Cooperative Oil Seeds Growers Federation Ltd. Hyderabad, Andhra Pradesh Vs. D. Achyuta Rao & Ors  Insc 282 (15
B.P. SINGH & ALTAMAS KABIR
(Arising out of SLP) Nos.15912-13 OF 2004) WITH
CIVIL APPEAL NOS 1392 2007 (Arising out of SLP) Nos.15926-15927 OF 2004) A.P.
Cooperative Oil Seeds Growers Federation .Appellants Ltd. Hyderabad, Andhra
Pradesh Versus M. Sheshagiri Rao & Ors. Respondents WITH
CIVIL APPEAL NOS 1393 2007 (Arising out of SLP) Nos.15923-15924 OF 2004) A.P.
Cooperative Oil Seeds Growers Federation .Appellants Ltd. Hyderabad, Andhra
Pradesh Versus Mohd. Anwar Ali & Ors. Respondents WITH
CIVIL APPEAL NO 1394 2007 (Arising out of SLP) No.15917 OF 2004) A.P.
Cooperative Oil Seeds Growers Federation .Appellants Ltd. Hyderabad, Andhra
Pradesh Versus Uppada Sudhakara Rao & Ors. Respondents WITH
CIVIL APPEAL NOS 1395 2007 (Arising out of SLP) Nos.15918-15919 OF 2004) A.P.
Cooperative Oil Seeds Growers Federation .Appellants Ltd. Hyderabad, Andhra
Pradesh Versus S. Sekhar Goud & Anr. Respondents WITH
CIVIL APPEAL NOS 1396 2007 (Arising out of SLP) Nos.15920-15921 OF 2004) A.P.
Cooperative Oil Seeds Growers Federation .Appellants Ltd. Hyderabad, Andhra
Pradesh Versus K.V. Nageswar Rao & Ors. Respondents WITH
CIVIL APPEAL NOS 1397 2007 (Arising out of SLP) Nos.17299-17306 OF 2004) M.
Ramesh & Ors. Appellants Versus Mohd. Anwar Ali & Ors. Respondents AND
CIVIL APPEAL NOS 1398 2007 (Arising out of SLP) Nos.15046-15051 OF 2004) A.P.
Cooperative Oil Seeds Growers Federation .Appellants Ltd. Hyderabad, Andhra
Pradesh Versus M. Sheshagiri Rao & Ors. Respondents B.P. SINGH, J.
Special leave granted.
In this batch of appeals the common judgment and order of the High Court of
Judicature of Andhra Pradesh at Hyderabad dated April 27, 2004 has been assailed. The High Court by its aforesaid common judgment and order allowed several
writ appeals against which the appellant, A.P. Cooperative Oil Seeds Growers
(hereinafter referred to as 'the Federation') has preferred appeals. The
respondents whose writ appeals were allowed by the High Court are D.
Achyuta Rao, Mohd. Anwar Ali, M. Seshagri Rao, K.V.N. Rao, Shekhar Goud and U.S.
Rao. They shall hereinafter be referred to as the 'contesting respondents'.
D. Achyuta Rao had preferred writ petition Nos. 9565 and 13985 of 2003 which
were dismissed by the learned Single Judge but the writ appeals being Nos. 1786
and 1787 of 2003 were allowed by the High Court against which the Federation
has preferred the appeals arising out of SLP ) Nos. 15912-15913 of 2004.
Mohd. Anwar Ali had preferred writ petition Nos. 9669 and 13941 of 2003
which were also dismissed by the learned Single Judge but the writ appeals
preferred by him being Writ Appeal Nos. 1784 and 1785 of 2003 were allowed by
the impugned common judgment and order of the High Court. The appeals arising
out of SLP ) Nos. 15923 and 15924 of 2004 have been preferred by the Federation
against the aforesaid judgment allowing the appeals of Mohd. Anwar Ali..
M. Seshagri Rao preferred writ petition Nos. 9671 and 13172 of 2003 which
were also dismissed by the learned Single Judge but the writ appeals being Nos.
1791 and 1794 of 2003 preferred by him were allowed by the impugned common
judgment and order of the High Court.
The cross-objections had been preferred by the Federation which were
dismissed by the High Court. The appeals arising out of SLP ) Nos.
15046 to 15051 of 2004 have been preferred by the Federation challenging the
impugned judgment and order of the High Court allowing the writ appeals. The
Federation has also filed appeals arising out of SLP ) No. 15926 and 15927 of
2004 against the order dismissing its cross- objections.
K.V.N. Rao had preferred writ petition Nos. 9670 and 13163 of 2003 which
were dismissed by the learned Single Judge. The appeals preferred being writ
appeals being Nos. 1795 and 1792 of 2003 were allowed by the impugned common
judgment and order of the High Court.
The cross-objections preferred by the Federation were also dismissed.
The appeals arising out of SLP ) Nos. 15920 to 15921 of 2004 have been
preferred by the Federation against the impugned judgment and order of the High
Shekhar Goud has preferred writ petition Nos. 10039 and 15270 of 2003 which
were dismissed by the learned Single Judge. The writ appeals preferred by him
being Nos. 1793 and 1796 of 2003 were allowed. The Federation has impugned the
common judgment and order of the High Court in the appeals arising out of SLP )
Nos. 15918 and 15919 of 2004.
Lastly U.S. Rao has filed similar writ petitions being No. 9633 of 2003
which was dismissed by the learned Single Judge. The writ appeal preferred by
him being No. 1801 of 2003 was allowed. The Federation has impugned the
judgment and order of the High Court in the appeal arising out of SLP ) No.
15917 of 2004.
The questions that arise for consideration in these appeals relate to the
Voluntary Retirement Scheme (hereinafter referred to as 'the VRS') offered by
the Federation to its employees having regard to the reduced cadre strength. It
is the case of the Federation that only those of the employees were retained
who came within the cadre strength determined in accordance with the norms
enunciated by the Federation and the remaining employees were offered the
benefit of the VRS. The six contesting respondents in these appeals had
challenged their inclusion in the list of surplus employees whose services were
to be discontinued.
Initially a large number of writ petitions were filed but the factual
position as it emerges today is that the strength of the cadre is 159 and,
therefore, 163 employees out of 322 had to be declared surplus. Out of those
declared surplus 137 accepted the VRS while 26 went to court.
The contesting respondents before us are amongst those who challenged the
order of the Federation declaring them surplus. When these appeals came up
before us we were informed that the writ appeals preferred by 20 others were
still pending before the High Court and, therefore, we had directed that those
appeals may also be disposed of so that all the matters could be heard
together, if necessary. Accordingly those writ petitions have been heard and
disposed of by the High Court and the aforesaid 20 writ petitioners have also
accepted the VRS pursuant to the order of the High Court dated 14th September, 2005. Thus the dispute is confined to the 6 contesting respondents before
this Court whose writ appeals were allowed by the High Court.
Shorn of unnecessary details the facts of the case are as follows :- The
appellant-Federation was registered as a cooperative society under the A.P.
Cooperative Societies Act with the object of bringing about increase in
production of oil seeds. The appellant-Federation started its operation in the
year 1983 with a 2 tier structure, namely the Federation at the State level and
cooperative societies at the village level.
The vegetable oil project was funded by the National Dairy Development Board
(for short 'NDDB') with a view to promote the Primary Cooperative Societies and
the establishment of processing units. On its suggestion the
appellant-Federation adopted a 3 tier structure with the Federation at the top
and two Regional Unions in the second tier. In the third tier, were the
cooperative societies at village level. It appears from the record that many of
the employees of the appellant-Federation were transferred to the Regional
Unions. This was challenged by 21 employees who filed Writ Petition No.24907 of
1996 contending that they were not the employees of the Regional Unions but
were employees of the Federation. The Unions were distinct legal entities since
they were also independently registered as cooperative societies. They had been
transferred to those Unions against their wishes and without their consent. The
aforesaid writ petition was allowed by judgment and order of June 6, 2000. It was held that the writ petitioners continued to be the employees of the
appellant-Federation. There was no contract of employment between them and the
Management of the Regional Unions.
The employer-employee relationship had not been severed and, therefore, in
law, they continued to be the employees of the appellant-Federation.
There was no employer-employee relationship between them and the aforesaid
two Regional Unions. Accordingly the appellant-Federation was directed to treat
them as their employees and extend to them all service benefits.
The appellant-Federation preferred Writ Appeal No. 798 of 2000.
The said appeal was later dismissed as having become infructuous in view of
the changed circumstances. This fact has been noticed by the High Court in its
impugned judgment and order.
After the re-organization, the Federation looked after the marketing and oil
palm development activity while the Regional Unions were entrusted with the
management of the processing facilities of conventional oil seeds. All the
assets and liabilities of the facilities were transferred to the Regional
Units. It is not disputed that the Regional Unions suffered huge losses. Having
regard to the mounting losses, a Joint Committee Meeting of the
appellant-Federation and the two Regional Unions was held on April 13, 2001 to consider the restructuring of the appellant-Federation and the two
Regional Unions. A decision was taken to close down both the Unions and to take
necessary steps in that direction. A time bound programme for closing down of
the Unions was prepared and a revised staffing structure of the Federation
based on a broad Five Year Business Plan was to be finalized. With this in view
a plan of action was agreed upon and the Federation appointed a Consultant for
the purpose of valuation of the assets of the two Regional Unions. The Board of
Directors of the Federation in its 74th Meeting held on May 13, 2002 approved the decision taken by the Joint Committee for the closure of the two Regional
Unions and the manpower of 161 employees for the restructured Federation was
worked out based on the Five Year Business Plan. The NDDB vide its letter dated
July 2, 2002 agreed in principle to the closure of the two Regional Unions
without prejudice to their invoking the Government guarantees for recovery of
their outstanding loans. In the Board Meeting of May 13, 2002 it was also resolved to offer VRS for the surplus manpower of the Federation and the Unions as per
the approved pattern. The Federation submitted its proposal to the Government
for financial assistance to implement this scheme. The Government vide its G.O.
dated July 23, 2002 exercising its power conferred by Section 3 of the A.P.
Cooperative Societies Act appointed the Principal Secretary, Public Enterprises
Department, and conferred upon him the necessary powers for
privatization/restructuring, winding-up under the Public Sector Reforms
Programme and also conferred powers of the Registrar under the A.P. Cooperative
Societies Act and the Rules made therein. The Government also appointed
liquidators for the aforesaid two Regional Unions vide its letter dated September 25, 2002. So far as the restructuring of the Federation was concerned, cadre
strength of 159 employees was proposed resulting in many of the employees in
different categories being rendered surplus. A Circular was issued by the
appellant-Federation on December 12, 2002 recording the fact that a common
seniority list of the employees had been prepared for the appellant-Federation
and the Regional Unions. The norms laid down in the said Circular were as
follows :- "(a) The principle adopted for fixing the seniority cadre- wise
is on the basis of date of joining of the employee in the previous immediate
(b) In the case of employees who were recruited as Field Officers and where
ranking was prescribed during the recruitment, the same ranking is maintained
for the seniority in the present cadre.
(c ) Wherever employees from various designations have been promoted to a
common single care, seniority is fixed, based on the difference in the pay
scales of these various designations i.e. the designation carrying higher pay
scale is made senior.
(d) Wherever the date of joining is same, the date of birth is taken into
account i.e., the employee with more age is placed as senior.
(e) This seniority list is fixed for the regular/permanent employees only.
(f) This seniority list is subjected to the final settlement of the
disciplinary cases/court cases (pertaining to promotions only or these having a
bearing on seniority only) pending, if any, against any employee."
The employees were invited to submit their objections, if any, to the said
seniority list. Later the norms were slightly modified on January 3, 2003 when
the Board resolved as follows :- "The Board approved norms adopted for
preparing the final common seniority list of all the employees except that in
case of promotions, when the date of joining is the same, the seniority of the
employees as per the feeder channel is to be protected rather than fixing the
seniority on the date of birth.
Wherever, the date of joining is different, on promotion, the seniority is
to be fixed depending on the date of joining in the promoted cadre."
After considering the objections filed by some of the employees the
appellant-Federation prepared a common seniority list indicating surplus
employees and proposing to offer VRS benefits to them. On May 7, 2003 the VRS
was announced giving option to the employees likely to be affected thereby to
accept the benefits under the VRS. The scheme was made effective from July 1,
2003. The cut-off date for VRS benefit was June 30, 2003.
On May 19, 2003 the staffing pattern was approved by the Registrar of
Cooperative Societies. The total revised cadre strength was determined as 159
consisting of about 29 categories of posts, many of them promotional posts and
some posts to which recruitment was made both by promotion and direct
recruitment. All the posts were treated as selection posts.
This gave rise to a large number of writ petitions being filed before the
High Court including the writ petitions filed by the contesting respondents.
Several issues were raised before the learned Single Judge who heard the
writ petitions. One of the submissions urged on behalf of the writ petitioners
was that all the employees appointed by appellant- Federation whose services
had been transferred to the two Regional Unions continued to be the employees
of the Federation and, therefore, they could not be treated as employees of the
two Regional Unions which were separate cooperative societies under the A.P.
Cooperative Societies Act. The appellant-Federation and the two Regional Unions
being three separate incorporated bodies, they were independent of each other
and, therefore, by mere deputation of the employees of the Federation to work
in the Regional Unions, the employer-employee relationship which existed
between the writ petitioners and the appellant-Federation was not severed.
Despite their transfer to the Regional Unions, they continued to be the
employees of the appellant-Federation.
The appellant-Federation contested the claim of the writ petitioners and
submitted that many of the employees transferred to the two Regional Unions had
been given promotion to the higher posts in the Unions and, therefore, they
could not be treated as deputationists. The Unions were also part and parcel of
the appellant-Federation and, therefore, the promotions made by the Unions must
be considered in that light. Those promoted in the Unions could not compare
their cases with their seniors working in the appellant-Federation.
The submission urged on behalf of the writ petitioners was upheld by the
learned Judge who held that in view of the earlier decision in Writ Petition
No. 24907/1996 holding the transferred employees to be the employees of the
appellant-Federation, it could not contend otherwise as long as the judgment
held the field. (As noticed earlier that judgment has since attained finality).
The learned Judge also held that the three cooperative societies, namely, the
Federation and the two Regional Unions were three separate bodies incorporated
as cooperative societies under the A.P. Cooperative Societies Act with separate
regulations, bye- laws and separate governing bodies. It was, therefore, not
correct to contend that the two Regional Unions were part and parcel of the
Federation. In the facts and circumstances of the case the employees of the
appellant-Federation continued to be its employees and their services in the
Unions must be treated as on deputation only. They had a lien on their posts in
the Federation and their service conditions, seniority, pay- scale etc. were
also protected as employees of the appellant-Federation.
The learned Judge further held that the Circular and the Notification dated
May 7, 2003 were valid. He held that though the seniority list of the employees
of the Federation and the two Regional Unions had been published and approved
by the Registrar of Cooperative Societies, the same was never acted upon. The
Federation was, therefore, right in consolidating and issuing a common
seniority list of the Federation employees consisting of three lists of the
employees of the Federation and inviting objections. He also held that the
staffing pattern approved by the Registrar which took effect from May 5, 2003
was authorized under Section 116-C of the A.P. Cooperative Societies Act and
the mere fact that the approval was granted on May 19, 2003 with effect from
May 5, 2003 did not invalidate the approval given.
The learned Judge rejected the submission urged on behalf of the writ
petitioners that the service regulations and the bye-laws of the Federation did
not prescribe any rule for determination of seniority of its employees. He held
that since the Board of Directors of the appellant- Federation approved uniform
procedure regarding the determination of seniority which were reflected in the
tentative seniority list as well as the final seniority list, which it was
authorized to do, the same could not be faulted unless it was shown to be
discriminatory, unjust or inequitable.
He held that the principles applied by the Federation for determination of
seniority were not arbitrary. He also rejected the contention urged on behalf
of the writ petitioners that since they have been promoted to higher posts and
were on probation, they could not be deemed to be confirmed against that post
till their probation was declared. Factually their probation was never declared
and they were never confirmed against the promotional post in accordance with
the regulations. Thus they continued to retain a lien on the lower post from
which they were promoted. He held that the transferred employees had held the
promotional post for over 2 years while the maximum period of probation was 2
years. They had, therefore, to be treated as confirmed.
It did not matter whether their probation was declared formally. Such a
question could only arise in the case of new entrants and not those promoted on
probation. In this view of the matter he rejected the contention of the writ
petitioners that they should be considered for appointment against the lower
post over which they held a lien and which post they held before promotion. The
learned Judge thereafter considered the individual cases of the writ
petitioners but it did not find any merit in them except in the writ petition
filed by one K. Ranga Rao.
However, while dealing with 19 promotions between 1994 to 1999 the learned
Judge held that on equitable considerations if the promotions given by the
Unions are ignored and the cases of the employees working in the Unions are
treated on par with the Federation employees taking into account that they were
also promoted on par with the Federation employees w.e.f. July 21, 1999, there
will be no chain reaction or any change for upsetting the entire exercise made
by the Federation. The learned Judge prepared a list which showed that by
treating July 21, 1999 as the deemed date of promotion, very few employees
would be rendered surplus.
Accordingly the writ petitions preferred by the contesting respondents
herein and many other writ petitions were dismissed by the learned Single
The judgment and order of the High Court was challenged in writ appeals by
some of the writ petitioners.
It was submitted in the appeals by the contesting respondents herein that
the appellant-Federation gave a complete go bye to the service regulations and
fixed the seniority in a most arbitrary and illegal manner.
As a result, employees who entered the service of the Federation earlier
were declared surplus while persons junior to them were retained. The service
conditions of the employees had not been approved by the Registrar of
Cooperative Societies as required under Section 116-C of the Cooperative
Societies Act. The regulations framed by the appellant- Federation did not
contain the method and manner of fixation of seniority and in fact no seniority
list had been published. The employees who had been transferred to the Unions
were promoted at different times and all this was beyond the knowledge of the
employees concerned. No promotion rules had been framed for promotion from one
category to another. The appellant-Federation submitted in reply that the
Managing Committee of the Society was fully empowered to take decision in
respect of fixation of seniority since it had powers to frame service
conditions. It further submitted that once the initial service regulations are
approved by the Registrar, Cooperative Societies, the subsequent changes in the
services rules and regulations need not be approved by him. Thus when the
decision was taken by the Board of Management of the Federation with regard to
principles to be applied to determine seniority, it did not require approval of
the Registrar of Cooperative Societies. The Board had in its 76th Meeting fixed
the criteria for determination of seniority.
The High Court in the Writ Appeals negatived the contention that as and when
the existing service rules are amended or additional service rules are framed,
the approval of the Registrar, Cooperative Societies is not necessary. It held
that if the interpretation as contended by the appellant-Federation were to be
accepted the very purpose of getting approval of the rules relating to service
conditions by the statutory authority shall be frustrated because in that even
after getting the approval initially, the Federation may amend the rules in
whatever way it liked and completely defeat the very purpose for which Section
116-C was framed. The learned Judges of the appellate Bench, therefore, did not
agree with the finding of the learned Single Judge, but having regard to the
developments that had taken place in the meantime, they did not consider it
advisable to direct the appellant-Federation to seek approval of the Registrar
of Cooperative Societies afresh. The Unions were lying closed for several years
and, therefore, it was not advisable to resort to the time consuming process of
seeking fresh approval of the Registrar of Cooperative Societies. The learned
Judges, therefore, considered it advisable to decide the matter themselves.
The High Court considered the provisions of the Service Regulations which
came into effect on June 1, 1983. After considering the various provisions
contained therein it was observed that in the instant case a very different
situation emerged on account of the fact that the employees who were initially
appointed in a particular cadre were transferred to the two Regional Unions
where they were again promoted to the higher posts. It was not clear as to
whether the employees were promoted to higher posts on the basis of channels
created or on the basis of any criteria determined by the respective Unions. It
was also not discernible from the material placed on record whether any proper
selection committee had been constituted for promoting the employees on the
basis of merit. The fact remained that the employees were promoted to higher
posts both at the level of the Federation and the two Regional Unions. In view
of the fact that they were to be reintegrated and seniority had to be fixed for
the purpose of determining which of the employees were rendered surplus, the
appellant-Federation was required to undertake an exercise. While the learned
Single Judge had found that the criteria fixed for assessing the inter-se
seniority was just and reasonable and did not require any interference, the
learned Judges of the appellate bench, however, found it otherwise. It was
found that the promotions were granted without reference to any channel of
promotion determined by the Management. The same applied to employees who were
sent to the Unions and were promoted there. The High Court was of the view that
so far as the employees of the appellant-Federation are concerned, who were
sent on deputation to the two Regional Unions, their promotion in the Unions
had nothing to do with their position in the appellant-Federation. Their
service in the Unions must be considered as service in ex-cadre posts since it
was unrelated to his status as an employee of the appellant-Federation. There
was no material whatsoever to establish that the promotions were made to posts
approved by the Registrar of Cooperative Societies. The employees had to be
treated as the employees of the appellant-Federation in view of the judgment in
Writ Petition No.24907 of 1996. Thus only their relative seniority in the
respective cadres of the appellant-Federation could be taken into
consideration, and their promotion in the ex-cadre post in the Unions had
nothing to do with their seniority in their parent cadre under the
appellant-Federation. Thus it could not be said that such of the employees who
were promoted in pursuance of the interim directions of the High Court were
treated as probationers and consequently they were deemed to have been
confirmed on those posts. On the other hand their transfer from the
appellant-Federation to the Unions and their positions at the relevant time in
their parent cadre had relevance. If any of the employees of the
appellant-Federation was promoted who was junior to the transferred employee,
it became imperative that the promotion and seniority of such transferred
employee ought to be protected irrespective of their promotion in the Union.
The fact that promotions were not challenged for many years could not be a
ground for rejecting their claim since such promotions granted in the Unions
could not be treated as promotions in the parent cadre in the
appellant-Federation. Such promotions, therefore, could not affect their
service conditions in the appellant-Federation. The High Court, therefore,
concluded that the writ petitioners were entitled to challenge the promotions
given to junior employees while working on transfer in the Regional Unions.
The High Court took the view that for the purpose of determining inter-se
seniority of the employees in the parent cadre of the appellant- Federation ,
their date of entry into service in their respective cadres in the
appellant-Federation only had to be taken into consideration.
However, the seniority lists of the employees borne in the cadre of the
appellant-Federation including those who were sent on transfer to the Unions
were never prepared and circulated. It was only when the surplus manpower was
being worked out in view of the approved strength that the exercise was
undertaken to determine seniority and to evolve principles of determination of
seniority. The employees had no opportunity to protest against the grant of
promotion to other employees who may be junior to them.
The other important finding recorded by the appellate Bench is that there
was no clear cut promotion policy either in the appellant-Federation or in the
Unions. After appreciating the material on record, the High Court in its
impugned judgment and order has observed as follows :- "It is also further
noticed that there was no clear cut promotion policy either in the OILFED or in
the Unions as is seen from the seniority list, an Operator was promoted as
Shift Supervisor, a Chemist was promoted as Assistant G-1, Driver was promoted
as Senior Assistant. Similarly a Chemist was promoted as Executive Quality
Control and also Quality Control Officer. Thus, it is seen that the employees
have been promoted to various posts without there being any stipulated channels
beyond procedure of promotions. Under those circumstances, fixing the seniority
on any of the modes excepting the seniority as available as on the date of
their entry in the initial cadre will be the safe method which would ensure the
principle of lost come first go and first come last go."
The High Court, therefore, held that in the absence of any rules governing
such mattes and in the absence of approved channels of promotion and
particularly in view of the fact that promotions were granted in an irrational
manner, as found by it, not much importance could be attached to the promotions
granted in the Unions. Since all the employees were held to be employees of the
appellant-Federation their seniority had to be determined by reference to norms
which were reasonable and not discriminatory. Thus in the absence of rules,
applying the principle of seniority by reference to date of initial
appointment, the High Court held that the cases of the contesting respondents
must be considered by reference to the dates of their appointment in the parent
cadre having regard to the category to which they belonged.
Shri P.P. Rao, learned counsel appearing on behalf of the
Appellant-Federation submitted that there was no justification for the High
Court to interfere when the majority of the employees had accepted the scheme
of voluntary retirement. He relied upon the decision in (1980) 4 SCC 38 : Kamal
Kanti Dutta and others vs. Union of India and others and submitted that where
service rules operate, more than one view is always possible to take without sacrificing
either reason or common sense, but the ultimate choice has to be necessarily
conditioned by several considerations ensuring justice to as many as possible
and injustice to as few. He submitted, relying upon the aforesaid decision,
that no matter with what care, objectivity and foresight a rule is framed, some
hardship, inconvenience or injustice is bound to result to some members of the
service. The paramount consideration is the reconciliation of conflicting
claims. He also brought to our notice the decision of this Court in 1986 Supp.
SCC 143 : reserve Bank of India and others vs. C.N. Sahasranaman and others
wherein it was held that in matter of service conditions, it is difficult to
evolve an ideal set of norms governing various conditions of service.
Reiterating the principles laid down in Kamal Kanti Dutta and others (supra)
this Court held that the constitutionality of any service rule has to be judged
by considering whether it is fair, reasonable and does justice to the majority
of the employees and fortunes of some individuals is not the touchstone. In
judging whether a rule is just, fair and reasonable, it must be seen that the
rule does not suffer from the vice of Articles 14 and 16 of the Constitution or
any other constitutional guarantee.
It is no doubt true that service rules, however, meticulously framed, there
is always a chance of some hardship being caused to a particular section of the
employees, but as long as the rules are just, fair and reasonable, even if two
views are possible, the mere fact that some hardship, inconvenience or
injustice results to some members of the service, is not a ground to strike
down the rule. It is not safe to test the constitutionality of a service rule
on the touchstone of fortunes of an individual. If the rule otherwise appears
to be fair, just and reasonable and does not suffer from the vice of Articles
14 and 16 of the Constitution or any constitutional guarantee, the mere fact
that some little hardship or injustice is caused to someone, is no ground to
strike down the rule altogether.
We may, however, notice at the threshold that in relation to the promotions
granted in the two Unions, no rules were brought to our notice which were
followed while granting promotions. It is on the basis of such promotions that
the inter-se seniority of the employees was determined which led to some of
them being retained and others being declared surplus having regard to the
total cadre strength determined for carrying on the activities of the
Federation after the closure of the Unions.
Shri Rao also contended that in the instant case in working the VRS the
principle followed was the rule of seniority determined by reference to length
of service in the grade. Such a rule cannot be said to be unreasonable and has
judicial sanction. In particular he referred to the judgment of this Court in
(1977) 3 SCC 399 : S.B. Patwardhan and another vs. State of Maharashtra and
others. It is no doubt true that in the aforesaid decision this Court held that
seniority determined on the sole touchstone of confirmation was indefensible
having regard to the fact that the confirmation is one of the glorious
uncertainties of government service depending neither on efficiency of the
incumbent nor on the availability of substantive vacancies. While appreciating
the principles laid down by their Lordships, one cannot lose sight of the facts
of the case which demonstrated that the directs recruits and the promotees
drawn from two different sources constituted a single integrated cadre discharging
identical functions and bearing similar responsibilities and yet clause (iii)
of Rule 8 provided that probationers recruited during any year shall in a bunch
be treated as senior to promotees confirmed in that year. The plain arithmetic
of this formula was that the direct recruit appointed on probation even later
was regarded as senior to a promotee who was appointed as an officiating Deputy
Engineer much earlier, but was confirmed later than the direct recruit.
Such a formula gave a direct recruit even the benefit of his one year's
period of training and another year's period of probation for the purposes of
seniority and denied to the promotees the benefit of their long and valuable
experience. This differentiation could not be justified on an intelligible
ground bearing nexus with efficiency in public service. It will thus be seen
that counting the period of officiation and probation in the case of direct
recruits and not counting such officiation in the case of promotees, was held
to be arbitrary and unreasonable and was, therefore, violative of Articles 14
and 16 of the Constitution of India because it left the valuable right of
seniority to depend upon the mere accident of confirmation.
Mr. Rao also contended that the High Court was wrong in holding that the
probation of the employees had not been declared. The normal rule was of one
year probation and the maximum period of probation was 2 years. So an employee
on probation must be deemed to have been confirmed after the completion of two
years of probation. He placed reliance on decisions of this Court reported in
1968 (3) SCR 1 = AIR 1968 SC 59 : Commissioner of Commercial Taxes, Board of
Revenue, Madras and another vs. Ramkishan Shrikishan Jhaver ; 1988 (2) SCC 250
R.L. Gupta and another vs. Union of India and others and (1995) 4 SCC 422:
Krishan Lal vs. State of J & K.
In any event he submitted that the learned Single Judge had deferred the
date of promotion of candidates to 21st July, 1979 on equitable consideration
as that was the date which least affected the parties.
On the other than Shri Gurumurthy, learned senior counsel appearing on
behalf of some of the respondents, submitted that no principles whatsoever were
adhered to while granting promotions in the two Unions. He referred to the
facts of the case to make good his submission. He highlighted the finding of
the High Court that in the two Unions promotions were granted without adhering
to any rule, regulations or norms. Only on the basis of expediency, and without
any rational basis, promotions were granted and the persons promoted were not
necessarily senior to those not promoted. No channel of promotion was
prescribed by rules and employees of one branch were promoted to higher posts
in another branch wholly unrelated to the branch from which he was promoted.
Promotions were granted in higher posts in other departments even though the
work of that department was unrelated to the work of the employee concerned in
his lower post. He criticized the appellant-Federation for not being fair to its
employees as a model employer should be, and drew our attention to the
observations of this Court in paragraph 24 of the judgment reported in (2000) 1
SCC 641 Sub-Inspector Rooplal and another vs. Lt. Governor through Chief
Secretary, Delhi and others. He also contended that when candidates are
selected in the same process of selection and a merit list is prepared, the
date on which the candidate actually joined the post is not determinative of
his seniority. It is his position in the merit list which determined his
seniority. In support of this proposition which is well accepted, he relied
upon the decisions of this Court in (1994) 4 SCC 301 : Chairman, Puri Gramya
Bank and another vs. Ananda Chandra Das and others ; (2003) 5 SCC 604 : Bimlesh
Tanwar vs. State of Haryana and others and (2004) 2 SCC 459 : P. Srinivas vs.
M. Radhakrishna Murthy and others.
According to Shri Gurumurthy, the employees of the Federation transferred to
two Unions could claim a lien only on the posts to which they were appointed in
the Federation because their transfer to the Unions were not regulated by rules
nor were any rules framed for promotions within the Unions. According to him
all the appointments and promotions granted were adhoc in nature. No rules
governed such matters and no norms were laid down or followed by the Management
while granting promotions. He relied upon the decision of this Court in (2003)
10 SCC 14 : G. Varandani V. Kurukshetra University and another and supported
the decision of the High Court which held that the seniority of the employees
concerned must be determined by reference to their dates of appointment in the
Federation since they were not holding any regular or permanent posts in the
Unions and were merely working on deputation. The earlier decision of the High
Court holding that all the employees were the employees of the Federation
further strengthened his submission.
It is also his submission that a valid appointment pre-supposes the
existence of a vacancy or anticipated vacancy against which an appointment may
be made. Reliance was placed on a decision of this Court in 1964 (4) SCR 964 =
AIR 1964 sc 521 : The State of Punjab vs.
Jagdip Singh. He also submitted that a direct recruit could not be reverted
to a lower post and he relied on a decision of this Court in (1988) 4 SCC 168 :
Hussain Sasan Saheb Kaladgi vs. State of Maharashtra.
Applying these principles to the cases of the six respondents before this
Court he submitted that the Division Bench of the High Court rightly allowed
the appeals and granted relief to the contesting respondents having regard to
the peculiar facts of each case after thoroughly considering their cases in the
light of the well-settled principles of law.
Mr. Ranjit Kumar, learned senior counsel, appearing for some of the
respondents submitted that two principal questions arose for consideration of
the Court. Firstly, whether the principles laid down for declaration of surplus
employees were valid and legal. Secondly, whether they are not arbitrary and
unreasonable since they lead to retention of juniors while declaring seniors as
surplus. He submitted that when the Unions were formed and the option of the
employees was sought, they did not opt to go to the Unions and wanted to be
retained in the Federation. However, they were sent to the Unions against their
wishes. In any event in the year 1996 the High Court in the writ petition had
clearly declared the legal position that all the employees continued to be the
employees of the Federation and, therefore, a common seniority list had to be
prepared. Such a seniority list was never prepared till June, 2003. In the
course of hearing before the learned Single Judge the so- called seniority list
was prepared. Several writ petitions were filed challenging the seniority list
and the declaration of surplus employees.
He objected to the chart which is incorporated in the judgment of the
learned Single Judge contending that such a chart was not given to the Court,
and in any case, was never given to the parties so that they could object to
the same. He also submitted that in declaring surplus employees the principle
of last come first go must be applied. The Federation was under a legal
obligation to prepare a common seniority list even if the VRS was to be
implemented. Unfortunately the declaration of the VRS was of May 7, 2003
whereas the purported final seniority list was given to the Court on June 26,
2003 to which they had no opportunity to object. However, the Court had given
opportunity to the parties to object to the seniority list. The norms applied
for reckoning seniority were arbitrary and unreasonable and based on promotions
which were granted without reference to rules or norms. He also commented that
since there was no seniority list of the lower cadre, it was not possible to
prepare seniority list of the higher cadre. He also drew our attention to the
finding of the Division Bench of the High Court that no channels of promotion
had been created nor was any criteria determined for promotion to the higher
posts in the two Unions. It was not discernable from the material placed on
record whether any proper selection committee had been constituted for
promoting the employees on the basis of merit. Though all the posts are said to
be selection posts, there is no indication as to how the merit of the
candidates was judged.
The respondents are right in their contention that the transfer of employees
from the Federation to the Unions was not regulated by rules framed or norms
laid down by the Management. Since a three tier structure was envisaged, many
of the employees of the Federation were transferred to the two Unions. It may
be that not much thought was given to such matters as it was believed that in
due course, the employees working in the Unions may be absorbed in those Unions
and disputes of this nature may not arise. However, that never happened. The
Federation continued as an independent cooperative society while the two Unions
also functioned as two independent cooperative societies.
The transfers were made on ad hoc basis in the absence of rules and
similarly promotions were also granted without reference to rules or norms. No
rules were framed governing the grant of promotions on transfer of employees
from the Federation to the Union, or from one Union to another. We cannot lose
sight of the fact that the Federation and the two Unions were three distinct
legal entities. All the employees with whom we are concerned were appointed to
posts in the Federation and, therefore, it was rightly contended that they were
employees of the Federation and no distinction could be made merely because
they were officiating against posts in one or the other Union. The matter was
put beyond controversy by a decision of the High Court which attained finality
holding that all the employees must be treated as the employees of the
Federation and not the Unions. They, therefore, belonged to the same service
under one employer namely the Federation and their inter- se seniority had to
be determined on that basis.
So far as the inter-se seniority in the Federation is concerned, though not
formally determined, it must be held, in the absence of rules, that seniority
must be reckoned by reference to the length of service in the Federation. This
is precisely what the High Court has held.
The question is whether upon their transfer to the Unions and upon
promotions being granted in the Unions the seniority of the employees inter-se
was affected. It is no doubt true that even in the absence of rules promotions
may be granted, but it must be shown that the promotions granted are just and
fair and that they do not offend Articles 14 and 16 of the Constitution of
India or any other constitutional guarantee. If promotions are granted
arbitrarily without following norms or guidelines, such promotions will have to
be ignored in determining the seniority of the employees concerned, firstly for
the reason that there are no rules governing grant of promotion, and secondly
because the grant of promotions are arbitrary and violative of the principles
enshrined in Articles 14 and 16 of the Constitution of India.
The High Court in its impugned judgment has considered the matter in great
detail and we agree with its finding that in the grant of promotions within the
Unions no rule whatsoever was followed.
Admittedly no seniority rules had been framed when promotions had been
granted in the Unions. The management acted in exercise of its authority to
grant promotions. The action of the Management in granting promotions must be
determined on the touchstone of Articles 14 and 16 of the Constitution of
India. If the grant of promotions is found to be arbitrary or unreasonable it
must be held that such promotions will not affect the right of seniority of the
persons concerned, since the promotions were granted neither in accordance with
any rule nor by following norms consistent with principles incorporated in
Articles 14 and 16 of the Constitution of India. The High Court has very
critically analysed the facts of the case. It has found as a fact that there
was no clear cut promotion policy either in the Federation or in the Unions. An
Operator was promoted as Shift Supervisor ; a Chemist was promoted as Assistant
Grade-1; a Driver was promoted as Senior Assistant and another Chemist was
promoted as Executive Quality Control and also Quality Control Officer. Thus,
the High Court concluded that the employees had been promoted to various posts
without there being any stipulated channels of promotion and without following
any procedure prescribed by rules of promotion. Thus determination of their
seniority by reference to promotions which were not governed by any rule and
were at best fortuitous could not be justified. We fully endorse the view of
the High Court. Where promotions are not granted in accordance with the rules or
fair and reasonable norms laid down for the purpose, and the promotions are at
best fortuitous, such an uncertain event cannot be made the basis for
determining seniority which is a valuable right of an employee. This is fully
consistent with the principles laid down in S.B.
Patwardhan and another (supra). Even the learned Single Judge was hesitant
in accepting seniority by reference to dates of promotion granted in Unions.
The learned Judge, therefore, ingeniously worked out a chart and identified a
date which, if taken as the date of promotion, would cause least inconvenience
to the employees. Unfortunately such a principle cannot be followed in service
matters where seniority confers a very valuable right on an employee and his
entire future career is at times dependent upon such seniority. Seniority,
therefore, must be determined by rules validly framed or norms enunciated
and/or followed which are consistent with the principles enshrined in Articles
14 and 16 of the Constitution of India.
The instant case has another facet. While the employees were transferred to
the Unions much earlier and were granted promotions in due course in the
Unions, the question of their seniority inter-se and the principles to be
applied in determining seniority were evolved for the first time when the
closure of the Unions was being considered necessitating retrenchment of
surplus employees. It was at this stage that the cadre strength was first
determined and thereafter norms were sought to be evolved in the light of which
seniority was to be determined and junior employees in excess of the determined
cadre strength to be given the benefit of VRS. It was really a process of
working backwards. Rules and norms were sought to be evolved later governing
promotions which were granted much earlier without reference to such rules or
norms, but which were to determine the inter-se seniority of the employees for
the purpose of retrenchment.
We are, therefore, satisfied that the High Court was right in holding that
the promotions earlier granted in the Unions and the norms later laid down by
the Federation could not be applied to determine the inter-se seniority of the
employees of the Federation. The only rule which, in the facts of the case,
could be safely applied to determine seniority was to reckon seniority by
reference to length of service in the Federation. As a necessary corollary, the
date of initial appointment in the Federation was decisive in determining
seniority. Thus applied, seniority must be determined by reference to the date
of initial appointment and not by reference to dates of promotion granted in
the Unions unguided by rules framed or norms declared which could be said to be
fair and reasonable applying the test of Articles 14 and 16.
The High Court has thereafter considered the individual cases of the
appellants applying the test of seniority by reference to length of service in
In the case of Anwar Ali (respondent in SLP ) Nos. 17299-17306 of 2004 and
SLP ) Nos. 15923-15924 of 2004) the facts reveal that Anwar Ali was appointed
as a Field Officer on July 11, 1983. The petitioner M. Ramesh was appointed as
a Field Officer on July 13, 1983.
Another person, namely Tirupathi Reddy was appointed to the same post on
July 11, 1983. Since Anwar Ali was senior most in age, he was given seniority
over Tirupathi Reddy. All the three were promoted as Executives by order dated
July 15, 1989 but they joined on different dates. Anwar Ali could join only on
August 4, 1989 because he was not relieved of his duties by the authorities
having regard to the exigencies of service. In the next higher post Anwar Ali
was promoted on July 21, 1999 whereas the other two were promoted pursuant to
orders passed by the High Court on July 23, 2001 with retrospective effect from
July 21, 1999. The High Court has rightly come to the conclusion that since
Anwar Ali was the senior-most amongst the three, he could not be declared
Similarly in the case of Achyuta Rao (respondent in SLP ) Nos.15912-15913 of
2004) the High Court found that he was appointed as Field Officer on November
29, 1983. He claimed seniority over Ramesh Kumar Reddy, who was appointed Field
Officer on December 5, 1983. So far as their promotions to the post of
Executive (Agriculture) in the Unions are concerned, while Achyuta Rao was
promoted on September 18, 1989, Ramesh Kumar Reddy was promoted on March 15,
1989. The facts, therefore, disclose that Achyuta Rao when initially appointed
to the post of Field Officer was senior to Ramesh Kumnar Reddy, but if the
promotion granted in the Union is ignored, he must be declared senior to Ramesh
Kumar Reddy and ought not to be included in the surplus list. The High Court,
therefore, rightly upheld the contention of Achyuta Rao.
In the case of Seshagiri Rao (respondent in SLP ) Nos.15926- 15927 of 2004
and SLP ) Nos. 15046-15051 of 2004) it is not disputed that he was appointed as
a Chemist in the Federation on May 11, 1987.
Later the other officers (respondents 3 to 8) in the writ petitions had been
appointed to the same post. It so happened that Seshagiri Rao was transferred
to the Union where he was later promoted as Executive, Quality Control. The
High Court upheld his contention. Since he was the first entrant in the
category of Chemist, he could not be deprived of his seniority in the parent
department. Accordingly his appeals were allowed and he was declared as
The case of K.V. Nageshwara Rao (respondent in SLP ) Nos.
15920 15921 of 2004) stands on the same footing as that of Seshagiri Rao. He
was appointed to the post of Chemist in the Federation on May 12, 1987 and was, therefore, senior to the other officers (respondents 3 to 8 in the writ
petitions), who were appointed later.
In SLP ) Nos. 15918-15919 of 2004 and SLP ) No. 15917 of 2004, though the
appellant-Federation has challenged the decision of the High Court, the parties
likely to be adversely affected if its contention is upheld by us, have not
been made parties in the appeals. We must, therefore, refuse to interfere with
the order of the High Court.
We, therefore, find no merit in these appeals and they are accordingly
dismissed. Parties to bear their own costs.
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