TMI Blog1996 (3) TMI 557X X X X Extracts X X X X X X X X Extracts X X X X ..... Scheme ). The aforesaid scheme had been framed by the Government of India in exercise of the powers conferred by Section 9 of the Banking companies (Acquisition and Transfer of Undertaking Act 1980) (hereinafter referred to as the Acquisition Act ). The employees of the Transferee Bank also filed Writ Petitions in the High Court of Punjab Haryana challenging the Placement Scheme on the ground that the seniority of the employees of the Transferee Bank has been altered to their disadvantage on account of the principle of seniority indicated in the Placement Scheme and the said Scheme is arbitrary and violative of Article 14 of the Constitution of India. The Division Bench of the Punjab Haryana High Court dismissed all the Writ Petitions and upheld the provisions of the Placement Scheme and hence these appeals by the Workmen and Officers of the Transferor Bank as well as by the employees of the Transferee Bank. 3. Under the provisions of the Acquisition Act of 1980, 14 banks in the country were nationalised including the Transferee Bank. The New Bank of India Limited was a Private Bank which was taken over by the Central Govt. Under the provisions of the Acquisiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the commencement of this Scheme in the ownership, possession, power or control of the transferor bank in relation to the undertakings, whether within or outside India, and all books of accounts, registers, records and all other documents of whatever nature relating thereto and shall also be deemed to include all borrowings, liabilities and obligations of whatever kind then subsisting of the transferor bank in relation to the undertakings. (2) Where any property is held by the transferor bank under any lease the transferee bank shall on and from the date of commencement of this scheme be deemed to have become the lessee in respect of such property as if the lease in relation to such property had been granted to the transferee bank and thereupon all the rights under such lease shall be deemed to have been transferred to, and vested in, the transferee bank; Provided that on the expiry of the term of any lease referred to in this sub-clause such lease shall, if so desired by the transferee bank, be renewed on the same terms and conditions on which the lease was held by the transferor bank immediately before the date of commencement of this Scheme. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of determining the minimum length of service for promotion from subordinate cadre to clerical cadre in the transferee bank and Clause 4(b)(ii) provides the guidelines for the determination of seniority on fitment or for promotion to the next grade or scale of an officer of the transferor bank in the transferee bank. Since both these provisions have been challenged by the employees and officers of the transferor bank as well as the employees of the transferee bank it would be worthwhile to extract the aforesaid provisions in extenso : (a)(iii) The procedure for computation of years of service rendered in the transferor bank for the purpose of determining the minimum length the service for promotion from subordinate cadre to clerical cadre as also from the clerical cadre to officer cadre and also for the purpose of posting in the posts carrying special allowance, shall be computed in the ratio 2:1, that is, two years of service in transferor bank as equivalent to one year of service in the transferee bank. For this purpose total service in the respective cadre of the workmen employees, that is clerical or sub-staff in which the official is placed at the time of tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... volume of business handled by the employees of the two banks, the promotion effected in scales 3 to 7 by the New Bank of India just before its merger with the Punjab National Bank, the rate of promotion of the employees in the two banks when compared are taken into account. The High Court also came to the conclusion that on account of acute financial position of the transferor bank when it was open to the Central Government to close down the bank, the Government in consultation with the Reserve Bank of India decided not to take the extreme step of closing the bank and, on the other hand, decided to merge the same with the stronger Punjab National Bank, the scheme of amalgamation and placement has to be examined from the point of view of wider public interest and unless it is positively established that any clause thereof is arbitrary or irrational the Court should not interfere with the same. 10. Mr. P.P. Rao, the learned senior advocate appearing for the workmen of the transferor bank contended that Clause 5(4) of the Amalgamation Scheme authorises the Central Government to make a further scheme for determining the placement of the employees of the transferor bank a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s indicated in paragraph 6 of their counter affidavit filed before the High Court by no stretch of imagination can be considered to be germane factors and, therefore, the decision contained in Clause 4(b)(ii) of the placement Scheme must be struck down as irrational and arbitrary. He further contended that the merger of a small bank with a stronger bank cannot be held to be a ground for reducing the years of service of an employee of a transferor bank and such reduction of service is wholly arbitrary. Mr. Arora, learned Counsel also contended that there has been no iota of material in the counter affidavit filed before the High Court that the rate of promotion was much faster in the transferor bank as compared to the transferee bank. And further the finding of the High Court that the officers of the transferee bank will be junior to the officers of the New Bank of India if the entire credit is given to the services rendered in the transferor bank is a finding based on no evidence. Learned Additional Solicitor General replying to the contentions raised by the learned Counsel for the appellants submitted that the framing of the Amalgamation Scheme framed by the Central Government in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olproof and some section or other of the employee is bond to feel aggrieved on the score of its expectations being falsified or remaining to be fulfilled as has been held by this Court in the case of V.T. Khanzoda and Ors. v. Reserve Bank of India and Ors.: (1982)ILLJ465SC . Therefore, unless the persons aggrieved establish arbitrariness, irrationality, perversity or malafide the scheme cannot be held to be unconstitutional. 12. Mr. Reddy cited before us several decisions of this Court indicating the parameters for interference by the Court when validity of similar scheme is assailed and submitted that the impugned scheme more particularly Clauses 4(a)(iii) 4(b)(ii) of the Placement Scheme infact strikes a just balance between the conflicting claims of the employees of the transferor bank and the employees of the transferee bank and the said provision can neither be held to be arbitrary and irrational and therefore the Court should not interfere with the same. 13. Mr. Reddy lastly submitted that the conclusion of the High Court that the scheme making process is not legislative in nature is wholly erroneous. 14. Mr. Salve, the learned s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Was the High Court correct in coming to the conclusion that the scheme making process under Section 9 of the Acquisition Act is not legislative in nature? 17. So far as the first question is concerned Mr. Rao appearing for the appellants elaborated his submission by contending that no doubt Section 9 of the Acquisition Act confers power on the Central Govt. to make a scheme for Amalgamation of one bank with the other after consultation with the Reserve Bank of India and in exercise of that power the Central Government did frame the Scheme of Amalgamation which was published on 4th September, 1993. Under the said Amalgamation Scheme the undertaking of the New Bank of India stood vested in Punjab National Bank on the commencement of the Scheme itself and the effect of such vesting has been indicated in Clause 4 of the Amalgamation Scheme. Under Clause 5(2) of the said Scheme the officer and employees of the transferor bank became officer and employees of the transferee bank and they shall hold their office or service in the transferee bank on the same terms and conditions and with the same rights, pension, gratuity and other matters as would have been admissible to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of K.I. Shephard and Ors. Etc. Etc. v. Union of India and Ors. (1988)ILLJ162SC which was approved and followed in the case of H.L. Terhan v. Union of India [1988] Suppl. 3 SCR 923. In the Shephard's case (supra) when some private banks were amalgamated with Punjab National Bank, Canara Bank and State Bank of India in terms of separate schemes drawn under Section 45 of the Banking Regulation Act, 1949, some of the employees of the amalgamated banks were excluded from employment in the transferee banks and such exclusion was made without giving the employees an opportunity of being heard. When the matter had been challenged before the Kerala High Court, the learned Single Judge of the High Court had proposed a post amalgamation hearing but that had been vacated by the Division Bench of the High Court. In that context this Court had held that even a post decisional bearing will not meet the ends of justice and there is no justification to throw out the employees from their employment without giving them an opportunity of representation and giving an opportunity of representation is a condition precedent to the action taken. We fail to understand how this decision is of any as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med the Amalgamation Scheme and retained to itself the power to frame another scheme for placement and seniority of the employees of the transferor bank vis-avis the employees of the transferee bank and in accordance with that power framed the Placement Scheme. In our considered opinion, neither the Placement Scheme in any way alters the conditions of service of the employees of the transferor bank nor does it require any opportunity of hearing to be given to the employees of the transferor bank before framing of the Placement scheme. Mr. Rao also placed reliance on the decision of this Court in the case of Canara Bank v. MS. Jasra and Ors. (1992)ILLJ777SC . In the aforesaid case the question for consideration was, when some private banks are amalgamated with the Nationalised bank under the provisions of Banking Regulation Act 1949 can the employees of the private banks claim to be governed by an age of superannuation of the transferor bank or they would be governed by the terms and conditions of service applicable to the employees of corresponding ranks or status of the transferee bank. This court answered the question by holding that the employees would be governed by the terms a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to extract Clause 5(4) of the Amalgamation Scheme as well as Clauses 4(a)(iii) 4(b)(ii) of the Placement Scheme. (4) The Central Government shall, as soon as possible after the commencement of this Scheme, make a Scheme in consultation with Reserve Bank of India for determining the placement of the employees of the transferor bank including the determination of their inter-se seniority vis-a-vis the employees of the transferee bank. While making the Scheme the Central Government shall take account of relevant factors such as experience of the employee of the transferor bank. (a)(iii) The procedure for computation of years of service rendered in the transferor bank for the purpose of determining the minimum length of service for promotion from subordinate cadre to clerical cadre as also from the clerical cadre to officer cadre and also for the purpose of posting in the posts carrying special allowance, shall be computed in the ratio 2:1 that is two years of service in transferor bank as equivalent to one year of service in the transferee bank. For this purpose, total service in the respective cadre of the workmen employees, that is clerical or sub-st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Placement Scheme what has been intended is that for determination of the inter-se seniority and in the matter of promotion from subordinate cadre to the clerical cadre and from the clerical cadre to the officers cadre while the computation of years of service rendered is taken into account, the computation shall be made in the ratio of 2:1 i.e. two years of service, in the transferor bank would be considered equivalent to one year of service in the transferee bank. This computation is only one time computation and whether such decision has been taken after taking the relevant factors into account will be considered by us when the question of arbitrariness etc. is considered. But on examining the provisions of the Acquisition Act as well as the provisions of Clause 5(4) of the Amalgamation Scheme framed in exercise of power under Section 9 of the Acquisition Act and the impugned clauses of the Placement Scheme we have no hesitation to come to the conclusion that the Central Govt. did retain the power to frame the Placement Scheme in question which is essential for determination of the placement of the employees of the transferor bank and the inter-se seniority vis-a-vis t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erical staff of the specialised departments and it also made provision for determination of inter-se seniority. The validity of the said scheme had been challenged on the ground that the Scheme is violative of the Constitutional principle of equality and must be held to be discriminatory. This Court negativing the aforesaid contentions held that the integration of different cadres into one cadre cannot be said to involve any violation of equality clause. Examining the question of rule of seniority adopted by the combined Seniority Scheme the Court further observed : Now there can be no doubt that it is open to the State lay down any rule which it thinks appropriate for determining seniority in service and it is not competent to the court to strike down such rule on the ground that in its opinion another rule would have been better or more appropriate. The only enquiry which the court can make is whether the rule laid down by the State is arbitrary and irrational so that it results in inequality of opportunity amongst employees belonging to the same class. Now, here, employees from non-clerical cadres were being absorbed in the clerical cadre and, therefore, a rule fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter of promotion and fixed the principle of computation of service in determining the seniority. This Court on examining the ratio fixed by the government order held The ratio of 5:3 and 3:2 respectively were prescribed for the ministerial staff and teaching staff, taking realistic note of the total numbers in the two equivalent group viz., quondam District Board servants and relative government school staff. This is not an irrational criterion when coalescence of two streams springing from two sources occurs. 21. The Court further observed : Counsel for the respondents explain that when equated groups from different sources are brought together quota-rota expedients are practical devices familiar in the field. Bearing in mind the strength of the District Board staff to be included, the ratio is rational. May be, a better formula could be evolved, but the court cannot substitute its wisdom for government's, save to see that unreasonable perversity, malafide manipulation, indefensible arbitrariness and like infirmities do not defile the equation for integration. We decline to demolish the order on this ground. Curial therapeutics can heal only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made to harmonize the two considerations. No scheme governing service matters can be foolproof 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. 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 employees is not evidence of these. 24. In S.C. Sachdev and Anr. v. Union of India [1981]1SCR971 a particular provision of the Recruitment Rules of 1969 was being challenged as an arbitrary. The said provision provided that UDCs drawn from Audit offices must put in 10 years of service for acquiring eligible for promotion where other UDCs are eligible for promotion in putting in 5 years of service. Rejecting the contention of the appellant this Court held; Considering the history leading to the formation of the new organisation, SBCO-ICO, the distinction made between the two classes of UDCs, in the context of the length of their service for the purposes of promotion is not arbitrary or unreasonable. The staff of the Audit Offices which wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith effect from April 1, 1971. He filed a suit and obtained injunction against the abolition of post and termination of his services. In the course of litigation a compromise had been arrived at between the Board and the appellant wherein he was appointed as a Sectional Head Officer and his pay as a Special Officer was also protected. The Board, therefore, passed an order on March 20, 1972 appointing the appellant as a Sectional Head Officer in the general cadre. In the seniority list of Sectional Officers prepared by the Board the appellant had been shown above respondent No. 5 and he had been granted promotion to the post of Asstt. Secretary. The respondent No. 5 therefore, filed a Writ Petition challenging the seniority list. The High Court came to the conclusion that the post of Sectional Officer occupied by the appellant not being a cadre post the services rendered by the appellant as Special officer cannot be taken into account for his seniority in the cadre of Sectional Officer. This Court in appeal reversed the judgment of the High Court and held that the compromise entered into between the parties and the order of March 20, 1972 is capable of being interpreted as an order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e complete date and entire material on record of the case and in consultation with Reserve Bank of India decided that the Service rendered in erstwhile New Bank of India by employees/Officers in grade/scale in which they were placed at the time of amalgamation had to be computed in the ratio of 2:1 and that to only for the purpose of computing eligibility for consideration for promotion to next grade/scale and/or for the purpose of postings on a post carrying special allowance. For all other purpose, the service rendered by the employees of erstwhile New Bank of India has to be treated at par with the service rendered by the employees of New Bank of India in PNB. It is relevant to mention that New Bank of India was small in size both in regard to its branches and also in terms of its deposits and business etc. A comparison of the erstwhile New Bank of India and the Punjab National Bank in terms of productivity, volume of business, staff strength, time taken for promotion etc. as indicated below would reveal that the employees of Punjab National Bank were having higher productivity per employee and higher level of responsibilities, house keeping and higher average business per branc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... much beyond what its scares resources would permit, relying heavily on market borrowings. With the constraints on resources the bank would find it difficult to service even its existing borrowers. (iv) The bank had not been able to bring about any improvement in credit management despite repeated advice. The appraisal of credit proposals showed several deficiencies. Discretionary powers had not been exercised properly by the functionaries at various levels including the top executives. Ad hoc/spot sanctions/excess drawals had been allowed frequently. The post disbursement supervision of advances was also unsatisfactory. (v) The bank was saddled with substantial load of sticky advances amounting to ₹ 438.66 crore as on 31/3/1992 which formed 39.2% of the total advances. (vi) The Bank did not comply with the minimum capital requirement under the provisions of the Reserve Bank of India Act. It was prima facie a fit case de-scheduling the bank; (vii) The bank was not in a position to pay the depositors in full as and when their claims accrue and its methods of operation were far from satisfactory. Under the policy follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sferor bank is taken into account or one time reduced level is taken into account and finally evolved the scheme of placement and modalities for promotion. Having considered the necessary averments made in the affidavits filed by the Union Government as well as by the Reserve Bank of India we are of the considered opinion that in framing the Placement Scheme and determining the ratio of 2:1 in Clauses 4(a)(iii) 4(b)(ii) the appropriate authorities have taken relevant and germane materials into consideration and the said provision cannot be termed as arbitrary and irrational. 30. So far as the fourth question is concerned we do not find any substance of Mr. Rao's argument that the Placement Scheme is retrospective in nature. As we have discussed earlier, on deciding to amalgamate the two banks in exercise of power under Section 9 of the Acquisition Act the Union Government framed the scheme of amalgamation and notified the same on 4th September, 1993. But in that scheme excepting making the employees of the transferor bank as employees of the transferee bank, the other questions like their inter-se seniority and fitments in the cadre of the transferee bank had n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arliament for a total period of 30 days and the Parliament has the power to agree to the Scheme and making any modification or in giving to a decision that the scheme should not be made and it is only thereafter the Scheme has the effect either in the modified form or does not agree. The essential distinction between the two provisions therefore, is that whereas under the Banking Regulation Act the Scheme framed has merely to placed before the Parliament and nothing further but under the Acquisition Act the scheme becomes effective only after the same is placed before both the Houses of Parliament and after the Parliament makes such modification and agrees to the scheme. In this view of the matter the decision of this Court in Sephard's case (supra) has no application to a scheme framed under the provisions of the Acquisition Act and in our considered opinion, a scheme framed under Section 9 of the Banking Companies Acquisition and Transfer of Undertakings Act, 1980, is a legislative one. The High Court was in error in holding the scheme not to be a legislative one. 32. Mr. Sharma, the learned senior counsel appearing for the appellant, the Punjab National Bank E ..... X X X X Extracts X X X X X X X X Extracts X X X X
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