1996 (3) TMI 557 - SC - Indian Laws

Summary

Issues Involved:
1. Legality of the Placement Scheme framed by the Central Government.
2. Powers of the Court to examine such schemes.
3. Whether the Placement Scheme is arbitrary and irrational.
4. Retrospective nature of the Placement Scheme.
5. Legislative nature of the scheme-making process under Section 9 of the Acquisition Act.

Detailed Analysis:

1. Legality of the Placement Scheme framed by the Central Government:
The appellants argued that Clause 5(4) of the Amalgamation Scheme authorizes the Central Government to determine the placement of employees of the transferor bank and their inter-se seniority vis-a-vis the transferee bank employees. However, they contended that the Central Government exceeded its jurisdiction by altering the conditions of service, particularly regarding promotions, which should have been the prerogative of the transferee bank. The Court held that the Central Government had the power to frame the Placement Scheme, including Clauses 4(a)(iii) and 4(b)(ii), which compute years of service in a 2:1 ratio for the purpose of promotions. This power was derived from Section 9 of the Acquisition Act and Clause 5(4) of the Amalgamation Scheme.

2. Powers of the Court to examine such schemes:
The Court emphasized that it can interfere with a scheme only if it is found to be arbitrary, irrational, or based on extraneous considerations. The Court referred to precedents like Reserve Bank of India v. N.C. Paliwal, which established that the State can lay down any rule for determining seniority and promotions, and the Court's role is limited to checking for arbitrariness or irrationality.

3. Whether the Placement Scheme is arbitrary and irrational:
The Court found that the Placement Scheme, particularly the 2:1 ratio for computing years of service, was not arbitrary or irrational. The Reserve Bank of India and the Union Government had considered relevant factors like the volume of business, rate of promotions, and the financial condition of the transferor bank before framing the scheme. The Court concluded that the scheme struck a just balance between the conflicting claims of employees from both banks.

4. Retrospective nature of the Placement Scheme:
The appellants argued that the retrospective application of the Placement Scheme was illegal. The Court rejected this argument, stating that the scheme was necessarily given effect from the date of amalgamation (4th September 1993) and was not retrospective in nature. The complete fusion of employees from both banks was achieved only after the Placement Scheme was framed.

5. Legislative nature of the scheme-making process under Section 9 of the Acquisition Act:
The High Court had concluded that the scheme-making process under Section 9 of the Acquisition Act was not legislative in nature, relying on the decision in Shephard's case. However, the Supreme Court disagreed, noting a fundamental distinction between Section 45 of the Banking Regulation Act and Section 9 of the Acquisition Act. Under Section 9, the scheme becomes effective only after being laid before both Houses of Parliament and receiving their approval. Therefore, the scheme framed under Section 9 of the Acquisition Act is legislative in nature.

Conclusion:
The Supreme Court dismissed the appeals, upholding the Placement Scheme framed by the Central Government. The scheme was found to be within the powers conferred by the Acquisition Act, not arbitrary or irrational, and not retrospective in nature. The scheme-making process under Section 9 of the Acquisition Act was also deemed legislative.