Holding

PNB was empowered to transfer/redeploy surplus NBI employees prior to the placement scheme, and the transfers were not arbitrary or discriminatory.

Summary

The Supreme Court examined the validity of Punjab National Bank’s (PNB) transfer of surplus officers and staff of the merged New Bank of India (NBI) before a Central Government placement scheme was issued. The petitioners argued that such transfers violated paragraphs 5(2) and 5(4) of the Amalgamation Scheme, were arbitrary, discriminatory and contravened Articles 14 and 16 of the Constitution. The Court held that paragraph 5(2) made NBI employees automatically become PNB employees, giving PNB the authority to redeploy surplus staff as needed, and that a separate placement scheme was not a statutory prerequisite for such transfers. It further found that the transfers were made in accordance with PNB’s guidelines, were necessary for administrative efficiency, and did not amount to arbitrariness or discrimination. Consequently, the High Court’s order declaring the transfers illegal was set aside and the writ petition dismissed.

Issues considered

The power of PNB to transfer/redeploy surplus NBI employees before the Central Government placed a placement scheme under paragraph 5(4) of the Amalgamation Scheme.
Whether the transfers violated Articles 14 and 16 of the Constitution by being arbitrary or discriminatory.
Interpretation of the term "placement" in the Amalgamation Scheme and whether a separate placement scheme was a statutory requirement.
Whether PNB’s guidelines for transfers were consistent with the statutory scheme and applicable awards.

Subjects

amalgamationtransfer of employeesplacement schemebanking lawservice lawfairness in actionarbitrarinessdiscriminationinter se seniorityredeploymentcentral government scheme

Judgment

'
A PUNJAB NATIONAL BANK AND ORS.
v.
y
ALL INDIA NEW BANK OF INDIA EMPLOYEES'
FEDERATION AND ORS.

FEBRUARY 11, 1997
B
[S.C. AGRAWAL AND G.T. NANAVATI, JJ.)

Service Law: :.;

c Scheme,New1993:
Bank of India (Amalgamation and Transfer of Undertakings)
Paragraphs 5(2) and 5(4).

Power of Bank-To transfer officers/employees of a Bank in accord-
ance with its guidelines before framing of Placement Scheme by Central
Government-Held: Such Power was available under Amalgamation
D Scheme-Plea that such transfers could not be made before framing of
'Placement Scheme, rejected--Fwther, such transfers were not rotational but ---..
iii effect redeployment of surplus officers/staff-New Bank of India (Deter-
mination of Placement of Employees-Officers and Workmen-Of the New
Bank of India in (Punjab National Bank) Scheme, 1993, Para 3-Banking
Companies (Acquisition and Transfer of Undertakings) Act, 1980, S.9.
E
Bank~Transfer of employees-Held: Banks entitled to decide on a
consideration of the necessities of banking business, whether the tramfer of
an employee should be made to a particular branch--The management best

--~
judge to distribute the employees between different branches. _
F Banks-Transfer of employees-Outside limited area-field: Pennis-
sible in special circumstances.

BankS"-Transfer of employees--Clwllenge against-On ground of ar-
bitrariness or discrimination-Employees alleged that their transfers were
arbitrat01y and discriminatory because the transfers were made to accom-
G
modate some other employeeS"-Allegation not refuted by Bank but employees
did not fumish details as to when and under what circumstances the other
employees were transferred-Held: Onus of proof on person challenging )"'
tramfer-Hence, plea of arbitrariness/discrimination not accepted.

H Administrative Law :
1126
P.N.B. v. ALL IINDIA NEW RANK OF INDIA EMPLOYEES FEDERATION 1127

·-,.- Natural justice-!'Faimess in action''-Action of State or State in- A
stmmentalities-Test of fairness-Held: An established test to judge validity
of such action.

Words and Phrases :

"Redeployment" and. "Transfer''-Meaning of-In the context of New B
Bank of India (Detennination of Placement of Employees-Officers and
,.. Workme~f the New Bank of India in Punjab National Bank) Scheme,
1993, Para 3.

''Placement"-A1ea11i11g of-17ie word ''placement" has a widl}r meaning
but the word as used in the Amalgamation Scheme of New Bank of India
c
with Punjab National Bank (PNB) referred only to fitment of officers/staff in
the administrative set-up of PNB-lnterpretation of Statutes.

The Central Government framed a scheme for amalgamation of New
Bank of India (NBI) wit6 Punjab National Bank (PNB) and in exercise of D
its powers under Section 9 of the Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1980, made a scheme named as New Bank
of India (Amalgamation and Transfer of Undertakings) Scheme, 1993•.
Paragraph 5(4) of the Amalgamation
. ------ that the Central
Scheme provided
Government would make another scheme for placeme~ officers and
staff of NBI. On the commencement of.the scheme the Undertakings of
E
NBI stood transferred to and vested in PNB. After the amalgamation, PNB
did not close any of the branches ofNBI but it did not consider it necessary

-
to have separate head office and regional offices for NBI at the places
~
where PNB was already having its regional offices. Some of the officers and
employees of NBI were, therefore, found surplus and it became necessary F
to deploy/redeploy them in other branches which involved outstation trans-
fers. These transfers were made in accordance with the guidelines framed
by PNB on 16-9-1993. Subsequently on 8-12-1993 the Central Government
made the New Bank of India (Determination of Placement of Employees -
Officers and Workmen • of the New Bank of India in Punjab National
G
Bank) Scheme, 1993.

-")-
The respondents as well as some employees of NBI challenged the
aforesaid transfers before the High Court. The grounds of challenge were: ·
(i) the transfers were violative of paragraphs 5(2) and 5(4) of the Antal-
gamation Scheme, (ii) PNB could not make transfers before framing of H
1128 SUPREME COURT REPORTS [1997] 1 S.C.R.
A Placement Scheme by the Central Government, (iii) the transfers were T-'
arbitrary and discriminatory although not a single branch or office was
closed by PNB, (iv) the transfers were violative of the agreements entered
into by NBI with its officers/employees, (v) after transferring some
employees of NBI as being surplus, PNB brought its own employees at
B those stations and, therefore, in the garb of redeployment of surplus staff,
PNB accommodated its own employees and (vi) the transfers were not
consistent with the guidelines dated 16-9-1993. The High Court allowed the
petition. Being aggrieved the appellants preferred the present appeal. ..:

Allowing the appeal, this Court
c
HELD: 1.1. lt is dear from paragraph 5(2) of the New Bank oflndia
(Amalgamation and Transfer of Undertakings) Scheme, 1993 that the of·
ficers and employees of New Bank of India (NBI) became employees of
Punjab National Bank (PNB) from the date of commencement of the Amal-
gamation Scheme and they came under the supervision and control of PNR.
D It was, therefore, permissible for PNB to deploy or transfer surplus ,...
employees of NBI till the New Bank of India (Determination of Placement
of Employees· Officers and Workmen· of the New Bank of India in Punjab
National Bank) Scheme, 1993 was made by the Central Government. It
could not have been the intention of the Central Government, when it made
E the Amalgamation Scheme, that no deployment or transfer of the
employees of the erstwhile NBI should be made. [1137-E-H, 1138-B-C]

1.2. Making .of a separate Placement Scheme by the Central Govern·
ment is not a statutory requirement. 1be Central Government reserved to
F itself the power for making the Placement Scheme in order to see that no
injustice was done to the employees of NBI as a result of their absorption
in the service of PNB. Though the word 'placement' bas a wider dictionary
meaning it does not appear to have been used in Paragraph 5(4) of the
Amalgamation Scheme to mean an act of placing or posting. It is unthink-
able that the Central Government by reserving to itself the power of
G making a Plarement Scheme intended to determine the places where the
employees of NBI were to be deployed or posted. Considering the complex
nature of banking operations it is not likely that the Central Government
intended to lay down the principles or guidelines for postings or transfers
of the employees of NBI. By reserving to itself the power under Paragraph
H 5(4) of the Amalgamation Scheme for making a Placement Scheme the
P.N.B. v. ALL !INDIA NEW BANK OF INDIA EMPLOYEES FEDERA TlON 1129

....,._ Central Government appears to have intended to lay down the noi-ms and
guidelines for solving the problems that were likely to arise as a result of
A

the merger. In this context, the word 'placement' appears to have been used

- in the sense of fitment into a position in the administrative set-up of PNB.
The Placement Scheme was contemplated for deciding at which level or in
which position the employees ofNBI were to be fitted in the administrative B
set-up of PNB. It was possibly for this reason that it was further provided
., in Paragraph 5(4) that while making the scheme the Central Government
shall take into account relevant factors such as experience of the employee,
>
etc. [1138-D-H, 1139-A-B]

New Bank of India Employees' Union v. Union of India, [1996] 8 SCC c
407, relied on.

2. If it was the intention of the Central Government that PNB should
not deploy or transfer any employee of NBI till the Placement Scheme was

... made, it would have made an elaborate provision in that behalf in the
Placement Scheme. Instead only a general provision has been made in
D

Paragraph 3 of the Scheme. The provision for transfer of workmen-
employees was made in the Placement Scheme so as to remove any doubt
with respect to the power of PNB to redeploy or transfer them to any of
the offices or branches of PNB. There is nothing in Paragraph 3 of the E
Placement Scheme, which would indicate that redeployment/transfers of
the officers/workmen-employees of NBI were not contemplated by the
Central Government till the Placement Scheme was framed by it. The
important provision made in the Placement Scheme is with respect to
~ fixation of inter se seniority and determination of senfority for the purpose
F
of promotions. [139-F-G, 1140-C]

3. The Amalgamation Scheme did not deny the power of an employer
to PNB to effectively and economically utilise its manpower and to make
transfers when found necessary. TI1e banks are entitled to decide on a
consideration of the necessities of banking business whether the transfer G
of an employee should be made to a particular branch and that the
management is in the best position to judge how to distribute its employees
between the different branches. Therefore, the action of framing guidelines
and then effecting transfers in accordance therewith cannot be said to be
inconsistent with or contrary to the statutory Amalgamation and Piace- H
' )---

1130 SUPREME COURT REPORTS [1997] 1 S.C.R.
A meut Schemes. [1140-G-H, 1141-A]
Syndicate Bank Ltd. v. Workmen, (1996) 1 LW 440, relied on.

K. Prabhavathi v. The Dy. Divisional Manager, Syndicate Bank II,
(1995) RC 538 AP, held inapplicable.
B
4. Though "fairness in action" is now an established test to judge
validity of actions of State or State instrumentalities, yet even after applying
this test the action of PNR cannot be described as arbitrary or dis-
criminatory because PNR considered it necessary to close the head office
C and regional offices of NBI at the places where PNR was already having its
regional offices and, therefore, surplus staff had to be deployed. The fact
that not even a single branch of NBI was closed by PNR does not lead to the
inference that transfers and redeployment was unnecessary. Where service
of an employee is transtcrable even though within a limited area, in special
circumstances, he can be transferred outside that area. The respondents
D have failed to establish their case of discrimination. PNR has acted in a fair '4 1
manner as is clear from the guidelines framed by it. [1141-D, 1142-R-E]

Gunnail Singh v. State of Punjab, [1991] 1 SCC 189 and Union of
India v. D. Mohan, [1995] 3 SCC 115, relied on.

E 5. The respondents quoted certain instances to show that after
transferring some employees of NRI as being surplus, PNR brought its
own employees at those stations. It was submitted that this fact was not
refuted by PNR. No details have been given by the respondents as to exactly

F
when and under what circumstances those transfers of the employees of
PNB were made. It is quite likely that they were routine rotational trans-
fers. It is also possible that they were required to be made for some
--
compP.lling reasons or administrative exigencies. It is, therefore, not. pus-
sible to accept the contention that in the garb of redeployment of surplus
staff, PNB accommodated its own employees. [1143-A-R]

G 6. The respondents' contention that their transfers are against the
agreements entered into with NRI is also misplaced because this is not a
case of rotational transfers but it is a case of redeployment of surplus staff.
[1143-H, 1144-A]
7. A grievance was also made on behalf of the respondents that some
H of the order of transfers are not consistent \\ith the guidelin~s dated
P.N.B• .-. ALL IINDIA NEW BANK OF INDIA EMPLOYEES FEDERATION [NANAVA"D, J) 1131

16-9-1993. If that is so it would be open to the respondents to draw the A
attention of the concerned authorities of PNB to such orders and seek their
· cancellation or modification. PNB will have to consider such application
or representations, if made, and take appropriate decision or pass orders
in accordance with the said guidelines. [1144-D]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 749 of B
1997.

" From the Judgment and Order dated 24.1.96 of the Allahabad High
Court in S.A. No. 877 of 1993.

V.R. Reddy, Additional Solicitor Genera~ O.C. Mathur and Ms.
c
Meera Mathur for JBD & Co. for the Appellant.

•. Narayan B. Shetye, Mukul Mudgal and Arun K. Sinha for the Inter-
venors.
D
Dr. Rajeev Dhawan, D.S. Chauhan, R. Vasudevan, K.D. Saini,
Chetan Sharma, Rakesh Dwivedi and Prashant Kumar for the Respondent
No. 7 a~d Intervenors.

The Judgment of the Court was delivered by :
E
NANAVATI, J. Leave granted.

This appeal by special leave is directed against the judgment and
order passed by the High Court of Allahabad in Special Appeal No. 877
of 1993.
F
Fourteen banks including the Punjab National Bank Ltd. (for short
'PNB') were nationalised in 1970. Six more banks including the New Bank
of lndia (for short 'NBI') were nationalised by the Banking Companies
(Acquisition & Transfer of Undertakings) Act, 1980 (for short the 'Act').
'· Finding it necessary, the Central Government, in exercise of the powers G
conferred by Section 9 of the Act, framed a scheme for amalgamation of
. NBI with PNB, named as the New Bank of India (Amalgamation and
Transfer of Undertakings) Scheme, 1993. On the commencement of the
Scheme the Undertakings of NBI stood transferred to and vested in PNB.
All the officers and other employees of NBI, who were willing to join PNB,
became officers and employees of PNB. As a result of this merger, some H
1132 SUPREME COURT REPORTS (1997] 1 S.C.R.
A officers and employees of former NBI were found surplus. Therefore, on
16.9.93, the PNB framed guidelines for deployment/re-deployment of such
surplus staff as well as for ensuring exchange of personnel ·and proper
placing of officers of the banks. Following those guidelines the surplus
workmen-staff of NBI was transferred to various branches of PNB. These
transfer orders were challenged by the All India New Bank of India
B Employees Federation and NBI Employees Union as well as ~ome of the
employees of NBI (for short referred to as petitioners) by filing a writ
petition in the Allahabad High Court. It was allowed by a learned Single
Judge of the High Court on 11.11.93. PNB and their officers filed an appeal
before a Division Bench of that Court. While the appeal was pending an
C application for impleadment was made by 27 employees of NBI. That was
allowed. The Division Bench dismissed the appeal with certain observa-
tions.

The transfer orders and the transfer policy were challenged before
D the learned Single Judge on two grounds. It was contended that they were
illegal as hit by paragraph 5(2) of the Amalgamation Scheme and also
because no scheme as envisaged by paragraph 5(4) thereof for "placement
of the employees of the transferor bank including the determination of
their inter-se-seniority vis-a-vis the employees of the tranferee bank" was
framed by the Central Government till then and without which no deploy-
E ment or transfers could have been made. It was also contended that the
transfer orders and the transfer policy were bad as they meted out dis-
criminatory treatment to the employees of NBI by illegally terming them
as surplus staff although not a single branch or office of the NBI was closed
by PNB: The appellant supported its orders and the transfer policy on the
p ground that neither the transfer policy nor the transfer orders were incon-
sistent with paragraph 5(4) of the Scheme which really provided for making
a separate scheme for fitment of the employees of NBI and consequent
determination of their inter se seniority. It was its contention that deploy-
ment by way of transfers was required to be made as of necessity to adjust
the surplus staff of NBI, as it was found after scrutiny that a large number
G of them were in excess and the Management was faced with the problem
of either retrenching their services or adjusting them at some other places.
The learned Single Judge rejected the contention that the transfer policy
was hit by paragraph 5(4) of the Scheme and that in absence of a scheme
for placement of the employees of NBI no transfers could have been made.
H But he found substance in the second contention for the reason that no
P.N.B. v. ALL IINDIA NEW BANK OF INDIA EMPLOYEES FEDERATION (NANAVATI, J] 1133
office establishment or branch run by NBI had been closed nor it was A
explained as to how some of the employees of NBI had become surplus
and also because the averment made in paragraph 30 of the writ petition

- "that the employees/officers of the erstWhile NBI are being transferred
outside the stations/states and in their places the employees/officers of the
PNB are being adjusted which further proves the mala fides of the Punjab
B
National Bank" was not denied. He, therefore, held that the transfer orders
and the transfer policy were violative of Articles 14 and 16 of the Constitu-
..... tion and consequently allowed the petition, quashed the circular dated
16.9.93 and also the orders of transfers issued thereunder.

The bank preferred an appeal before a Division Bench of that Court. c
The Division Bench took the view that although the employees of NBI, on
the commencement of the Scheme, became employees of PNB, they did
not become part and parcel of the existing service of PNB. It held that their
merger in the existing service of PNB was to become effective only after
the Central Government framed a placement scheme under paragraph 5(4)'
of the Amalgamation Scheme. It also held that the word "placement" h<i;.s
been used in the scheme by the Central Government in the sense of
deployment of the employees of NBI in the service of PNB so as to bring
about complete merger of the employees of the two banks and that such
deployment was to be made on the basis of the principles and criteria laid
down in placement scheme. It further held that in absence of a placement E
scheme it was not open to the appellant to make such deployment of the
employees of NBI. It was also of the view that placement/deployment of
the employees of NBI had to be a one-time event and was a part of the
amalgamation process provided by the Scheme. Therefore, provision for
placement was made in the Scheme itself; and, also because it was con- F
sidered necessary to prevent giving of step-motherly treatment to the
employees of NBI. It held that as the transfer orders were made by the
PNB on 16.9.93 without waiting for the placement scheme which was later
on made on 8.12.93, the orders of transfers were bad, particularly because
the criteria and the principles for deployment laid down in the Scheme are
different and inconsistent with the criteria fixed by PNB in its transfer G
policy. The Division Bench, therefore, dismissed the appeal with an obser-
vation that after implementing the placement scheme it will be open to
PNB to pass rotational transfer orders regarding the employees of NBI in
accordance with law. Aggrieved by that decision PNB has, with the leave
of this .Coµrt, filed the present appeal. H
1134 SUPREME COURT REPORTS [1997) 1 S.C.R.
A In order to provide for the acquisition and transfer of the undertak-

B
ings of certain banking companies, the Parliament enacted the Banking
Companies (Acquisition and Transfer ofUndertakings) Act, 1980. It came
into force on 15.4.80. Under the Act, the New Bank of India Limited which
was till then a private bank became a corresponding new bank renamed as
New Bank of India and its entire capital vested in the Central Government.
1
The NBI was ·incurring losses and by 1991-92, its financial position had
become so bad that its capital and deposits completely stood eroded. The
Central Government, therefore, in consultation with the Reserve Bank of
India, decided to amalgamate NBI with PNB and in exercise of its powers
under Section 9 of the Act made the Amalgamation scheme. On commen-
C cement of the said scheme the undertakings of NBI stood transferred to
and vested in PNB. The employees of the NBI, who were willing to
continue in service, became employees of PNB. In this behalf sub-para-
graph (2) of paragraph 5 provided as under :

"Save as otherwise provided in this Scheme, every officer or
D
other employee of the transferor bank shall become on the com-
mencement of this Scheme an officer or other employee,. as the
case may be, of the transferee bank and shall hold his office or
service in that bank on the same terms and conditions and with
the same rights to pension, gratuity and other matters as would
E have been admissible to him if the undertakings of the transferor
bank had not been transferred to and vested in the transferee bank
subject, however, to such facilities being available at the time of
the transfer to similarly placed officers and employees of the
transferee bank and continue to do so unless and until his employ-
F ment in the transferee bank is terminated or until his remuneration, ... -
terms and conditions are duly altered by the transferee bank."

Snb-paragraph (4) thereof, which reads as under, provided for
making a placement scheme :-

G "The Central Government shall, as soon as possible after the
commencement of this Scheme, make a scheme in consultation
with Reserve Bank of India for determining the placement of the
employees of the transferor bank including the determination of
their inter-se seniority vis-a-vis the employees of the transferee
H bank. While making the Scheme the Central Government shall take
--~
'

P.N.B. '· ALL IINDJA NEW BANK OF INDIA EMPLOYEES FEDERATION [NANAVATI, J} 1J35
account of relevant factors such as experience of the employee of A
the transferor bank."

But before a placement scheme could be made by the Central
Government, PNB in order to facilitate re-deployment of surplus staff of
NBI as well as for ensuring proper placement of the officers of the two
banks, framed guidelines on 16th September, 1993. On the same day it also B
framed guidelines for deployment of workmen staff of NBI as deployment
of such staff had become necessary in view of the special circumstances
and with a view to achieve the object of utilising the available manpower
in the best possible manner to achieve optimum productivity. The said
guidelines for deployment of the workmen staff were as under : c
"1. After the surplus staff has been identified, its redeployment
may be considered within the same language area in the zone.

2. In the event the staff is identified as surplus for the zone,
the matter may be taken up with HO : Personnel Division for the D
>- redeployment of such staff in the same language area of nearby
zones.

3. For out of station transfers but within the Region/Zone, the
criteria should be the length of service of an employee, i.e., the
employees with lesser length of service should be transferred first. E
This will, however, not apply in case of lady employees and physi-
cally handicapped employees employed on this ground, and
employees retiring within next three years, subject to merits of each
~ case.
.... F
4. In case of transfers within the same station, the total stay of
an employee in a branch shall be the criteria of transfer and those
employees having longest stay in the branch will be transferred
first.

5. In case of employees who are drawing special allowances,
G
the posting for which is made on town-wise seniority in our bank,
they may be retained within the same town/city with the conccur-
~,.
rence of Zonal Manager.

6. Transfer requests of employees from the surplus Regions to
the deficit Regions within the Zone may be acceded to by the H
1136 SUPREME COURT REPORTS (1997] 1 S.C.R.

A Zonal Managers.

7. Keeping in view the administrative exigency and merits Of
each case, the ZMs may exercise their discretion to effect transfers
beyond these guidelines only in exceptional cases which shall be
reported to HO : Personnel Division with full details in each case.
B
8. The ZMs shall ensure inter-change of employees in the
branches located at the same station so that at least 20-30 per cent
of the workmen staff in the branches of erst. NBI are from PNB
Offices, in order to hasten the process of assimilation of systems
and procedures.
c
9. While effecting transfers under these guidelines, our instruc-
tions regarding Rotational Transfers of the staff may be kept in
view and the staff of PNB as well as erst. NBI who fall due for
transfers under the Rotational Transfer guidelines, may also be
D transferred simultaneously."
'4i..'
Subsequently on 8th December, 1993 the Central Government, in
exercise of the powers conferred by Section 9 read with sub- paragraph (4)
of Paragraph 5 of the Amalgamation Scheme made the New Bank of India
(Determination of Placement of Employee - Officers and Workmen - of
E the New Bank' of India in Punjab National Bank), Scheme, 1993. It has
been made effective retrospectively from 4.9 .1993. Paragraph 3 of that
Scheme provides for redeployment of officers/staff and reads as under :

"Redeployment of Officers/Staff -

F The transferee bank may redeploy/transfer the Officers/Award
Staff of the transferor bank to any of the offices/branches of the
transferee bank keeping in view the suitability of the of-
ficer/employee, administrative exigencies and manpower require-
ments of the transferee bank, in accordance with the provisions
contained in the Punjab National Bank (Officers') Service Regula-
G
tions, 1970 or existing Awards/Bipartite Settlements. The officers
may be transferred to any place in India and the postings/transfers
of workmen employees will be made within the same linguistic
area."

H In Paragraph (4) thereof the Central Government has laid down the
P,N,S, v, ALL IINDIA NEW BANK OF INDIA EMPLOYEES FEDERATION [NAN AVATI, J] 1137
norms for determining seniority of employees (officers or workmen) of the A
NBI vis-a-vis employees of PNB. Sub-paragraph (a) pertains to
workmen/employees and by sub-paras (a)(i) and (a)(ii) the Rules, Settle-
ments etc. applicable to the workmen/employees of PNB are made ap-
plicable to the workmen/employees of NBI. In sub-paragraph (a)(iii) the
procedure for computation of years of service rendered in NBI for the B
purpose of determining minimum length of service for promotion has been
stated. In terms of that procedure two years of service in NBI is to be
treated as equivalent to one year of service in PNB. With respect to officers
also the same ratio of 2:1 has been fixed for the purposes. of seniority,
fitment and promotion to the next higher grade and scale. For officers the
Placement Scheme also provides that they shall be placed in the same C
grade and scale of the pay with suitable changes in their designations, if
required.

· As stated earlier, construing the Amalgamation Scheme the High
Court has held that it did not bring about complete merger of the Staff of D
NBI in the existing service of PNB and such merger being a one time event
and part of amalgamation process was intended to be complete only after
the Central Government framed a Placement Scheme.

In our opinion, the High Court has neither construed the Amalgama-
tion Scheme nor interpreted the word 'placement' used therein correctly. E
On commencement of the Amalgamation Scheme the undertakings of NBI
stood completely transferred to and vested in PNB. Moreover, paragraph
5(2) thereof in clear terms provided that every officer and other employees

-
,;., of NBI shall become from that date an officer or employee of PNB. Not
only that it further provided that they shall hold office or be in service on
the same terms and conditions. Since they became officers and employees
of PNB it was further provided that they will continue in the service on the
same terms and conditions until they are duly altered by PNB. Thus from
F

the date of commencement of the Scheme the officers and other employees
of NBI not only became officers and employees of PNB but also became
subject to supervision and control of PNB. It was, therefore, not correct to G
say that did not become part and parcel of the then existing service of PNB
right from that date. If the officers and employees of NBI were to be
treated as a separate lot and not to be disturbed till the placement scheme
was made by the Central Government then it would not have made a
provision with respect to the terms and conditions on which they were to H
1138 SUPREME COURT REPORTS [1997] 1 S.C.R.
A become the employees of PNB. In Paragraph 5(2) the Central Government
also made it clear that it was thereafter open to PNB to terminate services
of such employees and also to alter their remuneration and other terms
.and conditions of service. If the merger was intended to be complete only
after making of the placement scheme then the Central Government would
B not have made such a provision in the amalgamation scheme itself. If the
PNB could thus exercise such wi.de powers of an employer before making
of a placement scheme it is difficult to appreciate why it did not have the
power to. deploy or transfer the employees of NBI till the placement
scheme was made. Therefore, it could not have been the intention of the
Central Government, when it made the amalgamation scheme, that no
C deployment or transfer of the employees of the erstwhile NBI should be
made.

Making of a separate placement scheme by the Central Government
is not a statutory requirement. It appears that in order to see that no
D injustice was done to the employees of NBI, as a result of their absorption
in the service of PNB, it reserved to itself the power to make another
scheme with respect to them for determining their placement in the ad-
ministrative set-up of PNB and to lay down the norms and guidelines for
determination of their inter se seniority vis-a-vis the employees of PNB.
Though the word 'placement' has a wider dictionary meaning it does not
E appear to have been used in Paragraph 5(4) of the amalgamation scheme
to mean an act of placing or posting. After amalgamation of NBI with PNB
it was not expected that PNB should maintain all the offices and branches
of NBI and should carry on its business through those offices and branches
with the same employees of NBI. NBI was not run efficiently and it was
F for that reason that it has made huge losses. These circumstances, also
indicate that the Central Government did not intend that till a placement
scheme was framed by it PNB should not deploy or transfer any employee
of NBI to any other branch or office. Moreover, it is unthinkable that the
Central Government by reserving to itself the power of making a placement
scheme intended to determine the places where the employees of NBI were
G to be deployed or posted. Considering the complex nature of banking
operations it is not likely that the Central Government, in any case,
intended to lay down the principles for guidelines for postings or transfers
of the employees of NBI. By reserving to itself the power under Paragraph
5(4) of the amalgamation scheme for making a placement scheme the
H Central Government appears to have intended to lay down the norms and
P.N.B. '- ALLIINDIA NEW BANK OF INDIA EMPLOYEES FEDERATION (NANAVATI.JJ 1139

guidelines for solving the problems that were likely to arise as a result of A
the merger. In this context, the word 'placement' appears to have been used
in the sense of fitment into a position in the administrative set-up of PNB.
In other words, what was contemplated was making of a scheme by the
Central Government for the purpose of deciding at which level or in which
position the employees of NBI were to be fitted in the administrative set-up B
of PNB. It was possibly for this reason that it was further provided in
Paragraph 5( 4) that while making the scheme the Central Government
> shall take into account relevant factors such as experience of the employee,
etc.

In New Bank of India Employees' Union v. Union of India, (1996] 8 C
SCC 407, this Court had an occasion to construe the placement scheme,
though in a different .context. It held that the expression 'Placement' in
clause 5(4) of the Amalgamation Scheme meant re-deployment of the
employees of NBI, that is, fitment of those employees in a grade or rank
or cadre in PNB and determining inter se seniority of those employees D
vis-a-vis the empl0yees of PNB in that cadre or grade. It also held that
under the placement scheme what has been provided and what was in-
tended is that for determination of inter se seniority and for the purpose
. of promotions the computation of years of service had to be done in the
· manner provided in that scheme. This decision thus supports the view that
· we are taking. E

If it was the intention of the Central Government that PNB. should
not deploy or transfer any employee of NBI till the placement scheme was
' ..... made, it would have made an elaborate provision in that behalf in the
placement scheme. Instead we find that with respect to deployment/trans- F
fer only a general provision has been made in Paragraph 3 of the scheme.
Moreover, the said provision appears to have been made out of abundant
caution. Even in absence of such a provision employees of NBI after they
became employees of PNB could have been transferred by PNB subject to
the service regulations and the existing awards and settlements. No G
employee of NBI could have thereafter successfully contended that PNB
had no power to transfer them. So, the provision with respect to the
transfer of workmen-employees was made in the placement scheme so as
to remove any doubt, if any, with respect to the power of PNB to redeploy
or transfer them to any of the offices or branches of PNB. When the
Central Government provided in the placement scheme that redeployment H
1140 SUPREME COURT REPORTS [1997] 1 S.C.R.
A or transfer may be made considering the suitability of the officer/employee,
administrative exigencies and manpower requirements of PNB it did not
fix any fresh or different norm for that purpose. Therefore, the said
provision. appears to have been made more by way of protection against
discrimination rather than by way of fixihg the principles and norms for
B their transfers. The only restriction placed on the power of PNB with
respect to redeployment or transfers of the officers and workmen-
employees of NBI is that the postings/transfers of workmen-employees will
have to be made within the same linguistic area. Thus, we do not find
anything in Paragraph 3 of the placement scheme which would indicate
that redeployment/transfers of the officers/workmen employees of NBI
C were not contemplated by the Central Government till the placement
scheme was framed by it. The important provision made in the placement
scheme is with respect to fixation of inter se seniority and determination of
seniority for the purpose of promotions. We are, therefore, of the view that
the High Court was wrong in declaring the transfer orders of e_mployees
D of NBI as bad on the ground that till the placement scheme was framed
by the Central Government PNB had no power or authority to redeploy or
transfer them.

It was also contended on behalf of the respondents that the
guidelines for transfers w,ere framed by PNB in exercise of its administra-
E tive powers and, therefore, it could not have displaced the provision made
in paragraph 5(2) of the Amalgamation Scheme which was statutory in
character. In the alternative, it was contended that the said guidelines being
contrary to the statutory amalgamation and placement schemes must be
regarded as bad and the placement scheme cannot have the effect of
F validating the action taken by PNB under the said guidelines. These
contentions, in our opinion, are misconceived as they are based upon an
erroneous reading of the provision made in paragraph 5(2) of the Amal-
gamation Scheme with respect to its true nature and effect, which we have
pointed out earlier. The Amalgamation Scheme did not deny the power of
an employer to PNB to effectively and economically utilise its manpower
G and to make transfers when found necessary. As rightly submitted by Mr.
Reddy, learned Additional Solicitor General, relying upon the decision of
this Court in Syndicate Bank Ltd. and Its workmen (1966) I LU 440, that
there can be no doubt that the banks are entitled to decide on a considera-
tion of the necessities of banking business whether the transfer of an
H employee should be made to a particular branch and that the management
P.N.B. '· ALL IJNDIA NEW BANK OF INDIA EMPLOYEES FEDERATION [NANAVATI, JJ 1141
is in the best position to judge how to distribute its employees between the A
different branches. Therefore, the action of framing guidelines and then
. effecting transfers in accordance therewith cannot be said to be inconsis-
tent with or contrary to the statutory amalgamation and placement
schemes, and the decision of the Andhra Pradesh High Court in K.
Prabhavathi v. The Deputy Divisional Manager, Syndicate Bank II, (1995)
B
BC 538, relied upon by Dr. Dhawan, learned senior counsel appearing for

- some of the respondents, can be of no help to him.

It was also contended that not a single branch of NBI was closed
down as a result of amalgamation and, therefore, it was really unnecessary
c
to transfer any workman employee of NBI. Only the employees of NBI
were transferred and that would indicate that impugned transfers were
made either to accommodate employees of PNB or for some other con-
siderations. Thus the transfer orders were either arbitrary or discriminatory
and so they were rightly declared as illegal and bad. In support of his

.... contention that in cases where both the transferor and transferee are State D
or State instrumentalities, it is open to the court to review whether the
terms and conditions of the transfer ensure "fairness in action" and non-ar- ·
bitrari.ness, Dr. Dhawan relied upon the decision of this Court in Gunnail
Singh ·v. State of Punjab, [1991] 1 SCC 189. Though "fairness in action" is
now an established test to judge the validity of actions of State or State
instrumentalities, we do not find, even after applying that test, that the E
impugned action of PNB was either arbitrary or discriminatory. In the
affidavit of Malvinder Singh, Manager of PNB, filed during pendency of
the special appeal before the High Court, the reasons for transferring the
workmen employees of NBI have been stated. It is pointed out that at the
time of merger, NBI had one head office, 16 Regional Offices, 2 Training F
Centres and 591 branches. After the amalgamation it had become wholly
redundant to have more than one head office or regional office at the same
place, that is, at the place where both PNB and NBI had their regional
offices. Discontinuation of such offices had thus become necessary. The
total number of employees working in such offices was approximately 2000 G
and it had become necessary to redeploy them elsewhere. Under these
circumstances PNB had thought it fit to redeploy/transfer them and to
frame the guidelines for that purpose. It is also pointed out that at the time·
of amalgamation PNB had given option to the employees of NBI either to
continue in service under PNB or to leave it and in the letters of acceptance
signed by all those employees it was clearly agreed that the basis of H
1142 SUPREME COURT REPORTS (1997) 1 S.C.R.
A computation of their seniority and such other matters will be determined
in terms of the scheme that was to be issued by the Central Government
and in the matter of other terms and conditions they shall be governed by
the policy and procedures as in vogue with respect to employees of PNB.
Therein it is also pointed out that productivity of NBI employees was as
B low as 27 lacs per employee while the corresponding figure with respect to
PNB was 42 lacs per employee. Therefore, in order to make provision for
the surplus staff and in order to efficiently utilise the manpower impugned
transfers wete made. After pointing out these relevant facts and cir-
cumstances it is stated that the object of these transfers was to avoid any
retrenchment or adverse effect on their terms and conditions of service.
C He has denied that in effecting those transfers PNB had acted contrary to
-
any award/settlement/agreement in force. Therefore, the circumstance that
not a single branch of NBI was closed down cannot lead to an inference
that there was no surplus as stated and their redeployment and transfers
were unnecessary. It was rightly contended by Mr. Reddy, learned Addi-
D tional Solicitor General, relying upon the decision of this Court in Union
of India v. D. Mohan, (1995] 3 SCC 115, that where service of an employee
is transferable even though within a limited area, in special circumstances,
he can be transferred outside that area. We are of the view that the
respondents have failed to establish their case of discrimination. On the
contrary, we find that PNB has acted in a fair manner. The guidelines
E framed by PNB clearly indicate that no wholesale transfers of NBI
employees were to be made and the Zonal Managers were authorised to
transfer only the surplus staff and that too within the same language area
in their zohes. Even while effecting such transfers they were required to
follow the guidelines. Any transfer outside the language area zone was to +
p be done \vith the approval of the Head Office.

An attempt was made by Dr. Dhawan to show that NBI had not, in
fact, made huge losses as contended on behalf of the appellants. What he
submitted was that NBI was making profits till 31.3.90 and it was one of
the most efficiently managed banks. By not preparing the balance sheets
G in a proper manner a wrong picture was projected to the effect that NBI
had made huge losses. Obviously, we cannot go behind the fmding of the
Central Government and the Reserve Bank of India that NBI had made
huge losses and that considering its financial condition it deserved to be
merged with PNB. Moreover, the real reason for redeployment of some of
H the employees of NBI was that they had become surplus because of closing
P.N.B. '· ALLIINDIA NEW BANK OF !NDIAEMPLOYEES FEDERATION [NANAVATI, J] 1143
down of the Head Office and some regional offices of NBI which were A
found unnecessary. Dr. Dhawan also relied upon certain instances to show
that after transferring some employees of NBI, as being surplus, PNB had
brought its owu employees at those stations. It was submitted that this fact
was not refuted by PNB before the learned Single Judge who had heard
the writ petition and who had taken a note of it in his judgment. No details
B
were given by the petitioners in this behalf as to exactly when and under
what circumstances those transfers of employees of PNB were made. It is
quite likely that they were routine rotational transfers. It is also possible
that they were required to be made for some compelling reasons or
administrative exigencies. It is, therefore, not possible to accept the con-
tention that in the garb of redeployment of surplus staff what PNB had c
done was to accommodate its own employees.

On behalf of the respondents it was contended that Paragraph 5(2)
of the Amalgamation Scheme protected the terms and conditions of service
of the employees ofNBI. Therefore, even after the officers and workmeJJ D
employees of NBI be.came the officers and workmen employees of PNB
they retained their earlier terms and conditions. In view of the tra~sfer ·
policy of NBI and the awards and bipartite settlements between NBI and
its employees the workmen employees could not be transferred outside
their stations. It was also submitted that though the Shastri Award recog-
nises the right of the banks to transfer its employees it had really no E
relevance in view of the provisions made in the Amalgamation and Place-
ment Schemes which are statutory in nature. Therefore, reliance placed by
the appellants on the Shastri Award was misplaced. It was also submitted
~- that in Paragraph 536 of the Shastri Award it is clearly mentioned that so
far as members of the subordinate staff are concerned there should be no F
transfers ordinarily and if there are any transfers at all they should not be
beyond the language area of the persons so transferred. In this behalf Dr.
Dhawan drew our attention to the Office Order dated 27th February, 1989
issued by the New Bank of India to its Regional Offices whereby their
attention was drawn to its earlier Circulars dated 7.5.87 and 29.6.88 with
respect to rotational transfers of staff and thereafter they were instructed G
to follow the guidelines laid down in that order while effecting such
transfers. According to those guidelines, in case of workmen staff, the
transfers were to be effected with the same station. It was further provided
that in case of rotational transfers of surplus workmen staff they should be
deployed at the same station only. On a careful reading of the said order H
1144 SUPREME COURT REPORTS (1997J 1 S.C.R.

A what we find is that it lays down guidelines for effecting rotational transfers
of staff. The transfers under challenge were not rotational transfers. They
were really in the nature of redeployment of surplus staff. Therefore, those
guidelines even if they are treated as a part of terms and conditions of their
service, being not applicable, cannot make the impugned transfers bad.
B Though the petition and the learned counsel for the respondents have
referred to certain awards and bipartite settlements nothing in particular
was pointed out to show that the workmen employees of NRI could, under
no circumstances, be transferred outside their stations. Our attention was
f
also drawn by Dr. D_hawan to the guidelines issued by PNB with respect
to transfer of its staff. We find that they also pertain to rotational transfers
C and, therefore, the respondents cannot derive any benefit from it in 1;heir
challenge to the deployment on being rendered surplus as a result o"f the
amalgamation.

A grievance was also made on behalf of the respondents that some
of the orders of transfers are not consistent with the guidelines. dated 16th
D Sep!ember 1993. If that is so it would be open to the respondents t.J draw
the attention of the concerned authorities of PNB to such orders and seek
their cancellation or modification. Obviously, PNB will have to·consider
such application or representations, if made, and take appropriate decision
or pass orders in accordance with the said guidelines.
E
Except to the extent of the aforesaid observation we allow this
appeal, set aside the judgment and order passed by the High Court of
Allahabad in Special Appeal No. 877 of 1993 and dismiss Civil Misc. Writ
Petition No. 39883of1993. However, in view of the facts and circumstances
of the case, we pass no order as to costs. ....
V.S.S. Appeal allowed.