V. Sivaraman Nair, J.:— Petitioners in these two Writ Petitions are officer employees of the State Bank of Hyderabad. They are working in Junior Management Grade Scale-I (for short JMGS-I) with effect from 27.12.1982 They had completed two years or more of service in rural branches which are identified as such by the Bank. They were aspirants of promotion to the next higher scale of Middle Management Grade Scale-II (for short MMGS-II) for the years 1989 and 1990. They had completed all other eligibility criteria including one year service as field officer. They complained against their exclusion from appointment in spite of their qualification, eligibility and entitlement, by including names of ineligibles who had not completed the obligatory period of one year's service as field officer and/or two years of service in the rural branches, according to the circular No. PER/89-90/43 dated 28.7.1989 (in W.P No. 15466/89) and circular No. PER/90-91/7 dated 26.4.1990 (in W.P 8343/90) respectively. Petitioners submit that two years of service in the rural branches and one year's field service are obligatory eligibility criteria in accordance with the guidelines issued by the Government of India, which have been incorporated as part of the ad hoc promotion policy and the relevant employment notices issued pursuant thereto by the State Bank of Hyderabad. The respondent-Bank however maintains that it had no course open except to grant relaxation in case of employees who were otherwise eligible but could not possess the requisite period of rural service or field service on the relevant dates in 1989 and 1990 due to no fault of theirs. Respondents contend that the two items of qualifications though pre-requisites for promotion, do not form part of the eligibility criteria. In other words, respondents submit that it was not possible to eliminate persons who were otherwise qualified and seniors but could not be posted in rural branches or in the field and therefore were denied opportunity of acquiring those otherwise essential qualifications. Respondent-bank submits that such of the seniors who were otherwise eligible had to be and were promoted with the stipulation that their promotion would be effective only on completion of the obligatory period of rural service. Whether the respondent-bank could have done so overlooking the petitioners who were duly qualified, according to the regulations, the promotion policy and the circulars, is the crux of the controversy involved in these two Writ Petitions.

2. There is no controversy as to the status of the State Bank of Hyderabad as a statutory Corporation covered by the State Bank of India (Subsidiary Banks) Act, 1957, hereinafter referred to as the Subsidiary Banks Act and the Regulations framed thereunder. It is admitted that the State Bank of Hyderabad (which was then called the Hyderabad Bank) before the enactment of the above Act was governed by the State Bank of Hyderabad Act, 1956. Before and after the enactment of the Subsidiary Banks, Act, the State Bank of Hyderabad was and continues to be a statutory Corporation with all characteristics of a ‘State’, under Article 12 of the Constitution of India. Section 63 of the Subsidiary Banks Act confers power on the State Bank of India to frame Regulations in respect of subsidiary Banks, which include the State Bank of Hyderabad as well. Such Regulations may comprehend pay and service conditions of officers and other employees of such banks. Such Regulations are framed from time to time by the State Bank of India in consultation with the Board of Directors of each of the Subsidiary Banks. It is also not in dispute that the service conditions of employees are governed by the State Bank of Hyderabad Officers Service Regulations, 1979, hereinafter referred to as the ‘Service Regulations’. Clause 17 of the Regulations empowers the Board of Directors or the Executive Committee, to lay down promotion policy from time to time. The State Bank of India issued Circular No. PER/12 of 1987 dated 12.2.1987 to the effect that Government of India guidelines making rural service compulsory as one of the eligibility criteria for promotion from JMGS-I to MMGS-II, for a minimum period of two years would be followed. This was because of the statutory obligation cast on the State Bank of India and the subsidiary Banks to follow the instructions and guidelines issued by the Government of India scrupulously in respect of conditions of staff, officers and others employed by the respective Banks. Since the State Bank of Hyderabad had not framed regular promotion policy, it has issued ad hoc promotion policy which was being adopted by the Board of Directors or Executive Committee from year to year. It is beyond dispute that in each of the circulars issued after 1987, it was mentioning specifically that for promotion, compulsory rural service for a period of two years would be insisted upon.

3. In circular dated 12.2.1987, the General Manager (Operation) of the Bank classified Metropolitan, Urban, Semi-Urban and rural branches, for the purpose of posting and promotion. It was stated that—

“Please note that officers who do not complete rural/semi-urban service will be disqualified for promotions, eventhough they may fulfil other eligibility criteria as to service etc etc. for the purpose of promotion to Middle Management Grade Scale-II or Middle Management Grade-Hi as the case may be to be made effective from the 1st June, 1988.”

(emphasis supplied)

4. It was also stated that—

“It is therefore for the officers concerned who did not have rural service of the requisite period, to approach the superior officers for opportunity to complete the rural service if they want to be seriously considered for promotion.”

5. In the ad hoc promotion policy issued for the year 1989–90, specific reference was made to “the Government of India circulars including that of the rural service.” The complaint of the petitioners is that in spite of such prior intimation in the selections conducted in the year 1989–90, ineligible officers who stayed back in Metropolitan and Urban Branches were not disqualified. On the other hand, they were promoted with the condition that such promotions would be effective only after they completed two years of rural service.

6. Petitioners seek the issue of a writ of certiorari to quash the promotion orders dated 28.7.89 and circular dated 28.4.1990, leading to the written test for the latter year as unconstitutional, illegal, arbitrary and malafide. They also seek a declaration that they are entitled to promotion to MMGS-II with all consequential benefits as on 1.8.1989 and 1.8.90

7. The factual details relating to the petitioners, their eligibility and their qualifications are not in dispute. The only dispute seems to be that persons who are seniors to them but could not be or were not posted in sub-urban/rural branches due to reasons not attributable to them are not liable to be disqualified due to non-possession of rural service for the requisite period. The respondent-bank contends that two years of rural service is obligatory, not for consideration for selection-but only for effective promotion and the same is ensured by the specific provision contained in the promotion order. Respondent therefore submits that there is no illegality or arbitrariness in considering seniors for promotion and in ordering promotion subject to those promotions being effective only on their completing the requisite obligatory period of rural service. Petitioners submit that they are not aware of all of the officers who were considered for promotion without completing two years of rural service as on the relevant date without disqualifying them as was obligatory as circular dated 12.2.1987 They however have impleaded a few of the officers who fall into that category. In an additional affidavit in W.P 15466/89, they have also stated that they filed a representation before the respondent-bank on 16.9.91 requesting the respondent to furnish the names of persons who did not complete two years of rural service or those not having operational experience of one year, so as to enable them to implead such persons as party respondents in the Writ Petitions. Respondent No. 7 in the first Writ Petition-Associate of Bank Officers' Association, Hyderabad representing some such officers has. got itself impleaded as additional 7th respondent, as per orders dated 1.2.1991 in W.P.M.P No. 1516/91. They claim to represent the officers who have been ordered to be promoted. In the light of the above facts, it seems to me right to assume that the parties who are likely to be affected are before me through their Association, in addition to respondents Nos. 5 and 6 who have been individually impleaded.

8. As I mentioned above, the short question which comes up for consideration is whether the stipulation contained in the Government of India instructions which were reproduced in Circular No. PER/12 of 1987 dated 12.2.1987 and to which reference was made repeatedly in the ad hoc promotion policy and Circulars relating to selections conducted year after year from 1988 for promotion from JMGS-I to MMGS-II, that only such of the candidates in the former who have completed two years of rural service and one year service in operation/field service, would be considered for promotion, is an obligatory eligibility criteria or is only a post-promotion qualification which has to be completed before orders of promotion could be effective.

9. Section 49 of the Subsidiary Banks Act, 1959 provides for continuance of existing officers and employees of some of the subsidiary Banks. Section 50 deals with staff of subsidiary banks and provides that a subsidiary bank may, subject to such limitations and conditions as may be prescribed, appoint such number of officers, advisers and employees as it considers necessary or desirable, for the efficient performance of its functions and on such terms and conditions as it may deem fit. Section 62 enables the Central Government to frame rules and section 63 empowers the State Bank to make regulations. The latter provision is in the following terms:

63. Power of the State Bank to make regulations:

The State Bank may, with the approval of the Reserve Bank, (by notification in the Official gazette) make in respect of a subsidiary bank, regulations, not inconsistent with this Act and the rules made thereunder, to provide for all matters for which provision is necessary or expedient for the purpose of giving effect to the provisions of the Act.”

10. Sub-section (2), Clause (m) of Section 63 enables framing of regulations relating to—

“the conditions and limitations subject to which the subsidiary bank may appoint officers, advisers and other employees and fix their remuneration and other terms and conditions of service.”

11. Clause (n) empowers framing of regulations relating to the duties and conduct of officers, advisers and other employees of the subsidiary bank.

Sub-section (3) provides that ‘all regulations under this section, except the first regulations, shall be made in consultation with the Board of Directors of the subsidiary bank concerned.’

Sub-section (4) states that every regulation shall, as soon as may be after it is made, be forwarded to the central Government and the Government is obliged to obtain the approval of the Houses of Parliament.

12. It is therefore clear that the conditions of service including rules relating to promotion have to be promulgated as regulations by the State Bank of India. It was in exercise of that power that the State Bank of Hyderabad Officers' Service Regulations, 1979 were framed. Clause 17 of the above regulations is in the following terms:

“17. Promotions to all grades of officers in the Bank shall be made in accordance with the policy laid down by the Board or the Executive Committee from time to time having regard to the State Bank's guidelines.”

13. Promulgation of a promotion policy is therefore a statutory obligation. As long as regular promotion policy is not framed, ad hoc promotion policy adopted in exercise of the power under clause 17 of the Regulations will do duty as statutory conditions of service regarding promotion. The source of power for issue of circular No. PER/12 of 1987 dated 122.1987 must necessarily be clause 17 of the regulations. There are indications in the above circular that it was part of the promotion policy. It was specifically issued with reference to promotions to MMGS-II and III and the same specifically referred to the rural service and semi-urban service as compulsory requirements for promotions. It was stated therein—

“Pending finalisation of a regular promotion policy covering all grade/scales of officers in terms of Regulation 17 of the State Bank of Hyderabad (Officers) Service Regulations 1979, the Government of India have issued guidelines making rural/semi-urban service compulsory as one of the eligibility criteria for considering promotion from Junior Management Grade Scale-I to Middle Management Grade Scale-II and Middle Management Grade Scale-II to Middle Management Grade Scale-III as a part of the promotion policy to be effective from the 1st June 1988. The details are as under: Promotion from JMGS-I to MMGS-II:

Minimum two years' service in a rural branch. As regards specialist officer, he should take the requisite rural branch experience as and when he switches over to the main stream of banking.”

14. For implementation of the above term, the branches of the Bank were classified as Metropolitan, Urban, Semi-urban and rural. It also contained in the following recital.

“While the Bank has initiated suitable steps to expose the officers who have not completed the requisite rural/semi-urban service nevertheless, officers who have not completed service in the rural, semi-urban centers are advised to inform their respective controlling Authorities in case their transfer orders to rural/semi-urban centers as the case may be are not received by the 31st March, 1987. Please note that officers who do not complete the rural/semi-urban service will be disqualified for promotions even though they may fulfill other eligibility criteria as to service etc., for the purpose of promotion to Middle Management Grade Scale-II or Middle Management Grade Scale-III as the case may be to be made effective from the 1st June, 1988.”

(Emphasis supplied)

15. It is therefore evident that the Government of India issued guidelines as a substitute for regular promotion policy. It is beyond doubt that the respondent-bank considered the guidelines issued by the Government of India as part, of the promotion policy. If it is not so, there was no meaning in the classification of the branches and the caution that all officers “who have not completed the requisite period of service in the rural/semi-urban centres are advised to inform their respective controlling Authorities in case their transfer orders to rural/semi-urban centers as the case may be are not received by the 31st March, 1987, to fulfill the eligibility criteria for promotion to MMGS-n, to be made effective from the 1st June, 1988.”

16. In the employment notice-Circular PER/89-90/11 dt. 10.5.1989 - reference was made to the Government of India guidelines in which eligibity criteria including two years of rural service was stipulated for promotion from JMGS-I to MMGS-II. It was also stated that “pending formulation of regular promotion Policy covering all grades/scales in terms of Regulation 17 of the State Bank of Hyderabad Officers' Service Regulations, 1979, the Executive Committee at its meeting held on the 15th April, 1989, approved the following ad hoc promotion policy for filling up vacancies identified for the year 1989 under channels viz., (a) Seniority Channel and (b) Merit Channel in the ratio of 50 : 50 of the total vacancies determined for promotion under each of the channels.”

17. Among the general conditions in clause (v) of the circular, sub-clause (d) was to the effect that the “Government of India guidelines in regard to rural posting will be meticulously implemented”. In the light of the circular issued viz., PER/12 of 1987 dt. 12.2.1987 and the employment notice relating to promotion from JMGS-I to MMGS-II for year 1989, the relevant portions of which I have extracted above, there could have been no doubt among the eligible's that the promotion policy which the Executive Committee framed in exercise of its power under Regulation 17 of the Service Regulations definitely stipulated the eligibility criteria that such of the officers in Junior Management Grade-Scale-I who had completed two years of service in rural branches alone would be qualified for promotion and those who did not have those qualification would be ‘disqualified’ for promotion.

18. Having stipulated this condition in exercise of the statutory power, was it open for the respondent-bank-Board of Directors or the Executive Committee-to favour persons who had not acquired the necessary eligibility criteria? Was it open for the bank to admit persons who were not eligible in terms of the promotion policy to appear for the test and other process as for selection leading to promotion to MMGS-II. I have no doubt that if the circulars dt. 12.2.1987 and 10.5.1989 spelt out a promotion policy which was promulgated in exercise of the power under clause 17 of the staff Regulations, the respondent-bank was bound to act only in accordance with the terms of the above promotion policy. It was bound to disqualify such of the officers who had not completed the rural service for a period of two years as on the relevant date viz., 1st June, 1989.

19. The explanation of the respondent-bank is that though it had issued circular dt. 12.2.1987 to the effect that rural service for two years would be an eligibility criterion for promotion with effect from 1st June, 1988 and the circular specifically mentioned that the Bank had initiated steps to post officers to complete lie requisite rural sendee, in some cases, it could not provide posting to such rural and semi-urban areas immediately due to administrative difficulties. It is stated that considerable number of officers otherwise suitable for being considered for promotion from JMGS-I to MMGS-II could not complete the stipulated 2 years of rural/semi-urban service, that this resulted in a number of officers not completing rural service by 1st August, 1989, and it was because of this anxiety that some of the candidates who have not completed two years of rural service were also considered and their posting was deferred till the completion of that requirement.

20. The respondent-bank seems to contend that the bank had the power to grant exemption from the promotion policy in deserving cases where candidates who were otherwise eligible were disabled from acquiring the requisite qualification due to no fault of theirs. It may perhaps be that in cases where a condition or qualification was introduced suddenly in such circumstances where the eligibles had no opportunity to acquire there new qualifications, it may be necessary to consider that question.

21. There is considerable force in the submission of the petitioners that it could not have been impossible for the respondent-bank to devise the posting of candidates who were otherwise eligible to rural/semi-urban branches, within the stipulated period from the date of issue of circular dt. 12.2.1987 It was more than two years thereafter that the ad hoc promotion policy for promotion to MMGS-II for 1989 was framed. Petitioners are right in their submission that persons who obtained and continue to obtain the benefits of Metropolitan and Urban postings in defiance of the circulars are not entitled to any exemption as has been pleaded by the respondent-bank.

22. In all cases where exemption from rural service was granted, assuming there is such power, it shall be only for the purpose of rectifying an injustice done to any individual or remedying the grievance of a group of persons which was occasioned by reason of administrative decisions taken in the exigencies of service. The power to grant relaxation or exemption shall not be exercised to confer benefits on the favorites contrary to the stipulations contained in principles and rules of general application. If rules are framed which are to be implemented uniformly in all similar cases, I do not find any reason why persons who continued to enjoy the benefit of Metropolitan/Urban posting shall have an edge over those who had completed the rural/semi-urban service requirement, the absence of which was mentioned as a disqualification in the circular dt. 12.2.1987

23. In spite of the stipulations in that circular, if officers were continued in Metropolitan/Urban postings to their manifest advantage, the imperatives of the circular inviting a disqualification shall not be relaxed in favour of those very officers. The relaxation, if any, granted, was contrary to the terms of the circular which was incorporated as part of the ad hoc promotion policy for the relevant year.

24. The same reasoning applies with equal force to the promotions effected during the next year, which is the subject matter of challenge in W.P 8483/90. In its letter SBD/001357 dt. 11.5.1990, the State Bank of India informed the Managing Director of the State Bank of Hyderabad that as a result of consultation with the Associate Banks Officers' Association, a promotion policy has been finalised and the same may be adopted to ensure that promotions for the year 1990 are completed on or before 1st August, 1990 positively. Clause 5 of the general guidelines for promotion was the following:

“The Government of India guidelines in regard to promotions to the above grades will be kept in view.”

25. Clause (b) of the promotion policy from JMGS-I to MMGS-II provided that:

“One year's operational experience as Field Officer/Dy. Manager/Manager of a Division/Branch Manager. The Associate Banks will have to ensure that all eligible officers are exposed to one year's operational experience before they are due for promotion.”

26. Among ‘other guidelines’ clause-3 was to the effect that ‘the Government guidelines like these relating to rural assignment etc. will be meticulously followed’. In its memorandum dt. 15.5.1990 to the Executive Committee, the Chief General Manager recommended approval of the promotion policy for filling up the vacancies from JMGS-I to MMGS-II for the years 1990 onwards. Clause-5 of the general guidelines was also the same as in the guidelines proposed by the State Bank of India. Clause-4 of the “other guidelines” was the same as was referred to earlier viz., that “the Government guidelines like those relating to rural assignment will be meticulously followed.” It is therefore obvious that no person was left in any doubt that he should complete there requisite period of rural service for two years and operational experience for one year as a part of the eligibility criteria for consideration for promotion. It was clear that the promotion policy proposed by the State Bank of India and which was adopted by the Executive Committee of the State Bank of Hyderabad, left no quarter for the concerned subsidiary Bank to withhold the requisite posting in rural/semi-urban branch so as to enable the eligible officers to acquire the requisite qualification. I find considerable force in the submission of counsel for the petitioners that favourites were retained in Metropolitan/Urban postings with assurance that the short fall in rural service or operational experience would be condoned when occasion arises. Exemption of obligatory requirements for promotion in favour of those who ought to have been disqualified is clearly arbitrary and discriminatory.

27. In the light of the above discussion, I hold that the petitioners are entitled for promotion in preference to those who had not completed the obligatory period of two years of rural service or one year of operational experience as prescribed by the relevant promotion policy, the absence of which was to be treated as disqualification of the candidates who were otherwise eligible. Since there is no dispute that the petitioners were otherwise eligible, qualified and suitable and could not be promoted due to the promotion of persons who were liable to be disqualified, their claims for promotion shall be considered against vacancies which had arisen, and the filling up of which was deferred till such time as the ineligibles completed the obligatory service requirements. The respondent-bank shall promote the petitioners forthwith. They shall be assigned appropriate ranks in MMGS-II. If that requires any revision of ranking or reversion of disqualified officers who were wrongly promoted, it shall be done after issue of notice to such persons as are likely to be affected. The Writ Petitions are allowed as above. Petitioners are entitled to their costs including advocate's fee of Rs. 500/- in each of the petitions.

28. Petition allowed.