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PETITIONER: V.T. KHANZODE & ORS.

       Vs.

RESPONDENT: RESERVE BANK OF INDIA & ANR.

DATE OF JUDGMENT05/03/1982

BENCH: CHANDRACHUD, Y.V. ((CJ) BENCH: CHANDRACHUD, Y.V. ((CJ) FAZALALI, SYED MURTAZA KOSHAL, A.D.

CITATION:  1982 AIR  917            1982 SCR  (3) 411  1982 SCC  (2)   7        1982 SCALE  (1)316  CITATOR INFO :  RF         1985 SC 774  (2)  RF         1986 SC1830  (1,8,9,13,37)  RF         1987 SC1399  (20)  R          1988 SC2073  (13)

ACT:      Seniority-Draft combined  seniority list  fixed by  the Administrative Circular  No.8 dated  January 7, 1978, Office Order No.  679 dated  April 27,1978  by  the  Reserve  Bank, whether violative  of Articles 14 and 16 of the Constitution of India.      Reserve Bank  of India  Act, (Act  II) of  1974-Section 58(1) &  (2), scope of-Whether the power to make regulations emanate from  section 58(1)-Competency  of the Central Board of Directors to make regulations and to issue administrative circulars in respect of service conditions of staff.      Retrospectivity  of  the  operation  of  the  seniority scheme, validity of.

HEADNOTE:      Under the  Reserve Bank  of India  (Staff) Regulations, 1948 framed  under section  58 of  the Reserve Bank of India Act 1934,  the terms  and conditions of service of the staff (including officers)  in the  Reserve Bank  were revised and regulated from time to time.      Ever since  the date  of the  Staff Regulations of 1948 and even  prior thereto, there were "groups" constituted for the different  departments of the Reserve Bank, and officers were required to exercise irrevocable options for service in any particular Group. Those who had opted for a service in a particular Group  were to be normally eligible for promotion in that  Group only.  The grouping  was revised  with effect from April  1951 when employees were asked to exercise their option with  regard to  the Group  of their choice. In 1951, the various  departments of the Bank were re-classified into three Groups,  Group I,  Group II and Group III. This system of grouping  continued until  1955, in  which year  the Bank found it  necessary to  reorganise the  Agricultural  Credit Department. Accordingly,  the staff  attached to the various departments were  regrouped into  Groups I, II, III, and IV, with effect  from April  1, 1957.  In each  of these Groups,

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there are  six grades  of  officers  based  on  pay  scales, namely, Grades A, B, C, D, E and F, the lowest being Grade A and the  highest being  Grade F.  Each  Group  had  its  own seniority list,  that is  to say,  there were  four separate seniority lists,  one for  each group.  The latest  of  such lists prior  to the draft combined seniority list of 1978 is dated July 1,1976.      Earlier to  the said  list  dated  July  1,  1976,  the Reserve Bank  had constituted  a Cadre  Review Committee  in 1970 followed by another Committee. On the 412 basis of  the report submitted by the Cadre Review Committee in October  1972, the Bank issued an Administrative Circular No. 15  dated May 22, 1974 specifying the decisions taken by it  in   the  light  of  the  recommendations  made  by  the Committee. One  such decision  which the  Bank took  was  to prepare a  common seniority  list for  and  to  provide  for inter-group mobility at the lowest level of officers in each group, namely,  Grade A  officers, including  those who were promoted to Grade B on or after January 1, 1970. With regard to higher  grades (including  officers in  Grade B  promoted prior to  January 1,  1970), the  Bank decided to retain the "group-wise  seniority   as  at  present".  The  inter-group mobility in  Grades C  and D  was to be introduced only to a limited extent,  namely, "on  a swap basis". It was first to be introduced  in Grade  C and thereafter to be extended "in due course"  to the  officers in  Grade D.  The  two  higher Grades, namely,  Grades E  and F  were left untouched and no intention was  expressed in  the above circular to introduce either combined  seniority or  any scheme for inter-mobility in these  grades. In accordance with the decisions expressed in the  Administrative Circular  dated May 22, 1974 the Bank published separate  seniority lists  of officers  in Grade B and above for the years 1974, 1975 and 1976.      By the  Administrative Circular  No. 8 dated January 7, 1978, the  Bank stated  that it  had decided  to combine the seniority of all officers on the basis of their total length of  service  (including  officiating  service)  in  Group  I (Section A),  Group II  and Group  III. The seniority of all officers in each of the three Groups was to be combined with effect from  May 22, 1974 on the basis of their total length of service,  including officiating  service, in the grade in which they were then posted on a regular basis. The Circular introduced combined seniority with retrospective effect from May 22, 1974 (the date of Administration Circular No. 15) as it was  "fair and equitable to the officers as a class". The effect of  this decision  is that  the group-wise  system of seniority which  was in  existence for  more than  27  years stands substituted  by a  combined seniority for officers in Group  I   (Grade  A)   and  in   Groups  II  and  III  with retrospective  effect.   That  has  adversely  affected  the existing seniority  of officers,  particularly of  those  in Group I, who are now placed many places below their existing position of seniority, some by several hundred places.      Hence these  twenty five petitions under Art. 32 by the petitioners, all  of whom  are officers  in Group I, and who are given their due seniority as on July 1, 1976.      Dismissing the petitions, the Court ^      HELD: 1:1. The Administrative Circular No. 8 dated 7-1- 1978, the Office Order No. 679 dated 22-4-1978 and the draft combined seniority  list are  not violative of the rights of the  petitioners   under  Articles   14  and   16   of   the Constitution. Whether  there should  be a combined seniority in different  cadres or  groups is  a matter of policy which

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does not  attract the  applicability of the equality clause. [442 D-F]      Reserve Bank  of India  v. N.  C. Paliwal, [1977] 1 SCR 377, applied and followed. 413      1:2. The  historical events  make  it  clear  that  the various Departments  of the  Reserve Bank  were grouped  and regrouped  from  time  to  time.  Such  adjustments  in  the administrative affairs of the Bank are a necessary sequel to the growing  demands of  new situations  which are  bound to arise in  any developing economy. The group system has never been a  closed or  static chapter  and the  officers of  the various groups were not kept, as it were, in quarantine. The group system  has been  a continuous  process of  trial  and error and  the impugned  scheme of  inter-group mobility has emerged as  the best solution of the experience of the past. Combined seniority  has  been  recommended  by  two  special committees,  whose   reports  reflect   the  expertise   and objectivity which  was brought  to bear  on their  sensitive task. [441 B-D]      1:3. Inter-group  mobility and  common seniority  are a safe and  sound  solution  to  the  conflicting  demands  of officers belonging  to Group  I on  one hand  and  those  of Groups  II  and  III  on  the  other.  Private  interest  of employees of  public  undertakings  cannot  override  public interest and  an effort  has to be made to harmonize the two considerations. No  scheme governing  service matter  can be fool-proof and  some section  or the  other of  employees is bound to  feel aggrieved  on the  score of  its expectations being falsified or remaining to be fulfilled. [441 D-E]      Arbitrariness, irrationality, perversity and mala fides will of  course render  any scheme  unconstitutional but the fact that  the scheme  does not  satisfy the expectations of every employee  is not  evidence of  these. Vested interests are prone  to hold  on to their acquisitions and the Group I officers have  to surrender a part of the benefits which had accrued  to  them  in  a  water-tight  system  of  grouping. Combined  seniority   is  indispensable   for   the   smooth functioning of  the Bank  and no  organisation can  function smoothly if  one section  of  its  officers  has  an  unfair advantage   over    others   in   matters   of   promotional opportunities. The reports of the Cadre Review Committee and the Thareja  Committee  show  that  combined  seniority  has emerged as  the most  acceptable solution  as  a  matter  of administrative,   historical   and   functional   necessity. Further, the  conclusion to which these committees came were considered by  the  Bank  when  Shri  M.  Narasimhan,  later India’s Executive  Director  in  the  World  Bank,  was  the Governor  and   it  was   after  Dr.  I.G.  Patel,  Formerly Secretary, Economic  Affairs,  Govt.  of  India  and  Deputy Administrator, United  Nations Development  Programme,  took over as  Governor in  December 1977  that the final decision was taken  by the  Central Board  to  introduce  inter-group mobility and combined seniority. [441 E-H, 442 A-B]      2. As  regards the  retrospective  operation  given  to Scheme with  effect from  May 22,  1974, it does appear that the Board  has  struck  a  via  media  between  two  extreme contentions advanced  by officers  belonging to  Group I and those  belonging   to  Groups  II  and  III.  But  that  was inevitable and  it was  the best  solution in  the  peculiar circumstances  of   the  case.   In  order  to  rectify  the imbalances and anomalies caused by the compartmentalised and group-wise seniority, it was necessary to give retrospective effect to the Combined Seniority List. Officers belonging to Group I  urged that the Scheme should be brought into effect

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from January 1, 1976, while those belonging to Groups II and III wanted the Scheme to be brought into effect from January 1, 1970.  The Central Board struck a balance by choosing the date May 22, 1974, because that was the date on which 414 the  decision   in  regard   to  combining   the   seniority retrospectively with  effect from  January 1, 1970 in regard to Grade  ’A’ and  part of Grade ’B’ officers was announced. It was, again, on that date that the Bank had announced that a similar  decision in  regard to  the remaining  grades  of officers was  under its consideration. Thus, at least on May 22, 1974  it was  known to  officers of  all grades  that  a combined seniority list was due to be brought into force. If a  certain   section   officers   succeeded   in   obtaining promotional benefits  thereafter, the  imbalance  introduced thereby in  the services  of the  Bank  and  the  consequent dissatisfaction had to be rectified. That could only be done by not  recognising the  accelerated promotions  obtained in the intervening  period by  a certain class of officers. Any scheme of seniority is bound to produce isolated aberrations and that  fact cannot  justify the  argument that the entire scheme is  for that  reason violative  of the  guarantee  of equality. [442 F-H, 443 A-D]      3:1. The  power to  frame  service  conditions  is  not derived from clause (j) of section 58(2) of the Reserve Bank of India  Act, 1934. Section 58(2) (j) refers to staff funds and superannuation  funds and  it  cannot  comprise  service conditions. Clause  (j) cannot  be split  up to  read:  "the constitution and  management of  staff:  and  superannuation funds for  the officers and servants of the Bank". It hardly makes any  sense that  way. What  the clause  means is: "the constitution and  management  of  staff  and  superannuation funds for  the  officers  and  servants  of  the  Bank".  An important subject  like the  service conditions of the staff could not  have been  provided for  in such  a  dubious  and indirect manner. Nor indeed, could it have been described as "constitution and  management of staff". A rule of seniority cannot properly fall under such a head. [426 A-D]      Reserve Bank  Employees Association  v. Union of India, 1980 (2) S.L.R. 167 approved.      3:2.  Where  a  specific  power  is  conferred  without prejudice to  the generality  of a  power already conferred, the specific  power is only illustrative and cannot restrict to width  of the  general power. Therefore, the ambit of the general  power   conferred  by  sub-section  (1)  cannot  be attenuated by  limiting it  to  matters  specified  in  sub- section (2)  of section  58, the  provisions whereof are not exhaustive of  the  power  of  the  Central  Board  to  make regulations. [426 D-F]      Emperor v. Shibnath Banerjee, 72 I.A. 241; Omparkash v. Union of India, A.I.R. 1971 SC 771, 773, 774, referred to.      4:1. The  doctrine of  ultra vires  in relation  to the powers of  a statutory  corporation  has  to  be  understood reasonably  and  so  understood,  "whatever  may  fairly  be regarded as  incidental to,  or  consequential  upon,  those things  which  the  Legislature  has  authorised  ought  not (unless  expressly   prohibited)  to  be  held  by  judicial construction to  be  ultra  vires".  The  Central  Board  of Directors of  the Reserve Bank has the power to make service regulations under  section 58(1)  of the  Act. The  Board is vested with  power to  make regulations  in order to provide for  all   matters  for  which  provision  is  necessary  or convenient for the 415 purpose of giving effect to the provisions of the Act and it

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is not  only convenient  but manifestly necessary to provide for the  service conditions  of the Bank’s staff in order to give effect  to the  provisions of  the Act.  It  cannot  be denied that  the power  to provide for service conditions of the staff  is at least incidental to the obligation to carry out the  purposes for  which Bank was constituted. [426 G-H, 427 A-D]      Armour v.  Liverpool Corporation,  1939 (1)  Ch.D. 422, 434, 435;  Attorney General  v. Great  Eastern  Ry.  Co.,  5 Appeal Cases 473, quoted with approval.      4:2. There is no doubt that a statutory corporation can do only  such acts as are authorised by the statute creating it and  that, the powers of such a corporation cannot extend beyond what  the statute  provides expressly or by necessary implication. If  an act  is neither  expressly or  impliedly authorised by  the statute which creates the corporation, it must be  taken to be prohibited. But, section 58(1) being in the nature  of an enabling provision under which the Central Board "may"  make regulations  in order  to provide  for all matters for  which it  is necessary  or convenient  to  make provisions  for   the  purposes  of  giving  effect  to  the provisions of  the Act,  the Central  Board has the power to frame regulation  relating to  the conditions  of service of the Bank’s  staff. If  it has that power, it may exercise it in accordance  with section 58(1) or by acting appropriately in the  exercise of  its general power of administration and superintendence. [428 E-F, G-H, 429A]      4:3. By  section 7(2) of the Reserve Bank of India Act, the general superintendence and direction of the affairs and business of  the Bank  are entrusted to the Central Board of Directors, which  is empowered to exercise all powers and do all acts  and things  which may  be exercised or done by the Bank. Matters  relating to  the service  conditions  of  the staff  are,  pre-eminently,  matters  which  relate  to  the affairs of  the Bank. It would therefore be wrong to deny to the  Central   Board  the   power  to  issue  administrative directions or circulars regulating the conditions of service of the  Bank’s staff. To read into the provisions of section 58  (1)   a  prohibition   against  the   issuance  of  such administrative directions or circulars is patently to ignore the scope  of wholesome  powers conferred  upon the  Central Board of  Directors by  section 7  (2)  of  the  Act.  While issuing the  administrative circular  governing the  staff’s conditions of  service, the  Central Board  of Directors has neither violated  any statutory injunction nor indeed has it exercised a  power which  is not  conferred upon  it by  the statute. The  circular is  strictly within  the confines  of section 7 (2). [429 A-E,G-H, 430 A]      Sukhdev  Singh   v.  Bhagatram,   [1975]  3   SCR  619, reiterated.      4:4. So  long as staff regulations are not framed under section 58  (1), it  is open  to the  Central Board to issue administrative circulars  regulating the  service conditions of the  staff, in the exercise of power conferred by section 7 (2)  of the  Act. The  power to frame rules or regulations does not  necessarily imply  that no  action  can  be  taken administratively in  regard to  a subject-matter  on which a rule or regulation can be framed, until it is so framed. The only  precaution  to  observe  in  the  cases  of  statutory corporations is  that they  must act within the framework of their  charter.   Its  express   provisions  and   necessary implications must  at all  events be  observed scrupulously. [430 A-B, 431 A-B] 416      T. Cajee  v. U.  Jormanik Siom,  [1961] 1 SCR 750; B.N.

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Nagarajan v.  State of  Mysore, [1966]  3 SCR 682, explained and applied.      4:5. Any action taken by the Central Board of Directors under section  7 (2)  is subject  to the directions given by the Central  Government under  section  7(1),  just  as  any regulation framed  by it  under section 58 is subject to the previous sanction of the Central Government. In either case, the Central Board has to abide by the decision or directions of the  Central Government.  There  can,  therefore;  be  no apprehension that, by taking action under section 7 (2), the Central Board  may circumvent  the condition  on  which  the power conferred  by section  58 can  be exercised by it. The overall authority  of  the  Central  Government  acts  as  a restraining influence  on any  action taken  by the  Central Board, whether  it acts  under one or the other provision of the Act. [431 B-D]      5:1. A  consideration of  the entire  material  on  the subject, including  the correspondence  that has  transpired between the  Reserve Bank  and the Central Government and in particular the  Memorandum of  January 21,  1949,  makes  it clear that  the Staff Regulations of 1948 were not framed in the exercise of power conferred by section 58 of the Act and that they  were not  made with  the previous sanction of the Central Government.  Whereas section  58 (1)  envisages  the making of  regulations "with  the previous  sanction of  the Central Government",  the Regulations of 1948 do not purport to have  been made  with such sanction. Indeed, in so far as the  ex  facie  aspect  of  the  matter  is  concerned,  the Regulations of  1948 have  not been made under section 58 at all. The  statement contained  in paragraph 9 of the counter affidavit of  the Deputy  Manager dated  March 30, 1980 that the Memorandum  of January  21,  1949  contains  a  "factual mistake" to  the effect  that the  Staff Regulations  (which would include  the Regulations  of 1948)  were made with the approval of  the Central Government, correctly clarifies the position. It  is one thing to infer that the Regulations had the approval  of the  Central Government  since no objection was raised  by it to the making of the Regulations and quite another that they were made with its previous sanction. [431 F-H, 433 B-D]      Reserve Bank  Employees Association  v. Union of India, 1980 (2) S.L.R. 167 (Cal.); Emperor v. Shibnath Barerjee; 72 I.A. 241; Om Parkash v. Union of India A.I.R. 1971 S.C. 771, 773, 774; Reserve Bank of India v. N.C. Paliwal,[1977] 1 SCR 377; Bimal  Kumar Shome v. P.C. Bhattacharya, Misc. Petition No. 206 of 1967 decided on August 6, 1969 (Bombay H.C.) R.M. Joshi v.  The Reserve  Bank of  India, Civil Writ No. 876 of 1974 decided on March 19, 1980 by a Full Bench (Delhi H.C.), approved      5:2. Since  the Staff  Regulations of  1948 are  in the nature of administrative directions, it was competent to the Central Board  to alter  or amend  them by an administrative circular. No  lack of  statutory powers  is involved in that process. Under section 7(2), the Central Board has the power to provide  for service  conditions of  the Bank’s  staff by administration circulars,  so long  as they  do not  impinge upon any  Regulations made under section 58 of the Act. [433 F-G, 434 A] 417

JUDGMENT:      ORIGINAL JURISDICTION: Writ Petitions Nos. 4158-4182 of 1978.

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    (Under article 32 of the Constitution of India)      F.S. Nariman,  B.R. Agarwala  and P.G.  Gokhale for the Petitioners.      B. Sen,  I.N. Shroff  and H.S.  Parihar for Respondents Nos. 1 & 2.      R.K. Garg,  S. Balakrishnan  and M.K.D.  Namboodiry for Respondent No. 3.      P.R. Mridul, Mrs. Shobha Dikshit and Mrs. Urmila Kapoor for the intervener.      The Judgment of the Court was delivered by      CHANDRACHUD, C.J.  These are 25 petitions under Article 32 of  the Constitution of India challenging the decision of the Reserve  Bank of  India as  regards the  introduction of common seniority  and inter-group mobility amongst different grades of  officers belonging  to Group I (Section A), Group II and  Group III,  with retrospective  effect from  May 22, 1974. That  decision or order is contained in Administration Circular No. 8 dated January 7, 1978 as also in Office Order No. 679  dated April 27, 1978 and has been acted upon in the draft combined  seniority list  of  officers  in  Grade  ’B’ (appointed as  such prior  to January 1, 1970) and in Grades ’C’, ’D’,  ’E’ and  ’F’ The contention of the petitioners is that the  aforesaid  circular,  office  order  and  combined seniority list  are violative  of their  fundamental  rights under Articles  14 and  16 of the Constitution, and are also ultra vires  the power,  jurisdiction and  competence of the Reserve Bank  of India,  being without  the authority of law and in  contravention of  the provisions of the Reserve Bank of India Act, 1934.      The facts  leading upon  the  impugned  decision  dated January 7,  1978, the office order dated April 27, 1978, and the draft  combined  seniority  list  are  as  follows:  The Reserve Bank  of India  (Respondent No.  1) was  established under the  Reserve Bank  of  India  Act,  1934,  hereinafter referred to  as "the  Act".  Under the Reserve Bank of India (Staff) Regulations,  1948 framed  under section  58 of  the Act, the  terms and  conditions  of  service  of  the  staff (including officers) of the respondent Bank were 418 revised and  regulated. These  Regulations were amended from time  to  time.  Provisions  regarding  record  of  service, seniority and  promotion are  contained in Regulations 27 to 30 (Chapter III), which read thus:      "27. Record of  Service: A  record of  service shall be           maintained by the Bank in respect of each employee           at such  place or places and shall be kept in such           form and  shall contain such information as may be           specified from time to time by the Chief Manager.      28.  Seniority: An  employee confirmed  in  the  Bank’s           service shall ordinarily rank for seniority in his           grade according to his date of confirmation in the           grade  and   an  employee   on   probation   shall           ordinarily rank  for seniority among the employees           selected  along   with  him   in  the  same  batch           according to  the ranking  assigned to  him at the           time of selection.      29.  Promotion: All  appointments and  promotions shall           be  made   at  the  discretion  of  the  Bank  and           notwithstanding  his  seniority  in  a  grade,  no           employee shall  have a  right to  be appointed  or           promoted to any particular post or grade.      30.  (1)  An employee  transferred from one appointment                to  another   or  confirmed  in  a  grade  or                appointment higher than his substantive grade                or  appointment,   shall  be   liable  to  be

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              reverted with  out notice  at any time within                one year of such transfer or confirmation.           (2)  An  employee   who  has   been  appointed  to                officiate in  a higher  grade or appointment,                or whose  confirmation in  a higher  grade or                appointment  is  subject  to  his  undergoing                probation  for   any  specified   period   or                otherwise, shall  be liable  to  be  reverted                without notice  at any  time when  he  is  so                officiating or undergoing probation.           (3)  Nothing in  sub-regulations (1) and (2) shall                affect the provisions of Regulation 47." 419      Ever since  the date  of the  Staff Regulations of 1948 and even  prior thereto, there were "groups" constituted for the different  departments of the Reserve Bank, and officers were required to exercise irrevocable options for service in any particular Group. Those who had opted for a service in a particular Group  were to be normally eligible for promotion in that  Group only.  The grouping  was revised  with effect from April, 1951 when employees were asked to exercise their option with  regard to  the Group  of their choice. In 1951, the various  departments of the Bank were re-classified into three Groups,  Group I,  Group II and Group III. This system of grouping  continued until  1955, in  which year  the Bank found it  necessary to  reorganise the  Agricultural  Credit Department. Accordingly,  the staff  attached to the various departments were  regrouped into  Groups I,  II, III and IV, with effect  from April  1, 1957.  In each  of these Groups, there are  six grades  of  officers  based  on  pay  scales, namely, Grades A, B, C, D, E and F, the lowest being Grade A and the  highest being  Grade F.  Each  Group  had  its  own seniority List,  that is  to say,  there were  four separate seniority lists,  one for  each group.  The latest  of  such lists, prior  to the  impugned combined  seniority list,  is dated July 1, 1976.      The  Reserve   Bank  had  constituted  a  Cadre  Review Committee in 1970, comprising Shri Justice J.L. Nain, then a sitting Judge  of the  Bombay High  Court, Shri  V. Isvaran, I.C.S.  (Retd.)  and  Prof.  N.S.  Ramaswamy,  a  Management Expert. The Committee submitted a report in October 1972, on the basis  of which  the Bank issued Administration Circular No. 15,  dated May  22, 1974, specifying the decisions taken by it  in the  light of  the  recommendations  made  by  the Committee. One  such decision  which the  Bank took  was  to prepare a common seniority list for and to provide for inter group mobility  at the  lowest level officers in each group, namely, Grade  A officers, including those who were promoted to Grade  B on  or after  January 1,  1970. With  regard  to higher grades (including officers in Grade promoted prior to January 1, 1970), the Bank decided to retain the "group-wise seniority as at present". The inter-group mobility in Grades C and  D was  to be  introduced only  to a  limited  extent, namely, "on  a swap basis": It was first to be introduced in Grade C and thereafter to be extended "in due course" to the officers in Grade D. The two higher Grades viz. Grades E and F were  left untouched and no intention was expressed in the above 420 circular to  introduce  either  combined  seniority  or  any scheme for  inter-mobility in  these grades.  In  accordance with the decisions expressed in the aforesaid circular dated May 22, 1974, the Bank published separate seniority lists of officers in  Grade B  and above for the years 1974, 1975 and 1976. The  petitioners, all of whom are officers in Group I,

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were given their due seniority as of July 1, 1976.      By the  impugned Administration  Circular No.  8, dated January 7,  1978, the  Bank stated  that it  had decided  to combine the  seniority of all officers on the basis of their total length  of service  including officiating  service) in Group I  (Section A),  Group II and Group III. The seniority of all  officers in  each of  the three  Groups  was  to  be combined with effect from May 22, 1974 on the basis of their total length  of service,  including officiating service, in the grade in which they were then posted on a regular basis. The   Circular    introduced   combined    seniority    with retrospective  effect   from  May  22,  1974  (the  date  of Administration  Circular   No.  15)  as  it  was  "fair  and equitable to the officers as a class".      Briefly stated,  the effect  of this  decisions is that the group-wise  system of  seniority which  was in existence for more  than 27  years stands  substituted by  a  combined seniority for officers in Group I (Grade A) and in Groups II and  III  with  retrospective  effect.  That  has  adversely affected the existing seniority of officers, particularly of those in Group I, who are now placed many places below their existing position  of seniority,  some  by  several  hundred places.      According to  the petitioners,  the Reserve Bank has no power, competency  or jurisdiction to introduce the impugned scheme which discriminates against officers in higher posts, adversely affecting  their vested  and  existing  rights  of seniority. The  scheme, according  to them,  is without  any rational and  far from  furthering the efficient functioning of the  Bank, it  will affect  it  adversely  by  compelling officers to  leave positions in which they had acquired long and valuable  experience and  work in  posts for  which they possess no  expertise. For  example, for  the Department  of Banking  Operations  and  Development  (in  Group  II),  the emphasis was  laid on  the commercial  banking experience of officers whereas,  for  recruitment  and  selection  in  the Agricultural Credit  Department (in Group III), the emphasis was on  experience in co-operation and agricultural finance. That is why the Bank had laid the pre-condition that the 421 selected officer  should give  a  specific  and  irrevocable undertaking to serve in the Group for which he was selected. Another grievance  of the  petitioners is  that although the Bank has  stated in paragraph 9.2.1 of the impugned Circular that the seniority of officers will be combined on the basis of their  total length of service, the seniority list has in fact, been  prepared in  a  very  arbitrary  and  iniquitous manner. In  a large  number of  cases, it  is  alleged,  the actual service  rendered by  the officers concerned has been arbitrarily reduced and adjusted in the length of service of other officers,  and the latter have been nationally treated as officiating  in higher  grades from  dates much  prior to their actual  promotions to  those grades. In some cases, on the other  hand, officiation in higher posts has been wholly ignored. This  has generally  resulted  in  accelerated  and discriminatory benefit  being conferred upon officers mostly belonging to  Groups II  and III,  vis-a-vis the petitioners and the other officers in Group 1. The petitioners apprehend that a large number of officers who have been promoted since January 1,  1976  against  normal  vacancies  in  their  own departments on  the basis  of their experience and expertise of the  relative work are likely to be reverted and replaced by officers  from other  groups, mostly  from Group III, who were selected  for the  specific job  requirements  of  that group and  who have  no experience  of the  work done in the

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Group 1  departments. The  petitioners  also  challenge  the retrospective effect given to the impugned circular from May 22, 1974  as irrational and arbitrary. Further, according to them, the  said circular  dated January  7, 1978, the Office Order dated  April 27,  1978 and the combined seniority list are violative of the Reserve Bank (Staff) Regulations. 1948.      In reply  to the writ petition, a counter-affidavit has ceen filed  on behalf  of the  Reserve Bank  by Shri  S.  L. Jathar, Deputy  Manager in  the Department of Administration and Personnel, Central Office, Bombay. The case of the Bank, as disclosed  in that  affidavit is  as follows: The Reserve Bank of  India (Staff)  Regulations, 1948, are not statutory in character, not having been framed under section 58 of the Reserve Bank  of India Act, 1934. The said Staff Regulations did not  provide for  the division  of the staff of the Bank into different groups but only categorised them as Officers, Personal Assistants,  etc. In  view of  the growing need for specialisation in  departments handling  research  work  and developmental  activities,   a  functional   segregation  of departments into four groups, with group-wise 422 seniority for  Officers, was  introduced in  the year  1951. Appendix XII  to the  Report of  the ’Reserve  Bank of India Cadre Review Committee’, which refers to the grouping of the departments from time to time, shows that the groupings were not static and fixed but were changed as and when necessary. Group I was composed of General Departments dealing with the day-to-day  operational  functions  of  the  Bank  including accounts and organisational mattres, Group II of Departments dealing with  regulatory and  inspection functions  over the money market;  Group III of Departments dealing with the Co- operatives and  agricultural Credit  institutions; and Group IV of  Research Departments.  Each Department had a separate line of  seniority and although the Bank had the right under the Staff  Regulations to  post any  employee to  any group, each group operated as an independent seniority unit and the employees were  eligible for  promotion within  their  group only. It  was, however,  noticed that  the group  system had resulted   in    glaring   inequalities    in    promotional opportunities in  the various  Departments, because  of  the accelerated pace  of expansion of Departments in some of the Groups wherein  relatively junior  employees  were  able  to secure earlier  promotions and  confirmations. So far as the non-officers staff  was concerned,  the  Bank  took  several steps from  time  to  time  to  equalise  their  chances  of promotion. Finally,  in pursuance  of an  agreement with the All-India Reserve  Bank Employees’  Association, which  is a representative Association  of Class  III employees  of  the Bank, the  Bank introduced  a combined  scheme for  clerical staff in  May 1972 under which, the separate seniority lists of clerical employees in Class III were merged into one list with effect  from  7th  May,  1972,  irrespective  of  their respective  groups.   The  validity   of  that   Scheme  was challenged in  several High Courts and the matter came up on appeal to this Court from a decision of the Delhi High Court which has  struck down  the Scheme.  This Court,  in Reserve Bank of  India v.  N.C. Paliwal(1)  upheld the  Scheme.  The ’Cadre Review  Committee’ whose  report was  received by the Bank on  October 11,  1972 recommended, broadly, the gradual introduction of  inter-mobility  of  officers  in  different groups and  the framing  of a  common seniority list, except for  officers   in  specialised   groups  like   Economists, statisticians,  Lawyers  and  Engineers.  According  to  the Committee, the  most rational  basis for drawing up a common seniority list  was to  go by  the date  of  entry  of  each

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officer in a grade in a continuous officiating capacity. The Bank announced  its  decision  as  regards  the  Committee’s recommendations, by the Administra- 423 tive Circular dated May 22, 1974. In December 1975, the Bank appointed a  Departmental Committee under Shri C.L. Thareja, the then  Chief  Manager  of  the  Bank,  to  work  out  the modalities of  integration of the group-wise seniority lists of officers  in the  higher grades  which had  not yet  been integrated. That  Committee submitted its report on December 15,   1976.    It   unanimously   recommended   simultaneous introduction of  combined to  seniority for  all grades but, its members  could not  agree on  the date to be adopted for integration of  the group-wise seniority lists. The Chairman and one  member favoured  January 1,  1976 as  the  date  of integration while the remaining two members favoured January 1, 1970.  A Committee  of the  Central  Board  of  the  Bank decided to  appoint May, 22 1974 as the date for integration as a  via media  and also  because, it was on that date that the Bank  had announced  to its  officers  its  decision  on combined   seniority,   mobility   and   interchangeability. Fixation of  January 1,  1970 as  the date  for  integration would have  adversely affected  the  interests  of  Group  1 officers while  the other  date January  1, 1976, would have adversely  affected  the  interests  of  officers  in  other groups.      That is  the answer  made by  the Reserve  Bank to  the petition. Originally,  the writ  petition was  filed against two respondents  only; (1) The Reserve Bank of India and (2) the Chief  Manager, Reserve  Bank of  India,  Department  of Administration &  Personnel,  Central  Office,  Bombay.  The petitioners did  not implead  to the  petition  any  of  the officers belonging  to the other groups who are likely to be affected if the relief sought by the petitioners is granted. Later, by  an order dated July 24, 1978, respondents 3 and 4 were  allowed   to  join   in  the  petition  on  their  own application. Respondent  3, Shri  M.P. Saxena,  was then the Deputy Chief  Officer, Department  of Banking Operations and Development, New Delhi, while respondent 4, Shri S. Acharya, was Deputy  Chief Officer,  Agricultural Credit  Department, Chandigarh.      Respondent 3,  whose counter-affidavit has been adopted by respondent  4, has  raised a preliminary objection to the maintainability of  the writ  petition on  the  ground  that hundreds  of   officers  similarly   situated  who  are  all specifically identifiable  and who  would  be  prejudicially affected if  the prayers  in the writ petitions are granted, have not  been impleaded  as respondents.  According to him, this is  a case of a few privileged persons trying to retain their undue privileges at the cost of a scheme introduced to improve the 424 operational efficiency of the Institution and for the common good of  the officers  as a  class. Respondent  3  has  also raised the  objection that  no writ  petition can  lie under article 32  to enforce or challenge service conditions which are purely contractual.      The contentions  raised by respondent 3 in his counter- affidavit may  be summed up thus: Groupings and re-groupings of departments  have been  undertaken by the Reserve Bank as and  when   the  need  arose  in  the  context  of  changing requirements, and  all such  groupings and  regroupings have been done  as a result of administrative decisions and given effect  to  through  appropriate  Administration  Circulars. While the expedient of group-wise promotions based on group-

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wise seniority lists served the immediate convenience over a period of  time, this  artificial  segregation  resulted  in compartmentalised approach to questions of policy, impairing thereby the  overall efficiency  of  the  institution  as  a whole.  Further,   it  also   led  to  other  anomalies  and imbalances, more  particularly in  promotional opportunities of the  staff attached  to different groups. In some groups, expansion was  quicker and  greater than in others. It is in order to  meet this  situation that  several  measures  were initiated by  the Bank  and by the Associations of employees of various categories. Since these measures did not meet the situation adequately, the Bank initiated a dialogue with the respective Associations for introducing a combined seniority for the  various grades in different groups. For officers at the base  level, namely,  ’A’ Grade  (direct recruits),  the Bank had  maintained a  common list of seniority in place of group-wise  lists  since  1968.  Thereafter,  groupings  and regroupings have been a continuous process to meet the needs of the  changing  situations,  and  the  present  scheme  of combined seniority  which is  one such,  has come about as a matter of  administrative,  and  historical  and  functional necessity. The  implementation of  the scheme of inter-group mobility  is   being  stalled   by   the   Bank’s   internal administration, which  was  controlled  solely  by  a  small section of  officers drawn from Group-I, which all along had unfair advantage  of accelerated promotions as compared with officers in  Groups II  and III. Thus, the petitioners’ plea is  an   attempt  to   perpetuate  the  unfair  and  unequal privileges which they had enjoyed over the years without any justification and  with detriment to Bank’s interests a fact which has  been recognised by an impartial tribunal like the Cadre Review Committee. The Staff Regulations of 1948 are in the  nature   of  standardised   contractual  conditions  of service. They  were not  framed under  section 58 of the Act and 425 therefore, it  is competent  to the  Bank to  alter them  by administrative circulars.      On these  pleadings, the  three  main  questions  which arise  for  our  consideration  are,  firstly,  whether  the Reserve  Bank   of  India   (Staff)  Regulations,  1948  are statutory in character; secondly, whether it is competent to the Bank  to provide  for conditions of service of its staff by  administrative  circulars;  and,  thirdly,  whether  the impugned circular  and seniority  list  offend  against  the provisions of  articles 14  and 16  of the Constitution. The contention of  the petitioner  is that  the Regulations were framed under  section 58  of the  Reserve Bank of India Act, 1934;  that   they  cannot   be  altered  by  administrative circulars; that  conditions of  service cannot  be framed by administrative circulars  but must  be framed by Regulations made under  section 58  of the  Act; and  that, the impugned circular and  seniority list  violate their  right to  equal treatment in  the matter  of their  service  conditions  and career. The Reserve Bank and the contesting respondents have joined issue with the petitioners on all these questions.      Turning to  the first  question, section  58(1) of  the Reserve Bank of India Act, 1934 provides that:           "The Central Board may, with the previous sanction      of the  Central Government, make regulations consistent      with this  Act to  provide for  all  matter  for  which      provision is necessary or convenient for the purpose of      giving effect to the provisions of this Act." Sub-section (2)  of section  58 provides  that in particular and without  prejudice to  the generality  of the  foregoing

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provision, such  regulations may  provide for  all or any of the matters  mentioned in  the various  clauses of that sub- section.  Clause   (j)  refers   to  "the  constitution  and management of staff and supernnuation funds for the officers and servants  of the  Bank", while  clause (r) refers to the subject:  "generally,  for  the  efficient  conduct  of  the business  of  the  Bank".  Sub-sections  (3)  and  (4)  were inserted in  section 58  by Act  51 of  1974. By sub-section (3), any  regulation made under section 58 shall have effect from such  earlier or  later date as may be specified in it. Sub-section (4)  requires that  every Regulation  shall,  as soon as  may be  after it  is made  by the Central Board, be forwarded to  the Central  Government which,  in turn, shall cause a  copy of  the same  to be  laid before each House of Parliament. Thereafter, the 426 Regulation   takes    effect   in    accordance   with   the modifications, if any, made by the Parliament.      A side  argument may  be disposed  of briefly.  It  was suggested on behalf of the petitioners, though faintly, that the power to frame service conditions is derived from clause (j) of section 58 (2) of the Act. It is impossible to accept this contention.  That clause  cannot be  split up  to read: "the   constitution    and   management    of   staff;   and superannuation funds  for the  officers and  servants of the Bank". It  hardly makes  any sense that way. What the clause means is:  "the constitution  and management  of staff funds and superannuation  funds for  the officers  and servants of the Bank".  An important subject like the service conditions of the  staff could  not have  been provided  for in  such a dubious and  indirect manner. Nor indeed, could it have been described as  "constitution and management of staff." A rule of seniority  cannot properly  fall under  such a  head.  We endorse the view taken by the Calcutta High Court in Reserve Bank Employees Association v. Union of India(1) that section 58 (2)  (j) refers  to staff  funds and superannuation funds and that it cannot comprise service conditions.      But, the  provisions of  sub-section (2)  of section 58 cannot be taken to be exhaustive of the power of the Central Board to  make regulations.  It is well-settled that where a specific  power   is  conferred  without  prejudice  to  the generality of  a power already conferred, the specific power is only  illustrative and  cannot restrict  the width of the general power.  (See Emperor  v.  Shibnath  Barerjee;(2)  Om Parkash v.  Union of  India(3). Therefore,  the ambit of the general  power   conferred  by  sub-section  (1)  cannot  be attenuated by  limiting it  to  matters  specified  in  sub- section (2) of Section 58.      Section 58  (1) of the Act confers power on the Central Board of  Directors of the Bank to make regulations in order to provide for all matters for which provisions is necessary or convenient  for the  purpose  of  giving  effect  to  the provisions of  the Act.  It seems to us clear that it is not only convenient  but manifestly necessary to provide for the service conditions  of the  Bank’s staff  in order  to  give effect to  the provisions  of the Act. The Act was passed in order to  constitute a  Bank for achieving economic purposes of the 427 highest national  importance: regulating  the issue  of Bank notes, keeping  reserves with  a view  to securing  monetary stability in India and generally to operate the currency and credit system of the country to its advantage. It is, in our view, not open to any question either on the basis of reason or  authority   that  the   power  to  provide  for  service

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conditions of  the staff  is  at  least  incidental  to  the obligation to  carry out the purposes for which the Bank was constituted.   As    observed   in   Armour   v.   Liverpool Corporation,(1) "To assist in removing from the minds of its employees the  fear of  an unprotected  old age,  to  foster their happiness  and contentment  and to  procure their good and efficient  service, these  are objects  which,  even  if economic considerations  alone count, are incidental, if not vital, to  the proper carrying on of any undertaking as well by a  municipal as  any other  corporation." The doctrine of ultra vires  in  relation  to  the  powers  of  a  statutory corporation  has   to  be   understood  reasonably   and  so understood, "whatever  may fairly  be regarded as incidental to,  or   consequential  upon,   those  things   which   the Legislature  has  authorised  ought  not  (unless  expressly prohibited) to be held by judicial construction, to be ultra vires." (See  Attorney-General v.  Great Eastern  Ry. Co.(2) The Central  Board has, therefore, the power to make service regulations under section 58 (1) of the Act.      Shri Nariman pleads for such a power but his purpose in doing so  is to  urge  that  section  58  (7)  is  the  sole repository of  the power of the Central Board to provide for the conditions  of service  of the Bank’s staff. He contends that statutory  corporations like  the Reserve Bank of India have no inherent or residuary powers and that they must seek and find  their powers  and obligations  in the  Charter  of their creation  Therefore,  the  argument  proceeds,  it  is imperative that  regulations governing  terms and conditions of service  of the Bank’s staff must be framed under section 58 (1) only and cannot be framed by administrative circulars issued in the exercise of any non-statutory power authority.      In support  of this  submission, reliance  is placed by the learned  counsel on  the statement  of law  contained in paragraphs 1326 and 428 1333 (pages  775 and  779) of  Halsbury’s Laws  of  England, Fourth edition. In paragraph 1326 it is stated that:           "Corporations may  be  either  statutory  or  non-      statutory and  a fundamental distinction exists between      the  powers   and  liabilities   of  the  two  classes.      Statutory corporations have such rights and can do such      acts only  as are  authorised directly or indirectly by      the statutes creating them; non-statutory corporations,      speaking generally,  can do everything that an ordinary      individual  can   do  unless   restricted  directly  or      indirectly by statute". Paragraph 1333 says that:           "The powers  of a  corporation created  by statute      are limited  and circumscribed  by the  statutes  which      regulate it,  and extend  no further  than is expressly      stated therein, or is necessarily and properly required      for  carrying   into  effect   the  purposes   of   its      incorporation, or  may be fairly regarded as incidental      to, or  consequential  upon,  these  things  which  the      legislature has  authorised. What  the statute does not      expressly or  impliedly authorise  is to be taken to be      prohibited." There is  no doubt  that a statutory corporation can do only such acts  as are  authorised by the statute creating it and that, the  powers of such a corporation cannot extend beyond what  the   statute  provides   expressly  or  by  necessary implication. If  an act  is neither  expressly or  impliedly authorised by  the statute which creates the corporation, it must be  taken  to  be  prohibited.  This  cannot,  however, produce the  result for  which Shri  Nariman  contends.  His

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contention is  not that  the Central  Board has  no power to frame staff regulations but that it must do so under section 58 (1)  only. On  that argument, it is material to note that section 58  (1) is  in the  nature of  an enabling provision under which  the Central  Board "may"  make  regulations  in order to  provide for  all matters for which it is necessary or convenient  to make  provision for  the purpose of giving effect to the provisions of the Act. This provision does not justify the  argument that  staff regulations must be framed under it  or not at all. The substance of the matter is that the  Central  Board  has  the  power  to  frame  regulations relating to  the conditions  of service of the Bank’s staff. If it has that power, it may exercise 429 it either  in accordance  with section  58 (1)  or by acting appropriately in  the  exercise  of  its  general  power  of administration and superintendence.      The statement  of law  in Halsbury puts emphasis on the limitation on  powers of statutory corporations in the light of  the   provisions  of   statutes  under  which  they  are constituted. From  that point  of view,  the  provisions  of section 7 (2) of the Act are important. By that section, the general superintendence  and direction  of the  affairs  and business of  the Bank  are entrusted to the Central Board of Directors, which  is empowered to exercise all powers and do all acts  and things  which may  be exercised or done by the Bank. Matters  relating to  the service  conditions  of  the staff are, preeminently, matters which relate to the affairs of the  Bank. It  would therefore  be wrong  to deny  to the Central Board  the power  to issue administrative directions or circulars  regulating the  conditions of  service of  the Bank’s staff.  To read into the provisions of section 58 (1) a prohibition  against the  issuance of  such administrative directions or  circulars is  patently to ignore the scope of wholesome  powers   conferred  upon  the  Central  Board  of Directors by  section 7 (2) of the Act. Indeed, this section brings the  impugned circular  and seniority list within the rule mentioned  in Halsbury;  they have the authority of the statute.      In this behalf, reliance is also placed by Shri Nariman on a  decision of  a Constitution  Bench of  this  Court  in Sukhdev Singh  v. Bhagatram,(1)  Ray, C.J.,  who  spoke  for three members  of the  Bench, observes  in his judgment that the powers  of statutory  bodies are derived, controlled and restricted by  the statutes  which create  them and that any action of  such bodies  in  excess  of  their  power  or  in violation of  the restrictions  placed on  their  powers  is ultra-vires. The  concurring judgment  of  Mathew,  J.  also contains observations to the same effect (see pages 628, 630 and 659  of the  Report). This  enunciation of law is to the same effect as in Halsbury and our answer is the same. While issuing the  administrative circular  governing the  staff’s conditions of  service, the  Central Board  of Directors has neither violated  any statutory injunction nor indeed has it exercised a power which is 430 not conferred  upon it  by  the  statute.  The  circular  is strictly within the confines of section 7 (2).      So long  as staff  regulations  are  not  framed  under section 58  (1), it  is open  to the  Central Board to issue administrative circulars  regulating the  service conditions of the  staff, in the exercise of power conferred by section 7 (2)  of the  Act. In  T. Cajee  v. U.  Jormanik Siem,(1) a District Council was constituted under the Sixth Schedule to the Constitution,  for the  United Khasi  and Jaintia  Hills

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District in  the Tribal  Areas of  Assam. The  rules in  the Sixth Schedule  empowered the  District Council to make laws with respect to various matters regarding the administration of the  District, including the appointment or succession of Chiefs and  Headmen. No law was however made regulating such appointments. Even  so, it  was held  by this Court that the District  Council   had  the  power  to  appoint  or  remove administrative  personnel   under  the   general  power   of administration  vested   in  it   by  the   Sixth  Schedule. Delivering the  leading judgment  of the Bench, Wanchoo, J., said that  where executive power impinges upon the rights of citizens, it  will have  to be backed by an appropriate law; but  where  executive  power  is  concerned  only  with  the personnel of  the administration,  it is  not necessary that there must  be laws,  rules  or  regulations  governing  the appointment of  those who  could carry on the administration under the  control of  the District  Council.  The  District Council had  therefore the  power  to  appoint  officers  by virtue of the fact that the administration was vested in it. In B.N. Nagarajan v. State of Mysore(2) Rule 3 of the Mysore State  Civil  Services  (General  Recruitment)  Rules,  1957 provided that  recruitment to the State Civil Services shall be made  by a  competitive examination  or by  promotion and that the  method of  recruitment and qualifications shall be as set  forth in the Rules specially made in that behalf. It was urged  before this  Court that  no recruitment  could be made to any service until the rules were made. That argument was rejected  on the  ground that it is not obligatory under the proviso  to art. 309 to make rules of recruitment before a service  can be  constituted and that it was not necessary that there  must be  a law in existence before the executive is enabled  to function. It is true that reliance was placed in that  case on  the provisions  of art.  162, by which the executive power  of a  State extends  to  the  matters  with respect to 431 which the  legislature of  the State has power to make laws. But the  decision is  useful for illustrating that the power to frame  rules or  regulations does  not necessarily  imply that no  action can be taken administratively in regard to a subject matter  on which a rule or regulation can be framed, until it is so framed. The only precaution to observe in the cases of statutory corporations is that they must act within the framework  of their  charter. Its express provisions and necessary  implications  must  at  all  events  be  observed scrupulously.      It may  bear mentioning  that any  action taken  by the Central Board  of Directors under section 7(2) is subject to the directions given by the Central Government under section 7(1) just as any regulation framed by it under section 58 is subject to  the previous sanction of the Central Government. In either  case, the  Central Board  has  to  abide  by  the decision or  directions of the Central Government. There can therefore, be  no apprehension  that, by taking action under section  7   (2),  the  Central  Board  may  circumvent  the condition on  which the power conferred by section 58 can be exercised by  it.  The  overall  authority  of  the  Central Government acts  as a  restraining influence  on any  action taken by the Central Board, whether it acts under one or the other provision of the Act.      Having seen  that the  Central Board  has the  power to provide for  service conditions  of  the  staff  by  issuing administrative   circulars,    the   next    question    for consideration is  whether the Staff Regulations of 1948 were issued under  section 58  of the Act. The importance of this

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question lies  in the  fact that, quite clearly, if the 1948 Regulations  are   statutory,  they  cannot  be  altered  by administrative circulars  and, in  that event,  the impugned circular will  not have  the  effect  of  superseding  them. Having  considered  the  entire  material  on  this  subject including the correspondence that has transpired between the Reserve  Bank   and  the  Central  Government,  we  find  it difficult to  take the  view that  the Staff  Regulations of 1948 were  framed in  the exercise  of  power  conferred  by section 58. One fact which stands out in this regard is that whereas section  58 (1)  envisages the making of regulations "with the  previous sanction of the Central Government", the Regulations of  1948 do  not purport  to have been made with such sanction.  Indeed, in  so far as the ex facie aspect of the matter  is concerned,  the Regulations  of 1948  do  not purport to  have been  made under  section 58  at all. It is true that  this by itself is not conclusive because, failure to mention the source of power 432 cannot invalidate  the exercise  of power,  if the  power is possessed by  the authority  which exercises  it.  But,  the common course  of the  manner in  which  the  Central  Board exercises its  power when it purports to do so under section 58 is  not without relevance and has an important bearing on the question  under consideration.  The Employees’ Provident Fund Regulations of 1935, the Note Issue Regulations of 1935 the  General  Regulations  of  1949,  the  Scheduled  Banks’ Regulations of  1951 and  the  Guarantee  Fund  Regulations, which were  all framed  under section 58, contain a preamble reciting that  they were  framed under that section and that they were  framed with  the previous sanction of the Central Government. By way of illustration, we may cite the preamble of the  Reserve Bank  of India  General  Regulations,  1949, which runs thus:           "In exercise of the powers conferred by section 58      of the Reserve Bank of India Act, 1934 (II of 1934) and      in supersession  of the  Reserve Bank  of India General      Regulations, 1935,  the Central  Board of  the  Reserve      Bank of  India,  with  the  previous  sanction  of  the      Central Government,  is pleased  to make  the following      Regulations..." It is  significant that  such  a  recital  is  conspicuously absent in  the Regulations of 1948. That renders it safe and reasonable to  accept the statement contained in the counter affidavit filed  on behalf  of  the  Reserve  Bank  by  Shri Shamrao Laxman  Jathar Deputy  Manager in  the Department of Administration and  Personnel to  the effect  that the Staff Regulations of  1948 are  not statutory  in  character,  not having been  made under  section 58  of the Act of 1934. The rejoinder affidavit  dated July  16, 1979 filed on behalf of the  petitioners  by  Shri  Jamnadas  Gupta  reiterates  the contention that  the Regulations  of 1948  were framed under section 58  (1) with the sanction of the Central Government. Support is sought to that contention from the correspondence annexed to  the affidavit  filed  in  support  of  the  writ petition and the correspondence annexed to the rejoinder. Of particular importance  is the  statement  contained  in  the ’Memorandum to  the Central  Board’ dated  January 21, 1949, submitted by  the then  Governor of  Reserve Bank, Shri C.D. Deshmukh,  on   the  subject   of  "Reserve  Bank  of  India Regulations". That Memorandum contains a list of regulations which were  made by  the Central Board "with the approval of the Central  Government". The very first item in the list is "Reserve  Bank   of  India   (Staff)  Regulations".   Having considered the  correspondence bearing  on the  subject  and

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particularly the  aforesaid Memorandum,  we see no reason to doubt 433 the contention of the Bank that the Regulations of 1948 were not framed under section 58 and that they were not made with the previous  sanction of  the Central  Government. The then Governor of  the Reserve Bank of India, Shri C. D. Deshmukh, a  distinguished   Economist  and   Civilian,  was   perhaps justified in  assuming  from  the  correspondence  that  the Central  Government   has  no   objection  to  the  proposed regulations, which  explains his  statement, that  they were made with  the "approval" of the Central Government. But, it is one  thing to infer that the Regulations had the approval of the  Central Government  since no objection was raised by it to  the making  of the regulations and quite another that they were made with its previous sanction. The supplementary affidavit dated March, 1980 which was filed on behalf of the Reserve Bank by Shri Pradeep Madhav Joshi, Deputy Manager in the Department  of Administration  and Personnel,  has dealt fully with  the correspondence  on the  subject of  previous sanction of  the Central  Government to  the Regulations  of 1948. We  are inclined  to accept the statement contained in paragraph 9  of the  said affidavit  that the  Memorandum of January 21,  1949 contains a "factual mistake" to the effect that  the   Staff  Regulations,  (which  would  include  the Regulations of  1948) were made with the approval of Central Government. We  therefore conclude  that the Reserve Bank of India (Staff)  Regulations  of  1948  were  not  made  under section 58  of the  Act and that, in fact, the Central Board had not  obtained the  sanction of the Central Government to the making of those Regulations.      The High  Courts of  Bombay,(1) Calcutta  and  Delhi(2) have all  taken the  view that the Staff Regulations of 1948 are not  statutory, not  having been framed under section 58 of the Act. We endorse the correctness of that view.      Since the  Staff Regulations  of 1948 are in the nature of  administrative  directions,  it  was  competent  to  the Central Board  to alter  or amend  them by an administration circular. No  lack of  statutory powers  is involved in that process. Under  section 7  (2), the  Central Board  has  the power to  provide for service conditions of the Bank’s staff by administration circulars, so long as they do 434 not impinge  upon any  Regulations made  under section 58 of the Act.      It now  remains to  be considered  whether the impugned Administration Circular,  No.  8,  dated  January  7,  1978; Office Order  No. 679,  dated April  27 1978;  and the draft Combined  Seniority   List  of  officers  prepared  pursuant thereto, are violative of the petitioners’ right to equality in the  matter of  their  service  conditions.  The  salient features of  the impugned  Administration  Circular  may  be summarized thus:           (a)  A common  seniority and  inter-group mobility                is introduced simultaneously in all Grades of                officers attached  to Group I (Section A) and                Groups II and III.           (b)  The seniority  of all officers is combined as                on May  22, 1974, on the basis of their total                length  of   service  (including  officiating                service), in  the grade  to which  they  were                then posted  on a regular basis. In doing so,                the  existing   inter  se  seniority  of  the                officers  in   the   respective   groups   is                maintained and  the subsequent  supersessions

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              for  promotion   or   confirmation   in   the                respective groups are suitably reflected. The                date  of   confirmation  is  not  taken  into                account for this purpose.           (c)  The Circular  covers all  officers in Group I                (Section A)  and Groups  II and  III who were                appointed to  Grade ’B’  prior to  January 1,                1970 as well as officers in the higher grades                ’C’, ’D’,  ’E’ and ’F’. The Circular does not                cover officers in Sections B to L of Group I,                technical officers  in Group III and officers                attached to Group IV.           (d)  All promotions  to Grade  ’C’ and above which                were  made   on  a  provisional  basis  after                January  1,   1976   are   to   be   reviewed                individually in  order  to  ascertain  as  to                which of  the  officers  may  be  allowed  to                continue in  the higher grade on the basis of                their     seniority      and     suitability.                Consequential adjustments are to be made in a                phased and 435                gradual manner  in order  to ensure  that the                operational   efficiency   of   the   various                departments and  the Bank’s requirements of a                specialised  staff   of  officers   are   not                adversely affected.           (e)  Officers promoted  to higher  grades prior to                January 1,  1976 are  to be allowed to retain                their existing grades, though not necessarily                the same  posts, and their seniority is to be                adjusted under a common seniority scheme.           (f)  Officers appointed to officiate in the higher                grade on  a provisional  basis  on  or  after                January  1,  1976  and  who  are  allowed  to                continue in  such grade on the basis of their                seniority  and   suitability,   are   to   be                considered for  confirmation  in  the  normal                course.           (g)  Officers who  are in  a lower  grade but  who                rank  higher   in  seniority  in  the  common                seniority list  than those  who  are  already                officiating or confirmed in the higher grade,                are to  be considered  for promotion  on  the                basis of their suitability.           (h)  All future promotions to Grade ’C’ and to the                higher grades  are to be made on the basis of                the  common   seniority  list,   subject   to                selectivity.           (i)  Wherever possible,  the transfer  of officers                from one  department or  group to  another in                the same  grade has to be encouraged in order                to enable  a broader  diffusion of experience                and to  prepare a  wider base for development                of officers in different departments.           (j)  All promotions  from Grade  ’B’ to ’C’ are to                be  made   on  the  basis  of  seniority-cum-                suitability,   with   greater   emphasis   on                suitability. The  selections for this purpose                are to  be made  by the Reserve Bank of India                Services Board.           (k)  Selections for  promotions to  Grade ’D’  and                above are  to be  made by  a Committee of the                Deputy 436

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              Governors,   who    are   to   give   greater                consideration  to   merit  apart   from   the                aptitude  and   experience  of  the  officers                concerned.      Office Order  No. 679,  dated April 27, 1978 was issued in pursuance  of the  aforesaid Circular. The Bank announced by it that the tentative Combined Seniority List of officers in Grade ’B’ (appointed prior to January 1, 1970) and Grades ’C’, ’D’, ’E’ and ’F’ would be available for inspection upto May 12,  1978. Officers aggrieved by the tentative Seniority List were  asked  to  submit  their  representations  within fifteen days.  The tentative  Combined Seniority  List shows the  proposed   position  occupied   seniority-wise  by  644 officers belonging  to Group I (Section A) and Groups II and III.      These writ  petitions were  filed by the petitioners on June 10,  1978 in  order  to  challenge  the  Administration Circular, the  Office order  and the Combined Seniority List referred to  above. The  25 petitioners  are all officers in Group I.      The case  of the petitioners is that the Administrative Circular and the draft Combined Seniority list are violative of their rights under articles 14 and 16 of the Constitution because; (a)  The combined  fixation of  seniority  has  the effect of  treating unequals as equals in so far as officers belonging  to   different  groups   are   concerned,   whose appointment, recruitment,  promotion and  seniority had  all along been  fixed, accepted  and acted  upon on a group-wise basis; and  (b)  Recruitment,  selection  and  promotion  of officers having been made on a group-wise basis from time to time and  their seniority having been fixed accordingly, the seniority is  now fixed  retrospectively from  an  arbitrary date viz., May 22, 1974.      These contentions,  particularly the  first, have to be answered in  the light  of  historical  data  governing  the constitution and  management of  Services under  the Reserve Bank, from time to time. Without an awareness of the history leading to  the events which the petitioners have challenged as unconstitutional,  it will  not  be  possible  either  to appreciate their contention or to provide an answer to it.      The Reserve  Bank of  India was constituted on April 1, 1935 under  the Reserve  Bank of  India Act,  1934. The main purpose of constituting the Bank, as stated in the Preamble 437 of the Act was -"To regulate the issue of bank notes and the keeping  of  reserves  with  a  view  to  securing  monetary stability in India and generally to operate the currency and credit system of the country to its advantage." In course of time, new  functions came  to be  added as  a result  of new measures so  as to  meet the  growing needs  of an expanding economy. During  the first decade after the inception of the Bank in 1935, these functions were carried out through three departments: The  Banking Department,  the Issue  Department and the  Agricultural Credit  Department.  The  Agricultural Credit Department  was trifurcated  into three branches with effect from  August 1,  1945: (i)  the  Agricultural  Credit Department, (ii)  the Department  of Research and Statistics and (iii)  the Department  of Banking  Operations. The first two branches,  which were  of  a  specialised  nature,  were grouped together  for the purposes of promotions of officers while the third branch was grouped for that purpose with the banking group  on the General Side. All promotions were made from two  separate  common  seniority  lists,  one  for  the specialised or technical group and the other for the banking group. The  departments  were  regrouped  again  into  three

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Groups, with effect from April 1, 1951. Group I consisted of Staff attached to the Department of Research and Statistics, Group II  of the Staff attached to the Department of Banking operations, the  Department of  Banking Development  and the Agricultural Credit  Department and  Group III  of the Staff attached to  the other  Departments on the General Side. The Staff attached  to the  Agricultural Credit  Department  was reconstituted into a new Group, namely, Group IV with effect from April  1, 1955.  The Industrial  Finance Department and the Department  of Non-Banking Companies were added to Group II in  September 1957  and March 1966, respectively. Group V was created  for the staff of the Industrial Department Bank of India  with effect from April 1, 1965. The composition of the five  Groups was  readjusted  on  that  date  to  ensure greater administrative efficiency.      This system  of grouping  had many drawbacks bearing on the promotional  opportunities of  Officers in  the  various Groups. To  mention but  a  few,  the  drawbacks  were:  (i) Unequal size  of one  Group as  compared  to  another,  (ii) Uneven expansion  in one  Group as  compared to another, and (iii) Earlier  confirmations of  Officers in  one  Group  as compared to those in another. 438      In 1955,  Group I  was the  largest of  all  the  three Groups on  the basis  of the  total number  of  officers  in Grades ’B’  and above  in each  of  the  three  Groups.  The subsequent expansion  in staff  strength has been greater in Groups II  and III  than in  Group I with the result that by the end of 1975, the total strength of Officers in Grade ’B’ and above  was the  smallest in  Group I  as compared to the other Groups.  The number of officers in Grade ’A’, however, continues to  be the  largest in  Group I  on account of the operational nature  of its  functions. While the increase in the total number of officers in Grade ’B’ and above in Group I over  a period of twenty years was 280%, the corresponding increase  in   Groups  II   and  III   was  451%  and  1100% respectively. However,  the large expansion in Groups II and III was  mainly at  the junior officers ’level’ particularly in Grade  ’B’. As  regards senior  officers i.e. Officers in Grades ’D’,  ’E’ and ’F’ while the expansion in Groups I and II could be regarded as more or less equal, the expansion in Group III, particularly in Grade ’D’ was marked. In spite of this, the  total number  of posts of senior officers and the percentage of  such posts  as compared  with those of junior officers continued  to be  smaller in  Groups  II  and  III. Officers in  Groups II  and III  also  took  a  longer  time generally for  confirmation as  the posts against which they were  promoted   were  either   initially  sanctioned  on  a temporary basis  and continued  as such  for quite  sometime before they were made permanent or the vacancies were caused by deputation of regular officers to commercial banks, state co-operative banks,  etc. for  which no  permanent vacancies were created.  On the  other hand,  Group I had more or less its normal  growth during these years and there was a smooth flow of  normal vacancies.  The officers  recruited  in  the early years  of the Bank had also gradually started reaching the age  of superannuation  and there  was a regular flow of retirement  vacancies.   The  Officers   in  Group   I  had, therefore, their  confirmation quickly  and thereby  derived distinct benefits.      Under the  Bank’s rules, the seniority of an Officer in a particular  grade was  ordinarily dependent on the date of his confirmation  in that grade and although for the purpose of  promotion,   the  seniority  of  an  officer  was  given weightage  only   within  the  same  group  for  a  notional

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comparison of  seniority of  officers in different Groups an officer who  was confirmed  earlier in one Group as compared with another who was confirmed later in another Group had an edge over  the latter  in matters  of service benefits. Such comparisons 439 arising from  promotional imbalances  in the  various groups caused resentment among the affected officers. This state of affairs had  long agitated  the minds  of  the  officers  in Groups II  and III and they brought this state of affairs to the management’s notice by various representations beginning from 1968.      The Management of the Bank took several steps from time to time  to correct  the promotional  imbalances  but  these steps  did  not  touch  even  the  fringe  of  the  problem, especially since,  the ad-hoc  schemes  and  proposals  were mainly aimed  at correcting imbalances that the lower level. Ultimately,  in   face  of  growing  discontentment  amongst officers belonging  to Groups  II and  III,  the  Management decided to  refer the question to the Cadre Review Committee (CRC) a  which was  appointed by  the Bank  in May 1970. The Committee was,  among other  things, required to examine and make  recommendations  for  the  changes  desirable  in  the existing constitution  of the cadres of officers; having due regard to  the  need  to  provide  reasonable  prospects  of increments and promotion and to ensure such degree of inter- changeability as administrative efficiency and exigencies of the Bank’s  services  demanded.  The  Committee,  under  the Chairmanship of  Shri J.L.  Nain, a  sitting  Judge  of  the Bombay High Court, submitted its report in October 1972.      The Cadre  Review Committee  expressed  the  view  that there was  irrationality in  the way  the groupings had been done and  the way  in which  seniority was  being maintained group-wise and  that Group  I had  an  unfair  advantage  in matters of  promotion over  Groups II and III. The Committee further held  that as  certain departments were inordinately large as  compared to others, this by itself, in the context of absence  of inter group mobility brought about imbalances in promotional  opportunities. The Committee also recognised that mobility  from one  group to  another  would  not  only facilitate   removing    the   imbalances   in   promotional opportunities  but  that  it  would  also  lead  to  "better operational efficiency". The Committee stressed the need for a  common   seniority  list   for  each  grade  of  officers throughout the  Bank, except  in respect of the Economic and Statistics Departments  and  among  lawyers,  engineers  and other technical  sections  of  officers.  It  recommended  a system of promotion from a lower grade to higher grade which would ensure,  among other  things, to  the  largest  extent possible, equality  of opportunity  of promotion  among  all officers in the same grade 440 and effective  operation of  mobility  of  officers  between different departments and groups. In regard to the operation of the  combined seniority scheme, the Committee recommended its immediate introduction for ’A’ and ’B’ grades and within a period  of two  years for  the ’C’ grade. In regard to the rest of  the grades, namely, ’D’, ’E’ and ’F’, the Committee recommended  the   application  of  this  principle  mutatis mutandis and  left it  to the  discretion  of  the  Bank  to introduce it as and when it chose, taking into consideration the exigencies  of the  situation. The Committee was also of the view  that it  was necessary  that mobility  and  inter- changeability as between groups among all grades of officers should be introduced in the shortest time possible.

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    Following  the  recommendations  of  the  Cadre  Review Committee, the  Bank introduced  through  an  administrative circular (No. 15, dated 22.5.1974), a combined seniority for ’A’ and  part of  ’D’ grades,  with retrospective effect. In regard to  ’C’ and  ’D’ Grades,  the circular  provided  for mobility and  interchangeability on  a swap  basis, but  the Officers’ Association  protested  against  it  and  demanded immediate  and   simultaneous   introduction   of   combined seniority and  interchangeability for the rest of the grades also.      Following the persistent demand made by the majority of the officers, the Bank appointed a Committee comprising Shri C.L. Thareja,  the then  Chief Manager, as Chairman, Shri K. Madhava Das,  Chief Officer, Agricultural Credit Department, Shri P.N.  Khanna,  Chief  Officer,  Department  of  Banking Operations and  Development, and  Shri T.D. Katara, Manager, Bombay  Office,   to  work   out  the   modalities  of   the implementation of  the combined  seniority scheme for grades ’C’ to ’F’ and to determine the operative date for combining the seniority.  The Bank decided that pending the submission of the  report by  this  Committee,  all  future  promotions namely those  effected from  1.1.1976, will be purely ad hoc and provisional.      The Thareja Committee, like the Cadre Review Committee, unanimously  recommended   the  introduction   of   combined seniority  simultaneously   for  all   grades  of  officers. However, on  the question  of the  operative  date,  it  was divided in  its views. Whereas Shri Thareja and Shri Katara, both Group  I officers, recommended that the scheme be given retrospective effect from January 1, 1976, the 441 other two  members representing  Groups II  and III, were of the view  that it  should be  given effect  from January  1, 1970. The  Bank, by  the impugned circular, accepted May 22, 1974 as  the date from which the combined seniority list was to have effect.      It is  clear from  this narration  of historical events that the  various  Departments  of  the  Reserve  Bank  were grouped and regrouped from time to time. Such adjustments in the administrative  affairs of  the  Bank  are  a  necessary sequel to  the growing  demands of  new situations which are bound to  arise in  any developing economy. The group system has never been a closed or static chapter and it is wrong to think that  the officers of the various groups were kept, as it  were,  in  quarantine.  The  group  system  has  been  a continuous process  of trial  and  error  and  the  impugned scheme of  inter-group mobility  has  emerged  as  the  best solution  out  of  the  experience  of  the  past.  Combined seniority has  been recommended  by two  special committees, whose reports  reflect the  expertise and  objectivity which was brought  to bear  on their  sensitive task.  It is clear that inter-group  mobility and  common seniority  are a safe and sound  solution to  the conflicting  demands of officers belonging to  Group I on one hand and those of Groups II and III on  the other.  Private interest  of employees of public undertakings cannot  override public  interest and an effort has to  be made  to harmonize  the  two  considerations.  No scheme governing  service matters can be fool-proof and some section or the other employees is bound to feel aggrieved on the score  of its  expectations being falsified or remaining to be  fulfilled. Arbitrariness,  irrationality,  perversity and  mala   fides  will   of  course   render   any   scheme unconstitutional but  the fact  that  the  scheme  does  not satisfy the  expectations of  every employee is not evidence of these.  Vested interests  are prone  to hold  on to their

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acquisitions and  we understand  the  feelings  of  Group  I officers who  have to surrender a part of the benefits which had accrued  to them  in a  water-tight system  of grouping. Combined  seniority   is  indispensable   for   the   smooth functioning of  the Bank  and no  organisation can  function smoothly if  one section  of  its  officers  has  an  unfair advantage   over    others   in   matters   of   promotional opportunities. The  reports of  the Cardre  Review Committee and the  Thareja Committee  show that combined seniority has emerged as  the most  acceptable solution  as  a  matter  of administrative, historical  and functional necessity. We see no justification for undoing 442 what these  committees have  achieved after an objective and integral examination of the whole issue. We may mention that the  conclusion   to  which   these  committees   came  were considered by  the  Bank  when  Shri  M.  Narasimhan,  later India’s Executive  Director  in  the  World  Bank,  was  the Governor  and   it  was   after  Dr.  I.G.  Patel,  Formerly Secretary, Economic  Affairs,  Govt.  of  India  and  Deputy Administrator, United  Nations Development  Programme,  took over as  Governor in  December 1977  that the final decision was taken  by the  Central Board  to  introduce  inter-group mobility and combined seniority.      In Reserve  Bank of  India v.  N.C. Paliwal, a Combined Seniority Scheme  was introduced  by  the  Reserve  Bank  of India, consisting  of two  parts, one  part provided for the integration of the clerical staff of the General Departments with the  clerical staff  of  the  Specialised  Departments, while the other provided for the switch-over and integration of the non-clerical staff with the clerical staff in all the Departments of  the Bank. The Delhi High Court set aside the Scheme on  the ground that it violated Articles 14 and 16 of the Constitution.  While setting  aside the  judgment of the High  Court,   this  Court  held  that  the  integration  of different cadres into one cadre did not involve violation of the equality  clause and that neither Article 14 nor Article 16  forbids  creation  of  different  cadres  in  Government service. Whether  there should  be a  combined seniority  in different cadres  or groups  was, according  to the Court, a matter of  policy which did not attract the applicability of the equality  clause. The  integration of  non-clerical with clerical services  which was  effectuated  by  the  Combined Seniority Scheme  was, in  the circumstances, held to be not violative of the guarantee contained in Articles 14 and 16.      As regards  the retrospective  operation given  to  the Scheme with  effect from  May 22,  1974, it does appear that the Board  has  struck  a  via  media  between  two  extreme contentions advanced  by officers  belonging to  Group I and those  belonging   to  Groups  II  and  III.  But  that  was inevitable and  we consider  it as  the best solution in the peculiar circumstances  of the case. In order to rectify the imbalances and anomalies caused by the compartmentalised and group-wise seniority, it was necessary to give retrospective effect to the Combined Seniority List. Officers belonging to Group I  urged that the Scheme should be brought into effect from January 1, 1976, while those belonging to Groups II and III wanted the Scheme to 443 be brought  into effect  from January  1, 1970.  The Central Board struck  a balance  by choosing  the date May 22, 1974, because that was the date on which the decision in regard to combining the  seniority retrospectively  with  effect  from January 1, 1970 in regard to Grade ’A’ and part of Grade ’B’ officers was announced. It was, again, on that date that the

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Bank had  announced that a similar decision in regard to the remaining grade,  of officers  was under its considerations. Thus, at  least on  May 22, 1974 it was known to officers of all grades  that a  combined seniority  list was  due to  be brought  into  force.  If  a  certain  section  of  officers succeeded in  obtaining promotional benefits thereafter, the imbalance introduced thereby in the services of the Bank and the consequent  dissatisfaction had  to be  rectified.  That could only  be  done  by  not  recognising  the  accelerated promotions obtained  in the  intervening period by a certain class of  officers. Shri  Nariman has drawn our attention to various individual  cases of  officers in  Group I whose old seniority has  gone down by several steps in the new Scheme. As we  have stated earlier, any scheme of seniority is bound to produce  isolated aberrations.  That cannot  justify  the argument that the entire Scheme is for that reason violative of the guarantee of equality.      We are,  therefore, of  the opinion  that the  impugned Administration Circular,  the Office  Order and the Combined Seniority List  are not  violative  of  the  rights  of  the petitioners under Articles 14 and 16 of the Constitution.      For these  reasons, the  Writ Petitions  are dismissed, but there will be no order as to costs. S.R.                                    Petitions dismissed. 444