Kerala Transport Development Finance Corporation Employees’ Seniority and Promotion: Supreme Court Verdict

The case of Kerala Transport Development Finance Corporation Limited vs. Basil T K & Others revolves around the seniority and promotion rights of employees whose services were initially terminated and later reinstated. The Supreme Court ruled that employees whose termination was found unlawful must be granted continuity of service, impacting their seniority and promotional prospects. This decision clarified the principles governing seniority in public sector organizations.

Background of the Case

The dispute arose when six employees of Kerala Transport Development Finance Corporation Limited (KTDFCL) were appointed as Assistant Managers on a contractual basis in 2000. In 2006, their services were regularized by the Kerala government. However, in 2007, the government canceled their regularization, citing the absence of a standard recruitment procedure and non-compliance with the reservation policy for Scheduled Castes and Scheduled Tribes.

The employees challenged this decision in the Kerala High Court, which ruled in their favor in 2007. Despite this, the government reaffirmed its stance and terminated their services in 2008. The High Court again intervened, ordering reinstatement with continuity of service but without monetary benefits for the period they were out of service. The dispute then shifted to the employees’ seniority and promotion eligibility.

Read also: https://judgmentlibrary.com/bank-employee-dismissal-overturned-supreme-court-orders-reinstatement-with-full-benefits/

Arguments of the Petitioner (KTDFCL)

KTDFCL argued the following points:

• Seniority Should Reflect Actual Service: Employees should not gain seniority for the period they were not in service due to their termination.
• Impact on Other Employees: Granting seniority and promotion benefits to reinstated employees would unfairly affect employees like Aneesh Babu, who remained in service throughout.
• Service Rules Must Be Followed: Residency requirements in the service rules must be fulfilled for promotions, and the respondents did not meet this criterion.
• Monetary Benefits Not Allowed: The High Court had previously ruled that the employees would not be entitled to monetary benefits for the period they were out of service.

Arguments of the Respondents (Employees)

The reinstated employees countered with the following points:

• Unlawful Termination: Since their termination was ruled illegal, they should be treated as continuously employed.
• Continuity of Service Ensures Seniority: The High Court’s order granting continuity of service implies that their service should be counted for seniority and promotion.
• Equal Treatment: Other employees, including Aneesh Babu, benefited from retrospective regularization, and the same standard should apply to them.
• Government Orders Support Their Claim: The Kerala government clarified that their out-of-service period would not affect their seniority or promotional prospects.

Supreme Court’s Observations

The Supreme Court, led by Justices Dr. Dhananjaya Y Chandrachud and Surya Kant, made the following key observations:

• Continuity of Service Maintained: The High Court’s earlier ruling that reinstated employees must be given continuity of service remains valid.
• Promotion Eligibility Based on Rules: Employees should be promoted based on their service history and applicable rules.
• Distinction Between Continuity and Monetary Benefits: While continuity of service is granted, arrears of salary for the period they were out of service will not be provided.
• Seniority Determined by Initial Appointment: Since the respondents were appointed in 2000 and their termination was set aside, their seniority must reflect their original appointment.

Final Judgment

The Supreme Court ruled that the respondents must be granted seniority from their initial appointment date, impacting their promotion eligibility. However, it clarified:

“The respondents shall not be entitled to arrears of salary for the period between 2007 and 2012 when they were out of service. However, their seniority and promotion eligibility must be determined based on continuity of service.”

Implications of the Judgment

This ruling has several important implications:

• Reinforces Employee Rights: Protects employees from wrongful termination by ensuring continuity of service.
• Clarifies Seniority Rules: Establishes that reinstated employees should not be placed at a disadvantage in seniority rankings.
• Prevents Arbitrary Government Actions: Ensures that employment terminations follow due process and do not unfairly impact career progression.
• Guidance for Public Sector Promotions: Provides clarity on how promotional eligibility should be assessed in cases of reinstatement.

With this ruling, the Supreme Court has reinforced the principle that employees should not suffer unjustly due to wrongful termination, ensuring fairness in seniority and promotions.

Petitioner Name: Kerala Transport Development Finance Corporation Limited.
Respondent Name: Basil T K & Others.
Judgment By: Justice Dhananjaya Y Chandrachud, Justice Surya Kant.
Place Of Incident: Kerala.
Judgment Date: 31-01-2022.

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