ANDHRA BANKversusB. SATYANARAYANA AND ORS.

A                                 ANDHRA BANK
                                           V,

                        B. SATY ANARA YANA AND ORS.

                               FEBRUARY 12, 2004

B        (V.N. KHARE, CJ., S.B. SINHA AND S.H .• KAPADIA, JJ.]


          Service law:

          Banking Companies (Acquisition and Transfer of Undertakings) Act,
C 1980; Ss.12(2) and 19/Andhra Bank (Officers) Service Regulations, 1982;
    Regulation 17(/):

         Promotion to the Post ofAssis/ant General Manager in terms ofprocedure
   laid down in a Circular as per Regulation 17(/)-Circular-Challenge to--
  Single Judge of the High Court held the Regulation as arbitrary as without
D guidelines-On appeal, Division Bench ofthe High Court held the Regulation
  1101 ultra vi res· the Constitution of India, however, observed that the procedure

  laid down in Section 19 ofthe Act should have been followed while formulating
  the promotion policy-On appeal, held: Parliament has conferred essential
  legislative functions upon the Board of Directors/Bank to make regulations-
E While formulating a promotional policy 'a corresponding new Bank' must
  follow directions of the Cenlral Government in consultation wilh the Reserve
   Bank of Jndia-Amendments, ifproposed in the Regulations, has to be placed
  before both the Houses of Parliament-Hence lhe Regulation does not co1ifer
  any unguided, uncanalised and arbitrary power on the Bank while laying
  down the promotion policy-However, procedure laid down therefore is
F irrelevant for the purpose offormulating the promotion policy decision.
          Words and Phrases:

        'corresponding new Bank'-Meaning of in the context of Banking
    Companies (Acquisition and Transfer of Undertakings) Act, 1980.
G
          legal Maxims:

          Maxim 'ut res magis valeat quam pereat '-Applicability of-Discussed.

          Respondents were holding the posts of Regional manager and they
H                                         3M
                ANDHRA BANK v. B. SATY ANARA Y ANA                       305
were considered for promotion to the post of Assistant General Manager           A
by the appellant-Bank as per procedure laid down in the Circular issued
in terms of Regulation 17(1) of the Andhra Pradesh (Officers) Service
Regulations. Respondent Nos. 3 to 13 were promoted. Respondent Nos. 1
and 2; the aggrieved Officers, challenged the validity of the Circular. Single
Judge of the High Court held Regulation 17 as arbitrary as no guidelines         B
were provided. The Bank preferred an appeal, which was allowed by the
Division Bench of the High Court holding that the Regulation was not ultra
vires the Constitution of India; however, it noticed that the Bank did not
comply with the provisions of Section 19 of the Banking Companies
(Acquisition and Transfer of Undertakings) Act, while formulating the
promotion policy. Hence the present appeal.                                      C
     It was contended for the appellant that the promotion policy was
formulated in terms of Regulation 17 of the Regulations and in conformity
with the guidelines issued by the Government of India; and that it was
not necessary to consult the Reserve Bank of India or obtain prior
permission of the Central Government.                                            D
      Allowing the appeal, the Court

        HELD: 1.1. The appellant-Bank was a 'corresponding new bank'
  within the meaning of the provisions of the Banking Companies
. (Acquisition and Transfer of Undertakings) Act. It has to be guided by         E
  such directions as regard the matters of policy involving public interest
  as the Central Government may give after consultation with the Governor
  of Reserve Bank. 1308-El

      1.2. The Board of Directors of the corresponding new bank is
empowered to make a regulation after consultation with the Reserve Bank          F
of India and after obtaining previous sanction of the Central Government,
pursuant to or in furtherance of sub-section (2) of Section 12 read with
Section 19 of the Banking Companies (Acquisition and Transfer of
Undertakings) Act. 130:; 3, Cl

     1.3. In terms of Regulation 17 of the Regulations, sufficient
                                                                                 G
safeguards have been provided for therein in as much as while laying down
the policy, the Board must have regard to the guidelines issued by the
Central Government. It is further not in doubt or dispute that such
guidelines had been provided by the Government in terms of the
regulation. 1309-F, GI                                                           H
    306                   SUPREME COURT REPORTS                    [2004] 2 S.C.R.

A          J.4. It is a well-settled principle of service jurisprudence that the
    employer is entitled to lay down policy decision laying down the criteria
    for grant of promotion to its officers. The eligibility norms for such
    promotions must be defined by the Bank on a realistic basis wherefor a
    system to choose the best available talent to man the critical positions is
B   to be devised. Once a power vests in an authority by reason of the
    provisions of a statute, it is trite that such power can be exercised from
    time to time. Changes are required to be made keeping in view the
    requirement of the management as also the exigency of the situation
    obtaining at the relevant time. Furthermore, it is one thing to say that by
    reason of Section 19 of the Act the Parliament has conferred essential
C   legislative functions upon the Board of Directors to make regulation but
    it is another thing to say that the regulation is arbitrary and ultra vires as
    it did not contain sufficient guidelines. The High Court did not come to
    the codclusion that essential legislative competence of the Parliament has
    been delegated to the Board of Directors in terms of Section 17 of the Act
D   or otherwise. (309-H; 310-A, B, C]

          1.5. For amending the regulations, each time Board of Directors
    were not only required to consult the Reserve Bank of hidia and obtain
    previous permission of the Central Government but also the amended
    regulations were required to be laid before both the Houses of the
E   Parliament in terms of Section 19 of the Act. With a view to avoid the
    rigors of such procedural requirements, there existed no reason as to why
    the said power cannot be delegated to the Board of Directors keeping in
    view the fact that the policy dt)cision required to be laid down for effecting
    promotions to different grades of officers and employees at different points
    of time. (310-D, EJ
F
         J.6. Regulation 17 of the Regulation does not confer any unguided,
  uncanalised and arbitrary power as the same was issued in conformity
  with the guidelines issued by the Central Government. The requirement
  to lay down the regulation before both Houses of Parliament also provides
G for sufficient safeguard. For making a regulation, the requirements of
  Section 19 of the Act were required to be complied with but the procedure
  laid down therefor are wholly irrelevant for the purpose of formulating
  the policy decision in terms of Regulation 17. The High Court in its
  impugned judgment failed to notice the said distinction and, thus, based
  its decision wholly on a wrong premise. A machinery provision, it is trite,
H must be construed in such a manner so as to make it workable ~aving
~··




                 ANDHRA BANK v. B. SATYANARAYANA [SINHA, J.]                   307
      regard to the doctrine 'ut res magis valeat quam pereat '.                       A
       '                                                  (310-F, G, H; 311-AI

           People's Union for Civil Liberties and Anr. v. Union of India and Ors.,
      JT (2004) 1 SC 152, relied on.

              CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1877 of                  B
      1999.

           From the Judgment and Order dated 3 J.3.1998 of the Andhra Pradesh
      High Court in W.A. No. 1152 of 1988.

            V.R. Reddy, P.P. Singh, Sunil Murarka and Sakya Singha Chaudhuri C
      for the Appellant.

              Manoj Wad (NP), Shrish Kumar Misra (NP) for the Respondents.

              The Judgment of the Court was delivered by
                                                                                       D
            S.B. SINHA, J. This appeal is directed against the judgment and order
      dated 31.3.1998 passed by a Division Bench of the Andhra Pradesh High
      Court in Writ Appeal No.1152 of 1988 whereby and whereunder an appeal
      preferred by the appellant herein against a judgment and order dateq 13.6.1988
      passed by a learned Single Judge in Writ Petition No.6076 of 1984 was
      dismissed.                                                                       E
             In view of the point involved in this appeal, it may not be necessa_cy
      to dwell at length the fact of the matter. Suffice it to point out that Respondent
      Nos. 3 to 12 herein at all relevant times were holding the posts oLRegional
      Manager. They along with the Respondent Nos. I and 2 herein were considered
      for promotion to the post of Assistant General Manager upon following the F
      procedures laid down in a circular letter dated 11.2.1984 issued in terms of
      Regulation 17(1) of the Andhra Bank (Officers') Service Regulations, 1982,
      (hereinafter referred to as 'the Regulations', for the sake of brevity). Upon
      consideration of the ca.:.t:s of the private parties herein, the respondent Nos.
      3 to 13 were promoted; whereafter the writ petition was filed by the respondent G
      Nos. 1 and 2 herein questioning the validity of the said circular. A learned
      Single Judge of the High Court in the said writ petition held that Regulation
       17(1) of the Regulation is arbitrary as no guideline was provided thereby.
      Aggrieved by and dissatisfied with the said judgment, the appellant herein
      preferred an appeal before the Division Bench of the High Court. The Division
      Bench despite holding that Regulation 17 of the Regulations may not be ultra H
    308                    SUPREME COURT REPORTS                    [2004] 2 S.C.R.

A vires the Constitution of India but the promotion policy formulated by the
    appellant should have been issued in compliance of the procedure laid down
    in Section 19 of the Banking Companies (Acquisition and Transfer of
    Undertakings) Act, 1980 (hereinafter referred to as 'the Act', for the sake of
    brevity) holding :

B           " ... It is a settled principle of law when power is delegated to a
            subordinate law making body subject to certain conditions, the
            conditions must be complied with. Otherwise the subordinate
            legislation would be ultra vires, the power granted to it, which itself
            is subject to a condition."

C           Mr. V.R. Reddy, learned Senior Counsel appearing on behalf of the
    appellant would submit that the Division Bench of the High Court went
    wrong in holding that in making the guidelines, the conditions precedent for
    making the regulation as contained in Section 19 of the Act were required to
    be complied with. The learned counsel would submit that it is not in dispute
D   that the Board of Directors of the appellant-Bank before framing the regulations
    had consulted the Reserve Bank of India and also obtained prior approval of
    the Central Government in terms of Section 19 of the Act. The policy decision
    as regard promotion of the officers having been framed in terms of Regulation
    17 and in conformity with the guidelines issued by the Union of India, Mr.
    Reddy would submit, it was not necessary to consult the Reserve Bank of
E   India or obtain prior permission of the Central Government.

          It is not in dispute that the appellant-Bank was a 'corresponding new
    bank' within the meaning of the provisions of the Act. Section 8 of the Act
    obligates every corresponding new bank to be guided by such directions as
    regard the matters of policy involving public interest as the Central Government
F   may, after consultation with the Governor of the Reserve Bank, give.

          Sub-section (2) of Section I 2 of the Act reads as under:

            "(2) Save as otherwise provided in sub-section (I), every officer or
            other employee 'of an existing bank shall become, on the
G           commencement of this Act, an officer or other employee, as the case
            may be, of the corresponding new bank and shall hold his office or
            service in that bank on the same terms and conditions and with the
            same rights to pension, gratuity and other matters as would have been
            admissible to him if the undertaking of the existing bank had not
            been transferred to and vested in the corresponding new bank and
H
-                ANDHRA BANK v. B. SATYANARAYANA [SINHA, J.]                   309

            continue to do so unless and until his employment in the corresponding     A
            new bank is terminated or until his remuneration, terms or conditions
            are duly altered by the corresponding new bank."

           The Board of Directors of the correspondi11g new bank is empowered
    to make a regulation after consultation with the Reserve Bank of India and
    previous sanction of the Central Government. Such regulation, inter alia,          B
    may relate to the duties and conduct of officers and other employees of the
    corresponding new bank.

          It is not in dispute that pursuant to or in furtherance of sub-section (2)
    of Section 12 read with Section I9 of the Act, in consultation with the            C
    Reserve Bank of India and upon obtaining prior permission therefor, the
    Board of Directors of the appellant-Bank framed the Regulations known as
    'Andhra Bank (Officers') Service Regulations 1982'. Regulation 17 of the
    said Regulations reads thus :

            "I 7. Promotions :
                                                                                       D
            I.    Promotions to all Grades of officers in the Bank shall be made
                  in accordance with the policy laid down by the Board, from time
                  to time, having regard to the guidelines of the Government, if
                  any.
           2.     For the avoidance of doubts, it is clarified that this regulation    E
                  shall also apply to promotions of any category of employees to
                  the Junior Management Grade."

         It appears that the Central Government had also issued guidelines
    purported to be in terms of Regulation 17 of the Regulations.
                                                                                       F
          It was not the contention of the Respondent Nos. I and 2 before the
    High Court or before us that the Board of Directors by reason of the regulation
    making power could not have been delegated with the power to lay down a
    policy for grant of promotion to the officers working in the bank. From a
    bare perusal of Regulation 17, it would be evident that sufficient safeguards      G
    have been provided for therein inasmuch as while laying down such policy,
    the Board must have regard to the guidelines issued by the Central
    Government. It is further not in doubt or dispute that such guidelines had
    been provided by the Government in terms of the aforementioned regulation.

          A valid regulation once framed would be a part of the statute.               H
    310                    SUPREME COURT REPORTS                    [2004] 2 S.C.R.

A          It is a well-settled principle of service jurisprudence that the employer
    is entitled to lay down policy ?ecision laying down the criteria for grant of
    promotion to its officers. The eligibility norms for such promotions must be
    defined by the bank on a realistic basis wherefor a system to choose the best
    available talent to man the critical positions is to be devised. Once a power
B   vests in an authority by reason of the provisions of a statute, it is trite that
    such power can be exercised from tirr.e to time. Changes are required to be
    made keeping in view the requirement of the management as also the exigency
    of the situation obtaining at the relevant time. Furthermore, it is one thing to
    say that by reason of Section 19, the Parliament has conferred essential
    legislative functions upon the Board of Directors to make regulation but it is
C   another thing to say that the regulation is arbitrary and ultra vires as it did
    not contain sufficient guidelines. The High Court did not come to the
    conclusion that essential legislative competence of the Parliament has been
    delegated to the Board of Directors in terms of Section 17 of the Act or
    otherwise.

D          The regulations in terms of sub-section (2) of Section 12 read with
    Section 19 of the Act were required to be framed by the Board of Directors.
    For amending the regulations each time they were not only required to consult
    the Reserve Bank of India and obtain previous permission of the Central
    Government but also the amended regulations were required to be laid before
E   both the Houses of the Parliament in terms of Section 1.9 of the Act. With a
    view to avoid the rigors of such procedural requirements, we see no reason
    as to why the said power cannot be delegated to the Board of Directors
    keeping in view of the fact that the pol icy decision required to be laid down
    for effecting promotions to different grades of officers and employees at
    different points of time.
F
           Regulation 17 of the Regulation, in our opinion, does not confer any
    unguided, uncanalised and arbitrary power as the same was issued in
    conformity with the guidelines issued by the Central Government. The
    requirement to lay down the regulation before both Houses of Parliament
    also provides for sufficient safeguard. For making a regulation, the
G   requirements of Section 19 of the Act were required to be complied with but
    the procedure laid down therefor are wholly irrelevant for the purpose of
    fomllllating the policy decision in terms of Regulation 17 aforementioned.
    The High Court in its impugned judgment failed to notice the said distinction
    and, thus, based its decision wholly on a wrong premise.
H
I




""'

               ANDHRA BANK v. B. SATYANARAYANA [SINHA, J.]                     311

             A machinery provision, it is trite, must be construed in such a manner A
      so as to make it workable having regard to the doctrine 'ut res magis valeat
      quam pereat'.

            In People's Union for Civil Liberties and Anr. v. Union of India and
      Ors., JT (2004) I SC 152, this Court while rejecting a similar contention as
      regard Section 18 of the Atomic Energy Act, 1962 held:                       B
             "The question as to whether a statute is ultra vires Constitution of
             India having conferred unguided, uncanalised or wide power cannot
             be determined in vacuum. It has to be considered having regard to the
             text and context of the State as also the character thereof. It deals C
             with a sensitive subject.

                 Section 18 has be~n enacted for the purposes specified therein. It
             is well-settled that guidelines for enacting the said provision must be
             found out from the subject matter covering the field. For the said
             purpose even the preamble of the Act may be looked into.
                                                                                       D
                 The notification of discovery of uranium or thorium, control over
             mining operations, the disposal of uranium, power to obtain
             information are within the scope and ambit of the said Act. Section
             13 provides for infomiations as regard, contracts. Section 14 postulates
             control over production and use of atomic energy. Restrictions as E
             regard disclosure of information as contained in Section 18 are' not
             vague or wide in nature. It specifies the areas where such disclosures
             are prohibited. The powers of the Central Government to make an
             order in terms thereof are, thus, limited.

                 It is not a case where as in Hamdard Dawakhana and Anr. v. p
             Union of India and Ors., AIR ( 1960) SC 554 or Krishna Mohan (P)
             ltd. v. Municipal Corporation of Delhi, [2003] 7 SCC 151 the Central
             Government has been conferred with a wide uncanalised and unguided
             power. It is also not a case where the words employed in the provision
             provide for no criteria nor can it be said that no standard has been
             laid down by the Parliament therefor. It is furthermore not a case G
             where principles on which the power of the Central Government are
             to be exercised have not been disclosed. By reason of the Act, essential
             legislative functions have also not been delegated.

                 We do not think that having regard to the purport and object of
             the said Act, the provisions of Section 18 have bestowed unguided H
    312                   SUPREME COURT REPORTS                    [2004] 2 S.C.R.

A            and uncanalised powers on the Central Government. Sections 18 and
             3 of the Atomic Energy Act had to be enacted by the Parliament as
             in wrong hands the information can pose a danger not only to the
             security of the State but to the public at large."

         The High Court, therefore, committed a manifest error in passing the
B   impugned judgment.

          For the reasons aforementioned, the impugned judgment of the High
    Court cannot be sustained. It is set aside accordingly. The Appeal is allowed.
    Since in view of the fact that nobody appeared for the respondents, there
    shall be no order as to costs.
c
    S.K.S.                                                       Appeal allowed.