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CASE NO.: Appeal (civil)  3405 of 2008

PETITIONER: Andhra Bank

RESPONDENT: Andhra Bank Officers & Anr

DATE OF JUDGMENT: 08/05/2008

BENCH: S.B. Sinha & Lokeshwar Singh Panta

JUDGMENT: JUDGMENT                                                           REPORTABLE

                IN THE SUPREME COURT OF INDIA

                 CIVIL APPELLATE JURISDICTION

                CIVIL APPEAL NO. 3405           OF 2008                  (Arising out of SLP (C) No.11853 of 2006)

Andhra Bank                                             ... Appellant

                                 Versus

Andhra Bank Officers & Anr.                             ... Respondents

                           JUDGMENT

S.B. Sinha, J.

1.    Leave granted.

2.    Interpretation of Regulation 26 of the Andhra Bank (Officers) Service

Regulations, 1982 framed under Section 19 of the Banking Companies

(Acquisition and Transfer of Undertakings) Act, 1980 (for short, ‘the Act’)

is the question involved herein. Parliament enacted the Act to provide for

the acquisition and transfer of the undertakings of certain banking

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companies, having regard to their size, resources, coverage and organization

in order to further control the heights of the economy, to meet progressively,

and serve better, the needs of the development of the economy and to

promote welfare of the people, in conformity with the policy of the State

towards securing the principles laid down in clauses (b) and (c) of Article

39 of the Constitution and for matters connected therewith or incidental

thereto. Section 3 of the Act provides for the transfer of undertakings of the

existing banks. Appellant bank is a ‘New Bank’ within the meaning of the

provisions of the said Act. Undertaking of the existing bank in terms of the

said Act vested in the ‘New Bank’. Section 8 of the Act provides that every

corresponding ‘New Bank’ shall in the discharge of its functions be guided

by such directions in regard to the matters of policy involving public

interest as the Central Government may, after consultation with the

Governor of the Reserve Bank, issue. Section 19 of the Act empowers the

Board of Directors to make regulations, sub-section (1) whereof is in the

following terms :

            "19. Power to make regulations.--(1) The Board              of Directors of a corresponding new bank may,              after consultation with the Reserve Bank and with              the previous sanction of the Central Government,              by notification in the Official Gazette, make              regulations, not inconsistent with the provisions of              this Act or any scheme made thereunder to provide              for all matters for which provision is expedient for

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            the purpose of giving effect to the provisions of              this Act."

3.    Indisputably, the Board of Directors, in consultation with the Reserve

Bank of India and with prior sanction of the Central Board, made

regulations, Regulation 26 whereof reads as under :

            "26. Bank’s car for personal purposes : 1)    No officer, other than the Officers authorized by the       Board, in accordance with the guidelines of the       Government, shall be allowed the use of the Bank’s car       for personal purposes. 2)    The use of the Bank’s car for personal purposes should       be subject to the rules formulated by the Bank in       accordance with the guidelines of the Government from       time to time."

4.    The Board of Directors framed a scheme as regards reimbursement of

the amount expended by the officers for undertaking their journey by car

from their respective residences to the bank and back. A circular letter was

issued on 20.4.1983 to the said effect, clause (3) whereof reads as under :

            3.     Reimbursement towards Driver’s salary for              the officers for whom the (sic) provides a car.              i) At places, Bombay Delhi                 and Calcutta            : Upto Rs.650/- p.m.              (ii)   At all other state Capitals

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                 And Area-I (above 12                   Lakhs population           : Upto Rs.450/- p.m.             (iii) At other places            : Upto Rs.400/- p.m.

           This scheme comes into force with effect from             22.2.1983.

           II.    MAINTENANCE OF VEHICLES OWNED                    BY OFFICERS

                 Reimbursement of maintenance expenditure             for cars and scooters to Chief Officers Managers             including in Administrative/Controlling Officers,             Technical Officers and Credited Officers owned             by them will be as under :

           Mopeds              :       Rs.75/- per month             Scooters            :       Rs.150/- per month.             Cars                :       Rs.325/- per month.             Competent authority to sanction conveyance             allowance to officers is AGM, Dy-in-charge of BS             & BD at Central Office. (Prior sanction from             Central Officers necessary)."

5.    In its meeting dated 20.2.1985, a scheme was formulated by the Bank

which was circulated to all concerned in terms of its letter dated 7.3.1985,

the relevant part whereof reads as under :

           "1. Travel from residence to office and back is             to be considered as travel for office work (as far as             reimbursement of conveyance expenses is             concerned)."

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      The Central Government, however, by reason of a circular letter dated

25.4.1990 addressed to the Chief Executive of all public sectors banks, inter

alia, stated :

                "The to and from journeys between office and                  residence should not be treated as official journeys                  and no reimbursement for such journeys be made.                  The claim duly countersigned by an officer at least                  one step higher than the officer claiming the                  reimbursement for the entire month should be                  submitted only once. However, the officers in                  Scale IV and above may not get their vouchers                  countersigned."

      The said letter was circulated by the Indian bank Association.

6.     A writ petition was filed by the respondents herein before the Andhra

Pradesh High Court questioning the validity of the said purported guidelines

issued by the Central Government. During the pendency of the said writ

petition, the Board of Directors issued a circular letter dated 22.2.1991, the

relevant portion whereof reads as under :

                "Keeping in view the prevalent situation, we are                  informed by the Indian Banks’ Association vide its                  letter No.PD/CIR/76/E(x)/2208 dated 25.1.1991                  that in its discussions held with the Officers’                  Organisations on the above issue, the Officers’                  Organisations had indicated their inclination to

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           accept some reduction in the consumption of             petrol and subsequently, some of the senior             leaders of the Officers’ Organisations met the             Chairman of the Indian Banks’ Association and             conveyed to the IBA writing to the banks to bring             about a cut in petrol limits, it being the need of the             hour. Accordingly, it has been decided to bring             about a cut in the petrol limits of the officers             owning vehicles and covered under the Scheme             ‘B’ and bring about uniformity in all the Public             Sector Banks.             In view of the above, the revised limits for             reimbursement of conveyance expenses to Officers             under Scheme ‘B’ (for the officers owning             vehicles) as against the existing limits shall be as             under with effect from 1.3.1991..."

7.    A learned Single Judge of the said Court, although opining that the

appellant bank was entitled to change its policy decision, held that as prior

to issuance of the guidelines, the Central Government had not consulted the

Reserve Bank of India, the same was violative of Section 8 of the Act

stating:

           "The guidelines do not purport to be under the             provisions of the Act. It is sought to be argued             that power to issue such guidelines is to be found             in Section 8 of the Act. Section 8 only says that             the Bank in question in discharge of its functions             shall be guided by such directions in regard to             matters of Policy involving public interest Central             Government may after consultation with the             Governor of Reserve Bank of India may give. As             stated already the impugned circular nowhere

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            shows that any consultation took place between              respondent No1. and the Governor of Reserve              Bank of India. It is thus clear that Respondent              No.1 cannot legitimately contend that the              impugned guidelines have been validly issued              under Section 8 of the Act. There does not appear              any other provision which justifies Respondent              No.1 to issue any such guidelines to the Banks.              As pointed out already, Respondent No.3-Bank              had formulated the scheme under its powers              conferred by the Regulations. The said scheme              was implemented already. Under the said scheme,              the journeys from residence to office and vice-              versa were to be treated as ‘on official duty’. This              was a specific term in the scheme. Respondent              No.1 had absolutely no power to tinker with the              provisions of the scheme."

8.    A Division Bench of the High Court affirmed the said view of the

learned Single Judge, stating :

            "Section 8 of the Act lays down that the Bank in              the discharge of functions shall be guided by such              directions in regard to matters of policy involving              public interest as the Central Government may              after consultation with the Governor of Reserve              Bank of India.              A perusal of the impugned guidelines makes it              clear that there was no prior consultation with the              Governor of the Reserve Bank of India. The said              consultation was only with the Indian Banks’              Association. Had such a consultation been there,              the bank is bound by the directions. From this it is              beyond doubt that the power for issuing the

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           impugned guidelines cannot be traced to Section 8             of the Act."

9.    With a view to ascertain as to whether, in fact, any consultative

process had been undergone with the Reserve Bank of India by the Central

Government, the former was impleaded as a party to this appal.

     At our request, learned Solicitor General for India also assisted us.

10.   The only question which arises for our consideration is as to whether

in the facts and circumstances of the case, it was necessary to consult the

Reserve Bank of India by the Central Government before issuing the

impugned guidelines.

11.   Submission of the learned Solicitor General, as also Mr. V.R. Reddy,

learned Senior Advocate, appearing for the appellant, are :

(1)   Whereas Section 8 of the Act applies when the Central Government is

     required to issue a policy decision; regulation having been framed

     after consulting the Reserve Bank of India in the prior sanction of the

     Central Government, it was not necessary to consult the Reserve

     Bank of India again.

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(2)     Guidelines having been issued by the Central Government in terms of

       Regulation 26 and not in terms of Regulation 8, no consultation with

       the Reserve Bank of India was necessary.

12.     Mr. Jaideep Gupta, learned senior counsel appearing on behalf of the

respondent, on the other hand, would submit

(i)     Consultation with the Reserve Bank of India was imperative in

nature;

(ii)    In view of the fact that although bank can change its policy from time

       to time, if it does so in terms of the Guidelines issued by the Central

       Government, the same must subserve the legal requirements as

       envisaged under Section 8 of the Act;

(iii)   As admittedly, the Central Government had not consulted the Reserve

       Bank of India, the impugned judgments are unassailable.

13.     Section 8 of the Act provides for issuance of directions by the Central

Government with regard to matters of policy involving public interest which

are bound to be followed by the ‘New Banks’ in the discharge of its

functions. The functions of the bank are regulated not only by the said Act

but also by Banking Regulation Act, 1949 and Reserve Bank of India Act,

1934.

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     A regulation framed for the purpose of laying down the terms and

conditions of service of the employees of the bank do not necessarily

involve any policy decision involving public interest. Each word used in

Section 8 must be given effect to. It is separate and distinct from the

regulation making power. Section 9 and Section 19 are made for different

purposes.   Whereas Section 8 postulates issuance of directions by the

Central Government which must undergo the consultative process with the

Governor of the Reserve Bank, in terms of Section 19, it is for the Board of

Directors to consult the Reserve Bank. Only thereafter the Regulations can

be brought in force with the previous sanction of the Central Government.

Such Regulations must be consistent with the provisions of the Act or the

scheme made thereunder.       It must provide for all matters for which

provisions have been made for the purpose of giving effect to the the said

Act wherefor Section 12(2) of the Act has also a significant role to play.

     The services of the employees of the existing bank were contemplated

to be taken over by reason of the provisions of the Act. They were to be

governed by the same terms and conditions and continue to have the same

rights as regards pension, gratuity and other matters subject, however, to

any alternation made by the corresponding new bank with regard to his

remunerations and other terms and conditions of service. Such alternations

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are required to be made only in terms of the regulations made under Section

19 and not otherwise. Use of the Bank’s cars for personal purpose is only

one of the regulations. The guidelines contemplated under sub-regulation

(2) of Regulation 26 would be those issued by the Central Government but

they are not subject to any further regulation. For issuance of the said

guidelines, the procedures laid down for making Regulations were not

required to be undergone.      The guidelines issued by the Government,

however, would be subject to Rules formulated by the Bank. If there is no

guideline, the same by itself would not stand in the way of the bank to make

a scheme but if there is a guideline, the Rules must be formulated in

accordance therewith. Guidelines may be issued by the Government from

time to time. The expression from ‘time to time’ is significant. It must be

given its due meaning. It does not and cannot mean that whenever the

guidelines are issued, the Central Government must consult the Reserve

bank of India.

     The question, albeit in a bit different context, came up for

consideration before a Three Judge Bench in Andhra Bank v. B.

Satyanarayana & Ors. [(2004) 2 SCC 657] which we may notice.

     Regulation 17 of the Regulations which was the subject matter of

consideration therein reads as :

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            "17. Promotions.--(1) Promotions to all grades of              officers in the Bank shall be made in accordance              with the policy laid down by the Board, from time              to time, having regard to the guidelines of the              Government, if any.              (2) For the avoidance of doubts, it is clarified that              this Regulation shall also apply to promotions of              any category of employees to the Junior              Management Grade."

     It was noticed that the Government had also issued guidelines of the

said Regulation. This Court held that once the power vests in an authority

by reason of the provisions of a statute, such power can be exercised from

time to time.    Changes are required to be made keeping in view the

requirements of managements as also exigencies of the situation obtaining

at the relevant time. It is true, as has been contended by Mr. Gupta, that one

of the contentions raised therein was that the Regulation was arbitrary and

ultra vires as it did not contain sufficient guidelines. But this Court therein

also took into consideration the effect and purport of Section 19 of the Act

in the folliwing terms :

            "12. The Regulations in terms of sub-section (2)              of Section 12 read with Section 19 of the Act were              required to be framed by the Board of Directors.              For amending the Regulations each time they were              not only required to consult the Reserve Bank of              India and obtain previous permission of the              Central Government but also the amended

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            Regulations were required to be laid before both              the Houses of Parliament in terms of Section 19 of              the Act. With a view to avoid the rigours of such              procedural requirements, we see no reason as to              why the said power cannot be delegated to the              Board of Directors keeping in view the fact that a              policy decision was required to be laid down for              effecting promotions to different grades of officers              and employees at different points of time."

14.   The term ‘rules’ used in sub-regulation (2) of Regulation 19 appeared

to have been loosely used. It did not envisage any statutory rules. The

power to frame rules is vested with the Bank. The power of the bank is

required to be exercised by the Board of Directors. The scheme in regard to

reimbursement of the expenses incurred for going to office from the

residence or coming back from the office to the residence was treated to be

official. The Central Government could, thus, issue a guideline in relation

thereto. When the Central Government, in exercise of its power under

Regulation 6 of the Regulations, issues a direction, the requirements of sub-

regulation (2) thereof regulating formulation of the rule only is that it should

be in accordance with the guidelines. The words used in the provision are

‘should be’ and not ‘must be’. The ultimate decision, therefore, is in the

bank although guidelines issued by the Government must be given due

weight. Such guidelines may be issued from time to time as the Regulations

itself have been framed in consultation with the Reserve Bank of India. The

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latter must be held to have given its approval for such exercise of the power

by the bank as also issuance of guidelines by the Government. Whenever

such guidelines are issued or rules are made, fresh consultative process need

not be undergone.

     Furthermore, the word ‘consultation’ has different connotations in

different contexts.    Reliance has been placed by Mr. Gupta on some

decisions of this Court in Municipal Corporation of Greater Bombay v. New

Standard Engineering Co. Ltd. [(1991) 1 SCC 611]; Indian Administrative

Service (S.C.S.) Association, U.P. & Ors. [1993 Supp.(1) SCC 730]; and

Gauhati High Court & Anr. v. Kuladhar Phukan & Anr. [(2002) 4 SCC

524]. In view of our findings aforementioned, the said decisions have no

application in this case.

15.   There cannot be any doubt whatsoever where one authority is

required to consult the another, such consultation must be meaningful. It

must mean conscious and effective consultation but the same would apply

where the consultation is necessary. As for the purpose of issuance of

guidelines, no consultation was necessary to be made with the Reserve Bank

of India by the Central Government, in our opinion, the impugned judgment

cannot be sustained.

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16.   Reliance has also been placed on Union of India & Ors. v. Mohd.

Ramzan Khan [(1991) 1 SCC 588], wherein it was held that the guidelines

issued by the Central Government were not relateable to any Regulation or

Section 8 of the Act. The said decision has no application in the instant

case, as it was noticed that the guidelines issued by the Central Government

were not in terms of any Regulation. In this case, the guidelines have been

issued in terms of sub-regulation (2) of Regulation 26. It is, therefore,

referable to a statutory power.

17.   For the reasons aforementioned, the impugned judgment cannot be

sustained.   It is set aside accordingly.   Appeal is allowed with costs.

Counsel’s fee assessed at Rs.25,000/- (Rupees twenty five thousand only).

                                                 .............................J.                                                   [S.B. Sinha]

                                                 .............................J.                                                   [Lokeshwar Singh Panta]

New Delhi May 8, 2008