1996 Supreme(SC) 553

1996(4) Supreme 732
SUPREME COURT OF INDIA
K. Ramaswamy and G.B. Pattanaik, JJ.
New Bank of India Employees Union & Anr. -Appellants
versus
Union of India & Ors. -Respondents
Civil Appeal Nos. 4247-50 of 96
@ SLP (C) Nos. 18361/95, 19047-19048/95 & 19175/95
All Decided on 13-3-1996

IMPORTANT POINTS
1. No scheme of amalgamation of banks can be fool proof and a court would be entitled to interfere only when it comes to the conclusion that either the scheme is arbitrary or irrational or has been framed on some extraneous consideration.
2. A scheme framed under Section 9 of the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1980, is a legislative one.

Headnote:(i) Banking Companies (Acquisition and Transfer of Undertaking) Act, 1980-Section 9-New Bank of India (Determination of Placement of Employee (officers and workmen) of the New Bank of India in Punjab National Bank) Scheme 1993-Clause 4(a)(iii) and clause 4(b)(ii)-Amalgamation of New Bank of India with Punjab National Bank-Placement Scheme dated 8.12.1993 framed under clause 5(4) r/ws 9-Ratio of 2:1 provided for purpose of promotion of employees of Transferor Bank-Legality of-Is the Placement Scheme beyond the power of Central Government ?-(No)-For framing such scheme it was not necessary to afford an opportunity of hearing to employees of transferor bank.

       Held : When the Central Government decided to amalgamate two banks it has to make a scheme after consulting the Reserve Bank of India under Section 9 of the Acquisition Act. In the case in hand Amalgamation bacame necessary as the transferor bank was incurring heavy loss and without the amalgamation it would have been totally wound up. When a scheme is franed amalgamating two banks. it is not possible for the Central Government to take the details of the service condition in account and that is why it provided that the employees of the transferor bank would become the employees of the tranferee bank on the same terms and conditions, with the same right to pension, gratuity and other matters which would have been admissible to them if they would have continued as the employees of the transferor bank. But so far as the question of their palcement and inter-se seniority vis-a-vis the employees of the transferee bank, the Scheme itself stipulated that in consultation with the Reserve Bank of India the Central Government after taking relevant factors into consideration may frame the Scheme. It is in exercise of this power the placement scheme has been framed and under the Placement Scheme what has been intended is that for determination of the inter se secniority and in the matter of promotion from subordinate cadre to the clerical cadre and from the clerical cadre to the officers cadre while the computation of years of service rendered is taken into account, the computation shall be made in the ratio of 2:1 i.e. two years of service in the transferor bank would be considered equivalent to one year of service in the transferee bank. This computation is only one time computation and whether such decision has been taken after taking the relevant factors into account will be considered by us when the question of arbitrariness etc. is considered. But on examining the provisions of the Acquisition Act as well as the provisions of Clause 5(4) of the Amalgamation Scheme framed in exercise of power under Section 9 of the Acquisition Act and the impugned clauses of the Placement scheme we have no hesitation to come to the conclusion that the Central Govt. did retain the power to frame the Placement Scheme in question which is essential for determination of the placement of the employees of the transferor bank and the inter-se seniority vis-a-vis the employees of the transferee bank and for framing such scheme it was not necessary to afford an opportunity of hearing to the employees of the transferor bank, as in our view there has been no change on conditions of their service. In this view of the matter we answer the first question by holding that the Central Government had the power to frame the subsequent scheme which has been termed by us in this judgment as the Placement Scheme for the placement of the employees of the transferor bank in the transferee bank and for the determination of their inter se seniority with the employees of the transferee bank. (Para 14)

       (ii) Banking-Amalgamation of two Banks-Placement Scheme framed by Central Government-Powers of Court to examine such schemes-Grounds for interference.

       Held : That no scheme of amalgamation can be fool proof and a Court would be entitled to interfere only when it comes to the conclusion that either the scheme is arbitrary or irrational or has been framed on some extranneous consideration. (Para 15)

       Further held : On examining the provisions of the Placement Scheme more particularly Clauses 4(a)(iii) & 4(b)(ii) and on consideration of the opinion rendered by the Reserve Bank of India we have no hesitation to come to the conclusion that the said Scheme is neither arbitrary nor irrational and on the other hand a just scheme evolved by the Union Government after due consultation with the Reserve Bank of India and Court cannot interfere with such a Scheme. (Para 19)

       (iii) Banking-Amalgamation of two banks-Determination of inter-se seniority of transferor bank vis-a-vis employees of transferee bank-Placement Scheme dated 8.12.1993 framed under Clause 5(4) of the Amalgamation Scheme-Determining ratio of 2:1 for purpose of promotion of employees of Transferor Bank-Legality of-Whether while framing the Placement Scheme and determining ratio of 2:1, relevant and germane materials had been taken into account or the provisions can be held to be arbitrary and irrational ?

       Held : The Placement Scheme which is being impugned in the present case by the employees of the transferor bank had been framed in due consultation with the Reserve Bank of India and the said Reserve Bank has filed affidavits indicating the broad consideration on which the ratio 2:1 has been fixed. (Para 20)

       Further held : The financial loss sustained by the transferor bank had brought the bank to a virtual collapse. It is at that point of time the Reserve Bank on consideration having taken a sympathetic view of the matter and instead of advising winding up of the bank and its liquidation advised for its merger with a stronger bank and the Government of India ultimately accepted the advise of the Reserve Bank. On its amalgamation necessary provisions were required to be made for the placement of the employees of the transferor bank with the employees of the transferee bank. At that stage the bank as well as the Union Government considered the total volume of business of both the banks, the rate of promotion in both the banks, the total number of employees in both the banks, as well as the impact if the entire length of service of the employees of the transferor bank is taken into account or the time reduced level is taken into account and finally evolved the scheme of placement and modalities for promotion. Having considered the necessary averments made in the affidavits filed by the Union Government as well as by the Reserve Bank of India we are of the considered opinion that in framing the Placement Scheme and determining the ratio of 2:1 in clauses 4(a)(iii) & 4(b)(ii) the appropriate authorities have taken relevant and germane materials into consideration and the said provision cannot be termed as arbitrary and irrational. (Para 21)

       (iv) Banking-Amalgamation of banks-Determination of seniority of employees of transferor bank-Placement Scheme dated 8.12.1993 framed under clause 5(4) of Amalgamation Scheme, 1993-Whether can be held as retrospective in nature ?-(No).

       Held : On deciding to amalgamate the two banks in exercise of power under Section 9 of the Acqusition Act the Union Government framed the scheme of amalgamation and notified the same on 4th September, 1993. But in that scheme excepting making the employees of the transferor bank as employees of the transferee bank, the other questions like their inter se seniority and fitments in the cadre of the transferee bank had not been decided. On the other hand clause 5(4) of the Amalgamation Scheme left the matter open for being evolved at a later stage and the complete fusion between the employees of the two banks came only on the subsequent scheme being framed, which scheme was evolved after due deliberations on the relevant materials. The scheme therefore, necessarily have to be given effect with effect from the date of amalgamation and the same cannot be held to be retrospective in nature. (Para 22)

       (v) Banking Companies (Acquisition and Transfer of Undertaking) Act, 1980-Section 9-Scheme making process under-Whether legislative in nature ?-(Yes).

       Held : Under Section 9 of the Acquisition Act under which Act the impugned scheme has been framed, every scheme framed by the Central Government has to be laid before each Houses of Parliament for a total period of 30 days and the Parliament has the power to agree to the Scheme and making any modification or in giving to a decision that the scheme should not be made and it is only thereafter the scheme has the effect either in the modified form or does not agree. Under the Acquisition Act the scheme becomes effective only after the same is placed before both the Houses of Parliament and after the Parliament makes such modification and agrees to the scheme. In our considered opinion, a scheme framed under Section 9 of the Banking Companies Acquisition and Transfer of Undertakings Act, 1980, is a legislative one. Para 23)