Supreme Court Clarifies Seniority Rights in Reinstatement Cases: Kerala Transport Development Finance Corporation Limited vs. Basil T K & Ors (2022)

Introduction

Date of the Judgment: 31 January 2022

Citation: 2022 INSC 88

Judges: Dr Dhananjaya Y Chandrachud, J and Surya Kant, J

Can a reinstated employee claim seniority over a colleague who was continuously in service? The Supreme Court of India recently addressed this question in a case involving the Kerala Transport Development Finance Corporation Limited (KTDFCL). The core issue revolved around determining the seniority of employees who were reinstated after being wrongly terminated, specifically concerning their eligibility for promotions and other service benefits. The judgment was delivered by a two-judge bench comprising Justice Dr. Dhananjaya Y Chandrachud and Justice Surya Kant.

Case Background

In 2000, Basil T K and Sherith A (referred to as “the respondents”) were appointed as Assistant Managers at KTDFCL on a contractual basis for one year. They continued in this position until 2006. On 22 February 2006, the KTDFCL’s Service Rules were approved, and the government issued an order to regularize the services of 106 contractual employees, including the respondents, on 23 February 2006. However, this regularization was cancelled on 12 February 2007, because the appointments did not follow standard recruitment procedures and reservation policies.

The High Court of Kerala quashed the cancellation order on 9 April 2007, citing lack of notice to the affected employees. KTDFCL was allowed to re-examine the matter. Following this, on 12 September 2007, the government terminated the respondents’ employment, stating that the posts were not available at the time of their initial appointment and that the initial appointment and subsequent regularization were irregular. The High Court, on 11 October 2007, differentiated the respondents from other retrenched employees, noting that they were appointed through a selection process, and set aside their termination. The government was directed to pass fresh orders after hearing the respondents.

On 25 April 2008, after hearing the respondents, the government rejected their request for regularization. The respondents then filed another writ petition, which was allowed by the High Court on 9 October 2009, directing their reinstatement with retrospective effect from 12 September 2007, but without any monetary benefits for the period they were out of service. This order was upheld by a division bench on 14 March 2012.

The State Government issued GO (MS) No 23/2012 on 28 April 2012, reinstating the respondents with continuity of service but without monetary benefits. The government clarified on 3 November 2012, that the period out of service would be treated as “non-duty” without forfeiture of past service, and on 21 June 2013, that it would not affect their seniority or promotion prospects. Increments were authorized on 9 January 2014, excluding the period from 12 September 2007 to 2 May 2012. The respondents were promoted as Deputy Managers on 24 July 2014.

A committee was formed on 18 March 2016, to scrutinize the seniority and promotion of regular employees. It recommended that the respondents be promoted as Deputy Managers from 24 February 2007 and as Managers from 14 October 2012. A seniority list published on 7 February 2017, placed the respondents at Serial Nos. 1 and 2, while Aneesh Babu, another employee, was placed at Serial No. 3. On 24 March 2017, the Staff Promotion Committee resolved to promote the respondents as Managers but referred the eligibility dates to the government. The government accepted the committee’s report on 5 July 2017, without retrospective monetary benefits. A provisional seniority list on 15 July 2017, placed Aneesh Babu at S.No 1 and the respondents at S.Nos 2 and 3.

The respondents objected to the seniority list, arguing that the period of their retrenchment should be counted for promotion. On 11 December 2017, the Staff Promotion Committee finalized the seniority list. The respondents then filed a writ petition challenging the seniority list.

Timeline:

Course of Proceedings

The respondents initially challenged the cancellation of their regularization before the High Court of Kerala, which quashed the cancellation order on 9 April 2007. The High Court again intervened on 11 October 2007, setting aside the termination of the respondents and directing the government to pass fresh orders after hearing them. After the government rejected their request for regularization on 25 April 2008, the respondents filed another writ petition.

A Single Judge of the High Court set aside the government’s order on 9 October 2009, directing the reinstatement of the respondents with retrospective effect from 12 September 2007, but without monetary benefits for the period they were out of service. A writ appeal against this order was dismissed on 14 March 2012.

Subsequently, the respondents filed another writ petition challenging the seniority list, which led to the Single Judge of the High Court ruling in their favor on 6 December 2018, directing that the period they were out of service be treated as notional service for promotion. This decision was upheld by the Division Bench on 14 March 2019.

Legal Framework

The case primarily revolves around the interpretation and application of the Kerala Transport Development Finance Corporation Rules (referred to as “Service Rules”). The Service Rules contain provisions for promotion and determination of seniority.

Rule 18 of the Service Rules deals with seniority and states:

“18.Seniority
(a) Seniority of a person in a service, class, category or grade shall unless he has been reduced to a lower rank as punishment be determined by the date of order of his first appointment to such service, class category or grade.
Provided that the seniority of persons appointed direct, otherwise than on advice of the Commission shall be in accordance with the ranked list of approved candidates.”

The Service Rules also define “Approved Probationer,” though the specific definition is not provided in the judgment. The rules also specify the conditions for promotion, which include a residency period in the current post.

Arguments

KTDFCL argued that:

• If the retrenched period of more than four years was considered as actual service, the respondents would have been promoted to the highest post of Chief Manager immediately upon rejoining, as the residency period for promotion from Assistant Manager to Deputy Manager and Deputy Manager to Manager is one year each.
• The High Court, in its judgment dated 9 October 2009, directed the reinstatement of the respondents without monetary benefit, only with continuity of service, which means that there would be no forfeiture of their previous service from 23 February 2006 to 12 September 2007.
• Under the Service Rules, non-duty period cannot be counted for any service benefits, including probation and promotion.
• Aneesh Babu was appointed as Assistant Manager on 13 October 2008 through direct recruitment after undergoing a three-tier selection process and his service was considered for calculating the residency periods for the purpose of promotion.
• The respondents were originally promoted as Deputy Manager with effect from 24 July 2014, and the one year residency period would only be completed on 24 July 2015. However, by holding that the respondents would be entitled to be promoted as Manager with effect from 14 October 2012, they were promoted without serving in the post of Deputy Manager.
• The committee followed a uniform procedure of counting their service in KTDFCL for calculating residency period for the purpose of promotion. The only period that was not calculated with respect to the respondents was the period they spent out of service due to the retrenchment.

The respondents argued that:

• The government had informed them on 21 June 2013, that the period during which they were kept out of service would not affect their prospect of promotion.
• They were unable to perform their duties since they were unjustly terminated from service, which was subsequently rectified by the High Court.
• Aneesh Babu was granted promotion reckoning the service rendered by him in the post of Assistant Manager for promotion to Deputy Manager and Manager. However, according to the Service Rules, actual service in each of the posts is a requirement. If the benefit of promotion is denied to the respondents on that ground, it must be denied to Aneesh Babu as well on the ground of parity.
• The High Court, while directing the respondents to be reinstated, directed that continuity of service must be provided.
• The period when they stood retrenched must be counted as service completed for the purpose of promotion.

Aneesh Babu argued that:

• He was appointed as an Assistant Manager through a due process of selection.
• Despite being appointed through a due process, he was initially appointed on a contractual basis on 13 October 2008, but the injustice to him was rectified and he was eventually regularized on 12 December 2014 with effect from the original date of appointment.
• The respondents were appointed purely on a contractual basis, and their regularization was a result of the initial order of regularization dated 23 February 2006.
• The consequence of the direction to grant continuity of service would mean that the services of the respondents would have to be treated as unbroken and uninterrupted.
• The respondents had not fulfilled minimum residency requirements when they were promoted as Deputy Mangers and Managers, and since he had, he must rank higher in seniority in the post of Manager.
• At the time when he fulfilled the residency requirement of one year in each of the subsequent posts as Deputy Manager and Manager, he was the only eligible candidate for promotion to the post of Chief Maanager.
• The subsequent reinstatement in service of the respondents should not allow them to steal a march in seniority over him.

The innovativeness of the argument of the respondents lies in their reliance on the concept of “continuity of service” as directed by the High Court, arguing that it implies their service should be treated as unbroken and uninterrupted, thereby entitling them to seniority benefits as if they had been continuously employed.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section, but the core issues that were addressed were:

1. Whether the respondents are entitled to have the period during which they were kept out of service counted for the purpose of seniority and promotion.
2. Whether the direction to grant continuity of service to the respondents means that their service should be treated as unbroken and uninterrupted.
3. Whether the respondents’ seniority should be placed above Aneesh Babu, given that Aneesh Babu was continuously in service.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Cases:

• The judgment of the Single Judge of the Kerala High Court dated 9 October 2009, which directed the reinstatement of the respondents with retrospective effect from 12 September 2007, but without monetary benefits for the period they were out of service.
• The judgment of the Single Judge of the Kerala High Court dated 6 December 2018, which directed KTDFCL to grant promotion to the respondents, treating the period during which they were kept out of service, as notional service.

Legal Provisions:

• Rule 18 of the Kerala Transport Development Finance Corporation Rules (Service Rules), which provides for the determination of seniority based on the date of first appointment.

Treatment of Authorities by the Court

Judgment

The Supreme Court’s judgment can be summarized as follows:

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The judgment of the Single Judge of the Kerala High Court dated 9 October 2009* was followed, with the Supreme Court emphasizing the importance of the direction for reinstatement with continuity of service. The Court clarified that while continuity of service was granted, monetary benefits for the period out of service were not applicable.
• The judgment of the Single Judge of the Kerala High Court dated 6 December 2018* was modified. The Supreme Court upheld the direction for notional service but clarified that the respondents were not entitled to arrears of salary for the period they were out of service.
• Rule 18 of the Kerala Transport Development Finance Corporation Rules (Service Rules)* was applied to determine the seniority of the respondents based on their initial date of appointment.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle of “continuity of service” as directed by the High Court in its earlier judgment. The Court emphasized that when a termination is deemed illegal and the employee is reinstated with continuity of service, the period of wrongful termination should not negatively impact their career progression. The Court also focused on ensuring fairness and equity, noting that the respondents were unjustly terminated and that their reinstatement should restore them to their rightful position.

The Court was also influenced by the fact that the respondents were initially appointed earlier than Aneesh Babu. The court reasoned that since the respondents’ regularization was made retrospective to their initial date of appointment, they should be placed above Aneesh Babu in the seniority list.

The Court also considered the fact that Aneesh Babu, despite not fulfilling the one year residency criteria in each post, was promoted taking into account his service as the Assistant Manager. This was a point of parity that the Court considered to ensure a fair outcome.

Sentiment Analysis of Reasons Given by the Supreme Court:

Fact:Law Ratio:

The Court’s reasoning was primarily based on legal interpretations and the application of the principle of continuity of service. The factual aspects of the case, such as the dates of appointment and the specific circumstances of the termination, were considered in light of the legal principles.

Logical Reasoning

Issue 1: Whether the respondents are entitled to have the period during which they were kept out of service counted for the purpose of seniority and promotion.

Issue 2: Whether the direction to grant continuity of service to the respondents means that their service should be treated as unbroken and uninterrupted.

Issue 3: Whether the respondents’ seniority should be placed above Aneesh Babu, given that Aneesh Babu was continuously in service.

Key Takeaways

• Continuity of Service: The principle of “continuity of service” is paramount in cases of wrongful termination and reinstatement. It ensures that employees are not penalized for periods during which they were unjustly kept out of service.
• Seniority Rights: Reinstated employees are entitled to have their seniority reckoned from their initial date of appointment, especially when the reinstatement is with continuity of service.
• No Monetary Benefits: While reinstated employees are entitled to continuity of service, they are not automatically entitled to monetary benefits for the period they were out of service, unless specifically directed by the court.
• Fairness and Equity: The court emphasized the need for fairness and equity in service matters, ensuring that employees who have been wronged are restored to their rightful position.

Potential Future Impact:

• This judgment sets a precedent for cases involving reinstatement and seniority rights, particularly in the context of service law.
• It reinforces the importance of adhering to the principle of continuity of service in cases of wrongful termination.
• The judgment may lead to a more equitable treatment of reinstated employees, ensuring that they are not disadvantaged in terms of seniority and promotion prospects.
• It may also prompt employers to be more cautious in terminating employees and to ensure that proper procedures are followed.