Karnataka High Court
K.B. Nagendra And Anr. vs S.P. Raghunath And Anr. on 21 August, 1996
Equivalent citations: ILR1996KAR2701, 1996(6)KARLJ284
Author: R.P. Sethi
Bench: R.P. Sethi
JUDGMENT R.P. Sethi, C.J.
1. Promotion of the appellant as Chief Manager vide order dated 4.7.1995 was challenged in the Writ Petition filed by Sri S.P. Raghunath-respondent, mainly on the grounds of violation of the Service Rule applicable, ignoring his seniority and non-consideration of the case. The Writ Petition was allowed by quashing the impugned order giving the employer-Corporation liberty to make fresh order of promotion in accordance with law and keeping in view the observations made in the said judgment. It is submitted that the order of the learned Single Judge being contrary to the relevant Rules was liable to be set-aside. It is contended that the learned Single Judge was not right in holding that the Committee which approved promotion was not properly constituted. It is further submitted that the learned Single Judge, did not properly appreciate the effect of Rule 13 of the Karnataka State Small Industries Development Corporation Ltd., (Cadre & Recruitment) Rules (hereinafter referred to as 'the Rules'). The promotions to the post of Chief Manager could not be made only on the basis of the seniority as it has stated to have been presumed by the learned Single Judge.
2. On almost identical grounds the Corporation has also challenged the order of the learned Single Judge vide their separate appeal.
3. In order to appreciate the rival contentions of the parties it is necessary to have a resume of facts which are either admitted or substantially established.
4. Both the appellant and the respondent are Deputy Chief Managers and eligible to be promoted to the post of Chief Manager under the Rules applicable in the case. It is submitted that as per Schedule-A to the Rules, the post of Chief Manager (C & M) is required to be filled-up by deputation or direct recruitment or by promotion. The schedule to the Rules prescribes a minimum period of five years service in the cadre of Deputy Chief Manager as eligibility for promotion to the post of Chief Manager. The Managing Director is stated to be the authority to decide the order of promotions of all the categories of employees, upto the grade of Deputy Chief manager. For promotion to the posts of Chief Manager and above the promotions are to be made by a Committee consisting of Managing Director and a Director of the Board. The Board of Directors in its 24th Meeting is stated to have constituted a Selection Committee comprising the Managing Director and Sri N.M. Nabi, Chairman of the Company to consider the question of making promotion for the post of Chief Manager from amongst the eligible Deputy Chief Managers, C & M Section. The committee stated to have met on 3rd July 1995 and after allegedly considering cases of four Deputy Chief Managers came to the conclusion that appellant who was the seniormost Deputy Chief Manager be promoted. The respondent-Writ Petitioner submitted that before making promotions the Committee should have resorted to hold a written or such other test which they might have considered appropriate besides an interview of the eligible candidates. As no written test or interview was held, the whole of the proceedings were prayed to be quashed. It was further submitted that as Departmental enquiries were pending against the appellant, he could not have been selected or appointed pending his clearance in the enquiries. The assessment pertaining to the appellant was therefore required to be kept in a sealed cover till the conclusion of the disciplinary proceedings. It was vehemently urged on behalf of the respondent that the Committee which is stated to have considered the case of eligible Deputy Chief Managers was not a properly constituted Committee. Instead of a Director the Managing Director had the Chairman of the Company sitting with him for the purpose of the evaluation of the merit and suitability of the candidates which was contrary to law. The Chairman could not be deemed to be a Director for the purposes of the Committee in the light of the Rules applicable. The consideration accorded by the Committee was alleged to be not binding as according to the respondent his case was not considered and the Committee ignored the relevant material which was required to be taken into consideration while making promotions. The recommendations of the Committee were also stated to be contrary to Clause-86 of the Articles of Association of the Corporation. The learned Single Judge did not find any substance in the submissions of the respondent regarding holding of written test for the purposes of determining the merit. The plea for resorting to keeping the assessment in a sealed cover was also not accepted holding that the Government Circular dated 14.7.93, Annexure-F, was not applicable in the case. However, the learned Single Judge was impressed with the argument that the Committee constituted was in violation of the Rules and that the case of the respondent was not properly considered. After referring to the relevant Rule and the Resolution of the Corporation passed in that behalf the learned Judge came to the conclusion:
"A joint reading of the Rules and the resolution quoted above, clearly shows that the Scheme of the Rules envisages the Selection Committee to be comprising of the Managing Director and a Director only and not the Managing Director and the Chairman of the Company. This is so far more than one reasons. Firstly because the language employed in the Rule is very dear, in that, it contemplates of only a Director as a member of the Committee and not the Chairman of the Corporation. Secondly, because, if the Selection Committee was chaired by the Managing Director a person holding a position higher than him could never be meant or reasonably expected to serve in a capacity subordinate to that he otherwise held, and thirdly because, if the intention of the Rules was to make it possible for the Chairman of the Company also to be a member of the Selection Committee, there was no reason why the Rules could not specifically say so. It follows that the Constitution of the Selection Committee was not proper and in accordance with the requirements of the Rules. The argument that Shri Nabi the Chairman of the Corporation was also a Director of the Board does not impress me. For an appointment as Chairman of the Corporation, it is necessary that the appointee is a member of the Board of Directors urged Mr. Ramesh but the two capacities according to him were distinct and could be retained simultaneously. In other words one could be the Chairman and Director both and act alternatively in those capacities. The argument has an obvious fallacy in it. If being a Director of the Corporation is an essential condition as urged by Mr. Ramesh, for appointment as its Chairman, then upon any such appointment, the person appointed would combine in himself the two capacities and on the principle of the lesser getting sunk or drowned in the bigger, his capacity as a Director would sink in his capacity as a Chairman, so long as he retains the later position. Any other interpretation would lead to anamolous results, for instance the Chairman has a casting vote in terms of Clause 77 of the Articles of Association; and if the interpretation placed by Mr. Ramesh was to be accepted it would mean that the Chairman would have the right to cast his vote twice once as Director of the Corporation and again as its Chairman. This was and could never be the true intention behind giving the Chairman a casting vote. What follows is that once a Director is appointed as a Chairman, his capacity of position as Director gets submerged in his higher position of Chairman so that he cannot during the continuance of his Chairmanship claim to be or otherwise function as a Director."
5. The learned Single Judge after referring to Rule 13 of the Rules opined that the consideration contemplated was to be on the basis of not only ACR's but also upon the financial and administration performance of the eligible candidates. In view of this assumed position of law the learned Single Judge proceeded to see, "whether the Committee considered the case of the candidates by reference to and on the basis of both the types of materials made relevant by Rule 13 supra." Again after referring to the proceedings of the Committee the learned Single Judge came to the conclusion:
"First and the foremost being the total non-consideration of the "financial and Administrative performance" of the candidates. The report of the Committee does not even refer to any such performance let alone demonstrate a fair and proper consideration of the same. To that extent therefore the Committee ignored from its consideration material that was admissible not only be reason of its general relevance, to the question being considered but even because of the sanction given to the same by Rule 13. A consideration based on such a truncated material would not satisfy the requirements of Rule 13 of the Rules or those of Articles 14 and 16 of the Constitution."
6. Heard the learned counsels for the parties at length and perused the records. Rule 13 of the Rules deals with promotion and provides:
"The Managing Director is empowered to make promotions on the basis of seniority-cum-merit (i.e., annual confidential reports and also the financial and administrative performance) and no employee, not withstanding his seniority, can claim promotion to any post as a matter of right."
7. According to Schedule-A of the Rules the post of Chief Manager can be filled-up either by deputation from the Government or from the Public Sector undertaking or by direct recruitment or by promotion by selection for which minimum service required is not less than 8 years in the grade of Deputy Chief Manager. The selection is required to be based on merit and not only by seniority. According to the same Schedule the Managing Director is shown to be the appointing authority in case of all categories of the employees of the Corporation. He has further been held to be the authority to decide and order for promotions of all categories of employees and upto the grade of Deputy Chief Manger. Promotions to the cadre of Chief Managers and above are required to be decided by a Committee consisting of Managing Director and a Director of the Board. Upon recommendations of such Committee the Managing Director is authorised to issue all orders of promotion and appointments. A perusal of Rule 13 read with Schedule-A dearly shows that the post of the Chief Manager can be filled-up by promotion on the basis of recommendations made by the Committee appointed under the Rules and the consequential orders of the Managing Director issued in that behalf. The point for consideration is whether the promotion is to be made on the rule of seniority-cum-merit or on the basis of Rule of merit-cum-seniority.
8. In the instant case the Government of Karnataka vide notification issued on 23.5.95 appointed Sri N.M. Nabi, Minister for Small Scale Industries, Government of Karnataka, Bangalore, to the Board of Directors of the Corporation in place of Sri M.C. Sathyawadi with immediate effect and until further orders. This appointment was made under Article 66 of the Articles of the Association of the Corporation. Vide the same notification and in exercise of powers conferred Under Article 81 of the Articles of Association of the Corporation, the Government also appointed Sri N.M. Nabi as Chairman of the said Corporation in place of Sri M.C. Sathyawadi. The power of the Government to appoint Sri N.M. Nabi as Director and Chairman have not been disputed nor challenged. The only point for our consideration is as to whether with his appointment as Chairman Sri N.M. Nabi ceased to be a Director of the Company. 'Directors' has been defined to be the Director for the time-being of the Company under Clause-'e' of Article 1 and the 'Chairman' to be the Chairman of the Board of Directors for the time-being of the Company under Clause of the Articles of Association of the Company. The appointment of the Directors are regulated by Articles 66 and their powers by Articles 69 to 74 of the Articles of Association. Under Article 76 the office of a Director is to be deemed to have been vacated if he fails to obtain within the time specified in the Act, or at any time thereafter ceases to hold, the share qualification if any, necessary for his appointment, or he is found to be unsound mind by a Court of competent jurisdiction or he is adjudged insolvent or he or any firm in which he is a partner or any private company of which he is a director fails to pay calls made on him in respect of shares held by him, the firm or the private company as the case may be, within six months from the date of such calls being made or he or any firm in which he is a partner, or any private company of which he is a Director without the sanction of the Company in general meeting accepts or holds any office of profit under the Company other than that of a Managing Director or Manager or a legal or technical adviser or a banker or he absents himself from three consecutive meetings of the Directors or from all meetings of the Directors for a continuous period of three months, whichever is longer, without leave of absence from the Board of Directors, or he accepts a loan or any guarantee or security for a loan from the Company, or he is concerned or participates in the profit of contract with the Company, or he is punished with imprisonment for a term exceeding six months.
9. The Chairman of the Board of Directors is authorised to preside as Chairman at every General Meeting of the Company. In the absence of the Chairman the Vice Chairman if any is authorised to preside the Meeting and if there is no Vice-Chairman available then the Members present are authorised to choose some one of them to be Chairman of the Meeting. Under Article 52 the Chairman has the power to adjourn the meeting from time to time and from place to place. At any general meeting a resolution put to the vote of the meeting is to be decided on a show of hands, unless the poll is demanded. The Chairman has authority to declare that the resolutions have been passed either by a show of hands or by a poll. In case of equality of votes, whether on a show of hands or on a poll. The Chairman of the Meeting at which the show of hands takes place or at which the poll is demanded, has been held entitled to a second or casting vote.
10. A perusal of the powers and duties of the Director and Chairman clearly indicates that there is no conflict. The Chairman besides having the authority to preside over the Meetings has an additional vote in the General Meeting of the Company which is held for the purposes specified in Articles 43,44 and 45 of the Articles of Association. There is no overlapping of the powers of the Director and the Chairman. The additional right of the Chairman to exercise his second or casting vote is only under special and specified circumstances. By his mere appointment as Chairman, the Director of the Corporation does not cease to be a Director appointed under Article 66 of the Articles of the Association. The learned Single Judge was therefore not justified in holding that with his appointment as Chairman, Sir N.M. Nabi ceased to be a Director of the Company. There was no question of his capacity as a Director sinking in his capacity as Chairman so long as he retained the later position. There was no question of exercise of casting vote by Chairman in terms of Article 77 of Articles of Association which perhaps persuaded the learned Single Judge to conclude that with his appointment as Chairman his position as Director merged and sank in that capacity of the Chairman. A perusal of the relevant Articles where the Chairman is authorised to exercise his casting vote would dearly show that such a right was not available to him in the matter of making appointments or associating himself in the process of promotion on the basis of merit and ability. We also do not find ourselves in agreement with the finding of the learned Single Judge that once if a Director is appointed as Chairman, his capacity or position as Director gets merged in his higher position of Chairman. The Director continues to be a Director for all purposes as contemplated by Articles of Association and with added rights of presiding the Meetings and exercising his casting vote in his capacity as Chairman as and when required and strictly in accordance with and under specified circumstances. The concept of merger is alien to the Service Laws, It relates to the estate or the property subject to charges created by act of parties and arising by operation of law. This occurs by the merger of a lower in a higher security and by the merger of a lesser estate in a greater estate. The ordinary meaning of the word merger, the incorporation of the one right in another cannot be stretched to the extent of making it applicable in the Service laws. The rights contemplated under the doctrine of merger relate to real properties and estates. This may also be applicable in relation to merging of one or more charges dependent upon the intention gathered or contemplated. It may also be applicable in cases of business carried on by different concerns, partnerships and Companies as is regulated by the appropriate statute. The equitable rule of intention is an exception engrafted on the common law rule of merger. There is no common law rule of merger in India. Even if by any stretch of imagination the rule is held to be applicable, in its application, the intention of the statute allegedly resulting in merger has to be gathered and decided. Such intention is required to be actual and not artificial. The approach of the learned Single Judge in holding that the post of Director held by Sri N.M. Nabi had merged into his post of Chairman or that his capacity as a Director had sank in his position as Chairman is not correct. We are satisfied that Sri N.M. Nabi had participated in the Meeting in his capacity as a Director and that the Committee comprising of the Managing Director and Sri N.M. Nabi was not in violation of the Rules applicable in the case.
11. A perusal of Rulers shows the seniority though a factor could not be held to be a dominant factor in the matter of promotion to the post of Chief Manager. Rule 13 read with Schedule-A (serial No. 26) was not applicable in the case of appointment and the promotions of the Chief Managers. Under Serial No. 3 of Schedule-A of the Rules the promotion by selection was required to be based on merit and not only by seniority. It is now well settled principle of Service law that while making promotions, the Government/employer is guided by the consideration of improving the efficiency, integrity and suitability of the service for which merit and ability are required to be given preference unless otherwise provided by the Service Rules applicable in the case. The question regarding ascendency between seniority and merit has been the subject matter of controversy in the services which have time and again been decided keeping in view the nature of duties and concept of service to which the relevant rules were made applicable. The Supreme Court in SANT RAM SHARMA v. STATE OF RAJASTHAN, , held that question of a proper promotion policy was dependent upon various conflicting factors. All promotions cannot be directed to be made on the ground of seniority alone, because such a method is so objective that it fails to take into account of the personal merit. It was further held.
"As employees move up the ladder of responsibility, it is entitled to less and less weight. When seniority is made the sole determining factor, at any level, it is a dangerous guide. It does not follow that the employee longest in service in a particular grade is best suited for promotion to a higher grade; the very opposite may be true."
12. A Full Bench of Himachal Pradesh High Court in HARI DATT KAINTHLA, CJM & ANR. v. STATE OF HP. & ORS., 1974(1) SLR 208. held that merit was best acceptable criterion for promotion unless otherwise provided by the employer by substituting seniority for it. Once the merit alone has been made the basis of promotion one could not be permitted to have any grievance on the basis of seniority alone.
13. From the record it appears that after the post of the Chief Manager fell vacant the Board of the Corporation resolved to fill-up the said post by promotion from amongst the eligible Deputy Chief Managers of the C & M Section in accordance with Cadre & recruitment rules of the Corporation. The Committee comprising of the Managing Director and Sri N.M. Nabi, Director, as also the Chairman of the Company was constituted to scrutinise the Confidential Reports and other relevant papers for consideration for grant of promotion to the post of Chief Manager (C & M) from amongst eligible Deputy Chief Managers of C & M Section. After considering the relevant record of all the eligible Deputy Chief Managers (C & M) the Committee submitted in its report dated 3.7.95 its recommendations upon the basis of which the impugned order Annexure-J was issued promoting the appellant to the post of Chief Manager (C & M) in the pay-scale of Rs. 3825-125-4700-150-5300-175-5825, until further order with the conditions specified therein. The observation of the learned Single Judge that as the Committee had not considered the comparative financial and administrative performance of the person eligible for promotion, the promotion of the appellant was liable to be quashed, cannot be accepted for 2 reasons:
(1) Firstly, that this Court while exercising the powers under Article 226 of the Constitution of India cannot substitute its opinion by peeping into the files and ignoring the claim of the employer regarding observance of the Rules. Once the promotion process is in accordance with Rule and is not motivated by any extraneous consideration, the mere fact that any other conclusion or finding was possible, cannot be made a basis for disturbing or setting-aside the report of the Committee entrusted with the process of making selection on the basis of comparative merit of all eligible candidates. Non-consideration of the case has to be distinguished from improper considerations. Improper consideration may be a ground to set-aside the action in appeal but cannot be the basis for quashing the action in exercise of writ jurisdiction unless the violation is flagrant and apparent on the face of the record.
(2) Secondly, such a consideration regarding comparative merit with regard to financial and administrative performance was assumed to be in existence by force of Rule 13 of the Rules. In the earlier part of this judgment it has already been held that Rule 13 was not applicable in the case of promotion of Chief Managers. The over all service record of all the eligible candidates was required to be scrutinised by the Committee appointed for the purpose and if such record is shown to have perused before making the recommendation, the Court cannot interfere in exercise of its writ jurisdiction.
The learned Single Judge though noted the judgment of Supreme Court in NATIONAL INSTITUTE OF MENTAL HEALTH & NEURO SCIENCES v. Dr. K. KALYANA RAMAN AND ORS., , yet failed to take note of the law laid-down therein. The Supreme Court has unambiguously held that the function of the Selection Committee is neither judicial nor adjudicatory. It is purely administrative. If the selection is shown to have been made by the assessment of the relevant merits of the rival candidates possessing the required eligibility, the Court would not interfere. The Selection Committee is not required to record reasons unless specifically provided for by the rules. It further held:
"Administrative authority is under no legal obligation to record reasons in support of its decision. Indeed, even the principles of natural justice do not require an administrative authority or a Selection Committee or an examiner to record reasons for the selection or non-selection of a person in the absence of statutory requirement. This principle has been stated by this Court in R.S. Dass v. Union of India, . "
14. The procedural fairness is the main requirement in administrative action for the purposes of making promotion by selection. The decision if held to be reasonable and not guided by extraneous or irrelavent considerations, has to be upheld. The learned Single Judge has however not come to the conclusion that the selection was either arbitrary or whimsical or that Selection Committee did not act fairly towards the appellant. A faint attempt was made by the learned Counsel for the respondent to suggest that the meeting of the Committee and process of selection was merely ritual in view of Annexure-L dated 4.3.95. The said note is stated to have been sent by the then Chief Minister, Sri H.D. Devegowda, who was impleaded as party respondent-2 in the Writ Petition. The said note is of a no help to the respondent firstly because the respondent-2 was dropped as party-respondent in the Writ Petition and secondly there was nothing in the note which could be suggestive of any extraneous consideration. The then Chief Minister wrote to the Principal Secretary to the Government, Commerce and industries Department, pointing-out that as the then Chief Manager (C & M) Sri M.R. Shivaswamy was retiring shortly:
"Therefore, while filling-up of the post of Chief Manger(C & M), the Deputy Chief Manger (C & M) who is working in the same Corporation and who is senior should be given promotion and the proposal in that behalf should be immediately sent for, along with the other records with the opinion of the Department and should be placed before me."
15. The suggestion made was fair and reasonable and cannot be termed to be the direction for promotion of the appellant as has been urged before us.
16. In the instant case proceedings of the Committee dated 3.7.95 clearly and unambiguously show that before making recommendation for promotion of Appellant as Chief Manager the relevant record of all eligible Deputy Chief Managers was perused and examined. The minutes of the proceedings of the Committee as shown to us are reproduced hereunder for the ready reference:
"The Board of Directors in their 247th meeting have constituted a Committee consisting of two Directors viz., Sri N.M. Nabi and Sri Ranganath Kelvadi, to scrutinize Confidential Reports and other reinvent papers for the purpose of filling up the post of Chief Manager (C & M) which has been declared to be vacant in the said resolution. Consequently, the two Directors met this day i.e., 3rd July 1995 and have verified the available Confidential Reports of the following Deputy Chief Managers (C & M):
1. Sri K.B. Nagendra
2. Sri S.G. Kembhavi
3. Sri N.C. Chikkanna Gouder
4. Sri S.P. Raghunath The Directors while reviewing the Confidential Reports and other related papers have observed that Sri K.B. Nagendra, joined the services of Corporation as Deputy Chief Manager(C & M) on 25.4.1985 (direct recruitment), Sri S.G. Kembhavi, joined on 19.6.1962, Sri N.C. Chikkanna Gouder joined on 6.9.62 as Assistant Mangers(C & M) and Sri S.P. Raghunath, joined the Corporation as Deputy Chief Manager (C & M) on 4.12.1989(direct recruitment).
As regards qualification, Sri K.B Nagendra, has passed B.E.(Civil) First Class Distinction while Sri S.G. Kembhavi and Sri N.C. Chikkanna Gouder, have passed Diploma in Engineering. Shi S.P. Raghunath, has acquired the qualification M.E.(Civil), First Class.
As regards the places worked, it is observed the Sri K.B. Nagendras, has worked in Bangalore, Mangalore and Hubli as DCM (C & M). Sri S.G. Kembhavi and Sri N.C. Chikkanna Gouder, have worked in all these places but in a lower cadre such as Assistant Manager (C & M) and Manager (C & M) Sri S.P. Raghunath, worked in Bangalore, Gulbarga as DCM (C & M).
As regards the Confidential Reports, it is seen that the Confidential Report of all the officers for the year 1994-95 which are available has no adverse remarks entered therein. But as regards previous years confidential reports, though they are available, they are not for a continuous period ending with 1994-95. The available C.Rs. in respect of the candidates perused by the committee. The committee noted that wherever the C.Rs. are not available for the reasons that they are not written, it should be presumed that they are not adverse.
As regards the seniority position, the Committee perused the seniority list drawn up by the Corporation and it indicates that Sri K.B. Nagendra, is the senior most and thereafter Sri S.G. Kembhavi, Sri N.C. Chikkanna Gouder and Sri S.P. Raghunath figure in the list.
Having considered all the aspects of the matter, the Committee has come to the conclusion that Sri K.B. Nagendra, the Senior most Deputy Chief Manager(C & M) is eligible for promotion."
17. We are satisfied that the impugned order of promotion of the appellant-Sri K.B. Nagendra, annexure-J, was issued strictly in accordance with the rules and after consideration of the claims of all eligible Deputy Chief Managers. The order of promotion was not actuated by any extraneous considerations. The learned Single Judge did not properly apply the rules and therefore come to the wrong conclusion in setting - aside the impugned orders. The appeal is accordingly accepted and the judgment of the learned Single Judge is set-aside. The Rule issued is discharged.
18. No costs.