JUDGMENT

Kuldip Singh, J.-Special leave granted.

2. A learned single Judge of the Karnataka High Court allowed the bunch - petitions filed by the respondents and quashed the promotions made by the Cauvery Gramina Bank, Mysore (the Bank) to the cadre of Senior Managers on the short ground that the guidelines issued to the Bank by the National Bank for Agricultural and Rural Development (the NABARD) were not followed while making the promotions. A Division Bench of the High Court upheld the judgment of the learned single Judge. The appellants- affected officers - have challenged by way of this appeal the correctness of the judgment of the learned single Judge and that of the Division Bench of the High Court.

3. The Bank was sponsored by the State Bank of Mysore and established in October 1976 under the Regional Rural Banks Act, 1976. The NABARD was established in the year 1982 with a view to look after the agricultural and rural development in the country. The NABARD has been issuing guidelines from time to time regarding the conditions of service of the employees of the rural banks in the country. The NABARD issued a circular dated December 31,1984 providing guidelines for appointments /promotions in the rural banks to the posts of Senior Managers/Area Managers and General Managers. The relevant part of the circular is as under :

"Area Managers/Senior Managers:

(a) Source of Recruitment : 100% by promotion from amongst officers working in bank. Promotions will be on the basis of seniority-cum-merit. If suitable officers are not available internally, these posts could be filled by taking temporarily officers of the sponsor Banks and other banks/organisations on deputation."

NABARD issued another circular dated April 7, 1986 which clarified the procedure and provided for the standard to be adopted for promotions in the rural banks in India. The relevant part of the circular is as under:

"For effecting promotions, the Board may constitute one or more staff selection committees depending on the scale of the posts for which the candidates are to be interviewed, for the purpose of selecting the employees of the bank for promotion to higher posts. The Committee should have at least three official directors of the Board excluding Chairman, of which one should be form the National Bank or the Reserve Bank and one each from sponsor Bank and State Govt. respectively. Also one member from SC/ST community should be represented in such committees as indicated in our circular letter dated 9.12.1985. The selection of the eligible candidates should be based on performance of respective candidates in the bank. The recommendation of the committees should thereafter have the approval of the Board before effecting promotions."

The Bank issued its own guidelines by the circular dated July 17,1986 for appointment to the posts of Area Managers? Senior Managers and invited applications from eligible officers to be considered for promotion. The relevant part of the circular is reproduced hereunder:

"The question of strengthening the supervisory support at the field as well as at the Head Office level consequent on growth in the volume of business and geographical coverage has been examined by the Government of India in consultation with the NABARD. They have approved, in principle, creation of the posts of Area Managers/Senior Managers as and when required and justified by the volume and nature of business. In the light of the guidelines issued by the NABARD in this regard, the Board of Directors have approved creation of a few posts of Area Managers and upgradation of a few Managers posts at Head Office to Senior Managers posts.

The following guidelines have been laid down for appointment to the posts of Area Managers/Senior Managers.

SOURCE OF RECRUITMENT

(a) 100% by promotion from amongst the eligible officers;

(b) Seniority-cum-merit;

(c) If suitable officers are not