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PETITIONER: STATE BANK OF INDIA ETC.

       Vs.

RESPONDENT: KASHINATH KHER & ORS. ETC.

DATE OF JUDGMENT:       08/02/1996

BENCH: RAMASWAMY, K. BENCH: RAMASWAMY, K. G.B. PATTANAIK (J) G.B. PATTANAIK (J)

CITATION:  1996 AIR 1328            1996 SCC  (7) 470  JT 1996 (2)   569        1996 SCALE  (2)423

ACT:

HEADNOTE:

JUDGMENT:                             WITH                 CIVIL APPEAL NO.4232 OF 1994                          O R D E R      These appeals by special leave arise from the orders of the Division  Bench of the Madhya pradesh High Court made on August 27,  1993 in  Misc. Petition Nos.1965/90 and 2091/90. The facts  not in  dispute are  that the  respondents  while working as  Middle Management  Grade Scale  II officers (for short, "MMGS-II")  in the  State Bank  of India,  its Bhopal Circle have  challenged the  policy  of  the  appellant-Bank dated March  21, 1990  and August  6,  1990  whereunder  the officers who have not completed two years of line assignment and two years Rural/Semi-urban service were to be considered eligible for  promotion to Middle Management Grade Scale III (for short,  "MhGS-III"). The  High Court has held that they are ineligible  and such  a clubbing  of ineligible officers with eligible  officers  is  violative  of  Article  14  and accordingly struck down the criteria and given directions in the order.  Calling in  question of  the said  order,  these appeals by special leave came to be filed.      The Preamble of the State Bank of India, Act 23 of 1955 (for short,  the "Act˜) envisages establishment of the State Bank of  India (for short, the "Bank") for extending banking facility  on   a  large   scale  more  particularly  in  the rural/semi urban area and for diverse other public purposes. Section 43(1)  of the Act gives power to the Bank to appoint such  number  of  officers,  advisers  or  employees  as  it considers  necessary   or  desirable   for   the   efficient performance of  its functions and to determine the terms and conditions of  their appointment  and service. Regulation 55 of the  State Bank  of India General Regulations (for short, the "Regulations")  provide the  power of the Local Board in respect of  the staff.  Regulation 55(2)(a)  envisages  that appointing   and/or    promoting   authority   for   various

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categories/Grades of officers and employees shall be such as the Executive  Committee may  by general  or  special  order designate from  time to  time. The  operation of the Bank is regulated by  the Board  of Managing  Directors of  the Bank which empowers  appointment of  the Committee.  The Managing Committee consists  of the Chief General Manager and such of the officers designated thereunder. It would appear that the Board or  Managing Committee  issues policy  directions from time  to   time.  The   State   Bank   of   India   Officers (Determination of  Terms and  Conditions of  Service) Order, 1979 (for  shorts the  "Rules") was  made in exercise of the aforesaid  power  under  Section  43(1).  Rule  17  provides procedure for promotion. It envisages that:      "Promotions  to   all   grades   of      officers in  the Bank shall be made      in accordance  with the policy laid      down by  the Central  Board or  the      Executive Committee  from  time  to      time.      EXPLANATION: For  the avoidance, of      doubts, it  is clarified  that  the      provisions of  this paragraph shall      also apply  to  promotions  of  any      category of employees to the junior      management grade."      The Executive  Committee issued  circulars from time to time. In  1990,  for  promotion  from  MMGS-II  to  MMGS-III effective from August 1, 1986, the eligibility criteria laid down is as under:      "(a) The  eligibility criteria will      be reckoned  with  reference  to  a      date  of   eligibility  which  will      normally   be 1st  of August  every      year.      (b) 2  years service as MMGS-II and      both parts of C.A.I.I.B.; or      3 years"  service  as  MMGS-II  and      Part I of C.A.I.I.B.; or      5 years"  service as MMGS-II and no      Part of the C.A.I.I.B.      (c)   The   officer   should   have      completed satisfactorily 2 years of      line assignment.      NOTE:      ----      For the  promotions effective  from      the year  1988 onwards,  to  become      eligible for promotion to MMGS-III,      an   officer   should   have   also      completed   3    years’   stay   in      rural/semi-urban branch."      In  1990,   by  memo   dated  March  21,  1990  general guidelines for  promotion to  MMGS-III were envisaged  which read as under:      "Line Assignment:      Satisfactory  completion   of  Line      assignment as  Branch Manager or as      Manager of  a business division for      a minimum  period of  2 years  is a      pre-requisite for consideration for      promotion. Officers  who  have  not      completed the  full 2  years tenure      of  the  line  assignment  but  are      otherwise       eligible        for      consideration far  promotion to MMG

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    Scale III  would have  to be placed      in the line assignment position for      a minimum  period of  not lass than      six months  so as  to  complete  or      exceed  a  minimum  period  of  two      years   service    in   the    line      assignment.      Rural/Semi  Urban   Service  in   a      Branch:      As  approved   by   the   Executive      Committee of  the Central  Board at      its meeting  held on 21.10.1989, it      was  advised   that  as   per   the      Government of India guidelines, all      officers JMG  Scale I and MMG Scale      II  are  required  to  put  in  the      undernoted    minimum    stipulated      service in  a Rural  or Semi  Urban      branch before  they are  considered      for promotion  to MMG  Scale II and      MMG Scale III.      Grade of    Stipulated   period  of      Officer     Service      JMG Scale I Minimum 2 years service                  in a rural branch.      MMG Scale II Minimum 3 years  servi                   ce in a rural and/or                   semi-urban branch                   including 2 years                   rural service as                   officer, JMG                   Scale I.      This stipulation  is effective  for      promotions to  be  made  from  1988      onwards and  shall be  one  of  the      eligibility criteria for promotions      to MMG  Scale II  and MMG Scale III      with  effect   from  1.8.1988   and      onwards."      In the light of these guidelines, the promotions are to be  considered   and  the  eligibility  criteria  prescribed thereunder regulates  the eligibility  of the candidates for promotion. The  case of  the  respondent  is  that  for  the promotions that have arisen from 1988, 1989 and 1990, as per the rules  and the policy, the officer in MMGS-II should put in minimum of two years in "line assignment" and three years in rural/semi  urban service  even for  consideration.  Line assignment has  been stated  as exposure to work in the line or  branches  like  Branch  Managers  and  Managers  of  the segmental division both of which involved in discharging budgetary  responsibility  and  fulfillment  of  targets  in banking  business.   Raral/Semi  urban  service  would  mean working experience on being posted in various area where the population is  less than  10,000 in rural area and more than 10,000 but less than one lakh as a semi urban area.      It would  thus be seen that for the candidate to become eligible  for   consideration  for  promotion  the  criteria required under  the guidelines requires to be fulfilled. But it is  seen  from  the  record  that  for  reasons  of  non- availability of  the posts  or due  to nonenforcement of the conditions, many of the officers have not had the benefit of working in the line assignment and the rural service. Consequentially, the question arose whether rule requires to be adhered  to or the policy requires to be changed. In that behalf the Board has decided to relax the condition for the

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posts as one time measure to give the chance to the officers to fulfill  the conditions. Nonetheless, the conditions have not been  fulfilled due to the diverse reasons which include mismanagement at  circle  levels  as  noted  by  the  Board. Consequentially, they  have decided  to arrange three lists. List A  consists of  officers who  have  put  in  two  years required service  of line assignment; in list B composing of officers who  have not  completed two years service but have done partly  and list  ’E’ consists of officers who have not had the  service at all. The officers who have not completed the rural  or semi-urban service are not included in list B. But they  are separately  dealt with.  In this  case we  are concerned with List B officers and we are not concerned with List ’C’ officers.      It is  stated by  the Board  in their  circular that in spite of  repeated instructions  given to  the circles, they have  not  complied  with  the  directions  of  posting  the officers to  the line assignment as well as rural/seme-urban services. As  a consequence,  heart burning  was brewing  up among the officers who did not have the opportunity to serve in the  line assignment  and also rural/seme-urban services. Consequentially, the  Board had  decided that  all those who were required  to he promoted would be considered subject to the fulfillment  of the  eligibility criteria.  Officers who have completed  the  required  service  and  found  fit  for promotion would  be promoted  immediately; officers who have not completed  two years  service in the line assignment and also in  rural/semi-urban service  would be  considered  for promotion and  if found fit would be selected, put in B list would be  promoted only  on their  completing their required service. Thereafter,  their placement  on completion  of the above service conditions would be below his immediate senior in MMGS-II but promoted earlier to them in MMGS-III.      The respondents,  therefore, have contended in the High Court that  clubbing the  officers in  List B  with those of List A  is  unconstitutional  violating  Article  14,  being unequals they  are treated  as equals  with them  and  that, therefore, it is not permissible in law. That contention was found favour  with the  High Court.  It is contended by Shri R.F. Nariman,  the learned  senior counsel for the appellant that  the  policy  adopted  by  the  appellant  was  not  in relaxation of  the essential  conditions of the service, but providing eligibility  for the  officers who  for fortuitous circumstance  of  not  completing  the  service  were  given opportunity  to   consider  eligibility  for  promotion  and thereby making  everyone on  par so  as to avoid hardship or injustice for  no fault  of theirs to those officers who are otherwise eligible,  may be some of them more seniors to the officers who  are placed  in List  A. Thereby  there  is  no injustice meted out to anyone.      Ms. Nisha  Bagchi, learned  counsel for the respondents contended that  the entire exercise is illegal. According to her,  under   the  Rules,   having  made   the  satisfactory completion of  line assignment  and rural/semi urban service being a  condition precedents  unless  officers  in  MMGS-II complete those  conditions, they  are  not  eligible  to  be considered; ineligibles  cannot be  made eligibles by virtue of instructions  issued by  the Board  which is inconsistent with the  rules. The  consideration for  promotion should be made as  and when vacancies have arisen. These directions by way of  circulars were  issued by  the Board in 1990 for the vacancies that  have arisen in 1988, 1989 and 1990 and that, therefore, the  criteria cannot  be applied to the vacancies that  have  arisen  in  1988,  1989  and  1990.  It  may  be prospective for the vacancies to be filled up in future. She

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also contended  that when  the respondents  filed  the  Writ Petitions  in  the  High  Court  assailing  the  correctness thereof, the  Board had  come forward  with  the  relaxation subsequently to  undo the mischief which the respondents had pointed out.      Having  considered   the  respective  contentions,  the question. arises  whether the  action taken by the appellant in making  the officers  who have not completed the required service of  the line assignment and rural/semi-urban service and considering  their case,  found them fit and placed them in list B is violative of Article 14? We find that the stand taken by  the Bank  appears to be just and fair on the facts of the  case. It  would be  seen that  from 1986  onwards no promotions have been made. Despite directions issued in 1986 as one  time measure  directing all  the circles to post the officers  to   line  assignment  and  for  rural/semi  urban assignment from 1989, no steps have been taken at the circle level to  comply with  the directions given by the Board and the Executive  Committee. Consequentially, officers, who are otherwise eligible  and entitled  to be considered were made ineligible   for   no   fault   of   theirs.   Under   those circumstances, it  necessitated to  relieve hardship to such officers due to the inaction or skillful maneavour at circle level. Fortuitous  circumstances of  some officers completed the criteria  would be a ground to scale march over officers who are  otherwise legible and they cannot be made to suffer injustice,  denial   of  their   legitimate  expectation  to consider their  cases for  promotion  would  be  unjust  and unfair. It  is true. as rightly Contended by Ms. Nisha, that the criteria  being conditions of service cannot be relaxed. Service conditions  being  essential  conditions  cannot  be relaxed and  it is  not the  case of the appellant-Bank that they have  done that  exercise. What  the Board  has done is giving an  opportunity to  the officers,  who are  otherwise eligible, to  complete the  required service  conditions and then would  be given  promotion, on  completion of requisite conditions thereof.  In view  of the  fact that they did not have the  opportunity to  serve and  complete the qualifying service, with a view to see that those who had the advantage of completing  the service  would not scale a march over the seniors, they  equally adopted  an  equitable  principle  of putting the  officers in  list B  and being  given seniority after promotion  below his  immediate senior  in MMGS-II  so that injustice will not be meted out to such officers for no fault of  them. The  procedure adopted  by the Bank is just, fair and reasonable.      The question  is: whether such exercise is in violation of Article 14. The contention of Ms. Nisha is that weightage provided in  the criteria for consideration by the committee get defeated  is without force. The committee is required to consider the  overall experience  for the  period  specified therein.  The  mere  fact  that  the  fortuitous  factor  of officers officiating  in MMGS-III  would not  be a  wedge to walk over those who did not have such fortuitous opportunity nor  they  denied  of  equal  opportunity.  This  Court  had considered an  analogous situation in Mohd. Usman & ors. vs. State of  Andhra Pradesh  &  ors.  [1971  Suppl.  SCR  549]. Therein, the UDCs and LDCs in a district were unit-wise. The LDCs were  entitled to  be considered for promotion as UDCs. The UDCs  were eligible  to be  considered for  promotion as Grade II  Sub-registrars in  the Registration  Department of Andhra Pradesh.  Grade II Sub-Registrars was Statesise cadre while  lDCs  and  UDCs  were  districtwise  cadre.  In  some Districts where  persons appointed  as LDCs  though seniors, due to  lack of opportunities, they could not get the chance

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to become  UDCs, but  they get  the chances  lately. In some districts, due  to frequent  of successive  vacancies,  LDCs appointed later  to those appointed in other districts would get chances  for promotion  as UDCs  over their counter part seniors in  other districts thereby they would steal a march over LDCs  working in  other districts.  With a  view to see that all  of them would become eligible for consideration as Sub-Registrars Grade  II, the  UDCs and  LDCs  were  clubbed together as  a unit  and for  Statewise  promotion  as  Sub- Registrar Grade  II. That  criteria  was  adopted  to  avoid hardship  and   injustice  to   such  of  those  senior  LDC candidates. When the validity of the rule was questions, the High Court  declared rule 5 of the Special Rules to be ultra vires of Article 14. When the matter had come up, this Court had held thus;      "On the  facts  before  us  we  are      unable  to   agree  that   for  the      purpose of  recruitment with  which      we are  concerned herein  the State      should have  classified the U.D.Cs.      and  L.D.Cs.   separately.  If  the      State had  treated the  U.D.Cs.  as      being superior  to the  L.D.Cs. for      the purpose  of that recruitment it      would have resulted in a great deal      of injustice  to a large section of      the    clerks.    The    fortuitous      circumstance of  an  officer  in  a      particular  district   becoming   a      U.D.C.  would  have  given  him  an      undue advantage  over  his  seniors      who might have as efficient or even      more efficient than himself, merely      because they  chanced to  serve  in      some  other   district.   For   the      reasons mentioned  above, we do not      think that  in the present case the      State can  be said  to have treated      unequals as  equals.  The  rule  of      equality  is  intended  to  advance      justice by avoiding discrimination.      In our  opinion the  High Court  by      overlooking the  reason behind Rule      5 came  to the erroneous conclusion      that the  said rule violated Art.14      of the Constitution."      It would  thus be  seen  that  it  is  not  a  case  of ineligible persons  made eligible,  but  a  case  of  giving opportunities to those officers, who for no fault of theirs, were  not   made  eligible   to  be   considered  and  given opportunity  to   be  considered  for  promotion  and  after consideration,  on   fulfillment  of  the  service  of  line assignment and rural/semi-urban service for a minimum of two years were  promoted to the MMGS-III. Thus, we hold that the policy adopted  by the  Board is not violative of Article 14 of the  Constitution. But  it must  be  remembered  that  in considering whether  the candidate has completed the line of assignment or  rural/semi-urban  service  for  the  required period, a  clear demarcation  be drawn  between the officers who either  due to  volitions refusal  to serve and those on account of  inaction or  deliberate omission  on the part of the controlling authority did not have an opportunity as the case may  be, to  get the  required service  qualifications. Therefore, an  exercise requires to be done by the appellant to identify  this grouping and consider all those candidates

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who  have   otherwise  become   eligible  but  did  not  get opportunity, for  no fault of theirs’, to secure the service qualification but  should be denied to those who volunteered not to go for line assignment or rural or semi-urban service as the  case may  be, and  then to consider according to the criteria prescribed under the rules or the circulates issued from time to time.      It is  true as contended by Ms. Nisha, learned counsel, that  due   to  the   accelerated  promotions,  the  line-up promotions have  been scaled  in quick succession from Scale II to  Scale III and then to Scale IV but, unfortunately, no factual foundation  has been placed before us to find out as to when  and under  what circumstances such exercise came to be made and in what circumstances the accelerated promotions came to  be given.  But these  are the  matters to be looked into after doing the exercise as indicated above.      Learned counsel  for the  respondents is  not right  to contend that  the vacancies  have arisen  in 1988,  1989 and 1990 and that the rule of relaxation cannot be given in 1990 to the vacancies that have arisen in 1988, 1989 and 1990 and be considered  according to  the rules  in  vogue  when  the vacancies had  arisen. It  is seen  that the policy decision was taken  for the  first time  on March  21, 1990 effective from August  1, 1988.  In other  words, the  promotions  are required to  be considered  retrospectively in  the light of the decision to fill up the vacancies existing as on August, 1988. Therefore,  it is  not a case of applying a rule which were made  later to  a vacancy  which was  existing anterior thereto. Equally,  it is  not correct  to  state  that  this principle is an unjust principle. It is true that this Court in Y.V. Rangaiah vs. J.Sreenivasa Rao [(1983) 3 SCC 284] had considered the  question of retrospective application of the rule to  the vacancies  existing  prior  to  the  rules,  in paragraphs 7  and 8  of the  Judgment. But in that case, the rule  was   in  vogue   for  Sub-Registrars   Grade  II   in Registration Department  of Andhra  Pradesh. But no list was prepared, promotion  was not  made according to the existing rules.  The   list  of   eligible  candidates  was  prepared according to  the amended  Rules, consequential to the zonal system introduced  in Andhra  Pradesh under  Article 371D of the Constitution  and Presidential  Order. It  was held that the vacancies  that had arisen prior to making the amendment to the  Rules should  be filled in accordance with the rules that were in vogue prior to the amendment and vacancies that arose subsequently should be filled according to the amended rules. That situation does not apply to the factual matrix.      It would  appear  that  the  confidential  reports  and character rolls  are being  prepared by  the officers of the same rank  in the  same MMGS II working in the establishment department over  the same  cadre officers  working elsewhere and the  reporting officers are the same. Ms. Nisha is right and the  High Court is well justified in holding that such a procedure is violative of the principles of natural justice. Such procedure  and practice  is  obviously  pernicious  and pragrant with  prejudices  and  manipulative  violating  the principles of  natural justice and highly unfair. The object of writing  confidential report is two fold, i.e. to give an opportunity to  the officer  to remove  deficiencies and  to inculcate  discipline.   Secondly,   it   seeks   to   serve improvement of  quality and  excellence  and  efficiency  of public service.  This Court in Delhi Transport Corporation’s case pointed  out pitfalls  and insidious effects on service due to  lack  of  objectives  by  the  controlling  officer. Confidential and  character reports  should,  therefore,  be written by  superior officers  higher above  the cadres. The

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officer  should   show  objectively,  impartially  and  fair assessment without  any prejudices  whatsoever with  highest sense of responsibility alone to inculcate devotion to duty, honesty  and   integrity  to   improve  excellence   of  the individual officer.  Lest the officers get demoralized which would be  deleterious to  the  efficacy  and  efficiency  of publish  service.  Therefore,  they  should  be  written  by superior officer  of high  rank,  who  are  such  high  rank officers is for the appellant to decide. The appellants have to  prescribe   the   officer   competent   to   write   the confidential. There should be another higher officer in rank above the  officer who  was written  confidential report  to revies  such   report.  The   appointing  authority  or  any equivalent  officer   would  be  competent  to  approve  the confidential reports  or character  rolls.  This  procedures would be fair and reasonable. The reports thus written would form basis  for consideration  for promotion.  The procedure presently adopted is clearly illegal, unfair and unjust.      It  would   also  appear   from  the  record  that  the confidential reports  submitted were  adopted in toto by the Committee   considering    promotion   without   any   cross verification from  the character  rolls or  the  record  and independent assessment of merit and ability. That would also be clearly  illegal. Being a competent authority to consider the claim of the candidates, the Committee for promotion has to independently  assess  the  merit  and  ability  of  each candidate from  the reports  and the records etc. consistent with the  weightage prescribed  in the  rules  and  then  to determine the  relative merit  and ability  of officers  and then  to   arrange  order  of  merit  of  the  officers  for promotion. Being  selection posts, the selection record also must indicate  reasons, however,  brief they may be, so that when tested  by judicial  review, the  Court would be better assisted by  such record  to reach  correct decision in law. This exercise  should also  be done by the appellant. If the confidential  reports   written  earlier   are  by  superior officers, then  the entire  record could  be secured  by the controlling officers.  They  should  be  considered  by  the promotion Committee  and each  case must  be examined in the light of  the record  of each officer. It would be desirable to prepare  a columnar  statement with all relevant columns. The C.Rs. and other relevant record should be preserved. The matters considered by the promotion committee should also be preserved.      Accordingly, we  hold that the High Court was not right in setting  aside the  promotions and  giving directions  to promote all  the officers in list A and then to consider the officers in  list B  and then to go on doing the exercise as indicated in  the order.  The promotions  made remain ad hoc pending regular  consideration and  promotion. The appellant is directed  to identify  the officers  who have voluntarily did not  opt to  serve in the line assignment or rural/semi- urban service  and then  eliminate such officers for List B, and put  them in list ’C’. Thereafter, consider the officers within the zone of consideration of all the officers in List A and  B together,  who are  eligible to  be considered  for promotion subject  to other  ralevant criteria.  Those found fit be  promoted be put in List ’A’ and ’B’ respectively and take action thereon.      The appeals  are accordingly  allowed and the orders of the High  Court are set aside. The appellant should consider the case of all the officers in accordance with law now laid down. Prepare A and B lists promote all the officers in List A, Officers in List B, be posted in line assignment and also rural/semi-urban service.  On  completion  of  the  required

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service be given promotion to MMGS-III. They would be placed in seniority  below their  respective  immediate  senior  in MMGS-II. The appellant is directed  to complete the exercise within a  period of nine months from the date of the receipt of this order. No costs.      Application for intervention is allowed.