Statutory placement scheme upheld: employee seniority and fitment after bank amalgamation were sustained on relevant considerations.

SC held that Section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 empowered the Central Government to frame a placement scheme covering fitment and inter-se seniority of employees after amalgamation. Judicial review was limited to whether the scheme was arbitrary, irrational, perverse, mala fide, or based on extraneous considerations, and the Court would not substitute its own view. The 2:1 ratio in the placement clauses was upheld because it was supported by relevant material, including the transferor bank's weakness and manpower considerations. The scheme was not treated as retrospectively altering rights, and the scheme-making process was held to be legislative in nature. The challenge failed.

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Issues: (i) whether the Central Government had power under Section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 to frame the placement scheme regulating placement and inter-se seniority of employees of the transferor bank; (ii) what is the scope of judicial review over such amalgamation and placement schemes; (iii) whether the ratio of 2:1 in Clauses 4(a)(iii) and 4(b)(ii) was arbitrary or irrational for want of relevant material; (iv) whether the placement scheme was retrospective in nature; and (v) whether the scheme-making process under Section 9 of the Act was legislative in nature.

Issue (i): whether the Central Government had power under Section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 to frame the placement scheme regulating placement and inter-se seniority of employees of the transferor bank.

Analysis: The amalgamation scheme left the question of placement and inter-se seniority to a further scheme to be framed by the Central Government in consultation with the Reserve Bank of India. The expression "placement" was understood to include fitment in the transferee bank and the consequential seniority position in the relevant cadre. The scheme did not alter the service conditions in a manner beyond the statutory and scheme-based authority conferred for the amalgamation exercise.

Conclusion: The Central Government had the power to frame the placement scheme.

Issue (ii): what is the scope of judicial review over such amalgamation and placement schemes.

Analysis: The governing test was whether the scheme was arbitrary, irrational, perverse, mala fide, or founded on extraneous considerations. The Court emphasised that it cannot substitute its own administrative preferences for the scheme-maker's judgment if the scheme reflects a rational attempt to balance competing claims in a public sector restructuring.

Conclusion: Interference is warranted only on proof of arbitrariness, irrationality, perversity, mala fides, or extraneous considerations.

Issue (iii): whether the ratio of 2:1 in Clauses 4(a)(iii) and 4(b)(ii) was arbitrary or irrational for want of relevant material.

Analysis: The ratio was adopted after consultation with the Reserve Bank of India and on consideration of the financial weakness of the transferor bank, relative business volume, manpower strength, promotional avenues, productivity, and the need to avoid unfairly displacing the transferee bank employees. The material showed a reasoned balancing of interests rather than an unguided reduction of past service.

Conclusion: The ratio of 2:1 was neither arbitrary nor irrational.

Issue (iv): whether the placement scheme was retrospective in nature.

Analysis: The initial amalgamation scheme had already effected the transfer, while the later placement scheme only implemented the unresolved question of placement and seniority from the date of amalgamation. Giving effect to that scheme from the amalgamation date was part of the statutory scheme arrangement and not a true retrospective alteration of existing rights.

Conclusion: The placement scheme was not retrospective in the legal sense.

Issue (v): whether the scheme-making process under Section 9 of the Act was legislative in nature.

Analysis: Unlike the scheme considered under the Banking Regulation Act, the scheme under Section 9 of the 1980 Act became effective only after being laid before Parliament and subjected to parliamentary modification or disapproval. That mechanism gave it a legislative character.

Conclusion: The scheme-making process under Section 9 was legislative in nature.

Final Conclusion: The placement scheme and the ratio fixed for service computation and seniority were upheld, the challenge to the scheme failed, and all appeals were dismissed.

Ratio Decidendi: A service placement scheme framed pursuant to statutory amalgamation power will be sustained if it is based on relevant considerations, fairly balances competing employee interests, and is not shown to be arbitrary, irrational, mala fide, or beyond the delegated authority.

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