Supreme Court Clarifies Service Calculation for Inter-Company Transfers: Coal India Ltd. vs. Navin Kumar Singh (25 September 2018)

Date of the Judgment: 25 September 2018

Citation: (2018) INSC 846

Judges: Dipak Misra, CJI, A.M. Khanwilkar, J., Dr. D.Y. Chandrachud, J.

Can an employee’s past service in a parent company be completely disregarded when considering promotion eligibility after an inter-company transfer? The Supreme Court of India recently addressed this question in a case involving Coal India Limited and one of its employees. The court clarified that while seniority might be affected by such transfers, past service cannot be ignored when determining eligibility for promotion. This judgment has significant implications for employees undergoing inter-company transfers. The bench was composed of Chief Justice Dipak Misra and Justices A.M. Khanwilkar and Dr. D.Y. Chandrachud, with the judgment authored by Justice A.M. Khanwilkar.

Case Background

Navin Kumar Singh, the respondent, was initially appointed as a Chemical Engineer in E-2 Grade at Dankuni Coal Complex (DCC), a unit of Coal India Limited (CIL), on 27th June, 1990, and joined on 4th August, 1990. On 23rd April, 1991, at his request, he was transferred to Central Mine Planning and Design Institute Limited (CMPDIL), another subsidiary of CIL, in the same grade. The transfer order specified that his seniority in the E-2 Grade would be reckoned from the date he joined CMPDIL, i.e., 15th May, 1991. In September 1993, when promotions from E-2 to E-3 Grade were considered, Singh was overlooked because CIL did not count his previous service at DCC. He was eventually promoted to E-3 Grade in December 1994, but his seniority was kept separate. Singh then challenged the decision to exclude his service at DCC while considering his eligibility for promotion.

Timeline

Course of Proceedings

Initially, Singh filed a writ petition (CWJC No.2074/1997) before the High Court of Jharkhand, seeking notional seniority in the E-3 Grade from 12th November, 1993. The Single Judge directed CIL to consider his representation. CIL rejected his representation on 16th February, 1999 stating that the applicable policy at the time of considering the respondent’s seniority was that an employee would lose his past seniority in his existing Grade in the event of an inter -company transfer, if the request for transfer was made by the employee himself. Aggrieved, Singh filed another writ petition (CWJC No.4177 of 2000). The Single Judge allowed the writ petition on 20th June, 2003, holding that Singh’s service at DCC should not be overlooked. CIL appealed, and the Division Bench of the High Court upheld the Single Judge’s decision on 20th May, 2010, with minor modifications, stating that the past service could not be forfeited for all purposes, except for seniority. A review petition filed by CIL was dismissed on 11th December, 2013, leading to the present appeal before the Supreme Court.

Legal Framework

The case revolves around the interpretation of Coal India Limited’s policy regarding inter-company transfers, specifically clause 11, which deals with the determination of seniority of executives in E-1 to E-4 grades. According to this policy, when an inter-company transfer is effected on personal grounds at the request of the executive, their seniority in the new company is fixed as if they entered the grade on the date of their assumption of charge. This means the executive loses their past seniority in the grade. The policy was further clarified by an Office Memorandum dated 5th June, 1985, which stated that while the transferred officer’s name would be placed at the bottom of the seniority list, their past service in the previous company would count towards eligibility for promotion, provided they had completed the minimum prescribed period of service in the previous company. The court also considered the principles laid down in previous cases, specifically, Union of India and Ors. Vs. C.N. Ponnappan and Scientific Advisor to Raksha Mantri and Anr. Vs. V.M. Joseph.

Arguments

Appellant’s Arguments:

• The appellant argued that the respondent’s claim was against the policy under which he was transferred to CMPDIL at his own request.
• They contended that the Office Memorandum dated 5th June, 1985, had no application to the facts of the case as there was no senior executive above the respondent in the new company.
• The appellant argued that the policy of inter-company transfer on personal request clearly stated that the executive would lose his past seniority in the grade and that the past service could not be counted for promotion.

Respondent’s Arguments:

• The respondent argued that the policy only governed seniority and did not affect the length of service.
• He contended that his past service at DCC should be counted for determining his eligibility for promotion to E-3 Grade.
• He relied on the decisions in Union of India and Ors. Vs. C.N. Ponnappan and Scientific Advisor to Raksha Mantri and Anr. Vs. V.M. Joseph, stating that past service should be considered for promotion eligibility.
• The respondent argued that the policy was only to ensure that no prejudice is caused to the executives already working in the transferred company.

Issues Framed by the Supreme Court

The Supreme Court framed the following key issue:

1. Whether the policy regarding the determination of inter-se seniority of the executives on inter-company transfers would come in the way of the respondent for reckoning his eligibility for promotion to the higher Grade i.e. E-3 Grade, whilst in the new transferred company (CMPDIL)?

Treatment of the Issue by the Court

Authorities

Cases Relied Upon by the Court:

• Union of India and Ors. Vs. C.N. Ponnappan [ (1996) 1 SCC 524 ] – Supreme Court of India
  • The Court relied on this case to emphasize that service rendered at the place from where an employee was transferred is regular service and should be counted for eligibility for promotion.
• Scientific Advisor to Raksha Mantri and Anr. Vs. V.M. Joseph [ (1998) 5 SCC 305 ] – Supreme Court of India
  • The Court relied on this case to reiterate that eligibility for promotion cannot be confused with seniority, and that past service should be considered for promotion eligibility.

Legal Provisions Considered by the Court:

• Clause 11 of the policy of Coal India Limited regarding determination of seniority of executives on inter-company transfers.
  • The Court interpreted this clause to mean that while seniority in the new company is reckoned from the date of joining, past service in the parent company should still be considered for promotion eligibility.
• Office Memorandum dated 5th June, 1985, issued by the General Manager (Personnel) of Coal India Limited.
  • The Court noted that this memorandum clarified that past service would count towards eligibility for promotion, provided the minimum prescribed period of service was completed in the previous company.

Judgment

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

How each authority was viewed by the Court?

• The Court followed the principles laid down in Union of India and Ors. Vs. C.N. Ponnappan [(1996) 1 SCC 524]* and Scientific Advisor to Raksha Mantri and Anr. Vs. V.M. Joseph [(1998) 5 SCC 305]*, emphasizing that past service should be considered for promotion eligibility.
• The Court interpreted Clause 11 of the policy of Coal India Limited to mean that while seniority in the new company is reckoned from the date of joining, past service in the parent company should still be considered for promotion eligibility.
• The Court noted that the Office Memorandum dated 5th June, 1985, clarified that past service would count towards eligibility for promotion, provided the minimum prescribed period of service was completed in the previous company.

What weighed in the mind of the Court?

The Supreme Court emphasized that the policy of forfeiture of seniority on inter-company transfers was limited to seniority and did not extend to the length of service for promotion eligibility. The court held that the service rendered by the respondent in the parent company (DCC) should be reckoned for determining his eligibility for promotion to E-3 Grade. The court also noted that the policy was to ensure that no prejudice was caused to the executives already working in the transferred company. The court emphasized that eligibility for promotion cannot be confused with seniority as they are two different and distinct factors. The court also stated that the Office Memorandum dated 5th June, 1985, supported the view that past service should be counted for promotion eligibility.

Logical Reasoning:

The court considered the policy of inter-company transfers and clarified that while seniority is affected by the transfer, the length of service in the previous company cannot be ignored for the purpose of promotion eligibility. The court relied on previous judgments to support its view that eligibility for promotion and seniority are distinct concepts. The court also considered the Office Memorandum dated 5th June, 1985, which clarified that past service would count towards eligibility for promotion. The court rejected the argument that the respondent’s past service should be completely disregarded. The court concluded that the High Court was correct in directing CIL to grant notional promotion from 12th November, 1993.

“The policy of forfeiture of seniority in the parent company, however, is limited to the executives who seek inter-company transfer on personal grounds. That is to ensure that no prejudice is caused to the executives already working in the transferred company.”

“Eligibility for promotion cannot be confused with seniority as they are two different and distinct factors.”

“The service rendered by him in DCC can be and ought to be taken into account for all other purposes, other than for determination of his seniority in E-2 Grade in the new company i.e. CMPDIL.”

Key Takeaways

• Past service in a parent company cannot be ignored when determining promotion eligibility after an inter-company transfer on personal grounds.
• While seniority in the new company is reckoned from the date of joining, past service should be considered for promotion eligibility.
• Eligibility for promotion and seniority are distinct concepts, and the policy of forfeiture of seniority does not extend to the length of service for promotion eligibility.
• This judgment clarifies the rights of employees who have undergone inter-company transfers on personal request.

Directions

The Supreme Court upheld the High Court’s direction to assign a notional date of promotion to the respondent in E-3 Grade with effect from 12th November, 1993.

Development of Law

The ratio decidendi of this case is that while an employee who transfers to another company on personal grounds loses seniority, their past service in the previous company must be counted for the purpose of eligibility for promotion. This judgment reinforces the principle that eligibility for promotion and seniority are distinct factors and clarifies that policies related to inter-company transfers should not be interpreted to deny employees the benefits of their past service. This ruling clarifies that the policy of forfeiture of seniority does not extend to length of service, thus ensuring that employees are not unfairly disadvantaged due to inter-company transfers. This clarifies the position of law and reinforces the principles laid down in Union of India and Ors. Vs. C.N. Ponnappan and Scientific Advisor to Raksha Mantri and Anr. Vs. V.M. Joseph.

Conclusion

The Supreme Court dismissed the appeals filed by Coal India Limited, affirming the High Court’s decision. The court held that while an employee who transfers to another company on personal grounds loses seniority, their past service in the previous company must be counted for the purpose of eligibility for promotion. This judgment clarifies the rights of employees undergoing inter-company transfers and ensures that their past service is not disregarded when considering promotion eligibility.