SHRI DEVENDRA MANAGEMENT TRAINEES AND ORS.versusPUNJAB NATIONAL BANK

     SHRI DEVENDRA MANAGEMENT TRAINEES AND ORS.                                       A
                                        v.
                        PUNJAB NATIONAL BANK

                            NOVEMBER 26, 1993
                                                                                      B
            [AM. AHMADI AND N. VENKATACHALA, JJ.)

      Service Law-Banking Companies (Acquisition and Trans/er of Under-
takings) Act, 1970/T7te Punjab National Bank (Officers) Service Regulations
1979:
                                                                                      c
        Ss. 12(2), 19/Regulation 13--Management Trainees-Selection of
members of Scheduled Castes/ Scheduled Tribes working in clerical cadres
on condition of passing Bank's confirmation test, passing Part-I ·of Indian
Institute of Bankers Examination etc.-Revision of Pay structure during train-
ing-Circular No. 492 dated 16.l.198o-Management Trainees on regular pay               D
scale one day prior to appointed date given the benefit of fitment formula-
Appellants not being in any regular time scale formula-Appellants not being
in any regular time scale governing managerial staff, on appointed date Bank
fixed their pay at the initial stage of time scale waiving all conditions regarding
confirmation-Held, Bank cannot be said to have acted arbitrarily nor can it
be said that it had discriminated against appellants and violated Articles            E
 14/ 16 of the Constitution.

       The appellants were members of Scheduled Castes/Scheduled Tribes
and were working in the clerical cadres of the respondent-Bank. They were
selected as Management Trainees on the condition that they would be on p
training for two years and would be considered for confirmation on their
getting satisfactory report about their training, passing bank's confirma-
tion test and passing part I of the Indian Institute of Banker's Examina-
tion. They were to receive consolidated emoluments of Rs. 700 per month
during the first year of the training, total emoluments admissible to a 'C'
Grade Officer at the initial stage of Rs. 700 along with usual allowances G
in the second year, and in the third year they were to be placed in the time
scale with two advance increments and were to begin at the basic salary of
Rs. 760 per month in the time scale of 700-1315, provided they successfully
cleared the confirmation test. The appellants commenced the training
w.e.f. 13.11.1978. Meanwhile, the respondent-bank formulated the Punjab H
                                     855
    856                   SUPREME COURT REPORTS [1993) SUPP. 3 S.C.R ..

A National Bank (Officers) Service Regulations, 1979 which come into force
    w.e.f. 1.7.1979 bringing over the managerial cadres to the revised pay
    structure according to the fitment formula evolved thereunder.

          A1> regards the fitment in the case of Management Trainees, the Bank
    issued ·Circular No. 492 dated 16.1.1980 providing that the Management
B   trainees drawing consolidated emoluments on 30.6.1979 would be placed
    in the Junior Management Scale i.e. R. 700-1800, at basic pay of Rs. 700
    with usual allowances w.e.f. the appointed date i.e. 1.7.1979 and the
    Management Trainees who were placed in Grade 'C' before the appointed
    date were to be refitted like other officers of the Bank. The appellants who
C   were covered under the first part of the Circular, filed a departmental
    appeal which was dismissed. Their writ petition was summarily rejected
    by the High Court. Hence the appeal by Special leave.

           It was contended on behalf of the appellants that the circular dated
D   16.1.1980 prejudiced them and being arbitrary and discriminatory, it was
    violative of Articles 14 and 16 of the Constitution; they should have been
    granted the benefit of fitment like any other employee belonging to
    managerial cadre and their pay should have been fixed at Rs. 950 in the·
    time scale of Rs. 700-1800, but the bank erred in fixing their pay at Rs. 700
    as a result of which they suffered in two ways • firstly, they were not given
E   (he benefit of fitment formula, secondly their dearness allowance shrunk
    from 93% to 51 % under the revised D.A. formula.

          Dismissing the appeal, this Court

F         .HELD : 1.1. The bank cannot be said to have acted arbitrarily with
    intent to prejudice the appellants nor can it be said that it had deliberately
    discriminated against the appellants by evolving the fitment formula found
    in Circular dated 16.1.1980 and thereby violated Articles 14/16 of the
    Constitution. [864-H]

G         1.2. On the appointed date the appellants not being in any regular
    time scale governing·the ma~agerial staff, were not entitled to be placed
    in the corresponding revised scale adopted by the bank under the Regula-
    tions pursuant to the implementation of the modified Pillai Committee
    report and, under the letter of appointment they would have been entitled
H   to the same only after they had passed the confirmation test. The letter. of
                       MGMT. TRAINEESv. P.N.B.                          857

appointment stipulated that the terms and conditions set out therein were A
subject to revision on implementation of the Pillai Committee report or
any Government Order, Rules or Regulations issued from time to time.
Besides, the Bank revised its entire salary structure and hence the pay of
each and every officer had to be placed in the revised scale. Since on the
appointed date the appellants were still trainees and were not in a regular B
scale, and pay-scale wise they belonged to the clerical cadre, the Bank had
to place them at the minimum of the revised scale from the appointed date.
                                                     [863-B, G-H, 864-A-CJ

      1.3. The bank was entitled to place the appellants in a regular time
scale with a view to achieving uniformity in pay scales, etc., in respect of C ·:
its managerial cadres. Therefore before the appellants were confirmed as
per the appointment letter they were switched over to the regular time scale
with effect from the appointed date to bring about uniformity as rest of
the employees in the regular time scale were also browght over to the
revised scales w.e.f. 1.7.1979. They too were subjected to the revised DA
formula by which .the percentage of neutralisation was reduced to stand· D
ardise the DA formula with other sectors including Central Government ·
employees. [864-E-FJ

      1.4. If the appellants were not brought on the revised pay structure
from the appointed date and were allowed to be governed by the terms of        E
the letter of appointment, there would have been several anomalies includ·
Ing the anomaly of the seniors drawing less than their juniors. Such a
situation would have resulted in injustice to the seniors who would cer·
tainly have raised demands for stepping up their salaries That would have
created ripples in other streams as well. The Bank, therefore, rightly         p
decided to waive the requirement of clearing the confirmation test and
advisedly brought them over to a regular pay scale. [865-A, D-E]

       2. The appellants had no right to insist that they should be retained
under the old pay scale when the entire stafTwas being brought over to the
new pay structure. If any such right is recognised employees in regular pay    G
scales may also like the fitment in new scales postponed till they reach a
particular stage in the existing time scale of pay which is most beneficial
to them. Such a situation cannot be permitted as it would result in
umpteen difficulties and would disturb both the horizontal and vertical
relatives of the revised pay scales. (865-FJ                                   H
    858                   SUPREME COURT REPORTS (1993] SUPP. 3 S.C.R.

A           CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4019 of
    1982.

          From the Judgment and Order dated 4.8.81 of the Delhi High Court
    in C.W. No. 1337 of 1981.

B        M.S. Ganesh, G.D. Gupta, Venkataramani and T.L. Roy for the
    Appellants.

            S.K. Mehta, Dhruv Mehta and A Vachher for the Respondents.

            Mukul Mudgal for the impleading party.
c
            The Judgment of the Court was delivered by

         AHMADI, J. The appellants joined the clerical cadre of the respon-
  dent-bank the posts reserved for Scheduled Caste/Scheduled Tribe can-
D didates sometime between 1974 and 1977. As the bank felt the paucity of
  finding Scheduled Caste and scheduled Tribe members to man its
  managerial Cadres, it issued a Circular No. 386 dated 30th May, 1978
  inviting Scheduled Caste/Scheduled Tribe employees working in the cleri-
  cal cadres to appear at the test for selection of Management Trainees. In
  response to this circular the appellants appeared at the test and were
E selected as Management Trainees, intimation whereof was conveyed to
  them by the letter dated 30th October, 1978. While giving the intimation
  qf their selection as Management Trainees, the said letter conveyed the
  terms and conditions which would apply to them. The relevant terms and
  conditions with which we are concerned have been set out in paragraph 1
  as under:
F
              "PAY & ALLOWANCES: Your pay and allowanc~.....will be as
              under:-                                 .

                   First Year : Consolidated emoluments of Rs. 700 p.m.
G
                   Second Year: Total emoluments payable to an officer placed
                   in 'C' Grade at its initial stage i.e. Rs. 700 basic p.m. plus
                   other allowances admissible under the rules.

                   Third Year : You will draw a basic pay of Rs. 760 p.m. in the
H                  pay scale of Rs. 700-30-790-35-930-40-1050 EB-40-1090-45-
                MGMT. TRAINEES v'. P.N.B. [AHMADI, J.]                   859

              1315 provided you have passed Bank's confirmation test. A
              However, in the event of your failure to pass bank's confir-
              mation test, you will continue to draw the same salary as in
              the second year of your service i.e. Rs. 700 basic pay plus
              other allowances.

        The commencement of the second year and third year of service           B
        would be extended by the period of leave availed without pay.

        You will be considered for confirmation/promotion subject to your
        qualifying bank's confirmation test, passing Part-I Institute of
        Bankers Examination and satisfactory performance during train-          C
        ing/probation."

It was clearly indicated in the said letter that the selected candidates will
be on training for two years and would be considered for confirmation
thereafter on their (a) getting satisfactory report about their training, (b)   D
passing bank's confirmation test, and (c) passing Part I of the Indian
Institute of Bank~rs' Examination. They were not to be considered for
promotion until confirmation. T}Jese were the broad terms on which the
appellants were selected as Management Trainees. It would be seen from
the above terms that for first year they were to receive consolidated
emoluments of Rs. 700 per month and in the second year they were to be          E
paid total emoluments admissible to a 'C' Grade Officer at the basic or
initial stage of Rs. 700 and certain allowances admissible under the rules.
In other words although they were to be placed in the time scale of Grade
'C' at the basic minimum of the scale and were to be entitled to certain
admissible allowances, they were not to be allowed the scale and annual         F
increments till they entered the third year of training when they were to be
placed in the time scale and granted two advance increments i.e. they were
to begin at the basic salary of Rs. 760 per month provided they succesMully
cleared the confirmation test. Now pursuant to their selection they com-
menced the training w.e.f. 13th November, 1978. They were, therefore,
entitled to consolidated emoluments of Rs. 700 per month from 13th              G
November, 1978 to 12th November, 1979, total emoluments admissible to
an officer placed in 'C' grade at the minimum of the scale plus admissible
allowances from 13th November, 1979to12th November, 1980 and on their
successful clearance of the confirmation test they would have been placed
in the regular scale of Rs. 700-1315 at the basic of Rs. 760 from 13th          H
    860                   SUPREME COURT REPORTS (1993] SUPP. 3 S.C.R.

A November, 1980 and onwards. These were the terms on which they were
    selected as Management Trainees.

         By a resolution dated 19th July, 1973 the Government of India had
  appointed a Committee consisting of five members with Professor V.R.
  Pillai as' its Chairman to standardise the pay scales, allowances. and per-
B quisites of the officers working in the 14 Nationalised Banks. This Com-
  mittee, popularly known as Pillai Committee, submitted its report in May,
  1974. The Central Government thereafter appointed a Study Group of
  Bankers sometime in September, 1976 to study the report and make
  suggestions for its implementation. This Study Group suggested certain
C modifications in the method of implementation of the recommendations
  made by the Pillai Committee in its report submitted in January, 1977. The
  Government accepted the report as modified by the Study Group of
  Bankers. The standardised pay scales suggested by the Pillai Committee in
  paragraph 5.13 of its report were as under :

D    "Grades                                  Scales
     Top Executive                   VII      Rs. 3000-125-3500
                                     VI       Rs. 2750-125-3250
     Senior Management                v       Rs. 2500-100-2700
                                      IV      Rs. 2000-100-2400.
E    ~fiddle Management               III     Rs. 1800-75-2250
                                      II      Rs. 1200-70-1550-75-2000
     Junior Management                        Rs. 700-40-900-50-1100-EB-
                                       I
                                              1200~60- 1800."

F  These scales are linked to the quarterly average of 200 in the All India
  Working Class Consumer Price Index (base 1960-100) and it was decided
  that while the amount of neutralisation may continue to be 3% of pay for
  every 8 points rise till the index level rises to 272 with certain maxima fixed
  at each level, it was decided that the neutralisation may be limited to 2.5%
  for every 8 points rise thereafter subject to a maximum of Rs. 20 as
G obtaining in the Central Government. On the acceptance of the recommen-
  dations of the Pillai Committee as modified by the Study Group of Bankers,
  the respondent-bank in exercise of powers conferred by Section 19 read
  with Section 12(2) of the Banking Companies (Acquisition & Transfer of
  Undertakings) Act, 1970 formulated regulations in consultatjon with the
H Reserve Bank of India and with the previous sanction of the Centr.al
                MGMT. TRAINEES v. P.N.B. [AHMADI, J.]                    861

Government known as Punjab National Bank (Officers) Service Regula-             A
tions, 1979. In continuation thereof the respondent-bank issued a Circular
No. 492 dated 16th January, 1980 prescribing the grades and categorisation
of scales for its officers as extracted earlier. In the Regulations framed by
the respondent-bank no provision was made in regard to Management
Trainees. Therefore, provision was made in regard to Management
Trainees in paragraph 7 of the aforesaid Circular in the following terms :
                                                                                B

        "Fitment in case of Management Trainees :--The Management
        Trainees who were drawing consolidated emoluments of Rs. 700
        per month as on 30th June, 1979 will be placed in the Junior
        Management scale at basic pay of Rs. 700 with effect from 1st July,     C
        1979. They will also be eligible to draw DA, HRA and other
        allowances as admissible in terms of the Service Regulations with
        effect from the appointed date.

        In the case of Management Trainees who were placed in Grade
        'C' before the appointed date, their basic pay will be refitted as in D
        the case of other officers of the bank."

The appointed date according to the regulations was 1st July, 1979. There-
fore, since the regulations came into force w.e.f. 1st July, 1979, the
managerial cadres of the bank were brought over to the revised pay E
structure according to the fitment formula evolved under the regulations.
Regulation 13 provided that if any officer was aggrieved by the fitment
accorded to him in the new scales of pay, he may prefer an appeal to the
Committee constituted by the Board for this purpose. It may here be
mentioned that the appellants had preferred an appeal before the said
Committee but the same was rejected whereupon the appellants filed a F
Writ Petition No. 1337/81 in the High Court of Delhi which was summarily
rejected by a Division Bench of that High Court after hearing Senior
Counsel for the petitioners. Feeling aggrieved by the summary dismissal of
their petition the original petitioners have preferred this appeal by special
leave.
                                                                                G
       The grievance of the appellants is that they should have been fixed
in the revised scale applicable to the Junior Management Cadre and should
have been granted the advantage of fitment like any other employee
belonging to the managerial cadre. According to them if they had been
granted the benefit of the fitment formula ~volved under the regulations, H
    862                   SUPREME COURT REPORTS [1993) SUPP. 3 S.C.R.

A they would have been placed at Rs. 950 in the scale of Rs. 700-1800
    prescribed for the Junior Management Cadre. However, the respondent-
    bank did not give them the benefit of the fitment formula admissible to the
    managerial cadres of the bank and instead fixed them at the minimum of
    the basic scale of Rs. 700 without granting them the benefit under the
    fitment formula. On account of this they suffered in two ~ays, firstly, they
B were not given the benefit of fitment formula and their salary was not fixed
    at Rs. 950 under that formula and secondly their Dearness Allowance
    which would have been admissible to them at 93% of the basic wage shrunk
    to 51 % under the revised DA formula, thereby resulting in a loss over Rs.
  · 300 per month. In this way, contend the appellants, the Circular No. 492
C dated 16th January, 1980 providing for .the fitment of Management
    Trainees in the revised scale has prejudiced them and being arbitrary,
    unreasonable and discriminatory it is hit by Articles 14 and 16 of the
    Constitution.

D        The respondents in their counter affidavit have contended that by the
  letter of appointment dated 30th October, 1978 it was made clear that they
  will receive consolidated emoluments of Rs. 700 per month in the first year
  i.e. upto the end of 13th November, 1979. It was also stated in the said
  letter that the terms and conditions set out therein were subject to revision
  by the bank on the implementation of the Pillai Committee report. They
E contend that under the terms of the said letter since the appellants were
  on consolidated emoluments of Rs. 700 per month upto 12th November,
  1979 and were not placed in a regular time scale of pay, they were not
  entitled to be placed in the revised scales. In fact they would have drawn
  a consolidated amount of Rs. 700 per month upto 12th November, 1979
F under the terms of the letter of 30th October, 1978 but by the fitment
  formula evolved for Management Trainees under the Circular No. 492
  dated 16th January, 1980 they were placed in a time scale of pay w.e.f. 1st
  July, 1979 and thereby they have entered the regular time scale seven
  months in advance and have to that extent benefited by payment of all
  allowances admissible to officers on a regular pay scale. Besides, the
G respondents contend that under the appointment letter they were expected
  to be confirmed only after they had satisfied the requirements of paragraph
  3 of that letter which, inter alia, require that they must among other things
  clear the confirmation test before being placed in the regular pay scale. All
  these requirements were given a go by on their being placed in the Junior
H Management Scale w.e.f. 1st July, 1979. The respondent, therefore, con-
                MGMT. TRAINEES v. P.N.B. [AHMADI, J.)                   863

tends that the grievance of the appellants is not well-founded; it is not     A
correct to say that respondent had acted unreasonably or arbitrarily or had
been guilty of discrimination in evolving the fitment formula applicable to
Management Trainees.

       We think that the grievance made by the appellants is not well-
founded. In the first place on the appointed date, i.e. 1st July, 1979, they B
were not in any regular time scale of pay governing the managerial staff of
the bank. _They were, therefore, not entitled to be placed in the correspond-
ing revised scale adopted by the respondent-bank under its regulations
pursuant to the implementation of the modified Pillai Committee report.
They would have continued on the fixed emolµments' of Rs. 700 per month C
till 12th November, 1979 under the terms of the letter of appointment in
which case they would not have been entitled to allowances admissible
under the relevant rules and regulations of the respondent-bank. Even after
they entered the second year, they would have been entitled to emoluments
payable to an officer placed in 'C' grade at the initial stage of Rs. 700 basic D
per month plus allowances admissible under the rules but nothing beyond
that. Instead they have been placed in a regular time scale W.P..f. 1st July
1979 and have been admitted to allowances payable to regular employees
of the bank. Even under the terms of the letter of appointment they would
have been entitled to two increments of Rs. 30 each on their entering the
third year in the time scale of Rs. 700-1315. In other words they would have E
been entitled to an increment of Rs. 60 on entering the third year. Under
the revised scale they have been granted two increments of Rs. 40 each,
which is more. It is true that their second increment would have been
 available to them under the letter of appointment on 13th November, 1980
 when they would have entered the third year whereas under the fitment F'
 formula they become entitled to the second increment on 30th June, 1981.
 The third increment has, therefore, been delayed to that extent but they
 have been compensated by the higher increment granted under the revised
 time scale. Besides, under the letter of appointment they would have been
 entitled to these benefits only after they had passed the c~nfirmation test
 and n~t otherwise. There was no guarantee that all of them would have . G
 passed the confirmation test in the first attempt. There could have been
 several imponderables. Under the revised fitment formula they been placed
 in a regular time scale without insisting on clearance of the confirmation
 test. Paragraph 9 of the letter of appointment also clearly indicated that
 the terms and conditions set out there in were subject to revision on H
       864                  SUPREME COURT REPORTS [1993) SUPP. 3 S.C.P•.

  A implementation of the Pillai Committee report or any Government Order,
    Rules or Regulations issued or framed from time to time. The appellants
    being in the service of the bank, albeit in the clerical cadre, were aware
    that the pay structure for the managerial cadres of the bank was under
    revision and the service conditions were being rationalised. But the learned
 B counsel pointed out that under the terms of the appointment letter and the
    DA admissible before revision, the appellants would have received Rs. 700
     + DA which according to him would have come to Rs. 649 whereas under
    the revised DA formula the DA stands reduced to Rs. 336 and thus they
    have suffered a monetary loss of Rs. 313 per month and this loss is more
    at the basic of Rs. 760 per month. Assuming this to be correct, it must be
 C remembered that the bank was r~vising its entire salary structure with
    effect from 1st July, 1979 and hence the pay of each and every officer had
    to be placed in the revised scale. Unfortunately at the appointed date the
    appellants were still trainees and were not in a regular scale. Pay scale-wise
    they belonged to the clerical cadre. The bank had, therefore, to place them
 D at the minimum of the revised scale from the appointed date. Their entry
    into the regular managerial cadre was dependent on several imponderables
    since they had to satisfy the requirements for confirmation. Therefore, the
     appellants cannot contend that the respondents had acted in an arbitrary
    manner or had discriminated against them by placing them in the revised
    pay .scale w.e.f. 1st July, 1979. They were at that point of time on con-
 E solidated emoluments and not in a regular time scale and, therefore, the
    fitment formula admissible to those in the regular time scale was not
    applicable to them. The bank was entitled to place them in regular time
   -scale with a view to achieving uniformity in pay scales, etc., in respect of
    managerial cadres of the bank. Therefore, before the appellants were
 F confirmed as per the appointment letter they were switched over to the
    regular time scale with effect from the appointed date to bring about
    uniformity as rest of the employees in the regular time scale were also
    brought over to the revised scales w.e.f. 1st July, 1979. They too were
    subjected to the revised DA formula by which the percentage of neutralisa-
    tion was reduced to standardise the DA formula with other sectors includ-
·a ing  Central Government employees. We are, therefore, of the opinion that
    the bank cannot be said to have acted arbitrarily with intent to. prejudice
    the appellants nor can it be said that it had deliberately discriminated
    against the appellants by evolving the fitment formula found in Circular ·
    No. 492 dated 16th January, 1980 and thereby violated Articles 14/16 of the
 H Constitution. ·
                    MGMT. TRAINEES v. P.N.B. [AHMADI, J.]                    865

          There is another angle from which the claim may be examined. If the A
    appellants were not brought on the revised pay structure from the ap-
    pointed date were allowed to be governed by the terms of the letter of
    appointment, there would have been several anomalies. Suppose a person
    was appointed in the junior management cadre immediately after the
    appointed date, i.e. 1st July, 1979, he would have been placed at the basic B
    minimum of Rs. 700 in the scale of Rs. 700-1800. In two years he would
    have earned two increments and would have been at Rs. 780 per month
    plus DA according to the revi~ed formula. Now suppose the appellants on
    their clearance of the confirmation test would have been brought over to
    the revised pay scale under the fitment formula. They would have earned
    two increments and would be drawing DA under the old formula which C
    would have been higher by more than Rs. 300 per month as compared to
    the revised DA formula. In that case the total emoluments would have been
    much more and with the added benefit of the fitment formula, they would
    have drawn much more than their colleagues who may have joined imme-
    diately after the appointed date. That would have resulted in the anomaly D
    of the seniors drawing less than their juniors. Such a situation would have.
    resulted in injustice to the seniors who would certainly have raised
    demands for stepping up their salaries. That would have created ripples in
    other streams as well. The Bank, therefore, rightly decided to waive the
    requirement of clearing the confirmation test and advisedly brought them
    over to a regular pay scale. We, therefore, find it difficult to find fault with E
    the action taken by the Bank, which action was bona fide and not arbitrary.

           Besides, it must also be realised that the appellants had no right to
-   insist that they should be retained under the old pay scale when the entire
    staff was being brought over to the new pay structure. If any such right is
                                                                                    F
    recognised, employees in regular pay scales may also like the fitment in
    new scales postponed till they reach a particular stage in the existing time
    scale of pay which is most beneficial to them. Such a situation cannot be
    permitted as it would result in umpteen difficulties and would disturb both
    the horizontal and verticle relativities of the revised pay scales.

          For the above reasons we do not entertain this appeal and dismiss
                                                                                   G
    the same but with no order as to costs. We may, however, make it clear
    that the respondent-bank will not recover if any excess payment is made
    which was stayed by this Court's order dated 7th December 1982.

    R.P.                                                      Appeal dismissed.