JUDGMENT

SURINDER SINGH NIJJAR,J.

1. Leave granted in all the Special Leave Petitions.

2. These appeals are directed against the common judgment and final order dated 8th December, 2010 passed by the High Court of Judicature at Allahabad in Writ Petition Nos. 58206 of 2005 and in connected Writ Petition Nos. 58214, 59016, 59018, 59035 and 59758 of 2005, whereby the High Court has allowed all the Writ Petitions and set aside the Circular No. 17 of 2009 dated 30th November, 2009 and Circular dated 12th July, 2010 in so far as they make a provision to exclude the employees from consideration for promotion, who are otherwise eligible to be considered for promotion and are within the zone of consideration, on the basis that they have either obtained the ‘D’ rating in the annual performance report or have been penalized for any misconduct in the preceding 5 years.

Background:-

3. Before we take up for consideration, the issues involved, it would be appropriate to briefly notice the background leading to the present litigation.

4. There are currently about 82 Regional Rural Banks (for short “RRBs”) sponsored by various nationalized banks, set up under the Regional Rural Banks Act, 1976 (for short “the RRB Act, 1976”). There are about 67,000 employees of the Bank, spread all over India mostly in the interiors.

5. To ensure uniformity amongst all the RRBs, Section 29 read with Section 17 of the RRB Act, 1976 empowers the Central Government to lay down the terms and conditions of service of employees of all the banks. Section 17 of the RRB Act, 1976 empowers the RRBs to appoint such number of officers and other employees as it may consider necessary or desirable in such manner as may be prescribed for the efficient performance of its functions and to determine the terms and conditions of their appointment and service. Section 24 of the Act lays down that in the discharge of its functions, RRBs shall be guided by such directions in regard to matters of policy involving public interest and the Central Government may, after consultation with the National Bank for Agriculture and Rural Development (for short “NABARD”), may prescribe. Under Section 29 of this Act, the Central Government has been empowered to make rules after consultation with the NABARD and the Sponsor Banks for carrying of the provisions of the RRB Act, 1976. By Clause (ba) of sub-section (2) of Section 29, which was inserted by the Regional Rural Banks (Amendment Act), 1988, the Central Government was empowered to make rules relating to the manner in which the officers and other employees of the RRBs shall be appointed.

6. Till the year 1988, there were no statutory rules governing the promotion of employees of RRBs and the same were governed by various Circulars issued by the Central Government and NABARD. On 1st December, 1987, NABARD issued guidelines to all RRBs vide letter No. IDD.RRB.NO. C-78/316(GEN)/87-88, explaining the concept of promotion by “Seniority-cum-Merit” as envisaging promotion by seniority with due considerations to minimum merit/fitness prescribed. Further, it was stipulated that “this rule envisages promotion by seniority with due considerations to minimum merit/fitness prescribed. Fitness implies that there is nothing against an officer; no disciplinary action is pending against him and none is contemplated. The officer has neither been reprimanded nor any adverse remarks have been conveyed to him in the reasonable recent past”. Although the aforesaid Circular was issued in relation to promotion of Managers to the post of Area/Sr. Manager, it was observed that the similar procedure may be followed in case of the promotion of Sr. Clerk and internal promotion to Field Supervisor and Manager Posts.

7. The Central Government vide a Notification dated 28th September, 1988 framed statutory rules, known as Regional Rural Banks (Appointment and Promotion of Officers and other Employees) Rules, 1988 (for short “the RRB Rules, 1988). These rules were made in exer