Holding

Seniority of employees of the Federation, including those transferred to the unions, must be determined by reference to the date of their initial appointment in the Federation, not by promotions granted in the unions.

Summary

The A.P. Cooperative Oil Seeds Growers Federation Ltd., a cooperative society registered under the Andhra Pradesh Cooperative Societies Act, restructured its three‑tier organization by closing its two regional unions and preparing a common seniority list to identify surplus employees for a voluntary retirement scheme. Several employees who had been transferred to the unions and later promoted challenged the seniority list, arguing that promotions were arbitrary and that seniority should be based on date of initial appointment in the Federation. The High Court held that the employees remained employees of the Federation, that promotions granted in the unions were not governed by any rule, and that seniority must be reckoned by length of service in the Federation, not by promotion dates. On appeal, the Supreme Court affirmed the High Court’s reasoning, emphasizing that service rules must be just, fair and reasonable and cannot be struck down merely because they cause hardship to some individuals. Consequently, the Court dismissed the Federation’s appeals, upholding the seniority determination based on initial appointment dates.

Issues considered

Whether employees transferred to the regional unions remained employees of the Federation for service‑benefit purposes
Whether promotions granted in the unions, which were not based on any rule or policy, can be taken into account for inter‑se seniority
Whether the seniority list prepared by the Federation, based on promotion dates, violates Articles 14 and 16 of the Constitution
Whether the Federation was required to obtain fresh approval of the service rules from the Registrar under Section 116‑C of the Andhra Pradesh Cooperative Societies Act
Whether the criteria used to declare employees surplus and offer VRS were arbitrary and unreasonable

Subjects

service lawseniorityvoluntary retirement schemecooperative societypromotionArticles 14 and 16inter‑se seniorityarbitrary promotions

Judgment

~ A.P. COOPERATIVE OIL SEEDS GROWERS FEDERATION LTD. A
/ HYDERABAD, ANDHRA PRADESH

"
D. ACHYUTA RAO AND ORS.

MARCH 15, 2007
B
[B.P. SINGH AND AL TAMAS KABIR, JJ.]

Service· Law.
~

Seniority List-Federation registered as cooperative society adopting c
3 tier structure with Regional Unions in second tier-Many employees of
Federation transferred to Regional Unions-Transfer of employees from
federation to Unions not regulated by rules or norms laid down by
management-Employees transferred getting promotions in Unions-Decision
taken to close down Unions and revised staffing structure of Federation D
finalized-Voluntary Retirement Scheme ojJered to surplus employees-
Common seniority list of employees of federation and Unions prepared
indicating surplus employees-Seniority list challenged by some employees
,;
declared surplus-Held, promotions granted not governed by any promotion
policy and also arbitrary and unreasonable-Determination of seniority by
reference to promotions not governed by any rule not justified-In the facts E
and circumstances, held, seniority to be reckoned by reference to length of
service in the Federation by reference to date of initial appointment-
Constitution of India, 1950-Articles 14 and 16.

Appellant-Federation registered as cooperative society under the A.P.
Cooperative Societies Act adopted a 3 tier structure with the Federation at F
-r top and two Regional Unions in the second tier and cooperative societies at
village level in the third tier. Many employees of Federation transferred to
the Regional Unions. High Court on 6.6.2000 in petition filed by some of such
transferred employees had held that they continued to be employees of the
Federation and entitled to all service benefits. In view of mounting losses, a G
decision was taken in the year 2001 to restructure the Federation and to close
-..' down both the Unions and a revised staffing structure of the Federation of
I
manpower of 159 employees based on a broad Five Year Business Plan was
.,;
finalized resulting in many of the employees being rendered surplu~. It was
also resolved to offer Voluntary Retirement Scheme (VRS) for the surplus
.. I H
·~ .

2 SUPREME COURT REPORTS [2007] 4 S.C.R.

A manpower of the Federation and the Unions as per the approved pattern. A
common seniority list indicating surplus employees was prepared. Majority
of employees declared surplus accepted VRS Scheme.

Respondent were also declared surplus employees and they along with
some other employees filed various writ petitions challenging order of
B Federation declaring them surplus. Single Judge dismissed the writ petitions
inter alia holding that employees transferred to Regional Unions continued
to be employees of Federation and their services in the Union must be treated
as on deputation only; that Federation was right in consolidating and issuing
a common seniority list of its employees; and that the principles applied by
C Federation for determination of seniority were not arbitrary. Respondents
filed writ appeals challenging the order of the Sittgle Judge. Division Bench
allowed the appeals inter alia holdin-g that criteria fixed for determining inter-
se seniority was not just and reasonable; that only the relative seniority in
the respective cadres of the Federation of employees sent on deputation to
D the Unions could be taken into consideration, and their promotion in the ex-
cadre post in the Unions had nothing to do with their seniority in their parent
cadre under the Federation; that there was no clear cut promotion policy
either in the Federation or the Unions and since the promotions were granted
in an irrational manner, not much importance could be attached to the
promotions granted in the Unions; and that seniority of employees had to be
E determined by reference to date of their initial appointment. Hence the present
appeals by the Federation.

Appellant-Federation inter alia contended that soine hardship,
inconvenience or injustice is bound to result to some members offhe service
even when a rule is framed with care, objectivity and foresight ; and that in
F working the VRS the principle followed was the rule of seniority determined
/ by reference to length of service in the grade and such a rule cannot be said +
to be unreasonable.

Respondent inter alia contended that norms applied for reckoning
seniority were arbitrary and unreasonable based on.promotions which were
G granted without reference to rules or norms; and that in declaring surplus
employees the principle of last come first go must be applied.

Disinissirig the appeals, the Court

HELD: 1. It is no doubt true that service rules, however, meticulously ....
H
I
_;.._

A.P. COOP. OIL SEEDS GROWERS FED. LTD. HYDERABAD. ANDHRA PRADESH ,._ D. ACHYUT RAO 3
/
framed, there is always a chance of some hardship being caused to a particular A
section of the employees, but as long the rules are just, fair and reasonable,
even if two views are possible, the mere fact that some hardship, inconvenience
or injustice results to some members of the service, is not a ground to strike
down the rule. It is not safe to test the constitutionality of a service rule on
the touchstone of fortunes of an individual. If the rule otherwise appears to be
fair, just and reasonable and does not suffer from the vice of Articles 14 and
B
16 of the Constitution or any constitutional guarantee, the mere fact that some
little hardship or injustice is caused to someone, is no ground to strike down
the rule altogether. !Para 31) 117-E-FJ

Kamal Kanti Dutta and Ors. v. Union of India and Ors., [1980) 4 SCC c
38 and Reserve Bank ofIndia and Ors. v. C.N. Sahasranaman and Ors., [1986)
Supp. SCC 143, referred to.

2. The transfer of employees from the Federation to the Unions was not
regulated by rules framed or norms laid down by the Management. The D
transfers were made on ad hoc basis in the absence of rules and similarly
,,>-
promotions were also granted without reference to rules or norms. No rules
were framed governing the grant of promotions on transfer of employees from
the Federation to the Union, or from one Union to another. All the employees
with whom this Court is concerned were appointed to posts in the Federation
and, therefore, it was rightly contended that they were employees of the E
Federation and no distinction could be made merely because they were
officiating against posts in one or the other Union. The matter was put beyond
controversy by a decision of the High Court which attained finality holding
that all the employees must be treated as the employees of the Federation and
not the Unions. They, therefore, belonged to the same service under one F
-<·
employer namely the Federation and their inter-se seniority had to be
determined on that basis. So far as the inter-se seniority in the Federation is
concerned, though not formally determined, it must be held, in the absence of
rules, that seniority must be reckoned by reference to the length of service
in the Federation. This is precisely what the High Court has held.
(Paras 40 and 41] (21-E-H; 22-A-BJ G
"'
3.1. It is no doubt true that even in the absence of rules promotions may
)

.
be granted, but it must be shown that the promotions granted are just and
fair and that they do not offened Articles 14 and 16 of the Constitution of
India or any .other constitutional guarantee. If promotions are granted
arbitrarily without following norms or Guidelines, such promotions will have H
4 SUPREME COURT REPORTS [2007] 4 S.C.R.

A to be ignored in determining the seniority of the employees concerned, firstly "
for the reason that there. are no rules govern_ing grant of promotion, and
secondly because the gra!lt of promotions are arbitrary and vio_lative of the
principles enshrined in Articles 14 and 16 of the Constitution of India.
!Para 421122-C-D)

B 3.2. Admittedly no seniority rules had been framed when promotions
had been granted in the Unions. The management ·acted in exercise of its
authority to grant promotions. The action of the Management in granting
promotions must be determined on the touchsto?e of Articles 14 and 16 of
the Constitution of India. If the grant of promotions is found to be arbitrary
c or unreasonable it must be held that such promotions will not affect the right
of seniority of the persons concerned, since the promotions were granted
neither in accordance with any rule nor by following norms consistent with
principles incorporated in Articles 14 and 16 of the Constitution oflndia.
The High Court has very critically analysed the facts of the case. I has found
as a fact that there was no clear cut promotion policy either in the Federation
D or in the Unions. An Operator was promoted as Shift Supervisor; a Chemist
was promoted as Assistant Grade-I; a Driver was promoted as Senior
Assistant and another Chemist was promoted as Executive Quality Control
and also Quality Control Officer.•Thus, _the High Court concluded that the
employees had been promoted to various.posts without there being any
stipulated of promotion and without following any procedure prescribed by
E
rules of promotion. Thus determination of their seniority by reference to
promotions which were not governed by any rule and were at best fortuitous
could not be justified. Where promotions are not granted in accordance with
the rules or fair and reasonable norms laid down for the purpose, and the
promotions are at·best fortuitous, such an uncertain event cannot be made
F the basis for determining seniority which is a valuable right of an employee.
Seniority, therefore, must be determined by rule_s validly framed or norms +.-
enunciated and/or followed which are consistent with ,t_he principles enshrined
in Articles 14 a111d 16 of the Constitution of India.
f Para 431122-E, F, G, H; 23-A, B, DJ

G S.B. Patwardhan and Anr. v. State of Maharashtra and Ors., 119771 3
sec 399, relied on. "}

4. While the employees were ~ransferred ~o !he Unions much earlier
and were granted promotions in due course in tlie Unions, the question o~
their seniority inter-se and the principles to be applied in determining
H seniority were evolved for the first time when the closure of the Union was
I
A.P. COOP OIL SEEDS GROWERS FED. LTD. HYDERABAD. ANDHRA PR o\DESH r D. ACHY UT RAO 5
/ being considered necessitating retrenchment of surplus employees. It was at A
this stage that the cadre strength was first determined and thereafter norms
were sought to be evolved in the light of which seniority was to be determined
and junior employees in excess of the determined cadre strength to be given
the benefits of YRS. It was really a process of working backwards. Rules and
norms were sought to be evolved later governing promotions which were
granted much earlier without reference to such rules or norms, but which B
were to determine the inter-se seniority of the employees for the purpose of
}.
retrenchment. !Para 44) 123-E-FI
.- 5. The High Court was right in holding that the promotions earlier
granted in the Unions and the norms later laid down by the Federation could
not be applied to determine the inter-se seniority of the employees of the
c
Federation. The only rule which in the facts of.the case, could be safely applied
to determine seniority was to reckon seniority by reference to length of
service in the Federation. As a necessary corollary, the date of initial
appointment in the Federation was decisive in determining seniority. Thus
applied, seniority must be determined by reference to the date of initial D
appointment and not by reference to dates of promotion granted in the Unions
unguided by rules framed of norms declared which could be said to be fair
and reasonable applying the test of Articles 14 and 16.
!Para 45) 123-G-H; 24-A-B)

Commissioner of Commercial Taxes, Board of Revenue, Madras and Anr. E
v. Ramkishan Shrikishan Jhaver, 11968) 3 SCR 1; AIR (1968) SC 59, R.L.
Gupta and Anr. v. Union ofIndia and Ors., 11988) 2 SCC 250; Krishan Lal v.
State of J & If., 119951 4 SCC 422; Sub-Inspector Roop/al and Anr. v. Lt.
Governer through Chief Secretary, Delhi and Ors., [2000] 1 SCC 641;
Chairmen, Puri Gramya Bank and Anr. v. Ananda Chandra Das ans Ors.,
(1994) 4 sec 301; Bimlesh Tanwar v. State of Haryana and Ors., 12003) 5
F
SCC 604; P. Srinivas v. M Radhakrishna Murthy and Ors., 120041 2 sec
459; G. Varandani v. Kurukshetra University and Anr., f2003) 10 SCC 14
and The State of Punjab v. Jagdip Singh, f196414 SCR 964 =AIR (1964) SC
521 and Hussain Sasan Saheb Kaladgi v. State of Maharashtra, ( 1988) 4 SCC
168, cited. G
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1391 of2007.
~
From the Judgment and Order dated 27.4.2004 of the High Court of
Judicature of Andhra Pradesh at Hyderabad in W.A. Nos. 1786-1787/2003.
WITH H
6 SUPREME COURT REPORTS [2007] 4 S.C.R.

A Civil Appeal Nos. 1392-1398/2007 .

. P.P. Rao, M.N. Rao, K. Subba Rao, T.V. Ratnam, Y. Ramesh ~nd Y. Raja
Go pa la· Rao for the Appellants.

H.S. Guraraja R,ao, Rapjit Kumar, K. M.~rut~i Rao, J(. Jla.dha, Anjani
B Aiyagari, S.U.K. Sagar, T. Sl;ldhakar ~eddy, Bina Madh.ava,n, .He~~I K. Sheth
for M/s. Lawyer's Knit.&. Co. f<;>r th,e Respo,n~.ents.

The Judgment of the Court was delivered by

B:P. ~I~~f!, J. Special Ie,ave grante.d.
c
l. In. this batch of appeals _the common judgm~r.it ar.id or~er of the High
Court of Judicature of Af.i~dhra Pr~~esh _at Hyde~a-~ad dated .Apr,il 27, 2Q.OT4 lias
been assai.led. The High Court by its aforesai.d common judgment and order
allowed several wr.it appeals -~g~i.nst.which th·~.!iPPe.Iiant, A.P. C<;>9perativ~ Oil
Seeds Growers Federation Ltd. (hereinafter referred to as 'the Federation') has
D preferred app~~I~. n'ie ~~spo,n~e.~ts .;~o~e ~~i1,~ppe,ai~ w~re .aiio~e.d.. by the.
High Court are D. AchY.\l!a R~o, fy1ghd. A-.m':~r ,A.Ii, :ryt. S!!~hagri)\ao, K.V.N.
Rao, Shekqar Goud and l).S .. R,a,o. T,ney.~h~ll.hereiqa.fter.l:ie re.ferred to as the
'contesting respoi:id~r;its'.

E 2. D. Achyuta ~ao h~d. pr~fe~red W~it Pe,t,i~i?.n N_os.,9565 1 a~d 13985 <;>f
2003 which were dismissed by''lthe learned Single Judge .but the writ ,,iappeals
' • t - ' •f• •I t • Jl>-'tr . ' ' • •
i;; \,0) 1, •

being :Nos. 1786 and 1787 of 2903 were allowed by the High Court against
which ~he Fed,er!ltion has p;eferred :~he,~pp~alS:aris\~g ?.~t of SLP (c)°Nos.
15912-159p of2Q04.

F 3. Mohd. Anwar Ali had preferred Writ Petiti<?n Nos. 9669 ~nd 13~41 of
2003 which were also dismissed by the learned ~ingle Judge but the writ ).
appeals preferred by him being Writ Appeal.Nos. 1784 and 1785 of2003 were
allowed by.the impugned COfTlmC?njudgment.:if!d p~der of the High Court. The
appeals .arising ~ut of SLP (C) Nos. 15923 .~rid 159~4 9f 2004 .have been
preferred by t~e Federation against tre, ~foresaid jµdgm~nt a!~owing .the
G appeals of Mopd. Anwar Ali ..

4. M. Seshagri Rao preferr:d Writ Petition Nos. 9671 a~d 13172 of 2003
which were also dismissed by the learned Single Judge but.the writ appeals .I,.
' 1 ' ~.- • I , ~ . .

being Nos. 1791 .and 17?4 of 2003 preferred by him w.ere.allowed by the
impugn~d comm~n judg'!l_e,nt and order of the High C<?urt. The cro~s-?bjections
H
A.P. COOP. OIL SEEDS GROWERS FED. LTD. HYDERABAD. ANDHRA PRADESH•·. D. ACHYUT RAO JB.P. SINGH. J.j 7
/ had been preferred by the Federation which were dismissed by the High A
Court. The appeals arising out of SLP (c) Nos. 15046 to 15051 of 2004 have
been preferred by the Federation challenging the impugned judgment and
order of the High Court allowing the writ appeals. The Federation has also
filed appeals arising out of SLP (c) No. 15926 and 15927 of 2004 against the
order dismissing its cross-objections.
B
5. K.V.N. Rao had preferred Writ Petition Nos. 9670 and 13163 of2003
which were dismissed by the learned Single Judge. The appeals preferred
being writ appeals being Nos. 1795 and 1792 of 2003 were allowed by the
impugned common judgment and order of the High Court. The cross-objections
preferred by the Federation were also dismissed. The appeals arising out of c
SLP (c) Nos. 15920 to 15921 of2004 have been preferred by the Federation
against the impugned judgment and order of the High Court.

6. Shekhar Goud has preferred Writ Petition Nos. 10039 and 15270 of
2003 which were dismissed by the learned Single Judge. The writ appeals
preferred by him being Nos. 1793 and 1796 of 2003 were allowed. The D
Federation has impugned the common judgment and order of the High Court
in the appeals arising out of SLP (c) Nos. 15918 and 15919 of 2004.

7. Lastly U.S. Rao has filed similar Writ Petitions being No. 9633 of2003
which was dismissed by the learned Single Judge. The writ appeal preferred
by him being No. 1801 of2003 was allowed. The Federation has impugned the E
judgment and order of the Hig.h Court in the appeal arising out of SLP (c) No.
15917 of2004.

8. The questions that arise for consideration in these appeals relate to
the Voluntary Retirement Scheme (hereinafter referred to as 'the YRS') offered
by the Federation to its employees having regard to the reduced cadre F
strength. It is the case of the Federation that only those of the employees
were retained who came within the cadre strength detennined in accordance
with the norms enunciated by the Federation and the remaining employees
were offered the benefit of the VRS. The six contesting respondents in these
appeals had challenged their inclusion in the list of surplus employees whose G
services were to be discontinued. Initially a large number of writ petitions
were filed but the factual position as it emerges today is that the strength of
~ the cadre is I 59 and, therefore, 163 employees out of 322 had to be declared
surplus. Out of those declared surplus 13 7 accepted the YRS while 26 went
to court. The contesting respondents before us are amongst those who
challenged the order of the Federation declaring them surplus. When these H
8 SUPREME COURT REPORTS [2007] 4 S.C.R.

A appeals came up before us we were informed that the writ appeals preferred
by 20 others were still pending before the High Court and, therefore, we had
directed that those appeals may also be disposed of so that all the matters
could be heard together, if necessary. Accordingly those writ petitions have
been heard and disposed of by the High Court and the aforesaid 20 writ
B petitioners have also accepted the YRS pursuant to the order of the High
Court dated 14th September, 2005. Thus the dispute is confined to the 6
contesting respondents before this Court whose writ appeals were allowed by
the High Court.

9. Shorn of unnecessary details the facts of the case are as follows:-

C The appellant-Federation was registered as a cooperative society under
the A.P. Cooperative Societies Act with the object of bringing about increase
in production of oil seeds. The appellant-Federation started its operation in
the year 1983 with a 2 tier structure, namely the Federation at the State level
and cooperative societies at the village level. The vegetable oil project was
D funded by the National Dairy Development Board (for short 'NDDB') with a
view to promote the Primary Cooperative Societies and the establishment of
processing units. On its suggestion the appellant-Federation adopted a 3 tier
.\..
structure with the Federation at the top and two Regional Unions in the
second tier. In the third tier, were the cooperative societies at village level. It
appears from the record that many of the employees of the appellant-Federation
E were transferred to the Regional Unions. This was challenged by 21 employees
who filed Writ Petition No.24907 of 1996 contending that they were not the
employees of the Regional Uni_ons but were employees of the Federation. The
Unions were distinct legal entities since they were also independently registered
as cooperative societies. They had been transferred to those Unions against
F their wishes and without their consent. The aforesaid writ petition was allowed
by judgment and order of June 6, 2000. It was held that the writ petitioners
continued to be the employees of the appellant-Federation. There was no
contract of employment between them and the Management of the Regional
Unions. The employer~employee relationship had not been severed and,
therefore, in law, they continued to be the employees of the appellant-
G Federation. There was no employer-employee relationship between them and
the aforesaid two Regional Unions. Accordingly the appellant-Federation was
directed to treat them as their employees and extend to them all service
benefits.

10. The appellant-Federation preferred Writ Appeal No. 798 of 2000.
H The said appeal was later dismissed as having become infructuous in view
A.P. COOP OIL SEEDS GROWERS FED. LTD HYDERABAD. ANDHRA PRADESH 1·. 11. AOIYUT RAO IB.P. SINGH. J.I 9

~
of the changed circumstances. This fact has been noticed by the High Court A
in its impugned judgment and order.

11. After the re-organization, the Federation looked after the marketing
and oil palm development activity while the Regional Unions were entrusted
with the management of the processing facilities of conventional oil seeds.
All the assets and liabilities of the facilities were transferred to the Regional B
Units. It is not disputed that the Regional Unions suffered huge losses.
Having regard to the mounting losses, a Joint Committee Meeting of the
appellant-Federation and the two Regional Unions was held on April 13, 2001
to consider the restructuring of the appellant-Federation and the two Regional
Unions. A decision was taken to close down both the Unions and to take
necessary steps in that direction. A time bound programme for closing down
c
of the Unions was prepared and a revised staffing structure of the Federation
based on a broad Five Year Business Plan was to be finalized. With this in
view a plan of action was agreed upon and the Federation appointed a
Consultant for the purpose of valuation of the assets of the two Regional
Unions. The Board of Directors of the Federation in its 74th Meeting held on D
May 13, 2002 approved the decision taken by the Joint Committee for the
closure of the two Regional Unions and the manpower of 161 employees for
,A
the restructured Federation was worked out based on the Five Year Business
Plan. The NDDB vide its letter dated July 2, 2002 agreed in principle to the
closure of the two Regional Unions without prejudice to their invoking the
E
Government guarantees for recovery of their outstanding loans. In the Board
Meeting of May 13, 2002 it was also resolved to offer VRS for the surplus
manpower of the Federation and the Unions as per the approved pattern. The
Federation submitted its proposal to the Government for financial assistance
to implement this scheme. The Government vide its G.O. dated July 23, 2002
exercising its power conferred by Section 3 of the A.P. Cooperative Societies F
Act appointed the Principal Secretary, Public Enterprises Department, and
conferred upon him the necessary powers for privatization/restructuring,
winding-up under the Public Sector Reforms Programme and also conferred
powers of the Registrar under the A.P. Cooperative Societies Act and the
Rules made therein. The Government also appointed liquidators for the
aforesaid two Regional Unions vide its letter dated September 25, 2002. So far G
as the restructuring of the Federation was concerned, cadre strength of 159
employees was proposed resulting in many of the employees in different
,.J
categories being rendered surplus. A Circular was issued by the appellant-
Federation on December 12, 2002 recording the fact that a common seniority
list of the employees had been prepared for the appellant-Federation and the H
10 SUPREME COURT REPORTS [2007) 4 S.C.R.

A Regional Unions. The norms laid down in the said Circular were as follows:- .,

"(a) ~he principle adopted for fixing the seniority cadre-wise is on the
basis of date of joining of the employee in the previous immediate
lower cadre.

(b) In the case of employees who were recruited as Field Officers and
B where ranking was prescribed during the recruitment, the same
ranking is maintained for the seniority in the present cadre.

(c ) Wherever employees from various designations have been
promoted to a common single care, seniority is fixed, based on
the difference in the pay scales of these various designations i.e.
c the designation carrying higher pay scale is made senior.

(d) . Wherever the date of joining is same, the date of birth is taken
into account i.e., the employee with more age is placed as senior.

(e) This seniority list is fixed for the regular/permanent employees
D only.

(t) This seniority list is subjected to the final settlement of the
disciplinary cases/court cases (pertaining to promotions only or
these having a bearing on seniority only) pending, if any, against
any employee."
E 12. The employees were invited to submit their objections, if any, to the
said seniority list. Later the norms were slightly modified on January 3, 2003
when the Board resolved as follows :~

"The Board approved.norms adopted for preparing the final common
seniority list of all the employees except that in case of promotions,
F when the date of joining is the same, the seniority of the employees
as per the feeder channel is to be protected rather than fixing the
seniority on the date of birth. Wherever, the date of joining is different,
on promotion, the seniority is to be fixed depending on the date of
joining in the promoted cadre."
G
13. After considering the objections filed by some of the employees the
l
appellant-Federation prepared a common seniority list indicating surplus r
employees and proposing to offer VRS benefits to them. On May 7, 2003 the
. 'I
VRS was announced giving option to the employees likely to be affected
thereby to accept the benefits under the VRS. The scheme was made effective
H from July I, 2003. The cut-off date for VRS benefit was June 30, 2003.
A.P COOP. OIL SEEDS GROWERS FED. LTD. HYDERABAD. ANDHRA PRADESH 1· D. ACHYUT RAO j)J.P. SINGH. J.j ) )

14. On May 19, 2003 the staffing pattern was approved by the Registrar A
of Cooperative Societies. The total revised cadre strength was determined as
159 consisting of about 29 categories of posts, many of them promotional
posts and some posts to which recruitment was made both by promotion and
direct recruitment. All the posts were treated as selection posts.

15. This gave rise to a large number of writ petitions being filed before B
the High Court including the writ petitions filed by the contesting respondents.

16. Several issues were raised before the learned Single Judge who
heard the writ petitions. One of the submissions urged on behalf of the writ
petitioners was that all the employees appointed by appellant-Federation C
whose services had been transferred to the two Regional Unions continued
to be the employees of the Federation and, therefore, they could not be
treated as employees of the two Regional Unions whicr were separate
cooperative societies under the A.P. Cooperative Societies Act. The appellant-
Federation and the two Regional Unions being three separate incorporated
bodies, they were independent of each other and, therefore, by mere deputation D
of the employees of the Federation to work in the Regional Unions, the
employer-employee relationship which existed between the writ petitioners
and the appellant-Federation was not severed. Despite their transfer to the
Regional Unions, they continued to be the employees of the appellant-
Federation.
E
17. The appellant-Federation contested the claim of the writ petitioners
and submitted that many of the employees transferred to the two Regional
Unions had been given promotion to the higher posts in the Unions and,
therefore, they could not be treated as deputationists. The Unions were also
part and parcel of the appellant-Federation and, therefore, the promotions F
made by the Unions must be considered in that light. Those promoted in the
Unions could not compare their cases with their seniors working in the
appel Iant-Federation.

18. The submission urged on behalf of the writ petitioners was upheld
by the learned Judge who held that in view of the earlier decision in Writ G
Petition No. 24907/1996 holding the transferred employees to be the employees
of the appellant-Federation, it could not contend otherwise as long as the
7' judgment held the field. (As noticed earlier that judgment has since attained
finality). The learned Judge also held that 'the three cooperative societies,
namely, the Federation and the two Regional Unions were three separate H
.-1.

12 SUPREME COURT REPORTS [2007] 4 S.C.R.

A bodies incorporated as cooperative societies under the A.P. Cooperative
Societies Act with separate regulations, bye-laws and separate governing
bodies. It was, therefore, not correct to contend that the two Regional Unions
were part and parcel of the Federation. In the facts and circumstances of the
case the employees of the appellant-Federation continued to be its employees
B and their services in the Unions must be treated as on deputation only. They
had a lien on their posts in the Federation and their service conditions,
seniority, pay-scale etc. were also protected as employees of the appellant-
Federation.

19. The learned Judge further held that the Circular and the Notification
C dated May 7, 2003 were valid. He held that though the seniority list of the
employees of the .Federation and the two Regional Unions had been published
and approved by the Registrar of Cooperative Societies, the same was never
acted upon. The Federation was, therefore, right in consolidating and issuing
a common seniority list of the Federation employees consisting of three lists
D of the employees of the Federation and inviting objections. He also held that
the staffing pattern approved by the Registrar which took effect from May
5, 2003 was authorized under Section 116-C of the A.P. Cooperative Societies
Act and the mere fact that the approval was granted on May 19, 2003 with
effect from May 5, 2003 did not invalidate the approval given.

E 20. The learned Judge rejected the submission urged on behalf of the
writ petitioners that the service regulations and the bye-laws of the Federation
did not prescribe any rule for determination of seniority of its. employees. He
held that since the Board of Directors of the appellant~Federation approved
uniform procedure regarding the determination of seniority which were reflected
in the tentative seniority list as well as the final seniority list, which it was
F authorized to do, the same could not be faulted unless it was shown to be
discriminatory, unjust or inequitable. He held that the principles applied by
the Federation for determination of seniority were not arbitrary_. He also
rejected the contention urged on behalf of the writ petitioners that since they
have been promoted to higher posts and were on probation, they could not
G be deemed to be confirmed against that post till their probation was declared.
Factually their probation was never declared and they were never confinned
against the promotional post in accordance with the regulations. Thus they
continued to retain a lien on the lower post from which they were promoted.
·t
He held that the transferred employees had held the promotional post for over
H 2 years while the maximum period of probation was 2 years. They had,
therefore, to be treated as confinned. It did not matter whether their probation
!
..1

AY. COOP 011. SEEDS GROWERS FED. LTD. HYDF.RAB.o\f>. ANDllR ..\ PRADESH r. D. ACUYUT RAO IB.P. SINGll ..l.j 13
) was declared formally. Such a question could only arise in the case of new A
entrants and not those promoted on probation. In this view of the matter he
rejected the contention of the writ petitioners that they should be considered
for appointment against the lower post over which they held a lien and which
post they held before promotion. The learned Judge thereafter considered the
individual cases of the writ petitioners but it did not find any merit in them l3
except in the writ petition filed by one K. Ranga Rao. However, while dealing
with 19 promotions between 1994 to 1999 the learned Judge held that on
equitable considerations if the-promotions given by the Unions are ignored
and the cases of the employees working in the Unions are treated on par with
the Federation employees taking into account that they were also promoted
on par with the Federation employees w .e.f. July 21, 1999, there will be no C
chain reaction or any change for upsetting the entire exercise made by the
Federation. The learned Judge prepared a list which showed that by treating
July 21, 1999 as the deemed date of promotion, very few employees would
be rendered surplus.

2 I. Accordingly the writ petitions preferred by the contesting D
respondents herein and many other writ petitions were dismissed by the
learned Single Judge.

22. The judgment and order of the High Court was challenged in writ
appeals by some of the writ petitioners. E
23. It was submitted in the appeals by the contesting respondents
herein that the appellant-Federation gave a complete go bye to the service
regulations and fixed the seniority in a most arbitrary and illegal manner. As
a result, employees who entered the service of the Federation earlier were
declared surplus while persons junior to them were retained. The service F
conditions of the employees had not been approved by the Registrar of
Cooperative Societies as required under Section 116-C of the Cooperative
Societies Act. The regulations framed by the appellant-Federation did not
contain the method and manner of fixation of seniority and in fact no seniority
list had been published. The employees who had been transferred to the G
Unions were promoted at different times and all this was beyond the knowledge
of the employees concerned. No promotion rules had been framed for promotion
from one category to another. The appellant-Federation submitted in reply
that the Managing Committee of the Society was fully empowered to take
decision in respect of fixation of seniority since it had powers to frame service
conditions. It further submitted that once the initial service regulations are H
_l

14 SUPREME COURT REPORTS [2007] 4 S.C.R.

A approved by the Registrar, Cooperative Societies, the subsequent changes in :,
the services rules and regulations need not be approved by him. Thus when
the decision was taken by the Board of Management of the Federation with
regard to principles to be applied to determine seniority, it did not require
approval of the Registrar of Cooperative Societies. The Board had in its 76th
B Meeting fixed the criteria for determination of seniority.

24. The High Court in the Writ Appeals negatived the contention that
as and when the existing service rules are amended or additional service rules
are framed, the approval of the Registrar, Cooperative Societies is not necessary.
It held that if the interpretation as contended by the appellant-Federation
C were to be accepted the very purpose of getting approval of the rules relating
to service conditions by the statutory authority shall be frustrated because
in that even after getting the approval initially, the Federation may amend the
rules in whatever way it liked and completely defeat the very purpose for
which Section 116-C was framed. The learned Judges of the appellate Bench,
therefore, did not agree with the finding of the learned Single Judge, but
D having regard to the developments that had taken place in the meantime, they
did not consider it advisable to direct the appellant-Federation to seek approval
of the Registrar of Cooperative Societies afresh. The Unions were lying
\
closed for several years and, therefore, it was not advisable to resort to the
time consuming process of seeking fresh approval of the Registrar of
E Cooperative Societies. The learned Judges, therefore, considered it advisable
to decide the matter themselves.

25. The High Court considered the provisions of the Service Regulations
which came into effect on June I, 1983. After considering the various provisions
contained therein it was observed that in the instant case a very different
p situation emerged on account of the fact that the employees who were initially
appointed in a particular cadre we~~ transferred to the two Regional Unions
where they were again promoted to the higher posts. It was not clear as to
whether the employees were promoted to higher posts on the basis of channels
created or on the basis of any criteria determined by the respective Unions.
It was also not discernible from the material placed on record whether any
G proper selection committee had been constituted for promoting the employees
on the basis of merit. The fact remained that the employees were promoted
to higher posts both at the level of the Federation and the two Regional
Unions. In view of the fact that they were to be reintegrated and seniority
had to be fixed for the purpose of determining which of the employees were
H rendered surplus, the appellant-Federation was required to undertake an
AP. ('OOP Oil. SEEDS GROWERS FF.O l TD HYDER.A.BAD. .\NOHRA PRADESH 1· 0. ACll'r'UT RAO IB.P SINGl-I. J.I 15

/ exercise. While the learned Single Judge had found that the criteria fixed for A
assessing the inter-se seniority was just and reasonable and did not require
any interference, the learned Judges of the appellate bench, however, found
it otherwise. It was found that the promotions were granted without reference
to any channel of promotion determined by the Management. The same
applied to employees who were sent to the Unions and were promoted there. B
The High Court was of the view that so far as the employees of the appcllant-
Federation are concerned, who were sent on deputation to the two Regional
Unions, their promotion in the Unions had nothing to do with their position
in the appellant-Federation. Their service in the Unions must be considered
as service in ex-cadre posts since it was unrelated to his status as an
employee of the appellant-Federation. There was no material whatsoever to C
establish that the promotions were made to posts approved by the Registrar·
of Cooperative Societies. The employees had to be treated as the employees
of the appellant-Federation in view of the judgment in Writ Petition No.24907
of 1996. Thus only their relative seniority in the respective cadres of the
appellant-Federation could be taken into consideration, and their promotion D
in the ex-cadre post in the Unions had nothing to do with their seniority in
their parent cadre under the appellant-Federation. Thus it could not be said
that such of the employees who were promoted in pursuance of the interim
directions of the High Court were treated as probationers and consequently
they were deemed to have been confirmed on those posts. On the other hand
their transfer from the appellant-Federation to the Unions and their positions E
at the relevant time in their parent cadre had relevance. If any of the employees
of the appellant-Federation was promoted who was junior to the transferred
employee, it became imperative that the promotion and seniority of such
transferred employee ought to be protected irrespective of their promotion in
the Union. The fact that promotions were not challenged for many years F
could not be a ground for rejecting their claim since such promotions granted
_)
in the Unions could not be treated as promotions in the parent cadre in the
appellant-Federation. Such promotions, therefore, could not affect their service
conditions in the appellant-Federation. The High Court, therefore, concluded
that the writ petitioners were entitled to challenge the promotions given to G
j~nior employees while working on transfer in the Regional Unions.

26. The High Court took the view that for the purpose of determining
inter-se seniority of the employees in the parent cadre of the appellant-
Federation, their date of entry into service in their respective cadres in the
ai:iPellant-Federation only had to be taken into consideration. However, the H
16 SUPREME COURT REPORTS (2007] 4 S.C.R.

A seniority lists of the employees borne in the cadre of the appellant-Federation \
including those who were sent on transfer to the Unions were never prepared
and circulated. It was only when the surplus manpower was being worked out
in view of the approved strength that the exercise was undertaken to determine
seniority and to evolve principles of determination of seniority. The employees
had no opportunity to protest against the grant of promotion to other
B
employees who may be junior to them.

·'.
27. The other important finding recorded by the appellate Bench is that
there was no clear cut promotion policy either in the appellant-Federation or
in the Unions. After appreciating the material on record, the High Court in its
c impugned judgment and order has observed as follows :-

"It is also further noticed that there was no clear cut .promotion policy
either in the OILFED or in the Unions as is seen from the seniority
list, an Operator was promoted as Shift Supervisor, a Chemist was
promoted as Assistant G-1, Driver was promoted as Senior Assistant.
D Similarly a Chemist was promoted as Executive Quality Control a?d
also Quality Control Officer. Thus, it is seen that the employe7.s have
been promoted to various posts without there being any stipulated
_\,
channels beyond procedure of promotions. Under those circumstance~,
fixing the seniority on any of the modes excepting the seniority .as
E available as on the date of their entry in the initial cadre will be the
·•
safe me~hod which would ensure the principle of lost come first go
and first come last go."

28. The High Court, therefore, held that in the absence of any rules
governing such mattes and in the absence of approved channels of promotion
F and particularly in v'iew of the fact that promotions were granted in an
irrational manner,,as found by it, not much importance could be attached to
the promotions granted in the Unions. Since all the employees were' held to
be employees of the appellant-Federation their seniority had to be determined
by reference to norms which were reasonable and not discriminatory. Thus
G in the· absence of rules, applying the principle of seniority by reference to date
of initial appointment, the High Court held that the cases of the contesting
respondents must be considered by reference to the dates of their appointment
in the parent cadre having regard to the category to which they belonged.
~
29. Shri P.P. Rao, learned counsel appearing on behalfofthe Appellant-
H Federation submitted that there was no justification for the High Court to .,..
I
_l_

A.P. COOP. OIL SEEDS GROWERS FED LTD. lffDERABAO. ANDHRA PRADESH r D ACllYlJT RAO JB P. SINGH. J.I 17
)
interfere when the majority of the employees had accepted the scheme of A
voluntary retirement. He relied upon the decision in [ 1980] 4 SCC 38 : Kamal
Kanti Dutta and Ors v. Union of India and Ors .. and submitted that where
service rules operate, more than one view is aiways possible to take without
sacrificing either reason or common sense, but the ultimate choice has to be
necessarily conditioned by several considerations ensuring justice to as
many as possible and injustice to as few. He submitted, relying upon the B
aforesaid decision, that no matter with what care, objectivity and foresight a
,,;
rule is framed, some hardship, inconvenience or injustice is bound to result

-· to some members of the service. The paramount consideration is the
reconciliation of conflicting claims. He also brought to our notice the decision
of this Court in 1986 Supp. SCC 143: Reserve Bank of India and Ors. v. C.N. c
Sahasranaman and Ors., wherein it was held that in matter of service
conditions, it is difficult to evolve an ideal set of norms governing various
conditions of service. Reiterating the principles laid down in Kamal Kanti
Dutta and Ors (supra) this Court held that the constitutionality of any service
rule has to be judged by considering whether it is fair, reasonable and does
justice to the majority of the employees and fortunes of some individuals is D
not the touchstone. In judging whether a rule is just, fair and reasonable, it
must be seen that the rule does not suffer from the vice of Articles 14 and
16 of the Constitution or any other constitutional guarantee.

30. It is no doubt true that service rules, however, meticulously framed, E
there is always a chance of some hardship being caused to a particular
section of the employees, but as long as the rules are just, fair and reasonable,
even if two views are possible, the mere fact that some hardship, inconvenience
or injustice results to some members of the service, is not a ground to strike
down the rule. It is not safe to test the constitutionality of a service rule on
J
the touchstone of fortunes of an individual. If the rule otherwise appears to F
be fair, just and reasonable and does not suffer from the vice of Articles 14
and 16 of the Constitution or any constitutional guarantee, the mere fact that
some little hardship or injustice is caused to someone, is no ground to strike
down the rule altogether.

31. We may, however, notice at the threshold that in relation to the
G
promotions granted in the two Unions, no rules were brought to our notice
.) which were followed while granting promotions. It is on the basis of such
promotions that the inter-se seniority of the employees was determined which
led to some of them being retained and others being declared surplus having
H
'
,_.L.

18 SUPREME COURT REPORTS [2007] 4 S.C.R.

A regard to the total cadre strength determined for carrying on the activities of \
the Federation after the closure of the Unions.

32. Shri Rao also contended that in the instant case in working the VRS
. the principle followed was the ruie of seniority determined by reference to
length of service in the grade. Such a rule cannot be said to be unteasonable
B and has judicial sanction. In particular he referred to the judgment of this
Court in [1977] 3 SCC 399: S.B. Patwardhan and Anr. v. State of Maharashtra
and Ors. It is no doubt true that in the aforesaid decision this Court held that
seniority determined on the sole touchstone of confirmation was indefensible
having regard to the fact that the confirmation is one of the glorious ..
C uncertainties of government service depending neither on efficiency of the
incumbent nor on the availability of substantive vacancies. While appreciating
the principles laid down by their Lordships, one cannot lose sight of the facts
of the case which demonstrated that the directs recruits and the promotees
drawn from two different sources constituted a single integrated cadre
discharging identical functions and bearing similar responsibilities and yet
D clause (iii) of Rule 8 provided that probationers recruited during any year shall
in a bunch be treated as senior to promotees confirmed in that year. The plain
arithmetic of this formula was that the direct recruit appointed on probation
even later was regarded as senior to a promotee who was appointed as an
officiating Deputy Engineer much earlier,_ but was confirmed later than the
E direct recruit. Such a formula gavl< a direct recruit even the benefit of his one
year's period of training and. another year's period of probation for the purposes
of seniority and denied to the promotees the benefit of their long and valuable
experience. This differentiation could not be justified on an intelligible ground
bearing nexus with efficiency in public service. It will thus. be seen that
counting the period of officiation and probation in the case of direct recruits
F and not counting such officiation in the case of promotees, was held to be
arbitrary and unreasonable and was, therefore, violative of Articles 14 and 16
of the Constitution of India because it left the valuable right of seniority to
depend upon the mere accident of confirmation.

33. Mr. Rao also contended that the High Court was wrong in holding
G that the probation of the employees had not been declared. The normal rule
was of one year probation and the maximum period of probation was 2 years.
So an employee on probation must be deemed to have been confirmed after
the completion of two years of probation. He placed reliance on decisions of
this Court reported in [1968] 3 SCR I = AIR (1968) SC 59 : Commissioner of
H Commercial Taxes, Board of Revenue, Madras and Anr v. Ramkishan '.
1.

A.P. COOP. OIL SEEDS GROWERS FED. LTD. H''l'DERABAD. ANDHRA PRADESH 1·. D. ACHYUT RAO IB.P. SINGH. J.I ) 9
) Shrikishan Jhaver; [ 1988] 2 SCC 250 R.l. Gupta and Anr. v. Union of India A
and Ors., and [ 1995] 4 SCC 422: Krishan Lal v. State of J & K.

34. Jn any event he submitted that the learned Single Judge had
deferred the date of promotion of candidates to 2 lst July, 1979 on equitable
consideration as that was the date which least affected the parties.
B
35. On the other than Shri Gurumurthy, learned senior counsel appearing
on behalf of some of the responaents, submitted that no principles whatsoever
were adhered to while granting promotions in the two Unions. He referred to
the facts of the case to make good his submission. He highlighted the finding
of the High Court that in the two Unions promotions were granted without C
adhering to any rule, regulations or norms. Only on the basis of expediency,
and without any rational basis, promotions were granted and the person~
promoted were not necessarily senior to those not promoted. No channel of
promotion was prescribed by rules and employees of one branch were promoted
to higher posts in another branch wholly unrelated to the branch from which
he was promoted. Promotions were granted in higher posts in other D
departments even though the work of that department was unrelated to the
work of the employee concerned in his lower post. He criticized the appellant~
Federation for not being fair to its employees as a model employer should be,
and drew our attention to the observations of this Court in paragraph 24 of
the judgment reported in [2000] I SCC 641 Sub-Inspector Roop/a/ and Anr.
v. Lt. Governor through Chief Secretary, Delhi and Ors. He also contended E
that when candidates are selected in the same process of selection and a merit
list is prepared, the date on which the candidate actually joined the post is
not determinative of his seniority. It is his position in the merit list which
detennined his seniority. In support of this proposition which is well accepted,
he relied upon the decisions of this Court in [1994] 4 SCC 301 : Chairman, F
Puri Gramya Bank and Anr. v. Ananda Chandra Das and Ors; [2003] 5 SCC
604: Bimlesh Tanwar v. State of Haryana and Ors., and [2004] 2 SCC 459:
P. Srinivas v. M Radhakrishna Murthy and Ors.

36. According to Shri Gurumurthy, the employees of the Federation
transferred to two Unions could claim a lien only on the posts to which they G
were appointed in the Federation because their transfer to the Unions were
not regulated by rules nor were any rules framed for promotions within the
Unions. According to him all the appointments and promotions granted were
adhoc in nature. No rules governed such matters and no nonns were laid

H
20 SUPREME COURT REPORTS [2007] 4 S.C.R.

A down or followed by the Management while granting promotions. He relied
upon the decision of this Court in [2003] 10 SCC 14 : G. Varandani v.
Kurukshetra University and Anr., and suppo11ed the decision of the High
Court which held that the seniority of the employees concerned must be
detennined by reference to their dates of appointment in the Federation since
they were not holding any regular or pe.rmanent posts in the Unions and were
B merely working on deputation. The earlier decision of the High Court holding
that all the employees were the employees of the Federation further
strengthened his submission.

37. It is also his submission that a valid appointment pre-supposes the
C existence of a vacancy or anticipated vacancy against which an appointment
may be made. Reliance was placed on a decision of this Court in[i'964] 4 SCR
964 = AIR (1964) SC 521 : The State of Punjab v. Jagdip Singh. He also
submitted that a direct recruit could not be reverted to a lower post and he
relied on a decision of this Court in [1988] 4 SCC 168 : Hussain Sasa·n Saheb
Kaladgi v. State of Maharashtra.
D
38. Applying these principles to the cases of.the six respondents before
this Court he submitted that the Division Bench of the High Court rightly
allowed the appeals and granted relief to the contesting respondents having
regard to the peculiar facts of each case after thoroughly considering their
cases in the light of the well-settled principles of law.
E
39. Mr. Ranjit Kumar, learned senior counsel; appearing for some of the
respondents submitted that two principal questions arose for consideration
of the Court. Firstly, whether the principles laid down for declaration of
surplus employees were valid and legal. Secondly, whether they are not
F arbitrary and unreasonable since they lead to retention of juniors while
declaring seniors as surplus. He submitted that when the Unions were fonned
and the option of the employees was sought, they did not opt to go to the
Unions and wanted to be retained in the Federation. However, they were sent
to the Unions against their wishes. In any event in the year 1996 the High
Cour,t in the writ petition had clearly declared the legaF position that all the
G employees continued to be the employees of the Federation and, therefore,
a common seniority list had to be prepared. Such ·a seniority list was never
prepared till June, 2003. In the course of hearing before the learned Single
Judge the so-called seniority list was prepared. Several writ petitions were
filed challenging the seniority list and the declaration of surplus employees.
H He objected to the chart which is incorporated in the judgment of the learned
,
'
)..

-
I :\.P. COOP. OIL SEEDS GROWERS FED LTD HYOERABAD. ANDllRA PRADESH 1·. D ACHY UT RAO \B.P. SINGlt J I 21 1

,.
/ Single Judge contending that such a chart was not given to the Court, and A
in any case. was never given to the parties so that they could object to the
same. He also submitted that in declaring surplus employees the principle of
last come first go must be applied. The Federation was under a legal obligation
to prepare a common seniority list even if the VRS was to be implemented.
Unfortunately the declaration of the VRS was of May 7, 2003 whereas the
purported final seniority list was given to the Court on June 26, 2003 to which B
they had no opportunity to object. However, the Court had given opportunity
~
to the parties to object to the seniority list. The norms applied for reckoning
seniority were arbitrary and unreasonable and based on promotions which
·- were granted without reference to rules or norms. He also commented that
since there was no seniority list of the lower cadre, it was not possible to c.
prepare seniority list of the higher cadre. He also drew our attention to the
finding of the Division Bench of the High Court that no channels of promotion
had been created nor was any criteria determined for promotion to the higher
posts in the two Unions. It was not discernable from the material placed on
record whether any proper selection committee had been constituted for.
promoting the employees on the basis of merit. Though all the posts are said D
to be selection posts, there is no indication as to how the merit of the
candidates was judged.

40. The respondents are right in their contention that the transfer of
employees from the Federation to the Unions was not regulated by rules
framed or norms laid down by the Management. Since a three tier structure
E
was envisaged, many of the employees of the Federation were transferred to
the two Unions. It may be that not much thought was given to such matters,
as it was believed that in due course, the employees working in the Unions
may be absorbed in those Unions and disputes of this nature may not arise.
However, that never happened. The Federation continued as an independent F
cooperative society while the two Unions also functioned as two independent
cooperative societies. The transfers were made on ad hoc basis in the absence
of rules and similarly promotions were also granted without reference to rules
or norms. No rules were framed governing the grant of promotions on transfer
of employees from the Federation to the Union, or from one Union to another.
~
We cannot lose sight of the fact that the Federation and the two Unions were. G
three distinct legal entities. All the employees with whom we are concerned
were appointed to posts in the Federation and, therefore, it was rightly
-I
contended that they were employees of the Federation and no distinction:
could be made merely because they were officiating against posts in one or
the other Union. The matter was put beyond controversy by a decision of H
__.__
'

22 SUPREME COURT REPORTS [2007] 4 S.C.R. \

A the High Court which attained finality holding that all the employees must be
treated as 'the employees of the Federation and not the Unions. They, therefore,
belonged to the same service under one employer namely the Federation and
their inter-se seniority had to be detem1 ined on that basis.

41. So far. as the inter-se seniority in the Federation is concerned,
B though not formally .determined, it must be held, in the absence of rules, that
seniority must be reckoned by reference to the length of service in the
Federation. This is precisely what the High Court has held.

42. The question is whether upon their transfer to the Unions and upon
promotions being granted in the Unions the seniority of the employees inter-
C se was affected. It is no doubt true that even in the absence of rules promotions
may be granted, but it must be .shown that the promotions granted are just
and fair and that they do not offend Articles 14 and 16 of the Constitution
of India or any other constitutional guarantee. If promotions are granted
arbitrarily without following norms or guidelines, such promotions will have
D to be ignored in detennining the seniority of the employees concerned, firstly
for the reason that there are no rules governing grant of promotion, and
secondly because the grant of promotions are arbitrary and violative of the
principles enshrined in Articles 14 and 16 of the Constitution of India.

43. The High Court in its impugned judgment has considered the matter
E in great detail and we agree with its finding that in the grant of promotions
within the Unions no rule whatsoever was followed. Admittedly no seniority
rules had been framed when promotions had been granted in the Unions. The
management acted in exercise of its authority to grant promotions. The action
of the Management in granting promotions must be determined on the
F touchstone of Articles 14 and 16 of the Constitution of India. If the grant of
promotions is found to be arbitrary or unreasonable it must be held that such
promotions will not affect the right of seniority of the persons concerned,
since the promotions were granted neither in accordance with any rule nor
by following norms consistent with principles incorporated in Articles 14 and
16 of the Constitution of India. The High Court has very critically analysed
G the facts of the case. It has found as a fact that there was no clear cut
promotion policy either in the Federation or in the Unions. An Operator was
promoted as Shift Supervisor ; a Chemist was promoted as Assistant Grade-
l; a Driver was promoted as Senior Assistant and another Chemist was
promoted as Executive Quality Control and also Quality Control Officer. Thus,
H the High Court concluded that the employees had been promoted to various
AP. COOP. OIL SEEDS GROWERS FED. I.TO. HYOF.RAB.'\D. ANDHRA PRADESH r. D '\(HYlJT RAO jB.P. SINGH. l! 23

/ posts without there being any stipulated channels of promotion and without A
following any procedure prescribed by rules of promotion. Thus detennination
of their seniority by reference to promotions which were not governed by any
rule and were at best fortuitous could not be justified. We fully endorse the
view of the High Cout1. Where promotions are not granted in accordance with
the rules or fair and reasonable norms laid down for the purpose, and the
promotions are at best fortuitous, such an uncertain event cannot be made B
the basis for determining seniority which is a valuable right of an employee .
.)
This is fully consistent with the principles laid down in S.B. Patwardhan and
Anr (supra). Even the learned Single Judge was hesitant in accepting seniority
by reference to dates of promotion granted in Unions. The learned Judge,
therefore, ingeniously worked out a chart and identified a date which, iftaken c
as the date of promotion, would cause least inconvenience to the employees.
Unfortunately such a principle cannot be followed in service matters where
t seniority confers a very valuable right on an employee and his entire future
career is at times dependent upon such seniority. Seniority, therefore, must
be determined by rules validly framed or norms enunciated and/or followed
which are consistent with the principles enshrined in Articles 14 and 16 of D
the Constitution of India.

44. The instant case has another facet. While the employees were
transferred to the Unions much earlier and were granted promotions in due
course in the Unions, the question of their seniority inter-se and the principles
to be applied in detennining seniority were evolved for the first time when the
E
closure of the Unions was being considered necessitating retrenchment of
surplus employees. It was at this stage that the cadre strength was first
determined and thereafter nonns were sought to be evolved in the light of
which seniority was to be determined and junior employees in excess of the
determined cadre strength to be given the benefit of VRS. It was really a F
process of working backwards. Rules and norms were sought to be evolved
later governing promotions which were granted much earlier without reference
to such rules or norms, but which were to determine the inter-se seniority of
the employees for the purpose of retrenchment.

45. We are, therefore, satisfied that the High Court was right in holding G
that the promotions earlier granted in the Unions and the norms later laid
down by the Federation could not be applied to determine the inter-se seniority
" of the employees of the Federation. The only rule which, in the facts of the
case, could be safely applied to determine seniority was to reckon seniority
by reference to length of service in the Federation. As a necessary corollary,
H
24 SUPREME COURT REPORTS [2007] 4 S.C.R.

A the date of initial appointment in the Federation was decisive in determining
seniority. Thus applied, seniority must be determined by reference to the date
of initial appointment and not by reference to dates of promotion gr~nted in
the Unions unguided by rules framed or nonns declared which could be said
to be fair ~nd reasonable applying the test of Articles 14 and 16.

B 46. The High Court has thereafter considered the individual cases of the
appellants" applying the test of seniority by reference to length of service in
the Federation.

47. In the case of AnwarAli (respondent in SLP (c) Nos. 17299-17306
of2004 and SLP (c) Nos. 15923-15924 of2004) the facts reveal that Anwar Ali
C was appointed as a Field Officer on July 11, 1983. The petitioner M. Ramesh
was appointed as a Field Officer on· July 13, 1983. Another person, namely
Tirupathi Reddy was appointed to the same post on July 11, 1983. Since
Anwar Ali was senior most in _age, he was given seniority over Tirupathi
Reddy: All the three were promoted as Executives by order dated July 15, 1989
D but they joined on different dates. Anwar Ali could join only on August 4,
1989 because he was not relieved of his duties by the authorities having
regard to the exigencies of service. In the next higher post Anwar Ali was
promoted on July 21, 1999 whereas the other two were promoted pursuant to
orders passed by the High Court on July 23, 2001 with retrospective effect
from July 21, 1999. The High Court has rightly come to the conclusion that
E since Anwar Ali was the senior-most amongst the three, he could not be
declared surplus.

48. Similarly in the case of Achyuta Rao (respondent in SLP (c)
Nos.15912-15913 of2004) the High Court found that he was appointed as
F Field Officer on November 29, 1983. He claimed seniority over Ramesh Kumar
Reddy, who was appointed Field Officer on December 5, 1983. So far as their
promotions to the post ofExecutive (Agriculture) in the Unions are concerned, ·',
while Achyuta Rao was promoted on September 18, 1989, Ramesh Kumar
Reddy was promoted on March 15, 1989. The facts, therefore, disclose that
. Achyuta Rao when initially appointed to the post of Field Officer was senior
G to Ramesh Kumnar Reddy, but if the promotion granted in the Union is
ignored, he must be declared senior to Ramesh Kumar Reddy and ought not
to be included in the surplus· list. The High Court, therefore, rightly upheld
the contention of Achyuta Rao.

49. In the case ofSeshagiri Rao (respondent in SLP (c) Nos.15926-15927
H
A..P COOP OIL SEEDS GROWERS FEU LTD llYDERAB-\D . .\:-.lOllRA PRAOES!l 1 D •\CHYt:T RAO 113 P. SIS(ill. J.I 25
of2004 and SLP (c) Nos. I 5046-15051 of2004) it is not disputed that he was A
appointed as a Chemist in the Federation on May 11. 1987. Later the other
officers (respondents 3 to 8) in the writ petitions had been appointed to the
same post. It so happened that Seshagiri Rao was transferred to the Union
where he was later promoted as Executive, Quality Control. The High Court
upheld his contention. Since he was the first entrant in the category of
Chemist, he could not be deprived of his seniority in the parent department. B
Accordingly his appeals were allowed and he was declared as non-surplus.

50. The case ofK.V. Nageshwara Rao (respondent in SLP (c) Nos. 15920
- 15921 of2004) stands on the same footing as that ofSeshagiri Rao. He was
appointed to the post of Chemist in the Federation on May 12, 1987 and was, C
therefore, senior to the other officers (respondents 3 to 8 in the writ petitions),
who were appointed later.

51. In SLP (c) Nos. 15918-15919 of2004 and SLP (c) No. 15917 of2004,
though the appellant-Federation has challenged the decision of the High
Court, the parties likely to be adversely affected if its contention is upheld D,
by us, have not been made parties in the appeals. We must, therefore. refuse
to interfere with the order of the High Court.

52. We, therefore, find no merit in these appeals and they are accordingly
dismissed. Parties to bear their own costs.
E
A.K.T. Appeal dismissed .

.;