Delhi High Court
Ravi vs Union Of India & Ors. on 4 October, 2021
IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment delivered on: October 04, 2021
+ W.P.(C) 5635/2021, CM Nos. 17562/2021, 18326/2021
RAVI
..... Petitioner
Through: Mr. Prashant Chandra and
Mr.Arvind Varma, Sr. Advs.
with Ms.Meha Rashmi, Mr.
Gantavya, Mr.Ashish Virmani
and Ms. Smridhi, Advs.
versus
UNION OF INDIA & ORS.
..... Respondents
Through: Mr. Chetan Sharma, ASG,
Mr.Ravi Prakash, CGSC with
Mr.Vinay Yadav, Mr.Akshay
Gadeock and Mr.Sahaj Garg,
Advs. for UOI.
Mr.Gopal Jain, Sr. Adv. with
Mr.Ramesh Babu, Ms.Manisha
Singh, Ms.Nisha Sharma and
Ms.Sanya Panjwani, Advs, for
R-2/BBB.
Mr.Varun Aggarwal, Adv. for
R-3 to R-12.
Mr.Bhupesh Kumar Chandna,
Adv. for R-6 & 9
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KUMAR YADAV W.P.(C) 5635/2021 Page 1 of 74
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CORAM:
HON'BLE MR. JUSTICE V. KAMESWAR RAO
JUDGMENT
V. KAMESWAR RAO, J
1. This petition has been filed by the petitioner with the
following prayers:-
―In view of the above grounds, it is therefore most
respectfully prayed that this Hon'ble Court may
graciously be pleased to issue an appropriate writ,
order and/or direction;
A. issue a writ of certiorari or a writ, order or direction
in the nature of certiorari quashing the circulars dated
13.12.2018; 06.11.2019; and 09.06.2020 issued by the
Respondent No. 13 (Annexures P-13, P-14 and P-15),
the letter dated 06.11.2019 issued by the Respondent
No.1 (Annexure P - 16) and the entire process of
selection for appointment to the post of General
Manager and Director, Public Sector General
Insurance Companies undertaken by the Respondents in
July/August 2020 and May 2021 (being de hors the law)
and the consequent recommendations dated 11.05.2021
(Annexures P-1 and P-2);
B. Issue a writ of certiorari or a writ, order or direction
in the nature of certiorari quashing the orders of
appointment of Respondents No. 9 - 12 to the post of
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General Manager & Director in Public Sector General
Insurance Companies, issued by the Respondent No.1 in
violation of principle of seniority and principles of law,
pursuant to the impugned recommendation dated
10.08.2020 passed by the Respondent No. 2, after
summoning the same in original;
C. issue a writ of mandamus or a writ, order or
direction in the nature of mandamus commanding the
Respondents No. 1 to treat the Petitioner as having been
appointed as General Manager & Director of any of 77
the PSGICs (preferably in the National Insurance
Company Limited) with effect from August, 2020 and
provide all consequential benefits arising therefrom;
D. issue a writ of mandamus or a writ, order or
direction in the nature of mandamus commanding the
Respondents not to give effect to the impugned circulars
dated 13.12.2018; 06.11.2019; and 09.06.2020 issued
by the Respondent No.13; the letter dated 06.11.2019
issued by the Respondent No.1 and impugned
recommendations dated 11.05.2021 and 10.08.2020 and
to restrain the Respondents No. 9 to 12 from working as
―General Manager and Director‖ of PSGICs (Annexure
P-1 and P-2);
E. issue any other appropriate writ, order or direction
which this Hon'ble Court may deem just and necessary
in the circumstances of the case may also be passed;
and
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F. to allow the writ petition with costs.‖
2. The petitioner in the instant petition joined National
Insurance Company Limited ("NICL", for short) in 1984 on
the post of Assistant Administrative Officer and from 2018, is
holding the post of General Manager at the said public sector
insurance company. According to the petitioner, as General
Manager of NICL, he is eligible for appointment to the
promotional post of General Manager and Director in Public
Sector General Insurance Companies ("PSICs", for short).
3. The petition has been filed assailing the selections to the
posts of General Manager and Director of PSICs made by
respondent No. 2, Banks Board Bureau ("BBB", for short), inter
alia, on the ground that it is not a body competent to make the
impugned selections. According to petitioner, BBB is a banking
body established under the Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1980 ("Act of 1980", hereinafter),
a special statute governing nationalised public sector banks listed
in Schedule I thereof. The Nationalised Banks (Management and
Miscellaneous Provisions) Scheme, 1980 (Scheme of 1980) was
formulated by the Central Government in exercise of its powers
under section 9 of the Act of 1980, and was amended by the
Nationalised Banks (Management and Miscellaneous Provisions)
Amendment Scheme, 2016 ("Scheme of 2016", hereinafter) with
the approval of the Parliament to constitute the BBB for
overseeing appointments on the Board of Directors of Public
Sector Banks pursuant to the Report and Recommendations of
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Reserve Bank of India‟s ("RBI", for short) P.J. Nayak Committee
to Review Governance of Boards of Banks in India.
4. It is averred by the petitioner that contrary to the express
provisions of the Scheme of 2016 and de hors the law, the area of
operation of respondent No. 2/BBB was enlarged, vide circulars
of the Appointments Committee of the Cabinet ("ACC", for short
and respondent no. 13 herein) dated December 13, 2018,
November 06, 2019 and June 09, 2020. Pursuant thereto, the
respondent No 2/BBB undertook selections to the post of General
Manager and Director in PSICs in August 2020 and May 2021 in
excess of its jurisdiction, powers and functions. It is stated that in
undertaking the impugned selections, the respondent no. 2/BBB
illegally amended and modified its composition and functions set
out under Clauses 7A, 7B and 7C of the Scheme of 2016.
5. It is contended that in undertaking the impugned
selections, regulations issued under the provisions of the
Insurance Act, 1938, Insurance Regulatory and Development
Authority ("IRDA", for short) Act, 1999, and General Insurance
Business (Nationalisation) Act, 1972 ("GIBNA, 1972", for short)
which mandate that appointment to the post of General Manager
& Director, PSICs has to be undertaken strictly in accordance
with seniority and that the senior-most General Manager is to be
appointed to the Board of Directors as and when vacancies arise,
provided he has at least one year of residual service on the date of
the vacancy, have been violated by the respondents. The
petitioner, despite being one of the most senior and eligible
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candidates, has been superseded and persons much junior to him
have been recommended for appointment.
6. It is further stated that under Section 17A of GIBNA,
1972, the Central Government may make schemes to regulate the
terms and conditions of service of officers, which is to be placed
before the Parliament. However, without taking recourse to and
bypassing the provisions of Section 17A, the respondents have
sought to amend the entire promotion and appointment process to
the Board of Directors of PSICs through Circulars issued by the
ACC, which is neither a legislative nor a rule making body. It is
stated that it is settled law that where a power is given to do a
certain thing in a certain manner, the thing must be done in that
manner or not at all. It is further stated that therefore, the
impugned Circulars, having been issued without authority of law
and contrary to explicit statutory provisions, are liable to be
quashed and set aside.
7. That apart, it is stated that the respondent No. 13/ACC
has no role in the appointment of an employee of PSICs on the
Board of Directors of the PSICs, as these appointments are made
ex officio and are governed by the provisions of Insurance Act,
1938, Companies Act 2013 and the Charter Documents of the
PSICs, and are subject to the final authority of the IRDA alone. It
is also submitted that respondent No. 13/ACC was never
involved in the process of appointment to the post in question,
until it illegally usurped powers in August 2020.
8. It is further stated that insurance and banking sectors are
two separate and distinct sectors, and are governed by separate
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Central Legislations. The Act of 1980 is a special statute
governing Public Sector Banks, and Section 9 of the said Act
empowers the Central Government to make schemes for carrying
out the provisions of the Act, in consultation with the RBI. It is in
exercise of this power that the Scheme of 2016 was formulated
and the BBB was created for improving the governance of Public
Sector Banks.
9. It is further contended that Clause 7C of the Scheme of
2016 confines the functions of the respondent No. 2/BBB to
matters related to the selection and appointment of Board of
Directors in Public Sector Banks, and it has no role whatsoever in
the selection and appointment of Directors in PSICs. It is for this
reason that under Clause 7A of the Scheme of 2016, the
respondent No. 2 consists of specialised experts from the banking
sector, but none from the insurance sector. Clauses 7A and 7C of
the Scheme of 2016 read as under:-
―7A. Creation of Banks Board Bureau.-
(1) The Banks Board Bureau (hereafter in this
notification referred to as Bureau) shall be established
by the Central Government for the purpose of evolving
a sound managerial policy for the nationalized banks.
(2) The Board of Directors of the Bureau shall consist
of seven members with one Chairman and six members
as mentioned in the Table given below.
TABLE
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(3) (i) The Chairman shall be a retired official from the
banking sector or regulatory institutions or a business
person of repute with sufficient knowledge of the
financial sector, or a person with at least twenty five
years of experience in public administration with
experience of banking and financial sectors.
(ii) Out of three part time members of the Board, at
least two shall be ex-public or private sector bankers
and the rest shall be academicians, former regulators,
and business people, former administrators with
experience in business management, information
technology, human resource, finance and accounting.
(4) All the members except the official members as
indicated in sub-clause (3) including Chairman of the
Bureau shall be nominated by the Central Government
on part time basis and shall be paid a sitting fee of fifty
thousand rupee per sitting or as determined by Central
Government from time to time.
(5) The Bureau shall appoint a person to act as
Secretary of the Bureau Secretariat and the Secretariat
shall have its office in Mumbai or such other place as
the Central Government may, by notification specify.
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(6) The Secretary and staff of the Bureau shall be
appointed as per notified recruitment rules by the
Department in consultation with the Reserve Bank of
India.
(7) The general superintendence, direction and
management of the affairs of the Banks Board Bureau
shall vest in the Secretary (BBB), who shall exercise all
powers and do all acts and things which may be
exercised or done by the Bureau in accordance with
the Scheme.
7C Functions
The Bureau shall perform the following functions,
namely:-
(a) to recommend the selection and appointment of
Board of Directors in Nationalised Banks (Whole Time
Directors and Chairman);
(b) to advise the Central Government on matters
relating to appointments, confirmation or extension of
tenure and termination of services of the Directors of
nationalised banks;
(c) to advise the Central Government on the desired
management structure of nationalised banks, at the
level of Board of Directors and senior management;
(d) to advise the Central Government on a suitable
performance appraisal system for nationalised banks;
(e) to build a data bank containing data relating to the
performance of nationalised banks and its officers;
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(f) to advise the Central Government on the
formulation and enforcement of a code of conduct and
ethics for managerial personnel in nationalised banks;
(g) to advise the Central Government on evolving
suitable training and development programs for
managerial personnel in nationalised banks.
(h) to help the banks in terms of developing business
strategies and capital raising plan and the like; and
(i) any other work assigned by the Government in
consultation with Reserve Bank of India.‖
10. It is stated that it is evident from the above statutory
provisions that the respondent No.2/BBB is a body constituted
solely for the banking sector under the Act of 1980 with overall
control of the RBI and that the respondent No.2/BBB had no
jurisdiction or control over PSICs. It is further stated that the
entire selection process was contrary to specific provisions of the
statute and hence is void ab initio.
11. It is also stated that in undertaking the impugned
selections, the respondents entirely overlooked the existing
regulations in relation to appointment to the Board of Directors in
PSICs, which mandate that appointments are to be made strictly
on the basis of seniority, and the senior-most General Manager is
to be appointed as General Manager & Director as and when
vacancies arise. This system of appointment has been followed
ever since the petitioner joined service in 1984, and is codified
under the Circular No. F. No. A-15011/02/2008 - Ins. III dated
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February 16, 2012 issued by the respondent No.1 which reads as
under:-
―Every time a vacancy of WTD arises due to any exit,
by whatever reason, the next senior most GM, in the
combined seniority list, be posted to the company
where the vacancy has arisen. This may necessitate
transfer of GMs from one company to other. However,
it may be ensured that the person who has been
transferred is left with at least one year of residual
service on the date of vacancy in the other company. In
case, the officer, who has more than a year of service
left, is unwilling to move to the other company as WTD
due to his locational preference or any other such
reason, he foregoes the benefit available to WTD, in
terms of Para 1 above. For this purpose, the
Committee of CMDs prescribed under Para 13 of the
Promotion Policy of Officers will make a suitable
recommendation to the Government as per the existing
practice and procedure.‖
12. It is also stated that the provisions of the impugned
Circulars are contrary to the provisions of the Articles of
Association of PSICs, which are binding in nature and cannot be
deviated from or amended, without the prior consent of the IRDA
as set out under the Companies Act, 2013 and Section 34A of the
Insurance Act, 1938. Hence, any Board of Directors constituted
pursuant to the impugned selection process in violation of the
provisions of the Articles would be without authority of law and
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therefore void. Section 34A of the Insurance Act, 1938 reads as
under:-
―Section 34A. Amendment of provisions relating to
appointments of managing directors, etc., to be
subject to previous approval of the 1[Authority].-
(1) In the case of an insurer,-
(a) no amendment made after the commencement of
the Insurance (Amendment) Act, 1968, of any
provision relating to the appointment, reappointment,
termination of appointment or remuneration of a
managing or whole-time director, or of a manager or
a chief executive officer, by whatever name called,
whether that provision be contained in the insurer's
memorandum or articles of association, or in an
agreement entered into by him, or in any resolution
passed by the insurer in general meeting or by his
Board of directors shall have effect unless approved
by the 1[Authority];‖
13. It is stated that every Scheme made under Section 9 of the
Act of 1980 is a Legislative Scheme and cannot be overridden by
Executive Instructions.
14. It is further stated that vide the impugned selections
conducted in August, 2020 nine vacancies which arose on the
Board of Directors in different PSICs between November 2018 to
July 2020 were sought to be filled and despite being eligible and
meritorious and at rank 13 in the combined seniority list, the
petitioner was superseded and out of the nine vacancies at least
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three vacancies were filled by persons junior to him in seniority
as well as merit, in a premeditated manner, i.e. by respondent
nos. 9, 10 and 11 who were at ranks 14, 18, 19 of the combined
seniority list, respectively.
15. Similarly, vide the impugned selections undertaken in
May, 2021, five vacancies which arose on the Board of Directors
in different PSICs between December 31, 2020 and April 30,
2021 were sought to be filled and despite being the third
senior-most candidate in the combined seniority list with
excellent service record and fulfilling all the qualifications and
attributes/virtues as laid down in the Circular dated February 13,
2012 and the Promotion Policy of Officers, the petitioner has not
been recommended for promotion and appointment. Instead, the
vacancies have been filled by persons junior to him in seniority
and merit. It is the case of the petitioner that while he is at rank 3
of the combined seniority list, he has been illegally superseded by
the respondent Nos. 4, 5, 6, 7 and 8 who were all junior to him
and are at ranks 9, 8, 7, 6 and 4 respectively.
16. It is stated that in the impugned recommendation dated
May 11, 2021, the petitioner has been kept in the Reserve List for
the post of General Manager & Director in Oriental Insurance Co.
Ltd. („OICL‟, for short) which itself evidences that he does not
have any disqualification, and is perfectly eligible and fully
qualified for appointment.
17. To safeguard the inter-se seniority of the General
Managers, the Committee of Chairman and Managing Directors
("Committee of CMDs", for short) of the PSICs, constituted
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under the Promotion Policy for Officers, is required to
recommend transfer of General Managers from one PSIC to
another at the time of appointment on the Board of Directors. For
this purpose, the Committee of CMDs makes its final
recommendation to the Central Government, on the basis whereof
the Central Government issues the requisite transfer orders in
exercise of its authority under Section 22 of the GIBNA, 1972. It
is averred by the petitioner that however, the procedure
prescribed in the Promotion Policy for Officers has entirely been
overlooked and the functions exclusively vested in the
Committee of CMDs as prescribed in the Circular dated February
16, 2012 and the Promotion Policy were conspicuously
withdrawn without authority of law in an illegal and
impermissible manner, and entrusted to the respondent No. 2.
None of the CMDs were members of the Board which carried out
the impugned selections and out of the total six members who sat
on the respondent No. 2 in May, 2021, only one member was
from the general insurance sector, and the remaining members
had no knowledge or expertise in relation to general insurance.
18. It is also stated that the petitioner‟s Annual Confidential
Report ("ACR", for short) of the year 2020-2021 was not
considered while undertaking the impugned selection process of
May 2021.
19. It is further stated that before the selection, contrary to
established procedure and practice laid down, vacancies were
neither announced nor published on the web-portal of any of the
respondents before the expiry of tenure of the incumbent. The
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zone of consideration, criteria and weightage for selection,
process of selection, details of other candidates in the foray etc.
were not circulated to the eligible candidate, and no HR agency
was engaged for the process to carry out the necessary spade
work as stipulated.
20. It is also the averment of the petitioner that the
respondents altered the eligibility criteria for appointment to the
post in question in violation of the statutory scheme, by
considering and recommending for appointment, officers of
Agricultural Insurance Company India Limited ("AICIL", for
short), who were ineligible, vitiating the entire procedure of
selection. It is submitted that AICIL is a newly formed
organisation and there is no batch parity between the employees
of AICIL and other PSICs. AICIL does not participate in the
common promotion exercise conducted for PSICs, and the
Combined Seniority List followed for promotion of officers of
PSICs does not include the officers of AICIL. General Managers
of PSICs have never been appointed to vacancies arising on the
Board of AICIL, and vice versa. AICIL is not governed by the
provisions of GIBNA, 1972 and as a consequence thereto
respondent no. 1 has no power to transfer any officer of PSICs to
AICIL and vice versa. Despite being well aware of these
anomalies, respondent nos.1, 2 and 13, included AICIL officers
in the zone of consideration and even appointed one such officer,
respondent no. 12, on the post in question, contrary to the
standard procedure under law, without a Combined Seniority List
being circulated.
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21. Counter affidavit has been filed by respondent no.
2/BBB wherein it is stated that the petitioner is estopped from
challenging the selection process after duly participating in the
same. It is the stand of respondent no. 2/BBB that the petitioner
participated without protest or demur not only in the current
selection process of May 2021, but also in the selection process
conducted in August, 2020, and therefore it is not open to him to
challenge the jurisdiction, competency or procedure followed
therein.
22. It is further stated that the number of vacancies filled in
the month of August 2020 were nine, whereas as per the
Combined Seniority List of General Managers maintained by
General Insurance Public Sector Association ("GIPSA", for
short), as on April 01, 2020 the name of the petitioner reflected at
serial no. 21. Therefore, even if the selection was to be conducted
solely on the basis of seniority, there were 20 candidates who
were ranked above the petitioner.
23. It is stated that the President of India in exercise of his
powers under Article 77 of the Constitution of India made rules
titled The Government of India (Transaction of Business) Rules,
1961 ("Transaction of Business Rules", for short) for convenient
transaction of the business of the Government of India. The first
Schedule to the Transaction of Business Rules categorically
provides for the functioning of the ACC. On this mandate, the
ACC vide its Office Order dated December 13, 2018 approved a
proposal of the Department of Financial Services ("DFS", for
short and respondent no. 1 herein) and assigned the process for
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appointment of Whole-Time Directors of PSICs to the BBB. The
ACC also directed to modify, with prior approval of the
Competent Authority, the existing guidelines as prescribed in
Office Order dated August 24, 2015 to expand the mandate of the
BBB with respect to the PSICs. Accordingly, the ACC and DFS
approved the revision of the guidelines and the same was issued
vide Office Order dated November 06, 2019 by the ACC. The
revised selection methodology as applicable for PSICs is
reproduced under:
―Selection methodology to be adopted by the BBB:-
The revised system of interaction adopted for the year
2014-15 onwards would continue. The HR agency
would be confined to only doing spadework about
applicants and would not be involved in short listing of
candidates. BBB would follow the process of three
separate interviews for each candidate. Three panels
for interaction with each candidate would consist of (i)
Secretary (DFS) + One Expert Member (ii) Secretary,
GOI + one Expert Member and (iii) DG, RBI + one
Expert Member. In case of PSICs, DG, RBI would be
replaced with chairman, IRDAI and expert members
from banking sector would be replaced with expert
members from insurance sector.
The methodology for awarding marks would be same
as has been devised by RBI and which is being
presently adopted by the Appointments Board. The
BBB should meet after the interviews are over and
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finalize the results based on the outcome of the 3
interview panels. Based on its discussions, BBB's
recommendations regarding the ranking along with
comments, if any, and the interview marks shall be sent
to the Government of India for final approval.
Apart from that, BBB will also develop an appropriate
methodology to enable the search and selection of
High calibre part-time Chairpersons and Whole Time
Directors for appointment on the Board of Directors of
Public Sector Banks, Financial Institutions and Whole
Time Directors on the Board of PSICs‖
24. Accordingly, the BBB setup a separate Board for
conducting selection in respect of PSICs and since then, has been
making recommendations for Whole-Time Directors of mandated
Insurance Companies in accordance with the methodology
mentioned. Vide Office Order dated June 09, 2020 issued by the
ACC, the BBB was directed to recommend candidates for the
position of General Manager and Directors of PSICs. The said
order also provided the eligibility conditions for the candidates,
the zone of consideration, criteria for selections, the selection
board etc.
25. It is stated that the BBB, by virtue of the aforesaid Office
Orders issued by the DFS and the ACC, not only has jurisdiction
to make recommendations to the position of General Manager
and Directors in PSICs but is also competent inasmuch as a
separate board consisting of the Chairman of the IRDA and
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experts from the insurance sector has been formed for the said
purpose.
26. That apart, it is submitted in the counter affidavit that the
selection process/ mechanism, as devised by the ACC and DFS
for recommendation and selection of General Manager and
Directors in PSICs, aims to select most eligible and suitable
candidates for the post while following a five-fold criteria in
interview and giving 50% weightage to the APAR/ ACR scores
for the last five years. The criteria for selection to the posts of
General Manager and Directors of PSICs is as follows:
―Weightage in the ratio of 50:50 is to be awarded for
interview and APAR/ACR scores for the last five
years (maximum 10 marks for each year) in the
selection process. Weightage will be assigned to
various parameters by the Banks Board Bureau
during interview as under:
i. 35% to technical knowledge
ii. 20% to Managerial Capabilities
iii. 15% to Diversity of Experience
iv. 15% to General & Economic Awareness and
v. 15% to overall Personality
The interview procedure and methodology for award
of marks to be followed by Banks Board Bureau shall
be the same as that in case of CMDs of LIC, PSGICs
and Public Sector Banks. Based on its discussions,
Banks Board Bureau's recommendations regarding
the ranking along with comments, if any, and the
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interview marks shall be sent to the Government of
India for final approval.‖
27. Interviews were conducted by the BBB constituted to
conduct the selection and all candidates were called for the
interview. It is also stated that, since the position of Chairman,
IRDA was vacant at the time of selection process, the Secretary,
Department of Personnel and Training was made the ex-officio
Member in his place.
28. It is submitted that as per the above selection process,
merit is the criteria for the selection, and as such no officer has a
legal right to be selected for promotion, except that he has only a
right to be considered along with others and a selection of junior
in service in preference to his senior does not amount to
supersession.
29. It is also stated that the required spadework in the instant
case was done by the Secretariat staff as appointment of HR
agency is not a mandatory requirement. It is further submitted
that a common merit list was prepared strictly based on the order
of merit and recommendations were made for the positions and
for reserve list. It is further submitted that the recommendations
and reserve list were published on the official twitter handle and
website within an hour of finalisation of the result.
30. A rejoinder has been filed by the petitioner, wherein it is
stated that the participation of the petitioner in the impugned
selections would not mean that a gross illegality would stand
condoned and perpetuated by invoking the principle of estoppel.
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31. It is further alleged in the rejoinder that none of the
candidates, including the petitioner were informed of the manner
of selections including the vacancy, criteria, weightage and
process thereof prior to the selection process.
32. It is also stated by the petitioner that it is maliciously and
mischievously stated by the respondent no.2/BBB that the
petitioner was at serial no. 21 in the seniority list, whereas it is a
matter of record that the petitioner was at serial no. 13, as
evidenced by the Combined Seniority List annexed to the writ
petition.
33. It is further stated that the Transaction of Business Rules
relied upon by the respondent No.2/BBB have been formulated in
exercise of the Executive Power of the Union under Article 77 (3)
("Conduct of Business of Government of India") of the
Constitution of India, contained in Part V ("The Union"), Chapter
I ("The Executive"). These Rules are for the more convenient
transaction of the pre-defined business of the Government, to
carry out administration of the country in accordance with the
powers conferred on it by law. Simply put, the Rules of Business
are procedural and do not envisage conferment of legislative
powers upon the executive. As a consultative body constituted
under the Transaction of Business Rules, the ACC is strictly
bound to exercise its powers in accordance with the Constitution
and statutes, and cannot claim sovereignty or supremacy over
other organs. Its role is limited to approving the selections
already made under the extant service rules, and it does not have
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the power to rewrite the rules itself, or abdicate upon itself the
power to make appointments on higher posts.
34. It is further stated that under the Transaction of Business
Rules, Schedule 1 (i), power of the ACC to take decisions is
restricted to board level appointments with a pay grade of the
level of Joint Secretary (namely, posts carrying Grade Pay of Rs.
10,000 in Pay Band-4 and above). There is no separate pay scale
for a Whole-Time Director of PSICs and even after being
appointed as General Manager and Director, the employee
continues to draw Scale VII pay of General Manager, which is
much lower than the pay grade of a Joint Secretary. This is
contrasted with the pay scale of Directors of Public Sector Banks
(higher than Joint Secretary) and even that of the Chairman and
Managing Directors of PSICs (equivalent to Additional
Secretary). It is submitted that for this reason, until the impugned
selections in August 2020 and May 2021, the ACC had no role
whatsoever and was never involved in the appointment of Whole-
Time Directors in PSICs.
35. Counter Affidavit has been filed on behalf of respondent
no. 1/DFS wherein, apart from reiterating the contentions as set
forth in the counter affidavit filed by respondent no. 2/BBB, it is
stated that the DFS is a Department within the Ministry of
Finance and as per Allocation of Business Rules, 1961,
respondent No.1 is responsible for matters pertaining to banking
as well as insurance, including general insurance and re-
insurance companies in public sector. Further as per Transaction
of Business Rules, the standing committee of the Union Cabinet
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is the ACC. As per Annexure-1 to the First Schedule of the
Transaction Business Rules, appointments to the post of
Chairman and other members of the Board of PSICs require
approval of ACC. Entry 6 of the Annexure to First Schedule
reads as under:
"6. Appointment, whether salaried or not, of Chairman,
and other Members of the Board of Management
(including the Managing Director and the Financial
Adviser, if the Financial Adviser is a member of the
Board of Management) of any Schedule 'A' or Schedule
'B' State-owned public corporation, Public Sector
Banks, Public Sector Insurance Companies and
Financial Institutions, company or enterprise, except
where such appointment is made ex-officio by the
Government."
The BBB was created by way of an Office Order dated
August 24, 2015 pursuant to approval granted by the ACC based
upon the proposal of the respondent No.1. The functions of the
BBB were laid down in the order dated August 24, 2015 and
BBB started functioning from April 1, 2016. In terms of the
Office Order dated August 24, 2015, the BBB was inter alia
responsible for the selection and appointment of Board of
Directors in public sector banks and financial institutions. The
ACC vide office order dated December 13, 2018 had approved
the respondent No.1‟s proposal for assigning the process of
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appointment of whole-time Directors of PSICs to the BBB with
the following composition:
1. Sh. B.P. Sharma, Former Part Time Chairman
Secretary, DoPT
2. Secretary, Department of Ex-officio Member
Financial Services
3. Secretary, Department of Public Ex-officio Member
Enterprises
4. Chairman, Insurance Regulatory Ex-officio Member
and Development Authority
5. Shri G.N. Bajpai Part-Time Member
6. Shri Mathew Verghese Part-Time Member
7. Shri T. Bhargava Part-Time Member
36. Further ACC has vide order dated November 6, 2015 also
approved the respondent No.1‟s proposal for revision in the BBB
guidelines contained in the Office Order dated August 24, 2015,
as a result of which, BBB became responsible for the selection
and appointment of whole-time Directors in PSICs as well. The
ACC vide Office Order dated June 9, 2020 also approved the
respondent No.1‟s proposal to frame guidelines for selection to
the post of General Manager and Directors in PSICs. Pursuant to
above, the respondent No.1 had written to BBB on June 18, 2020
asking BBB to initiate the process of filling up of 9 posts of
General Manager and Directors in PSICs in the manner
prescribed by ACC approved guidelines dated June 9, 2020. The
BBB thereafter undertook the selection exercise for filling up the
posts of General Manager and Directors in PSICs in which 22
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candidates participated. By way of recommendation dated
August 10, 2020, BBB recommended the names of 9 candidates
for the vacant posts of General Manager and Directors in PSICs.
The petitioner‟s name did not figure among the 9 recommended
candidates. Further, on account of 4 vacancies on the post of
General Manager and Director have arisen in PSICs, the
respondent No.1 vide its communication dated April 27, 2021
wrote to BBB to carry out selection exercise for the aforesaid
four vacancies. Respondent No.1 has also forwarded a list of
General Managers, who had minimum one year of residual
service on the relevant dates of vacancy based on zone of
consideration of 12 for the four vacancies applied to common
seniority. One more vacancy had arisen in the post of General
Manager on account of superannuation of Atul Jerath.
Accordingly, the zone of consideration of 14 eligible General
Managers for five vacancies was communicated to the BBB.
Pursuant to the selection undertaken, the BBB vide its
recommendation dated May 11, 2021 recommended five names
for the posts of General Manager and Director and Ms.
Rajeshwari Singh and the petitioner were placed as the
candidates for the reserved list in the said order for the vacancies
of General Manager and Director in United India Insurance
Company Ltd. and OICL. It is stated that the Circulars dated
December 13, 2018, November 06, 2019 and June 09, 2020 have
been validly issued and are not in violation of Section 34A of the
Insurance Act or any other law.
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37. It is stated that pursuant to the enactment of the GIBNA,
1972, the Central Government issued a Notification dated
December 29, 1972 in exercise of the powers conferred by
Section 35 of the said Act. The notification categorically
specifies the exceptions, restrictions, limitations in Column (2) as
a result of which the provisions of Section 34A of the Insurance
Act, 1938 requiring prior approval of IRDA for appointment of
Directors on the Board has been made "not applicable" for
companies covered under the GIBNA, 1972. In view of the same,
the selection for the post of the General Manager and Director in
the petitioner's employer company i.e., NICL or the OICL where
the petitioner was put in reserve list, would not be governed by
the provisions of Section 34A of the Insurance Act, 1938.
38. It is further stated that upon enactment of the GIBNA,
1972, certain powers have been vested upon the Central
Government under Section 16 (l)(e) read with Section 16 (7) of
the said Act, wherein the Articles of Association or the
Memorandum of Association can be altered for the companies
covered under the purview of the Act. Pursuant to the aforesaid
provision envisaged under GIBNA, 1972 and the Office Order
dated December 20, 2007, the Articles of Association of NICL
and OICL provides that the Directors and Whole Time Chairman-
cum-Managing Director shall be appointed by the Central
Government.
39. A short rejoinder has been filed by the petitioner to the
counter affidavit filed by the respondent no.1.
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40. The statement of respondent no.1 in the counter affidavit
that Section 34A of the Insurance Act, 1938 is not applicable to
PSICs by virtue of notification dated December 29, 1972, is
denied by the petitioner. It is submitted that the said notification
is outdated and does not apply to Section 34A in its current form.
The notification relied on was made way back in 1972, whereas
the IRDA was established only 1999, whereafter Section 34A
was amended vide Act 41 of 1999.
41. It is stated that furthermore, perusal of the notification of
1972 discloses that the same has been made specifically and only
for the General Insurance Corporation of India constituted under
Section 9 of the GIBNA, 1972 and has no application to the
PSICs including NICL, OICL, New India Assurance Company
Limited and United India Insurance Company Limited which are
constituted under Section 10A of GIBNA, 1972. These PSICs are
separate and distinct legal entities owned by the Central
Government.
SUBMISSIONS
42. It is the submission of Mr. Prashant Chandra, Learned
Senior Counsel appearing on behalf of the petitioner that the
impugned exercise for selection to the post of General Manager
and Directors in PSICs has been undertaken by the BBB, per se
without jurisdiction. BBB is a Statutory Body established for
making selections of personnel in nationalised banks under the
provisions of the Act of 1980 and the Scheme of 2016, and has
no jurisdiction over the insurance sector, which is a separate and
distinct sector governed by separate Central enactments.
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43. It is further contended that the ACC is not conferred with
any legislative powers under Article 77(3) enabling it to override
Statutory Schemes. The view of ACC is not sacrosanct and mere
office orders communicating the acceptance by ACC of proposals
of DFS cannot enlarge the mandate of BBB and confer upon it
the jurisdiction over PSICs.
44. Mr. Chandra submitted that impugned communications
are inter-departmental communications issued by the Secretariat
of the ACC, Office of the Establishment Officer, and DoPT
recording an opinion of the ACC. They are mere opinion of the
executive and have not culminated into an order of the
Government under Article 77 issued and expressed in the name
of the President, and hence, cannot affect the rights of the parties.
Reliance in this regard is placed on Shanti Sports Club and Anr.
v. Union of India and Ors., (2009) 15 SCC 705.
45. He further submitted that the Constitutional scheme does
not permit the ACC to usurp powers under a Statute and vest
them in the respondent no.2, a body which has no jurisdiction
over Insurance Companies. As a consultative body constituted
under the Transaction of Business Rules, the ACC is bound to
exercise its executive powers under Article 77 strictly in
accordance with Article 53(3) of the Constitution. The ACC
cannot amend the Statutory Scheme, has no "seed" jurisdiction or
"inherent" law-making power and cannot intermeddle with the
existing law, either of the Union, or of the State, or other
authority. The ACC cannot claim sovereignty or supremacy over
other organs.
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46. It is the contention of Mr. Chandra that, the Transaction
of Business Rules relied upon by the respondents are only for the
more convenient transaction of the pre-defined business of the
Government. The Rules of Business are procedural and ACC‟s
role there under is limited to approving the selections already
made under the extant service rules, and it does not have the
power to rewrite the rules itself, or abdicate upon itself the power
to make appointments on higher posts. Reliance is placed by
Mr. Chandra on the Division Bench Judgment of this Court in
Waris Rashid Kidwai v. Union of India, 1998 (3) SCT 178
(Delhi) wherein it was held that act of ACC is only in the name
of the President and is not an act of the President. In Sunil Alag
v. Union of India and Ors., 221 (2015) DLT 199, this Court held
that the ACC is not above the law, and cannot be permitted to
violate statutory provisions and regulations laying down the
procedure for appointment.
47. He submitted that the contention of the respondents that
the BBB was created vide the communication dated August 24,
2015 is contrary to the stand of respondent no.2 in its Annual
Report wherein it is unequivocally admitted that it has been
established under the Scheme of 2016. It is a matter of record that
the BBB as envisaged under the DFS proposal never came into
existence. The DFS proposal which was approved by the
communication dated August 24, 2015 was examined in detail by
the RBI as mandated by the Act of 1980 and significant changes
were made. The finalised Scheme was then placed before the
Houses of Parliament, approved and the Gazette Notification was
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issued on March 23, 2016. Thereafter, the BBB was established
under Clause 7A of the Scheme of 2016 and started functioning
from April 01, 2016.
48. Mr. Chandra further submitted that every scheme made
under Section 9 of the Act of 1980 is a legislative scheme and
cannot be overridden by executive instructions. Reliance in this
regard is placed upon the Judgment of the Supreme Court in New
Bank of India Employees Union and Ors. v. Union of India,
(1996) 8 SCC 407.
49. That apart, he further submitted that it is a matter of
record that ACC has never been involved in the appointment of
Directors of PSICs, and neither its consent nor approval was
sought until the power was illegally usurped by it in July 2020. It
is settled law that once the legislature intervenes to enact a law,
the power of executive, including the President, is totally
displaced on the "doctrine of occupied field". Once the statutory
Scheme of 2016 occupied the field, the ACC could not have
exercised its executive power inconsistent with the provisions
thereof. To buttress this argument, reliance is placed upon the
Judgments in K. P. Sudhakaran & Anr v. State of Kerala, AIR
2006 SC 2138, Radhashyam Panigrahi v. Registrar (Admn.),
Orissa High Court and Ors., 107 (2009) CLT 673; J & K Public
Service Commission v. Dr. Narinder Mohan, (1994) 2 SCC 630
and A.B. Krishna v. State of Karnataka, (1998) 3 SCC 495.
50. According to Mr. Chandra, it is a settled position of law
that Executive Orders cannot modify or override Statutory
Schemes. Reference in this regard has been placed on the
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Judgment of the Supreme Court in K. Kuppusamy and Anr. v.
State of Tamil Nadu and Ors., 1998 (8) SCC 469.
51. The BBB is a statutory body and can only function
within the four-corners of the Act of 1980 and the Scheme of
2016. It does not have the authority or power to constitute a
separate board outside the statutory Scheme. In support of this
submission, reference has been made to the Judgments in
Embassy Property Developments Pvt. Ltd. v. State of Karnataka
and Ors., (2020) 13 SCC 308; Nautam Prakash & Ors v. K.K.
Thakkar, (2006) 5 SCC 330 and N.C. Dhoundial v. Union Of
India, (2004) 2 SCC 579.
52. He stated that ACC was never involved in the
appointment of Director of PSICs, neither its consent nor
approval was sought until the power was illegally usurped by it in
July, 2020. This according to Mr. Chandra is because the three
Central enactments, i.e., GIBNA, 1972, IRDA Act, 1999 and
Insurance Act, 1938 are a complete code in themselves. In other
words, once the legislature intervenes to enact law, the power of
the executive including the President is totally displaced on the
doctrine of occupied field. He stated the Transaction of Business
Rules do not apply as unlike Public Sector Banks there is no
separate cadre of whole-time Directors in PSICs. Appointments
are made on the basis of seniority as provided under the Articles
of Association and Circular dated February 16, 2012 with prior
approval of IRDA.
53. He submitted that under Sections 34A to 34H of the
Insurance Act, 1938 the control over management of insurance
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companies is vested in the IRDA. Section 34A of IRDA Act,
1999 is the final authority on appointment of Directors of PSICs,
and there can be no amendment of provisions relating to such
appointments without IRDA‟s prior approval. Section 34D of the
Insurance Act, 1938 gives overriding effect to Sections 34B and
34C over all other laws.
54. According to Mr. Chandra the contention of the
respondent no. 1 that sections 34A to 34H of the Insurance Act,
1938 are not applicable to PSICs by virtue of an alleged
notification dated December 29, 1972 is untenable as the alleged
notification was issued in 1972 only with respect to the General
Insurance Corporation constituted under Section 9 of the GIBNA,
1972. Subsequent to the notification, the IRDA was constituted
vide Act 41 of 1999 and Sections 34A to 34H were amended to
their current form. Thereafter, vide the Amendment Act 40 of
2002, the PSICs were taken out of the ambit of the General
Insurance Corporation and were established as separate and
distinct legal entities owned by the Central Government under
Section 10A of GIBNA, 1972.
55. The section 17A of the GIBNA, 1972 is almost pari
materia with section 9 of the Act of 1980 and empowers the
Central Government to make schemes to regulate the terms and
conditions of service of officers of PSICs with the approval of
both Houses of Parliament. Mr. Chandra contended that it is
settled law that where a power is given to do a certain thing in a
certain manner, the thing must be done in that way or not at all
and therefore it was incumbent upon the respondents to
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promulgate a scheme under Section 17A to designate or establish
a selecting body for PSICs, as was done under Section 9 of the
Act of 1980 for establishment of respondent no. 2. Reference is
made in this regard to Nazir Ahmad v. Emperor (January 20,
1936 - Privy Council) AIR 1936 PC 253; Brajendra Singh
Yambem v. Union of India, (2016) 9 SCC 20 and CIT vs Anjum
Ghaswala 2002 (1) SCC 633.
56. He further submitted that seniority is an incident of
service which cannot be overlooked, and the petitioner has a
fundamental right as well a legitimate expectation for being fairly
considered for appointment with due regard to his seniority,
which has been denied to him in the present case. In violation of
the cardinal principal of seniority, despite being at Rank 3 in
seniority amongst candidates being considered for selection, the
petitioner was illegally superseded in the impugned selections of
May 2021 by the respondent nos. 4, 5, 6, 7 and 8 who are at
Ranks 9, 8, 7, 6 and 4, respectively. The petitioner does not have
any disqualification and is perfectly eligible for appointment, as
he has in-principle been approved for promotion but maliciously
placed in the wait list or "Reserve List" in the impugned
recommendation dated May 11, 2021. He further stated that
there is no dispute that the post in question is a promotion post as
it carries a higher status and benefits, with full protection of
seniority and emoluments. Reliance is placed on State of
Rajasthan v. Fateh Chand Soni, (1996) 1 SCC 562 wherein it
was held that promotion means advancement in honour and
dignity and can be either to a higher pay scale or to a higher post.
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57. He submitted that the cause of action for filing the
present petition has arisen as the entire exercise of selections is
already over and only the mere formality of ACC‟s approval
remains. As per settled law, recommendations of the selection
committee are binding on the ACC and will ordinarily not be
deviated from, but for grave and justifiable reasons. Reliance in
this regard is placed on the Judgment of the Apex Court in A.K.
Doshi v. Union of India, 2001 AIR (SC) 1369.
58. Mr. Chandra further contended that assuming that the
BBB has jurisdiction to undertake selections of Directors of
PSICs, it cannot do so under the impugned Communications as
they are unconstitutional, arbitrary and violate the cardinal
principal of seniority and amends the service conditions of the
petitioner with retrospective effect.
59. It is stated that the impugned Communication dated June
09, 2020 fixes excessive marks of 50% for interview, which is
patently arbitrary as three successive fleeting interviews are
conducted and each interview lasts merely for ten minutes on
video conferencing. Even for the selection on the higher post of
Chairman and Managing Directors of PSICs contained in circular
dated December 20, 2007 only 20% weightage is accorded to
interview.
60. That apart, it is submitted that officers of AICIL, who are
ineligible, have been included in the zone of consideration under
the impugned communication dated June 09, 2020, in violation of
the statutory scheme vitiating the entire procedure of selection.
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61. It is also submitted that the respondents indulged in
selective changes to manipulate merit and contrary to the
mandatory requirement under Point 1.4 of the impugned
Communication dated June 09, 2020 and failed to consider the
petitioner‟s ACR of 2020-2021 for filling a vacancy which arose
in 2020-2021 and deprived him of the benefit of due
consideration of his performance in 2020-2021. It is the
submission of the counsels for the petitioner that, under the ACC
circular dated June 16, 2008, any proposal for appointment which
is not accompanied by ACR of the last five years is considered
incomplete and is liable to be returned.
62. It is stated that the Chairman, IRDA, who is a compulsory
member of the BBB under the impugned Communication dated
December 13, 2018, was not a part of the Interview Board of
May, 2021 as the said position was vacant. In the absence of the
Chairman, IRDA, the Chairman of BBB is required to be a part
of the Interview Board as per the office order dated June 18,
2020. However, the Chairman of the BBB was also not on the
Interview Board.
63. It is the submission of Mr. Chandra that the Board for the
impugned selection consisted of Mr. G.N. Bajpai and Mr.
Mathew Verghese, who were disqualified in terms of Point 2(ix)
of the impugned Circular dated November 06, 2019 on the
ground of conflict of interest, as the former is a Chairman of the
Board of Future Generali Insurance Co Ltd, a private general
insurer of Kishore Biyani Group and the latter works with an
insurance broker firm Bharat Re and also serves as an advisor of
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non-life insurance Shriram Group and is appointed as
Independent Director on the board of Shriram General Insurance
Company.
64. It is also contended that vacancies were changed mid-way
through the impugned selection process of May 2021. It is also
submitted that the „Behavioural Assessment Round‟, mandatory
under Point 2(vi) of impugned Circular dated November 06, 2019
and undertaken to assist in the interview process in August 2020,
was arbitrarily skipped in May 2021. According to Mr. Chandra,
15% of the total marks towards „overall personality‟ which was
to be assessed during this round, was left to the unbridled
discretion of the Interview Panel.
65. Mr. Chandra submitted that the respondents erred in
publishing the reserve list of candidates which is to be kept in a
sealed envelope, thereby irreparably compromising the
transparency and fairness of the selection process.
66. That apart, it is submitted that the question of estoppel
does not arise as there is patent material unconstitutionality and
illegality in the impugned selections undertaken by respondent
no. 2 de hors the Law. To fortify this argument, reliance has been
placed on the Judgments of the Supreme Court in Dr. (Major)
Meeta Sahai v. State of Bihar and Ors., (2019) 20 SCC 17; Raj
Kumar v. Shakti Raj (1997) 9 SCC 527 and Mriganka Mondel v.
Dr. Asitabha Das (2018) SCC OnLine Cal 16646.
67. It is submitted by Mr. Gopal Jain, learned Sr. Counsel
appearing on behalf of respondent no.2/BBB that the petitioner is
estopped from challenging the selection process after
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participating in it not once, but twice. Reliance in this regard is
placed on the judgments of the Supreme Court in Manish Kumar
Shahi v. State of Bihar, (2010) 12 SCC 576, Ramesh Chandra
Shah and Ors. v. Anil Joshi and Ors. (2013) 11 SCC 309,
Madras Institute of Development Studies and others v. K.
Sivasubramaniyan and Ors., (2016) 1 SCC 454 and K.H. Siraj v.
High Court of Kerala and Ors., (2006)6 SCC 395.
68. Mr. Jain denied the allegation that the selection process is
conducted in an arbitrary or illegal manner while excluding the
most meritorious candidate. He submitted that the selection was
made on the basis of merit inasmuch as weightage in the ratio of
50:50 is awarded for interview and ACR scores for the last five
years (maximum 10 marks for each year) in the selection process.
And furthermore, weightage is assigned as per various parameters
during the interview i.e., 35% to Technical Knowledge, 20% to
Managerial Capabilities, 15% to Diversity of Experience, 15% to
General & Economic Awareness and 15% to Overall Personality.
The petitioner was provided equal opportunity along with other
candidates and after strictly following the aforesaid selection
process and guidelines, a common merit list was prepared by the
BBB and recommendations were made. It is also stated that the
BBB is not the appointing authority and it only conducts the
selection process and make recommendations to the Government.
It is the Government who appointment Directors in PSICs as per
the Memorandum and Articles of Association of the respective
companies.
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69. He further stated that it is a well settled principle of
service jurisprudence that where merit is the criteria for the
selection amongst the members of the service, no officer has legal
right to be selected for promotion, except that he has only a right
to be considered along with others and a selection of junior in
service in preference to his senior does not amount to
supersession. Reliance in this regard is placed on R.S. Dass and
others v. Union of India and others, 1986 Supp (1) SCC 617.
70. It is also contended by Mr. Jain that the impugned
recommendations are mere recommendations and the
appointment is to be done by the Government and that the
petition challenging the recommendation of shortlisted candidates
is not maintainable. In this regard, reliance is placed on
judgments of the Supreme Court in Geomin Minerals and
Marketing Pvt. Ltd. v. State of Orissa and Ors. (2013) 7 SCC
571, G. Sarana v. University of Lucknow and Ors., (1976) 3
SCC 585, judgment of the Division Bench of the High Court of
Calcutta in Utpal Kumar Chowdhury v. Pranab Kumar Dhar
(1995) ILR 1Cal. 176 and Sadhan Kumar Bose v.. Anirudha
Mukherjee, (1993) 4 SLR 473.
71. It is submitted by Mr. Jain that Mr. Chandra has
contended that procedure of the selection followed by the
respondents in August 2020 and May 2021 were not uniform and
the candidates were required to undergo a "Behavioural
Assessment Round" conducted by a talent management
consultancy firm in the process conducted in August 2020,
whereas no such procedure was resorted to in May 2021. In this
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regard, it is submitted that it is well settled proposition of law that
the Authority which is making selection is fully entitled to evolve
its own procedure for selection. Furthermore, the Behavioural
Assessment Round by talent management firm is not a mandatory
procedure as per the prevailing guidelines and it was the
procedure adopted by the BBB for assisting the interview
process. The findings of Behavioural Assessment are not a part of
the overall score and do not have any weightage. He has referred
to the Judgment of the Division Bench of this Court in Rakesh
Kumar v. The Chairman, Staff Selection Commission and Ors.,
2010 (3) SLR 758.
72. He submitted that the selection process by the selection
committee was conducted on the basis of guidelines / circular and
procedure laid down by the Competent Authority i.e., the ACC
and this Court cannot be called upon to sit in appeal while
considering the proceedings of the selection committee and the
scope to interfere is limited where either the selection is actuated
with malafide or statutory provisions have not been followed. It is
stated by Mr. Jain that the petitioner herein has failed to
demonstrate any malafide upon the selection committee and he
has also failed to showcase any violation of any statutory
provisions. Furthermore, the petitioner himself relies upon the
Executive Order of the respondent no. 1 to contend that he is
entitled to be appointed as General Manager and Director in
terms of seniority. The appointment of Directors in PSICs is the
prerogative of the Central Government and it is the sole
discretion of the Government to make appointments. The post of
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Director is not in the staff hierarchy of the companies. In this
regard, reference has been made to M.V. Thimmaiah and Ors. v.
Union Public Service Commission and Ors., (2008) 2 SCC 119.
73. Mr. Jain further submitted that the contention of the
petitioner that a Scheme for making appointments to the post of
General Manager and Director ought to have been promulgated
under Section 17A of the GIBNA, 1972 is misplaced. He
submitted that under Section 16(1)(g) of the GIBNA, 1972, the
Central Government can frame one or more Schemes providing
for rationalisation or revision of pay scales and other terms and
conditions of service of officers and other employees of the
insurance companies, whereas as per Section 17A (inserted by
way of amendment in the year 1985) a Scheme can be framed for
regulating the terms and conditions of services of officers and
other employees. While exercising the powers under Section 16,
the Central Government has framed a General Insurance
(Rationalisation of pay scales and other conditions of service of
officers) Scheme 1975, which has been subsequently amended
under Section 17A to amend the matters related to pay scales,
increments and allowances of officers and staff of PSICs. The
said Scheme of 1975 as well as Section 17A and Section 16 of
the GIBNA, 1972, are applicable only to officers and other
employees and not Directors.
74. As regards the allegation of the petitioner that his ACR of
last five years upto 2020-21 was not taken into consideration, it is
submitted by Mr. Jain that ACR of previous five years upto 2019-
20 were considered uniformly for all the candidates and the same
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has been given 50% weightage in the scores as per the rules and
procedure. Furthermore, the ACR for 2020-21 of the petitioner
was not even prepared at the time of selection process and the
same was approved only on July 07, 2021 which is much later
after the recommendations were made.
75. It is submitted by Mr. Jain that the BBB has conducted
the selection and recommended candidates for appointment as
Director of PSICs in the past also. Already nineteen such
candidates were appointed and there was no challenge to the
process or to the authority of the Board to conduct the selection.
The petitioner has decided to challenge the process only after
participating in the selection twice and failing. He further stated
that the appointment of Director of PSICs is not by way of
promotion and even when a General Manager is appointed as
Director, he continues to get the salary and perks of a General
Manager only. This, according to Mr. Jain, is the reason the
designation is General Manager and Director. PSICs being
Government Companies, appointment to the post of Director is
the prerogative of the Government. No one has any right of
appointment as Director due to his seniority or otherwise. He
further contended that even the order dated February 16, 2012
relied upon by the petitioner which talks about seniority as the
criteria is a procedure followed by the Government and can be
changed by the Government by issuing another order. The
Government has done that by issuing the circulars dated
December 13, 2018, November 06, 2019 and June 09, 2020. It
was done in the best interest of the public sector companies. It is
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submitted by Mr. Jain that such action taken by the Government
in good faith and in public interest cannot be unsettled at the
behest of a person who attempted to take benefit of the selection
and failed.
76. That apart, it is submitted that the argument of the
petitioner that there is a conflict of interest between members of
the board is baseless and deserves no consideration. When the
members of the Board have to be constituted with experts from
the insurance sector, they will obviously be persons who held
high posts in insurance companies or are still in the advisory
positions. Conflict will arise only if there is conflict of interest in
the subject matter of selection. In this case, none of the members
have any conflict of interest with the impugned selection. Mr.
Jain has relied upon the Judgment of the Supreme Court in G.
Sarana (supra).
77. Further Mr. Chetan Sharma, Ld. ASG appearing on
behalf of respondent no. 1 stated that the Circulars dated
December 13, 2018, November 06, 2019 and June 09, 2020 are
not in violation of any law, as the ACC has been assigned the
function, inter alia, to take decisions in respect of appointments
specified in Annexure I to the First Schedule of the Transaction
of Business Rules and therefore the appointments in PSICs
require the approval of the ACC.
78. It is stated by Mr. Sharma that the Notification dated
December 29, 1972 categorically specifies the exceptions,
restrictions, limitations in Column (2) thereof as a result of which
the provisions of Section 34A of the Insurance Act, 1938
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requiring prior approval of IRDA for appointment of Directors on
the Board has been made "not applicable" for companies covered
under the GIBNA, 1972, including both the General Insurance
Corporation and other acquiring companies.
79. It is further submitted that Section 24A of GIBNA, 1972,
which was subsequently inserted through amendment effected by
the Third Schedule to the IRDA Act, 1999, provides that the
exclusive privilege of the Corporation and the acquiring
companies of carrying on general insurance business in India
shall cease on from the commencement of the IRDA Act, 1999
and the Corporation and the acquiring companies shall,
thereafter, carry on general insurance business in accordance with
the provisions of the Insurance Act, 1938. Insofar as the
applicability of the IRDA Act, 1999 on the insurance companies
governed under GIBNA, 1972 is concerned, it is submitted that
the same shall be applicable only to the extent of mode of
carrying out the general insurance business in India and has no
relation whatsoever with the appointment of the Managing
Director/ Whole-Time Director of PSICs.
80. It is submitted that the power/jurisdiction to appoint a
Managing Director/ Whole Time Director of PSICs has always
been vested with the ACC under Transaction of Business Rules
and when the IRDA Act, 1999 came into force, Section 35 of the
GIBNA, 1972 and the exemption notification dated December
29, 1972 were not rescinded and are still in force.
81. It is also submitted by Mr. Sharma that if the intent of
Section 24A inserted under the Third Schedule of the IRDA Act,
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1999 in amending GIBNA, 1972 had been to provide for the
provisions of the Insurance Act to apply without any exceptions,
the said enactment would have omitted Section 35 of the GIBNA,
1972 as well. Therefore, given that Section 35 has remained on
the statute book despite the insertion of Section 24A, there is
need to read provisions of both the sections harmoniously, which
logically leads to the conclusion that the reference to the
provisions of the Insurance Act, 1938 in relation to the said
insurers, should be construed as a reference to the Insurance Act,
1938 as applicable to them after taking into account any
exceptions etc. (including the one in respect of section 34A of
Insurance Act) as notified under Section 35. He further stated that
the subject matter domain of Section 24A of GIBNA, 1972 is the
carrying out of general insurance business in India. Even if one
were to take the view that the provisions of the Insurance Act,
1938 shall apply notwithstanding any exceptions notified under
Section 35 of the GIBNA, 1972, the language of Section 24A of
GIBNA, 1972 expressly provides for applicability of Insurance
Act, 1938 provisions only in relation to the carrying on of general
insurance business in India.
82. It is the submission of Mr. Sharma that Section 118 (c) of
the Insurance Act, 1938 on Exemptions provides that nothing in
the Insurance Act, 1938 shall apply if the Central Government so
orders in any case, modifications as may be specified in the order
to any insurance business carried on by a Government Company.
The impugned Orders were issued by the ACC exercising the
powers conferred under the Transaction of Business Rules. It is
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submitted that therefore, the impugned Circulars issued by the
ACC constitutes as an Orders in terms of Section 118 (c) of the
Insurance Act, 1938.
83. Reference is made to the Index of the Insurance Act,
1938, wherein Chapter II contains „Provisions Applicable to
Insurers‟. Provisions specific to carrying out the business by
Insurance Companies are categorised under different sub
headings therein. It is contended by Mr. Sharma that since
Section 34A does not feature in any of these specific sub
headings, it is not applicable to companies covered under the
GIBNA, 1972 and therefore appointments to these companies
shall only be governed by the ACC under the Transaction of
Business Rules.
84. It is submitted that the BBB was created vide the Office
Order dated August 24, 2015 issued by the ACC based on the
proposal of the DFS. It is also stated that Banking Schemes made
under Section 9 of the Act of 1980 only requires consultation
with the RBI, and not approval of the RBI. Furthermore, Mr.
Sharma states that sub section (6) of Section 9 requires only post
facto laying of a Scheme in Parliament and therefore it is
incorrect that the Scheme was notified subsequent to the approval
of the Parliament. It is further submitted that since the origin/
creation/ establishment of BBB is by way of the Office Order
dated August 24, 2015 issued by the ACC, any change or
modification in the mandate of the BBB could have been carried
out only by way of a subsequent Office Order / Circulars of ACC,
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which in the present case has rightly been issued by the ACC
vide the impugned Circulars.
85. Mr. Sharma has reiterated the contention of respondent
no.2/BBB that having participated in the 2020 Selection Process
and 2021 Selection Process without protest or demur, the
petitioner is estopped from challenging the same. Reliance in this
regard is placed on the Supreme Court Judgments in Manish
Kumar Shahi vs. State of Bihar and others (supra) and
Ramesh Chandra Shah and Ors. v. Anil Joshi and Ors.,
(supra).
86. It is also stated that the BBB consists of specialised
experts from the insurance sector for the purpose of carrying out
selection for posts of Whole-Time Directors of PSICs.
87. That apart, it is stated that upon enactment of the GIBNA,
1972, certain powers have been vested upon the Central
Government under Section 16 (l)(e) read with Section 16 (7) of
the said Act, wherein the Articles of Association or the
Memorandum of Association can be altered for the companies
covered under the purview of the Act. Pursuant to the said
provision, the Articles of Association of NICL and OICL have
been amended to state that the Whole Time Chairman-cum-
Managing Director shall be appointed by the Central
Government.
88. It is submitted that Department of Personnel and Training
issued a Notification dated December 20, 2007, which provides
for the criteria of Selection of the Chairman-cum- Managing
Directors. The said notification was issued prior to the
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notification dated February 16, 2012 and the selection criteria
include weightage to the experience, performance of the officer
during the service and the interview. Thus, seniority alone was
not the criteria of selection for a Whole-Time Director of PSICs.
89. It is submitted that later, General Manager and Directors
were also included in the list of Whole-Time Directors as the
General Manager and Directors also have statutory and legal
obligations to fulfil as per the Companies Act, 2013 and SEBI
Rules. Therefore, it was decided with the approval of the Finance
Minister to appoint General Manager and Directors also with the
approval of ACC.
90. Mr. Sharma disputes the contention of the petitioner that
that the selection process of a Whole-Time Director can only be
done on the basis of seniority. It is submitted that the Circular
dated December 13, 2018 was issued by the ACC under Article
77(3) of the Constitution of India and it automatically supersedes
the order dated February 16, 2012, which is merely an Executive
Order.
91. Mr. Varun Agarwal, learned counsel appearing for
respondent Nos. 3 to 7 and 9 to 12, stated that he concurs with the
extensive submissions made by the counsels for respondent nos.
1 and 2.
92. That apart, he submitted that the respondent no. 3 GIPSA
provides a forum for facilitating consultations and deliberations
amongst PSICs on matters of common interest. He further stated
that the appropriate government is fully empowered to frame the
rules of selection for the posts intended to be filled by it in PSICs.
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The entire selection process has been carried out in an open and
fair manner and the modus/stages of selection were informed in
advance to all participants concerned. He also stated that
respondent Nos. 4 to 8 are the General Managers of PSICs who
have been selected by BBB for the post of General Manager and
Director on May 11, 2021 (second impugned selection). He
further submitted that respondent Nos. 9 to 12 were selected by
BBB for the post of GM and Director on October 8, 2020. Out of
these respondent No.9 Anjan Dey did not join the post of General
Manager and Director as he was later on also selected for the post
of Chairman-cum-Managing Director of OICL. Further
respondent No.2 has already been superannuated from the post of
General Manager and Director. In the end, he stated that BBB
has carried out the selection process for the appointments of
Whole Time Directors of PSICs as empowered to do so by the
appropriate Government and the respondents have bonafidely
participated in the selection process. The selection made is
justified.
CONCLUSION:
93. Having heard the learned Counsel for the parties and
perused the record, so also the written submissions filed by them,
before I deal with their rival submissions, it shall be appropriate
to cull out, in brief the facts as highlighted by the counsel for the
parties.
94. In 2018, petitioner was working as General Manager in
National Insurance Corporation Limited (NICL). As a General
Manager he is eligible for appointment to the post of General
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Manager and Director in PSICs. Between November, 2018 to
July, 2020, nine vacancies arose on the Board of Directors in
different PSICs. The first impugned selection was held in the
month of August, 2020.
95. It is the case of the petitioner, despite being eligible and
meritorious and ranked 13 in the overall seniority, he was
superseded by persons junior to him.
96. A second impugned selection took place in the month of
May, 2021 for filling five vacancies, when the petitioner was
kept in the reserved list. Previous to the impugned selections, the
mode of selection, as per Mr. Chandra was by seniority by the
Committee of the CMDs of PSICs, which makes
recommendation to the Central Government, who issues the
requisite transfer orders in exercise of its authority under Section
22 of the GIBNA, 1972.
97. The plea of Mr. Chandra is primarily that the
consideration / selection undertaken by BBB, a body constituted
solely for banking sector with overall control of Reserve Bank of
India has no jurisdiction or control over PSICs. In other words,
BBB could not have undertaken the selection of General
Manager and Directors in PSICs. To understand this submission,
it is necessary to understand the constitution of BBB.
98. Vide order dated August 24, 2015, the ACC approved the
proposal of DFS for creation of BBB, which stipulated structure /
composition / functions / management and methodology for
selection / tenure of members of BBB. The functions of BBB
primarily are with regard to selection and appointment of Board
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of Directors in Public Sector Banks and Financial Institutions. It
appears that upon consultation with the Reserve Bank of India, a
Gazette Notification dated March 23, 2016 was issued by
respondent No.1 DFS. In terms of this notification, the scheme
called ―Nationalised Banks (Management and Miscellaneous
Provisions) Amendment Scheme, 2016‖ amending the
―Nationalised Banks (Management and Miscellaneous
Provisions) Scheme, 1980‖ framed under Section 9 of the Act of
1980 was notified, whereby in Clause (2) after sub-clause (b),
sub-clause (ba) was inserted defining "Bureau" to mean Banks
Board Bureau (BBB). Further Clause 7(A) was inserted with
regard to establishing Banks Board Bureau (BBB) in the scheme
of 1980, so also stipulating the Board of Directors of the Bureau
consisting one Chairman and six members as mentioned below: -
Serial Name / Designation Designation
number
1. Part time Chairman Chairman
2. Secretary, Department of ex-officio Member
Financial Services
3. Secretary, Department of Public ex-officio Member
Enterprises
4. Deputy Governor, Reserve Bank ex-officio Member
of India
5. Part time Member Member
6. Part time Member Member
7. Part time Member Member
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99. Clause 7(B) was also inserted which refers to the manner
of appointment of Whole-Time Directors and Chairman of BBB
and creation of Bureau. Clause 7(C) was also inserted, which
details the functions of the Bureau in the following manner:
(a) to recommend the selection and appointment of
Board of Directors in Nationalised Banks
(Whole Time Directors and Chairman);
(b) to advise the Central Government on matters
relating to appointments, confirmation or
extension of tenure and termination of services
of the Directors of nationalised banks;
(c) to advise the Central Government on the desired
management structure of nationalised banks, at
the level of Board of Directors and senior
management;
(d) to advise the Central Government on a suitable
performance appraisal system for nationalised
banks;
(e) to build a data bank containing data relating to
the performance of nationalised banks and its
officers;
(f) to advise the Central Government on the
formulation and enforcement of a code of
conduct and ethics for managerial personnel in
nationalised banks;
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(g) to advise the Central Government on evolving
suitable training and development programs for
managerial personnel in nationalised banks.
(h) to help the banks in terms of developing business
strategies and capital raising plan and the like;
and
(i) any other work assigned by the Government in
consultation with Reserve Bank of India.
100. The case of the respondent No.1 as contended by Mr.
Chetan Sharma is that the President of India in exercise of his
powers under Article 77 (3) of the Constitution of India has made
Transaction of Business Rules. In terms of First Schedule to the
Rules, the ACC has been assigned the function, inter alia to take
decision with respect to appointments specified in Annexure-A1
to the First Schedule which includes appointment with respect to
Chairman and other members of the Board of Management of
PSICs and as such the ACC is competent to issue the circulars
dated December 13, 2018 and June 9, 2020 approving the
proposal of DFS to modify the guidelines dated August 24, 2015
to expand the mandate of BBB and also vide circular dated
November 6, 2019 prescribing the changes in composition of the
BBB; selection / tenure of the members of the BBB, selection
methodology to be adopted by BBB etc. to include selection and
appointment of Whole-Time Directors of PSICs. In fact, it is
stated by Mr. Sharma, that BBB was created vide office order
dated August 24, 2015 issued by the ACC based on the proposal
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of DFS and before the amendment of the Banking Scheme vide
notification dated March 23, 2016, many compliances have been
carried out through various documents. The plea is not appealing
for the reason that BBB has been created only vide notification
dated March 23, 2016 and not before, that too by amending the
Scheme of 1980, though pursuant to the approval granted by the
ACC to the proposal of DFS and in consultation with the RBI.
The approval granted by the ACC vide order dated August 24,
2015 for creation of BBB has been achieved with the issuance of
the notification dated March 23, 2016. The administrative order
of ACC dated August 24, 2015 shall not have the effect of
amending the Scheme of 1980 known to law. A further change
or modification of functions of BBB for purposes other than
appointments in the Banks, that is in PSICs cannot be affected as
the BBB has its roots / origin in Section 9 of the Act of 1980
which empowers the Central Government to make the Scheme,
after consultation with RBI, which includes for the constitution
of the Board of Directors in the Banks and Financial Institutions
only. In exercise of this power under Section 9, the Central
Government has framed the Scheme of 1980 which includes
detail provisions made in Chapter II with respect to constitution
of the Board which includes the appointment of Chairman and
Managing Director and whole-time Directors in banks by the
Central Government in consultation with the RBI, which has no
concern with the PSICs. The Act of 1980 / Scheme of 1980, is
enactment / scheme relating to Banking Companies with no
concern with Insurance Companies and the provisions thereunder
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cannot be invoked to govern the selection / appointment in the
PSICs. In fact, there is no provision in the Act of 1980 / Scheme
of 1980 to include the scheme / provision relating to
appointments in PSICs.
101. So, it must be held that the impugned circulars by which
ACC decided to modify the mandate of BBB to make
appointments in the insurance companies; changing the
composition of BBB for making appointments in PSICs, also
laying down the eligibility conditions / criteria for selection etc.
to be carried out through BBB shall be untenable and ultra vires
the Act of 1980 / Scheme of 1980.
102. Mr. Chandra is justified to say that the Act of 1980 /
Scheme of 1980 occupies the field of appointment to the Board
of Directors of the Banks / Financial Institutions only and cannot
include in its fold the appointments in PSICs. The issue can also
be looked from another angle inasmuch as Transaction of
Business Rules on which reliance has been placed by Mr. Sharma
justifying the issuance of the impugned circulars by the ACC,
have been framed under Article 77 (3) of the Constitution of
India by the President of India and to that extent is in exercise of
legislative power, but the provisions of the Transaction of
Business Rules are administrative in nature for the governance of
the business of the Government of India (Ref: Crawford Bayley
& Co. and Ors. Union of India and Ors. 2006 6 SCC 25). If the
Transaction of Business Rules are administrative in nature, the
exercise of power by the ACC under the said rules to amend
already existing statutory provisions / legislative scheme of 1980
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is impermissible. Even under Section 9(6) of the Act of 1980, a
Scheme framed becomes effective only after the same is placed
before the Houses of Parliament and after Parliament agrees to
the Scheme and made modifications. (Ref. New Bank of India
Employees' Union & Ors. (supra)). This exercise has not
happened, nor could have happened, as the impugned circulars,
could not have varied / amended the Scheme of 1980 to include
the selection and appointment in PSICs being ultra vires. Mr.
Chandra is also justified in relying upon K.P. Sudhakaran and
Anr. (supra) wherein the Supreme Court held, where the
statutory rules occupy the field, the executive instructions, cease
to apply. Similarly, reliance placed by Mr. Chandra on the
Judgment of Radhashyam Panigrahi (supra), of the Division
Bench judgment of the Orissa High Court, wherein it was held
that the executive instructions cannot override the statutory rules.
In the said Judgment, reference is also made to a Constition
Bench Judgment of the Supreme Court in the case of B.N.
Nagarajan v. State of Mysore, AIR 1966 SC 1942 wherein the
Supreme Court has held as under:
―It is hardly necessary to mention that if there is a
statutory rule or act on the matter, the executive must
abide by that act or rule and it cannot in exercise of its
executive powers under 162 of the Constitution ignore or
act contrary to that rule or that Act‖
103. From the above, it is clear that the Scheme made under
the Act of 1980 would only govern the appointments made to the
Board of Management of the Banks / Financial Institutions and
not the PSICs. In other words, BBB, the Statutory Authority
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must exercise the jurisdiction within the four corners of the Act
of 1980 / Scheme of 1980.
104. That apart the issuance of circulars dated December 13,
2018, November 6, 2019 and June 9, 2020 has resulted in an
anomalous position inasmuch as two different Board of Directors
/ composition have been created with regard to one body called
BBB. This I say so in view of the Board of Directors of BBB
stipulated in the notification dated March 23, 2016 and
composition stipulated in the approval of ACC dated December
13, 2018, are at variance.
105. It is the conceded case of the parties that prior to the
impugned selections, the appointment as General Manager /
Directors was made in terms of the notification issued on
December 20, 2007, with the approval of ACC. The circular
states, the appointment of Chairman-cum-Managing Director is
made by the Central Government under Memorandum and
Articles of Association of respective Company. The relevant part
of circular of 2007 reads as under:
"
xxxx xxxx xxxx
Appointments of Chairman-cum-Managing Director of
GIC (Indian re-insurer), Oriental Insurance Company
Ltd., National Insurance Company Ltd., New India
Assurance Company Ltd., United India Insurance
Company Ltd., and Agriculture Insurance Company of
India Ltd. are made by the Central Government under the
Memorandum and Articles of Association of the
respective Company.
xxxx xxxx xxxx‖
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This circular is followed by circular dated February 16,
2012. The 2012 circular also indicate the appointment of the
Whole-Time Directors in PSICs shall be from amongst the
General Managers. Having said that it must also be stated that in
view of Transaction of Business Rules, the competency of ACC
to make / prescribe the eligibility conditions / criteria for
selection / composition of the Selection Committee cannot be
disputed. But prescribing mode / process of selection through
BBB and composition of the Selection Committee in BBB cannot
be sustained. Even otherwise, assuming that the proposal as
mooted out by DFS as approved by the ACC on December 13,
2018 and November 6, 2019 with respect to Insurance
Companies is valid, still they have not been notified in the
Gazette as has been done on March 23, 2016 amending the
scheme of 1980 incorporating clauses 7(A), 7(B) and 7(C). This
I say so as the proposal approved by the ACC has the affect of
amending clauses 7(A), 7(B) and 7(C) of the Scheme of 1980 as
inserted vide the notification dated March 23, 2016. Mr.
Chandra is justified in relying on the Judgment of the Supreme
Court in the case of Shanti Sports Club and Anr. (supra)
wherein in Para 37, the Supreme Court has held as under:
―37. In the light of the submissions made by the
learned counsel for the parties, we shall now consider
whether the note dated 8-6-1999 recorded by the then
Minister for Urban Development can be treated as a
decision of the Government to withdraw from the
acquisition of land in question in terms of Section
48(1) of the Act, which lays down that:
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―48. Completion of acquisition not
compulsory, but compensation to be
awarded when not completed.--(1) Except
in the case provided for in Section 36, the
Government shall be at liberty to
withdraw from the acquisition of any land
of which possession has not been taken.‖
Although, the plain language of Section 48(1) does not
give any indication of the manner or mode in which the
power/discretion to withdraw from the acquisition of
any land is required to be exercised, having regard to
the scheme of Parts II and VII of the 1894 Act, which
postulates publication of notification under Section
4(1), declaration under Section 6 and agreement under
Section 42 in the Official Gazette as a condition for
valid acquisition of the land for any public purpose or
for a company, it is reasonable to take the view that
withdrawal from the acquisition, which may adversely
affect the public purpose for which, or the company on
whose behalf the acquisition is proposed, can be done
only by issuing a notification in the Official Gazette.‖
(emphasis supplied)
106. In view of the above discussion, if the BBB could not
have undertaken the process of selection of General Manager /
Directors in PSICs, then the selection by BBB would not be in
conformity with law. The process of selection to the post of
General Manager / Directors of PSICs need to have been
undertaken in terms of the provisions of the Memorandum and
Articles of Association of each PSIC, through the circulars
already issued or validly framed rules / guidelines relating to the
criteria, composition of the Committee etc. It is settled law that
an Authority approving / making appointment can evolve the
procedure / criteria for selection, but only in accordance with
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law. The reliance placed by Mr. Jain on the Judgment of this
Court in Rakesh Kumar (supra) wherein it is held that the
authority which is making recruitment is fully competent to
evolve its own procedure cannot be disputed but that is subject
to competency of the authority and is not in violation of any
law. As I have already held that ACC could not have evolved
the process of selection and appointments through BBB, the
Judgment is distinguishable. Hence, the stand of the respondent
No.1 that BBB was competent to carry out selection and
recommend the candidates for approval by ACC is
unsustainable.
107. A plea was advanced by Mr. Jain and Mr. Sharma that
the petitioner having participated in the 2020 and 2021 selection
process conducted by BBB based on the Circulars issued by the
ACC dated December 13, 2018, November 6, 2019 and June 9,
2020 without protest and demur and as he is not selected, he is
estopped from challenging the process of selection including the
jurisdiction and competency of BBB by relying on the
Judgments in the case of Manish Kumar Shahi (supra); Ramesh
Chandra Shah and Ors. (supra); Madras Institute of
Development Studies and others (supra); K.H. Siraj (supra) is
concerned, the same is unmerited, for the reason that the
principle of estoppel / acquiescence would not come into play
when the selection undertaken by the BBB is in violation /
contrary to the statutory scheme of 1980 (including the
amendments made vide notification dated March 23, 2016). In
other words, there is no estoppel against law. The above
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argument of Mr. Jain was rightly opposed by Mr. Chandra by
relying upon the Judgment in Raj Kumar (supra) in Para 16,
where it is held as under:
"16. Yet another circumstance is that the Government
had not taken out the posts from the purview of the
Board, but after the examinations were conducted under
the 1955 Rules and after the results were announced, it
exercised the power under the proviso to para 6 of 1970
Notification and the posts were taken out from the
purview thereof. Thereafter the Selection Committee was
constituted for selection of the candidates. The entire
procedure is also obviously illegal. It is true, as
contended by Shri Madhava Reddy, that this Court
in Madan Lal v. State of J&K [(1995) 3 SCC 486 : 1995
SCC (L&S) 712 : (1995) 29 ATC 603] and other
decisions referred therein had held that a candidate
having taken a chance to appear in an interview and
having remained unsuccessful, cannot turn round and
challenge either the constitution of the Selection Board or
the method of selection as being illegal; he is estopped to
question the correctness of the selection. But in his case,
the Government have committed glaring illegalities in the
procedure to get the candidates for examination under
the 1955 Rules, so also in the method of selection and
exercise of the power in taking out from the purview of
the Board and also conduct of the selection in
accordance with the Rules. Therefore, the principle of
estoppel by conduct or acquiescence has no application
to the facts in this case. Thus, we consider that the
procedure offered under the 1955 Rules adopted by the
Government or the Committee as well as the action taken
by the Government are not correct in law.‖
(emphasis supplied)
108. Similarly, in the case of Dr. (Major) Meeta Sahai
(supra), the Supreme Court has in Para 15 to 17 has held as
under:
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"15. Furthermore, before beginning analysis of the legal
issues involved, it is necessary to first address the
preliminary issue. The maintainability of the very
challenge by the appellant has been questioned on the
ground that she having partaken in the selection process
cannot later challenge it due to mere failure in selection.
The counsel for the respondents relied upon a catena of
decisions of this Court to substantiate his objection.
16. It is well settled that the principle of estoppel prevents
a candidate from challenging the selection process after
having failed in it as iterated by this Court in a plethora
of judgments including Manish Kumar Shahi v. State of
Bihar [Manish Kumar Shahi v. State of Bihar, (2010) 12
SCC 576 : (2011) 1 SCC (L&S) 256] , observing as
follows: (SCC p. 584, para 16)
―16. We also agree with the High Court [Manish
Kumar Shahi v. State of Bihar, 2008 SCC OnLine
Pat 321 : (2008) 4 PLJR 93] that after having
taken part in the process of selection knowing fully
well that more than 19% marks have been
earmarked for viva voce test, the appellant is not
entitled to challenge the criteria or process of
selection. Surely, if the appellant's name had
appeared in the merit list, he would not have even
dreamed of challenging the selection. The
[appellant] invoked jurisdiction of the High Court
under Article 226 of the Constitution of India only
after he found that his name does not figure in the
merit list prepared by the Commission. This
conduct of the appellant clearly disentitles him
from questioning the selection and the High Court
did not commit any error by refusing to entertain
the writ petition.‖ [ See also: Madan Lal v. State of
J&K, (1995) 3 SCC 486 : 1995 SCC (L&S)
712, Marripati Nagaraja v. State of A.P., (2007)
11 SCC 522 : (2008) 1 SCC (L&S) 68, Dhananjay
Malik v. State of Uttaranchal, (2008) 4 SCC 171 :
(2008) 1 SCC (L&S) 1005 and K.A.
Nagamani v. Indian Airlines, (2009) 5 SCC 515 :
(2009) 2 SCC (L&S) 57]
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The underlying objective of this principle is to prevent
candidates from trying another shot at consideration, and
to avoid an impasse wherein every disgruntled candidate,
having failed the selection, challenges it in the hope of
getting a second chance.
17. However, we must differentiate from this principle
insofar as the candidate by agreeing to participate in the
selection process only accepts the prescribed procedure
and not the illegality in it. In a situation where a
candidate alleges misconstruction of statutory rules and
discriminating consequences arising therefrom, the same
cannot be condoned merely because a candidate has
partaken in it. The constitutional scheme is sacrosanct
and its violation in any manner is impermissible. In fact,
a candidate may not have locus to assail the incurable
illegality or derogation of the provisions of the
Constitution, unless he/she participates in the selection
process.
(emphasis supplied)
109. Similarly, in Mriganka Mondel (supra), the Calcutta
High Court while referring to the Judgment of the Supreme
Court in Raj Kumar (supra) has in Para 50 & 51 held as under:
"50. In Raj Kumar (supra), the Supreme Court while
dealing with the legality of a selection process that had
been challenged by unsuccessful candidates had
observed as follows:
―16. Yet another circumstance is that the
Government had not taken out the posts from the
purview of the Board, but after the examinations
were conducted under the 1955 Rules and after
the results were announced, it exercised the
power under the proviso to para 6 of 1970
Notification and the posts were taken out from the
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purview thereof. Thereafter the Selection
Committee was constituted for selection of the
candidates. The entire procedure is also
obviously illegal. It is true, as contended by Shri
Madhava Reddy, that this Court in Madan
Lal v. State of J&K and other decisions referred
therein had held that a candidate having taken a
chance to appear in an interview and having
remained unsuccessful, cannot turn round and
challenge either the constitution of the Selection
Board or the method of selection as being illegal;
he is estopped to question the correctness of the
selection. But in this case, the Government have
committed glaring illegalities in the procedure to
get the candidates for examination under the
1955 Rules, so also in the method of selection and
exercise of the power in taking out from the
purview of the Board and also conduct of the
selection in accordance with the Rules. Therefore,
the principle of estoppel by conduct or
acquiescence has no application to the facts in
this case. Thus, we consider that the procedure
offered under the 1955 Rules adopted by the
Government or the Committee as well as the
action taken by the Government are not correct in
law.
(underlining for emphasis by us)
51. Reading the decisions in Dalpat Abasaheb
Solunke (supra) and Raj Kumar (supra) does suggest
that the process of selection can be challenged on the
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ground of illegality or patent material irregularity
or mala fides vitiating the selection. This is also the
conclusion we have reached above reading the
decision in C.D. Govinda Rao (supra).‖
(emphasis supplied)
110. In a more recent Judgment, the Supreme Court in the
case of Ramjit Singh Kardam and Ors. v. Sanjeev Kumar and
Ors. 2020 SCCOnline SC 448 has in Paras 36 to 38 held as
under:
―36. The preposition that a candidate, who
participates in a selection without a demur taking a
calculated chance to get selected cannot turn around and
challenge the criteria of selection and the constitution of
the selection committee is well settled. The appellants
have placed reliance on judgment of this Court in Madan
Lal v. State of J&K, (1995) 3 SCC 486; K.A. Nagamani v.
Indian Airlines, (2009) 5 SCC 515; Manish Kumar Shahi
v. State of Bihar, (2010) 12 SCC 576; Madras Institute of
Development Studies v. K. Sivasubramaniyan, (2016) 1
SCC 454 and Ashok Kumar v. State of Bihar, (2017) 4
SCC 357.
37. In Madan Lal (supra), this Court laid down
following in paragraph 9:--
―9. ............................It is now well settled
that if a candidate takes a calculated chance
and appears at the interview, then, only
because the result of the interview is not
palatable to him, he cannot turn round and
subsequently contend that the process of
interview was unfair or the Selection
Committee was not properly constituted. In
the case of Om Prakash Shukla v. Akhilesh
Kumar Shukla, 1986 Supp SCC 285, it has
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been clearly laid down by a Bench of three
learned Judges of this Court that when the
petitioner appeared at the examination
without protest and when he found that he
would not succeed in examination he filed a
petition challenging the said examination,
the High Court should not have granted any
relief to such a petitioner.‖
38. The above preposition has been reiterated in
other judgments of this Court noted above. In the present
case, whether the respondents-writ petitioners are
estopped from challenging the selection? While noticing
the facts of the case, we have noted above that both
appellants and the respondents had submitted
applications in pursuance of advertisement dated
28.07.2006 No. 6/2006. In advertisement, it was provided
that the Commission may shortlist the candidates for
interview by holding a written examination or on the
basis of a rational criteria to be adopted by the
Commission. The Commission on 28.12.2006 published
the criteria for calling the candidates for interview.
Notice dated 28.12.2006 provided that written
examination shall be held for post of PTI on 21.01.2007,
on 100 objective type multiple choice questions, each
question carrying two marks. The notification also
prescribed the minimum qualifying marks- 50% for
General category, SC BC and ESM 45% and 25% marks
was assigned to the viva voce. The above criteria was
implemented and written examination was conducted on
21.01.2007, which examination was cancelled citing
complaints regarding malpractices in the written
examination. Further notice dated 11.06.2008 was
published fixing 20.07.2008 for written examination as
per criteria earlier notified. Before the above
examination could take place, by public notice dated
30.06.2008, it was cancelled. Another public notice dated
11.07.2008 was published where Commission decided to
shortlist eight times the candidates of the advertised post
with minimum weightage secured in each category. The
said shortlisting was also given up by notice dated
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31.07.2009 when it was decided to call all eligible
candidates for interview. Commission did not publish any
criteria or marks on the basis of which interview was to
be held. The criteria, which was published by the
Commission on 28.12.2006, 11.06.2008 and 11.07.2008
were given up step by step and no criteria was published
for interview, which was scheduled to take place in from
2nd September to 17th October, 2008. When Commission
had not published any criteria on the basis of which
candidates were going to be subjected for selection
process and the candidates participated in the selection
without knowing the criteria of selection, they cannot be
shut out from challenging the process of selection when
ultimately they came to know that Commission step by
step has diluted the merit in selection. When candidate is
not aware of the criteria of selection under which he was
subjected in the process and the said criteria for the first
time is published along with final result dated
10.04.2010, he cannot be estopped from challenging the
criteria of selection and the entire process of selection.
Further when the written examination as notified earlier
was scrapped and every eligible candidate was called for
interview giving a go bye to a fair and reasonable
process for shortlisting the candidates for interview, that
too only by Chairman of the Commission whereas
decision regarding criteria of selection has to be taken by
Commission, the candidates have every right to challenge
the entire selection process so conducted. This Court in
Raj Kumar v. Shakti Raj, (1997) 9 SCC 527 held that
when glaring illegalities have been committed in the
procedure to get the candidates for examination, the
principle of estoppel by conduct or acquiescence has no
application. Referring to judgment of this Court's
judgment in Madan Lal (supra), this Court laid down
following in paragraph 16:--
―16. .......................................The entire
procedure is also obviously illegal. It is true, as
contended by Shri Madhava Reddy, that this Court
in Madan Lal v. State of J&K, (1995) 3 SCC 486
and other decisions referred therein had held that
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a candidate having taken a chance to appear in an
interview and having remained unsuccessful,
cannot turn round and challenge either the
constitution of the Selection Board or the method
of selection as being illegal; he is estopped to
question the correctness of the selection. But in his
case, the Government have committed glaring
illegalities in the procedure to get the candidates
for examination under the 1955 Rules, so also in
the method of selection and exercise of the power
in taking out from the purview of the Board and
also conduct of the selection in accordance with
the Rules. Therefore, the principle of estoppel by
conduct or acquiescence has no application to the
facts in this case. Thus, we consider that the
procedure offered under the 1955 Rules adopted by
the Government or the Committee as well as the
action taken by the Government are not correct in
law.‖
(emphasis supplied)
111. Mr. Jain and Mr. Sharma have in support of their
submissions on estoppel and acquiescence relied upon the
Judgments in the cases of Manish Kumar Shahi (supra),
Ramesh Chandra Shah (supra), Madras Institute of
Development Studies and others (supra) and K.H. Siraj
(supra). The same will have no applicability in the facts of this
case and as such are distinguishable. In fact, the judgments
referred by Mr. Jain and Mr. Sharma have been considered by
the Supreme Court in Ramjit Singh Kardam (supra), except
K.H. Siraj (supra), which was considered by the Supreme
Court in the case of M.V. Thimmaiah (supra) of which a
reference has been made by Mr. Jain, which Judgments are also
distinguishable on facts.
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112. Hence, it must be held that the process of selection can
be challenged if the same is contrary to statutory / legislative
scheme making the said process, patently illegal. Hence, this
plea of Mr. Jain is liable to be rejected.
113. Insofar as the submission of Mr. Chandra that ACC
was never been involved in the appointment of Director of
PSICs and neither its consent nor approval was sought until the
appointments in August, 2020 is a new case set up by the
petitioner in the written submissions. No such case has been set
up in the writ petition. There was no opportunity for the
respondent No.1 to deal with such a stand. In any case, the
submission of Mr. Chandra is contrary to the very document
relied upon by the petitioner (Annexure P-7) which is a circular
dated February 16, 2012, Para 2 (II) thereof, clearly stipulates
the Committee of CMDs making recommendation for
appointment of Whole-Time Directors to the Government as per
the existing practice and procedure. So the plea of Mr. Chandra
that appointments were made as provided under the Articles of
Association and circular dated February 16, 2012 with prior
approval of IRDA cannot be accepted. His connected plea is
that vide Sections 34A to 34H of the Insurance Act, 1938, the
control over the PSICs is vested in IRDA and it is the IRDA
(and not ACC) which is the final authority for appointment of
Directors in PSICs and there cannot be any amendment of
provisions relating to such appointment without the IRDA‟s
approval. He also stated, Section 34D of the Insurance Act,
1938 gives overriding effect to Sections 34B and 34C over the
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other laws. The plea is unmerited. Mr. Sharma is right in
stating that in terms of notification dated December 29, 1972,
the Sections 34A to 34H of the Insurance Act, 1938, are not
made applicable to PSICs. I reproduce the notification dated
December 29, 1972 as under:
―S.O. 771(B) - In exercise of the powers conferred by Sections 35 of
the General Insurance Business (Nationalisation) Act, 1972 (57 of
1972), the Central Government hereby specifies the exceptions,
restrictions and limitations specified in column (2) of the Table below
subject to which the Insurance Act, 1938 (of 1938) shall apply to or in
relation to the General Insurance Corporation of India formed under
Section 9 of the first mentioned Act and to every acquiring company
as defined under the said Act: -
TABLE
Sections of Insurance Act Exceptions, restrictions and limitations.
________________________________________________________
Sections 1C, 2B, 3B, 4, 6 to 9
(both inclusive), 13, 16, 17A,
22, 27, 27A, 28, 28A, 29 to 31
(both inclusive), 31A, 31B, 32,
32A, 34, 34A to 34H (both in-
clusive) 35, 36, 37, 37A, 38, 39,
40A, 40B, 42A, 42B, 42C, 44, Not applicable.
45, 47, 47A, 48, 48A, 48B, 49
to 52 (both inclusive), 52A, 52B,
52BB, 52C to 52N (both inclusive),
53 to 64, 64A to 64T (both inclu-
sive), 64V, 64VA, 64VC, 65 to
101 (both inclusive), 101B, 101C,
106A, 110E to 110G (both inclusive),
112, 113, 115, 116 and 120
xxxx xxxx xxxx
114. The submission of Mr. Chandra in this regard was,
that notification issued in 1972 is only with respect to the
General Insurance Corporation constituted under Section 9 of
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the GIBNA, 1972 and subsequent to the notification, IRDA was
constituted in the year 1999 and Sections 34A to 34H were
amended in the current form and vide amendment of 2002
PSICs were taken out of the ambit of General Insurance
Corporation and were established as separate legal and distinct
entities owned by the Central Government under Section 10A
of GIBNA, 1972. Though, the plea of Mr. Chandra looks
appealing on a first blush but on a deeper consideration the
following facts being relevant the plea cannot be accepted
inasmuch as pursuant to the Insurance Act enacted in the year
1938, the GIBNA, 1972 came into force in 1972 whereby
certain Insurance Companies were nationalised. The
respondent No.1 in exercise of power under Section 35 of the
GIBNA, 1972 issued a notification dated December 29, 1972.
The notification clearly specifies the exemptions, restrictions,
limitations in Column II as a result of which the provisions of
Section 34A (amongst other sections) of the Insurance Act,
1938 requiring prior approval of IRDA for appointment of
Directors on the Board has been made "not applicable" for
Companies covered under the GIBNA, 1972. Mr. Chetan
Sharma is right is stating that such an amendment was made
applicable to both GIC and acquiring Companies. So it follows
the notification dated December 29, 1972 exempt the
Companies covered under the GIBNA, 1972 from applicability
of various Sections including Sections 34A to 34H which
includes 34D on which reliance was placed by Mr. Chandra to
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state that the said Section stipulates Sections 34B and 34C shall
override other laws.
115. The plea of Mr. Chetan Sharma that if the intent of
Section 24A of the GIBNA, 1972 inserted under the Third
Schedule of the IRDA Act, 1999 is to provide for provisions of
Insurance Act to apply without exceptions then by the said
enactment Section 35 of the GIBNA, 1972 would have been
deleted, is appealing. I find that Section 35 continues to remain
on the Statue Book despite insertion of Section 24A. The only
way to harmonise the notification issued under Section 35 of the
GIBNA, 1972 and Section 24A as contended by Mr. Sharma is
to read the provisions harmoniously which shall lead to the
conclusion that the reference to the provisions of the Insurance
Act in relation to the said insurers should be construed as a
reference to the Insurance Act as applicable to them after taking
into account any exceptions etc., including the one in respect of
Section 34A of the Insurance Act, 1938 as notified under
Section 35 of the GIBNA, 1972.
116. The position which emerges from the above is that in
view of the notification dated December 29, 1972 as reproduced
above, the Sections referred therein being exempted are not
applicable with regard to General Insurance Corporation and the
acquired Companies under Section 10A of the GIBNA, 1972.
Hence, the requirement to seek the approval of the IRDA for
appointments of Directors in PSICs has no applicability. I may
also state that the petitioner has relied upon Annexure P-10 in
support of his stand that the MD / CEO of the insurance
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companies are appointed in terms of the guidelines issued by
IRDA. Suffice to state, the order dated May 18, 2016, is with
the subject matter ‗guidelines for corporate governance for
insurers in India' and the same does not relate to the PSICs.
117. The aforesaid position is also clear, as no document
has been shown to me that after the enactment of IRDA Act,
1999 that the appointments of Chairman and Managing Director
/ General Manager and Directors have been made with the
approval of the IRDA.
118. That apart, the petitioner has not challenged the vires
of the notification dated December 29, 1972, which has not
been revoked. I find even the guidelines for making
appointment to the post of Chairman Managing Director /
General Manager and Directors in PSICs in the years 2007 and
2012 have been framed with the approval of the ACC which
continues to be in vogue till the impugned selections. This plea
of Mr. Chandra is liable to be rejected and the Judgments in the
cases of J & K Public Service Commission (supra) and A. B.
Krishna (supra) relied upon by Mr.Chandra in support of his
submission that once the legislature intervenes to enact law, the
power of executive including the President is totally displaced,
on the doctrine of occupied field, shall not be applicable in view
of my conclusion above, in the facts of this case.
119. The plea of Mr. Chandra that Section 17A of GIBNA,
1972 is almost para-materia with Section 9 of the Act of 1980
and empowers the Central Government to make Schemes to
regulate the terms and conditions of service of Officers of
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PSICs with the approval of the Houses of Parliament is
unmerited. This I say so because Section 17A of GIBNA, 1972
primarily relates to the power of the Central Government to
regulate the service conditions of the Officers and other
employees of the PSICs and in exercise of this power, the
Central Government has framed the General Insurance
(Rationalisation of Pay Scales and Other Conditions of Service
of Officers) Scheme 1975. The same is applicable to Officers
from AAO to General Managers. In other words, Section 17A
is not a provision applicable to General Managers / Directors,
for framing of a Scheme.
120. Although, various submissions have been made by
Mr. Jain and Mr. Sharma on the nature and scope of judicial
review in the matter of selection by relying on the judgments in
the case of R.S. Dass and others (supra), Geomin Minerals
and Marketing Pvt. Ltd. (supra), G. Sarana (supra), Utpal
Kumar Chowdhury (supra) and Sadhan Kumar Bose (supra),
suffice to state the same may not be relevant, as such an issue is
not required to be gone into in view of my finding above to the
extent that the process of selection / appointment as General
Manager / Directors could not have been made through BBB.
121. Similarly, various submissions have been made by
Mr. Chandra with regard to violation of certain provisions
framed by the ACC even in the impugned selections. For
similar reasons, in view of my finding above, these submissions
are also not required to be gone into.
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122. In view of my above discussion, it must be held that
the impugned Circulars dated December 13, 2018, November 9,
2019, June 9, 2020 are ultra-vires the Act of 1980 and Scheme
of 1980 (as amended vide notification dated March 23, 2016)
and as such are set aside. Consequently, the impugned
selections could not have been undertaken by BBB. The
appointments made pursuant to the impugned selections of
General Manager and Directors of PSICs are liable to be set
aside. It is ordered accordingly. Liberty is with the respondent
No.1 to make selection and appointments of General Manager /
Directors in accordance with law. No costs.
CM No. 17562/2021 & CM. No. 18326/2021
In view of my decision above, these applications have
become infructuous and are dismissed as such.
V. KAMESWAR RAO, J
OCTOBER 04, 2021/jg
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