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CASE NO.: Appeal (civil)  1391 of 2007

PETITIONER: A.P. Cooperative Oil Seeds Growers Federation Ltd. Hyderabad, Andhra Pradesh

RESPONDENT: D. Achyuta Rao & Ors

DATE OF JUDGMENT: 15/03/2007

BENCH: B.P. SINGH & ALTAMAS KABIR

JUDGMENT: J U D G M E N T   

(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           \005.Appellants Ltd. Hyderabad, Andhra Pradesh Versus                                                      M. Sheshagiri Rao & Ors.                                        \005Respondents WITH CIVIL APPEAL NOS 1393 2007 (Arising out of SLP) Nos.15923-15924 OF 2004)  A.P. Cooperative Oil Seeds Growers Federation           \005.Appellants Ltd. Hyderabad, Andhra Pradesh         Versus Mohd. Anwar Ali & Ors.                                          \005Respondents WITH CIVIL APPEAL NO 1394 2007 (Arising out of SLP) No.15917 OF 2004)  A.P. Cooperative Oil Seeds Growers Federation           \005.Appellants Ltd. Hyderabad, Andhra Pradesh Versus Uppada Sudhakara Rao & Ors.                                     \005Respondents

WITH CIVIL APPEAL NOS 1395 2007 (Arising out of SLP) Nos.15918-15919 OF 2004)  A.P. Cooperative Oil Seeds Growers Federation           \005.Appellants Ltd. Hyderabad, Andhra Pradesh Versus S. Sekhar Goud & Anr.                                           \005Respondents WITH CIVIL APPEAL NOS 1396 2007 (Arising out of SLP) Nos.15920-15921 OF 2004)  

A.P. Cooperative Oil Seeds Growers Federation           \005.Appellants Ltd. Hyderabad, Andhra Pradesh         Versus K.V. Nageswar Rao & Ors.                                        \005Respondents WITH CIVIL APPEAL NOS 1397 2007 (Arising out of SLP) Nos.17299-17306 OF 2004)  

M. Ramesh & Ors.                                                        \005Appellants

       Versus

Mohd. Anwar Ali & Ors.                                          \005Respondents

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AND

CIVIL APPEAL NOS 1398 2007 (Arising out of SLP) Nos.15046-15051 OF 2004)  

A.P. Cooperative Oil Seeds Growers Federation           \005.Appellants Ltd. Hyderabad, Andhra Pradesh

Versus

M. Sheshagiri Rao & Ors.                                        \005Respondents

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 Federation Ltd.  (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

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order of the High Court.  

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,

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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 lower cadre.

(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

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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

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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

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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 Judge.  

       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

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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

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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

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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

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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

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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

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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.  

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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 the Federation.   

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 surplus.  

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 non-surplus.  

The case of K.V. Nageshwara Rao (respondent in SLP ) Nos.  15920 \026 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.

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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.