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Andhra Bank v. B. Satyanarayana And Others
Factual and Procedural Background
The appellant, Andhra Bank, promoted certain officers (Respondents 3–12) from the position of Regional Manager to Assistant General Manager in February 1984 following a policy circular issued under Regulation 17(1) of the Andhra Bank (Officers') Service Regulations, 1982. Respondents 1 and 2, who were considered but not promoted, challenged the validity of that circular in Writ Petition No. 6076 of 1984 before the Andhra Pradesh High Court. A learned Single Judge held Regulation 17(1) to be arbitrary for want of guidelines. The Bank’s intra-court appeal (Writ Appeal No. 1152 of 1988) was dismissed by a Division Bench, which ruled that although Regulation 17 itself was not unconstitutional, any promotion policy had to be issued only after following the procedure in Section 19 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980. The Bank appealed to the Supreme Court against that Division Bench decision.
Legal Issues Presented
- Whether Andhra Bank’s promotion policy circular dated 11-2-1984 required prior consultation with the Reserve Bank of India and previous sanction of the Central Government under Section 19 of the 1980 Act.
- Whether Regulation 17 of the Andhra Bank (Officers') Service Regulations, 1982 confers unguided or arbitrary powers on the Bank’s Board of Directors, rendering it unconstitutional.
Arguments of the Parties
Appellant’s Arguments
- The Board had already complied with Section 19 when framing the 1982 Regulations; separate compliance was unnecessary for each policy formulated under Regulation 17.
- Regulation 17 empowered the Board to lay down promotion policy from time to time, provided it had regard to Central Government guidelines, which were in fact issued and followed.
- Requiring Section 19 compliance for every policy decision would be impractical and contrary to the intent of delegating such powers to the Board.
No appearance was recorded on behalf of the respondents, and their arguments are not contained in the opinion.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| People's Union for Civil Liberties v. Union of India, (2004) 2 SCC 476 | Validity of delegated legislation must be assessed in its statutory context; powers are not unconstitutional if sufficiently guided. | Used to support the view that Regulation 17 provides adequate guidance and is therefore constitutional. |
| Hamdard Dawakhana v. Union of India, AIR 1960 SC 554 | Illustration of cases where legislation conferred wide, unguided powers and was struck down. | Distinguished; Court held the present case did not involve such unguided delegation. |
| Krishna Mohan (P) Ltd. v. Municipal Corporation of Delhi, (2003) 7 SCC 151 | Another example of invalid wide delegation. | Likewise distinguished to show that Regulation 17 contains sufficient safeguards. |
Court's Reasoning and Analysis
The Supreme Court observed that Andhra Bank is a “corresponding new bank” under the 1980 Act and that its Board is empowered by Sections 12(2) and 19 to frame service regulations after consulting the Reserve Bank of India and obtaining prior Central Government approval. Such consultation and approval were admittedly obtained when the 1982 Regulations—including Regulation 17—were framed; therefore, the essential legislative function had already been performed.
Regulation 17 authorises the Board to frame promotion policies “having regard to” Government guidelines. The Court held that this does not amount to an unguided or uncanalised delegation because:
- Central Government guidelines exist and were taken into account.
- Any amendment to the Regulation itself would still require Section 19 compliance and parliamentary scrutiny, providing an additional safeguard.
Requiring fresh compliance with Section 19 for every internal policy would render the regulatory scheme unworkable and defeat the purpose of delegating day-to-day policymaking to the Board. Citing the principle ut res magis valeat quam pereat, the Court construed the statutory scheme to preserve its practical efficacy.
Consequently, the High Court’s view that the promotion policy was ultra vires for want of Section 19 compliance was found to rest on a mistaken conflation of regulation-making with policy-making under an existing regulation.
Holding and Implications
Appeal Allowed; High Court judgment set aside.
The Supreme Court upheld the validity of Regulation 17 and the promotion policy formulated under it. The immediate consequence is that the promotions granted by Andhra Bank stand restored, and no further statutory procedure under Section 19 is required for future policies framed under an existing, valid regulation. The decision reinforces the principle that once a regulation is properly framed with requisite approvals, day-to-day policies implemented under that regulation do not require repeat compliance with the parent statute’s procedural mandates.
S.B Sinha, J.— This appeal is directed against the judgment and order dated 31-3-1998 passed by a Division Bench of the Andhra Pradesh High Court in Writ Appeal No. 1152 of 1988 whereby and whereunder an appeal preferred by the appellant herein against a judgment and order dated 13-6-1988 passed by a learned Single Judge in Writ Petition No. 6076 of 1984 was dismissed.
2. In view of the point involved in this appeal, it may not be necessary to dwell at length on the facts of the matter. Suffice it to point out that Respondents 3 to 12 herein at all relevant times were holding the posts of Regional Manager. They along with Respondents 1 and 2 herein were considered for promotion to the post of Assistant General Manager upon following the procedure laid down in a circular letter dated 11-2-1984 issued in terms of Regulation 17(1) of the Andhra Bank (Officers') Service Regulations, 1982 (hereinafter referred to as “the Regulations”, for the sake of brevity). Upon consideration of the cases of the private parties herein, Respondents 3 to 13 were promoted; whereafter the writ petition was filed by Respondents 1 and 2 herein questioning the validity of the said circular. A learned Single Judge of the High Court in the said writ petition held that Regulation 17(1) of the Regulations is arbitrary as no guideline was provided thereby. Aggrieved by and dissatisfied with the said judgment, the appellant herein preferred an appeal before the Division Bench of the High Court. The Division Bench despite holding that Regulation 17 of the Regulations may not be ultra vires the Constitution of India but the promotion policy formulated by the appellant should have been issued in compliance of the procedure laid down in Section 19 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (hereinafter referred to as “the Act”, for the sake of brevity) held:
“… It is a settled principle of law when power is delegated to a subordinate law-making body subject to certain conditions, the conditions must be complied with. Otherwise the subordinate legislation would be ultra vires the power granted to it, which itself is subject to a condition.”
3. Mr V.R Reddy, learned Senior Counsel appearing on behalf of the appellant would submit that the Division Bench of the High Court went wrong in holding that in making the guidelines, the conditions precedent for making the regulation as contained in Section 19 of the Act were required to be complied with. The learned counsel would submit that it is not in dispute that the Board of Directors of the appellant Bank before framing the Regulations had consulted the Reserve Bank of India and also obtained prior approval of the Central Government in terms of Section 19 of the Act. The policy decision as regard promotion of the officers having been framed in terms of Regulation 17 and in conformity with the guidelines issued by the Union of India, Mr Reddy would submit, it was not necessary to consult the Reserve Bank of India or obtain prior permission of the Central Government.
4. It is not in dispute that the appellant Bank was a “corresponding new bank” within the meaning of the provisions of the Act. Section 8 of the Act obligates every corresponding new bank to be guided by such directions as regard the matters of policy involving public interest as the Central Government may, after consultation with the Governor of the Reserve Bank, give.
5. Sub-section (2) of Section 12 of the Act reads as under:
“12. (2) Save as otherwise provided in sub-section (1), every officer or other employee of an existing bank shall become, on the commencement of this Act, an officer or other employee, as the case may be, of the corresponding new bank and shall hold his office or service in that bank on the same terms and conditions and with the same rights to pension, gratuity and other matters as would have been admissible to him if the undertaking of the existing bank had not been transferred to and vested in the corresponding new bank and continue to do so unless and until his employment in the corresponding new bank is terminated or until his remuneration, terms or conditions are duly altered by the corresponding new bank.”
6. The Board of Directors of the corresponding new bank is empowered to make a regulation after consultation with the Reserve Bank of India and previous sanction of the Central Government. Such regulation, inter alia, may relate to the duties and conduct of officers and other employees of the corresponding new bank.
7. It is not in dispute that pursuant to or in furtherance of sub-section (2) of Section 12 read with Section 19 of the Act, in consultation with the Reserve Bank of India and upon obtaining prior permission therefor, the Board of Directors of the appellant Bank framed the regulations known as “Andhra Bank (Officers') Service Regulations, 1982”. Regulation 17 of the said Regulations reads thus:
“17. Promotions.—(1) Promotions to all grades of officers in the Bank shall be made in accordance with the policy laid down by the Board, from time to time, having regard to the guidelines of the Government, if any.
(2) For the avoidance of doubts, it is clarified that this Regulation shall also apply to promotions of any category of employees to the Junior Management Grade.”
8. It appears that the Central Government had also issued guidelines purported to be in terms of Regulation 17 of the Regulations.
9. It was not the contention of Respondents 1 and 2 before the High Court or before us that the Board of Directors by reason of the regulation-making power could not have been delegated with the power to lay down a policy for grant of promotion to the officers working in the Bank. From a bare perusal of Regulation 17, it would be evident that sufficient safeguards have been provided for therein inasmuch as while laying down such policy, the Board must have regard to the guidelines issued by the Central Government. It is further not in doubt or dispute that such guidelines had been provided by the Government in terms of the aforementioned Regulation.
10. A valid regulation once framed would be a part of the statute.
11. It is a well-settled principle of service jurisprudence that the employer is entitled to lay down policy decision laying down the criteria for grant of promotion to its officers. The eligibility norms for such promotions must be defined by the bank on a realistic basis wherefor a system to choose the best-available talent to man the critical positions is to be devised. Once a power vests in an authority by reason of the provisions of a statute, it is trite that such power can be exercised from time to time. Changes are required to be made keeping in view the requirement of the management as also the exigency of the situation obtaining at the relevant time. Furthermore, it is one thing to say that by reason of Section 19, the Parliament has conferred essential legislative functions upon the Board of Directors to make regulation but it is another thing to say that the Regulation is arbitrary and ultra vires as it did not contain sufficient guidelines. The High Court did not come to the conclusion that essential legislative competence of the Parliament has been delegated to the Board of Directors in terms of Section 17 of the Act or otherwise.
12. The Regulations in terms of sub-section (2) of Section 12 read with Section 19 of the Act were required to be framed by the Board of Directors. For amending the Regulations each time they were not only required to consult the Reserve Bank of India and obtain previous permission of the Central Government but also the amended Regulations were required to be laid before both the Houses of Parliament in terms of Section 19 of the Act. With a view to avoid the rigours of such procedural requirements, we see no reason as to why the said power cannot be delegated to the Board of Directors keeping in view the fact that a policy decision was required to be laid down for effecting promotions to different grades of officers and employees at different points of time.
13. Regulation 17 of the Regulations, in our opinion, does not confer any unguided, uncanalised and arbitrary power as the same was issued in conformity with the guidelines issued by the Central Government. The requirement to lay down the regulation before both Houses of Parliament also provides for sufficient safeguard. For making a regulation, the requirements of Section 19 of the Act were required to be complied with but the procedure laid down therefor is wholly irrelevant for the purpose of formulating the policy decision in terms of Regulation 17 aforementioned. The High Court in its impugned judgment failed to notice the said distinction and, thus, based its decision wholly on a wrong premise.
14. A machinery provision, it is trite, must be construed in such a manner so as to make it workable having regard to the doctrine “ut res magis valeat quam pereat”.
15. In People's Union for Civil Liberties v. Union of India (2004) 2 SCC 476, JT (2004) 1 SC 152 this Court while rejecting a similar contention as regards Section 18 of the Atomic Energy Act, 1962 held:
“36. The question as to whether a statute is ultra vires the Constitution of India having conferred unguided, uncanalised or wide power cannot be determined in vacuum. It has to be considered having regard to the text and context of the statute as also the character thereof. It deals with a sensitive subject.
37. Section 18 has been enacted for the purposes specified therein. It is well settled that guidelines for enacting the said provision must be found out from the subject-matter covering the field. For the said purpose, even the preamble of the Act may be looked into.
38. The notification of discovery of uranium or thorium, control over mining operations, the disposal of uranium, power to obtain information are within the scope and ambit of the said Act. Section 13 provides for information as regards contracts. Section 14 postulates control over production and use of atomic energy. Restrictions as regards disclosure of information as contained in Section 18 are not vague or wide in nature. It specifies the areas where such disclosures are prohibited. The powers of the Central Government to make an order in terms thereof are, thus, limited.
39. It is not a case where as in Hamdard Dawakhana v. Union of India AIR 1960 SC 554, 1960 Cri LJ 735 or Krishna Mohan (P) Ltd. v. Municipal Corpn. of Delhi (2003) 7 SCC 151 the Central Government has been conferred with a wide, uncanalised and unguided power. It is also not a case where the words employed in the provision provide for no criteria nor can it be said that no standard has been laid down by Parliament therefor. It is furthermore not a case where principles on which the power of the Central Government is to be exercised have not been disclosed. By reason of the Act, essential legislative functions have also not been delegated.
40. We do not think that having regard to the purport and object of the said Act, the provisions of Section 18 have bestowed unguided and uncanalised powers on the Central Government. Sections 18 and 3 of the Atomic Energy Act had to be enacted by Parliament as in wrong hands the information can pose a danger not only to the security of the State but to the public at large.”
16. The High Court, therefore, committed a manifest error in passing the impugned judgment.
17. For the reasons aforementioned, the impugned judgment of the High Court cannot be sustained. It is set aside accordingly. The appeal is allowed. Since in view of the fact that nobody appeared for the respondents, there shall be no order as to costs.
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