Vidyanand N.R. v. Kerala Financial Corporation and Kerala Public Service Commission

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE** **FRIDAY, THE 12TH DAY OF JULY 2013/21ST ASHADHA, 1935** **WP(C).No. 33682 of 2010 (I) ----------------------------** **PETITIONER:** **----------** **VIDYANAND N.R., ANANDA BHAVAN, KANCHIYOOR KONAM, K.R.A. NO.30, KATTAKKADA P.O. THIRUVANANTHAPURAM-695 572.** **BY ADV. SRI.KALEESWARAM RAJ** **RESPONDENTS:** **-------------** **1. KERALA FINANCIAL CORPORATION, REPRESENTED BY THE MANAGING DIRECTOR KERALA FINANCIAL CORPORATION THIRUVANANTHAPURAM-695033.** **2. KERALA PUBLIC SERVICE COMMISSION, REPRESENTED BY THE SECRETARY, KERALA PUBLIC SERVICE COMMISSION, PATTOM THIRUVANANTHAPURAM-695 004.** **R1 BY ADV. SRI.M.M.SAYED MUHAMMED, SC, KFC R2 BY ADV. SRI.P.C.SASIDHARAN, SC, KPSC R1-2 BY ADV. SRI.K.JAJU BABU,SC,KERALA FINANCIAL CORPORATION** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 12-07-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ## **WP(C).No. 33682 of 2010 (I)** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXT.P1: COPY OF THE RANKED LIST FOR THE POST OF ASSISTANT MANAGER IN K.F.C.** **EXT.P2: COPY OF THE QUESTIONNAIRE DATED 16.7.2010 AND REPLY DATED 29.7.2010** **EXT.P3: COPY OF THE QUESTIONNAIRE DATED 11.8.2010 AND REPLY DATED 26.8.2010.** **EXT.P4: COPY OF RULE 9(iii) OF THE KERALA FINANCIAL CORPORATION STAFF REGULATIONS** **EXT.P5: COPY OF THE PROCEEDINGS DATED 7.2.2006 ISSUED BY THE MANAGING DIRECTOR, KFC** ## **RESPONDENT'S EXHIBITS:** **EXT.R1(A) : COPY OF THE PROCEEDING DATED 7.2.2006 VIDE NO.PS/3097/06 ISSUED BY THE MANAGING DIRECTOR, KERALA FINANCIAL CORPORATION.** **//True Copy//** **P.A to Judge** **ab** ## **A.M.SHAFFIQUE, J** *** * * * * * * * * * * * *** W.P.C.No.33682 of 2010 ---------------------------------------Dated this the 12[th] day of July 2013 ## **J U D G M E N T** This writ petition is filed challenging the Rule 9(iii) of the Kerala Financial Corporation Staff Regulations to the extent to which it permits the Board of the Kerala Financial Corporation (for short KFC) to deviate from filling up the vacancies meant for direct recruitment and for a declaration that the ratio of 1:1 should be applied against the cadre strength of Assistant Managers in KFC. 2. Petitioner is one among the persons included in the rank list for the post of Assistant Manager in KFC. The list came into force on 14/06/2010. Ext.P1 is the rank list and petitioner is No.8 in the said rank list. 3. It is alleged that the cadre strength for the post of Assistant Manager in KFC is 45. Petitioner relies upon Ext.P2 an information received from KFC in this regard. The information further reveals that 32 vacancies were already W.P.C.No.33682 of 2010 2 filled up and there were only 13 vacancies. 4. According to the petitioner, as per Rule 9(iii) of the KFC Staff Regulations, appointment to the post of Assistant Manager shall be made by promotion and by direct recruitment in the ratio 1:1. The complaint of the petitioner is that having provided such a ratio, the rules further permits the Board to fill up the said vacancy in respect of direct recruitment by transfer or deputation of officers holding similar posts in other financial institutions of the Government. The Board is also empowered by resolution to make appointments by promotion to a vacancy or vacancies to which appointments are to be made by direct recruitment, if the Board thinks that such deviation from the prescribed ratio is necessary for administrative efficiency or convenience. According to the petitioner, KFC being an instrumentality of the State, is bound to comply with the regulations and the discretion given to the Board to fill up the post which are to be filled up by direct recruitment by W.P.C.No.33682 of 2010 3 way of promotion, transfer or deputation is arbitrary and therefore appropriate directions are to be issued to KFC to fill up the vacancy by direct recruitment. 5. Counter affidavit is filed by the 1[st] respondent KFC inter alia contending that though Regulation 9(iii) of KFC staff regulations existed, it was only by gazette notification dated 25/5/2004 that direct recruitment to the post of Assistant Managers were brought within the purview of Kerala Public Service Commission by amending Clause 9(v) of the Staff regulation. It was pursuant to such entrustment of selection to PSC that PSC was requested to proceed with the preparation of rank list for the notified seven vacancies of Assistant Manager, consequent to which the notification came into existence. PSC prepared Ext.P1 rank list and advised six persons, all of whom were appointed and they joined duty. One vacancy is kept pending for NCA notification to Muslim community. The remaining six vacancies are meant for promotion to internal candidates. W.P.C.No.33682 of 2010 4 6. It is further indicated that the Corporation had formulated and implemented a restructuring plan in the year 2002. On such basis the total staff strength of the Corporation was reduced to 272 as on 31/3/2009 and the number of posts of the Assistant Managers proposed for recruitment through PSC was reduced as 7. It is also stated that the present strength to the Assistant Manager cadre was only 19 out of which six were appointed through Ext.P1 rank list. One of the candidates resigned subsequently. Only 11 persons are actually occupying the post of Assistant Manager and 8 posts are vacant. It is further stated that out of the 8 vacancies, 2 vacancies are set apart for direct recruitment which is already reported to PSC and the remaining six vacancies are to be filled up by promotion. It is also stated that until PSC was engaged for direct recruitment in the year 2004, direct recruitment and promotion were made by the Corporation. They also relied upon the Regulation 9(iii) and contended that it is not W.P.C.No.33682 of 2010 5 arbitrary or unreasonable as the regulation clearly permits KFC to fill up any vacancy by way of promotion as decided by the Board of Directors. 7. Counter affidavit is filed by PSC as well. According to them, the rank list for the post of Assistant Manager in the KFC was brought into force with effect from 14/06/2010. Seven fresh vacancies were reported from the Managing director, KFC and candidates were advised on 08/07/2010. Since no candidates were available to fill up the sixth Muslim turn, it was requested to notify the same in the NCA notification. 8. Heard learned counsel for the petitioner and Learned counsel appearing for the respondents. Learned counsel for the petitioner relied upon the judgment of the Supreme Court in **Kumari Shrilekha Vidyarthi and Others v. State of U.P. and Others** [(1991) 1 SCC 212] to contend for the position that the requirement of Article 14 should extend even in the sphere of contractual matters for W.P.C.No.33682 of 2010 6 regulating the conduct of the State activity. Article 14 applies to matters of Governmental policy and if the policy or any action of the Government, even in contractual matters fails to satisfy the test of reasonableness, it would be unconstitutional. The basic requirement of Article 14 is fairness in action by the State and the State cannot be permitted to act otherwise in any field of its activity, irrespective of the nature of its functions when it has the uppermost duty to be governed by the Rule of law. Another judgment relied upon is **Secretary, Ministry of Chemicals and Fertilizers, Government of India v. M/s.Cipla Ltd. And Others** [AIR 2003 SC 3078]. The principle of law relied upon is that though too much of legalism cannot be imported in understanding the scope and meaning of the clauses contained in policy formulations, the Government cannot at its sweet will and pleasure give a go-bye to the policy guidelines evolved by itself in the matter of selection of drugs for price control. W.P.C.No.33682 of 2010 7 9. Another judgment relied upon is **Prasad kurien v. Augustin** [2008(2) KLT 533(SC)]. The proposition evolved in the above case is held under paragraph 6 which reads as under: "6. Mr.Patwalia, learned senior counsel for the appellants along with other senior counsel submitted that every fourth vacancy has to be filled up by direct recruitment de hors the cadre strength. Mr.Patwalia submitted that Note (3) to R.5 of the General Rules which is of general application cannot be made applicable to these Special Rules. Learned senior counsel submitted that these special rules override the general rules and invoked the principle of 'Generaliabus speciali derogant ' ( i.e. special things derogate from general things). Learned senior counsel further submitted that since the Act of 1968 was promulgated by the State and these special Rules had been framed in exercise of the power under sub-s.(1) of S.2 of the Act of 1968 read with S.3 superseding all existing Rules, therefore, this proviso which is W.P.C.No.33682 of 2010 8 specially meant for recruitment of these services will govern and not the general rules which was framed in exercise of proviso to Art.309 of the Constitution. In this connection, learned senior counsel on the principle of ' special rules override the general rules' invited our attention to the following decisions of this Court, (i) ((1985) 4 SCC 645) S.C.Jain v. State of Haryana & Anr. (ii)((2002)6 SCC 127) Chandra Prakash Tiwari & Ors. v. Shakuntala Shukla & Ors. (iii) ((2003) 7 SCC 110) D.R.Yadav & Anr. V. R.K.Singh & Anr. and tried to distinguish the judgment of this Court in S.Prakash & Anr. (supra). Learned senior counsel submitted that Note (3) to R.5 of the Rules of 1958 was framed under proviso to Art.309 of the Constitution and that note cannot override the provisions of the Special Rules as the same is repugnant with that of the proviso to R.2 of the Rules of 1974 as the Rules of 1974 were framed under the Act of 1968, therefore these Rules will prevail W.P.C.No.33682 of 2010 9 and not the general Rules. In this connection, learned senior counsel submitted that R.2 of the Rules of 1958 which contemplates that in case of special Rules having been framed and if these are repugnant to that of general Rules, these Special Rules will prevail. The argument of learned senior counsel is very attractive but after deeper examination of the matter, we find that the argument of learned senior counsel is not sustainable because he has ignored the notification by which Note (3) to R.5 was inserted in the Rules of 1958. It may be relevant to mention here that Rules of 1958 were also saved by virtue of S.3 of the Act of 1968 which clearly says that all the Rules which had been framed under proviso to Art.309 of the Constitution shall be deemed to have been framed under the said Act and Note (3) which was appended to R.5 of the Rules of 1958 was also framed under the purported exercise of power under S.2 of the Act of 1968. The notification by which this Note (3) to R.5 of the Rules of 1958, was brought into force reads as under: W.P.C.No.33682 of 2010 10 **“S.R.O.No.194/93.-** In exercise of the powers conferred by sub-s.(1) of S.2 of the Kerala Public Services Act, 1968 ( 19 of 1968) read with S.3 thereof, the Government of Kerala hereby make the following rules further to amend the Kerala State and Subordinate Services Rules, 1958, namely:- **1. Short title and commencement.-** (a) These rules may be called the Kerala State and Subordinate Services (Amendment) Rules, 1992. **2. Amendment of the Rules.-** In Part II of the Kerala State and Subordinate Services Rules, 1958, in R.5 after Note “(2)” , the following Note shall be added, namely:“(3) Whenever a ratio or percentage is fixed for different methods of recruitment/ appointment to a post, the number of vacancies to be filled up by candidates from each method shall be decided by applying the fixed ratio or percentage to the cadre strength of the post to which the recruitment/transfer is made and not to the vacancies existing at that time.” By virtue of W.P.C.No.33682 of 2010 11 this amendment which has been brought out under the Rules of 1958 it clearly transpires that this Note (3) was not framed under the exercise of power under proviso to Art.309 of the Constitution. In fact, learned senior counsel gave us an impression during the course of argument that this Note (3) has been framed in exercise of power under proviso to Art.309 of the Constitution but that impression is now removed after perusing the notification which has been issued under the Act of 1968. Had that not been the position, then perhaps the argument of learned senior counsel for the appellants would have survived but after going through the notification it becomes absolutely clear that Note (3) which was inserted in the Rules of 1958 in 1992 was subsequent to the Rules of 1974 and this notification is of 1992 i.e. subsequent in point of time and this having been issued under the Act of 1968, therefore, the Rules of 1958 which have already been deemed to have been made under the Act of 1968 and the amendment which has been W.P.C.No.33682 of 2010 12 brought out by appending Note (3) is also under the Act of 1968. As such, the argument of learned senior counsel cannot now survive. The Rules of 1958 are of general nature which clearly stipulates that cadre strength has to be taken into consideration for maintaining the ratio in the Special Rules, meaning thereby these Rules which have come into being in subsequent point of time under the Act of 1968, will hold the field and these rules are not repugnant to the Rules of 1974. The Rules of 1974 only laid down that every fourth substantive vacancy shall be filled or reserved to be filled by direct recruitment and now on reading of this Note (3) along with the Rules of 1974 harmoniously then it comes to, at the time of determination of fourth substantive vacancy one has to maintain the ratio or percentage of the cadre strength of the posts to which the recruitment is made and not to the existing vacancies at that time. If we construe the whole thing in this light and read the service rules in a harmonious manner, then the desired result W.P.C.No.33682 of 2010 13 can be achieved. If the interpretation which is sought to be given by learned senior counsel for the appellants is to be accepted, then it is likely to disturb the ratio in the cadre strength. If every time vacancy is to be filled up and in that fourth vacancy has to go to the direct recruit then the proportion which is maintained i.e. 25% and 75% is likely to be disturbed. A rough chart of the vacancies has been given to us from which it appears that as per the proviso that every fourth vacancy is to be filled up by direct recruitment, then it appears that on the basis of the total cadre strength as on 1.1.2008, i.e. 310 and if 75 % is to go to promotees and 25% to the direct recruits, it appears that there are already 105 promotee Officers existing in this cadre strength. The percentage of promotee Excise Inspectors as on date will be 34 % and number to be reserved for direct recruitment as on date as per the calculation by the appellants, will be 205, then as on date the direct recruits will become 66 %. If the contention of learned senior counsel for the W.P.C.No.33682 of 2010 14 appellants is to be accepted, then naturally at every time when vacancy arises, and the fourth vacancy is to be filled up by direct recruits then the proportion is likely to be disturbed. That is not the intention of the Rules. When the Rules say that every 4th vacancy is to be filled up by direct recruit that means that the ratio is 25% by direct recruitment and 75 % by promotion. We cannot ignore the intention of the Rules that the proportion of 1: 4 is to be maintained i.e. the 4th vacancy has to be filled up by direct recruit then that ratio could only be maintained if the entire cadre strength of the service is taken into consideration. If every fourth vacancy is to be allowed then this proportion is likely to be disturbed and that was not the intention of the framers of the Rules. Therefore, the contention of Mr. Patwalia, learned senior counsel for the appellants cannot be accepted." The proposition as contended by the learned counsel for the petitioner is undoubted. W.P.C.No.33682 of 2010 15 10. But the question to be considered in the present case is whether the petitioner is entitled to seek the reliefs sought for, going by the present rule position. Rule 9(iii) reads as under: _9(iii): Appointments to one half of the vacancies arising in the post of Asst.Managers and above, except in cases where there is only one post in the category, shall be made by promotion and to the remaining vacancies by direct recruitment on 1:1 ratio, provided that, if the Board so decides, in particular cases, the vacancy/vacancies to be filled up by direct recruitment can be filled up by transfer or deputation of officers holding similar posts in other financial institutions or Government. However, the Board may by resolution decide to make appointments by promotion to a vacancy or vacancies to which appointments are to be made by direct recruitment, if the Board thinks that such deviation from the prescribed ratio is necessary for administrative efficiency or convenience. In_ W.P.C.No.33682 of 2010 16 _cases, where there is only one post in a category, the vacancy arising in that post can be filled up by promotion or direct recruitment or deputation, according to the decision to be taken by the Board, as and when the vacancy arises.”_ 11. The contention is that having framed the Rules evolving a policy to fill up the post of Assistant Manager by way of promotion and direct recruitment in the ratio 1:1, since 1966, no such attempt had been made and only seven vacancies were notified for direct recruitment and that too when all the promotees had been appointed to the said post. According to the petitioners the clause which permits the Board of Directors of KFC to make appointment by way of promotion even in respect of posts which are to be filled up by direct recruitment is totally unreasonable and arbitrary. Going by regulation 9(iii), the Board has adopted a policy to fill up the said post of Assistant Manager by direct recruitment as well as by promotion in the ratio 1:1 but by giving a leverage to the Board of directors to fill up the post W.P.C.No.33682 of 2010 17 of direct recruitment by promotion. By virtue of such a power given to the Board, clause providing 1:1 ratio is virtually nullified and any appointment by way of direct recruitment will always be at the whims and fancy of the Board of Directors of KFC. Having framed a regulation to have direct recruitment to the said post of Assistant Manager by incorporating a further provision giving authority to the Board of Directors to fill up the said post by promotion is contrary to the policy decision of the Corporation. It is understandable that in exigencies the Board of Directors can appoint promotees to the said post which is allocated to direct recruits but that cannot be the Rule. In that view of the matter, Rule 9(iii) to the extent it gives an absolute power to the Board of Directors of KFC to avoid direct recruitment can be treated as unreasonable and arbitrary. 12. However, in the case on hand, the contention was that the cadre strength is 45 and 32 vacancies were already W.P.C.No.33682 of 2010 18 filled up and therefore the balance 13 vacancies ought to be filled up by direct recruitment and the KFC was bound to appoint 23 persons from open market. According to the petitioner, all the 32 persons now working in the post of Assistant Managers are promotees. This is based on Ext.P3. 13. In the counter affidavit filed by KFC they have indicated that the present strength of Assistant Manager cadre is 19 out of which 6 were appointed from Ext.P1 rank list. One candidate resigned subsequently. 11 persons are actually occupying the post of Assistant Manager and 8 posts are vacant. Out of the 8 vacancies, 2 vacancies are set apart for direct recruitment and the remaining six are to be filled up by promotion. If this is the position, as matters stand now, there is a substantial reduction of the cadre strength and out of the eight vacancies now available two vacancies are set apart for direct recruitment which is already reported to PSC and remaining six are to be filled up by promotion. Such being the factual situation as available, W.P.C.No.33682 of 2010 19 I do not think that any direction can be issued to the respondents to fill up the vacancies from the rank list now available. In that view of the matter, the petitioner is not entitled for any relief in the writ petition as he cannot claim a valid legal right to be appointed on the basis of the rank list prepared as per Ext.P1. In that view of the matter, the validity or otherwise of Clause 9(iii) as matters stand now is only academic and therefore I do not intend to give any declaration in that regard. In the result the writ petition is dismissed. (sd/-) ## **(A.M.SHAFFIQUE, JUDGE)** jsr W.P.C.No.33682 of 2010 20 W.P.C.No.33682 of 2010 21