchayat service were not Government servants and so were not entitled to claim the reliefs asked for by them.

Allowing the petitions the High Court held that the employees belonging to the local cadre were Government servants and directed the State Government to make suitable orders under the 1965 Rules to initially fix the pay scales and other conditions of service, to revise the scales of pay in accordance with the recommendations of the Pay Commission. Certain other reliefs were also given.

The State Government filed in this Court an appeal against the judgment of the High Court. In the meantime, the Governor promulgated the Gujarat Panchayats Amendment Ordinance, 1978 which later became the Gujarat Panchayats (Third Amendment) Act, 1978.

The amending Act of 1978 was enacted to get over the effect of the judgment of the High Court. It denied the status of Government servants to certain categories of employees and their allocation to the panchayat service was cancelled with retrospective effect.

In their writ petitions the employees of the local cadre contended that the provisions of the Amendment Act of 1978 were violative of Article 311 of the Constitution, that the Act was discriminatory and that the benefits acquired by them could not be taken away with retrospective effect.

In the appeal it was contended that having regard to the various provisions of the Act the members of the panchayat service were Government servants.