# NEW BANK OF INDIA EMPLOYEES UNION AND ANR v. UNION OF INDIA AND ORS

- **Citation:** [1996] 3 S.C.R. 322
- **Court:** Supreme Court of India
- **Decided:** 1996-03-13
- **Case number:** Civil Appeal Nos. 4247-50 of 1996
- **Bench:** K. Ramaswamy, G.B. Pattanaik
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/new-bank-of-india-employees-union-and-anr-v-union-of-india-and-ors-14009
- **Pages:** 33

## Headnote

Banking Companies (Acquisition and Transfer of Undertakings) Act,
1980/New Bank of lndia(Amalgamation and Transfer of Undertakings)
C Scheme, 1993/New Bank of India Detennination of Placement of Employees
(Officers and Workmen) of New Bank of India in Punjab National Bank
Scheme, 1993.
S.9/clauses 4.5/clauses 3.4(a)(iii), 4(b )(ii)-Amalgamation of New
Bank of India with Punjab National Bank-Redeployment of employees of
D transferor bank in transferee bank and detemiination of their seniority with
employees of transferee bank-Employees of transferor bank made employees
of tran;feree bank on same tenns and conditions with same rights to pension,
gratuity etc. as would have been admissible to them had they continued in
transferor bank-For detennination of seniority and in matter of promotion
computation of years of service rendered, made in ratio of 2: 1, i.e., two years
E of se1vice in transferor bank as equivalent to one year of service in transferee
bank-Held provisions of Placement Scheme neither arbitra1y nor irrational-Central Government competent to make the Scheme-Scheme made
under s.9 of the Act is a legislative one-Expression 'placement'-Meaning-Explained.
F
Constitution of India.
A1ticle 14-0auses 4(a)(iii) and 4(b)(ii) of New Bank of India (Determination of Placemellt of Employees (Officers and Workmen) of New Bank
of India in Punjab National Bank) Scheme, 1993-For detennination of
G seniority and in matter of promotion computation of years of service rendered
by employees of transferor bank, made in ratio of 2: 1 i.e. two years of service
in transferor bank as equivalent to one year of service in transferee
bank-Held, neither irrational nor arbitrary.
H
Words and Phrases :
322
•
NEW BANK OF INDIA EMPLOYEES UNION v. U .0.1.
323
'Placement'-Meaning of in the context of clause 5(4) of New Bank of A
India (Amalgamation and Transfer of Undertaking) Scheme, 1995.
The New Bank of India, a nationalised Bank, incurred financial loss
to such an extent and its financial position was so unsatisfactory that it
was not practicable to run the Bank. The Reserve Bank of India advised B
the merger of it into another stronger nationalised bank. The Central
Government, .~xercising its powers under Section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, and in
consultation with the Reserve Bank of India framed the New Bank of India
" ..(
(Amalgamation and Transfer of Undertaking) Scheme, 1993 whereunder
the New Bank of India (transferor bank) was amalgamated with the C
Pun~ab National Bank (transferee bank) with all consequential effects.
I
. By virtue of Clause 5 of the Amalgamation Scheme, the Board of
Directors of the Transferor bank stood dissolved and its employees be·
came the employees of the transferee bank on the same terms and condi· D,
tions and with the same rights to pension, gratuity and other matters as
would have been admissible to them if the transfer of undertakings had
rrot taken place. For placement of the employees of the transferor bank,
the Central Government, exercising powers under clause 5(4) of the Amalgamation Scheme read wiih Section 9 of the Acquisition_ Act, and in
consultation with the Reserve Bank of India, framed the New Bank of India E
(Determination of Placemerrt of Employees (Officers and Workmen) of the
New Bank of India in Punjab National Bank) Scheme, 1993 which came
into operation with effect from 4.9.1993. Clause 4(a)(iii) of the Placement
Scheme, dealing with the procedure for computation of years of service
rendered in the transferor Bank for the purpose_ of determining the F
minimum length of service for promotion from subordinate cadre to
clerical cadre in the transferee Bank, and clause·4(b)(ii) dealing with the
guidelines for determination of seniority fitment or for promotion to the
next grade or scale of an officer of the transferor Bank in the transferee
bank, provided that for the above purposes years of service rendered in
the transferor Bank would be

## Text

_Characters 0–39,825 of 82,553. This is a partial read: ask again with offset=39825 for what follows._

A
NEW BANK OF INDIA EMPLOYEES UNION AND ANR.
v.
UNION OF INDIA AND ORS.
MARCH 13, 1996
B
(K. RAMASWAMY AND G.B. PATTANAIK, JJ.]
Banking Companies (Acquisition and Transfer of Undertakings) Act,
1980/New Bank of lndia(Amalgamation and Transfer of Undertakings)
C Scheme, 1993/New Bank of India Detennination of Placement of Employees
(Officers and Workmen) of New Bank of India in Punjab National Bank
Scheme, 1993.
S.9/clauses 4.5/clauses 3.4(a)(iii), 4(b )(ii)-Amalgamation of New
Bank of India with Punjab National Bank-Redeployment of employees of
D transferor bank in transferee bank and detemiination of their seniority with
employees of transferee bank-Employees of transferor bank made employees
of tran;feree bank on same tenns and conditions with same rights to pension,
gratuity etc. as would have been admissible to them had they continued in
transferor bank-For detennination of seniority and in matter of promotion
computation of years of service rendered, made in ratio of 2: 1, i.e., two years
E of se1vice in transferor bank as equivalent to one year of service in transferee
bank-Held provisions of Placement Scheme neither arbitra1y nor irrational-Central Government competent to make the Scheme-Scheme made
under s.9 of the Act is a legislative one-Expression 'placement'-Meaning-Explained.
F
Constitution of India.
A1ticle 14-0auses 4(a)(iii) and 4(b)(ii) of New Bank of India (Determination of Placemellt of Employees (Officers and Workmen) of New Bank
of India in Punjab National Bank) Scheme, 1993-For detennination of
G seniority and in matter of promotion computation of years of service rendered
by employees of transferor bank, made in ratio of 2: 1 i.e. two years of service
in transferor bank as equivalent to one year of service in transferee
bank-Held, neither irrational nor arbitrary.
H
Words and Phrases :
322
•
NEW BANK OF INDIA EMPLOYEES UNION v. U .0.1.
323
'Placement'-Meaning of in the context of clause 5(4) of New Bank of A
India (Amalgamation and Transfer of Undertaking) Scheme, 1995.
The New Bank of India, a nationalised Bank, incurred financial loss
to such an extent and its financial position was so unsatisfactory that it
was not practicable to run the Bank. The Reserve Bank of India advised B
the merger of it into another stronger nationalised bank. The Central
Government, .~xercising its powers under Section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, and in
consultation with the Reserve Bank of India framed the New Bank of India
" ..(
(Amalgamation and Transfer of Undertaking) Scheme, 1993 whereunder
the New Bank of India (transferor bank) was amalgamated with the C
Pun~ab National Bank (transferee bank) with all consequential effects.
I
. By virtue of Clause 5 of the Amalgamation Scheme, the Board of
Directors of the Transferor bank stood dissolved and its employees be·
came the employees of the transferee bank on the same terms and condi· D,
tions and with the same rights to pension, gratuity and other matters as
would have been admissible to them if the transfer of undertakings had
rrot taken place. For placement of the employees of the transferor bank,
the Central Government, exercising powers under clause 5(4) of the Amalgamation Scheme read wiih Section 9 of the Acquisition_ Act, and in
consultation with the Reserve Bank of India, framed the New Bank of India E
(Determination of Placemerrt of Employees (Officers and Workmen) of the
New Bank of India in Punjab National Bank) Scheme, 1993 which came
into operation with effect from 4.9.1993. Clause 4(a)(iii) of the Placement
Scheme, dealing with the procedure for computation of years of service
rendered in the transferor Bank for the purpose_ of determining the F
minimum length of service for promotion from subordinate cadre to
clerical cadre in the transferee Bank, and clause·4(b)(ii) dealing with the
guidelines for determination of seniority fitment or for promotion to the
next grade or scale of an officer of the transferor Bank in the transferee
bank, provided that for the above purposes years of service rendered in
the transferor Bank would be computed in the ratio of 2:1 i.e. 2 years of G
service in the transferor-bank as equivalent to one year of service in the
~ transferee bank.
The workman and officers of the transferee bank challenged clauses
4(a)(iii) and 4(b)(ii) of the Placement Scheme by filing writ petitions H
324
SUPREME COURT REP OR TS
[1996] 3 S.C.R.
A before the High Court. The employees of the transferee bank also filed writ
petitions in the High Court challenging the Placement Scheme as arbitrary
and violative of Article 14 of the Constitution. Their case was that by virtue
of the principle of seniority indicated in the Placement Scheme their
seniority had been altered to their disadvantage. The High Court upheld
B the provisions of the Scheme and dismissed the writ petitions. Aggrieved,
the writ petitioners filed the present appeals.
It was contended for the workmen of the transferor bank that
promotion of an employee from one cadre to another cadre being a
condition of service which under Clause S (2) of the Amalgamation Scheme
C could have been altered only by the transferee bank, the Central Government exceeded its jurisdiction in the matter of determining the placement
of the employees of the transferor bank as well as their inter se seniority
as it altered the conditions of service; that there was no justification for
fixing the ratio of 2:1 under clauses 4(a)(iii) and 4(b)(ii) of the Placement
Scheme when both the banks were nationalised banks and the recruitment
D in both the banks was through a process of selection by the recruitment
.~
' .
board and therefore the ratio or 2:1 was irrational and arbitrary. For the
\,
ollicers of the Transferor bank, it was also contended that the factors
•
which were considered by the Central Government to reduce the seniority
of the ollicers of the transferor bank could not be considered to be germane
E factors and, therefore, the decision contained in clause 4(b)(ii) of the
placement scheme was irrational and arbitrary.
Dismissing the appeals, this Court
HELD : 1.1. By virtue of clause 5(4) of the New Bank of India
F
(Amalgamation and Transfer of Undertaking) Scheme, 1993 read with s.9
of the Banking Companies (Acquisition and Transfer of Undertakings)
Act, 1980 the Central Government had the power to frame the New Bank
of India (Determination of Placement of Employees (Officers and
Workmen) of the New Bank of India in Punjab National Bank) Scheme,
G 1993 for placement of the employees of the transferor bank in the transferee bank and for determination of their inter se seniority with the
employees of the transferee bank. [342-G]
2.1. When a scheme is framed amalgamating two hanks, it is not
possible for the Central Government to take the details of the service
H conditions in account and that is why it provided that the employees of the
...
,.
t
•
NEWBANKOFINDIAEMPLOYEESUNJONv. U.0.1.
325
transferor bank wonld become the employees of the transferee bank on tlie A
same terms and conditions, with the same rights to pension, gratuity and
other matters which would have been admissible to them had they continued as the employees of the transferor bank. But as regards their placement and inter-se seniority vis-a-vis the employees of the transferee bank,
the Scheme itself stipulated that in consultation with the Reserve Bank of
India the Central Government after taking relevant factors into considera- B
ti on may frame the Scheme. It is in exercise of this power that the placement
scheme has been framed and 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 C
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
e<1uivalent to one year of service in the transferee bank. This computation
is <inly one time computation. [342-A-E]
2.2. In frami11g the Placement Scheme and determining the ratio of D
2:1 in clauses 4(a)(iii) and 4(b)(ii) the appropriate authorities have taken
relevant and germane materials into consideration and the said provisions
cannot be termed as arbitrary and irrational. The financial loss sustained
by the transferor bank had brought the bank to a virtual collapse, but the
Reserve Bank of India having taken a sympathetic view of the matter, E
instead of advising winding up of the bank and its liquidation, advised for
its merger with a stronger nationalised bank, and on amalgamation, the
scheme of placement of the employees was evolved. The ratio 2:1 was fixed
in the Placement Scheme in consultation with the Reserve Bank of India
and after a comparative study of the business of the two banks, the higher
productivity and larger measure of responsibility and higher average busiF
ness per branch of the transferee bank as compared to the transferor bank
and all other germane considerations; the total number of employees and
rate of promotion in both the banks as well as the impact if the entire length
of servii::e is taken into account and one time reduced level is taken into
account. [352-D; 351-H; 352-A-B; 354-B-C)
3.1. TI1e expression 'Placement' in Clause 5(4) of the Amalgamation
Scheme must be construed to mean redeployment of the employees; fitment
of these employees in a grade or rank or cadre in the transferee bank and
inter-se seniority of these employees vis-a-vis the employees of the transferee
G
bank in the cadre or grade. [340-F]
H
326
SUPREME COURT REPORTS
(1996] 3 S.C.R.
A
3.2. Neither the placement Scheme in any way altered the conditions
B
of service of the employees of the transferor bank nor did it require any
opportunity of hearing to be given to the employees of the transferor bank
before framing the Scheme. In view of the provisions of the Acquisition
Act, clause 5(4) of the Amalgamation Scheme and clauses 4(a)(iii) &
4(b) (ii) of the Placement Scheme, it is clear that the Central Government
did retain the power to frame the placement Scheme which is essential for
determination of the placement of the employees of the transferor bank
and the inter-se seniority vis-a-vis the employees of the transferee bank and
for framing such scheme it was not necessary to afford an opportunity of
hearing to the employees of the transferor bank, as there has been no
C charge in conditions of their service. (339-G; 340-H; 342-F-H]
D
K.I. Shephard & Ors. Etc. Etc. v. Union of India & Ors., (1988) 1 SCR
and H.L. Trehan v. Union of India, (1988] Suppl. 3 SCR 923, held inapplicable.
4.1. No scheme of amalgamation can be fool proof and a Court would
be entitled to interfere only when it comes to the conclusion that either the
scheme is arbitrary or irrational or has been framed on some extraneous
consideration. (343-B-C)
E
4.2. In view of the legal position of the Placement Scheme, more
F
G
particularly clauses 4(a)(iii) and 4(b)(ii), and on consideration of the
opinion rendered by the Reserve Bank of India, the Scheme is neither
arbitrary nor irrational but, on the other hand, is a just scheme evolved
by the Central Government after due consultation with the Reserve Bank
of India; and Court cannot interfere with such a Scheme. [348-F]
Remve Bank of India v. N.C. Pa/iwal, [1976] 4 SCC 838; Tamil Nadu
Education Depa1tmem Ministerial and General Subordinate Se1vices Association & Ors v. State of Tamil Nadu & 01», [1980] 3 SCC 97 and S.C. Sachdev
& Anr. v. Union of India, [1981] l SCR 971, relied on.
V. T. Khanzodoe and Others v. Reseive Bank of India and A11r., [1982]
2 sec 7, referred to.
Ca11ara Bank v. M.S. Jasra & Ors., (1992] 2 SCC 484; K. Madhavan and
Anr. Etc. v. Union of India & Ors., [1988] 1 SCR 121 and Tej Narain Tiwary
H v. State of Bihar & Ors., [1993) 2 Supply. SCC 623, held inapplicable.
• •
";
I
NEWBANKOFINDIAEMPLOYEESUNIONv. U.0.1. [PAITANAIK.J.]
327
5. A Scheme framed under Section 9 of the Banking companies Ac- A
quisition and Transfer of Undertaking Act, 1980, is a legislative one. The
High Court was in error in holding that Scheme not to be a legislative one.
Under Section 9 of the Acquisition Act, every scheme framed by the Central
Government has to be laid before each Houses of Parliament for a total
period of30 days; and the Parliament has the power to agree to the Scheme
and to make any modification therein or to decide that the scheme should B
not be made. The essential distinction between the provisions of s.45 of the
Banking Regulation Act, and those of s.9 of the Acquisition Act is that
under the former the Scheme framed has merely to be placed before the
Parliament whereas under the latter the scheme becomes effective only
after the same is placed before both the Honses of Parliament and after the C
Parliament agrees to the scheme and/or makes such modification therein
as it fit. [353-H; 354-A; 353-E-H]
K.I. Shephard & Ors. Etc. Etc. v. Union of India & Ors., [1988] 1 SCR
188, distinguished.
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 4247-50
of 1996.
From the Judgment and Order dated 5.5.95 of the Punjab & Haryana
High Court in C.W.P. No. 236 of 1994.
D
E
V.R. Reddy, Additional Solicitor General, P.P. Rao, D.S. Tewatia,
H.N. Salve, Jitendra Sharma, D.S. Chauhan, Santosh Srivastava, R.
Vasudevan, for Lawyers Inn, Ashok Mathur, Ms. Madhu Tawatia, Ranbir
Yadav, O.C. Mathur, Ms. Meera Mathur, for JBD., S.K. Mehta, Dhruv
Mehta, Fazlin Anam, R.K. Kapoor, P. Varma, S.K. Srivastava, Anis Ahmed
Khan, H.S. Parihar, Kuldeep S. Parihar, Ms. Gunwant Dara, Ms Minakshi F
Vij, P. Gaur, Rakesh Luthra, Gopal Singh, Arun K. Sinha, B.K. Pal, Mrs.
Shashi !Gran, S.N. Terdol V.G. Pragasam, K. L. Prasad and AN. Bardaiyar
for the Appearing parties.
The Judgment of the Court was delivered by
PATTANAIK, J. Leave granted.
These four appeals by WdY of Special Leave deal with one and the
same scheme of amalgamation of the New Bank of India (hereinafter called
G
as the "Transferor Bank") with the Punjab National Bank (hereinafter H
328
SUPREME COURT REPORTS
[1996] 3 S.C.R.
A called the "Transferee Bank"). The employees of the Transferor Bank filed
Writ Petitions, one by the officers and another by the workmen challenging
clause 4(a)(iii) and clause 4 (b)(ii) of the Scheme dated 8th December,
. _._.
1993 called the New Bank of· India (Determination of Placement of
Employee (officers and workmen) of the New Bank of India in Punjab
B National Bank)
Scheme, 1993 (hereinafter called the "Placement
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 &
~
<
c 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 &
D 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.
.,..
•
E
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 Acquisition Act of 1980 on 15.4.1980.
The said New Bank of India incurred financial loss to such an extent and
its financial position was so unsatisfactory that its capital and deposits
F completely stood eroded and the Bank declared a loss of Rs. 11.52 crores
&
in the year 1991-92. The Reserve Bank of India which is the monitoring
authority and advisor to the Government of India, on consideration of the
fmancial position of the New Bank of India suggested that it would subserve public interest if the said New Bank of India is merged with another
G
stronger Nationalised Bank. The Government of India finally decided to
exercise the powers under Section 9 of the Acquisition Act and in consultation with the reserve Bank of India decided to amalgamate the Transferor
Bank with the Transferee Bank and for the aforesaid purpose brought into
0
existence a scheme dated 4th September, 1993 called the New Bank of
India (Amalgamation and Transfer of undertaking) Scheme 1993
H (hereinafter called "The Amalgamation Scheme"). Under the aforesaid
NEWBANKOFJNDIAEMPLOYEES UNJONv. U.0.J. [PATI'ANAIK,J.]
329
amalgamation Scheme, the undertakings of the Transferor Bank stood A
transferred to and vested in the Transferee Bank and the effect of such
vesting was that all assets. rights, powers, authorities and privileges and all
property movable and immovable, cash balance, capital, reserve funds,
investments and all other rights and interests in, or arising out of such
property as were immediately before the commencement of the Scheme in B
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 deemed to have been transferred to C
and vested in the transferee bank. Clause 4 of the aforesaid Amalgamation
Scheme is extracted hereinbelow in extenso :
"4. General effect of vesting :
(1) The undertakings of the transferor bank shall be deemed to D
include all assets, rights, powers anthorities and privileges and all
property, movable and immovable, cash balances, capital, reserve
funds, investments and all other rights and interests in, or arising
out of ; such property as were immediately before the commencement of this Scheme in the ownership, possession, power or control E
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.
F
(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 G
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 6f any lease referred
to in this sub-clause such lease shall, if so desired by the transferee H
A
B
330
SUPREME COURT REPORTS
[1996] 3 S.C.R.
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."
Under clause 5 of the said Amalgamation Scheme the Board of Directors
of the Transferor Bank stood dissolved and the officers and employees of
the Transferor Bank became the officer and employee of the Transferee
Bank on the same terms and conditions with the same rights to pension,
gratuity and other matters as would have been admissible to those
employees if the undertakings of the transferor bank had not been transferred to and vested in the transferee bank subject to those facilities being
C available at the time of the transfer to the similarly placed employee of the
transferee bank.
Clause 5( 4) of the aforesaid Amalgamation Scheme authorises the
Central Bank to make another scheme in consultation with the Reserve
D Bank of India for determining the placement of the employees of the
transferor bank including the determination of their inter-se senority vis-avis the employees of the transferee bank. The aforesaid clause 5( 4) of the
Amalgamation Scheme is extracted in extenso :
E
F
"5( 4) The Central Goverriment shall, as soon as possible after
the commencement of this Scheme, make a Scheme is 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."
In exercise of the aforesaid power conferred upon the Central
Government under clause 5( 4) of the Amalgamation scheme read with
Section 9 of the Acquisition Act the Central Government did frame the
G Placement Scheme on 8th December, 1993 the legality of which had been
challenged both by the employees of the Transferor Bank as well as the
employees of the Transferee Bank.
Clause 1(2) of the placement Scheme stipulates that the Scheme shall
H be deemed to have come into force with effect from 4th September, 1993.
). '
.. ;i
NEW BANK OF INDIA EMPLOYEES UNIONv. U.0.1. [PATIANAIK, J.]
331
Clause 4 of the aforesaid Placement Scheme deals with the senority A
of officers and employees of the Transferor Bank vis-a- vis employees of
the Transferee Bank.
Clause 4(a)(iii) of the Placement Scheme deals with the procedure
for computation of years of service rendered in the transferor bank for B
the purpose 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 C
well as the employees of the transferee bank it would be worthwhile to
extract the aforesaid provisions in extenso :
"4(a)(iii) The procedure for computation of years of service
rendered in the transferor bank for the purpose of determining D
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 E
respective cadre of the. workmen employees, that is clerical or
sub-staff in which the official is placed at the time of transfer, shall
be reckoned but fractions of a month shall be ignored, for example,
if workman employee has rendered two years and nine months
service in the clerical/sub-staff cadre, as the case may be, in the F
transferor bank at the time of amalgamation with transferee bank,
it shall be reckoned as equal to one year and four months service
in the clerical or sub-staff cadre, as the case may be, in the
transferee bank.
4(b )(ii) For the purpose of seniority on fitment or for promoG
tion to the next grade or scale, the service rendered by an officer
in the transferor bank shall be computed, after amalgamation, in
the ratio of 2:1, that is two years of service in the transferor bank
as equivalent to one year service in the transferee bank. For this
purpose, total service in the scale in which an officer is transferred H
332
A
SUPREME COURT REPORTS
[1996] 3 S.C.R.
shall be reckoned but fractions of month shall be ignored. For
example if an officer has rendered two years nine months service
in Scale-II in the transferor bank at the time of amalgamation with
the transferee bank, it shall be reckoned as equal to one year and
four months, service in Scale-II in the transferee bank."
B
The Division Bench of the High Court came to the conclusion that :
c
(i) The scheme making process under Section 9 of the Acquisition
Act is not legislative in nature and, therefore, the Placement Scheme is not
law.
(ii) The power under Section 9 of the Acquisition Act is wide enough
to amalgamat the New Bank (The Transferor Bank) with any another
banking institution including the one taken over under the Acquisition Act
of 1970.
D
(iii) Once the Central Government has the power to amalgamate the
Transferor Bank with the transferee Bank it has to provid for the initial
placement of the employees and the scheme framed for the purpose cannot
be said to be without jurisdiction.
E
(iv) The Placement Scheme does not interupt services of the
employees of the transferor bank nor does it alter their terms and conditions of employees to their prejudice;
(v) The Placement Scheme providing for the services of the
employees of the transferor bank in the respective cadre at the time of
F merger in the transferee bank to be counted in the ratio of 2: 1 cannot be
said to be discriminatory when the profitivity in terms of business of the
two banks the 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.
G The High C.ourt 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
H stronger Punjab National Bank, the scheme of amalgamation and place-
•
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NEWBANKOFJNDIAEMPLOYEESUNIONv. U.0.1. [PATIANAIK,J.]
333
ment has to be examined from the point of view of wider public interest A
,;. ,
and unless it is positively established that any clause thereof is arbitrary or
irrational the Court should not interfere with the same.
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 B
scheme for determining the placement of the employees of the transferor
bank as well as for determination of their inter-se seniority vis-a-vis the
employees of the transferee bank where as clause 4(a)(iii) of the Placement
Scheme provides the procedure for computation of years of service
rendered in the transferor bank for the purpose of determining the .mini- C
mum length of service for promotion from subordinate-Cadre to the clerical
cadre as also from clerical cadre of the officer cadre which is beyond the
competence of the Central Government. In other words. Mr. Rao contended that the promotion of an employee from one cadre to the other is
condition of service of an employee which under clause 5(2) of the Amalgamation Scheme could have been duly altered only by the transferee bank D
and the Central Govermnent exceeded its jurisdiction in the garb of
determining the placement of the employees of the transferor bank as well
as their inter-se seniority in altering the condition of service. Mr. Rao
further urged that even if clause 5( 4) of the Amalgamation Scheme would
be held to authorise the Central GovernmeI)t to frame a scheme as E
provided in clause 4(a)(iii) of the Placement Scheme but the same is
vitiated since no relevant materials have been considered by the Central
Government and there is no justification for fixing the ratio of 2:1 i.e. 2
years of service in the transferor bank is equivalent to one year of service
in the transferee bank particularly when both the banks are nationalised F
banks and the recruitment of service in both the banks is through a process
of selection by the Recruitment Board. According to Mr. Rao, the
aforesaid computation in the ratio of 2:1 in clause 4( a)(iii) of the Placement
Scheme is irrational and arbitrary and therefore, should be struck down.
Mr. Rao lastly urged. that in any view of the matter the retrospective
operation of the scheme which came into force on 8th December, 1993 and G
was given retrospective effect with effect from 4th September, 1993 is on
the face of it bad in law as by an executive order the conditions of service
of an employee conld not have been altered retrospectively.
Mr. Arora, the learned counsel appearing for the officers of the H
334
SUPREME COURT REPORTS
(1996] 3 S.C.R.
A transferor bank apart from reiterating the stand taken by Mr. Rao submitted that the factors which were given to be the relevant factors for the
decision by the Government to reduce the seniority of the officers of the
transferor bank as indicated in paragraph 6 of their counter affidavit filed
before the High Court by no stretch of imagination can be considered to
B 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
C 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
D 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 exercise of powers under Section 9
of the Acquisition Act had not brought in a total fusion and was in a
E transitory stage and clause 5( 4) of the said Amalgamation Scbeme
authorised the Central Government to make a scheme of placement in
consultation with the Reserve Bank of India. The expression "Placement"
in clause 5( 4) of the Amalgamation Scheme conceives of fitment of an
F
employee in a cadre or grade; position he occupies in the grade which in
other words, would be his seniority, and redeployment of his service in the
grade. The Placement Scheme framed by the government more particularly
clause 4(a)(iii) as well as 4(b)(ii) achieves the aforesaid objective and is
squarely within the powers conferred upon the Central Government under
clause 5( 4) of the Amalgamation Scheme. So far as the considerations
G which weighed with the Central Government to take the ratio of 2:1,
learned Additional Solicitor General placed before us the relevant paragraphs of the counter affidavit of the Reserve Bank of India as well as the
Union Government and also produced before us a chart indicating the
impact of the ratio being 2:1 as well as the impact of it the entire service
H of an employee under transferor bank is taken into account and contended
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NEWBANKOFINDIAEMPLOYEES UNIONv. U.O.l. [PAITANAIK,J.]
335
that if the latter course would ha:'e been taken then for years to come no· A
,,.. .
employee of the Punjab National Bank, namely, the transferee bank would
have got any opportunity of getting promotion to the higher cadre. He also
further contended that when the Reserve Bank of India which monitors all
these Nationalised Banks was consulted and the said Reserve Bank of India
decided to have the ratio of 2:1 after considering several germane factors B
it cannot be said to be arbitrary or irrational as contended by the learned
counsel appearing for the appellants. Mr. Reddy learned Additional
Solicitor General also contended that the provisions of clause 4( a)(iii) &
4(b)(ii) is merely one time exercise and the said provision has been made
after due consultation with the Reserve Bank of India and after taking into c
consideration several important factors, like, respective manpower of the
two banks, respective tenure of promotion in two banks, respective business
of two banks and the fact that there has been a large scale promotion in
the transferor bank just before the amalgamation. According to Mr. Reddy
no scheme governing service matters can be foolproof and some section or
other of the employee is bond to feel aggrieved on the score of its D
expectations being falsified or remaining to be fulfilled as has been held by
this Court in the case of V. T. Khanzoda & Ors. v. Reserve Bank of India &
Ors., [1982] 2 SCC 7. Therefore, unless the persons aggrieved establish
arbitrariness, irrationality, perversity or malafide the scheme cannot be
held to be unconstitutional.
E
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
F
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 shonld not interfere with the same.
Mr. Reddy lastly submitted that the conclusion of the High Court G
"''-'
that the scheme making process is not legislative in nature is wholly
erroneous.
Mr. Salve, the learned senior counsel, appearing for the Reserve
Bank of India contended that when the New Bank of India was sustaining H
336
SUPREME COURT REPORTS
(1996] 3 S.C.R.
A loss and would have been otherwise wound up, the Reserve Bank of India
advised the Union Government to merge the same with a stronger bank so
that the employees will not suffer. While advising amalgamation the
Reserve Bank of India also considered the relevant factors for determination of the inter se seniority of the employees and after due deliberations
B came to the conclusion of accepting the ratio of 2:1 at the stage of
placement of promotion which advice was ultimately accepted by the
Central Government. According to Mr. Salve all materials having been duly
considered advice having been given to the Union Government which
advice was ultimately accepted, the contentions of arbitrariness and irrationality raised by the counsel appearing for the appellants is nothing but
C an imaginary grievance and not established through any positive data and,
therefore, the Court should refrain from interfering with the Amalgamation
Scheme as well as the Placement Scheme more particularly the ratio of 2:1.
Mr. Sharma, the learned counsel appearing for the employees of the
transferee bank, on the other hand contended, that the Scheme works out
D
harshly against the employees of the transferee bank and the benefits
conferred upon the employees of the transferor bank under the Scheme
should not be given to them.
In view of the rival submissions the following questions really arise
E for our consideration :
F
1. Is the Placement Scheme framed by the Central Government
which provides for the ratio of 2:1 for the purpose of promotion of the
employees of the Transferor Bank is beyond the power of the Central
Government as conferred under Clause 5( 4) of the Amalgamation Scheme
read with Section 9 of the Acquisition Act?
2. What are the powers of the Court to examine such schemes and
on what grounds the Court can interfere with such a Scheme?
G
3. Whether framing the Placement Scheme and determining the ratio
of 2:1 in Clauses 4(a)(iii) and 4(b)(ii), relevant and germane materials had
been taken into account or the provisions can be held to be arbitrary and
irrational?
4. Can the placement Scheme by any stretch of imagination can be
H
said to be retrospective in nature?
.....
NEWBANKOFIND!i\.EMPLOYEESUNIONv. U.0.1. (PAITANAIK,J.]
337
5. Was the High Court correct in coming to the conclusion that the A
scheme making process under Section 9 of the Acquisition Act is not
,.,. .
legislative in nature?
So far as the first question is concerned Mr. Rao appearing for the
appellants elaborated his submission by contending that no doubt Section B
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 under- c
taking 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 D
conditions and with the same rights, pension, gratuity and other matters as
"i
would have been admissible to him if the undertakings of the transferor
'
bank had not been transferred to and vested in the transferee bank until
the terms and conditions are duly altered by the transferee bank.
E
According to Mr. Rao the aforesaid provision makes it clear that the
employees of the transferor bank would continue to be the employees of
the transferee bank on the same terms and conditions which they were
enjoying under their erstwhile employer, namely, the transferor bank, until
~
and unless the terms and conditions are duly altered by the transferee bank. F
' .
In .that view of the matter the Union Government had no power to frame
clauses 4( a)(iii) & 4(b )(ii) of the Placement Scheme and thereby jeopardise
the chances of promotion of the employees of the transferor bank in the
transferee bank to their detriment and .altering their conditions of service.
According to Mr. Rao promotion and seniority are two different concept
and clause 5( 4) of the Amalgamation Scheme had merely authorised the G
Central Government to make another Scheme, a subsidiary one after
~ consultation with the Reserve Bank of India for determining the placement
of the employees of the transferor bank and for· determining their inter-se
seniority vis-a-vis the employees of the transferee bank. Promotion by no
stretch of imagination can be included within the purview of clause 5( 4) of H
338
SUPREME COURT REPORTS
[1996] 3 S.C.R.
A the Amalgamation Scheme. In this view of the matter the impugned clause
of the Placement Scheme, namely, clause 4(a)(iii) & 4(b)(ii) computing the
ratio of 2:1 for the purpose of determining the minimum length of service
for promotion from subordinate cadre to clerical cadre and also from
clerical cadre to officer cadre is wholly without jurisdiction and an arbitrary
B exercise of power by the Central Government. Mr. Rao contends that the
right of promotion of the employees of the transferor bank remains fully
protected under clause 5(2) .of the Amalgamation Scheme and it can only
be duly altered by the transferee bank and that right cannot be taken away
by the Central Government in framing a scheme in the garb of determinaC tion of inter se seniority. In this connection Mr.