# V.T. KHANZODE & ORS v. RESERVE BANK OF INDIA & ANR

- **Citation:** [1982] 3 S.C.R. 411
- **Court:** Supreme Court of India
- **Decided:** 1982-03-05
- **Case number:** Writ Petitions Nos. 4158-4182 A of 1978
- **Bench:** Y.V. Chandrachud, S. Murtaza Fazal Ali, A.O. Ko!HAL
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/v-t-khanzode-ors-v-reserve-bank-of-india-anr-8332
- **Pages:** 33

## Headnote

411
Seniority-Draft combined seniority list fixed by the Administrative Circular
No. 8 dated January 7, 1978, Office Order No. 679 dated April 27, 1978 by the
Reserve Bank, whether violative of Articles 14 and 16 of th• Constitution of
India.
Reserve Bank of India Act, (Act II) of 1974-Section 58(1) & (2), scope ofWhether the power to·makt regulations emanate .from section 58(1)-Competency
of tlu! Central Board of Director~ to make regulations and to issue administrative
Circulars in respect of service conditions of staff.
Retrospectivity of the operation of tlu s1niority scheme, ralidity of.
Under the Reserve Bank of India (Staff) Regulations, 1948 framed under
section S8 of the Reserve Bank of India Act 1934, the terms and conditions of
service of the staff (including officers) in the Reserve B""* were revised and
regulated from time to time.
Ever since the date of the Staff Regulations ot 1948 and even prior thereto,
there were
0 groups" constituted for the different departments of the Reserve
Bank, and officers were required to exercise irrevocable options for service in any
particular Group, Those who had opted for a service in a particular Group were
to be normally eligible for promotion io that Group only. The grouping was
revi1ed with effect· from April 1951 when employees were asked to exercise their
option with regard to the Group of their choice. In 1951, the various departments of the Bank were rc4 classified into three Groups, Group I, Group II and
Group III. This system of grouping continued until 1955, in which year the
Ban'k found it necessary to 'reorganise the Agricultural Credit Department.
Accordingly, the staff attachect to the various departments were regrouped into
Groups I, ii, Ill, and IV, with effect from April I, 1957. In each of these
Groups, there are six grades of officers based on pay scales, namely, Grades A,
B, C, D, E and F, the lowest being Grade A and the highest being Grade F.
Each Group had its own seniority list, that is to say, there were four separate
seniority lists, ooe for each group. The latest of such lists prior to the draft ·
com~inep seniority list of 1978 is dated July I, 1976.
.
Earlier to the said list dated luly I, 1976, the Reserve Bank"had constituted
a Cadre Review Olmmi ttee in 1970 followed by another Committee.
On the
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SUPREME COURT REPORTS
{i 982j j s.C.lt.
basis of the report submitted by the Cadre Review Committee in October 1972,
the Bank issued an Administrative Circular No. 15 dated May 22, 1974 specifying
the decisions taken by it in the light of the recommendations made by the
Committee. One such decision which the Bank took was to prepare a common
seniority list for and to provide for inter-group mobility at the lowest Jevel of
officers in each group, namely, Grade A officers, including those who were pron10ted to Grade Bon or after January l·, 1970. With regard to. higher grades (including officers in Grade B promoted prior to January I, 1970), the Bank decided
to retain the "groupwise seniority as at present". The inter-group mobility in
Grades C and D was to be
introduc~d only to a limited extent, namely, «on a
. swap basis". It was first to be introduced in Grade C and thereafter to be extended "in due course'' to the officers in Grade D. The two higher Grades,
namely, Grades E and F were left unt01:JChed and no intention was expressed in
the above circular to introduce either combined seniority or any scheme for
inter-mobility in these grades. In accordance with the decisions expressed in the
Administrative Circular dated May 22, 1974 tho Bank published· separate seniority lists of officers in Grade Band above for the years 1974, 1975 and 1976.
By the Administrative Circular No. ·3 dated January 7, 1978, the Bank.
stated that it had decided to combine the seniority of all officers on the basis of
their total length of service (including officiating service) in Group I (Section A),
Group II and Group III. The seniority of all

## Text

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V.T. KHANZODE & ORS.
V.
RESERVE BANK OF INDIA & ANR.
March 5, 1982
[Y.V. CHANDRACHUD, C.J., S. MURTAZA FAZAL ALI AND
A.O. Ko!HAL, JJ.J
411
Seniority-Draft combined seniority list fixed by the Administrative Circular
No. 8 dated January 7, 1978, Office Order No. 679 dated April 27, 1978 by the
Reserve Bank, whether violative of Articles 14 and 16 of th• Constitution of
India.
Reserve Bank of India Act, (Act II) of 1974-Section 58(1) & (2), scope ofWhether the power to·makt regulations emanate .from section 58(1)-Competency
of tlu! Central Board of Director~ to make regulations and to issue administrative
Circulars in respect of service conditions of staff.
Retrospectivity of the operation of tlu s1niority scheme, ralidity of.
Under the Reserve Bank of India (Staff) Regulations, 1948 framed under
section S8 of the Reserve Bank of India Act 1934, the terms and conditions of
service of the staff (including officers) in the Reserve B""* were revised and
regulated from time to time.
Ever since the date of the Staff Regulations ot 1948 and even prior thereto,
there were
0 groups" constituted for the different departments of the Reserve
Bank, and officers were required to exercise irrevocable options for service in any
particular Group, Those who had opted for a service in a particular Group were
to be normally eligible for promotion io that Group only. The grouping was
revi1ed with effect· from April 1951 when employees were asked to exercise their
option with regard to the Group of their choice. In 1951, the various departments of the Bank were rc4 classified into three Groups, Group I, Group II and
Group III. This system of grouping continued until 1955, in which year the
Ban'k found it necessary to 'reorganise the Agricultural Credit Department.
Accordingly, the staff attachect to the various departments were regrouped into
Groups I, ii, Ill, and IV, with effect from April I, 1957. In each of these
Groups, there are six grades of officers based on pay scales, namely, Grades A,
B, C, D, E and F, the lowest being Grade A and the highest being Grade F.
Each Group had its own seniority list, that is to say, there were four separate
seniority lists, ooe for each group. The latest of such lists prior to the draft ·
com~inep seniority list of 1978 is dated July I, 1976.
.
Earlier to the said list dated luly I, 1976, the Reserve Bank"had constituted
a Cadre Review Olmmi ttee in 1970 followed by another Committee.
On the
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E
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E
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SUPREME COURT REPORTS
{i 982j j s.C.lt.
basis of the report submitted by the Cadre Review Committee in October 1972,
the Bank issued an Administrative Circular No. 15 dated May 22, 1974 specifying
the decisions taken by it in the light of the recommendations made by the
Committee. One such decision which the Bank took was to prepare a common
seniority list for and to provide for inter-group mobility at the lowest Jevel of
officers in each group, namely, Grade A officers, including those who were pron10ted to Grade Bon or after January l·, 1970. With regard to. higher grades (including officers in Grade B promoted prior to January I, 1970), the Bank decided
to retain the "groupwise seniority as at present". The inter-group mobility in
Grades C and D was to be
introduc~d only to a limited extent, namely, «on a
. swap basis". It was first to be introduced in Grade C and thereafter to be extended "in due course'' to the officers in Grade D. The two higher Grades,
namely, Grades E and F were left unt01:JChed and no intention was expressed in
the above circular to introduce either combined seniority or any scheme for
inter-mobility in these grades. In accordance with the decisions expressed in the
Administrative Circular dated May 22, 1974 tho Bank published· separate seniority lists of officers in Grade Band above for the years 1974, 1975 and 1976.
By the Administrative Circular No. ·3 dated January 7, 1978, the Bank.
stated that it had decided to combine the seniority of all officers on the basis of
their total length of service (including officiating service) in Group I (Section A),
Group II and Group III. The seniority of all officers in each of the three Groups
was to be combined with effect from May 22, 1974 on the basis of their total
length of service, ·including officiating service, in the grade in which they were
then posted on a reQ,ular basis. The Circular introduced combined seniority
with retrospective effect from May 22, 1974 (the date or Administration Circular
No. 15) as it was "fair and equitable to the officers as a class". The effect of
this decision is that the group-wise system of seniority Which was in existence
for more than 27 years stands substituted by a combined seniority for officers in
Group I (Grade A) and in Groups II and IJJ with retrospective effect. That bas
adversely affected the existing seniority of officers, particularly of those in
/ Group I, who are now placed many places below their existing position of seniority, some by several hundred places.
Hence these twenty five petitions under Art. 32 by the petitioners, all of
whom are officers in Group I, and who are given their due seniority as on July l, .
1976.
Dismissing the petitions, the Court
HELD: 1:1. The Administrative Circular No. 8 dated 7-1-1978, the Office
Order No. 679 dated 22-4-1978 and the draft combined seniority list are not violative of the rights of the petitioners under Articles 14 and 16 of the Constitution.
Whether there should be a combined seniority in different cat1res or groups is a
matter of policy which does not att1act the applicability of the equaJity
clause. [442 D·F]
•
R6Serve Bank of lndia v. N. C. Paliwal, [1977] l SCR 377, applied and
followed.
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V.t. KHANZODB V. RBSBRVB BANK
413
1:2. The historical events make it clear that the various Departments of
the Reserve Bank were grouped and regrouped from time to time. Such adjust·
meats in the administrative affairs of the Bank are a necessary sequel to the
growing demands of new situations which are bound to arise in any developing
economy, The group system has never been a closed or static chapter and the
officers of the various groups were not kept, as it were, in quarantine. The
group system has been a continuous process of trial and error and the impugned
scheme of inter-group mobility has emerged as the best solution of the experience
of the past. Combined seniority has been recommended by two special committees, whose reports reflect the expertise and objectivity which was brought to
bear on their sensitive task. [441 B-D]
1:3. Inter-group mObility and common seniority are a safe and sound
solution to the conflicting demands of officers belonging to Group I on one hand
and those of Groups II and III on the other. Private interest of employees of
public undertakings cannot override public interest and an effort has to be made
to harmonize the two considerations. No scheme governing service matter can
be fool-proof and some section or the other of employees is bound to feel aggrieved on the score of its expectations being falsified or remaining to be fulfilled.
[441 D·B)
Arbitrariness, irrationality, perversity and malafid.es will of course render
any.scheme unconstitutional but the fact that the scheme does not satisfy the
expectations of every employee is not evidence of these. Vested interests are
prone to hold on to their acquisitions and the Group I officers have to surrender
a part of the benefits which had accrued to them in a w'ater-tight system of
grouping. Combined seniority is indispensable for the smooth functioning of
the Bank and no organisation can function smoothly if one section of its officers
has an unfair advantage over others in matters of promotional opportunities.
The reports of the Cadre Review Committee and the Tbareja Committee show
that combined seniority has emerged as the most acceptable solution as a matter
of administrative, historical and functional necessity". Further, the conclusion to
which these committees came were considered by the Bank when Shri M. Narasimhan, later India's Executive Director in the World Bank, was the Governor
and it was after Dr. I.G. Patel, Formerly Secretary, Economic Affairs, Govt. of
India and Deputy Administrator, United Nations Development Programme, took
over as Governor in Oecembcr 1977 that the final devjsion was taken by the
Central Board to introduce inter-group mobility and combined seniority.
(441 B-H, 442 A·B)
2. As regards the retrospective operation given to Scheme with effect from
May 22, 1974, it does appear that the Board has struck a via media between two
extreme contentions advanced by officers belonging to Group I and those belonging to Groups II and III. But that was inevitable and it was the best solution
in the peculiar circumstances of the case. Io order to rectify the imbalances
and anomalies caused by the compartmentalised and group-wise seniority, it was
necessary to give retrospective effect to the Combined Seniority List. Officers
belonging to Group I urged that the Scheme should be brought into effect from
January I, 1976, while those belonging to Groups II and III wanted the Scheme
to be brought into effect from January 1, 1970. The Central Board struck a
balance by choosing the date May 22, 1974, because that was the dato on which
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SUPkllME c!Jbkt ltEPbitts
[19811 ~ s.c.k.
the decision in regard to combining the seniority retrospectively with effect from
January 1, 1970 in regard to Grade 'A' and part of Grade 'B' officers was announced. It was, again, on that date that the Bank bad announced that a similar decision in regard to the remaining grades of officers was under its consideration. Thus, at least on May 22, 1974 it was known to officers of all grades that
a combined seniority list was due to be brought into force. If a certain section
of officers succeeded in obtaining promotional benefits thereafter, the imbaJance
introduced thereby in the services of the Bank and the consequent dissatisfaction
had to be rectified. That could only be done by not recosnising the accelerated
promotions obtained in the intervening period by a certain class of officers. Any
scheme of seniority is bound to produce isolated aberrations and that fact cannot justify the argument that the entire scheme is for that reason vioJative of the
guarantee of equality. [442 F-H, 443 A-DJ
3:1. The power to frame service conditions is not derived from clause (j)
of section 58(2) of the Reserve Bank of India Act, 1934. Section 58(2)
(j) refers to staff funds and superannuation funds and it cannot comprise
service conditions. Clause (j) cannot be split up to read: "the constitution
and management of staff: and superannuation funds for the officers and
servants of the Bank". It hardly makes any sense that way. What the cla~se
means is : "the constitution and management of staff ai:;i.d superannuation funds
for the officers and servants of the Bank". An important subject like the service
conditions of the staff cou1d not have been provided for in such a dubious and
indirect mann'er. Nor indeed, could it have been described as "constitution and
management of staff:'. A rule of seniority cannot properly fall under such a
head. [426 A-DJ
Restrv• Bank Employ .. • Association v. Union of India, 1980 (2) S.L.R. 167
approved.
3:2. Where a specific power is conferred without prejudice to the generality of a power already conferred, the specific power is only illustrative and cannot restrict to width of the general power. Therefore, the ambit of the general
power conferred by sub-~tion (I) cannot be. attenuated by limiting it to matters
.,ecified in subMsection (2) of section SB, the provisions whereof are not exhaustive of the power of the CentraJ Board to make regulations. [426 D-F]
Emperor v. Shibnalh Banerjee, 12 I.A. 241; Omp.arkash v. Union of India,
A.J.R. 1971 SC 771, 773, 774, referred to.
4:1. The doctrine of ullra vlres in relation to the powers of a statutory
corporation has to be understood reasonably and so understood, "whatever may
fairly be regarded as incidental to, or consequential upon, those things which
the Legislature bas authorised ought not (unle1§ expressly prohibited) to be held
by judicial construction to be ultra vires". The Central -Board of DireCtors of
the lleserve Bank has the power to make service regulations under section 58(1)
of the Act. The Board is vested with power to make regulations in order to
provide for all matters for which provision is necessary or convenient for the
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V.T. KHANZODE V. RESERVE BANK
415
purpose of giving effect to the provisions of the Act and it is not only convenient but manifestly necessary to provide for the service conditions of the Bank's
staff in order to give effect to the .provisions of the Act. It cannot be denied
that the power to provide for service conditions of the staff is at least incidental
to the obligation to carry out the purposes for which Bank was constituted.
[426 G-H, 427 A-DJ
Armour v. Liverpool Corporation, 1939 (I) Cb.D. 422, 434, 435; Attorney
General v. Great Eastern Ry. Co., 5 Appeal Cases 473, quoted with approval.
4:2. There is no doubt that a statutory corporation can do only such acts
as are authorised by the statute creating it and that, the powers of such a corporation cannot extend beyond what the statute provides ~xpressly or by necessary
implication. If an act is neither expressly or impliedly authorised by the statute
which creates the corporation, it must be taken to be prohibited. But, section
58(1) being in the nature of an enabling provision under w~ich the Central Board
"may" make regulations in order to provide for all matters for which it is neces~
sary or convenient to make provisions for the purposes of giving effect to the
provisions of the Act, the Central Board has the power to frame reg.ulation relating to the conditions of service of the Bank's staff. If it has that power, it may
exercise it in accordance with section 58(1) or by acting appropriately in the exercise of its general power of administration and superioteiidence.
[428'E·F,G-H, 429A]
4:3. By section 7(2) of tbe Reserve Bank of India Act, tbe general svperintendence and direction of the affairs and business of the Bank are entrusted to .
the Central Board of Directors, which is empowered to exercise all powers and
do all acts and things which may be exercised or done by the Bank. Matters
relating to the service conditions of the staff are, pre-eminently, matters which
relate to the affairs of the Bank. It would therefore be wrong to deny to the
Central Board the power to issue administrative directions or circulars regulating
the conditions of service of the Bank's staff. To read into the provisions of
section 58 (1) a prohibition against the issuance of such administrative directions
or circulars is patently to igaore the scope of wholesome powers conferred upon
the Central Board of Directors by section 7 (2) of tbe Act. While issuing the
administrative circular governing the staff's conditions of service, the Central
Board of Directors has neither violated any statutory injunction nor indeed has
it exercised a power which is not conferred upon it by the statute. The circular
is strictly within tbe confines of section 7 (2). [429 A-E,G-H, 430 AJ
Sukhdev Singh v. Bhogotrom, [1975] 3 SCR 619, reiterated.
4:4. So long as staff regulations are not framed under section 58 (I), it
is open to the Central Board to issue administrative circulars regulating the
service conditions of the staff, in the exercise of power conferred by section 7 (2)
of the Act. The power to frame rules or regulations does not nec1ssarily imply
dhat no action can be taken administratively ill regard to a subject-matter on
which a rule or regulation can be framed, un~il it is so framed. The oniy precaution to observe in the cases of statutory corporations is that they must act within
the framework of their charter. Its express provisions and necessary implications mu•t at all events be observed scrupulously. [430 A-B, 431 A-Bl
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SUPREME COURT REPORTS
(1982) 3 S.C.R.
A
T. Ca/ee v. U. Jormanik Siom, [1961] 1 SCR 750; B.N. Nagarajan v. State of
B
c
Mysore, [1966] 3 SCR 682, explained and applied.
4:5. Any action taken by the Central Board of Directors under section
7 (2) is subject to the directions given by the Central Government under section
7 (1), just as any regulation framed by it under section 58 is subject to the
previous sanction of the Central Government. In either case, the Central Board
has to abide by the decision or directions of the Central Government. There
can, therefore; be no apprehension that, by taking action under section 7 (2),
the Central Board may circumvent the condition on which the power confer red
by section 58 can be exercised by it. The overall authority of the Central
Government acts as a restraining influence on any action taken by the Central
Board, whether it acts under one or the other provision of the Act. [ 431 B-D)
S:l. A consideration of the entire material on the subject, including the
correspondence that- has transpired between the Reserve Bank and the Central
Government and in particular the Memorandum of January 21, 1949, makes it
clear that the Staff Regulations of 1948 were not framed in the exercise of power
conferred by section 58 of the Act and that they were not made with the
D
previous sanction of the Central Government. Whereas section 58 (1) envisages
the making of regulations "with the previous sanction of the Central Government", the Regulations of 1948 do not purport to have been made with such
sanction. Indeed, in so far as the ex facie aspect of the matter is concerned,
the Regulations of 1948 have not been made under section 58 at all. The statement contained in paragraph 9 of the counter affidavit of the Deputy Manager
dated March 30, 1980 that the Memorandum. of January 21, 1949 contains a
E
- "factual mistake" to the effect that the Staff Regulations (which would include
the Regulations of 1948) were made with the approval of the Central Goverment,
correctly clarifies the position. It is one thing to infer that the Regulations had
the approval of the Central Government since no objection was raised by it to
the making of the Regulations and quite another that they were made with its
previous sanction. [431 F-H, 433 B-D)
F
G
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Reserve Bank Employees Association v. Union of India, 1980 (2) S.L.R. 167
(Cal.); Emptror. v. Shibnath Barer;ee,· 721.A. 241; Om Parkash v. Union of India
A.I.R. 1971 S.C. 771, 773, 714; Rerer>e Bank of India v. N.C. Pliwal,[1977] 1
SCR 377; Bimal Kumar Shome v. P.C. Bhattacharya, Misc. Petition No. 206 of
1967 decided on August 6, 1969 (Bombay H.C.) R.M. Joshi v. The Reserve Bank
of India, Civil Writ No. 876 of 1974 dedcided on March 19, 1980 by a Full
Bench (Delhi H.C.), approved
5:2. Since the Staff Regulations of 1948 are in the nature of administrative directions, it was cpmpetfnt to the Central Board to alter or amend them by
an administrative circular. No lack of statutory powers is involved in that
process. Under section 7(2), the .Central Board has the power to provide for
service conditions of the Bank's staff by administration circulars, so long as they
Po not impinge upon any Regulations made 1,1nder section 58 of the Act.
.
I 433 F-G, 434 AJ
v.T. KHANZODE v. RESERVE BANK (Cha,ndrachud, C.J.)
417
ORIGINAL JURISDICTION: Writ
Petitions
Nos. 4158-4182
A
of 1978.
(Under article 32 of the Constitution of India)
F.S. Nariman, B.R. Agarwala and P.G. Gokha/e for the
Petitioners.
B. Sen, 1.N. Shroff and H.S. Parihar for Respondents
Nos. 1 & 2.
~----....._
R.K. Garg, S. Balakrishnan and M.K.D. Namboodiry for Res·
pondent No. 3.
P.R. Mridul, Mrs. Shobha Dikshit and Mrs. Urmila Kapoor
for the intervener.
The Judgment of the Court was delivered by
CHANDRACHUD, C.J.
These are 25 petitions under Article 32
of the Constitution of India challenging the decision of the Reserve
Bank of India as regards the introduction of common seniority.and
inter-group mobility amongst different grades of officers gelonging
to Group I (Section A), Group II and Group III, with retrospective
eflect from May 22, 1974.
That decision or order is contained in
Administration Circular No. 8 dated January 7, 1978 as also in
Office Order No. 679 dated April 27, 1978 and has been acted upon
in the draft combined seniority list of officers in Grade 'B' (appointed
as such prior to January 1, 1970) and in Grades 'C', 'D', 'fl' and 'F'
The contention of the petitioners is that the aforesaid circular, office
order and combined seniority list are violative of their fundamental
rights under Articles 14 and 16 of the Constitution, and are also
ultra vires the power, jurisdiction and competence of the Reserve
Bank of India, being without the authority of law and in contraven·
tion of the provisions of the Reserve Bank of Indfa Act, 1934.
The facts leading upon
the impugned decision
dated
January 7, 1978, the office order dated April 27, 1978, and
the draft combined seniority list are as follows : The· Reserve
Bank of India
(Respondent No. I) was established
under the
Reserve Bank of India Act, 1934, hereinafter referred to as "the
Act". Under the Reserve Bank of India (Staff) Regulations, 1948
framed under .section 58 of the Act, the terms and conditions of
service of the staff (including officers) of !lie respondent Bank werQ
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SUPREME COURT REPORTS
(1982] 3 S.C.R.
revised and regulated. These Regulations were ameneded from
time to time. Provisions regarding record of service, seniority and
promotion are contained in Regulations 27 to 30 (Chapter III),
which read thus :
"27. Record of Service : A record of service shall be maintained by the Bank in respect of each employee
at such place or places and shall he kept in such form
and shall contain such information as may be specified from time to time by the Chief Manager.
• 28. Seniority : An employee confirmed in the Bank's
service shall ordinarily rank for seniority in his grade
according to his date of confirmation in the grade and
an employee on probation shall ordinarily rank for
seniority among the employees selected along with
him in the same batch according to
the ranking
assigned to him at the time of selection.
29. Promotion:
All appointments and promotions shall
be made at the discretion of the Bank and notwith-
"' standing his senioritX in a grade, no employee shall
have a right to be appointed or promoted to any
particular post or grade.
30. (I) An employee transferred from one appointment
to another .or confirmed in a grade or appointment
higher than his substantive
grade or
a11pointment, shall be liable to be reverted without notice at any time within one year· of such
transfer or confirmation.
(2) An 'employee who has been appointed to officiate
in a higher grade or appointment, or whose confirmation in a higher grade or appointment is
subject to his undergoing probation for any specified period or otherwise, shall be liable to be
reverted without notice at any time when be is so
officiating or undergoing probation.
(3) Nothing in sub-regulations (!) and (2) shall affect
the provisions of Regulation 47.''
. ..
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v.T. KHANZODE v:RESERVE BANR (Chandrachud, C.J.)
419'
. Ever since the daie of the Staff Reg.ulations of 1948 and
even prior thereto, there were "groups" constituted 'for. the dilfe-.
rent departments of the Reserve Bank, and officers were required to
exercise irrevocable options for service in any particular Group.
Those who had opted for a service in a particular Group. were to be
· normally eligible for promotion in that Group. only. .The grouping
was revised with effect from April, 1951 when employees were.· asked
to exerci•e their option with regard to the Gronp·,of their choice.
In 1951, the various departments of the Bank were re-classified into
three Groups, Group I, Group II ·and Group. III. This system~-
•,
· of gronping continued until 1955, in which year the Bank foun~ it·
~--'- necessary ·to· reorganise the °AgriculturaL-Credit . Department.-.
•
Accordingly, the staff attached to the various. departments -were ..
regrouped into Groups I, II, III and IV; with ·effect from -Ap.ril 1,··--
1957 .. In _eacli of these Groups, there are. six grades .·of, officers·.
based on pay scales, namely, , Grades A, ·B, C, ·n, E and· F,.
the lowest -~being Grade A . and · the highest being . Grade
F. · Each. Group . had its ·own. seniority List, that · is to say,·
there were four separate seniority lists, one for . each group~ . The.
latest of such lists, prior to. the impugned combined . seniority lisi, is
dated July I, 1976.
· The Reserv~ Bank had co~~tituted a Cadre Rbview. Commi~tee
·in 1970, comprising Shri , Justice J.L. Nain, then a sitting Judge of•
the Bombay High Court, Shri V. Isvaran, I.C.S. (Retd.). and Prof.'
N.S. Ramaswamy, a Management Expert. , The Committee_ submitted a report in Octob~r 1972, on the basis of which the Bank issued.
Administration_Circular No. IS, dated May 22, 1974, specifying the .
decisions taken by it in the .light of the recommendations made by_
the Committee .. One such decision which the Bank took wa• ia
prepare a common seniority list for· and to provide for inter group ·
mobility at the lowest level officers in each group, -namely, Grade A ·
'officers, including those who were •promoted to Grade B on or after
January I, 1970.: With regard ·to higher grades (including officers.
iri .Grade B promoted prior to ·January I, ·J970); the Bank decided
to retain the "groupwise seniority as at present". The inter'group
mobility in Grades C and D was to be introduced only to a limited,
extent, namely, "on a swap basis" : · It was first to be introduced in .
Grade C and thereafter to· be extended "in due course" to ·the .
_officers in Grade D. The two higher· Grades.viz. Grades E and F
were left u111011ched 1111d no intention was expressed in the above·
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circular to . introduce either combined seniority. or _any scheme for
inter-mobility in these grades.
In _accordance_ with the decisions
expressed in the aforesaid' circular. dated May 22, · 1974, the Bankpublished separate seniority lists of officers in Grade B and above
for the years 1974; 1975 and 1976. The. petitioners, all of whom
are officers in Group I, were given their due seniority "as of July I,
B .
1976.
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By the impugned Administration Circular No. 8, dated
January ·7, 1978, the Bank stated that it had decided to combine the
seniority of all officers on ·the basis of their total length of service
including officiating service) in Group I (Section A), Group II and
Group III. The seniority o( all officers in each of the three Groups
was to be combined with effect -from May 22, 1974 on-the basis of -
their -total -length . of -service, including officiating_ service, in the
grade· in which they were then posted on -a regular basis .. The
Circular introduced combined seniority with retrospective effect from
May 22, 1974 (the date of Administration Circurlar :r-i:o. 15) as it was
. "fair and equitable to the officers as a class".-
·
· · Briefly stated, the effect of this decisions is that the group-wise
system of seniority which_ was in existence for more than 27 years
stands substituted . by a combined seniority for officers in Group I
(Grade A) and in Groups II and III with retrospective effect.-· That ·
has adversely aff~cted 'the existing seniority of officers; particularly
of those in Group I, who are now placed many places below their
existing position of seniority, some by several hundred places.
According to the petitioners, the Reserve Bank has no power, ·
competency or jursdiction to introduce the impugned scheme which
discriminates against officers in higher posts; adversely affecting
_ their _vested and existing rights of seniority. . The scheme, according
to them, is _without any rational and far from furthering the efficient
functioning .of the Bank, it will -affect it adversely by compelling
- officers to leave positions in which they had acquired long and
valuable experience and work in posts for which they possess no
expertise. ' For example, for the Department of Banking Operations
and Development (in Group IO. the emphasis : was laid o!l the
commercial banking experience of officers whereas, for recruitment
and selection in the Agricultural Credit Department (in Group III),
the emphasis was on experience in co-operation and agricultural
finance. That is why the Bank had laid the p_re-condition that the
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V.T. KHANZODE v. RESERVE BANK (Chandrachud, C.J.)
421
selected officer should give a specific and irrevocable undertaking to
serve in the G~oup for which he was selected. Anot.her grievance
of the petitioners is that although the Bank has stated in paragraph
9.2.1 of the impugned Circular that the seniority of officers will be
combined on the basis of their total length of service, the seniority
list bas in fact, been prepared in a very arbitrary and inequitous
manner. In a large number of cases, it is alleged, the actual service
·rendered by the officers concerned has been arbitrarily reduced and
adjusted in the length of service of other officers, and the latter have
been notionally treated as officiating in higher grades from dates
much prior to their actual promotions to those grades. In some
cases, on the other hand, officiation in higher posts has been wholly
ignored. This has generally resulted in accelerated and discriminatory benefit being conferred upon officers mostly belonging to
Groups II and III, vis-a-l'is the petitioners and the other officers in
Group I.
The petitioners apprehend I.hat a large number of
officers who have been promoted since January I, 1976 against
normal vacancies in their own departments on the basis of their
experience and expertise of the relative work are likely to be reverted
and replaced by officers from other groups, mostly from Group III,
who were selected for the specific job requirements of that group
and who have no experience of the work done in the Group I
departments. The petitioners also challenge the retrospective effect
given to the impugned circular from May 22, 1974 as irrational and
arbitrary.
Further, according to them, the said circular dated
January 7, 1978, the Office Order dated April 27, 1978 and the
combined seniority list are violative of. the Reserve Bank (Staff)
Regulations. 1948.
In reply to the writ petition, a counter-affidavit has ceen filed
on behalf of the Reserve Bank by Shri S. L. Jathar, Deputy Manager
in the Department of Administration and Personnel, Central Office,
Bombay. The case of the Bank, as disclosed in that affidavit is as
follows:
The Reserve Bank of India (Staff) Regulations, 1948, are
not statutory in character, not having been framed under section 58
of the Reserve Bank of India Act, 1934, The said Staff Regulations
did not provide for the division of the staff of the Bank into different
groups but only categorised them as Officers, Personal Assistants,
etc. In view of the growing need for specialisation in departments
handling research work and developmental activities, a functional
segregation of departments into four groups, with
~roup-wise
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SUPREME COURT REPORTS
[1982] 3 s.c.R.
seniority for Officers, was introduced in the year 1951.
Appendix
XII to the Report of the 'Reserve Bank of India ·Cadre Review
Committee', which refers to the grouping of the departments from
time to time, shows that the groupings were not static and fixed but
were changed as and when necessary. Group I was composed of
General
Departments
dealing with the day-to-day operational
functions of the Bank including accounts and organisational mattres,
Group II of Departments dealing with regulatory and .inspection
functions over the money market; Group III of Departments dealing
with the Co-operatives and agricultural Credit institutions; and
Group IV of Research Departments. Each Department had a seperate
line of seniority and although the· Bank had the right under the Staff
Regulations to post any employee to any group, each group operat·
ed as an independent seniority unit and the employees were eligible
for promotion within their group only. It was, however, noticed
that the group system had resulted in glaring inequalities in promotional opportunities in the various Departments, because of the
accelerated pace of expansion of Departments in some of the Groups
wherein relatively junior employees were able to secure earlier
promotions and confirmations. So far as the non-officers staff was
concerned, the Bank took several steps from time to time to equalise
their chances of promotion. Finally, in pursuance of an agreement
with the All-India Reserve Bank Employees' Association, which is
a representative Association
of Class III employees of the
Bank, the Bank introduced
a combined scheme for clerical
staff in May 1972 under which, the
separate seniority lists of
clerical employees in Class III were merged into one list with effect
from 7th May, 1972, irrespective of their respective groups. The
validity of that Scheme was challenged in several High Courts and
the matter came up on appeal to this Court from a decision of the
Delhi High Court which bas struck down the Scheme. This Court;
in Reserve Bank of India v. N.C. Pa/iwa/(1) upheld the Scheme. The
'Cadre Review Committee' whose report was received by the Bank
on October 11, 1972 recommended, broadly, the gradual introduction of inter-mobility of officers in different groups and the framing
of a common seniotity list, except for officers in specialised groups
like Economists, statisticians, Lawyers and Engineers. According to
the Committee, the most rational basis for drawing up a common
seniority list was to go by the date of entry of each officer in a grade
in a continuous officiating capacity. The Bank announced its decision
as regards the Committee's recommend!ltions, by the Administra-
(I) [1977] I SCR 377,
V.T. KilANZODE v. RESERVE BANK (Chandrachud, C.J.)
4~~
tive Circular dated May 22, 1974. Io December 1975;the Bank
appointed a Departmental Committee under Shri C.L. Thareja, the
then Chief Manager of the Bank, to work out the modalities of
integration of the group-wise seniority lists of officers in the higher
grades which had not yet been integrated. That Committee submitted its report on December 15, 1976. It unanimously recommended
simultaneous introduction of combined to seniority for all grades but,
its members could not agre@ on the date to b1. adopted for integration
of the group-wise
~eniority lists. The Chairman and one member
favoured January I, 1976 as the date of integration while the
remaining two members favoured January I, 1970. A Committee
of the Central Boaril of the Bank decided to appoint May, 22 1974
as the date for integration as a via media and also because, it was on
that date that the Bank had announced to its officers its decision on
combined seniority, mobility and interchangeability. Fixation of
January I, 1970. as the date for integration would have adversely
affected the intere;ts of Group I officers while the other date January
A
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I, 1976, would have adversely affected the interests of officers in
D
other groups.
That is the answer made by the Reserve Bank to the petition.
Originally, the writ petition was filed against two respondents only;
(I) The Reserve Bank of India and (2) the Chief Manager, Reserve
Bank of India; Department of Administration & Personnel, Central
Office, Bombay. The petitioners did not implead to the petition any
of the officers belonging to the other groups who are likely to be
affected if the relief sought by the petitioners is granted. Later, by
an order dated July 24, 1978, respondents 3 and 4 were allowed to
join in the petition on their own application. Respondent 3, Shri
M.P. Saxena, was then the Deputy Chief Officer, Department of
Banking Operations and Development, New Delhi, while respondent
4, Shri S. Acharya, was Deputy Chief Officer, Agricultural Credit
Department, Chandigarh.
E
Respondent 3, whose counter-affidavit has been adopted by
0
responc'ent 4, has raised a preliminary objection to the maintainability of the writ petition on the ground that hundreds of officers
similarly situated who are all specifically identifiable and who would
be prejudicially affected if the prayers in the writ petitions are
granted, have not been impleaded as respondents.
According to
H
him, this is a case of a few privileged persons trying to retain their
undue privileges at the cost ·of a scheme introduced to improve the
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SUPREME COURT REPOltTS
(J9SiJ J S.C.R.
operational efficiency of the Institution and for the common good of
the officers as a class.
Respondent 3 has also raised the objection
that no writ petition can lie under article 32 to enforce or challenge
service conditions which are purely contractual.
The contentions raised by re&pondent 3 in his counter-affidavit
may be summed up thus : Groupings and re· groupings of departments have been undertaken by the Reserve Bank as and when the
need arose in the context of changing requirements, and all such
groupings and regroupings have been done as a result of administra·
tive decisions and given effect to through appropriate Administration Circulars.
While the expedient of group-wise promotions
based on group-wise seniority lists served the immediate convenience
over a period of time, this artificial segregation resulted in compart·
mentalised approach to questions of policy, impairing thereby the.
overall efficiency of the institution as a whole. Further, it also led
to other anomalies and imbalances, more particularly in promotional opportunities of the staff attached to different groups.
In some groups, expansion
was quicker
and
greater than
in others. It is in order to meet this situation that several measures
were initiated by the Bank and by the Associations of employees of
various categories. Since these measures did not meet the situation
adequately, the Bank initated a dialogue with the respective Associations for introducing a combined seniority for the various grades in
different groups. For officers at the base level, namely, 'A' Grade
(direct recruits), the Bank had maintained a common list of seniority
in place of groupwise lists since 1968. Thereafter, groupings and
regroupings have been a continuous process to meet the needs of the
changing situations, and the present scheme of combined seniority
which is one such, has come about as a matter of administrative,
and historical and functional necessity.
The implementation of the
scheme of inter-group mobility is being stalled by the Bank's
internal administration, which was controlled solely by a small
section of officers drawn from Group-I, which all along had unfair
advantage of accelerated promotions as compared with officers in
Groups II and III. Thus, the petitioners' plea is an attempt to
perpetuate the unfair and unequal privileges which they had enjoyed
over the years without any justification and with detriment to
Bank's interests a fact which has been recognised by an impartial
tribunal like the Cadre Review Committee. The Staff R1igulations
of 1948 are in the nature of standardised contractual conditions of
service. They were not framed under section 58 of the Act and
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v.t. KHANZObE v.