Supreme Court clarifies seniority rights upon reinstatement: Kerala Transport Development Finance Corporation Limited vs. Basil T K & Ors (2022)

Date of the Judgment: 31 January 2022. Citation: (2022) INSC 72. Judges: Dr Dhananjaya Y Chandrachud, J and Surya Kant, J. Can a wrongfully terminated employee, upon reinstatement, claim seniority over those who were continuously in service? The Supreme Court of India addressed this question in a recent service law case, clarifying the principles governing seniority rights in such situations. The core issue revolved around whether a period of wrongful termination should be counted towards seniority upon reinstatement, and how this affects the employee’s position relative to others who were continuously employed. The judgment was delivered by a two-judge bench comprising Dr. Dhananjaya Y Chandrachud, J and Surya Kant, J, with the opinion authored by Dr. Dhananjaya Y Chandrachud, J.

Case Background

In 2000, the respondents were initially appointed as Assistant Managers on a contractual basis at the Kerala Transport Development Finance Corporation Limited (KTDFCL). They continued in this position until 2006. On 22 February 2006, the KTDFCL’s Service Rules were approved by the State Government. The government then issued an order on 23 February 2006, regularizing the services of 106 contractual employees, including the respondents. However, this regularization was short-lived. On 12 February 2007, the State Government cancelled the regularization, citing irregularities in the appointment process and a lack of adherence to reservation policies for Scheduled Castes and Scheduled Tribes.

The respondents challenged the cancellation in the High Court, which quashed the cancellation order on 9 April 2007, due to lack of notice and hearing. The KTDFCL was allowed to initiate fresh proceedings. After a fresh notice, the government again terminated the respondents’ employment on 12 September 2007, 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, held that the respondents were on a different footing as they were appointed through a selection process and set aside the termination. The government was directed to pass fresh orders after hearing the respondents.

Following this, on 25 April 2008, the government rejected the respondents’ request for regularization. The respondents then filed another writ petition, which was allowed by the High Court on 9 October 2009. The High Court directed their reinstatement with retrospective effect from 12 September 2007, but without any monetary benefits for the period they were out of service, while granting them continuity of service. This order was upheld by a Division Bench on 14 March 2012. The State Government then issued an order on 28 April 2012, reinstating them from 12 September 2007, with continuity of service but without monetary benefits. The government further 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.

The respondents were promoted as Deputy Managers on 24 July 2014. A committee was formed to scrutinize the seniority and promotion of employees, which concluded that the respondents were eligible for promotion as Deputy Managers from 24 February 2007 and as Managers from 14 October 2012. A provisional seniority list on 15 July 2017 placed the respondents below Aneesh Babu, who was appointed as Assistant Manager on 27 September 2008, and regularized from 13 October 2008. The respondents objected to this, leading to the writ petition that resulted in the present appeals.

Timeline

Course of Proceedings

The respondents initially challenged their termination in the High Court of Kerala, which led to a series of judgments. The High Court initially quashed the government’s order cancelling their regularization in 2007, citing a lack of notice. Subsequently, after the government terminated their employment again, the High Court set aside this termination, noting that the respondents were appointed through a selection process. The High Court then directed the government to pass fresh orders after hearing the respondents. After the government rejected their request for regularization, the High Court directed their reinstatement with retrospective effect from 12 September 2007, but without any monetary benefits for the period they were out of service, while granting them continuity of service. This order was upheld by a Division Bench. Following this, the respondents filed a writ petition challenging their placement in the seniority list below Aneesh Babu, which was allowed by the Single Judge, who directed that the period they were out of service should be treated as notional service for the purpose of promotion. This was upheld by the Division Bench, leading to the present appeals before the Supreme Court.

Legal Framework

The case primarily revolves around the interpretation of the Kerala Transport Development Finance Corporation Rules (Service Rules), specifically Rule 18, which deals with seniority. Rule 18(a) states: “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.” The proviso to the rule states: “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 Court also considered the implications of the High Court’s order dated 9 October 2009, which directed the reinstatement of the respondents with retrospective effect from 12 September 2007, while granting them continuity of service but without any monetary benefits for the period they were out of service. The concept of continuity of service was central to the dispute, as the respondents argued that it meant their service should be treated as unbroken and uninterrupted, while the appellants argued that it did not entitle them to seniority benefits for the period they were out of service.

Arguments

Arguments on behalf of KTDFCL:

• The direction for reinstatement with continuity of service does not mean that the period out of service should be counted for the purpose of promotion.
• The High Court’s order of 9 October 2009, specifically stated that the respondents were not entitled to monetary benefits for the period they were out of service, and that the continuity of service meant that there would be no forfeiture of their previous service from 23 February 2006 to 12 September 2007.
• As per the Service Rules, a non-duty period cannot be counted for any service benefits, including probation and promotion.
• If the retrenched period of more than four years was considered as actual service, then the respondents would have been permitted to rejoin on 2 May 2012 at the highest promotional post of Chief Manager since the residency period for promotion from Assistant Manager to Deputy manager, and Deputy Manager to Manger is one year each.
• The respondents were originally promoted as Deputy Manager with effect from 24 July 2014. 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 even for a day since they served as Assistant Manager till 23 July 2014.
• 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.

Arguments on behalf of Aneesh Babu:

• Aneesh Babu was appointed through a due process of selection and was initially appointed on a contractual basis on 13 October 2008, but was later regularized on 12 December 2014, with effect from the original date of appointment.
• The respondents were initially appointed on a contractual basis, and their regularization was cancelled and then reinstated.
• The concept of continuity of service should not allow the respondents to gain seniority over Aneesh Babu, who fulfilled the minimum residency requirements for promotions.
• At the time when Aneesh Babu 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.

Arguments on behalf of the Respondents:

• The High Court’s order of 9 October 2009, directed their reinstatement with continuity of service, which means their service should be treated as unbroken and uninterrupted.
• The government’s clarification on 21 June 2013, stated that the period out of service would not affect their seniority or promotion prospects.
• 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.

Submissions of Parties

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

1. Whether the respondents, upon reinstatement, were entitled to count the period during which they were out of service for the purpose of seniority and promotion, and whether they could claim seniority over Aneesh Babu.

Treatment of the Issue by the Court

Authorities

The Court primarily relied on the interpretation of Rule 18 of the Kerala Transport Development Finance Corporation Rules (Service Rules), which deals with seniority. The Court also considered the High Court’s order dated 9 October 2009, which directed the reinstatement of the respondents with retrospective effect from 12 September 2007, while granting them continuity of service but without any monetary benefits for the period they were out of service. The Court also considered the clarification issued by the State Government on 21 June 2013, which stated that the period out of service would not affect their seniority or promotion prospects.

Judgment

The Supreme Court upheld the High Court’s decision, clarifying that the respondents were entitled to count the period during which they were out of service for the purpose of seniority and promotion. The Court held that the High Court’s order of reinstatement with continuity of service meant that their service should be treated as unbroken and uninterrupted. The Court also noted that the government had clarified that the period out of service would not affect their seniority or promotion prospects. The Court further held that the respondents were entitled to seniority over Aneesh Babu, as they were initially appointed to the post of Assistant Manager in 2000, whereas Aneesh Babu was appointed in 2008. The Court clarified that the respondents were not entitled to arrears of salary for the period between 2007 and 2012 when they were out of service, but they were entitled to all other benefits based on the fixation of pay. The Court also stated that the promotion to the post of Chief Manager shall take place in accordance with the Service Rules and Regulations.

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

How each authority was viewed by the Court?

The Court considered the following authorities:

• Rule 18 of the Kerala Transport Development Finance Corporation Rules (Service Rules): The Court interpreted this rule to determine seniority, emphasizing that seniority is determined by the date of first appointment.
• High Court’s order dated 9 October 2009: The Court considered this order, which directed reinstatement with continuity of service, as the basis for granting seniority benefits to the respondents.
• Clarification issued by the State Government on 21 June 2013: The Court relied on this clarification to support its conclusion that the period out of service should not affect the respondents’ seniority or promotion prospects.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle of continuity of service, which was granted to the respondents by the High Court’s order. The Court emphasized that the respondents’ initial appointment in 2000, followed by their wrongful termination and subsequent reinstatement, should not deprive them of their seniority rights. The Court also took into account the government’s clarification that the period out of service would not affect their seniority or promotion prospects. The Court also noted that the respondents were unjustly terminated from service and that the High Court had rectified this injustice. The Court also considered that Aneesh Babu was promoted despite not fulfilling the one year residency criteria in each post, and therefore the respondents should also be granted the same benefit.

Logical Reasoning

Key Takeaways

• Reinstatement with continuity of service means that the period out of service should be counted for the purpose of seniority and promotion.
• The date of first appointment is crucial in determining seniority, as per Rule 18 of the Service Rules.
• Government clarifications regarding service conditions are binding and must be considered.
• Wrongful termination should not deprive employees of their rightful seniority and promotion prospects.
• The principle of parity should be considered while granting benefits to employees.

Directions

The Supreme Court directed that:

• The respondents shall not be entitled to arrears of salary for the period between 2007 and 2012 when they were out of service.
• The rest of the directions of the Single Judge, as affirmed by the Division Bench, are maintained, subject to the clarification that the promotion to the post of Chief Manager shall take place in accordance with the Service Rules and Regulations.

Development of Law

The ratio decidendi of this case is that when an employee is reinstated with continuity of service after a wrongful termination, the period of absence should be counted for seniority and promotion purposes. This judgment reinforces the principle that wrongful actions by the employer should not disadvantage the employee and that the principle of continuity of service should be given its full effect. This judgment also clarifies that government clarifications regarding service conditions are binding and must be considered.

Conclusion

The Supreme Court’s judgment in Kerala Transport Development Finance Corporation Limited vs. Basil T K & Ors clarifies the principles governing seniority rights in reinstatement cases. The Court held that reinstatement with continuity of service means that the period out of service should be counted for the purpose of seniority and promotion. The Court also held that the respondents were entitled to seniority over Aneesh Babu, as they were initially appointed to the post of Assistant Manager in 2000, whereas Aneesh Babu was appointed in 2008. This judgment reinforces the principle that wrongful actions by the employer should not disadvantage the employee and that the principle of continuity of service should be given its full effect. This judgment also clarifies that government clarifications regarding service conditions are binding and must be considered.