Karnataka High Court
Sri H Shiva Rao vs Reserve Bank Of India on 24 October, 2024
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NC: 2024:KHC:46664
WP No. 20815 of 2014
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 24TH DAY OF OCTOBER, 2024
BEFORE
THE HON'BLE MR JUSTICE R. NATARAJ
WRIT PETITION NO. 20815 OF 2014 (S-RES)
BETWEEN:
SRI. H. SHIVA RAO
AGED ABOUT 61 YEARS,
NO.1080, 42ND CROSS,
KUMARASWAMY LAYOUT, 1ST STAGE,
BANGALORE-560 078,
RETIRED AS BRANCH HEAD IN
THIRD RESPONDENT COMPANY.
...PETITIONER (BY SRI. SUBRAMANYA P.D., ADVOCATE) AND:
1. RESERVE BANK OF INDIA CENTRAL OFFICE, HUMAN RESOURCE MANAGEMENT DEPARTMENT, SHAHID BHAGAT SINGH MARG, Digitally signed MUMBAI-400 001, by MARKONAHALLI REPRESENTED BY RAMU PRIYA THE CHIEF GENERAL MANAGER.
Location: HIGH COURT OF KARNATAKA 2. STATE BANK OF INDIA CORPORATE CENTRE, ASSOCIATE BANKS DEPARTMENT, NARIMAN POINT, MUMBAI-400 021, REPRESENTED BY THE CHIEF GENERAL MANAGER.
3. SBI DFHI LTD., REGISTERED AND HEAD OFFICE, VOLTAS HOUSE, 3RD FLOOR, 23, J.N.HEREDIA MARG, BALLARD ESTATE, -2- NC: 2024:KHC:46664 WP No. 20815 of 2014 MUMBAI-400 001, REPRESENTED BY THE MANAGING DIRECTOR AND CEO.
4. MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER SBI DFHI LTD., VOLTAS HOUSE, 3RD FLOOR, 23, J.N.HEREDIA MARG, BALLARD ESTATE, MUMBAI-400 001.
...RESPONDENTS (BY SMT. TANMAYEE RAJKUMAR, ADVOCATE FOR RESPONDENT NO.1;
SMT. SUVARNA M.N., ADVOCATE FOR SRI. PUTTEGOWDA K., ADVOCATE FOR RESPONDENT NOS.2 TO 4) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE COMMUNICATION/ORDER MADE IN ADMN/NO.2010-11/282 DATED 12.07.2010 PASSED BY THE FOURTH RESPONDENT HEREIN (ANNEXURE-V) BEING ARBITRARY, ERRONEOUS AND NOT SUSTAINABLE IN LAW AND ETC.
THIS PETITION HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 01.08.2024 AND COMING ON FOR PRONOUNCEMENT OF ORDER THROUGH VIDEO CONFERENCE THIS DAY, THE COURT MADE THE FOLLOWING:-
CORAM HON'BLE MR. JUSTICE R. NATARAJ CAV ORDER The petitioner has sought the following reliefs:
"(i) Issue a writ of certiorari or any other writ or order or direction, quashing the -3- NC: 2024:KHC:46664 WP No. 20815 of 2014 Communication/Order made in Admn/No.2010-
11/282 dtd: 12.07.2010 passed by the fourth respondent herein (Annexure-V) being arbitrary, erroneous and not sustainable in law.
(ii) Issue a writ of certiorari or any other writ or order or direction, quashing the Communication/Order made in Admn/No.2010- 11/349 dtd: 05.08.2010 passed by the third respondent herein (Annexure-X) being arbitrary, erroneous and not sustainable in law.
(iii) Issue a writ of certiorari or any other writ or order or direction, quashing the Communication/Order made in Admn/No.2011- 12/220 dtd: 16.07.2011 passed by the fourth respondent herein (Annexure-Z_1) being arbitrary, erroneous and not sustainable in law.
(iv) Issue a writ of certiorari or any other writ or order or direction, quashing the Communication/Order made in No.Admn/No.2011-12/603 dtd: 30.01.2012 passed by the third respondent herein (Annexure-Z_3) being arbitrary, erroneous and not sustainable in law.
(v) Issue a writ of certiorari or any other writ or order or direction, quashing the Communication/Order made in -4- NC: 2024:KHC:46664 WP No. 20815 of 2014 No.Admn/No.2013-14/GV/455 dtd: 09.12.2013 passed by the third respondent herein (Annexure-Z_10) being arbitrary, erroneous and not sustainable in law.
(vi) Direct the third respondent company herein to pay differential amount of pay and allowances granting pay scales and allowances "in line" with that obtaining in the first respondent the RBI during the tenure of service of the petitioner herein in the third respondent herein in terms of the Second paragraph of the letter of offer dtd:
08.05.1995 with interest and payment of compensation equal to salary for loss of service due to premature retirement of the petitioner from service being discriminatory, erroneous and opposed to law, equity and justice alternatively Direct the first and second respondents herein to pay differential amount of pay and allowances granting pay scales and allowances "in line" with that obtaining in the first respondent the RBI during the tenure of service of the petitioner herein in the third respondent company herein as per the Second paragraph of the letter of offer dtd: 08.05.1995 with interest and payment of compensation equal to salary for loss of service due to premature retirement of the petitioner from service and recover from third -5- NC: 2024:KHC:46664 WP No. 20815 of 2014 respondent herein in the interest of justice and equity."
2. The petitioner contends that he was appointed on 14.03.1973 by the respondent No.1 in the cadre of Clerk-
GradeII/C.N Ex. Grade II. His appointment was confirmed on 01.01.1977. He was thereafter granted promotion to higher grades. From 07.08.1997, he was promoted as a Staff Officer, a Grade 'A' post and was transferred from Mumbai to Bengaluru.
2.1 The petitioner claimed that the respondent No.1 had established a new entity called the Discount and Finance House of India Limited (henceforth referred to as 'DFHI' in short) on 08.03.1988. The majority of its shares was held by the respondent No.1 and other Public Sector Banks while the remaining shares were held by all India financial institutions. DFHI was recognized as a subsidiary of RBI and a deemed Government Company under Section 619B of the Companies Act, 1956. The Chairman of the Board of Directors of DFHI used to be a Deputy Governor of RBI who invariably was a member of the Central Board of Directors of RBI. The objective of DFHI inter alia was to develop a market for money market -6- NC: 2024:KHC:46664 WP No. 20815 of 2014 instruments and as a primary dealer creating infrastructure in the Government security markets. It was to ensure development of underwriting and market making capabilities for Government Sector entities, improving secondary market trading system and making primary dealer an effective conduit for conducting open market operations. Before the establishment of DFHI, some of the above functions were managed by the Reserve Bank of India ('RBI' for short).
2.2 It is claimed that DFHI was owned and controlled by RBI and most of the officers of RBI were deputed as officers in DFHI. Likewise, the petitioner was deputed for a period of two years at the branch of DFHI at Bengaluru when it was opened in February 1991, in terms of an order dated 09.02.1991. The petitioner completed two years deputation in DFHI and his deputation was continued till 07.06.1995.
2.3 Later, the RBI started divesting its shares in DFHI and transferred majority of its stake to the respondent No.2 - State Bank of India ('SBI' for brevity) and its associate banks and other nationalized banks and all India financial institutions where respondent No.2 was holding majority shares. -7-
NC: 2024:KHC:46664 WP No. 20815 of 2014 2.4 The petitioner contends that the process of absorption of officers/staff deputed from RBI to DFHI started some time during 1992 and by the end of 1995, there were 15 such officers / staff absorbed into the service of DFHI. The petitioner was also offered by RBI on 08.05.1995, an option to be absorbed in DFHI. He was issued with a letter containing the terms of absorption. The petitioner accepted the offer agreeing to the terms mentioned in the letter dated 08.05.1995. Accordingly, he was absorbed into DFHI on 08.06.1995 after taking voluntary retirement from the RBI on 07.06.1995.
2.5 He contends that the letter offering absorption was subject to the terms and conditions mentioned in an annexed document which contained clauses 1 to 19. Each of these clauses related to a specific and independent subject. He claims that the scales of pay and grades are separately indicated in paragraph No.2 of the letter and has to be read independently, without reference to paragraph No.1 of the letter and clause Nos.1 to 19 in the annexure. As per paragraph No.2 of the letter, the scales of pay in DFHI would be on par with the pay scales and grades in the RBI. Therefore, the -8- NC: 2024:KHC:46664 WP No. 20815 of 2014 petitioner contends that he was assured of a pay scale and grade in DFHI that would be in line with the pay scale and grade in the RBI not only at the time of absorption but till he retired from service. He contends that at the time of absorption in DFHI, he held the post of officer in Grade 'A' / Assistant Manager post in RBI. As per the terms of the 3rd paragraph of the letter of offer, he obtained voluntary retirement from RBI on 07.06.1995 and was absorbed into DFHI on 08.06.1995. He was placed at a pay of Rs.4,800/- in the post of officer in Grade 'A'/Assistant Manager since the petitioner was obtaining pay scales and allowances as per the old revision effective from 01.11.1987 in the RBI.
2.6 He contends that the revision of pay scales and allowances was due from 01.11.1992 and the same was granted by the RBI vide its Circular No.5 dated 20.11.1995 with retrospective effect from 01.11.1992. Since the petitioner was absorbed into DFHI on 08.06.1995, the respondent No.1 had to calculate the revised pay and allowances of the petitioner from 01.11.1992 to 07.06.1995. Accordingly, the petitioner was paid the arrears by RBI while DFHI paid the revised pay scales and allowances in Grade 'A' from 08.06.1995 as promised under the -9- NC: 2024:KHC:46664 WP No. 20815 of 2014 offer letter. He was fitted in the pay at Rs.9650/- as on 08.06.1995 which was the maximum pay scale of Grade 'A' officer in the RBI effective from 01.11.1992. Since the petitioner reached the maximum in the pay scale of an officer in Grade 'A' in the RBI, he was given increment in the pay scales of combined Grade 'B' and 'C' as an incentive for agreeing to be absorbed in DFHI and later fixing his pay scales in line with that obtaining in the RBI for an officer Grade 'C' effective from 01.11.1997.
2.7 The petitioner was thereafter upgraded to the post of officer in Grade 'C' / Vice President which is equivalent to the post of Officer in Grade 'C' / Assistant General Manager in the RBI. He contends that DFHI issued a letter dated 17.07.2000 revising the pay scales and allowances for a period of five years and with retrospective effect from 01.01.1999 and the petitioner was placed in the pay scale Rs.12300-375-13050- 400-13850-425-17250-EB-425-19375 and his basic pay was re-fixed at Rs.17,250/- and allowances were also re-fixed.
2.8 He contends that the age of superannuation in the banking sector was 58 years when the petitioner accepted the
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NC: 2024:KHC:46664 WP No. 20815 of 2014 offer to be absorbed in DFHI. Thereafter the Rule relating to superannuation was changed in the banking industry extending service up to 60 years of age. Respondent No.1 brought similar Rules in the year 1998 and DFHI also incorporated similar provisions in DFHI (Staff) Amendment Rules, 1998 vide office order dated 28.12.1998. As a result, respondent No.1 transferred its portion of gratuity to the respondent No.3 considering the age of retirement of the petitioner as 60 years as was done in the case of the other absorbed officers.
2.9 The petitioner contends that the pay scales and allowances are revised in the RBI once in five years and are made effective from the first day of November of the particular year. Accordingly, the RBI issued Circular No.9 dated 01.01.2001 for revision of pay scales and allowances of officers with retrospective effect from 01.11.1997. When the aforesaid Circular as issued, the pay scale and the allowances of the petitioner were already in line though not equal to the Grade 'C' employees in the RBI. However, for nearly 1 year 2 months i.e., from 01.11.1997 to 31.12.1998, respondent No.3 did not reset the pay and allowances of the petitioner in line with the Grade 'C' officers in the RBI.
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NC: 2024:KHC:46664 WP No. 20815 of 2014 2.10 He contends that his pay of Rs.18,525/- in March 2002 was in line with the pay of an officer in Grade 'C' in the RBI which included the maximum sum of Rs.16,900/- in the pay scale plus a special pay of Rs.475/- and two stagnation increments of Rs.475/- each. Thereafter, DFHI issued another revision of pay scales and allowances in terms of an order dated 11.04.2002 revising the pay scales of the employees in DFHI with retrospective effect from 01.04.2002. As a result, the petitioner was placed in the pay scale of Rs.13500-400- 15500-450-17750-500-20750. His basic pay was fixed at Rs.20,250/- and the allowances were correspondingly revised. The respondent No.3 increased the House Rent Allowance (HRA) effective from April 2002 to those officials not availing residential accommodation from the Company.
2.11 The petitioner contends that with the complete divesting of shares in DFHI by the RBI in March 2002, the respondent No.2 acquired more than 50% of shares in DFHI and therefore, it became a subsidiary of SBI in March 2003. Similarly, another subsidiary of SBI named SBI Gilts Limited merged with DFHI in the year 2004 under a scheme of amalgamation which was duly approved by the High Court of
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NC: 2024:KHC:46664 WP No. 20815 of 2014 Bombay. The DFHI was subsequently renamed as respondent No.3 and a fresh certificate of incorporation was issued.
2.12 The petitioner contends that the RBI issued a Circular No.10 dated 21.11.2005 revising the pay scales and allowances of the officers in the RBI with retrospective effect from 01.11.2002. It is contended that when the RBI issued the aforesaid circular, the pay scale and allowances of the petitioner were significantly lower than that was granted in the RBI for Grade 'C' effective from 01.11.2002. Therefore, there was a need for resetting the pay scale and allowances of the petitioner in the respondent No.3 so that it is in line with that of a Grade 'C' officer in the RBI.
2.13 He contends that the respondent No.3 had a good record of profit after tax. He claimed that for the years 2008- 09, 2009-10, 2010-11, 2011-12 and 2012-13, it had the profit of Rs.66.95 crores, Rs.89.23 crores, Rs.56.94 crores, Rs.43.51 crores and Rs.80.29 crores respectively. He contends that being aggrieved by the significantly lower pay and allowances given to him when compared to the pay and allowances given to Grade 'C' officer in RBI, the petitioner submitted a
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NC: 2024:KHC:46664 WP No. 20815 of 2014 representation dated 02.09.2006 to the respondent No.4 to reset his pay and allowances. However, the same was not done.
2.14 He contends that for nearly 5 years and 2 months i.e., from 01.11.2002 to 31.12.2007, his pay and allowances were not in line with that of an officer in Grade 'C' in the RBI. Therefore, he contends that the respondent No.3 has violated the terms of absorption. He contends that the respondent No.3 issued a letter dated 24.01.2008 revising the pay scales and allowances with retrospective effect from 01.01.2008 and the basic pay of the petitioner was fixed at Rs.23,520/- and other admissible allowances were also revised.
2.15 The petitioner contends that in the year 1998, DFHI amended Rule No.16 of the DFHI (Staff) Rules, 1995 (for short, 'the Rules, 1995') vide an office order dated 28.12.1998 enhancing the age of superannuation from 58 to 60 years with effect from 01.12.1998.
2.16 He contends that on he attaining 58 years on 31.07.2010, he was asked to retire from service under the then prevalent SBI DFHI Limited Staff Service Rules, 2007 (for
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NC: 2024:KHC:46664 WP No. 20815 of 2014 short, 'the Rules, 2007'). The petitioner therefore dissatisfied with the discriminatory treatment meted out to him, submitted a representation dated 30.06.2010 requesting the respondent No.4 to extend him the benefit of extended superannuation age of retirement. The respondent No.4 rejected the request of the petitioner by his communication dated 12.07.2010. The petitioner thereafter submitted a detailed representation dated 19.07.2010 before the respondent No.3 requesting it to extend the age of retirement. Nonetheless, the petitioner was retired from service on 31.07.2010, even before receiving any reply from the respondent No.3. The respondent No.3 then rejected the appeal of the petitioner by a communication / order dated 05.08.2010 without assigning any reason.
2.17 The petitioner contends that he had worked for nearly 22 years and 3 months in the RBI and for 15 years 1 month in respondent No.3.
2.18 He contends that respondent No.1 issued the Circular No.4 dated 09.09.2010 revising the pay scales and allowances of officers in the RBI with retrospective effect from 01.11.2007. He contends that though the respondent No.3 vide
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NC: 2024:KHC:46664 WP No. 20815 of 2014 letter dated 24.01.2008 had revised the pay scales and allowances with effect from 01.01.2008, the same was not in line with the pay of a Grade 'C' officer in the RBI. The petitioner on coming to know of the circular dated 09.09.2010 submitted a representation dated 18.01.2011 to the respondent No.4 explaining the injustice meted out to him in not resetting his pay and allowance and also referring to the difference in pay scales. The respondent No.4 rejected the claim of the petitioner vide letter dated 16.07.2011. The petitioner submitted a detailed appeal dated 22.08.2011 before the respondent No.3. The respondent No.3 by a communication dated 30.01.2012, rejected the claim of the petitioner and affirmed the order of the respondent No.4.
2.19 The petitioner again submitted a representation dated 25.04.2012 requesting the respondent No.1 to look into his grievance regarding the violation of the terms of the letter of offer dated 08.05.1995. The respondent No.1 erroneously interpreting the second paragraph of the letter dated 08.05.1995 and clause 10 of the annexure to the offer letter, advised the petitioner to approach the respondent No.3 by its communication dated 04.06.2012. Therefore the petitioner
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NC: 2024:KHC:46664 WP No. 20815 of 2014 submitted representation dated 03.09.2012 to the Executive Director (Administration) of the RBI and another representation dated 07.03.2013 to the Hon'ble Governor of the RBI. The petitioner did not receive any affirmative action from the respondent No.1 though he received replies from the other authorities on 09.12.2012 and 25.04.2013.
2.20 The petitioner again submitted representation dated 18.06.2013 to the Central Board of Directors of the RBI to intervene and secure the relief to the petitioner. However, the Deputy Governor (HRK) of the RBI instructed the Executive Director (RG) of the RBI to speak with the respondent No.3 informally and impress upon it for payment of some compensation. Accordingly, an office note was recorded and instruction was complied in July 2013.
2.21 However, by a communication dated 02.08.2013 issued by the Assistant General Manager of RBI, he was again advised to approach the respondent No.3. He contends that since he did not receive any response from the respondent No.3, he submitted another representation to it and to the respondent No.1 on 16.09.2013. He claimed that there was no
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NC: 2024:KHC:46664 WP No. 20815 of 2014 response from the respondent Nos.1 and 3 which forced him to file another detailed representation dated 03.12.2013 with the respondent No.2, to intervene in the matter and grant relief to the petitioner. The respondent No.3 then issued a communication dated 09.12.2013 denying its liability. The respondent No.2 then addressed a communication dated 02.01.2014 to the petitioner referring to the communication of the respondent No.3 and declining to intervene in the matter.
2.22 The petitioner then again submitted representations dated 16.12.2013 and 10.02.2014 to the respondent No.3, comprehensively replying to all the earlier communications. Following this, the respondent No.3 replied on 22.02.2014 and 24.02.2014 again declining to entertain the request of the petitioner. Following this, the respondent No.2 addressed a communication dated 18.03.2014 declining to interfere in the matter. The petitioner is therefore before this Court seeking the aforesaid reliefs.
3. Learned counsel for the petitioner contended that when the petitioner was assured of protection of his pay, pay scale and allowances on his absorption at DFHI, he was entitled
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NC: 2024:KHC:46664 WP No. 20815 of 2014 to protection of his pay. He contends that the petitioner was also entitled to the revised pay scale and allowances in view of time bound revision while he was employed at the respondent No.1. He contends that the denial of this benefit is arbitrary and unconscionable.
4. The writ petition is opposed by the respondent Nos.2, 3 and 4. They contend that as per the offer letter dated 08.05.1995 seeking option of the petitioner for absorption, it was stated as follows:
"Discount & Finance House of India Limited is prepared to absorb your services on the terms and conditions indicated in the Annexure.
2. The scales of pay in D.F.H.I will be in line with pay scales and grades obtaining in Reserve Bank of India.
3. Before your appointment in D.F.H.I., you will have to seek voluntary retirement from the Bank's service under Regulation 26(3)/3(A) of the Reserve Bank of India (Staff) Regulations 1940. The Bank would be prepared to waive the required notice period to enable you to take up the appointment in D.F.H.I."
5. They contend that the terms and conditions for such absorption were annexed to the said letter. Condition Nos.6
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NC: 2024:KHC:46664 WP No. 20815 of 2014 and 10, which are relevant were referred and the same are extracted below:
"6. Superannuation benefits other than pension will continue to be admissible to the members of the staff to the extent as per the existing Rules obtaining in the Reserve Bank of India until such time as the Discount and Finance House of India Limited frames its own Scheme. The superannuation age will be 58 years except in case of employees in Class IV and it will be 60 years in case of an employee in Class-IV."
... ... ...
10. The Reserve Bank of India Staff Regulations will be applicable to the members of the staff in respect of all matters until such time as the Discount and Finance House of India Limited frames its own Rules. As and when the Discount and Finance House of India Limited Rules are framed they will be applicable to all members of the staff."
Therefore, they contend that as per the aforesaid terms, a person absorbed would be entitled to superannuation benefits other than pension as is admissible to the members of the staff as per the existing Rules in the RBI until the DFHI/Company frames its own scheme. It also mandated that the age of superannuation would be 58 years except in case of employees in Class-IV who would superannuate at the age of 60 years.
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NC: 2024:KHC:46664 WP No. 20815 of 2014 They contend that after the petitioner submitted his voluntary retirement from respondent No.1 and was absorbed into the services of the DFHI/Company, he was governed by the service Rules of the RBI until the Company framed its own scheme.
6. They contend that after the absorption of the petitioner on 07.06.1995, the Board of Directors of the Company/DFHI in its meeting held on 24.07.1995, resolved as follows:
"Agenda Item No.8 Approval of Staff Regulations and other allied schemes The Managing Director informed the members of the Board that it has become necessary for the Company to have its own staff rules/regulations with the gradual absorption of most of the staff initially availed on deputation.
He further mentioned that the said rules have been framed by Shri. Y.M.Paranjpe, retired senior officer of the Reserve Bank of India keeping in view similar rules/schemes followed by Reserve Bank of India and the requirements of various relevant statutes.
After discussions, the Board passed the following resolution unanimously:
"RESOLVED THAT the DFHI Staff Rules and Rules relating to Leave Fare Concession, Travelling and Halting
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NC: 2024:KHC:46664 WP No. 20815 of 2014 Allowance, Consumer Articles Loan, Vehicle Loan and Reimbursement of Conveyance Expenses, as circulated among the Directors be and are hereby approved."
7. They contend that it is evident that the Board of Directors of the Company/DFHI felt it necessary that the Staff Rules and Rules relating to leave, fare concession and other service benefits were to be approved by circulation amongst the Directors in view of similar Rules/Schemes followed by the respondent No.1 and most of the employees of the DFHI were either from SBI or from respondent No.1.
8. They contend that in the year 1997, when pay revision was on the anvil, the Managing Director of the Company by a memorandum dated 20.02.1997, proposed revision of pay of the employees of the Company under an agenda by de-linking the pay scales of the RBI as applicable to the employees who were absorbed on deputation from the RBI and to adopt the pay scales of the Company from 1997 onwards. The Board dealing with the issue at the meeting held on 05.03.1997 was pleased to approve the proposal in terms of the following resolution:
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NC: 2024:KHC:46664 WP No. 20815 of 2014 "AGENDA ITEM NO.6 Proposal for revision of pay of the employees of the Company The Board of Directors agreed, in principle, with the recommendations made by the Managing Director of the Company. However, they suggested certain modifications which are listed below:
1. Marginally revise upward the pay scales of the employees of the Company in different categories and completely delink these from the pay scales of RBI.
2. Alongside changes in scales, the job contents of Stenographer(s) and Office Assistants could be expanded and their designations changed to reflect their movement to a non-workman position.
3. Provision of leased accommodation to officers and rationalization/extension of other facilities could be examined keeping in view, among other factors, market conditions, improvement in productivity and cost to the Company.
4. Review and re-designate the various posts in the Company in line with the Company's structure, business needs and current market practices.
The Board authorised the Managing Director to finalise the issues at items (1) and (2) in consultation with the Chairman of the Company and report the matter to the Board at its next meeting.
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NC: 2024:KHC:46664 WP No. 20815 of 2014 Thereafter the following resolution was adopted unanimously:
"RESOLVED THAT the pay and perquisites of the employees in the Company should stand completely delinked from those in RBI and the Managing Director of the Company be and is hereby authorized to finalise, in consultation with the Chairman of the Board, revision in the pay scales of employees of the Company at all levels on the lines recommended with some improvements and create positions of Secretary and Executive Secretary.
RESOLVED FURTHER THAT THE Managing Director of the Company be and is hereby authorized to incur necessary expenditure pursuant to the proposed changes."
9. Therefore, it is contended that the petitioner became an absorbed employee from the respondent No.1 in the Company and in terms of Clause 10 of the terms and conditions found in Annexure to the offer letter dated 08.05.1995, the petitioner is bound by the resolution of the Board which dealt with the revision of pay scales from time to time. The petitioner chose not to question the said resolution of the Board as the pay scale that was made applicable to him was beneficial than that was prevalent in the respondent No.1. They contend that the petitioner having chosen to keep quiet for 13 years
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NC: 2024:KHC:46664 WP No. 20815 of 2014 cannot now claim pay scales of the RBI on the ground that the scales of the pay of the employees of the RBI are more beneficial to him.
10. They further contend that the respondent No.3 had initially revised the pay scales of all the staff with effect from 01.01.1997 as approved by the Board of the Company/DFHI consequent to which the salary of the petitioner was also revised based on the pay scales approved by the Board of the Company and not based on the RBI Service Rules. They contend that this revision of salary did not contain any provision for payment of salary to ex-RBI staff absorbed in the Company as per the RBI Service Rules. They contend that since the arrears were paid up to 31.12.1996 on the basis of revision of pay scales in the RBI, as those Services Rules were applicable up to 01.01.1997 only. They contend that in the year 2000, when pay scales had to be revised with effect from 01.01.1999, the Board resolved to revise the pay scales in tune with the pay scales of the Company and there was no mention of the revision of pay scales that were prevalent in the RBI or elsewhere. The relevant portion of the said resolution of the Board is extracted below:
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NC: 2024:KHC:46664 WP No. 20815 of 2014 "AGENDA ITEM NO.17 Proposal for pay revision of the employees of DFHI due from January 1, 1999:
The contents of the Memorandum were noted by the Board. A number of queries were made by the Directors seeking clarifications which were provided by the Managing Director of the Company to the satisfaction of the Board. The recommendations contained in the proposal for pay revision which were made to the Board for its consideration and approval are enumerated below:
1. The effect of pay revision may be given from January 1, 1999 i.e., immediately after the expiry of the previous wage agreement which expired on December 31, 1998 and that this agreement will remain valid for five years i.e. next agreement will fall due on January 1, 2004.
... ... ... ..."
11. Later in the year 2002, the Company had to revise the compensation structure. Therefore, the Board at its meeting held on 28.03.2002, resolved to revise the compensation structure of the Company independently and not in tune with the RBI Service Rules. They contend that the attempt of the petitioner to draw a comparison between the pay scales of the Company and the RBI is ipse dixit and was not based on any Service Rules.
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NC: 2024:KHC:46664 WP No. 20815 of 2014
12. They contend that the option for absorption should be read holistically and not in fragments. They contend that the emphasis of the petitioner on the contents of the letter dated 08.05.1995 and avoiding reference to the terms and conditions mentioned in the Annexure to it, was misleading. They contend that the option for absorption was clear and unequivocal and it was made clear that the Rules of RBI could be applicable only till such time the Company framed its own Rules. They further contend that DFHI is a non-banking financial Company and therefore, the Rules as applicable to the Banking industry would not mutatis mutandis apply to a non- banking financial Company until the Company specifically approves such application of the Rules made elsewhere by the Board of the Company. They contend that the petitioner joined the service of the Company and he continued to draw salary in line with the salary obtaining in the RBI as the Company was yet to frame its own Rules. The claim of the petitioner is that once the RBI revised the scales of pay and allowances to all the officers of the Company, the same is applicable to the Company, is based on an administrative Circular dated 01.01.2001 issued by RBI. However, in para No.1 of the said
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NC: 2024:KHC:46664 WP No. 20815 of 2014 Circular, it is clearly indicated that it is applicable only to officers of the RBI. They contend that the petitioner had sought voluntary retirement from the RBI and therefore, he is ceased to be an employee of the RBI and hence the Circular No.9 issued by the RBI dated 01.01.2001 was not applicable to him. They contend that the pay scales of the staff of the Company was revised with effect from 01.04.2002 resulting in a corresponding revision of the pay scale of the petitioner. They further contend that in the year 2004 i.e., on 19.03.2004, the Hon'ble High Court of Judicature at Bombay by an order in terms of Section 391 read with Section 394 of the Companies Act, 1956, DFHI was amalgamated with SBI Gilts Limited and all the assets of the Company were transferred to SBI Gilts Limited. They contend that the Company came to be known as SBI DFHI Limited from 19.03.2004 and onwards. The Board of Directors of respondent No.3 met on 11.01.2007 to determine the service conditions of employees who were working in DFHI and continued to work with SBI DFHI Limited and the Uniform Service Rules were brought with effect from 01.01.2007 which were placed before the Board on 11.01.2007. The Board passed the following resolution:
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NC: 2024:KHC:46664 WP No. 20815 of 2014 "AGENDA ITEM NO.7 Uniform Service Rules Memorandum No.7/104/2007 dated December 22, 2006 regarding Policy for Uniform Service Rules for the Company was placed before the Board.
After discussion, the Board -
"RESOLVED THAT approval be and is hereby given for the policy of Uniform Service Rules of the Company as detailed in the Memorandum No.7/104/2007 dated December 22, 2006 placed on the table of the meeting duly initialed by the Managing Director and Chief Executive Officer and Executive Vice President of the Company for purposes of identification."
Therefore, the Uniform Service Rules were made applicable with effect from 01.01.2007 to all employees working in respondent No.3.
13. They contend that as regards the age of retirement, Section 4 of the Uniform Service Rules reads as under:
"Section 4 - Superannuation and retirement
15.(1) An employee shall retire after completion of 30 years of service or 58 years of age whichever occurs first, unless extension in service has been granted by the Competent Authority -
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NC: 2024:KHC:46664 WP No. 20815 of 2014 Provided that on an employee completing 30 years of service or 50 years of age whichever occurs first, the case for extension in service or otherwise will be reviewed at biennial (2 years) intervals. Based on the review the Competent Authority may, at his discretion, grant extension of service for a period not exceeding two (2) years at a time. However, such extension in service shall not be granted beyond 58 years of age being the age of retirement (2) Notwithstanding anything to the contrary contained in sub rule (1) above, the Company may, at its discretion, retire an employee at any time after completion of 50 years of age.
(3) An employee who attains the age of superannuation on any day other than the first of a calendar month, shall retire on the last day of that month.
(4) An employee who has attained the age of 50 years may voluntarily retire after giving three months' notice in writing to the Competent Authority subject to the provisions of Rules No.14.
(5) Notwithstanding anything contained in this Rule, where an employee has balance of leave to the credit of his privilege leave account as on the date of retirement, he may be paid a lumpsum amount which would be equivalent of pay as defined in Rule 3(f) of these Rules, for the unavailed privilege leave subject to a maximum of eight months pay plus dearness allowances in respect thereof.
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NC: 2024:KHC:46664 WP No. 20815 of 2014 Explanation: "Date of Retirement" means the date on which the employee attains the age of 58 years or the date on which he is retired by SBI DFHI Ltd. under sub- rule (1) of this Rule, or the date on which the employee voluntarily retires in terms of sub-rule (4) of this Rule, as the case may be."
Therefore the age of retirement in terms of the Rules of respondent No.3 is 58 years and the said Uniform Service Rules are applied uniformly to all employees. Therefore, they contend that retiring the petitioner on completing 58 years is strictly in accordance with the Service Rules.
14. They contend that after the merger of DFHI with SBI Gilts, new company, namely, respondent No.3, was formed on 15.06.2004 with retrospective effect from 01.04.2003. In the scheme of amalgamation, there was no reference whatsoever that the service conditions in RBI could be made applicable to employees of respondent No.3. They contend that the claim of the petitioner that he ought to have been given the benefit of the revision of pay scales of RBI on 21.11.2005 with effect from 01.11.2002 is unacceptable as the petitioner had voluntarily retired from RBI on 07.06.1995. The respondents have copiously referred to the judgments of the Hon'ble
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NC: 2024:KHC:46664 WP No. 20815 of 2014 Surpeme Court in: B. Bharat Kumar v. Osmania University [(2007) 11 SCC 58]; Sureshchandra Singh v. Fertilizer Corporation of India Limited [(2004) 1 SCC 592]; Naresh Kumar v. Department of Atomic Energy [(2010) 7 SCC 525] and Karnataka Power Corporation Limited v. K. Thangappan [(2006) 4 SCC 322]. They contend that the petition is also liable to be dismissed as the petitioner had approached the Court with unclean hands. They contend that once the petitioner took voluntary retirement from respondent No.1 on 07.06.1995, it would not lie in his mouth to claim that he is entitled to the pay scale and the allowances as applicable to the employees of the RBI. Consequently, they contend that the petitioner being governed by the Services Rules of the respondent No.3, which superannuates its employees at the age of 58 years, he cannot contend to the contrary and claim that he is entitled to continue in service in respondent No.3 till 60 years.
15. After considering the case of the petitioner and the respondent No.3, it is evident that the petitioner has two claims viz., (i) resetting his pay to bring it on par with the scale of pay
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NC: 2024:KHC:46664 WP No. 20815 of 2014 prevalent in the RBI and (ii) extending his age of superannuation till the age of 60 years.
16. It is relevant to note that respondent No.1 established DFHI which was a specialised Agency, with an objective of developing a market for money market instruments, creating infrastructure in the Government securities market etc. This Agency was owned and controlled by the respondent No.1, which had deputed officers on its roll to DFHI for all operations. The petitioner too was one such officer who was deputed from respondent No.1 to DFHI on 09.02.1991 for a period of two years. Therefore, he was governed by the Reserve Bank of India (Staff) Regulations for all purposes relating to his service. It is stated that the process of absorption of the employees in DFHI was commenced in the year 1992, which is not disputed. Later, the respondent No.1 divested its shares in DFHI and transferred majority of its shares to respondent No.2 and its Associate Banks and other nationalised Banks and All India Financial Institutions and since respondent No.2 held majority of the shares, DFHI became a subsidiary of respondent No.2 and was re-named as respondent No.3. It was therefore inevitable for the respondent No.3 to
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NC: 2024:KHC:46664 WP No. 20815 of 2014 decide the fate of the employees who were deputed from respondent No.1. Thus on the initiation of the respondent No.3, the process of absorption of the existing employees in DFHI commenced which culminated in an offer to the employees of respondent No.3 to be absorbed in the respondent No.3. The petitioner too was offered to be absorbed in respondent No.3 in terms of a communication of respondent No.1 dated 08.05.1995 on terms and conditions mentioned therein as well as the terms and conditions mentioned in the annexure to the letter. The condition precedent for such absorption was that the petitioner had to submit his voluntary retirement from respondent No.1. Accordingly, the petitioner, who perhaps hoped of a better prospect having regard to the specialised skill and competence he had acquired in a niche field, opted to be absorbed in respondent No.3 as the terms of absorption, did give an impression that the service benefits as obtained in respondent No.1 would be continued. It was also held out that the pay that the petitioner was drawing while in service with respondent No.1 would be protected. Therefore, he submitted a request for voluntary retirement from respondent No.1 on 07.06.1995 and he was absorbed into the services of
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NC: 2024:KHC:46664 WP No. 20815 of 2014 respondent No.3 on 08.06.1995. Once the petitioner exercised option to be absorbed in the respondent No.3, the same was irrevocable and final and from the date of absorption, he had to forego all rights and claims relating to service in respondent No.1.
17. The letter dated 08.05.1995 provided that the scales of pay in DFHI would be in line with the pay scales and grades obtaining in respondent No.1 and for all other incidents of service such as accrued superannuation benefits, unavailed leave fare concession set and unavailed ordinary leave lying to the credit of each person, the absorption and consequential appointment of members of the staff in the DFHI shall be treated, virtually, as a transfer of service from the RBI to the DFHI. Those employees who sought voluntary retirement from RBI could claim superannuation benefits including encashment of balance of ordinary leave. They were entitled to continue their membership to the Reserve Bank of India Medical Fund Scheme. The superannuation benefits other than pension was admissible to the members of the staff to the extent as per the existing Rules obtaining in the RBI until such time as the DFHI framed its own scheme. Likewise, the RBI Staff Regulations
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NC: 2024:KHC:46664 WP No. 20815 of 2014 would apply to the members of the staff in respect of all matters until such time as DFHI framed its own Rules.
18. The petitioner was granted the same scale of pay that he was drawing in respondent No.1 on the date of absorption. After such absorption, the respondent No.3 resolved at a meeting of the Board on 05.03.1997 to delink the pay scale of its employees from the pay scales of RBI. Later respondent No.3 revised the pay scale of the petitioner with effect from 01.01.1997 in terms of the communication dated 31.03.1997 and placed the petitioner in the scale of Rs.7200- 325-9800-350-10150-EB-350-11200 and his pay was fixed at Rs.10,500/- per month with effect from 01.01.1997. The salary of Rs.10,500/- per month was paid from April 1997. In respect of the salary for the period from 08.06.1995 till 31.03.1997, the arrears of salary based on the revision of pay scale in respondent No.1 was offered to be paid. The revised pay scale in respondent No.3 after revision was supposedly higher than the pay scale in the RBI at that point in time. The respondent No.1 issued a Circular dated 01.01.2001 revising the pay scale of its employees with effect from 01.11.1997. If the pay of the petitioner in DFHI was not in line with the pay as revised by
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NC: 2024:KHC:46664 WP No. 20815 of 2014 respondent No.1 with effect from 01.11.1997, the respondent No.3 ought to have reset the pay to bring it on par.
19. The petitioner has claimed that the pay drawn by him in March 2002 was in line with the pay of Rs.18,325/- drawn by an officer in Grade 'C' in respondent No.1. Thereafter, DFHI issued another pay revision vide order dated 11.04.2002 revising pay scale of the petitioner with effect from 01.04.2002 as a result of which his basic pay stood revised to Rs.20,250/- per month. This was followed by a pay revision by respondent No.1 on 21.11.2005 revising the pay scales with effect from 01.11.2002. The petitioner contends that at this point in time, the scale of pay in respondent No.3 was not in line with those employees in respondent No.1 and therefore, his scale had to be reset to bring it on par.
20. It is relevant to note that the petitioner had the option to go back to RBI but he opted to be absorbed in DFHI as the offer of absorption was subject to same service conditions, scale of pay as was obtained in respondent No.1. It is quite obvious that the petitioner could not be expected to accept something less than what he would have otherwise got.
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NC: 2024:KHC:46664 WP No. 20815 of 2014 Therefore, even if the DFHI had delinked the pay and perquisites of its employees from the pay and perquisites of employees in respondent No.1, that did not mean that the petitioner could be deprived of the benefit that he would have got, had he continued in respondent No.1. It was therefore incumbent upon the respondent No.3 to ensure that the pay scale of the petitioner was refitted to bring it on par with the scale of pay extended to the employees in the respondent No.1.
21. In this regard, it is profitable to refer to a judgment of the Hon'ble Apex Court in Eastern Coalfields Limited and Others v. Prativa Biswas and Others [2018 (14) SCC 435] where it was held:
"17. When the pay scales were converted to and paid in Coal India Ltd., the respondents' pay drawn could not have been reduced, inasmuch as pay protection had been assured to them and in view of the aforesaid order that attained finality and pay fixation was to be made in the manner that total emoluments drawn were not less. After fitment, if it was found that lesser amount was to be received as salary on or after 1-1-1987, it was required that the shortfall was made good by way of personal adjustment(s). Accordingly, protection was to be made on the fitment by grant of personal pay meaning thereby the pay could not have been reduced
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NC: 2024:KHC:46664 WP No. 20815 of 2014 on the fitment in ECL pay scales. The order dated 26-8- 2002 was to be complied with in pith and substance; rather it was violated by the aforesaid method of fixation. As apparent from the aforesaid figure of fitment, pertaining to Prathiva Biswas, Senior Staff Nurse, Central Hospital, Kalla. The fitment that was made on 20-5-2003/21-5-2003 was clearly in violation of the order as well as the provisions of option form and even subject to the conditions on which the absorption had been made. Thus, in our opinion, the Division Bench has rightly set aside the order passed by the Single Bench by the order impugned [Prativa Biswas v. Union of India, 2008 SCC OnLine Cal 651 : (2009) 1 CHN 101] ; it was not the total emoluments that matter. Salary protection was to be ensured, it could not have been reduced apart from emoluments. There was dual protection; that was unfortunately ignored and overlooked by ECL in spite of the clear and categorical order passed by the Single Bench in the writ application of 1993, which order had attained finality, and had not been questioned by any of the parties."
22. Therefore, the claim of the petitioner that he is entitled to resetting of his pay to bring it on par with the pay scale in the respondent No.1 till he retired, merits consideration.
23. In so far as the claim of the petitioner that he was entitled to be continued to be in service in the respondent No.3
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NC: 2024:KHC:46664 WP No. 20815 of 2014 till he attained the age of 60 years, it is relevant to note that in the letter dated 08.05.1995, it was specifically mentioned as follows:
"6. Superannuation benefits other than pension will continue to be admissible to the members of the staff to the extent as per the existing Rules obtaining in the Reserve Bank of India until such time as the Discount and Finance House of India Limited frames its own Scheme. The superannuation age will be 58 years except in case of employees in Class IV and it will be 60 years in case of an employee in Class-IV."
24. It is undisputed that Discount and Finance House of India Limited (Staff) Rules, 1995 (for short, 'the Rules, 1995') prescribed the age of retirement of its employees as 58 years. It is not disputed that Rule 16 of the Rules, 1995 was amended by an office order dated 28.12.1998 enhancing the age of retirement to 60 years. After the respondent No.3 brought in Uniform Service Rules / SBI DFHI Ltd. Staff Service Rules (for short, 'the Rules, 2007') with effect from 01.01.2007, which were applicable to all its employees, superseding and replacing the pre-merger service rules of the erstwhile SBI-Glits and DFHI, the petitioner cannot contend that he was entitled to be continued till 60 years as was the case in the respondent No.1.
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NC: 2024:KHC:46664 WP No. 20815 of 2014 The period of service in any Organization is based on the Rules framed by such Organization. The petitioner did not challenge the Rules, 2007 until he retired from service and has now belatedly claimed that the age of retirement in the banking sector was generally 60 years. Besides, this, the petitioner has raised this question after nearly four years from the date of his retirement from respondent No.3. Therefore, he is not entitled to the relief of continuation in service in respondent No.3 till the age of 60 years.
The writ petition is allowed in part. As a result, the respondent No.3 is directed to pay the differential amount of pay and allowances to the petitioner by granting the pay scale and allowances on par with that obtaining in the Reserve Bank of India and re-determine the pension payable to the petitioner in accordance with law. The respondent No.3 shall comply with the above within three months from the date of receipt of a certified copy of this order, failing which, the respondent No.3 shall pay the petitioner interest @ 9% per annum on the differential amount from the date of filing of the writ petition till the date of payment.
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NC: 2024:KHC:46664 WP No. 20815 of 2014 The relief sought by the petitioner to notionally continue his service in the respondent No.3 till the age of 60 years is rejected.
Sd/-
(R. NATARAJ) JUDGE SMA List No.: 1 Sl No.: 70