Supreme Court settles promotion criteria: ESIC Regulations prevail over DACP Scheme (January 20, 2022)

Date of the Judgment: January 20, 2022

Citation: 2022 INSC 49

Judges: Dr Dhananjaya Y Chandrachud, J and A S Bopanna, J

Can an administrative scheme override statutory regulations? The Supreme Court of India recently addressed this crucial question in a case concerning the promotion of Assistant Professors within the Employees’ State Insurance Corporation (ESIC). The core issue revolved around whether the Dynamic Assured Career Progression (DACP) Scheme or the ESIC’s own Recruitment Regulations should govern promotions to the post of Associate Professor. The Supreme Court, in its judgment, clarified that the statutory regulations of the ESIC would prevail over the DACP Scheme. This decision has significant implications for the service conditions of employees in statutory bodies. The judgment was delivered by a two-judge bench comprising Dr. Dhananjaya Y Chandrachud, J and A S Bopanna, J.

Case Background

The case involves a dispute between the Employees’ State Insurance Corporation (ESIC) and several of its employees who were working as Assistant Professors at ESIC Model Hospital, Rajajinagar, Bengaluru. These Assistant Professors, referred to as the contesting respondents, had joined the ESIC between February 7, 2012, and June 26, 2014. At the time of their joining, the ESIC’s recruitment and promotion policies were governed by the Employees’ State Insurance Corporation (Medical Teaching Faculty Posts) Recruitment Regulations 2008. Subsequently, the ESIC introduced new regulations in 2015, which stipulated different criteria for promotion. The contesting respondents sought promotions based on the DACP scheme which was an Office Memorandum issued by the Central Government, which allowed for promotion to Associate Professor after two years of service.

Timeline:

Course of Proceedings

The contesting respondents, after completing two years of service, sought promotion under the DACP Scheme. They approached the Central Administrative Tribunal (CAT), Bengaluru. The CAT, relying on a submission by the ESIC’s counsel and a letter indicating the implementation of the DACP Scheme, directed the ESIC to consider the contesting respondents for promotion under the DACP Scheme. The ESIC challenged this order before the High Court of Karnataka. The High Court dismissed the ESIC’s petition, holding that the contesting respondents were entitled to the benefit of the DACP Scheme as they were recruited before the 2015 Regulations came into effect and also that the DACP Scheme has statutory effect under Section 17 of the ESI Act. The High Court also noted that the ESIC Recruitment Regulations 2015 departed from the DACP Scheme without prior approval of the Central Government.

Legal Framework

The core of this case revolves around the interpretation of Section 17 and Section 97 of the Employees’ State Insurance Act, 1948 (ESI Act).

Section 17 of the ESI Act deals with the staff of the corporation:

“17. Staff.—(1) The Corporation may employ such other staff of officers and servants as may be necessary for the efficient transaction of its business, provided that the sanction of the Central Government shall be obtained for the creation of any post the maximum monthly salary of which exceeds such salary as may be prescribed by the Central Government.

(2)(a) The method of recruitment, salary and allowances, discipline and other conditions of service of the members of the staff of the Corporation shall be such as may be specified in the regulations made by the Corporation in accordance with the rules and orders applicable to the officers and employees of the Central Government drawing corresponding scales of pay:

Provided that where the Corporation is of the opinion that it is necessary to make a departure from the said rules or orders in respect of any of the matters aforesaid, it shall obtain the prior approval of the Central Government:

Provided further that this sub- section shall not apply to appointment of consultants and specialists in various fields appointed on contract basis,

(b) In determining the corresponding scales of pay of the members of the staff under clause (a), the Corporation shall have regard to the educational qualifications, method of recruitment, duties and responsibilities of such officers and employees under the Central Government and in case of any doubt, the Corporation shall refer the matter to the Central Government whose decision thereon shall be final …….”

Section 97 of the ESI Act empowers the ESIC to make regulations:

“97. Power of Corporation to make regulations.—(1) The Corporation may, subject to the condition of previous publication, make regulations, not inconsistent with this Act and the rules made thereunder, for the administration of the affairs of the Corporation and for carrying into effect the provisions of this Act.

(2) In particular and without prejudice to the generality of the foregoing power, such regulations may provide for all or any of the following matters, namely —

[…..]

(xvi) the appointment of medical practitioners for the purposes of this Act, the duties of such practitioners and the form of medical certificates;

[…..]

(xxi) the method of recruitment, pay and allowances, discipline, superannuation benefits and other conditions of service of the officers and servants of the Corporation other than the [Director General and Financial Commissioner;

[…..]

(xxiii) any matter in respect of which regulations are required or permitted to be made by this Act.

(2-A) The condition of previous publication shall not apply to any regulations of the nature specified in clause (xxi) of sub-section (2).

(3) Regulations made by the Corporation shall be published in the Gazette of India and thereupon shall have effect as if enacted in this Act.

(4) Every regulation shall, as soon as may be, after it is made by the Corporation, be forwarded to the Central Government and that Government shall cause a copy of the same to be laid before each House of Parliament, while it is in session for a total period of thirty days, which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the regulation or both Houses agree that the regulation should not be made, the regulation shall thereafter have effect only in such modified form or be of no effect, as the case may be, so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that regulation.”

The ESIC Recruitment Regulations 2008 and 2015 were framed under Section 97 of the ESI Act, giving them statutory force. These regulations stipulated the required years of service for promotion from Assistant Professor to Associate Professor. The DACP Scheme, on the other hand, was an Office Memorandum issued by the Central Government.

Arguments

Appellant (ESIC)’s Submissions:

• The ESIC is an autonomous statutory body with the power to frame its own regulations under Section 97 of the ESI Act.
• The ESIC Recruitment Regulations 2015 stipulate a minimum of five years of qualifying service for promotion to Associate Professor, and this cannot be overridden by the DACP Scheme.
• The DACP Scheme applies to employees of the Central Government ministries and departments, not to statutory bodies like the ESIC.
• Section 17(2) of the ESI Act allows ESIC to depart from Central Government service conditions with prior approval.
• The ESIC Recruitment Regulations 2008, which required four years of service, were in effect when the contesting respondents joined.
• The High Court incorrectly held that the ESIC Recruitment Regulations 2015 were issued without Central Government approval. The preamble to the regulations explicitly states otherwise.
• A concession made by the ESIC’s counsel before the CAT does not amount to estoppel against statutory regulations.
• The ESIC Recruitment Regulations 2015 specifically govern “Medical Teaching Faculty Posts,” making the DACP Scheme inapplicable.
• Inconsistency between an advertisement and recruitment rules, the rules prevail.

Contesting Respondents’ Submissions:

• The DACP Scheme, as per Office Memorandums issued in 2008, applies to all medical doctors, including those in isolated posts, and is binding on the ESIC under Section 17(2)(a) of the ESI Act.
• The ESIC Recruitment Regulations 2008 were issued without the Central Government’s approval.
• The ESIC’s advertisements for Assistant Professor posts mentioned the availability of promotional avenues under the DACP Scheme.
• The ESIC had internally acknowledged that its recruitment regulations were under revision to align with the DACP Scheme.
• The ESIC Recruitment Regulations 2015 were also issued without obtaining prior approval from the Central Government.
• The ESIC admitted before the CAT and the High Court that the DACP Scheme applies to its employees.
• The contesting respondents had completed two years of service before the ESIC Recruitment Regulations 2015 came into effect, making them eligible for promotion under the DACP Scheme.
• The contesting respondents had three or more years of teaching experience before joining the ESIC, and the five-year requirement should be interpreted reasonably.
• Denial of the DACP Scheme to the ESIC’s teaching cadre violates Article 14 of the Constitution, especially when they perform similar functions as doctors in Central Government.
• The ESIC has, in other legal proceedings, argued that the DACP scheme is applicable to its employees from 01 March 2008.
• The ESIC is estopped from denying the applicability of the DACP scheme due to representations made in recruitment advertisements.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

1. Whether the Dynamic Assured Career Progression (DACP) Scheme or the Employees’ State Insurance Corporation (ESIC) Recruitment Regulations govern the promotion of Assistant Professors to Associate Professors.

Treatment of the Issue by the Court:

Authorities

The Supreme Court considered the following authorities:

On the statutory force of regulations:

• Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi [1975] 1 SCC 421, Supreme Court of India: The Court held that regulations framed by statutory authorities have the force of law.
• Pepsu Road Transport Corporation, Patiala v. Mangal Singh and Others [2011] 11 SCC 702, Supreme Court of India: The Court held that regulations made under a statute have the force of law.

On the precedence of statutory rules over executive instructions:

• Sant Ram Sharma v. State of Rajasthan AIR 1967 SC 1910, Supreme Court of India: The Court held that administrative instructions cannot amend or supersede statutory rules.
• Union of India v. Ashok Kumar Aggarwal [2013] 16 SCC 147, Supreme Court of India: The Court held that executive instructions can only supplement statutory rules, not supplant them.
• P D Aggarwal v. State of U.P. [1987] 3 SCC 622, Supreme Court of India: The Court held that an office memorandum cannot override statutory rules.
• Union of India v. Majji Jangamayya [1977] 1 SCC 606, Supreme Court of India: The Court distinguished between statutory orders and administrative instructions.

On the effect of erroneous advertisements:

• Malik Mazhar Sultan v. U.P. Public Service Commission [2006] 9 SCC 507, Supreme Court of India: The Court clarified that an erroneous advertisement cannot create a right if it is contrary to the rules.
• Ashish Kumar v. State of Uttar Pradesh [2018] 3 SCC 55, Supreme Court of India: The Court held that statutory rules take precedence over an erroneous advertisement.
• Rajasthan Public Service Commission v. Chanan Ram [1998] 4 SCC 202, Supreme Court of India: The Court held that an earlier advertisement becomes infructuous after a subsequent amendment to service rules.

On estoppel against statute:

• Nedunuri Kameswaramma v. Sampati Subba Rao AIR 1963 SC 884, Supreme Court of India: The Court held that a concession on a point of law does not bind the client.
• Himalayan Coop. Group Housing Society v. Balwan Singh [2015] 7 SCC 373, Supreme Court of India: The Court clarified that neither the client nor the court is bound by a lawyer’s statements or admissions on matters of law.
• Director of Elementary Education, Odisha v. Pramod Kumar Sahoo [2019] 10 SCC 674, Supreme Court of India: The Court held that a concession on a question of law concerning service rules would not bind the State.

Legal Provisions Considered:

• Section 17 of the Employees’ State Insurance Act, 1948: Deals with the staff of the corporation.
• Section 97 of the Employees’ State Insurance Act, 1948: Empowers the ESIC to make regulations.

Authority Table

Judgment

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

How each authority was viewed by the Court?

• Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi [1975] 1 SCC 421*: The Court relied on this case to establish that regulations framed by statutory authorities have the force of law.
• Pepsu Road Transport Corporation, Patiala v. Mangal Singh and Others [2011] 11 SCC 702*: The Court cited this to reinforce that regulations made under a statute have the force of law.
• Sant Ram Sharma v. State of Rajasthan AIR 1967 SC 1910*: The Court used this case to emphasize that administrative instructions cannot amend or supersede statutory rules.
• Union of India v. Ashok Kumar Aggarwal [2013] 16 SCC 147*: The Court relied on this to reiterate that executive instructions can only supplement, not supplant, statutory rules.
• P D Aggarwal v. State of U.P. [1987] 3 SCC 622*: The Court cited this case to support its view that an office memorandum cannot override statutory rules.
• Union of India v. Majji Jangamayya [1977] 1 SCC 606*: The Court used this to distinguish between statutory orders and administrative instructions.
• Malik Mazhar Sultan v. U.P. Public Service Commission [2006] 9 SCC 507*: The Court relied on this to clarify that an erroneous advertisement cannot create a right if it is contrary to the rules.
• Ashish Kumar v. State of Uttar Pradesh [2018] 3 SCC 55*: The Court cited this case to hold that statutory rules take precedence over an erroneous advertisement.
• Rajasthan Public Service Commission v. Chanan Ram [1998] 4 SCC 202*: The Court used this to hold that an earlier advertisement becomes infructuous after a subsequent amendment to service rules.
• Nedunuri Kameswaramma v. Sampati Subba Rao AIR 1963 SC 884*: The Court relied on this to assert that a concession on a point of law does not bind the client.
• Himalayan Coop. Group Housing Society v. Balwan Singh [2015] 7 SCC 373*: The Court cited this to clarify that neither the client nor the court is bound by a lawyer’s statements on matters of law.
• Director of Elementary Education, Odisha v. Pramod Kumar Sahoo [2019] 10 SCC 674*: The Court used this to emphasize that a concession on a question of law concerning service rules would not bind the State.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the statutory nature of the ESIC Recruitment Regulations and the principle that statutory rules prevail over executive instructions. The Court emphasized the following points:

• The ESIC Recruitment Regulations, framed under Section 97 of the ESI Act, have the force of law.
• The DACP Scheme, being an Office Memorandum, is an executive instruction and cannot override statutory regulations.
• The ESIC Recruitment Regulations 2015 were validly issued with the approval of the Central Government.
• The principle that in case of conflict between an advertisement and service regulations, the latter prevail.
• There is no estoppel against a statute.

Ranking of Sentiment Analysis of Reasons:

Fact:Law Ratio

The court’s reasoning was heavily influenced by legal principles and statutory interpretations, rather than factual aspects of the case.

Flowchart of Court’s Reasoning

Final Decision

The Supreme Court set aside the judgment of the High Court of Karnataka and upheld the applicability of the ESIC Recruitment Regulations. The Court held that the ESIC Recruitment Regulations 2015, which stipulate a minimum of five years of qualifying service for promotion to Associate Professor, would govern the promotion of the contesting respondents. The Court emphasized that the ESIC, being a statutory body, has the power to frame its own regulations under Section 97 of the ESI Act and that these regulations have the force of law.

Implications

The Supreme Court’s judgment has significant implications for the service conditions of employees in statutory bodies. It clarifies that:

• Statutory regulations framed by a body under the authority of a statute will prevail over executive instructions or office memorandums.
• Statutory bodies have the autonomy to frame their own service rules, which cannot be overridden by general schemes or policies of the Central Government.
• Erroneous advertisements cannot create a right if they are contrary to the service rules.
• Concessions made on a point of law do not bind the client or the court.

This decision reinforces the importance of statutory regulations in governing the service conditions of employees and ensures that statutory bodies have the autonomy to manage their affairs in accordance with the law. This judgment will serve as a precedent for future cases involving conflicts between statutory regulations and administrative schemes.