SRI JAGATHIGOWDA C.N. AND ORS.versusCHAIRMAN, CAUVERY GRAMINA BANK AND ORS.

A                  SRI JAGATHIGOWDA C.N. AND ORS.
                                        v.
           CHAIRMAN, CAUVERY GRAMINA BANK AND ORS.

                                 JULY 31, 1996

B             (KULDIP SINGH AND S. SAGH!R AHMED, JJ.)

         Se1vice Law :

          Regional Rural Banks Act, 1976-Guide/ines issued by NABARD-
C   Proniotions to the post to Senior Managers-Selection based on con1parative
    pe1fo11nance of respective candidates in Bank-On tlze basis of guidelines
    issued-Held, cannot be set aside unless it is shoivn to be arbitra1y.

          The Cauvery Gramina Bank, Mysore, a rural Bank sponsored by the
    State Bank of Mysore was established in 1976 under the Regional Rural
D   Banks Act, 1976. The NABARD which was esiablished in 1986 with a view
    to look after the agricultural and rural development in the country issued
    various circulars between 1984 and 1986 providing guidelines for promo-
    tions/appointments in the rural banks to the posts of Senior Manager/Area
    Managers and General Managers. The circular issued in April 1986 indi-
    cated that a Director's committee shall be constituted for effecting promo-
E   tions, and the selection of the eligible candidates should be based on
    performance of respective candidates to the Bank. The Bank issued its own
    guidelines in July 1986, based on circulars issued by NABARD and called
    for eligible officers to the post of Senior Manager and constituted a
    Director's Committee. In the interview, marks were awarded according to
F   the performance appraisal for:ns.

        The Respondents-unsuccessful employees of the rural Bank
  preferred writ petitions before the Single Judge of the Karnataka High
  Court for quashing the promotions to the post of Senior Managers. The
  respondents contended that the procedure adopted by the Director's Com-
G mittee was in violation of the guidelines issued by NABARD; and that the
  promotions were not made on the basis of seniority-cum-merit but by way
  of selection on the basis of interview held by the Committee constituted by
  the Banks. The Single Judge allowed the writ petition and quashed the
  promotions holding that the Bank violated the guidelines of the NABARD
H issued in the year 1984 and that the guidelines issued in 1986 by NABARD
                                        190
    JAGATIHGOWDA C.N. v. CHAIRMAN, CAUVER Y GRAMINA BANK 191

were not applicable to promotions in the cadre of Senior Managers. The       A
appeal filed by Appellants were dismissed on the ground that the service
record of recent past should have been taken into consideration and in
case there was nothing adverse against an officer he could not be denied
on the ground that some other officer junior to him was more meritorious.
The Division Bench held that the promotions were made on the basis of        B
selection in as much as marks were assigned on the basis of performance
appraisal and interview.

         Allowing the Appeal, this Court

     HELD : l. The Single Judge as also the Division Bench of the High       C
Court fell into patent error in quashing the promotions made by the Bank.
                                                                  (195-D]
      2. The 1986 guidelines issued by NABARD are applicable to all the
employees of the rural Banks. The High Court fell into patent error in
holding that the guidelines were not applicable to the impugned promo-       D
!ions. [195-E]

      3. TI1e cumulative reading of the two guidelines issued by NABARD
clearly shows that the promotions were to be made on the basis of the
comparative assessment of the performance appraisal of th,. Officers
concerned as has been done by the Director's committee of the Bank. The      E
instructions of the NABARD being in the nature of guidelines the promo-
tions made by the Bank cannot be set aside unless the same are arbitrary.
                                                                 [195-E-FJ
      4. The High Court was not justified in holding that the performance
appraisal could not be taken into consideration by the Director's Commit-    F
tee while considering the Officers for promotion to the higher rank. The
promotions made by the Bank are upheld in so far as the Appellants and
other similarly situated persons are concerned. [195-H; 196-A-B]

         CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9891 of
1996.                                                                        CJ
     From the Judgment and Order dated 5.2.92 of the Karnataka High
Court in W.A. No. 1854 of 1991.

         Ashish Dholakia, Tripurari Ray for Vineet Kumar for the Appel-
lants.                                                                       H
    192                   SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R.

A        M.L. Verma, S.N. Bhat, (S.K. Kulkarni} for M.T. George and M.M.
    Kashyap for the Respondents.

          The Judgment of the Court was delivered by

          KULDIP SINGH, J. Special leave granted.
B
          A learned single Judge of the Karnataka High Court allowed the
    bunch-petitions filed by the respondents and quashed the promotions made
    by the Cauvery Gramina Bank, Mysore (the Bank} to the cadre of Senior
    Managers on the short ground that the guidelines issued to the Bank by
C   the National Bank for Agricultural and Rural Development (the
    NABARD) were not followed while making the promotions. A Division
    Bench of the High Court upheld the judgment of the learned single Judge.
    The appellants - affected officers - have challenged by way of this appeal
    the correctness of the judgment of the learned single Judge and that of the
    Division Bench of the High Court.
D
          The Bank was sponsored by the State Bank of Mysore and estab-
    lished in October 1976 under the Regional Rural Banks Act, 1976. The
    NABARD was established in the year 1982 with a view to look after th,e
    agricultural and rural development in the country. The NABARD has been
E   issuing guidelines from time to time regarding the conditions of service of
    the employees of the rural banks in the country. The NABARD issued a
    circular dated December 31, 1984 providing guidelines for appoint-
    ments/promotions in the rural banks to the posts of Senior Managers/Area
    Managers and General Managers. The relevant part of the circular is as
    under:
F
             "Area Managers/Senior Managers :

             (a) Source of Recruitment : 100% by promotion from amongst
             officers working in bank. Promotions will be on the basis of
             seniority-cum-merit. If suitable officers are not available internally,
G            these posts could be filled by taking temporarily officers of the
             sponsor Banks and other banks/organisations on deputation."

    NABARD issued another circular dated April 7, 1986 which clarified the
    procedure and provided for the standard to be adopted for promotions in
H   the rural banks in India. The relevant part of the circular is as under :
  JAGATHIGOWDAC.N. '·CHAIRMAN, CAUVERY GRAM!NA BANJ([KULDIPS!NGH,J.) 193


       "For effecting promotions, the Board may constitute one or more A
       staff selection committees depending on the scale of the posts for
       which the candidates are to be interviewed, for the purpose of
       selecting the employees of the bank for the promotion to higher
       posts. The Committee should have at least three official directors
       of the Board excluding Chairman, of which one should be from B
       the National Bank or the Reserve Bank and one each from sponsor
       Bank and State Govt. respectively. Also one member from SC/ST
       community should be represented in such committees as indicated
       in our circular letter dated 9.12.1985. The selection of the eligible
       candidates should be based on performance of respective can-
       didates in the bank. The recommendation of the committees C
       should thereafter have the approval of the Board before effecting
                   11
       promotions.

The Bank issued its own guidelines by the circular dated July 17, 1986 for
appointment to the posts of Area Managers/Senior Managers and invited D
applications from eligible officers to be considered for promotion. The
relevant part of the circular is reproduced hereunder :

       "The question of strengthening the supervisory support at the field
       as well as at the Head Office level consequent on grmvth ;n the
       volume of business and geographical coverage has been examined        E
       by the Government of India in consultation with the NABARD.
       They have approved, in principle, creation of the posts of Area
       Managers/Senior Managers as and when required and justified by
       the volume and nature of business. In the light of the guidelines
       issued by the NABARD in this regard, the Board of Directors
       have approved creation of a few posts of Area Managers and            F
       upgradation of a few managers posts at Head Office to Senior
       Managers posts.

           The following guidelines have been laid down for appointment
       to the posts of Area Managers/Senior Managers.                        G
       SOURCE OF RECRUITMENT

       a.   100% by promotion from amongst the eligible officers;

       b.   Seniority-cum-merit;                                             H
    194                  SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R.

A           c.   If suitable officers are not available internally, the posts could
                 be filled-in by the officers of the sponsor bank.



            All the eligible officers arc being advised separately to appear for
B           promotional intervie\v.n

    The NABARD issued further guidelines on December 1, 1987 and
    February 10, 1988 but these instructions are not relevant for our purpose
    because the selection in dispute was held in the year 1986.             .
c         On July 23, 1986 the Chairman of the Bank constituted a Director's
    Committee to consider the cases of eligible officers for promotion in the
    light of the guidelines issued by the NABARD from time to time. The
    Committee called for interview 32 officers in accordance with their
    seniority. In interview the marks were awarded according to the perfor-
D   mance appraisal forms. The officers who obtained 85 marks out of 150,
    were shortlisted for promotion. As as result of the recommendations of the
    Director's Committee the promotion orders were issued on July 31, 1986.

           The main contention of the appellants before the High Court was
    that the promotions were made by the Director's Committee primarily on
E   the basis of the performance appraisal forms which were regularly main-
    tained in respect of each of the officers working in the Bank. The perfor-
    mance appraisal comprised of matters such as dimension of work, general
    intelligence, job knowledge, initiative and resourcefulness etc. The perfor-
    mance appraisal forms were regularly maintained in the course of the
F   service and contained a clause regarding overall suitability for promotion.

        The appellants were promoted on the basis of the service record
  maintained by the Bank in the form of performance appraisal. Some of the
  senior officers who were not found suitable on comparative consideration
  of the performance appraisal, challenged the promotion on the ground that
G the procedure adopted by the Director's Committee was in violation of the
  guidelines issued by the NABARD. The precise ground of challenge was
  that the promotions were not made on the basis of seniority-cum-merit but
  by way of selection on the basis of interview held by the Committee. A
  learned single Judge quashed the promotions holding that the Bank vio-
H lated the guidelines of NABARD issued in the year 1984. The learned
       JAGATI!IGOWDAC.N. '·CHAIRMAN, CAUVERY GRAMINA BANK [KULDIPS!NGll, J.I 195


    Judge further held that the April 1986 guidelines were not applicable to        A
    promotions in the cadre of Senior Managers. It was not disputed before
    the learned Judge that the service record of the writ petitioners was
    adverse.

    The .iudgmenl of the learned single Judge was upheld by the Division
                                                                                    B
    Bench of the High Court. The Division Bench came to the conclusion that
    the service record of recent past should have been taken into consideration
    and in case there was nothing adverse against an officer he could not be
    denied promotion on the grou11d that some other officer junior to him was
    more meritorious. According to the Bench the promotions were made on
    the basis of selection as much as marks were assigned on the basis of           c
    performance appraisal and intervie\V,


.          We have heard learned coun.sel for the parties at length. We are of
     the view that the learned single Judge and also the Division Bench of the
     High Court fell into patent error in quashing the promotions made by the       D
     Bank. The High Court has failed to appreciate that the NABARD circular
     dated April 7, 1986 clarified the earlier circular and specifically provided
     that "the selec\ion of the eligible candidates should be based on perfor-
     mance of respective candidates in the bank". The guidelines are applicable
    to all the employees of the rural banks. The High Court fell into patent
    error in holding that the guidelines were not applicable to the impugned        E
     promotions. We are of the view that the cumulative reading of the two
    guidelines issued by the NABARD (quoted above) clearly shows that the
    promotions were to be made on the basi~ of the comparative assessment
    of the performance appraisal of the officers concerned. This has precisely
    been done by the Director's Committee of the Bank. Even otherwise the           F
    procedure adopted by the Director's Committee was just and fair. The
    instructions of the NABARD being in the nature of guidelines the promo-
    tions made by the Bank cannot be set aside unless the same are arbitrary
    and unfair. It is settled proposition of law that even while making promo-
    tions on the basis of seniority-cum-merit the totality of the service record
    of the officer concerned has to be taken into consideration. The perfor-        G
    mance appraisal forms are maintained primarily for the purpose that the
    same are taken into consideration when the person concerned is con-
    sidered for promotion to the t\ighcr rank. The High Court, with respect,
    was not justified in holding that the performance appraisal could not be
    taken into consideration by the Director's Committee while considering the      H
    196                  SUPREME COURT REPORTS (1996] SUPP. 4 S.C.R.

A officers for promotion to the higher rank.
          We allow the appeal, set aside the judgment of the learned single
    Judge and also of the Division Bench of the High Court. We uphold the
    promotions made by the Bank so far as the appellants and other similarly
    situated persons are concerned. The writ petitions filed by the respondents
B   before the High Court shall stand dismissed. No costs.

    V.M.                                                      Appeal allowed.