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CASE NO.:

Appeal (civil) 1391 of 2007

PETITIONER:

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

RESPONDENT:

D. Achyuta Rao & Ors

DATE OF JUDGMENT: 15/03/2007

BENCH:

B.P. SINGH & ALTAMAS KABIR

JUDGMENT:

J U D G M E N T

(Arising out of SLP) Nos.15912-13 OF 2004)

WITH

CIVIL APPEAL NOS 1392 2007

(Arising out of SLP) Nos.15926-15927 OF 2004)

A.P. Cooperative Oil Seeds Growers Federation \005.Appellants

Ltd. Hyderabad, Andhra Pradesh

Versus

M. Sheshagiri Rao & Ors. \005Respondents

WITH

CIVIL APPEAL NOS 1393 2007

(Arising out of SLP) Nos.15923-15924 OF 2004)

A.P. Cooperative Oil Seeds Growers Federation \005.Appellants

Ltd. Hyderabad, Andhra Pradesh

Versus

Mohd. Anwar Ali & Ors. \005Respondents

WITH

CIVIL APPEAL NO 1394 2007

(Arising out of SLP) No.15917 OF 2004)

A.P. Cooperative Oil Seeds Growers Federation \005.Appellants

Ltd. Hyderabad, Andhra Pradesh

Versus

Uppada Sudhakara Rao & Ors. \005Respondents

WITH

CIVIL APPEAL NOS 1395 2007

(Arising out of SLP) Nos.15918-15919 OF 2004)

A.P. Cooperative Oil Seeds Growers Federation \005.Appellants

Ltd. Hyderabad, Andhra Pradesh

Versus

S. Sekhar Goud & Anr. \005Respondents

WITH

CIVIL APPEAL NOS 1396 2007

(Arising out of SLP) Nos.15920-15921 OF 2004)

A.P. Cooperative Oil Seeds Growers Federation \005.Appellants

Ltd. Hyderabad, Andhra Pradesh

Versus

K.V. Nageswar Rao & Ors. \005Respondents

WITH

CIVIL APPEAL NOS 1397 2007

(Arising out of SLP) Nos.17299-17306 OF 2004)

M. Ramesh & Ors. \005Appellants

Versus

Mohd. Anwar Ali & Ors. \005Respondents

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AND

CIVIL APPEAL NOS 1398 2007

(Arising out of SLP) Nos.15046-15051 OF 2004)

A.P. Cooperative Oil Seeds Growers Federation \005.Appellants

Ltd. Hyderabad, Andhra Pradesh

Versus

M. Sheshagiri Rao & Ors. \005Respondents

B.P. SINGH, J.

Special leave granted.

In this batch of appeals the common judgment and order of the

High Court of Judicature of Andhra Pradesh at Hyderabad dated April

27, 2004 has been assailed. The High Court by its aforesaid common

judgment and order allowed several writ appeals against which the

appellant, A.P. Cooperative Oil Seeds Growers Federation Ltd.

(hereinafter referred to as 'the Federation') has preferred appeals. The

respondents whose writ appeals were allowed by the High Court are D.

Achyuta Rao, Mohd. Anwar Ali, M. Seshagri Rao, K.V.N. Rao, Shekhar

Goud and U.S. Rao. They shall hereinafter be referred to as the

'contesting respondents'.

D. Achyuta Rao had preferred writ petition Nos. 9565 and 13985

of 2003 which were dismissed by the learned Single Judge but the writ

appeals being Nos. 1786 and 1787 of 2003 were allowed by the High

Court against which the Federation has preferred the appeals arising out

of SLP ) Nos. 15912-15913 of 2004.

Mohd. Anwar Ali had preferred writ petition Nos. 9669 and 13941

of 2003 which were also dismissed by the learned Single Judge but the

writ appeals preferred by him being Writ Appeal Nos. 1784 and 1785 of

2003 were allowed by the impugned common judgment and order of the

High Court. The appeals arising out of SLP ) Nos. 15923 and 15924 of

2004 have been preferred by the Federation against the aforesaid

judgment allowing the appeals of Mohd. Anwar Ali..

M. Seshagri Rao preferred writ petition Nos. 9671 and 13172 of

2003 which were also dismissed by the learned Single Judge but the writ

appeals being Nos. 1791 and 1794 of 2003 preferred by him were

allowed by the impugned common judgment and order of the High Court.

The cross-objections had been preferred by the Federation which were

dismissed by the High Court. The appeals arising out of SLP ) Nos.

15046 to 15051 of 2004 have been preferred by the Federation

challenging the impugned judgment and order of the High Court allowing

the writ appeals. The Federation has also filed appeals arising out of SLP

) No. 15926 and 15927 of 2004 against the order dismissing its cross-

objections.

K.V.N. Rao had preferred writ petition Nos. 9670 and 13163 of

2003 which were dismissed by the learned Single Judge. The appeals

preferred being writ appeals being Nos. 1795 and 1792 of 2003 were

allowed by the impugned common judgment and order of the High Court.

The cross-objections preferred by the Federation were also dismissed.

The appeals arising out of SLP ) Nos. 15920 to 15921 of 2004 have

been preferred by the Federation against the impugned judgment and

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order of the High Court.

Shekhar Goud has preferred writ petition Nos. 10039 and 15270 of

2003 which were dismissed by the learned Single Judge. The writ

appeals preferred by him being Nos. 1793 and 1796 of 2003 were

allowed. The Federation has impugned the common judgment and order

of the High Court in the appeals arising out of SLP ) Nos. 15918 and

15919 of 2004.

Lastly U.S. Rao has filed similar writ petitions being No. 9633 of

2003 which was dismissed by the learned Single Judge. The writ appeal

preferred by him being No. 1801 of 2003 was allowed. The Federation

has impugned the judgment and order of the High Court in the appeal

arising out of SLP ) No. 15917 of 2004.

The questions that arise for consideration in these appeals relate to

the Voluntary Retirement Scheme (hereinafter referred to as 'the VRS')

offered by the Federation to its employees having regard to the reduced

cadre strength. It is the case of the Federation that only those of the

employees were retained who came within the cadre strength determined

in accordance with the norms enunciated by the Federation and the

remaining employees were offered the benefit of the VRS. The six

contesting respondents in these appeals had challenged their inclusion in

the list of surplus employees whose services were to be discontinued.

Initially a large number of writ petitions were filed but the factual

position as it emerges today is that the strength of the cadre is 159 and,

therefore, 163 employees out of 322 had to be declared surplus. Out of

those declared surplus 137 accepted the VRS while 26 went to court.

The contesting respondents before us are amongst those who challenged

the order of the Federation declaring them surplus. When these appeals

came up before us we were informed that the writ appeals preferred by 20

others were still pending before the High Court and, therefore, we had

directed that those appeals may also be disposed of so that all the matters

could be heard together, if necessary. Accordingly those writ petitions

have been heard and disposed of by the High Court and the aforesaid 20

writ petitioners have also accepted the VRS pursuant to the order of the

High Court dated 14th September, 2005. Thus the dispute is confined to

the 6 contesting respondents before this Court whose writ appeals were

allowed by the High Court.

Shorn of unnecessary details the facts of the case are as follows :-

The appellant-Federation was registered as a cooperative society

under the A.P. Cooperative Societies Act with the object of bringing

about increase in production of oil seeds. The appellant-Federation

started its operation in the year 1983 with a 2 tier structure, namely the

Federation at the State level and cooperative societies at the village level.

The vegetable oil project was funded by the National Dairy Development

Board (for short 'NDDB') with a view to promote the Primary

Cooperative Societies and the establishment of processing units. On its

suggestion the appellant-Federation adopted a 3 tier structure with the

Federation at the top and two Regional Unions in the second tier. In the

third tier, were the cooperative societies at village level. It appears from

the record that many of the employees of the appellant-Federation were

transferred to the Regional Unions. This was challenged by 21

employees who filed Writ Petition No.24907 of 1996 contending that

they were not the employees of the Regional Unions but were employees

of the Federation. The Unions were distinct legal entities since they were

also independently registered as cooperative societies. They had been

transferred to those Unions against their wishes and without their

consent. The aforesaid writ petition was allowed by judgment and order

of June 6, 2000. It was held that the writ petitioners continued to be the

employees of the appellant-Federation. There was no contract of

employment between them and the Management of the Regional Unions.

The employer-employee relationship had not been severed and, therefore,

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in law, they continued to be the employees of the appellant-Federation.

There was no employer-employee relationship between them and the

aforesaid two Regional Unions. Accordingly the appellant-Federation

was directed to treat them as their employees and extend to them all

service benefits.

The appellant-Federation preferred Writ Appeal No. 798 of 2000.

The said appeal was later dismissed as having become infructuous in

view of the changed circumstances. This fact has been noticed by the

High Court in its impugned judgment and order.

After the re-organization, the Federation looked after the

marketing and oil palm development activity while the Regional Unions

were entrusted with the management of the processing facilities of

conventional oil seeds. All the assets and liabilities of the facilities were

transferred to the Regional Units. It is not disputed that the Regional

Unions suffered huge losses. Having regard to the mounting losses, a

Joint Committee Meeting of the appellant-Federation and the two

Regional Unions was held on April 13, 2001 to consider the restructuring

of the appellant-Federation and the two Regional Unions. A decision

was taken to close down both the Unions and to take necessary steps in

that direction. A time bound programme for closing down of the Unions

was prepared and a revised staffing structure of the Federation based on a

broad Five Year Business Plan was to be finalized. With this in view a

plan of action was agreed upon and the Federation appointed a

Consultant for the purpose of valuation of the assets of the two Regional

Unions. The Board of Directors of the Federation in its 74th Meeting held

on May 13, 2002 approved the decision taken by the Joint Committee for

the closure of the two Regional Unions and the manpower of 161

employees for the restructured Federation was worked out based on the

Five Year Business Plan. The NDDB vide its letter dated July 2, 2002

agreed in principle to the closure of the two Regional Unions without

prejudice to their invoking the Government guarantees for recovery of

their outstanding loans. In the Board Meeting of May 13, 2002 it was

also resolved to offer VRS for the surplus manpower of the Federation

and the Unions as per the approved pattern. The Federation submitted its

proposal to the Government for financial assistance to implement this

scheme. The Government vide its G.O. dated July 23, 2002 exercising its

power conferred by Section 3 of the A.P. Cooperative Societies Act

appointed the Principal Secretary, Public Enterprises Department, and

conferred upon him the necessary powers for privatization/restructuring,

winding-up under the Public Sector Reforms Programme and also

conferred powers of the Registrar under the A.P. Cooperative Societies

Act and the Rules made therein. The Government also appointed

liquidators for the aforesaid two Regional Unions vide its letter dated

September 25, 2002. So far as the restructuring of the Federation was

concerned, cadre strength of 159 employees was proposed resulting in

many of the employees in different categories being rendered surplus. A

Circular was issued by the appellant-Federation on December 12, 2002

recording the fact that a common seniority list of the employees had been

prepared for the appellant-Federation and the Regional Unions. The

norms laid down in the said Circular were as follows :-

"(a) The principle adopted for fixing the seniority cadre-

wise is on the basis of date of joining of the employee

in the previous immediate lower cadre.

(b) In the case of employees who were recruited as Field

Officers and where ranking was prescribed during the

recruitment, the same ranking is maintained for the

seniority in the present cadre.

(c ) Wherever employees from various designations have

been promoted to a common single care, seniority is

fixed, based on the difference in the pay scales of

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these various designations i.e. the designation

carrying higher pay scale is made senior.

(d) Wherever the date of joining is same, the date of birth

is taken into account i.e., the employee with more age

is placed as senior.

(e) This seniority list is fixed for the regular/permanent

employees only.

(f) This seniority list is subjected to the final settlement

of the disciplinary cases/court cases (pertaining to

promotions only or these having a bearing on

seniority only) pending, if any, against any

employee."

The employees were invited to submit their objections, if any, to the said

seniority list. Later the norms were slightly modified on January 3, 2003

when the Board resolved as follows :-

"The Board approved norms adopted for preparing the final

common seniority list of all the employees except that in

case of promotions, when the date of joining is the same, the

seniority of the employees as per the feeder channel is to be

protected rather than fixing the seniority on the date of birth.

Wherever, the date of joining is different, on promotion, the

seniority is to be fixed depending on the date of joining in

the promoted cadre."

After considering the objections filed by some of the employees

the appellant-Federation prepared a common seniority list indicating

surplus employees and proposing to offer VRS benefits to them. On May

7, 2003 the VRS was announced giving option to the employees likely to

be affected thereby to accept the benefits under the VRS. The scheme

was made effective from July 1, 2003. The cut-off date for VRS benefit

was June 30, 2003.

On May 19, 2003 the staffing pattern was approved by the

Registrar of Cooperative Societies. The total revised cadre strength was

determined as 159 consisting of about 29 categories of posts, many of

them promotional posts and some posts to which recruitment was made

both by promotion and direct recruitment. All the posts were treated as

selection posts.

This gave rise to a large number of writ petitions being filed before

the High Court including the writ petitions filed by the contesting

respondents.

Several issues were raised before the learned Single Judge who

heard the writ petitions. One of the submissions urged on behalf of the

writ petitioners was that all the employees appointed by appellant-

Federation whose services had been transferred to the two Regional

Unions continued to be the employees of the Federation and, therefore,

they could not be treated as employees of the two Regional Unions which

were separate cooperative societies under the A.P. Cooperative Societies

Act. The appellant-Federation and the two Regional Unions being three

separate incorporated bodies, they were independent of each other and,

therefore, by mere deputation of the employees of the Federation to work

in the Regional Unions, the employer-employee relationship which

existed between the writ petitioners and the appellant-Federation was not

severed. Despite their transfer to the Regional Unions, they continued to

be the employees of the appellant-Federation.

The appellant-Federation contested the claim of the writ petitioners

and submitted that many of the employees transferred to the two

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Regional Unions had been given promotion to the higher posts in the

Unions and, therefore, they could not be treated as deputationists. The

Unions were also part and parcel of the appellant-Federation and,

therefore, the promotions made by the Unions must be considered in that

light. Those promoted in the Unions could not compare their cases with

their seniors working in the appellant-Federation.

The submission urged on behalf of the writ petitioners was upheld

by the learned Judge who held that in view of the earlier decision in Writ

Petition No. 24907/1996 holding the transferred employees to be the

employees of the appellant-Federation, it could not contend otherwise as

long as the judgment held the field. (As noticed earlier that judgment has

since attained finality). The learned Judge also held that the three

cooperative societies, namely, the Federation and the two Regional

Unions were three separate bodies incorporated as cooperative societies

under the A.P. Cooperative Societies Act with separate regulations, bye-

laws and separate governing bodies. It was, therefore, not correct to

contend that the two Regional Unions were part and parcel of the

Federation. In the facts and circumstances of the case the employees of

the appellant-Federation continued to be its employees and their services

in the Unions must be treated as on deputation only. They had a lien on

their posts in the Federation and their service conditions, seniority, pay-

scale etc. were also protected as employees of the appellant-Federation.

The learned Judge further held that the Circular and the

Notification dated May 7, 2003 were valid. He held that though the

seniority list of the employees of the Federation and the two Regional

Unions had been published and approved by the Registrar of Cooperative

Societies, the same was never acted upon. The Federation was, therefore,

right in consolidating and issuing a common seniority list of the

Federation employees consisting of three lists of the employees of the

Federation and inviting objections. He also held that the staffing pattern

approved by the Registrar which took effect from May 5, 2003 was

authorized under Section 116-C of the A.P. Cooperative Societies Act

and the mere fact that the approval was granted on May 19, 2003 with

effect from May 5, 2003 did not invalidate the approval given.

The learned Judge rejected the submission urged on behalf of the

writ petitioners that the service regulations and the bye-laws of the

Federation did not prescribe any rule for determination of seniority of its

employees. He held that since the Board of Directors of the appellant-

Federation approved uniform procedure regarding the determination of

seniority which were reflected in the tentative seniority list as well as the

final seniority list, which it was authorized to do, the same could not be

faulted unless it was shown to be discriminatory, unjust or inequitable.

He held that the principles applied by the Federation for determination of

seniority were not arbitrary. He also rejected the contention urged on

behalf of the writ petitioners that since they have been promoted to

higher posts and were on probation, they could not be deemed to be

confirmed against that post till their probation was declared. Factually

their probation was never declared and they were never confirmed

against the promotional post in accordance with the regulations. Thus

they continued to retain a lien on the lower post from which they were

promoted. He held that the transferred employees had held the

promotional post for over 2 years while the maximum period of

probation was 2 years. They had, therefore, to be treated as confirmed.

It did not matter whether their probation was declared formally. Such a

question could only arise in the case of new entrants and not those

promoted on probation. In this view of the matter he rejected the

contention of the writ petitioners that they should be considered for

appointment against the lower post over which they held a lien and which

post they held before promotion. The learned Judge thereafter

considered the individual cases of the writ petitioners but it did not find

any merit in them except in the writ petition filed by one K. Ranga Rao.

However, while dealing with 19 promotions between 1994 to 1999 the

learned Judge held that on equitable considerations if the promotions

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given by the Unions are ignored and the cases of the employees working

in the Unions are treated on par with the Federation employees taking

into account that they were also promoted on par with the Federation

employees w.e.f. July 21, 1999, there will be no chain reaction or any

change for upsetting the entire exercise made by the Federation. The

learned Judge prepared a list which showed that by treating July 21, 1999

as the deemed date of promotion, very few employees would be rendered

surplus.

Accordingly the writ petitions preferred by the contesting

respondents herein and many other writ petitions were dismissed by the

learned Single Judge.

The judgment and order of the High Court was challenged in writ

appeals by some of the writ petitioners.

It was submitted in the appeals by the contesting respondents

herein that the appellant-Federation gave a complete go bye to the service

regulations and fixed the seniority in a most arbitrary and illegal manner.

As a result, employees who entered the service of the Federation earlier

were declared surplus while persons junior to them were retained. The

service conditions of the employees had not been approved by the

Registrar of Cooperative Societies as required under Section 116-C of the

Cooperative Societies Act. The regulations framed by the appellant-

Federation did not contain the method and manner of fixation of seniority

and in fact no seniority list had been published. The employees who had

been transferred to the Unions were promoted at different times and all

this was beyond the knowledge of the employees concerned. No

promotion rules had been framed for promotion from one category to

another. The appellant-Federation submitted in reply that the Managing

Committee of the Society was fully empowered to take decision in

respect of fixation of seniority since it had powers to frame service

conditions. It further submitted that once the initial service regulations

are approved by the Registrar, Cooperative Societies, the subsequent

changes in the services rules and regulations need not be approved by

him. Thus when the decision was taken by the Board of Management of

the Federation with regard to principles to be applied to determine

seniority, it did not require approval of the Registrar of Cooperative

Societies. The Board had in its 76th Meeting fixed the criteria for

determination of seniority.

The High Court in the Writ Appeals negatived the contention that

as and when the existing service rules are amended or additional service

rules are framed, the approval of the Registrar, Cooperative Societies is

not necessary. It held that if the interpretation as contended by the

appellant-Federation were to be accepted the very purpose of getting

approval of the rules relating to service conditions by the statutory

authority shall be frustrated because in that even after getting the

approval initially, the Federation may amend the rules in whatever way it

liked and completely defeat the very purpose for which Section 116-C

was framed. The learned Judges of the appellate Bench, therefore, did

not agree with the finding of the learned Single Judge, but having regard

to the developments that had taken place in the meantime, they did not

consider it advisable to direct the appellant-Federation to seek approval

of the Registrar of Cooperative Societies afresh. The Unions were lying

closed for several years and, therefore, it was not advisable to resort to

the time consuming process of seeking fresh approval of the Registrar of

Cooperative Societies. The learned Judges, therefore, considered it

advisable to decide the matter themselves.

The High Court considered the provisions of the Service

Regulations which came into effect on June 1, 1983. After considering

the various provisions contained therein it was observed that in the

instant case a very different situation emerged on account of the fact that

the employees who were initially appointed in a particular cadre were

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transferred to the two Regional Unions where they were again promoted

to the higher posts. It was not clear as to whether the employees were

promoted to higher posts on the basis of channels created or on the basis

of any criteria determined by the respective Unions. It was also not

discernible from the material placed on record whether any proper

selection committee had been constituted for promoting the employees

on the basis of merit. The fact remained that the employees were

promoted to higher posts both at the level of the Federation and the two

Regional Unions. In view of the fact that they were to be reintegrated

and seniority had to be fixed for the purpose of determining which of the

employees were rendered surplus, the appellant-Federation was required

to undertake an exercise. While the learned Single Judge had found that

the criteria fixed for assessing the inter-se seniority was just and

reasonable and did not require any interference, the learned Judges of the

appellate bench, however, found it otherwise. It was found that the

promotions were granted without reference to any channel of promotion

determined by the Management. The same applied to employees who

were sent to the Unions and were promoted there. The High Court was

of the view that so far as the employees of the appellant-Federation are

concerned, who were sent on deputation to the two Regional Unions,

their promotion in the Unions had nothing to do with their position in the

appellant-Federation. Their service in the Unions must be considered as

service in ex-cadre posts since it was unrelated to his status as an

employee of the appellant-Federation. There was no material whatsoever

to establish that the promotions were made to posts approved by the

Registrar of Cooperative Societies. The employees had to be treated as

the employees of the appellant-Federation in view of the judgment in

Writ Petition No.24907 of 1996. Thus only their relative seniority in the

respective cadres of the appellant-Federation could be taken into

consideration, and their promotion in the ex-cadre post in the Unions had

nothing to do with their seniority in their parent cadre under the

appellant-Federation. Thus it could not be said that such of the

employees who were promoted in pursuance of the interim directions of

the High Court were treated as probationers and consequently they were

deemed to have been confirmed on those posts. On the other hand their

transfer from the appellant-Federation to the Unions and their positions at

the relevant time in their parent cadre had relevance. If any of the

employees of the appellant-Federation was promoted who was junior to

the transferred employee, it became imperative that the promotion and

seniority of such transferred employee ought to be protected irrespective

of their promotion in the Union. The fact that promotions were not

challenged for many years could not be a ground for rejecting their claim

since such promotions granted in the Unions could not be treated as

promotions in the parent cadre in the appellant-Federation. Such

promotions, therefore, could not affect their service conditions in the

appellant-Federation. The High Court, therefore, concluded that the writ

petitioners were entitled to challenge the promotions given to junior

employees while working on transfer in the Regional Unions.

The High Court took the view that for the purpose of determining

inter-se seniority of the employees in the parent cadre of the appellant-

Federation , their date of entry into service in their respective cadres in

the appellant-Federation only had to be taken into consideration.

However, the seniority lists of the employees borne in the cadre of the

appellant-Federation including those who were sent on transfer to the

Unions were never prepared and circulated. It was only when the surplus

manpower was being worked out in view of the approved strength that

the exercise was undertaken to determine seniority and to evolve

principles of determination of seniority. The employees had no

opportunity to protest against the grant of promotion to other employees

who may be junior to them.

The other important finding recorded by the appellate Bench is that

there was no clear cut promotion policy either in the appellant-Federation

or in the Unions. After appreciating the material on record, the High

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Court in its impugned judgment and order has observed as follows :-

"It is also further noticed that there was no clear cut

promotion policy either in the OILFED or in the Unions as

is seen from the seniority list, an Operator was promoted as

Shift Supervisor, a Chemist was promoted as Assistant G-1,

Driver was promoted as Senior Assistant. Similarly a

Chemist was promoted as Executive Quality Control and

also Quality Control Officer. Thus, it is seen that the

employees have been promoted to various posts without

there being any stipulated channels beyond procedure of

promotions. Under those circumstances, fixing the seniority

on any of the modes excepting the seniority as available as

on the date of their entry in the initial cadre will be the safe

method which would ensure the principle of lost come first

go and first come last go."

The High Court, therefore, held that in the absence of any rules

governing such mattes and in the absence of approved channels of

promotion and particularly in view of the fact that promotions were

granted in an irrational manner, as found by it, not much importance

could be attached to the promotions granted in the Unions. Since all the

employees were held to be employees of the appellant-Federation their

seniority had to be determined by reference to norms which were

reasonable and not discriminatory. Thus in the absence of rules, applying

the principle of seniority by reference to date of initial appointment, the

High Court held that the cases of the contesting respondents must be

considered by reference to the dates of their appointment in the parent

cadre having regard to the category to which they belonged.

Shri P.P. Rao, learned counsel appearing on behalf of the

Appellant-Federation submitted that there was no justification for the

High Court to interfere when the majority of the employees had accepted

the scheme of voluntary retirement. He relied upon the decision in

(1980) 4 SCC 38 : Kamal Kanti Dutta and others vs. Union of India and

others and submitted that where service rules operate, more than one

view is always possible to take without sacrificing either reason or

common sense, but the ultimate choice has to be necessarily conditioned

by several considerations ensuring justice to as many as possible and

injustice to as few. He submitted, relying upon the aforesaid decision,

that no matter with what care, objectivity and foresight a rule is framed,

some hardship, inconvenience or injustice is bound to result to some

members of the service. The paramount consideration is the

reconciliation of conflicting claims. He also brought to our notice the

decision of this Court in 1986 Supp. SCC 143 : reserve Bank of India and

others vs. C.N. Sahasranaman and others wherein it was held that in

matter of service conditions, it is difficult to evolve an ideal set of norms

governing various conditions of service. Reiterating the principles laid

down in Kamal Kanti Dutta and others (supra) this Court held that the

constitutionality of any service rule has to be judged by considering

whether it is fair, reasonable and does justice to the majority of the

employees and fortunes of some individuals is not the touchstone. In

judging whether a rule is just, fair and reasonable, it must be seen that the

rule does not suffer from the vice of Articles 14 and 16 of the

Constitution or any other constitutional guarantee.

It is no doubt true that service rules, however, meticulously

framed, there is always a chance of some hardship being caused to a

particular section of the employees, but as long as the rules are just, fair

and reasonable, even if two views are possible, the mere fact that some

hardship, inconvenience or injustice results to some members of the

service, is not a ground to strike down the rule. It is not safe to test the

constitutionality of a service rule on the touchstone of fortunes of an

individual. If the rule otherwise appears to be fair, just and reasonable

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and does not suffer from the vice of Articles 14 and 16 of the

Constitution or any constitutional guarantee, the mere fact that some little

hardship or injustice is caused to someone, is no ground to strike down

the rule altogether.

We may, however, notice at the threshold that in relation to the

promotions granted in the two Unions, no rules were brought to our

notice which were followed while granting promotions. It is on the basis

of such promotions that the inter-se seniority of the employees was

determined which led to some of them being retained and others being

declared surplus having regard to the total cadre strength determined for

carrying on the activities of the Federation after the closure of the

Unions.

Shri Rao also contended that in the instant case in working the

VRS the principle followed was the rule of seniority determined by

reference to length of service in the grade. Such a rule cannot be said to

be unreasonable and has judicial sanction. In particular he referred to the

judgment of this Court in (1977) 3 SCC 399 : S.B. Patwardhan and

another vs. State of Maharashtra and others. It is no doubt true that in

the aforesaid decision this Court held that seniority determined on the

sole touchstone of confirmation was indefensible having regard to the

fact that the confirmation is one of the glorious uncertainties of

government service depending neither on efficiency of the incumbent nor

on the availability of substantive vacancies. While appreciating the

principles laid down by their Lordships, one cannot lose sight of the facts

of the case which demonstrated that the directs recruits and the

promotees drawn from two different sources constituted a single

integrated cadre discharging identical functions and bearing similar

responsibilities and yet clause (iii) of Rule 8 provided that probationers

recruited during any year shall in a bunch be treated as senior to

promotees confirmed in that year. The plain arithmetic of this formula

was that the direct recruit appointed on probation even later was regarded

as senior to a promotee who was appointed as an officiating Deputy

Engineer much earlier, but was confirmed later than the direct recruit.

Such a formula gave a direct recruit even the benefit of his one year's

period of training and another year's period of probation for the purposes

of seniority and denied to the promotees the benefit of their long and

valuable experience. This differentiation could not be justified on an

intelligible ground bearing nexus with efficiency in public service. It will

thus be seen that counting the period of officiation and probation in the

case of direct recruits and not counting such officiation in the case of

promotees, was held to be arbitrary and unreasonable and was, therefore,

violative of Articles 14 and 16 of the Constitution of India because it left

the valuable right of seniority to depend upon the mere accident of

confirmation.

Mr. Rao also contended that the High Court was wrong in holding

that the probation of the employees had not been declared. The normal

rule was of one year probation and the maximum period of probation was

2 years. So an employee on probation must be deemed to have been

confirmed after the completion of two years of probation. He placed

reliance on decisions of this Court reported in 1968 (3) SCR 1 = AIR

1968 SC 59 : Commissioner of Commercial Taxes, Board of Revenue,

Madras and another vs. Ramkishan Shrikishan Jhaver ; 1988 (2) SCC

250 R.L. Gupta and another vs. Union of India and others and (1995) 4

SCC 422: Krishan Lal vs. State of J & K.

In any event he submitted that the learned Single Judge had

deferred the date of promotion of candidates to 21st July, 1979 on

equitable consideration as that was the date which least affected the

parties.

On the other than Shri Gurumurthy, learned senior counsel

appearing on behalf of some of the respondents, submitted that no

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principles whatsoever were adhered to while granting promotions in the

two Unions. He referred to the facts of the case to make good his

submission. He highlighted the finding of the High Court that in the two

Unions promotions were granted without adhering to any rule,

regulations or norms. Only on the basis of expediency, and without any

rational basis, promotions were granted and the persons promoted were

not necessarily senior to those not promoted. No channel of promotion

was prescribed by rules and employees of one branch were promoted to

higher posts in another branch wholly unrelated to the branch from which

he was promoted. Promotions were granted in higher posts in other

departments even though the work of that department was unrelated to

the work of the employee concerned in his lower post. He criticized the

appellant-Federation for not being fair to its employees as a model

employer should be, and drew our attention to the observations of this

Court in paragraph 24 of the judgment reported in (2000) 1 SCC 641

Sub-Inspector Rooplal and another vs. Lt. Governor through Chief

Secretary, Delhi and others. He also contended that when candidates are

selected in the same process of selection and a merit list is prepared, the

date on which the candidate actually joined the post is not determinative

of his seniority. It is his position in the merit list which determined his

seniority. In support of this proposition which is well accepted, he relied

upon the decisions of this Court in (1994) 4 SCC 301 : Chairman, Puri

Gramya Bank and another vs. Ananda Chandra Das and others ; (2003)

5 SCC 604 : Bimlesh Tanwar vs. State of Haryana and others and

(2004) 2 SCC 459 : P. Srinivas vs. M. Radhakrishna Murthy and others.

According to Shri Gurumurthy, the employees of the Federation

transferred to two Unions could claim a lien only on the posts to which

they were appointed in the Federation because their transfer to the

Unions were not regulated by rules nor were any rules framed for

promotions within the Unions. According to him all the appointments

and promotions granted were adhoc in nature. No rules governed such

matters and no norms were laid down or followed by the Management

while granting promotions. He relied upon the decision of this Court in

(2003) 10 SCC 14 : G. Varandani V. Kurukshetra University and

another and supported the decision of the High Court which held that the

seniority of the employees concerned must be determined by reference to

their dates of appointment in the Federation since they were not holding

any regular or permanent posts in the Unions and were merely working

on deputation. The earlier decision of the High Court holding that all the

employees were the employees of the Federation further strengthened his

submission.

It is also his submission that a valid appointment pre-supposes the

existence of a vacancy or anticipated vacancy against which an

appointment may be made. Reliance was placed on a decision of this

Court in 1964 (4) SCR 964 = AIR 1964 sc 521 : The State of Punjab vs.

Jagdip Singh. He also submitted that a direct recruit could not be

reverted to a lower post and he relied on a decision of this Court in

(1988) 4 SCC 168 : Hussain Sasan Saheb Kaladgi vs. State of

Maharashtra.

Applying these principles to the cases of the six respondents before

this Court he submitted that the Division Bench of the High Court rightly

allowed the appeals and granted relief to the contesting respondents

having regard to the peculiar facts of each case after thoroughly

considering their cases in the light of the well-settled principles of law.

Mr. Ranjit Kumar, learned senior counsel, appearing for some of

the respondents submitted that two principal questions arose for

consideration of the Court. Firstly, whether the principles laid down for

declaration of surplus employees were valid and legal. Secondly,

whether they are not arbitrary and unreasonable since they lead to

retention of juniors while declaring seniors as surplus. He submitted that

when the Unions were formed and the option of the employees was

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sought, they did not opt to go to the Unions and wanted to be retained in

the Federation. However, they were sent to the Unions against their

wishes. In any event in the year 1996 the High Court in the writ petition

had clearly declared the legal position that all the employees continued to

be the employees of the Federation and, therefore, a common seniority

list had to be prepared. Such a seniority list was never prepared till June,

2003. In the course of hearing before the learned Single Judge the so-

called seniority list was prepared. Several writ petitions were filed

challenging the seniority list and the declaration of surplus employees.

He objected to the chart which is incorporated in the judgment of the

learned Single Judge contending that such a chart was not given to the

Court, and in any case, was never given to the parties so that they could

object to the same. He also submitted that in declaring surplus

employees the principle of last come first go must be applied. The

Federation was under a legal obligation to prepare a common seniority

list even if the VRS was to be implemented. Unfortunately the

declaration of the VRS was of May 7, 2003 whereas the purported final

seniority list was given to the Court on June 26, 2003 to which they had

no opportunity to object. However, the Court had given opportunity to

the parties to object to the seniority list. The norms applied for reckoning

seniority were arbitrary and unreasonable and based on promotions

which were granted without reference to rules or norms. He also

commented that since there was no seniority list of the lower cadre, it

was not possible to prepare seniority list of the higher cadre. He also

drew our attention to the finding of the Division Bench of the High Court

that no channels of promotion had been created nor was any criteria

determined for promotion to the higher posts in the two Unions. It was

not discernable from the material placed on record whether any proper

selection committee had been constituted for promoting the employees

on the basis of merit. Though all the posts are said to be selection posts,

there is no indication as to how the merit of the candidates was judged.

The respondents are right in their contention that the transfer of

employees from the Federation to the Unions was not regulated by rules

framed or norms laid down by the Management. Since a three tier

structure was envisaged, many of the employees of the Federation were

transferred to the two Unions. It may be that not much thought was

given to such matters as it was believed that in due course, the employees

working in the Unions may be absorbed in those Unions and disputes of

this nature may not arise. However, that never happened. The

Federation continued as an independent cooperative society while the

two Unions also functioned as two independent cooperative societies.

The transfers were made on ad hoc basis in the absence of rules and

similarly promotions were also granted without reference to rules or

norms. No rules were framed governing the grant of promotions on

transfer of employees from the Federation to the Union, or from one

Union to another. We cannot lose sight of the fact that the Federation

and the two Unions were three distinct legal entities. All the employees

with whom we are concerned were appointed to posts in the Federation

and, therefore, it was rightly contended that they were employees of the

Federation and no distinction could be made merely because they were

officiating against posts in one or the other Union. The matter was put

beyond controversy by a decision of the High Court which attained

finality holding that all the employees must be treated as the employees

of the Federation and not the Unions. They, therefore, belonged to the

same service under one employer namely the Federation and their inter-

se seniority had to be determined on that basis.

So far as the inter-se seniority in the Federation is concerned,

though not formally determined, it must be held, in the absence of rules,

that seniority must be reckoned by reference to the length of service in

the Federation. This is precisely what the High Court has held.

The question is whether upon their transfer to the Unions and upon

promotions being granted in the Unions the seniority of the employees

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inter-se was affected. It is no doubt true that even in the absence of rules

promotions may be granted, but it must be shown that the promotions

granted are just and fair and that they do not offend Articles 14 and 16 of

the Constitution of India or any other constitutional guarantee. If

promotions are granted arbitrarily without following norms or guidelines,

such promotions will have to be ignored in determining the seniority of

the employees concerned, firstly for the reason that there are no rules

governing grant of promotion, and secondly because the grant of

promotions are arbitrary and violative of the principles enshrined in

Articles 14 and 16 of the Constitution of India.

The High Court in its impugned judgment has considered the

matter in great detail and we agree with its finding that in the grant of

promotions within the Unions no rule whatsoever was followed.

Admittedly no seniority rules had been framed when promotions had

been granted in the Unions. The management acted in exercise of its

authority to grant promotions. The action of the Management in granting

promotions must be determined on the touchstone of Articles 14 and 16

of the Constitution of India. If the grant of promotions is found to be

arbitrary or unreasonable it must be held that such promotions will not

affect the right of seniority of the persons concerned, since the

promotions were granted neither in accordance with any rule nor by

following norms consistent with principles incorporated in Articles 14

and 16 of the Constitution of India. The High Court has very critically

analysed the facts of the case. It has found as a fact that there was no

clear cut promotion policy either in the Federation or in the Unions. An

Operator was promoted as Shift Supervisor ; a Chemist was promoted as

Assistant Grade-1; a Driver was promoted as Senior Assistant and

another Chemist was promoted as Executive Quality Control and also

Quality Control Officer. Thus, the High Court concluded that the

employees had been promoted to various posts without there being any

stipulated channels of promotion and without following any procedure

prescribed by rules of promotion. Thus determination of their seniority

by reference to promotions which were not governed by any rule and

were at best fortuitous could not be justified. We fully endorse the view

of the High Court. Where promotions are not granted in accordance with

the rules or fair and reasonable norms laid down for the purpose, and the

promotions are at best fortuitous, such an uncertain event cannot be made

the basis for determining seniority which is a valuable right of an

employee. This is fully consistent with the principles laid down in S.B.

Patwardhan and another (supra). Even the learned Single Judge was

hesitant in accepting seniority by reference to dates of promotion granted

in Unions. The learned Judge, therefore, ingeniously worked out a chart

and identified a date which, if taken as the date of promotion, would

cause least inconvenience to the employees. Unfortunately such a

principle cannot be followed in service matters where seniority confers a

very valuable right on an employee and his entire future career is at times

dependent upon such seniority. Seniority, therefore, must be determined

by rules validly framed or norms enunciated and/or followed which are

consistent with the principles enshrined in Articles 14 and 16 of the

Constitution of India.

The instant case has another facet. While the employees were

transferred to the Unions much earlier and were granted promotions in

due course in the Unions, the question of their seniority inter-se and the

principles to be applied in determining seniority were evolved for the

first time when the closure of the Unions was being considered

necessitating retrenchment of surplus employees. It was at this stage that

the cadre strength was first determined and thereafter norms were sought

to be evolved in the light of which seniority was to be determined and

junior employees in excess of the determined cadre strength to be given

the benefit of VRS. It was really a process of working backwards. Rules

and norms were sought to be evolved later governing promotions which

were granted much earlier without reference to such rules or norms, but

which were to determine the inter-se seniority of the employees for the

purpose of retrenchment.

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We are, therefore, satisfied that the High Court was right in

holding that the promotions earlier granted in the Unions and the norms

later laid down by the Federation could not be applied to determine the

inter-se seniority of the employees of the Federation. The only rule

which, in the facts of the case, could be safely applied to determine

seniority was to reckon seniority by reference to length of service in the

Federation. As a necessary corollary, the date of initial appointment in

the Federation was decisive in determining seniority. Thus applied,

seniority must be determined by reference to the date of initial

appointment and not by reference to dates of promotion granted in the

Unions unguided by rules framed or norms declared which could be said

to be fair and reasonable applying the test of Articles 14 and 16.

The High Court has thereafter considered the individual cases of

the appellants applying the test of seniority by reference to length of

service in the Federation.

In the case of Anwar Ali (respondent in SLP ) Nos. 17299-17306

of 2004 and SLP ) Nos. 15923-15924 of 2004) the facts reveal that

Anwar Ali was appointed as a Field Officer on July 11, 1983. The

petitioner M. Ramesh was appointed as a Field Officer on July 13, 1983.

Another person, namely Tirupathi Reddy was appointed to the same post

on July 11, 1983. Since Anwar Ali was senior most in age, he was given

seniority over Tirupathi Reddy. All the three were promoted as

Executives by order dated July 15, 1989 but they joined on different

dates. Anwar Ali could join only on August 4, 1989 because he was not

relieved of his duties by the authorities having regard to the exigencies of

service. In the next higher post Anwar Ali was promoted on July 21,

1999 whereas the other two were promoted pursuant to orders passed by

the High Court on July 23, 2001 with retrospective effect from July 21,

1999. The High Court has rightly come to the conclusion that since

Anwar Ali was the senior-most amongst the three, he could not be

declared surplus.

Similarly in the case of Achyuta Rao (respondent in SLP )

Nos.15912-15913 of 2004) the High Court found that he was appointed

as Field Officer on November 29, 1983. He claimed seniority over

Ramesh Kumar Reddy, who was appointed Field Officer on December 5,

1983. So far as their promotions to the post of Executive (Agriculture) in

the Unions are concerned, while Achyuta Rao was promoted on

September 18, 1989, Ramesh Kumar Reddy was promoted on March 15,

1989. The facts, therefore, disclose that Achyuta Rao when initially

appointed to the post of Field Officer was senior to Ramesh Kumnar

Reddy, but if the promotion granted in the Union is ignored, he must be

declared senior to Ramesh Kumar Reddy and ought not to be included in

the surplus list. The High Court, therefore, rightly upheld the contention

of Achyuta Rao.

In the case of Seshagiri Rao (respondent in SLP ) Nos.15926-

15927 of 2004 and SLP ) Nos. 15046-15051 of 2004) it is not disputed

that he was appointed as a Chemist in the Federation on May 11, 1987.

Later the other officers (respondents 3 to 8) in the writ petitions had been

appointed to the same post. It so happened that Seshagiri Rao was

transferred to the Union where he was later promoted as Executive,

Quality Control. The High Court upheld his contention. Since he was

the first entrant in the category of Chemist, he could not be deprived of

his seniority in the parent department. Accordingly his appeals were

allowed and he was declared as non-surplus.

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

15920 \026 15921 of 2004) stands on the same footing as that of Seshagiri

Rao. He was appointed to the post of Chemist in the Federation on May

12, 1987 and was, therefore, senior to the other officers (respondents 3 to

8 in the writ petitions), who were appointed later.

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In SLP ) Nos. 15918-15919 of 2004 and SLP ) No. 15917 of

2004, though the appellant-Federation has challenged the decision of the

High Court, the parties likely to be adversely affected if its contention is

upheld by us, have not been made parties in the appeals. We must,

therefore, refuse to interfere with the order of the High Court.

We, therefore, find no merit in these appeals and they are

accordingly dismissed. Parties to bear their own costs.