Holding

A promotion can be withheld only under valid rules; pending vigilance allegations without a charge‑sheet do not justify denial, so the respondents are entitled to notional promotion.

Summary

The respondents, senior officers of Mahanadi Coalfields Ltd., a government company, were recommended for promotion but were denied promotion because vigilance cases were pending against them, while their juniors were promoted. They filed writ petitions seeking notional promotion from the date their juniors were promoted. The High Court allowed the notional promotion based on office memorandums dated 1979 and 1981. On appeal, the Supreme Court examined whether a pending vigilance or departmental enquiry, without a charge‑sheet or prosecution, can lawfully withhold promotion. The Court held that a right to promotion can be kept in abeyance only under valid rules and that the office memorandums require vigilance clearance only when a charge‑sheet is issued, prosecution is pending, or the officer is under suspension. Consequently, the respondents were entitled to notional promotion from the date of their juniors' promotion. The appeal was dismissed with costs.

Issues considered

Whether a pending vigilance or departmental enquiry, in the absence of a charge‑sheet or prosecution, can justify withholding promotion of a government employee.
Interpretation of the office memorandums dated 27 June 1979 and 8 January 1981 regarding the requirement of vigilance clearance for promotion.
Whether the employer, being a State within Article 12, must satisfy the constitutional requirements of reasonableness, fairness and equality under Articles 14 and 16 in denying promotion.

Legislation cited

Companies Acts. 617

Subjects

promotionvigilance clearancegovernment employeenotional promotionservice rulesconstitutional lawArticles 12 14 16state employerdepartmental enquiryfairnessreasonableness

Judgment

COAL INDIA LTD. AND ORS. A
v.
SAROJ KUMAR MISHRA

APRIL 17, 2007

[S.B. SINHA AND MARKANDEY KA TJU, JJ.] B

- ..;
. Service Law-Promotion-Employees ofGovernment Company-Denied
promotion as vigilance case was pending against them-Writ Petition by
employees seeking notional promotion from the date, their juniors were
promoted-High Court holding them entitled to notional promotion in view
c
of Office Memorandums permitting such promotion-On appeal, held:
Employees were entitled to the notional promotion as claimed for-Rules do
not provide that only because some allegations have been made against an
officer, that itself would justifY keeping a right to promotion in abeyance-
A right to promotion can be kept in abeyance only in terms of valid rules- D
The employer being a State, their action should satisfy the test of
reasonableness and fairness-Constitution of India, 1950-Articles 12, 14
and 16.

Interpretation of Statutes/Rules-When a valuable right of an employee
is in question, the rules operating in the field must be construed in the light E
of Constitutional Scheme.

Respondents were the employees of a Government Company. Appellant-
Company was the holding company of the employer-Company. The names of
the respondents were recommended for promotion by DPC. But they were not
promoted in view of the fact that vigilance cases were pending against them.
F
~~

Juniors of the respondents were promoted. Respondents filed Writ Petitions
~
praying for notional promotion w.e.£ the date, their juniors were promoted.
During pendency of the Writ Petitions charge sheets were issued, disciplinary
proceedings initiated and punishment was imposed.
G
High Court, relying on Office Memorandums dated 19/27th June, 1979

.... -i,.
and 8th January 1981, held that once the respondents had been allowed the
benefit of recommendation ofDPC by giving them promotion, they were entitled
to notional promotion w.e.f. the date their juniors were promoted. Hence the
pre!:ent appeal.
233 H
234 SUPREME COURT REPORTS (2007] 5 S. C.R.

A Dismissing of the appeal, the Court

HELD: 1. There is no infirmity in the impugned judgments. Both First
Appellant as also the employer Company are 'State' within the meaning of
Article 12 of the Constitution of India. Their action must, therefore, satisfy
the test of reasonableness and fairness. Although an employee of a State is
B not entitled to promotion to a higher post as a matter of right, he is entitled
to be considered therefore in terms of Article 16 of the Constitution of India.
A right of promotion can be withheld or kept in abeyance only in terms of
valid rules. Rules operating in the field do not provide that only because some ..- -
allegations have been made as against an officer of the company, the same

c would itself justify keeping a valuable right to be considered for promotion of
an employee in abeyance. When a question of that nature comes up for
consideration before a superior court, the extant rules operating in the field
must necessarily be construed in the light of the constitutional scheme of
equality. !Paras 25 and IOI [241-G; 238-A, B, CJ

D State of Madhya Pradesh v. Srikanl Chaphekar, [19921 4 sec 689,
distinguished.

State of Kerala and Anr. v. NM Thomas and Ors., AIR [19761SC490;
E. V. Chinnaiah v. State of Andhra Pradesh and Ors., (2005] 1 SCC 394;
Bhagwandas Tiwari and Ors. v. Dewas Shajapur Kshetriya Gramin Bank and
•
'
.
E Ors., (2006) 11 SCALE 593 and B. V. Sivaiah and Ors. v. K. Addanki Babu
and Ors. Etc., [199816 SCC 720, referred to.

2. It is not the case of the appellants that pursuant to or in furtherance •
of the complaint received by the vigilance department, the competent authority
had arrived at a satisfaction as is required in terms of the said circulars that
F a charge sheet was likely to be issued on the basis of a preliminary enquiry Y-~

held in that behalf or otherwise. A departmental proceeding is ordinarily said
to be initiated only when a chargesheet is issued. [239-G; 240-A; 241-DJ
[Paras 13 and 211

3. The Circular Letters issued by the appellants put restrictions on a
G valuable right of an employee. They therefore, are, required to be construed
strictly. So construed there cannot be any doubt whatsoever that the conditions
precedent contained therein must be satisfied before any action can be taken .> -
•
in that regard. [Para 14] [240-A, Bl

H 4. Only because, there is a possibility of floodgate litigation by giving
"
COAL INDIA LTD. v. SAROJ KUMAR MISHRA [S.B. SINHA, J.] 235
.., -1 such promotion, a valuable right of a citizen cannot be permitted to be taken A
away. Despite such promotion if the delinquent employee has suffered
punishment, subsequently appropriate steps may be taken on the basis thereof.
(Paras 22 and 24] (241-D, E, F]

Zee Telefi/ms Ltd. and Anr. v. Union of India and Ors., (2005] 4 SCC
649 and Guruvayoor Devaswom Managing Committee and Anr. v. C. K. Rajan B
and Ors., (2003) 7 SCC 546, referred to.
-- --; CIVIL APPEALLATE JURISDICTION: Civil Appeal No. 1997 of2007.

From the Judgment and Order dated 12.04.2006 of the High Court of
Orissa in OJC No. 2760 of2002. c
WITH

C.A. No. 1998 of2007.

Ajit Kumar Sinha, Amitabh and G.P. Pandey for the Appeliants. D

# Janaranjan Das and Swetaketu Mishra for the Respondent.

- '
The Judgment of the Court was delivered by

S.B. SINHA, J. 1. Leave granted. E
2. These two appeals involving similar questions of law and facts were
taken up for hearing together and are being disposed of by this common
judgment.

3. Respondents herein were employees of Mahanadi Coalfields Ltd., a F
... -~

Government Company within the meaning of Section 617 of the Companies
Act. Coal India Limited admittedly is the holding company of Mahanadi
Coalfields Ltd. Appellant No. I framed rules laying down terms and conditions
of service of its Executive Officers. The Executive Cadre of the Officers of
Appellant No. 1 is divided in various grades namely Gr. E/l to Gr. E/8.
Indisputably, promotion from A/3 to A/4 grades is governed by the rule of G

- - ).
Seniority-Cum-Merit. For the purpose of considering the cases for promotion
of the eligible officers from Grade E/3 to E/4, a departmental promotion
committee held its meeting in April-May, 1999.

4. Respondents were, however, not promoted inter alia on the premise
H
236 SUPREME COURT REPORTS [2007] 5 S.C.R

A that the General Manager (Vigilance) of the Mahanadi Coalfields Ltd. intimated
to the concerned authority that vigilance cases were pending against them.
Orders of promotion were issued in favour of the officers who were admittedly
junior to them on 31.8.1999. When despite reµresentation, they were not
promoted on the ground of pendency of vigilance cases, they filed writ
B petitions before the Orissa High Court praying inter-alia for notional promotion
with effect from the date their juniors were promoted.

5. During pendency of the Writ Petitions namely in June, 2002, charge
sheets were issued and upon a disciplinary proceeding having been initiated,
a penalty of reduction of pay by one stage for a period of one year without
C cumulative effect was imposed upon the respondents in July, 2003.
6. Before the Orissa High Court as also before this Court, reliance has
been placed by the appellants on office memorandums dated l 9/27th June,
1979. Upon taking into consideration the said office memorandum as also
subsequent memorandums and in particular the one dated 8.1.1981, the High
D Court held;

"15. Taking into consideration of the entire factual matrix of the case
and keeping in view the ratio decided by the Apex Court in different
cases, so far as the present petitioner is concerned, the ratio decided
in the case of Union of India v. K. V. Jankiraman and Union ofIndia-
'-
{

E v. Dr.(Smt.) Sudha Sa/han has to be followed and since the concerned
employees in the cases of Delhi Development Authority v. H.C.
Khurana, AIR (1993) S.C. 1488, Union ofIndia v. Kewal Kumar, AIR
(1993) SC 1585 and Union of India v. R.S. Sharma, AIR (1993) S.C.
2337 stand on a different footing than the present petitioner, the ratio
decided in those cases cannot be followed in the case of the present
F petitioner. In the case of R.S. Sharma the order of the Tribunal directing y.,

to open the sealed cover and giving effect to the recommendation
made by the DPC on the ground of non-service of charge memo, was
set aside keeping in view the Rules/Circulars/0.M. in force more
particularly clause-iv of the O.M. wherein it is provided that during
G the pendency (lr "investigation on serious allegation of corruption,
bribery or similar grave misconduct is in progress either by the CBI
or any agency, departmental or otherwise", sealed cover procedure
can be resorted to till the proceeding is over in all respect. But in the
instant case on the basis of O.M./Circular/Rules followed by the
J
-
~

MCL/Coal India, the sealed cover was opened and the petitioner was
H
COAL INDIA LTD. v. SAROJ KUMAR MISHRA (S.B. SINHA, J.] 237

-;
given promotion to next higher grade (Grade-4) since the so called A

'
investigation was not completed within two years from the date the
immediate junior to the petitioner was promoted. This particular office
memorandum has been issued may be with the intention to check
prolonged enquiry covering a period of more than two years in r<>spect
of certain allegations against an employee, so that the concerned
employee shall not be harassed or debarred from getting benefit on B
the recommendation of DPC for an indefinite/prolonged period on the
ground of pendency of such enquiry, without initiation of a
• --<
departmental proceeding after service of charge memo. However once
the sealed cover is opened and the petitioner is allowed the benefit
of the recommendation of DPC by giving him promotion to the next c
higher grade, he shall be entitled for all consequential benefits from
the date his immediate junior got the same. In this case the petitio~er
had never been suspended during the period of the so-called
preliminary enquiry nor during the period of departmental enquiry. As
such, he shall be entitled for promotion notionally with effect from the
date his immediate junior got the same along with all service and D
financial benefit."
I I On the said findings, the writ petitions were allowed.
... 7. Mr. Ajit Kumar Sinha, learned counsel appearing on behalf of the
appellant took us through the said office memorandum dated 27 .6.1979 and E
submitted that as in terms thereof pendency of a vigilance or departmental
action would itself be sufficient for not promoting the officer who would, in
the event of their complete exoneration would be promoted as and from the
date his immediate junior has been promoted; the impugned judgment cannot
be sustained. The High Court, Mr. Sinha submitted, committed manifest error F
.•"'"'1" in invoking the sealed cover procedure which is not applicable to the fact of
the present case. If the impugned judgment is upheld, a flood-gate of litigation
would ensue. Strong reliance in this behalf has been placed by Mr. Sinha on
a reported decision of this case in Manoj Kumar Singh v. The Coal India Ltd
& Ors., in Civil Appeal No. 17 of 2005 disposed of on 2.1.2006 as also on State
of Madhya Pradesh v. Srikant Chaphekar, [1992] 4 SCC 689]. G

- -) 8. Mr. Janaranjan Das, learned counsel appearing on behalf of the

- respondent, on the other hand, supported the judgment of the High Court.

9. The factual matrix involved in the matter being not in dispute, the
only question which falls for our consideration is interpretation of the office H
238 SUPREME COURT REPORTS (2007] 5 S.C.R.

A memorandums dated 27.6.1979 and 8.1.1981.
t- -
10. Both First Appellant as also Mahanadi Coalfields Ltd. are 'State'
within the meaning of Article 12 of the Constitution of India. Their action
must, therefore, satisfy the test of reasonableness and fairness. Although an
employee of a State is not entitled to promotion to a higher post as a matter
B of right, he is entitled to be considered therefor in terms of Article 16 of the
Constitution of India. A right of promotion can be withheld or kept in abeyance
only in terms of valid rules. Rules operating in the field do not provide that
only because some allegations have been made as against an officer of the ,... .
company, the same would itself justify keeping a valuable right to be considered
C for promotion of an employee in abeyance. When a question of that nature
comes up for consideration before a superior court, the extant rules operating
in the field must necessarily be construed in the light of the constitutional
scheme of equality.

11. The office memorandum dated 19/27 June 1979 reads as under:-
D
"The issue relating to procedure to be followed with regard to promotion
of an officer who has been kept under suspension and/or against
whom a vigilance/departmental action is pending has been engaging

E
the attention of the management for some time past. Taking into
consideration the extant rules and orders of the Government of India
in this regard the following decision has been taken:
.
(a) All orders for promotion will be issued only after vigilance clearance.

(b) *** *** ***
( c) When an officer has been completely exonerated and he is
F subsequently promoted, his seniority should be fixed as if he had
been promoted in accordance with the position assigned to him in the
select list. Period of his eligibility for consideration for promotion to
the next higher grade should be reckoned with reference to the date
his immediate junior has been promoted. The pay of such an executive
G on promotion should be fixed notionally by allowing the intervening
period during which the officers could not be promoted due to his
suspension and/or pending departmental enquiry to be counted for
increments in the higher grade but no arrears would be admissible to

H
him. (Corrected as per No. C-5(A)/50972 (Vol.I) Pt./1507 dated
10.07.1979)."
-
COAL INDIA LTD. v. SAROJ KUMAR MISHRA [S.B. SINHA, J.] 239
The said office memorandum was, however, clarified by a subsequent A

r -;
memorandum dated 8.1.1981 wherein it was laid down

"It has been laid down in CIL O.M. number quoted above that all
orders for promotions will be issued only after vigilance clearance.
The stage at which a vigilance enquiry should affect the promotion,
confirmation et. Of an employee of CIL and its subsidiaries has not B
been clearly defined in the above. Quoted office memorandum. Vigilance
inquiries talce considerable time to complete and in absence of a clear
indication regarding the point at which such inquiries should stand
in the ay of an officer's promotion, there is scope for confusion on
this score. This matter has· been engaging the attention of the
management for quite some time. Taking into consideration the existing
c
orders of the Government oflndia in this regard, the following decision
has been taken.

"All orders for promotions will be issued only after vigilance clearance.
However, vigilance clearance shall not be withheld for the mere fact
D
that a P.E. or R.C. has been registered by the CBI against an officer

..
• or that complaints are being looked into a preliminary enquiry
departmentally but no conclusion has been reacted about the prima
facie guilt of the officer. Vigilance clearance shall be withheld only
when:
E
(I) In the case of a Preliminary Enquiry, either by the CBI or
departmental agencies, the competent authority, on consideration of

- the results of the investigation, has formed the opinion that a charge-
sheet may be issued on specific imputations for departmental action,
and
~.....,..
F
(2) In case of a regular case, the competent authority has decided to
accord section for prosecution of the officer in Court.

I2. Until the competent authority arrives at such a conclusion, the
officer may be treated at par as per with orders in the matter of
promotion, confirmation etc. G
These instructions shall come into force with immediate effect."
- ->
13. It is not the case of the appellants that pursuant to or in furtherance
of the complaint received by the vigilance department, the competent authority
had arrived at a satisfaction as is required in terms of the said circulars that
H
240 SUPREME COURT REPORTS [2007] 5 S.C.R.

A a charge sheet was likely to be issued on the basis of a preliminary enquiry
held in that behalf or otherwise.
/- -
14. The circular letters issued by the appellants put restrictions on a
valuable right of an employee. They therefore, are, required to be construed
strictly. So construed there cannot be any doubt whatsoever that the conditions
B precedent contained therein must be satisfied before any action can be taken
in that regard.

15. We may also notice that a revised guideline was also issued on or ,..._ -
about 14.5.2002, wherein it was stated;

c "the Vigilance clearance shall be withheld only on the ground (a)
when officer is under suspension (b) when the officer, in respect of
whom a charge sheet has been issued and disciplinary proceedings
are pending; and (c) when an officer in respect of whom prosecution
for a criminal charge is pending."
D 16. The said circular although is not ipso facto applicable in this case,
clearly laws down the law otherwise prevailing.

17. Reliance placed by Mr. Sinha on Manoj Kumar Singh (supra) is
wholly misplaced. Therein no law was laid down. It does not contain any ratio
' ..
~

decidendi. The question as to whether in absence of any chargesheet or at
E least in absence of any satisfaction having been arrived by the disciplinary
authority that a prima facie case has been made out for proceeding against
an employee, the Vigilance clearance can be given or not, did not fall for
consideration at all therein. No issue in that behalf was framed; no argument
was advanced; no reason has been assigned in support of the said order. This
F Court merely stated;
....-,
"In the present case, the decision to take action against the appellant
had been formed on 20.1.99. Therefore, the appellant could not have
been granted vigilance clearance. In the circumstances, we see no
reason to interfere with the order under challenge. The appeal is,
G accordingly, dismissed. There shall be no order as to costs."

18. It is surprising that although the appellant is a 'State' within the { .._

-
meaning of Article 12 of the Constitution of India, it failed even to be fair to
this Court inasmuch as the subsequent office memorandum dated 8.1.1981
and/or 14.5.2002 were not brought to its notice. Had the subsequent office
H memorandums and in particular the one dated 8.1.1981 been brought to the
COAL INDIA LTD. v. SAROJ KUMAR MISHRA [S.B. SINHA, J.] 241

~ ·1
notice of the Court, we have no doubt in our mind that the terms of the order A
passed in Mano} Kumar Singh (supra) would have been different.

19. Similarly, reliance placed on Srikant Chaphekar (supra) by Mr.
Sinha, is equally mis-placed. Therein a Departmental Promotion Committee
considered the adverse remarks passed against the employee concerned. In
this case, a departmental promotion committee did not take into consideration B
the case of the respondents at all. They were indisputably entitled to be
considered for promotion having regard to the rule of seniority-cum-merit.
- ...., Although, in the said rule, merit has some role to play, but the promotion
would not be based only on merit.

20. See State of Kera/a and Anr. v. N.M Thomas and Ors., AIR(1976) c
SC 490, E. V. Chinnaiah v State ofAndhra Pradesh & Ors, [2005] 1 SCC 394,
Bhagwandas Tiwari and Ors. v. Dewas Shajapur Kshetriya Gramin Bank
and Ors., (2006) 11 SCALE 593, B. V. Sivaiah and Ors. v. K. Addanki Babu
and Ors. etc., [ 1998] 6 SCC 720].
D
21. A departmental proceeding is ordinarily said to be initiated only
, I
when a chargesheet is issued.
~
22. The floodgate argument also does not appeal to us. The same
appears to be an argument of desperation. Only because, there is a possibility
of floodgate litigation, a valuable right of a citizen cannot be permitted to be E
taken away. This Court is bound to determine the respective rights of the
parties.

23. See Zee Telefilms Ltd and Anr. v. Union of India and Ors., [2005]
4 SCC 649 and Guruvayoor Devaswom Managing Committee and Anr. v.
___, C.K. Rajan and Ors., [2003] 7 SCC 546. F
24. Even, in such a case, the Employer is not in a helpless situation.
Despite such promotion if the delinquent employee has suffered punishment,
subsequently appropriate steps may be taken on the basis thereof.

25. We, therefore, are of the opinion that there is no infirmity in the G
impugned judgments. The appeals being wholly without merits, are dismissed
..... -} with costs. Counsel's fee assessed at Rs. 50,000/-.

K.K.T. Appeals dismissed.