Karnataka High Court

Sri H Shiva Rao vs Reserve Bank Of India on 24 October, 2024

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 24TH DAY OF OCTOBER, 2024

BEFORE
THE HON'BLE MR JUSTICE R. NATARAJ
WRIT PETITION NO. 20815 OF 2014 (S-RES)

BETWEEN:

SRI. H. SHIVA RAO
AGED ABOUT 61 YEARS,
NO.1080, 42ND CROSS,
KUMARASWAMY LAYOUT, 1ST STAGE,
BANGALORE-560 078,
RETIRED AS BRANCH HEAD IN
THIRD RESPONDENT COMPANY.

...PETITIONER
(BY SRI. SUBRAMANYA P.D., ADVOCATE)

AND:

1. RESERVE BANK OF INDIA
CENTRAL OFFICE,
HUMAN RESOURCE MANAGEMENT DEPARTMENT,
SHAHID BHAGAT SINGH MARG,
Digitally signed MUMBAI-400 001,
by
MARKONAHALLI REPRESENTED BY
RAMU PRIYA THE CHIEF GENERAL MANAGER.

Location: HIGH
COURT OF
KARNATAKA 2. STATE BANK OF INDIA
CORPORATE CENTRE,
ASSOCIATE BANKS DEPARTMENT,
NARIMAN POINT,
MUMBAI-400 021,
REPRESENTED BY
THE CHIEF GENERAL MANAGER.

3. SBI DFHI LTD.,
REGISTERED AND HEAD OFFICE,
VOLTAS HOUSE, 3RD FLOOR,
23, J.N.HEREDIA MARG,
BALLARD ESTATE,

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MUMBAI-400 001,
REPRESENTED BY
THE MANAGING DIRECTOR AND CEO.

4. MANAGING DIRECTOR AND
CHIEF EXECUTIVE OFFICER
SBI DFHI LTD.,
VOLTAS HOUSE, 3RD FLOOR,
23, J.N.HEREDIA MARG,
BALLARD ESTATE,
MUMBAI-400 001.

...RESPONDENTS

(BY SMT. TANMAYEE RAJKUMAR, ADVOCATE FOR RESPONDENT
NO.1;

SMT. SUVARNA M.N., ADVOCATE FOR SRI. PUTTEGOWDA K.,
ADVOCATE FOR RESPONDENT NOS.2 TO 4)

THIS WRIT PETITION IS FILED UNDER
ARTICLES 226
AND
OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
COMMUNICATION/ORDER MADE IN ADMN/NO.2010-11/282 DATED
12.07.2010 PASSED BY THE FOURTH RESPONDENT HEREIN
(ANNEXURE-V) BEING ARBITRARY, ERRONEOUS AND NOT
SUSTAINABLE IN LAW AND ETC.

THIS PETITION HAVING BEEN HEARD AND RESERVED FOR
ORDERS ON 01.08.2024 AND COMING ON FOR PRONOUNCEMENT OF
ORDER THROUGH VIDEO CONFERENCE THIS DAY, THE COURT MADE
THE FOLLOWING:-

CORAM HON'BLE MR. JUSTICE R. NATARAJ

CAV ORDER

The petitioner has sought the following reliefs:

"(i) Issue a writ of certiorari or any other writ or
order or direction, quashing the

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Communication/Order made in Admn/No.2010-

11/282 dtd: 12.07.2010 passed by the fourth
respondent herein (Annexure-V) being
arbitrary, erroneous and not sustainable in law.

(ii) Issue a writ of certiorari or any other writ or
order or direction, quashing the
Communication/Order made in Admn/No.2010-
11/349 dtd: 05.08.2010 passed by the third
respondent herein (Annexure-X) being
arbitrary, erroneous and not sustainable in law.

(iii) Issue a writ of certiorari or any other writ or
order or direction, quashing the
Communication/Order made in Admn/No.2011-
12/220 dtd: 16.07.2011 passed by the fourth
respondent herein (Annexure-Z_1) being
arbitrary, erroneous and not sustainable in law.

(iv) Issue a writ of certiorari or any other writ or
order or direction, quashing the
Communication/Order made in
No.Admn/No.2011-12/603 dtd: 30.01.2012
passed by the third respondent herein
(Annexure-Z_3) being arbitrary, erroneous and
not sustainable in law.

(v) Issue a writ of certiorari or any other writ or
order or direction, quashing the
Communication/Order made in

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No.Admn/No.2013-14/GV/455 dtd: 09.12.2013
passed by the third respondent herein
(Annexure-Z_10) being arbitrary, erroneous
and not sustainable in law.

(vi) Direct the third respondent company herein to
pay differential amount of pay and allowances
granting pay scales and allowances "in line" with
that obtaining in the first respondent the RBI
during the tenure of service of the petitioner
herein in the third respondent herein in terms of
the Second paragraph of the letter of offer dtd:

08.05.1995 with interest and payment of
compensation equal to salary for loss of service
due to premature retirement of the petitioner
from service being discriminatory, erroneous and
opposed to law, equity and justice alternatively

Direct the first and second respondents herein to
pay differential amount of pay and allowances
granting pay scales and allowances "in line" with
that obtaining in the first respondent the RBI
during the tenure of service of the petitioner
herein in the third respondent company herein
as per the Second paragraph of the letter of
offer dtd: 08.05.1995 with interest and payment
of compensation equal to salary for loss of
service due to premature retirement of the
petitioner from service and recover from third

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respondent herein in the interest of justice and
equity."

2. The petitioner contends that he was appointed on

14.03.1973 by the respondent No.1 in the cadre of Clerk-

GradeII/C.N Ex. Grade II. His appointment was confirmed on

01.01.1977. He was thereafter granted promotion to higher

grades. From 07.08.1997, he was promoted as a Staff Officer,

a Grade 'A' post and was transferred from Mumbai to

Bengaluru.

2.1 The petitioner claimed that the respondent No.1

had established a new entity called the Discount and Finance

House of India Limited (henceforth referred to as 'DFHI' in

short) on 08.03.1988. The majority of its shares was held by

the respondent No.1 and other Public Sector Banks while the

remaining shares were held by all India financial institutions.

DFHI was recognized as a subsidiary of RBI and a deemed

Government Company under
Section 619B
of the Companies

Act, 1956. The Chairman of the Board of Directors of DFHI

used to be a Deputy Governor of RBI who invariably was a

member of the Central Board of Directors of RBI. The objective

of DFHI inter alia was to develop a market for money market

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instruments and as a primary dealer creating infrastructure in

the Government security markets. It was to ensure

development of underwriting and market making capabilities

for Government Sector entities, improving secondary market

trading system and making primary dealer an effective conduit

for conducting open market operations. Before the

establishment of DFHI, some of the above functions were

managed by the Reserve Bank of India ('RBI' for short).

2.2 It is claimed that DFHI was owned and controlled by

RBI and most of the officers of RBI were deputed as officers in

DFHI. Likewise, the petitioner was deputed for a period of two

years at the branch of DFHI at Bengaluru when it was opened

in February 1991, in terms of an order dated 09.02.1991. The

petitioner completed two years deputation in DFHI and his

deputation was continued till 07.06.1995.

2.3 Later, the RBI started divesting its shares in DFHI

and transferred majority of its stake to the respondent No.2 -

State Bank of India ('SBI' for brevity) and its associate banks

and other nationalized banks and all India financial institutions

where respondent No.2 was holding majority shares.

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2.4 The petitioner contends that the process of

absorption of officers/staff deputed from RBI to DFHI started

some time during 1992 and by the end of 1995, there were 15

such officers / staff absorbed into the service of DFHI. The

petitioner was also offered by RBI on 08.05.1995, an option to

be absorbed in DFHI. He was issued with a letter containing

the terms of absorption. The petitioner accepted the offer

agreeing to the terms mentioned in the letter dated

08.05.1995. Accordingly, he was absorbed into DFHI on

08.06.1995 after taking voluntary retirement from the RBI on

07.06.1995.

2.5 He contends that the letter offering absorption was

subject to the terms and conditions mentioned in an annexed

document which contained clauses 1 to 19. Each of these

clauses related to a specific and independent subject. He

claims that the scales of pay and grades are separately

indicated in paragraph No.2 of the letter and has to be read

independently, without reference to paragraph No.1 of the

letter and clause Nos.1 to 19 in the annexure. As per paragraph

No.2 of the letter, the scales of pay in DFHI would be on par

with the pay scales and grades in the RBI. Therefore, the

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petitioner contends that he was assured of a pay scale and

grade in DFHI that would be in line with the pay scale and

grade in the RBI not only at the time of absorption but till he

retired from service. He contends that at the time of absorption

in DFHI, he held the post of officer in Grade 'A' / Assistant

Manager post in RBI. As per the terms of the 3rd paragraph of

the letter of offer, he obtained voluntary retirement from RBI

on 07.06.1995 and was absorbed into DFHI on 08.06.1995. He

was placed at a pay of Rs.4,800/- in the post of officer in Grade

'A'/Assistant Manager since the petitioner was obtaining pay

scales and allowances as per the old revision effective from

01.11.1987 in the RBI.

2.6 He contends that the revision of pay scales and

allowances was due from 01.11.1992 and the same was

granted by the RBI vide its Circular No.5 dated 20.11.1995 with

retrospective effect from 01.11.1992. Since the petitioner was

absorbed into DFHI on 08.06.1995, the respondent No.1 had to

calculate the revised pay and allowances of the petitioner from

01.11.1992 to 07.06.1995. Accordingly, the petitioner was paid

the arrears by RBI while DFHI paid the revised pay scales and

allowances in Grade 'A' from 08.06.1995 as promised under the

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offer letter. He was fitted in the pay at Rs.9650/- as on

08.06.1995 which was the maximum pay scale of Grade 'A'

officer in the RBI effective from 01.11.1992. Since the

petitioner reached the maximum in the pay scale of an officer

in Grade 'A' in the RBI, he was given increment in the pay

scales of combined Grade 'B' and 'C' as an incentive for

agreeing to be absorbed in DFHI and later fixing his pay scales

in line with that obtaining in the RBI for an officer Grade 'C'

effective from 01.11.1997.

2.7 The petitioner was thereafter upgraded to the post

of officer in Grade 'C' / Vice President which is equivalent to the

post of Officer in Grade 'C' / Assistant General Manager in the

RBI. He contends that DFHI issued a letter dated 17.07.2000

revising the pay scales and allowances for a period of five years

and with retrospective effect from 01.01.1999 and the

petitioner was placed in the pay scale Rs.12300-375-13050-

400-13850-425-17250-EB-425-19375 and his basic pay was

re-fixed at Rs.17,250/- and allowances were also re-fixed.

2.8 He contends that the age of superannuation in the

banking sector was 58 years when the petitioner accepted the

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offer to be absorbed in DFHI. Thereafter the Rule relating to

superannuation was changed in the banking industry extending

service up to 60 years of age. Respondent No.1 brought similar

Rules in the year 1998 and DFHI also incorporated similar

provisions in DFHI (Staff) Amendment Rules, 1998 vide office

order dated 28.12.1998. As a result, respondent No.1

transferred its portion of gratuity to the respondent No.3

considering the age of retirement of the petitioner as 60 years

as was done in the case of the other absorbed officers.

2.9 The petitioner contends that the pay scales and

allowances are revised in the RBI once in five years and are

made effective from the first day of November of the particular

year. Accordingly, the RBI issued Circular No.9 dated

01.01.2001 for revision of pay scales and allowances of officers

with retrospective effect from 01.11.1997. When the aforesaid

Circular as issued, the pay scale and the allowances of the

petitioner were already in line though not equal to the Grade 'C'

employees in the RBI. However, for nearly 1 year 2 months

i.e., from 01.11.1997 to 31.12.1998, respondent No.3 did not

reset the pay and allowances of the petitioner in line with the

Grade 'C' officers in the RBI.

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2.10 He contends that his pay of Rs.18,525/- in March

2002 was in line with the pay of an officer in Grade 'C' in the

RBI which included the maximum sum of Rs.16,900/- in the

pay scale plus a special pay of Rs.475/- and two stagnation

increments of Rs.475/- each. Thereafter, DFHI issued another

revision of pay scales and allowances in terms of an order

dated 11.04.2002 revising the pay scales of the employees in

DFHI with retrospective effect from 01.04.2002. As a result,

the petitioner was placed in the pay scale of Rs.13500-400-

15500-450-17750-500-20750. His basic pay was fixed at

Rs.20,250/- and the allowances were correspondingly revised.

The respondent No.3 increased the House Rent Allowance

(HRA) effective from April 2002 to those officials not availing

residential accommodation from the Company.

2.11 The petitioner contends that with the complete

divesting of shares in DFHI by the RBI in March 2002, the

respondent No.2 acquired more than 50% of shares in DFHI

and therefore, it became a subsidiary of SBI in March 2003.

Similarly, another subsidiary of SBI named SBI Gilts Limited

merged with DFHI in the year 2004 under a scheme of

amalgamation which was duly approved by the High Court of

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Bombay. The DFHI was subsequently renamed as respondent

No.3 and a fresh certificate of incorporation was issued.

2.12 The petitioner contends that the RBI issued a

Circular No.10 dated 21.11.2005 revising the pay scales and

allowances of the officers in the RBI with retrospective effect

from 01.11.2002. It is contended that when the RBI issued the

aforesaid circular, the pay scale and allowances of the

petitioner were significantly lower than that was granted in the

RBI for Grade 'C' effective from 01.11.2002. Therefore, there

was a need for resetting the pay scale and allowances of the

petitioner in the respondent No.3 so that it is in line with that of

a Grade 'C' officer in the RBI.

2.13 He contends that the respondent No.3 had a good

record of profit after tax. He claimed that for the years 2008-

09, 2009-10, 2010-11, 2011-12 and 2012-13, it had the profit

of Rs.66.95 crores, Rs.89.23 crores, Rs.56.94 crores, Rs.43.51

crores and Rs.80.29 crores respectively. He contends that

being aggrieved by the significantly lower pay and allowances

given to him when compared to the pay and allowances given

to Grade 'C' officer in RBI, the petitioner submitted a

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representation dated 02.09.2006 to the respondent No.4 to

reset his pay and allowances. However, the same was not

done.

2.14 He contends that for nearly 5 years and 2 months

i.e., from 01.11.2002 to 31.12.2007, his pay and allowances

were not in line with that of an officer in Grade 'C' in the RBI.

Therefore, he contends that the respondent No.3 has violated

the terms of absorption. He contends that the respondent No.3

issued a letter dated 24.01.2008 revising the pay scales and

allowances with retrospective effect from 01.01.2008 and the

basic pay of the petitioner was fixed at Rs.23,520/- and other

admissible allowances were also revised.

2.15 The petitioner contends that in the year 1998, DFHI

amended Rule No.16 of the DFHI (Staff) Rules, 1995 (for

short, 'the Rules, 1995') vide an office order dated 28.12.1998

enhancing the age of superannuation from 58 to 60 years with

effect from 01.12.1998.

2.16 He contends that on he attaining 58 years on

31.07.2010, he was asked to retire from service under the then

prevalent SBI DFHI Limited Staff Service Rules, 2007 (for

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short, 'the Rules, 2007'). The petitioner therefore dissatisfied

with the discriminatory treatment meted out to him, submitted

a representation dated 30.06.2010 requesting the respondent

No.4 to extend him the benefit of extended superannuation age

of retirement. The respondent No.4 rejected the request of the

petitioner by his communication dated 12.07.2010. The

petitioner thereafter submitted a detailed representation dated

19.07.2010 before the respondent No.3 requesting it to extend

the age of retirement. Nonetheless, the petitioner was retired

from service on 31.07.2010, even before receiving any reply

from the respondent No.3. The respondent No.3 then rejected

the appeal of the petitioner by a communication / order dated

05.08.2010 without assigning any reason.

2.17 The petitioner contends that he had worked for

nearly 22 years and 3 months in the RBI and for 15 years 1

month in respondent No.3.

2.18 He contends that respondent No.1 issued the

Circular No.4 dated 09.09.2010 revising the pay scales and

allowances of officers in the RBI with retrospective effect from

01.11.2007. He contends that though the respondent No.3 vide

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letter dated 24.01.2008 had revised the pay scales and

allowances with effect from 01.01.2008, the same was not in

line with the pay of a Grade 'C' officer in the RBI. The

petitioner on coming to know of the circular dated 09.09.2010

submitted a representation dated 18.01.2011 to the respondent

No.4 explaining the injustice meted out to him in not resetting

his pay and allowance and also referring to the difference in

pay scales. The respondent No.4 rejected the claim of the

petitioner vide letter dated 16.07.2011. The petitioner

submitted a detailed appeal dated 22.08.2011 before the

respondent No.3. The respondent No.3 by a communication

dated 30.01.2012, rejected the claim of the petitioner and

affirmed the order of the respondent No.4.

2.19 The petitioner again submitted a representation

dated 25.04.2012 requesting the respondent No.1 to look into

his grievance regarding the violation of the terms of the letter

of offer dated 08.05.1995. The respondent No.1 erroneously

interpreting the second paragraph of the letter dated

08.05.1995 and clause 10 of the annexure to the offer letter,

advised the petitioner to approach the respondent No.3 by its

communication dated 04.06.2012. Therefore the petitioner

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submitted representation dated 03.09.2012 to the Executive

Director (Administration) of the RBI and another representation

dated 07.03.2013 to the Hon'ble Governor of the RBI. The

petitioner did not receive any affirmative action from the

respondent No.1 though he received replies from the other

authorities on 09.12.2012 and 25.04.2013.

2.20 The petitioner again submitted representation dated

18.06.2013 to the Central Board of Directors of the RBI to

intervene and secure the relief to the petitioner. However, the

Deputy Governor (HRK) of the RBI instructed the Executive

Director (RG) of the RBI to speak with the respondent No.3

informally and impress upon it for payment of some

compensation. Accordingly, an office note was recorded and

instruction was complied in July 2013.

2.21 However, by a communication dated 02.08.2013

issued by the Assistant General Manager of RBI, he was again

advised to approach the respondent No.3. He contends that

since he did not receive any response from the respondent

No.3, he submitted another representation to it and to the

respondent No.1 on 16.09.2013. He claimed that there was no

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response from the respondent Nos.1 and 3 which forced him to

file another detailed representation dated 03.12.2013 with the

respondent No.2, to intervene in the matter and grant relief to

the petitioner. The respondent No.3 then issued a

communication dated 09.12.2013 denying its liability. The

respondent No.2 then addressed a communication dated

02.01.2014 to the petitioner referring to the communication of

the respondent No.3 and declining to intervene in the matter.

2.22 The petitioner then again submitted representations

dated 16.12.2013 and 10.02.2014 to the respondent No.3,

comprehensively replying to all the earlier communications.

Following this, the respondent No.3 replied on 22.02.2014 and

24.02.2014 again declining to entertain the request of the

petitioner. Following this, the respondent No.2 addressed a

communication dated 18.03.2014 declining to interfere in the

matter. The petitioner is therefore before this Court seeking the

aforesaid reliefs.

3. Learned counsel for the petitioner contended that

when the petitioner was assured of protection of his pay, pay

scale and allowances on his absorption at DFHI, he was entitled

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to protection of his pay. He contends that the petitioner was

also entitled to the revised pay scale and allowances in view of

time bound revision while he was employed at the respondent

No.1. He contends that the denial of this benefit is arbitrary

and unconscionable.

4. The writ petition is opposed by the respondent

Nos.2, 3 and 4. They contend that as per the offer letter dated

08.05.1995 seeking option of the petitioner for absorption, it

was stated as follows:

"Discount & Finance House of India Limited is
prepared to absorb your services on the terms and
conditions indicated in the Annexure.

2. The scales of pay in D.F.H.I will be in line with pay
scales and grades obtaining in Reserve Bank of
India.

3. Before your appointment in D.F.H.I., you will have to
seek voluntary retirement from the Bank's service
under
Regulation 26(3)
/
3(A)
of the Reserve Bank of
India (Staff) Regulations 1940. The Bank would be
prepared to waive the required notice period to
enable you to take up the appointment in D.F.H.I."

5. They contend that the terms and conditions for such

absorption were annexed to the said letter. Condition Nos.6

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and 10, which are relevant were referred and the same are

extracted below:

"6. Superannuation benefits other than pension will
continue to be admissible to the members of the staff
to the extent as per the existing Rules obtaining in
the Reserve Bank of India until such time as the
Discount and Finance House of India Limited frames
its own Scheme. The superannuation age will be 58
years except in case of employees in Class IV and it
will be 60 years in case of an employee in Class-IV."

... ... ...

10. The Reserve Bank of India Staff Regulations will be
applicable to the members of the staff in respect of
all matters until such time as the Discount and
Finance House of India Limited frames its own Rules.
As and when the Discount and Finance House of
India Limited Rules are framed they will be applicable
to all members of the staff."

Therefore, they contend that as per the aforesaid terms, a

person absorbed would be entitled to superannuation benefits

other than pension as is admissible to the members of the staff

as per the existing Rules in the RBI until the DFHI/Company

frames its own scheme. It also mandated that the age of

superannuation would be 58 years except in case of employees

in Class-IV who would superannuate at the age of 60 years.

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They contend that after the petitioner submitted his voluntary

retirement from respondent No.1 and was absorbed into the

services of the DFHI/Company, he was governed by the service

Rules of the RBI until the Company framed its own scheme.

6. They contend that after the absorption of the

petitioner on 07.06.1995, the Board of Directors of the

Company/DFHI in its meeting held on 24.07.1995, resolved as

follows:

"Agenda Item No.8

Approval of Staff Regulations and other allied schemes

The Managing Director informed the members of
the Board that it has become necessary for the
Company to have its own staff rules/regulations with the
gradual absorption of most of the staff initially availed
on deputation.

He further mentioned that the said rules have
been framed by Shri. Y.M.Paranjpe, retired senior officer
of the Reserve Bank of India keeping in view similar
rules/schemes followed by Reserve Bank of India and
the requirements of various relevant statutes.

After discussions, the Board passed the following
resolution unanimously:

"RESOLVED THAT the DFHI Staff Rules and Rules
relating to Leave Fare Concession, Travelling and Halting

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Allowance, Consumer Articles Loan, Vehicle Loan and
Reimbursement of Conveyance Expenses, as circulated
among the Directors be and are hereby approved."

7. They contend that it is evident that the Board of

Directors of the Company/DFHI felt it necessary that the Staff

Rules and Rules relating to leave, fare concession and other

service benefits were to be approved by circulation amongst

the Directors in view of similar Rules/Schemes followed by the

respondent No.1 and most of the employees of the DFHI were

either from SBI or from respondent No.1.

8. They contend that in the year 1997, when pay

revision was on the anvil, the Managing Director of the

Company by a memorandum dated 20.02.1997, proposed

revision of pay of the employees of the Company under an

agenda by de-linking the pay scales of the RBI as applicable to

the employees who were absorbed on deputation from the RBI

and to adopt the pay scales of the Company from 1997

onwards. The Board dealing with the issue at the meeting held

on 05.03.1997 was pleased to approve the proposal in terms of

the following resolution:

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"AGENDA ITEM NO.6

Proposal for revision of pay of the employees of the
Company

The Board of Directors agreed, in principle, with the
recommendations made by the Managing Director of the
Company. However, they suggested certain modifications
which are listed below:

1. Marginally revise upward the pay scales of the
employees of the Company in different categories and
completely delink these from the pay scales of RBI.

2. Alongside changes in scales, the job contents of
Stenographer(s) and Office Assistants could be
expanded and their designations changed to reflect
their movement to a non-workman position.

3. Provision of leased accommodation to officers and
rationalization/extension of other facilities could be
examined keeping in view, among other factors,
market conditions, improvement in productivity and
cost to the Company.

4. Review and re-designate the various posts in the
Company in line with the Company's structure,
business needs and current market practices.

The Board authorised the Managing Director to
finalise the issues at items (1) and (2) in consultation
with the Chairman of the Company and report the matter
to the Board at its next meeting.

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Thereafter the following resolution was adopted
unanimously:

"RESOLVED THAT the pay and perquisites of the
employees in the Company should stand completely
delinked from those in RBI and the Managing Director
of the Company be and is hereby authorized to
finalise, in consultation with the Chairman of the
Board, revision in the pay scales of employees of the
Company at all levels on the lines recommended with
some improvements and create positions of Secretary
and Executive Secretary.

RESOLVED FURTHER THAT THE Managing Director of
the Company be and is hereby authorized to incur
necessary expenditure pursuant to the proposed
changes."

9. Therefore, it is contended that the petitioner

became an absorbed employee from the respondent No.1 in the

Company and in terms of Clause 10 of the terms and conditions

found in Annexure to the offer letter dated 08.05.1995, the

petitioner is bound by the resolution of the Board which dealt

with the revision of pay scales from time to time. The

petitioner chose not to question the said resolution of the Board

as the pay scale that was made applicable to him was beneficial

than that was prevalent in the respondent No.1. They contend

that the petitioner having chosen to keep quiet for 13 years

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cannot now claim pay scales of the RBI on the ground that the

scales of the pay of the employees of the RBI are more

beneficial to him.

10. They further contend that the respondent No.3 had

initially revised the pay scales of all the staff with effect from

01.01.1997 as approved by the Board of the Company/DFHI

consequent to which the salary of the petitioner was also

revised based on the pay scales approved by the Board of the

Company and not based on the RBI Service Rules. They

contend that this revision of salary did not contain any

provision for payment of salary to ex-RBI staff absorbed in the

Company as per the RBI Service Rules. They contend that since

the arrears were paid up to 31.12.1996 on the basis of revision

of pay scales in the RBI, as those Services Rules were

applicable up to 01.01.1997 only. They contend that in the year

2000, when pay scales had to be revised with effect from

01.01.1999, the Board resolved to revise the pay scales in tune

with the pay scales of the Company and there was no mention

of the revision of pay scales that were prevalent in the RBI or

elsewhere. The relevant portion of the said resolution of the

Board is extracted below:

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"AGENDA ITEM NO.17

Proposal for pay revision of the employees of DFHI
due from January 1, 1999:

The contents of the Memorandum were noted by the
Board. A number of queries were made by the Directors
seeking clarifications which were provided by the
Managing Director of the Company to the satisfaction of
the Board. The recommendations contained in the
proposal for pay revision which were made to the Board
for its consideration and approval are enumerated below:

1. The effect of pay revision may be given from January
1, 1999 i.e., immediately after the expiry of the
previous wage agreement which expired on
December 31, 1998 and that this agreement will
remain valid for five years i.e. next agreement will
fall due on January 1, 2004.

... ... ... ..."

11. Later in the year 2002, the Company had to revise

the compensation structure. Therefore, the Board at its

meeting held on 28.03.2002, resolved to revise the

compensation structure of the Company independently and not

in tune with the RBI Service Rules. They contend that the

attempt of the petitioner to draw a comparison between the

pay scales of the Company and the RBI is ipse dixit and was

not based on any Service Rules.

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12. They contend that the option for absorption should

be read holistically and not in fragments. They contend that

the emphasis of the petitioner on the contents of the letter

dated 08.05.1995 and avoiding reference to the terms and

conditions mentioned in the Annexure to it, was misleading.

They contend that the option for absorption was clear and

unequivocal and it was made clear that the Rules of RBI could

be applicable only till such time the Company framed its own

Rules. They further contend that DFHI is a non-banking

financial Company and therefore, the Rules as applicable to the

Banking industry would not mutatis mutandis apply to a non-

banking financial Company until the Company specifically

approves such application of the Rules made elsewhere by the

Board of the Company. They contend that the petitioner joined

the service of the Company and he continued to draw salary in

line with the salary obtaining in the RBI as the Company was

yet to frame its own Rules. The claim of the petitioner is that

once the RBI revised the scales of pay and allowances to all the

officers of the Company, the same is applicable to the

Company, is based on an administrative Circular dated

01.01.2001 issued by RBI. However, in para No.1 of the said

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Circular, it is clearly indicated that it is applicable only to

officers of the RBI. They contend that the petitioner had sought

voluntary retirement from the RBI and therefore, he is ceased

to be an employee of the RBI and hence the Circular No.9

issued by the RBI dated 01.01.2001 was not applicable to him.

They contend that the pay scales of the staff of the Company

was revised with effect from 01.04.2002 resulting in a

corresponding revision of the pay scale of the petitioner. They

further contend that in the year 2004 i.e., on 19.03.2004, the

Hon'ble High Court of Judicature at Bombay by an order in

terms of
Section 391
read with
Section 394
of the Companies

Act, 1956, DFHI was amalgamated with SBI Gilts Limited and

all the assets of the Company were transferred to SBI Gilts

Limited. They contend that the Company came to be known as

SBI DFHI Limited from 19.03.2004 and onwards. The Board of

Directors of respondent No.3 met on 11.01.2007 to determine

the service conditions of employees who were working in DFHI

and continued to work with SBI DFHI Limited and the Uniform

Service Rules were brought with effect from 01.01.2007 which

were placed before the Board on 11.01.2007. The Board passed

the following resolution:

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"AGENDA ITEM NO.7

Uniform Service Rules

Memorandum No.7/104/2007 dated December 22, 2006
regarding Policy for Uniform Service Rules for the
Company was placed before the Board.

After discussion, the Board -

"RESOLVED THAT approval be and is hereby given for the
policy of Uniform Service Rules of the Company as
detailed in the Memorandum No.7/104/2007 dated
December 22, 2006 placed on the table of the meeting
duly initialed by the Managing Director and Chief
Executive Officer and Executive Vice President of the
Company for purposes of identification."

Therefore, the Uniform Service Rules were made applicable

with effect from 01.01.2007 to all employees working in

respondent No.3.

13. They contend that as regards the age of retirement,

Section 4
of the Uniform Service Rules reads as under:

"
Section 4
- Superannuation and retirement

15.(1) An employee shall retire after completion of 30
years of service or 58 years of age whichever
occurs first, unless extension in service has been
granted by the Competent Authority -

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Provided that on an employee completing 30
years of service or 50 years of age whichever
occurs first, the case for extension in service or
otherwise will be reviewed at biennial (2 years)
intervals. Based on the review the Competent
Authority may, at his discretion, grant extension of
service for a period not exceeding two (2) years at
a time. However, such extension in service shall not
be granted beyond 58 years of age being the age of
retirement

(2) Notwithstanding anything to the contrary contained in
sub rule (1) above, the Company may, at its discretion,
retire an employee at any time after completion of 50
years of age.

(3) An employee who attains the age of superannuation
on any day other than the first of a calendar month, shall
retire on the last day of that month.

(4) An employee who has attained the age of 50 years
may voluntarily retire after giving three months' notice in
writing to the Competent Authority subject to the
provisions of Rules No.14.

(5) Notwithstanding anything contained in this Rule,
where an employee has balance of leave to the credit of
his privilege leave account as on the date of retirement,
he may be paid a lumpsum amount which would be
equivalent of pay as defined in Rule 3(f) of these Rules,
for the unavailed privilege leave subject to a maximum of
eight months pay plus dearness allowances in respect
thereof.

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Explanation: "Date of Retirement" means the date on
which the employee attains the age of 58 years or the
date on which he is retired by SBI DFHI Ltd. under sub-
rule (1) of this Rule, or the date on which the employee
voluntarily retires in terms of sub-rule (4) of this Rule, as
the case may be."

Therefore the age of retirement in terms of the Rules of

respondent No.3 is 58 years and the said Uniform Service Rules

are applied uniformly to all employees. Therefore, they

contend that retiring the petitioner on completing 58 years is

strictly in accordance with the Service Rules.

14. They contend that after the merger of DFHI with

SBI Gilts, new company, namely, respondent No.3, was formed

on 15.06.2004 with retrospective effect from 01.04.2003. In

the scheme of amalgamation, there was no reference

whatsoever that the service conditions in RBI could be made

applicable to employees of respondent No.3. They contend that

the claim of the petitioner that he ought to have been given the

benefit of the revision of pay scales of RBI on 21.11.2005 with

effect from 01.11.2002 is unacceptable as the petitioner had

voluntarily retired from RBI on 07.06.1995. The respondents

have copiously referred to the judgments of the Hon'ble

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Surpeme Court in:
B. Bharat Kumar v. Osmania University

[(2007) 11 SCC 58];
Sureshchandra Singh v. Fertilizer

Corporation of India Limited
[(2004) 1 SCC 592];
Naresh

Kumar v. Department of Atomic Energy
[(
2010) 7 SCC

525] and Karnataka Power Corporation Limited v. K.

Thangappan
[(2006) 4 SCC 322]. They contend that the

petition is also liable to be dismissed as the petitioner had

approached the Court with unclean hands. They contend that

once the petitioner took voluntary retirement from respondent

No.1 on 07.06.1995, it would not lie in his mouth to claim that

he is entitled to the pay scale and the allowances as applicable

to the employees of the RBI. Consequently, they contend that

the petitioner being governed by the Services Rules of the

respondent No.3, which superannuates its employees at the

age of 58 years, he cannot contend to the contrary and claim

that he is entitled to continue in service in respondent No.3 till

60 years.

15. After considering the case of the petitioner and the

respondent No.3, it is evident that the petitioner has two claims

viz., (i) resetting his pay to bring it on par with the scale of pay

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prevalent in the RBI and (ii) extending his age of

superannuation till the age of 60 years.

16. It is relevant to note that respondent No.1

established DFHI which was a specialised Agency, with an

objective of developing a market for money market

instruments, creating infrastructure in the Government

securities market etc. This Agency was owned and controlled by

the respondent No.1, which had deputed officers on its roll to

DFHI for all operations. The petitioner too was one such officer

who was deputed from respondent No.1 to DFHI on 09.02.1991

for a period of two years. Therefore, he was governed by the

Reserve Bank of India (Staff) Regulations for all purposes

relating to his service. It is stated that the process of

absorption of the employees in DFHI was commenced in the

year 1992, which is not disputed. Later, the respondent No.1

divested its shares in DFHI and transferred majority of its

shares to respondent No.2 and its Associate Banks and other

nationalised Banks and All India Financial Institutions and since

respondent No.2 held majority of the shares, DFHI became a

subsidiary of respondent No.2 and was re-named as respondent

No.3. It was therefore inevitable for the respondent No.3 to

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decide the fate of the employees who were deputed from

respondent No.1. Thus on the initiation of the respondent No.3,

the process of absorption of the existing employees in DFHI

commenced which culminated in an offer to the employees of

respondent No.3 to be absorbed in the respondent No.3. The

petitioner too was offered to be absorbed in respondent No.3 in

terms of a communication of respondent No.1 dated

08.05.1995 on terms and conditions mentioned therein as well

as the terms and conditions mentioned in the annexure to the

letter. The condition precedent for such absorption was that the

petitioner had to submit his voluntary retirement from

respondent No.1. Accordingly, the petitioner, who perhaps

hoped of a better prospect having regard to the specialised skill

and competence he had acquired in a niche field, opted to be

absorbed in respondent No.3 as the terms of absorption, did

give an impression that the service benefits as obtained in

respondent No.1 would be continued. It was also held out that

the pay that the petitioner was drawing while in service with

respondent No.1 would be protected. Therefore, he submitted a

request for voluntary retirement from respondent No.1 on

07.06.1995 and he was absorbed into the services of

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respondent No.3 on 08.06.1995. Once the petitioner exercised

option to be absorbed in the respondent No.3, the same was

irrevocable and final and from the date of absorption, he had to

forego all rights and claims relating to service in respondent

No.1.

17. The letter dated 08.05.1995 provided that the

scales of pay in DFHI would be in line with the pay scales and

grades obtaining in respondent No.1 and for all other incidents

of service such as accrued superannuation benefits, unavailed

leave fare concession set and unavailed ordinary leave lying to

the credit of each person, the absorption and consequential

appointment of members of the staff in the DFHI shall be

treated, virtually, as a transfer of service from the RBI to the

DFHI. Those employees who sought voluntary retirement from

RBI could claim superannuation benefits including encashment

of balance of ordinary leave. They were entitled to continue

their membership to the Reserve Bank of India Medical Fund

Scheme. The superannuation benefits other than pension was

admissible to the members of the staff to the extent as per the

existing Rules obtaining in the RBI until such time as the DFHI

framed its own scheme. Likewise, the RBI Staff Regulations

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would apply to the members of the staff in respect of all

matters until such time as DFHI framed its own Rules.

18. The petitioner was granted the same scale of pay

that he was drawing in respondent No.1 on the date of

absorption. After such absorption, the respondent No.3

resolved at a meeting of the Board on 05.03.1997 to delink the

pay scale of its employees from the pay scales of RBI. Later

respondent No.3 revised the pay scale of the petitioner with

effect from 01.01.1997 in terms of the communication dated

31.03.1997 and placed the petitioner in the scale of Rs.7200-

325-9800-350-10150-EB-350-11200 and his pay was fixed at

Rs.10,500/- per month with effect from 01.01.1997. The salary

of Rs.10,500/- per month was paid from April 1997. In respect

of the salary for the period from 08.06.1995 till 31.03.1997,

the arrears of salary based on the revision of pay scale in

respondent No.1 was offered to be paid. The revised pay scale

in respondent No.3 after revision was supposedly higher than

the pay scale in the RBI at that point in time. The respondent

No.1 issued a Circular dated 01.01.2001 revising the pay scale

of its employees with effect from 01.11.1997. If the pay of the

petitioner in DFHI was not in line with the pay as revised by

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respondent No.1 with effect from 01.11.1997, the respondent

No.3 ought to have reset the pay to bring it on par.

19. The petitioner has claimed that the pay drawn by

him in March 2002 was in line with the pay of Rs.18,325/-

drawn by an officer in Grade 'C' in respondent No.1. Thereafter,

DFHI issued another pay revision vide order dated 11.04.2002

revising pay scale of the petitioner with effect from 01.04.2002

as a result of which his basic pay stood revised to Rs.20,250/-

per month. This was followed by a pay revision by respondent

No.1 on 21.11.2005 revising the pay scales with effect from

01.11.2002. The petitioner contends that at this point in time,

the scale of pay in respondent No.3 was not in line with those

employees in respondent No.1 and therefore, his scale had to

be reset to bring it on par.

20. It is relevant to note that the petitioner had the

option to go back to RBI but he opted to be absorbed in DFHI

as the offer of absorption was subject to same service

conditions, scale of pay as was obtained in respondent No.1. It

is quite obvious that the petitioner could not be expected to

accept something less than what he would have otherwise got.

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Therefore, even if the DFHI had delinked the pay and

perquisites of its employees from the pay and perquisites of

employees in respondent No.1, that did not mean that the

petitioner could be deprived of the benefit that he would have

got, had he continued in respondent No.1. It was therefore

incumbent upon the respondent No.3 to ensure that the pay

scale of the petitioner was refitted to bring it on par with the

scale of pay extended to the employees in the respondent No.1.

21.
In this regard, it is profitable to refer to a judgment

of the Hon'ble Apex Court in
Eastern Coalfields Limited and

Others v. Prativa Biswas and Others
[2018 (14) SCC

435] where it was held:

"17. When the pay scales were converted to and
paid in Coal India Ltd., the respondents' pay drawn could
not have been reduced, inasmuch as pay protection had
been assured to them and in view of the aforesaid order
that attained finality and pay fixation was to be made in
the manner that total emoluments drawn were not less.
After fitment, if it was found that lesser amount was to
be received as salary on or after 1-1-1987, it was
required that the shortfall was made good by way of
personal adjustment(s). Accordingly, protection was to
be made on the fitment by grant of personal pay
meaning thereby the pay could not have been reduced

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on the fitment in ECL pay scales. The order dated 26-8-
2002 was to be complied with in pith and substance;
rather it was violated by the aforesaid method of
fixation. As apparent from the aforesaid figure of
fitment, pertaining to Prathiva Biswas, Senior Staff
Nurse, Central Hospital, Kalla. The fitment that was
made on 20-5-2003/21-5-2003 was clearly in violation of
the order as well as the provisions of option form and
even subject to the conditions on which the absorption
had been made. Thus, in our opinion, the Division Bench
has rightly set aside the order passed by the Single
Bench by the order impugned [
Prativa Biswas v. Union of
India
, 2008 SCC OnLine Cal 651 : (2009) 1 CHN 101] ; it
was not the total emoluments that matter. Salary
protection was to be ensured, it could not have been
reduced apart from emoluments. There was dual
protection; that was unfortunately ignored and
overlooked by ECL in spite of the clear and categorical
order passed by the Single Bench in the writ application
of 1993, which order had attained finality, and had not
been questioned by any of the parties."

22. Therefore, the claim of the petitioner that he is

entitled to resetting of his pay to bring it on par with the pay

scale in the respondent No.1 till he retired, merits

consideration.

23. In so far as the claim of the petitioner that he was

entitled to be continued to be in service in the respondent No.3

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till he attained the age of 60 years, it is relevant to note that in

the letter dated 08.05.1995, it was specifically mentioned as

follows:

"6. Superannuation benefits other than pension will
continue to be admissible to the members of the staff to
the extent as per the existing Rules obtaining in the
Reserve Bank of India until such time as the Discount and
Finance House of India Limited frames its own Scheme.
The superannuation age will be 58 years except in case of
employees in Class IV and it will be 60 years in case of an
employee in Class-IV."

24. It is undisputed that Discount and Finance House of

India Limited (Staff) Rules, 1995 (for short, 'the Rules, 1995')

prescribed the age of retirement of its employees as 58 years.

It is not disputed that Rule 16 of the Rules, 1995 was amended

by an office order dated 28.12.1998 enhancing the age of

retirement to 60 years. After the respondent No.3 brought in

Uniform Service Rules / SBI DFHI Ltd. Staff Service Rules (for

short, 'the Rules, 2007') with effect from 01.01.2007, which

were applicable to all its employees, superseding and replacing

the pre-merger service rules of the erstwhile SBI-Glits and

DFHI, the petitioner cannot contend that he was entitled to be

continued till 60 years as was the case in the respondent No.1.

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The period of service in any Organization is based on the Rules

framed by such Organization. The petitioner did not challenge

the Rules, 2007 until he retired from service and has now

belatedly claimed that the age of retirement in the banking

sector was generally 60 years. Besides, this, the petitioner has

raised this question after nearly four years from the date of his

retirement from respondent No.3. Therefore, he is not entitled

to the relief of continuation in service in respondent No.3 till

the age of 60 years.

The writ petition is allowed in part. As a result, the

respondent No.3 is directed to pay the differential amount of

pay and allowances to the petitioner by granting the pay scale

and allowances on par with that obtaining in the Reserve Bank

of India and re-determine the pension payable to the petitioner

in accordance with law. The respondent No.3 shall comply with

the above within three months from the date of receipt of a

certified copy of this order, failing which, the respondent No.3

shall pay the petitioner interest @ 9% per annum on the

differential amount from the date of filing of the writ petition till

the date of payment.

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The relief sought by the petitioner to notionally continue

his service in the respondent No.3 till the age of 60 years is

rejected.

Sd/-

(R. NATARAJ)
JUDGE

SMA

List No.: 1 Sl No.: 70