Supreme Court Upholds Appellants in Regional Rural Bank Promotion Dispute Because NABARD Guidelines Permitted Performance-Based Selection. High Court Erred in Treating Senior Manager Promotions as Selection-Based Rather Than Seniority-Cum-Merit When Performance Appraisal Records Were Properly Considered.

Case Note & Summary

The dispute arose from promotions to Senior Manager cadre in Cauvery Gramina Bank, a regional rural bank sponsored by State Bank of Mysore and established in October 1976 under the Regional Rural Bank Act, 1976. The National Bank for Agricultural and Rural Development (NABARD), established in 1982, issued guidelines from time to time for service conditions of rural bank employees. NABARD circular dated December 31, 1984 provided that Area Managers/Senior Managers were to be filled 100% by promotion from amongst officers on seniority-cum-merit basis, with temporary deputation if suitable internal officers unavailable. NABARD circular dated April 7, 1986 clarified procedure: staff selection committees should have at least three official directors including one from NABARD/Reserve Bank, one from sponsor bank, one from State Government, and one SC/ST member; selection should be based on performance of respective candidates; recommendations needed Board approval. The Bank issued its own guidelines on July 17, 1986, approving creation of Area Manager and Senior Manager posts and stating source of recruitment as 100% promotion from eligible officers, seniority-cum-merit, and fallback to deputation. On July 23, 1986 the Bank's Chairman constituted a Director's Committee; 32 officers were called for interview in order of seniority; marks were awarded according to performance appraisal forms; officers obtaining 85 out of 150 marks were shortlisted; promotion orders were issued on July 31, 1986. Some senior officers not promoted filed writ petitions in Karnataka High Court challenging the promotions, contending that the procedure adopted by the Director's Committee violated NABARD guidelines because promotions were not made on the basis of seniority-cum-merit but by selection through interview. They argued that service records of the writ petitioners were not adverse and they should not be denied promotion due to junior officers being more meritorious. The learned single Judge quashed the promotions, holding that the Bank violated NABARD guidelines issued in 1984 and that the April 1986 guidelines were not applicable to Senior Manager promotions. A Division Bench upheld this judgment, reasoning that recent service record should be considered and that promotions were effectively selection-based because marks were assigned on performance appraisal and interview. The Supreme Court disagreed with the High Court. It held that the NABARD circular dated April 7, 1986 clarified the earlier circular and specifically provided that selection of eligible candidates should be based on performance of respective candidates in the bank; these guidelines applied to all employees of rural banks. The High Court erred in holding the guidelines inapplicable. Reading the two NABARD guidelines cumulatively, promotions were to be made on the basis of comparative assessment of performance appraisal, which the Director's Committee precisely did. The Court noted that the procedure adopted was just and fair. Since NABARD instructions were in the nature of guidelines, promotions could not be set aside unless arbitrary or unfair. The Court also reiterated that even in seniority-cum-merit promotions, the totality of the service record must be considered; performance appraisal forms are maintained precisely for promotion consideration. Therefore, the High Court was not justified in holding that performance appraisal could not be taken into account. The Supreme Court allowed the appeal, set aside the judgments of the single Judge and Division Bench, upheld the promotions made by the Bank for the appellants and similarly situated persons, dismissed the writ petitions, and imposed no costs.

Headnote

Issue of Consideration

Final Decision

Appeal allowed; judgments of learned single Judge and Division Bench of Karnataka High Court set aside; promotions made by Cauvery Gramina Bank to Senior Manager cadre upheld for appellants and similarly situated persons; writ petitions dismissed with no costs.

Law Points