Holding

The reversion order was illegal and vitiated by error of law; the appellants' selection and promotions were valid and the order is quashed.

Summary

The Railway Board, under para 123 of the Indian Railway Establishment Manual, recruited Traffic Apprentices for supervisory posts, reserving 10% of vacancies for graduates through a competitive examination. The appellants were selected in 1982-83 for Station Master (SM) posts, regularized, and later promoted to higher grades (Rs.1600-2660) after suitability tests. Following a restructuring of C and D posts in August 1983, the Railway authorities claimed the selection was illegal and reverted the appellants to lower ASM grades, placing them below all ASMs without hearing. The appellants challenged the reversion, arguing that their selection and subsequent promotions were lawful and that the reversion violated principles of natural justice and seniority. The Supreme Court held that the selection and promotions were valid, the reversion order was unjust, vitiated by error of law, and was passed without due process, and therefore set aside the Tribunal's order and quashed the reversion.

Issues considered

Whether the selection and appointment of the appellants as Station Masters under the 10% graduate quota was illegal in view of the 1983 restructuring of C and D posts.
Whether the Railway could revert the appellants to lower grades and alter their seniority after they had been regularized and promoted.

Subjects

service lawrecruitmentIndian Railwayspromotionreversionreservation quotacompetitive examinationseniorityrestructuringdiscrimination

Judgment

A M.S. USMAN! AND ORS.
v.
UNION OF INDIA AND ORS.

DECEMBER 14, 1994

B [R.M. SAHAI AND N.P. SINGH, JJ.]

SERVICE LAW: Indian Railway Establishment Manual-Para 123-
Recruitment of Traffic Apprentice-Employees selected and appointed by a
competitive examination against I 0% quota reserved for graduates-
Promoted to a higher scale of pay-Whether. could be reverted
c subsequently on assumption that the entire process of selection and
appointment was against the rules-Held Reversion order not only unjust
but vitiated by error oflaw.

In 1968 the Railway Board introduced a scheme under para 123 of
D the Indian Railway Establishment Manual in which. provision was
·made for recruitment of Traffic Apprentices to the extent of 25% in
various supervisory posts in the Transportation Department of the
Railway and 15% through agency of the Railway Service commission
and 10% from amongst the serving non-ministerial graduates of
Transportation Department, through open market to be filled on the
E basis of limited Departmental Competitive Examination. The
Departmental examination was to be conducted strictly in order of
merit by subjecting candidates to w.ritten test and viva-voce. The
Railway Board issued another letter communicating its decision that
10% of the annual vacancies in the category of Section Controllers,
F Station Masters (SMS) and Assistant Station Master's (ASMS) grade
Rs. 470".'700 and Rs. 455-700 were to be filled in through departmental
competitive Examination from Class-III non-Ministerial staff who were
graduates .and less than 33 years of age. Selection was done
accordingly.

G The selection list itself indicated the designation of candidates and
the category for which th.ey were selected. The list also contained names
of those ASMS who were in the scale of Rs. 425-640 but as consequence
of Selection they were placed in the scale of Rs. 455-700 as S.M. Many
of the appellants so selected and appointed were further promoted as
SMSITIS in the scale of 55-750 (revised scale Rs. 1600-2660).
H
572
M.S. USMANI v. U. 0. I. 573

In August i983 Grade C and D posts in the Northern Railway were A
restructured with reference to cadre strength as it existed on 1.8.83. It
provided for grant of proforma benefit from 1.8.1982 to the staff
eligible for higher grade. Consequent to the restructuring all these
ASMs who were working in the grade of Rs. 330-560 and were
graduates and had worked earlier with appellants but had not
appeared in the competitive examination or had appeared and ·failed B
stood upgraded and were placed in to scale of Rs. 425-700 for ASMs.

In 1987 the appellants were promoted in the higher grade of Rs.
1600-2660. Some of them were appointed as TIS. In May 1987 the
Railway Board issued a circular that fresh recruitment to the post of
Traffic Apprentice would be placed in the scale of Rs. 1600-2660, C
whereas those who were already serving as Traffic Apprentices shall be
in the scale of Rs. 1400-2300. Therefore for the same post o! Traffic
Apprentice two scales were provided which was challenged before the
Central Administrative Tribunals in different States on the ground of
discrimination. The Tribunal upheld the challenge and the order
became final as S.LP against that order was dismissed. D
After 4 years such of those ASMs, who as a result of restructuring
were allowed the same scale as was applicable to S.Ms approached the
Railway Authorities through Railway men's Union claiming that the
post of SMs in the post of Rs. 1600-2660 be filed in by invoking the
principle of pro-rata. The same was rejected. Thereafter the Union . E
approached the Head Quarters which rejected the claim holding that
the Selection of the appellants in September 1984 was illegal,
restructuring having been done on 1.8.83. In consequence of this
decision the appellants were reverted to the grade Rs. 1400-2300 and
were placed below all the ASMs in the panel on 1.8.83 for the purpose
of seniority. F
Aggrieved by the said order, the appellants approached the
Tribunal. The Respondents got impleaded in the petition at their
instance. Tribunal rejected the contention of appellant and dismissed
the application against which the present appeal have been preferred.
G
Allowing appeals, this Court

HELD :1. The selection in 1982 was held for the posts earmarked
for SM. The Selection and appointment of the appellants, therefore
could not be said to be against rules. Another aspect which needs be
clarified is about status promotion. According to respondents the H
574 SUPREME COURT REPORTS [1994] SUPP. 6 S.C.R

A appointment of appellants could be made only in the grade of Rs. 425-
640 and they could not be promoted in the grade of Rs. 455-700.
[578 H, 579 A]

2. Restructuring was done to upgrade certain percentage of posts
in each grade of ASM and SM. The percentage was to be worked out of
B the cadre in each category as it existed on 1st August 1983. This
upgradation had nothing to do with 10% graduate quota. But some
difficulty does arise as paragraph 3 of the restructuring order provided
that vacancies arising after July, 1983 would be filled in accordance
with the procedure provided in the circular. This gave rise to arguable
issue whether the vacancies for which selection was held in 1982 and all
c processes of selection had been completed in June, 1983 except the
declaration of panel could be said to be available on 31st July 1983.
. {581GtoH]
3. The reversion order issued by the Railways appears not only to
be unjust but vitiated by error of law. It was passed without affording
any opportunity of hearing to the appellants. The appellants had been
D select~d through a competitive merit examination. Their selection was
not challenged. They had been regularized and had been promoted to
even higher grade on the basis of suitability test. Reverting such
persons after a laps of six years from the date of their selection, five
years from the date of their appointment and two years from the date
of their promotion in the higher scale, was not warranted. The
E appellants having been regularized as SMs and promoted further as
Tis it was not open either for other Railways to re-open the selection
held earlier or for other employees to agitate that the selection held in
1982 was vitiated as the panel was announced after the cadre had been
restructured. [582 C to DJ
F 4. The order passed by the Tribunal is set aside and the order
issued by the Railways in 1989 reverting the appellants is .quashed.
They shall also be entitled to consequential benefits. [582 F]
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 9177-78 of
1994.
G From the Judgment and Order dated 23.2.1993 of the Central Admin-
istrative Tribunal, Lucknow in O.A.Nos. 162 and 28of1990.

Afzal and R.D. Upadhyay for the Appellants.

Ms. Kitty Kumar Manglam, Arivind Kumar Sharma, C.V. Subba Rao
H and S. Murlidhar for the Respondents.
M.S. USMANI v. U. 0. I. [R.M. SAHAI, J.] 575

The Judgment of the Court was delivered by A
R.M. SAHAI, J. The question of law that arises in these appeals
directed against order of Central Administrative Tribunal, Lucknow Bench,
is whether the appellants who were selected and appointed by a competitive
examination against I 0% quota reserved for graduates and were promoted
even to a higher scale of pay could have been reverted subsequently, on B
assumption that the entire process of selection and appointment was against
the rules.

Facts as they emerge from the order passed by the Central
Administrative Tribunal and the affidavits filed by the parties, more
particularly the Railways, are narrated in brief. In 1968 the Railway Board C
introduced a scheme under para 123 of the Indian Railway Establishment
Manual in which provision was made for recruitment of Traffic
Apprentices to the extent of 25% in various supervisory posts in the
Transportation Department of the Railways. In 1972 the scheme of 25%
was bifurcated pursuant to the decision taken in the Departmental Council
of the Ministry of Railways under the Joint Consultative Machinery D
Scheme and it was decided to recruit the Traffic Apprentices by two
methods- 15% through agency of the Railway Service Commission and
I 0% from amongst the serving non-ministerial graduates of Transportation
Department, through open competition to be filled on basis of Limited
Departmental Competitive Examination. It further provided that the
departmental examination was to be conducted strictly in order of merit by E
subjecting candidates to written test and viva voce. On 22nd July,1975 the
Railway Board issued another letter communicating its decision that I 0% of
the annual vacancies in the category of Section Controllers, Station Masters
(SMs), and Assistant Station Masters (ASMs) grade - Rs. 470-700 and Rs.
455-700 were to be filled in through departmental competitive examination F
from Class - III non-Ministerial Staff who were gradates and less than 33
years of age. It was reiterated on 18th March, 1976. The copy of the letter is
extracted below:

"In terms of Railway Board's letter No. E (NG) 72 RRI/18
dated March, 1972 circulated vide this office letter No. 220- G
E/172 Pt.XI (Rectt) dated June, 1972, 10% of the annual
vacancies in the category of SM' sfASM' sfAYM' s and
Section Controllers gr. Rs. 250-350 (As) are to be filled in
through a departmental competitive examination from Class -
III non-ministerial staff who are graduates and less than 33
years of age. H

I
)I

576 SUPREME COURT REPORTS [1994] SUPP. 6 S.C.R

A It has been decided that the staff selected against 10%
vacancies in the transportation Deptt. referred to above will
be trained in a Special Course, the syllabus for which is
under compilation in this office in consultation with the
Principal Zonal Training School, Chandausi. The selected
staff may be booked for training courses as and when the
B syllabus of the case is finalized and issued by this office."

It is thus clear that the selection of Traffic Apprentices for
placing them in various supervisory posts came to be
extended to SM as well at least from 1975. The selection
against 10% quota to fill up the vacancies in the category of
c SM/ASM/Tl/AYM and SCNL in the grade Rs. 455-700 was
initiated on 31st July, 1982. The break-up of the vacancies
for which the selection was held was :

"1. Station Master, Gr. Rs. 455-700 (RS) - 11
II II
2. Asstt. Station Master 11 11
- Nil
D
3. Asstt. Yd. Master Gr. II II II
II -One
II II II 11
4. Traffic Inspector - One

5. Section Controller Rs. 470-750 (RS) - Three
E Total - Sixteen"

It is thus too late to claim, as has been attempted by the private
respondents, that the selection against 10% reserved for graduates was not
held or could not have been held for the post of SM. The letter selecting the
appellants on 27th September, 1983 is extracted below:
F
"As a result of the Selection held for the above posts on
2.2.83, 17.4.83 and 29.6.83, the following staff found
suitable for the posts shown against each have been placed on
the provisional panel of 10% graduate quota in accordance
with their merit position in respective categories : -
G
T.l.

S.No. Name Designation Category
earmarked

1. Shri R.C. Gupta ASH/LIJ T.I.
H
M.S. USMAN! v. U. 0. I. [R.M. SARAI, J.J 577
STATION MASTER A
S.No. Name Designation Category
earmarked
2. Shri M.S. Usmani ASMIMLJ S.M.
3. Shri Rajendra Pd. Singh ASM/BKSA S.M. B
4. Shri J.R. Mourya ASM/FD S.M.
5. Shri S.J. Singh LR/ASM/LKD S.M.
6. Shri S.S. Singh ASMIDELD S.M.
7. Shri D.K. Kharey ASM/HCP S.M. c
8. Shri Gyan Prakash ASM/LRD S.M.
Srivastava
SECTION CONTROLLER
9. Shri Vinod Kumar THC/LKD SCNL D
IO. Shfi Krishna Pd. (SC) THC/BSB SCNL

The above staff should note that the retention of their names on the
panel is subject to their work remaining satisfactory during the currency of
the panel and qualifying R.29 A and B courses. Mere fact that their names E
have been placed on the panel is no guarantee that they will be offered the
post for which selected."

What is necessary to be mentioned is that this list itself indicates the
designation of candidates and the category for which they were selected.
For instance No. I was working as ASM/LIJ and was selected for T.I. F
Similarly No. 2 to 8 working as ASM were selected for SM and No. 9 and
IO who were THC were selected for SCNL. The appellants according to the
counter-affidavit of Railways were given training of one year as provided
by letter No. 757E/l02-I(Elb) dated 17th April, 1976. They were appointed
on 19th November, 1984 on various posts for which they were selected.
Even in the appointment letter the details were mentioned. For instance G
Usmani was shown as Assistant Station Master/MNJ in existing grade and
in the column of new designation and station of posting it is mentioned
SM/UTR - Rs. 455-700. The list also contained names of those ASMs who
were in the scale of Rs. 425-640 but as a consequence of selection they
were placed in the scale of Rs. 455-700 as SM. Many of the appellants so
selected and appointed were further promoted as SMsffls in the scale of H
578 SUPREME COURT REPORTS (1994) SUPP. 6 S.C.R

A Rs. 550-750 (revised scale Rs. 1600-2660). Some of them were even
selected and sent to Iraq for Iraq Rail India Technical Economic Services in
1988. The averments in the counter affidavit filed by Railways is extracted
below:

"It is however stated that the first part of the panel of the
B aforesaid selection was declared on 27.9.83 in which one
person was earmarked for the post of Traffic Inspector, seven
persons were earmarked for the post of Station Master Gr.
Rs. 455-700(RS) and two persons were earmarked for the
post of Section Controller in Gr. Rs. 470-750 (RS). The
remaining part of the panel was announced on 12.8.87 after
c getting the approval of competent authority for de-reserving
the six posts of SC/ST quota.

The incumbents on the panel formed against 10% graduate
quota were imparted the pre-requisite training and were
posted in their respective cadres after being declared
D successful and were allowed to reckon the seniority from the
date of joining in the cadre in tenns of para 302 of IREM.
The applicants were promoted to Gr. Rs. 1600-2660 (RPS)
by virtue of their position in the cadre of Station Master
which was assigned to them by operation of para 302 of
IE IREM." .

The eligibility of the appellants, their selection and appointment as SM
and further promotion as SM/Traffic Inspector cannot be disputed. Nor it
can be disputed that they after selection were given training and regularized
in the post of SM. Even the Tribunal found this and noticed that they were
F given seniority in accordance with paragraph 302 of the Establishment
Manual. But the Tribunal did not accept the case of the appellants as in
consequence of restructuring of C and D posts the reservation of posts for
. graduates came to an end and seniority of the appellants after restructuring
was contrary to Railway Establishment Code 302. Before proceeding
further it is necessary to mention that the respondents who were impleaded
G before the Tribunal, at their own instance, relied vehemently on paragraph
123 of the Railway Manual and urged that the Traffic Apprentices could be
selected for certain posts but not for the post of SM. The claim proceeded
on misapprehension as it did not take note of the letter issued in 1972, 1975
copies of which have been filed with the counter affidavit of the Railways.
The selection in 1982 as is clear from the affidavit of Railways was held for
H the posts earmarked for SM. The selection and appointment of the
M.S. USMAN! v. U. 0. I. [R.M. SARAI, J.] 579

appellants, therefore, could not be said to be against rules for this reason. A
Another aspect which need' be clarified is about status promotion.
According to respondents the appointment of appellants could be made
only in the grade of Rs.425-640 and they could not be promoted in the
grade of Rs. 455-700. But that stands belied as the selection of the appel-
lants was held for SM in the scale of Rs. 455-700.
B
The reason for reversion of the appellants may now be examined and
whether it was well founded. In August, 1983 C and D posts in the
Northern Railway were restructured. It came into effect on 1.8.1983. The
restructuring was done with reference to cadre strength as it existed on
1.8.1983. It provided for grant of profonna benefit from 1.8.1982 to the
staff eligible for higher grade. The restructuring in the category of C
SM/ASM was in two groups depending upon whether existing cadres or
SM/ASMs was separate or combined. It was further provided that revised
percentage would be allotted depending upon whether the existing structure
was combined or separate, since different practices were in vogue in
different zones. In consequence of restructuring it appears all those ASMs
who were working in the grade of Rs. 330-560 and were graduates and had D
worked earlier with appellants but had not appeared in the competitive
examination or had appeared but failed stood upgraded and were placed in
scale of Rs. 425-700 for ASM.

Till 1987 there was no dispute and the Railways and the employees
both understood that those who had come by way of selection against 10% E
quota in September, 1983 and those who came by way of restructuring
were in their respective positions and there was no occasion for grievance
as each was placed in the same scale of pay.

In 1987, the appellants were promoted in the higher grade of Rs. 1600-
2660 (Rs. 550-750). Some of them were appointed as Tis. The appointment F
order of appellant No. 1 is extracted below:

"A. As the result of suitability test for the post of Traffic-
Inspector in grade Rs. 1600-2660. The following two
candidates have been found suitable and are placed on this
select list in order of their seniority.
G
1. S/Shri M.S. Usmani, SM/LKO

2. S/Shri R.D. Jaiswal, SCNL/LKO

B. Consequent on the placement of above named staff or. the select
list for the post of Traffic-Inspector in grade Rs. 1600-2660, S/Shri H
580 SUPREME COURT REPORTS [1994] SUPP. 6 S.C.R

A M.S. Usmani, SM/LKO and R.D. Jaiswal, SCNL/LKO are
promoted and posted as Traffic-Inspector PBH and REL respec-
tively in grade Rs. 1600-2660."

At this stage when the appellants were selected and placed in the scale .,;

of Rs. 1600-2660 (Rs. 550-750) another controversy arose which even
B though not relevant may be mentioned as it probably furnished the occasion
for beginning of what ultimately led to the reversion order of the appellants.
In May, 1987 the Railway Board issued a circular that fresh recruits to the
post of Traffic Apprentice would be placed in the scale of Rs. 1600-2660
whereas those who were already serving shall be in the scale of Rs. 1400-
2300 (Rs. 425-700). This resulted in discrimination between the two classes
C of the same empJoyees. Therefore, many of the persons affected
approached the Central Administrative Tribunal and different tribunals in
different States allowed their claim and directed that all those Traffic
Apprentices would be entitled to be placed in the scale of Rs. 1600~2660
with effect from 15th May, 1987. The order of the Tribunal became final as
the Special Leave Petitions filed against some of -the orders passed by the
D tribunals were dismissed by this Court. When the appellants thus became
entitled for scale of Rs. 1600-2660 with effect from 15th May, 1987 those
ASMs who as a result of restructuring of the grade had been placed in the
same. scale of ASM as was being drawn by the appellants as SM
approached after four years through Railwaymen's Union and made a
demand in 68th Permanent Negotiating Meeting that the post of Station
E Master in grade Rs. 1600-2660 may be filled by invoking the principle of
pro-rata, that is, the ratio of 1: 17. In other words 1 should be promoted
from the grade of SM and 17 should be promoted from the grade of ASMs.
This demand was rejected by D.R.M., Lucknow as the pro-rata principle
was not applicable. The Union having failed at the divisional level raised
the issue at headquarter. What is significant to be mentioned is that the
F Union never claimed that the selection or appointment of the appellants was
illegal or irregular. It agitated for applicability of pro-rata principle for
promotion to the higher post. It appears on the representation made by the
Union comments were invited from the D.R.M., Lucknow who apprised the
headquarter that promotion as SM through selection against 10% reserved
for graduates was due fyom 1979. It was further pointed out that the cadre
G of ASM grade Rs. 1400-2300 and SM Rs. 1600-2660 were separate. The
re.spondents did not accept the claim of Union of granting promotion to the
higher scale on pro-rata basis. But they held that the entire selection of the
appellants in September, 1983 was illegal as the restructuring having been
done on 1st August, 1983 the appointment of appellants in September, 1984
was contrary to restructuring. It was in consequence of this decision that the
H
M.S. USMANI v. U. 0. I. [R.M. SAHAI, J.] 581

appellants were reverted from the post of SM/TI grade Rs. 1600-2660 to the A

- post of ASM grade Rs. 1400-2300 and placed below all the ASM in penal
on l st August, 1983 for the purposes of seniority.

On these facts and in the circumstances of the case two questions arise
for adjudication- one, whether selection and appointment of the appellants
in pursuance of examination held in 1983 could be said to be illegal or B
against the rules in view of restructuring of grade C and D staff and second,
whether even if it was so could the appellants be reverted even though they
had moved higher in the hierarchy and had been promoted to higher scale
of SM or Tis. It was submitted by the learned counsel for appellants that the
appellants having been selected and appointed as Station Masters through a
competitive examination in which others either did not appear or failed they C
could not have been reverted to a post below the post in which they had
been regularized. It was urged that even though the appellants had been
selected for the post of SM in the grade of Rs. 455-700 (revised scale- Rs.
1400-2300) but they having been appointed in the higher grade of Rs.470-
750 (revised scale- Rs. 1600-2660) after suitability test the Railways were
not justified in either reverting them or setting aside selection after a lapse D
of nearly six years. It was urged that even if for any reason the appellants
were reverted from the higher post they could not be pushed down below
the ASMs and their placement below all the ASMs promoted as a result of
restructuring was arbitrary. This according to appellant had resulted even in
disturbing the original seniority of the appellants as ASM prior to selection E
which was contrary to the rules. It was urged that the respondents wrongly
construed the restructuring circular as what was provided therein was that a
panel of non-selection post would lapse in consequence of restructuring.
But this could not apply to the selection of SMs which was a selection post
both before and after restructuring. It was also ur~ed that in any case the
appellants having moved up higher in hierarchy the setting aside of their F
selection and appointment which was otherwise in accordance with law
only because of the restructuring G.O. relating to grade C and D, Railways
was unfair.

Restructuring was done to upgrade certain percentage of posts in each
grade of ASM and SM. The percentage was to be worked out on the cadre G
in each category as it existed on 1st August 1983. This upgradation had
nothing to do with 10% graduate quota. But same difficulty does arise as
paragraph 3 of the restructuring order provided that vacancies arising after
July 1983 would be filled in accordance with the procedure provided in the
circular. This gave rise to argueable issue whether the vacancies for which
selection was held in 1982 and all processes of selection had been H
582 SUPREME COURT REPORTS [1994] SUPP. 6 S.C.R

A completed in June 1983 except the declaration of panel could be said to be
available on 3 lst July 1983. Much was said and could be said on behalf of
the appellants but it is not necessary to express any opinion on various
issues touching upon the applicability of the circular to the vacancies other
than those which arose out of restructuring. Nor it is necessary to express
-
any opinion on the clarification issued in August 1984 regarding 10%
B graduate quota and whether it could be confined to only those who had
been sent for training prior to 1.8.1983 or it could be extended even to
those who had been selected prior to this date as the appeal is liable to
succeed on other ground.

The reversion order issued by the Railways appears not only to be
C unjust but vitiated by error of law. It was passed without affording any
opportunity of hearing to the appellants. The appellants had been selected
through a competitive merit examination. Their selection was not
challenged. They had been regularized and had been promoted to even
higher grade on basis of suitability test. Reverting such persons after a lapse
of six years from the date of their selection, five years from the date of their
D appointment, and two years from the date of their promotion in the higher
scale, was not warranted. The appellants having been regularized as SMs
and promoted further as Tis it was not open either for Railways to re-open
the selection held earlier or for other employees to agitate that the selection
held in 1982 was vitiated as the panel was announced the cadre had been
restructured.
E
Therefore, without deciding the larger issue and not as precedent we
are of opinion that the appeals are liable to succeed. The order passed by
the Tribunal is set aside and the order issued by the Railways in 1989
reverting the appellants is quashed. They shall be entitled to continue in
their respective posts and shall also be entitled to consequential benefits.
F
No Costs.

K.S.D. Appeals allowed.