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The appellant, Bharat Sanchar Nigam Ltd., is the successor of the Department of Telecommunications, Ministry of Communications, and Government of India (for short `government’ or `telecom department’). The question involved in these matters is whether rules of reservation will apply to upgradation of posts.

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 1

 Reportable

 IN THE SUPREME COURT OF INDIA

 CIVIL APPELLATE JURISDICTION

 CIVIL APPEAL NOS.5286-87 OF 2005

Bharat Sanchar Nigam Ltd. ... Appellant

Vs.

R. Santhakumari Velusamy & Ors. ... Respondents

 With

 CIVIL APPEAL NOS.3405, 4542, 4543, 4544, 4545 and 4546 of 2006

 J U D G M E N T

R.V.RAVEENDRAN, J.

 The appellant, Bharat Sanchar Nigam Ltd., is the successor of the 

Department of Telecommunications, Ministry of Communications, and 

Government of India (for short `government' or `telecom department'). The 

question involved in these matters is whether rules of reservation will apply 

to upgradation of posts.

 2

2. There were four grades of employees of telecom departments known 

as Telegraphists or Telecom Operating Assistants in the Telecom 

Department. Promotions from one grade to a higher grade were on the basis 

of seniority/departmental examination. The telecom department introduced 

an `One Time-Bound Promotion' scheme (`OTBP scheme' for short) in the 

year 1983-84 under which regular employees who had completed 16 years 

of service in a grade, were placed in the next higher grade. After some years, 

the employees unions demanded a second time-bound promotion on 

completion of 26 years of service in the basic grade, as Group C and Group 

D cadres were only entitled to one-time bound promotion. The government 

decided that a second time bound promotion was not feasible. However, to 

provide relief from stagnation in the grade, the government decided to have 

a Biennial Cadre Review (`BCR' for short) under which a specified 

percentage of posts could be upgraded on the basis of functional 

justification. 

3. The BCR scheme was accordingly introduced vide Circular dated 

16.10.1990. It was made applicable to those cadres in Group C and Group D, 

for which one-time bound promotion scheme on completion of 16 years of 

service in the basic grade was in force. Under the said scheme, employees 

who were in regular service as on 1.1.1990 and had completed 26 years of 

 3

satisfactory service in the basic cadres, were to be screened by a duly 

constituted Committee to assess their performance and determine their 

suitability for advancement and if they were found suitable, to be upgraded 

in the higher scale. The upgradation was restricted to 10% of the posts in 

Grade III. We extract below the relevant terms of the BCR from the Circular 

dated 16.10.1990:

 ".......

 (iii) Biennial Cadre Reviews will be conducted in respect of the eligible 

 cadre at the level of circles who control these cadres. 

 (iv) At the time of review the number of officials who have 

 completed/would be completing 26 years of service in the basic cadres 

 including time spend in higher scale (OTBP) will be ascertained. The 

 persons will be screened by the duly constituted Review committee to 

 assess the performance and suitability for advancement. 

 (v) In the Biennial cadre review, suitable number of posts will be 

 created by upgradation based on functional justification. 

 (vi) Creation of posts by upgradation will be in the scales indicated 

 below: 

 Basic scale of the Scale after OTBP Scale after BCR on 

 cadre after 16 years of completion of 26 years or 

 basic grade more 

 750-940 800-1150 950-1400

 825-1200 950-1400 1200-1800

 975-1540 1320-2040 1400-2600

 975-1600 1400-2300 1600-2660 

 (10% of the posts in the pay 

 scale of 1600-2660 will be in 

 the pay scale of Rs.2000-3200

 1320-2040 1600-2600 1640-2900 

 (10% of the posts in the pay 

 scale of 1640-2900 will be in 

 the pay scale of Rs.2000-

 3200)

 4

 (vi) xxx xxx xxx

 (viii) Necessary posts will be created by upgradation under the powers 

 of CGMs in consultation with their accredited finance. 

 (ix) The first Biennial Cadre Review for eligible cadres/officials may 

 be conducted immediately covering the period upto 30.6.1992 to ascertain 

 the eligible officials who have completed/will be completing 26 years of 

 services or more as on the crucial dates, namely, the date of the review 

 01.1.1991, 01.7.1991 and 01.1.1992. The number of posts needed or 

 provide for the promotion of the eligible persons will be determined and 

 will be sanctioned/activated in four instalments the first immediately, the 

 second on 01.9.1991, the third on 01.7.1991 and the fourth on 01.1.1992. 

 With these posts, it should be possible be provide for promotion of those 

 employees who have completed 26 years of service or more on the above 

 crucial dates, subject to their otherwise being found fit. The criterion for 

 promotion will be seniority, subject to selection. 

 Order implementing the first instalment of cadre review should be issued 

 before 30.11.1990. 

 In the second cadre review, which will cover the period from 1.7.1992 to 

 30.6.1994, which should be completed before 01.7.1992, the required 

 number of posts needed to be released in half yearly instalments on 

 1.7.1992, 1.1.1993, 1.7.1993 and 1.1.1994 to cater for promotion of those 

 who would have completed 26 years of service on the four crucial dates, 

 will be ascertained and sanctions released in appropriate instalment so that 

 the promotions of eligible personnel could be notified on due dates. 

 ......"

4. The Government issued the following clarification regarding 

designations by circular dated 11.3.1991: 

 State of Entry Grade allotted

 (i) Initial Entry (Basic grade) Grade I

 (ii) OTBP scale Grade II

 (iii) BCR scale Grade III

 (iv) 10% of posts in BCR pay scales Grade IV

 to be placed in pay scale of 2000-3200

 5

By letter dated 7.5.1993, the telecom department clarified that there were no 

sanctioned posts in regard to 10% BCR and the number of posts depend 

upon the number of BCR officials available; and that therefore no local 

officiating arrangement could be made if an official in the 10% BCR retired 

before the next review.

5. By circular dated 13.12.1995, the government formulated the 

procedure regarding promotion to Grade IV. Under the said procedure, 

promotions to Grade IV were to be based on seniority in the basic grade 

from among the officers in Grade III subject to fitness determined in the 

usual manner of OTBP. By a clarificatory Circular dated 1.3.1996, the 

government issued a clarification that promotion to Grade IV would be 

given from among officials in Grade III on the basis of their seniority in the 

basic grade, subject to fulfillment of other conditions and that normal rules 

of reservation would apply to promotions in Grade IV. 

6. The circular of the telecom department dated 1.3.1996 applying rules 

of reservations to promotions to Grade IV under BCR was challenged by the 

All India Non SC/ST Telecom Employees Association on the ground that 

principles of reservation would not apply for upgradation of existing posts 

which did not carry any change in duties and responsibilities. The Central 

 6

Administrative Tribunal, Ahmedabad Bench by its order dated 11.4.1997 

(OA No.623/1996 - All India Non-Schedule Caste/Schedule Tribe Telecom 

Employees Association v. Union of India) held that the department could not 

apply reservation rules while upgrading the posts under the BCR scheme 

and directed the department to take appropriate action for effecting 

promotions to the upgraded posts without applying the reservation roster. 

The writ petition (SCA No.7576 of 1997) filed by the government 

challenging the said order of the Tribunal (Ahmedabad Bench) was 

dismissed by the Gujarat High Court by order dated 24.3.1999. In view of 

the said decision, the Government issued an order dated 8.9.1999 directing 

that a Review DPC be held and all ineligible officers wrongly promoted to 

Grade IV by application of reservation roster as per office order dated 

1.3.1996, should be reverted back and all eligible officers should be placed 

in Grade IV and their pay should be fixed notionally. As a consequence of 

the said Circular dated 8.9.1999, the contesting respondents were reverted 

from Grade IV to Grade III. 

7. Feeling aggrieved, the contesting respondents filed applications before 

the Madras Bench of the Tribunal. They challenged the validity of the said 

order dated 8.9.1999 and sought its quashing and also sought a direction to 

the government to permit them to continue in Grade IV. Similar applications 

 7

were filed before the Tribunal's Bangalore Bench. A Full Bench of the 

Tribunal at Bangalore allowed the applications by order dated 26.4.2000. It 

held : 

 "Through the mechanism of grant of time-bound advancements to the 

 higher scales of pay with different designations, or through appointments 

 to posts which are upgraded with higher scales of pay within a given 

 cadre, entailing creation of additional posts or not, essentially what takes 

 place is a process of advancement/appointment to these higher scales of 

 pay. We are convinced that this process can only be treated as promotion 

 in the light of the principle laid down by the Hon'ble Supreme Court that 

 an appointment to a higher scale of pay even at the same post and even 

 without involving any additional responsibilities can still be a promotion. 

 Even if in a given situation, the creation of the upgraded posts with higher 

 scales of pay do not result in a net addition to the existing number of posts 

 in that cadre, but is specifically and explicitly created to remove 

 stagnation, to follows that those upgraded posts involving higher scales of 

 pay are in effect a substitute for promotion. It is so because either through 

 a regular promotion in terms of the Cadre and Recruitment rules or 

 through the creation of the upgraded posts in the same cadre with a higher 

 scale of pay what is sought to be achieved is the provision of opportunities 

 for career advancement which, in the circumstances, is synonymous with 

 promotional opportunities. Once this basic objective for the creation of 

 upgraded posts is understood and appreciated, we are of the firm opinion 

 that such provisions for career advancement through appointments to 

 upgraded posts cannot be treated for the purpose of reservation of special 

 categories like SCs and STs differently from appointments to posts which 

 are designated in particular as promotional posts. In our view, it is also 

 absolutely immaterial as to whether the mode of appointment to these 

 upgraded posts with higher scales of pay is by selection or by merely 

 applying the criterion of seniority subject to fitness. In fact, it is evident 

 that appointments to a number of posts which are specifically designated 

 as promotional posts are also made on the basis of seniority-cum-fitness. 

 Therefore, the adoption of that latter criterion for appointment to a 

 upgraded post by itself cannot make such an appointment as non-

 promotional appointment. On this score drawing a distinction between 

 upgradation and promotion based on the nomenclature only does not 

 appear to be tenable."

 8

8. The Full Bench of the Tribunal differed from the decision of its 

Ahmadabad Bench and held that the decision of the Gujarat High Court 

affirming the said decision was also of no assistance as it was at variance 

with the decisions of this Court in Union of India vs. S.S. Ranade - 1995 (4) 

SCC 462, Lalit Mohan Deb v. Union of India - 1973 (3) SCC 862, State of 

Rajasthan vs. Fateh Chand Soni - 1996 (1) SCC 562, and Ram Prasad vs. 

D.K. Vijay - 1999 (7) SCC 251. It held that the BCR upgradation to Grade 

IV in the telecom department amounted to promotion, attracting reservation 

for SCs and STs.

9. Following the said decision of the Full Bench of the Tribunal, the 

Madras Bench of the Tribunal by order dated 25.7.2000 allowed the 

applications filed by the contesting respondents herein and directed the 

government to restore the contesting respondents to their promoted posts 

which they were holding before the order dated 8.9.1999. The 

Telecommunication Department challenged the said order of the Tribunal by 

filing a batch of writ petitions before the Madras High Court. The Madras 

High Court, by the impugned order dated 18.10.2004, dismissed the writ 

petitions upholding the order of the Tribunal.

 9

10. The said order is challenged in these appeals by special leave by the 

appellant. The appellant has put forth the following contentions :

(i) There is a clear distinction between upgradation and promotion. While 

promotion involves advancement in rank, grade or both and is always a step 

towards advancement to higher position, grade or honour, upgradation does 

not involve promotion to a higher position and the pedestal of the employee 

remains the same and the employee is merely conferred some financial 

benefits by granting a higher pay scale, to overcome stagnation. The BCR 

scheme introduced as per order dated 16.10.1990 was a scheme of 

upgradation and not promotion.

(ii) Where there is only upgradation of existing posts, with creating 

additional posts, principles of reservation would not apply. The Tribunal and 

the High Court committed a serious error by treating upgradation as a 

promotion to which reservation rules would apply. The Tribunal and the 

High Court ought to have followed the decision of this Court in All India 

Employees Association (Railways) vs. V.K. Agarwal - 2001 (10) SCC 165 

and the decision of the Gujarat High Court dated 24.3.1999 in Special Civil 

Application No.7576 of 1997 - Union of India vs. All India Non SC/ST 

Telecom Employees Association. 

11. Article 16(4) enables the State to make any provision for reservation 

of appointment or posts in favour of any backward classes of citizens. 

Article 16(4A) enables the State to make any provision for reservation in 

matters of promotion, with consequential seniority, to any class or classes of 

 10

posts in the services under the State in favour of Scheduled Castes and 

Scheduled Tribes, which in the opinion of the State, are not adequately 

represented in the services under the State. As upgradation involves neither 

appointment nor promotion, it will not attract reservation. Upgradation 

involves mere conferment of financial benefits by providing a higher scale 

of pay. If there is mere upgradation of posts, as contrasted from promotion, 

reservation provisions would not apply. [See : All India Employees 

Association (Railways) vs. V.K. Agarwal - 2001 (10) SCC 165 and Union of 

India vs. V. K. Sirothia - 2008 (9) SCC 283]. In V.K. Agarawal this Court 

held :

 "It appears from all the decisions so far that if as a result of 

 reclassification or readjustment, there are no additional posts which are 

 created and it is a case of upgradation, then the principle of reservation 

 will not be applicable. It is on this basis that this Court on 19.11.1998 had 

 held that reservation for SC and ST is not applicable in the upgradation of 

 existing posts and CA No.1481 of 1996 and the connected matters were 

 decided against the Union of India. The effect of this is that where the 

 total number of posts remained unaltered, though in different scales of 

 pay, as a result of regrouping and the effect of which may be that some of 

 the employees who were in the scale of pay of Rs.550-700 will go into the 

 higher scales, it would be a case of upgradation of posts and not a case of 

 additional vacancy or post being created to which the reservation principle 

 would apply. It is only if in addition to the total number of existing posts 

 some additional posts are created that in respect of those additional posts 

 the reservation will apply, but with regard to those additional posts the 

 dispute does not arise in the present case. The present case is restricted to 

 all existing employees who were redistributed into different scales of pay 

 as a result of the said upgradation." 

 (emphasis supplied)

 11

The decision of this Court in V.K. Sirothia arose from a decision of the 

Allahabad Bench of the Tribunal which expressed a similar view (in V.K. 

Sirothia vs. Union of India - O.A. No.384/1986). The Tribunal held : 

 "The restructuring of posts was done to provide relief in terms of 

 promotional avenues. No additional posts were created. Some posts out of 

 existing total were placed in higher grade to provide these avenues to the 

 staff who were stagnating. The placement of these posts cannot be termed 

 as creation of additional posts. There were definite number of posts and 

 the total remained the same. The only difference was that some of these 

 were in a higher grade. It was deliberate exercise of redistribution with the 

 primary object of betterment of chance of promotion and removal of 

 stagnation."

The Union of India challenged the said order of the Tribunal and this Court 

by a brief order dated 19.11.1998 (Union of India vs. V.K. Sirothia - 2008 

(9) SCC 283) dismissed the appeal by a brief order. The relevant portion of 

the said order is extracted below :

 "The finding of the Tribunal that "the so-called promotion as a result of 

 redistribution of posts is not promotion attracting reservation" on the facts 

 of the case, appears to be based on good reasoning. On facts, it is seen that 

 it is a case of upgradation on account of restructuring of the cadres, 

 therefore, the question of reservation will not arise. We do not find any 

 ground to interfere with the order of the Tribunal."

12. We may next consider the concepts of `promotion' and `upgradation'. 

In Lalit Mohan Deb, this Court explained the difference between a 

promotion post and a selection grade :

 "It is well recognised that a promotion post is a higher post with a higher 

 pay. A selection grade has higher pay but in the same post. A selection 

 grade is intended to ensure that capable employees who may not get a 

 chance of promotion on account of limited outlets of promotions should at 

 12

 least be placed in the selection grade to prevent stagnation on the 

 maximum of the scale. Selection grades are, therefore, created in the 

 interest of greater efficiency."

In Tarsen Singh vs. State of Punjab - 1994 (5) SCC 392, this Court defined 

`promotion' thus :

 "Promotion as understood under the service law jurisprudence means 

 advancement in rank, grade or both. Promotion is always a step towards 

 advancement to a higher position, grade or honour."

13. In S.S. Ranade the scope and meaning of the word `promotion' was 

considered. The issue in that case was whether a Commandant (Selection 

Grade) held a higher rank than a Commandant and consequently entitled to 

be superannuated at a later age of 58 years instead of 55 years. This Court, 

following the decision in Lalit Mohan Deb, held as follows:

 "Undoubtedly, a Commandant who becomes a Commandant (Selection 

 Grade) secures a promotion to a higher pay scale. But it is a higher pay 

 scale in the same post. The use of the word 'promotion' in Rule 6 and the 

 Constitution of a Departmental Promotion Committee for selection of 

 Commandant (Selection Grade) in Rule 7, do not necessarily lead to the 

 conclusion that the promotion which is contemplated there is necessarily a 

 promotion to a higher post. Promotion can be either to a higher pay scale 

 or to a higher post. These two Rules and the use of the word 'promotion' 

 there do not conclude the issue.

 xxx xxx xxx

 In the present case, an element of selection is involved in granting 

 selection grade because there is no automatic promotion to the selection 

 grade pay scale. But this factor is not decisive. In the present case also, as 

 in the above cases, Selection Grade posts are created entirely for the 

 purpose of granting some relief to those who have very limited avenues of 

 getting promotion to a higher post. That is why a higher pay or pay scale is 

 granted in the same post. Thus, by its very nature, a selection grade post 

 cannot be considered as a higher post for the purposes of Rule 9. 

 ...Because the creation of a selection grade in the same post stands on a 

 13

 very different footing. By its very nature a selection grade provides a 

 higher pay or a higher pay scale in the same post. The beneficiary of a 

 selection grade does not thereby occupy a post which is higher in rank 

 than the post earlier occupied by him."

 (emphasis supplied)

On facts, this Court found that the respondent therein required a promotion 

which resulted in occupation of a post which was higher in rank than the 

post earlier occupied, to get the relief of longer service. This Court held that 

though his promotion from Commandant to Commandant (Selection Grade), 

resulted in a promotion to a higher pay scale, that was not sufficient to grant 

relief to the respondent therein as his promotion to selection grade did not 

involve advancement to a higher post.

14. In Fateh Chand Soni, this Court following Ranade defined 

`promotion' thus: 

 "The High Court, in our opinion was not right in holding that promotion 

 can only be to a higher post in the service and appointment to a higher 

 scale of an officer holding the same post does not constitute promotion. In 

 the literal sense the word "Promote" means "to advance to a higher 

 position, grade, or honour". So also "Promotion" means "advancement of 

 preferment in honour, dignity, rank or grade". [See: Webster's 

 Comprehensive Dictionary, International Edition, p. 1009]. "Promotion" 

 thus not only covers advancement to higher position or rank but also 

 implies advancement to a higher grade. In service law also the expression 

 "Promotion" has been understood in the wider sense and it has been held 

 that "Promotion can be either to a higher pay scale or to a higher post." 

 (emphasis supplied)

 14

15. The distinction between upgradation and promotion was spelt out by 

a Full Bench of the Kerala High Court in N.G. Prabhu vs. Chief Justice, 

Kerala High Court - 1973 (2) Lab. IC 1399, thus :

 "Promotion is, of course, appointment, to a different post carrying a higher 

 scale of pay in the service. If, to better the conditions of service of the 

 incumbents in posts in the same category the scale of pay of all the posts 

 in the category is raised, the incumbents would naturally get the higher 

 scale of pay. But in such a case it may not be proper to characterize the 

 event as a promotion to higher posts though a benefit of a higher scale of 

 pay is obtained by all concerned. In other words, if the upgradation relates 

 to all the posts in a category naturally, there is no sense in calling it a 

 promotion of all the persons in that category. That is because there is no 

 question of appointment from one post to another. Parties continued to 

 hold same posts but get a higher scale of pay. It may be that it is not all the 

 posts in a particular category that are so upgrade, but only a part of it. 

 Normally, the benefit of such upgradation would go to the seniors in the 

 category. They would automatically get a higher scale of pay. That is 

 because though their posts continue in the same category a higher scale of 

 pay is fixed for those posts. It is appropriate then to say that the seniors 

 have been nominated to the higher grade which has been so created by 

 upgradation. This phenomenon does not differ from the case where all the 

 posts are upgraded and, it appears to us that those who get the higher 

 grade cannot be said to have been `promoted' because here again there is 

 no question of appointment from one post to another. They continue to 

 hold the same post, but because of seniority in the same post they are 

 given a higher scale of pay. When a person is nominated to the higher 

 scale of pay from time to time based on seniority, it may perhaps be 

 loosely termed as a promotion." 

16. But even in cases where no additional posts were created, but where a 

process of selection was involved in the upgradation, the process has to be 

considered not as an upgradation simplicitor, but a process of promotion and 

therefore the principles of reservation would be attracted. We may refer to 

the Constitution Bench decision of this Court in Ram Prasad (supra) where 

this Court held that appointment from senior scale to selection scale is a 

 15

promotion though it may not be a promotion to a higher position and 

consequently the reserved candidates are entitled to be promoted to the 

selection scale by way of roster points. For this purpose, the Constitution 

Bench relied upon the decision of Fateh Chand Soni.

17. In Fateh Chand Soni (supra), the issue was whether seniority in the 

selection grade (in the Rajasthan Police Service) was to be fixed on the basis 

of date of appointment to the selection scale or on the basis of seniority in 

the senior scale irrespective of the date on which appointment was made to 

the selection scale. This Court held that appointment to the selection scale of 

an officer in the senior scale in the service constituted promotion and 

seniority in the selection scale had to be fixed on the basis of the date of 

selection and a person selected and appointed as a result of an earlier 

selection would rank senior to a person who is selected and appointed as a 

result of a subsequent selection. We note below the reasoning of this Court :

 "In Lalit Mohan Deb v. Union of India, the pay scale of all the Assistants 

 in the Civil Secretariat in Tripura was Rs.80-180 and on the basis of the 

 recommendations of the Second Pay Commission appointed by the 

 Government of India the scales were revised and 25% of the posts were 

 placed in the Selection Grade in the scale of Rs. 150-300 and the rest 

 continued in the old pay scale of Rs.80-180. For the purpose of filling the 

 Selection Grade posts, a test was held and those who qualified in the said 

 test were appointed to the Selection Grade. The Assistants in the Selection 

 Grade and the Assistants in the old pay scale were doing the same type of 

 work. This Court observed that "provision of a Selection Grade in the 

 same category of posts is not a new thing" and that "a Selection Grade is 

 intended to ensure that capable employees who may not get a chance of 

 promotion on account of limited outlets of promotions should at least be 

 16

 placed in the Selection Grade to prevent stagnation on the maximum of the 

 scale" and that "Selection Grades are, therefore created in the interest of 

 greater efficiency". The Court took note of the fact that the basis for 

 selection of some of the Assistants to the Selection Grade scale was 

 seniority-cum-merit which is one of the two or three principles of 

 promotion widely accepted in the administration and, therefore, the 

 creation of Selection Grade in the category of Assistants was not open to 

 challenge. In that case, the Court had proceeded on the basis that the 

 appointment to the higher grade amounted to promotion.

 The Rules governing appointment to the Selection Scale in the Service 

 also envisage that such appointment constitutes promotion. The relevant 

 provision is contained in Rule 28(A) of the Rules which prescribes the 

 criteria, eligibility and procedure for promotion to Junior, Senior and other 

 posts encadred in the Service. Under sub-rule (5) of Rule 28(A) promotion 

 from the lowest post or category of post in the Service to the next higher 

 post or category of post in the Service is required to be made strictly on 

 the basis of seniority-cum-merit. Sub-rule (6) of Rule 28(A) provides that 

 selection for promotion to all other higher posts or higher categories of 

 posts in the Service shall be made on the basis of merit and on the basis of 

 seniority-cum-merit in the proportion of 50:50."

 (emphasis supplied)

18. In Dayaram Asanand Gursahani v. State of Maharashtra - 1984 (3) 

SCC 36 a three Judge Bench of this Court held :

 ".........As mentioned earlier, the selection grade post is not a post to 

 which promotion has to be made nor is there any efficiency bar rule 

 attached to it. Further it is not shown that the Governor had issued any 

 executive instructions as it had been done in Sant Ram Sharma v. State of 

 Rajasthan and Anr. (1968) 1 SCR 111 and in Lalit Mohan Deb and Ors. 

 v. Union of India and Ors. (1973) 3 SCC 862 enabling the High Court to 

 withhold increments in the extended pay scale which is in this case called 

 as selection grade pay scale. The pay scale to which a judicial officer is 

 entitled is a condition of service which can be regulated by a statute or 

 rules made under the proviso to Article 309 or by executive instructions 

 issued under Article 162 of the Constitution. It cannot come within the 

 range of the expression 'control' in Article 235 of the Constitution. (See 

 B.S. Yadav and Ors. etc. v. State of Haryana and Ors. etc. (1981) 1 SCR 

 1024). It is only where there is such a law, rule or executive instruction, 

 the High Court may act under Article 235 of the Constitution to sanction it 

 or to refuse to sanction it. We are of the view that in the present case the 

 mere nomenclature given to the extended pay scale as the selection grade 

 pay scale does not lead to the inference that there is an element of 

 selection involved in sanctioning it. In the circumstances it should be 

 17

 treated as just an extended pay scale which forms part of the pay scale of 

 Rs. 900-1800 as clarified in two Government orders sanctioning the 

 selection grade posts. ........."

The aforesaid decision in Dayaram Asanand Gursahani was distinguished in 

Fateh Chand Soni on the following reasoning : 

 "The High Court has referred to the decision of this Court in Dayaram 

 Asanand Gursahani v. State of Maharashtra and Ors. [1984] 2 SCR 703, 

 wherein, after considering the resolution of the State Government 

 sanctioning the post of District Judge in the Selection Grade, this Court 

 has held that the said resolution did not indicate that there was any process 

 of promotion by selection or otherwise from the cadre of District Judges to 

 the Selection Grade District Judges. In the particular facts of that case it 

 was held that mere nomenclature given to the extended pay scale as the 

 Selection Grade pay Scale does not lead to the inference that there is no 

 element of selection involved in sanctioning it and that it should be treated 

 as just an extended pay scale which forms part of the pay scale. The 

 position in the present case is, however, different. Here the Selection Scale 

 is a separate scale and is not an extension of the Senior Scale. Moreover 

 appointment to the Selection Scale is made by selection on the basis of 

 merit and seniority-cum-merit in accordance with Rule 28(A) of the 

 Rules."

19. In view of the decisions in Dayaram Asanand Gursahani, Fateh 

Chand Soni and Ram Prasad, the position that emerges is that even where 

the upgradation does not involve appointment to a different or higher post, 

but is as a result of a promotional process involving selection, then the 

principles of reservation are attracted. 

20. In Union of India vs. Pushpa Rani - 2008 (9) SCC 242, this Court 

examined the entire case law and explained the difference between 

upgradation and promotion thus :

 18

"In legal parlance, upgradation of a post involves transfer of a post from 

lower to higher grade and placement of the incumbent of that post in the 

higher grade. Ordinarily, such placement does not involve selection but in 

some of the service rules and/or policy framed by the employer for 

upgradation of posts, provision has been made for denial of higher grade 

to an employee whose service record may contain adverse entries or who 

may have suffered punishment. The word `promotion' means 

advancement or preferment in honour, dignity, rank, grade. Promotion 

thus not only covers advancement to higher position or rank but also 

implies advancement to a higher grade. In service law, the word 

`promotion' has been understood in wider sense and it has been held that 

promotion can be either to a higher pay scale or to a higher post. 

Once it is recognized that additional posts becoming available as a result 

of restructuring of different cadres are required to be filled by promotion 

from amongst employees who satisfy the conditions of eligibility and are 

adjudged suitable, there can be no rational justification to exclude 

applicability of policy of reservation while effecting promotions, more so 

because it has not been shown that procedure for making appointment by 

promotion against such additional posts is different than the one 

prescribed for normal promotion. 

Policy contained in Letter dated 9.10.2003 has been framed with a view to 

strengthen and rationalize the staffing pattern. For this purpose, the 

Ministry of Railways undertook review of certain cadres. The basis of the 

review was functional, operation and administrative requirement of the 

Railways. This exercise was intended to improve efficiency of 

administration by providing incentives to existing employees in the form 

of better promotional avenues and at the same time requiring promotees to 

discharge more onerous duties. The policy envisaged that additional posts 

becoming available in the higher grades as a sequel to restructuring of 

some of the cadres should be filled by promotion by considering such of 

the employees who satisfy the conditions of eligibility including minimum 

period of service and who are adjudged suitable by the process of 

selection. This cannot be equated with upgradation of posts which are 

required to be filled by placing existing incumbents in the higher grade 

without subjecting them to the rigor of selection. It has therefore to be held 

that the Railway Board did not commit any illegality by directing that 

existing instructions with regard to the policy of reservation of posts for 

SC and ST will apply at the stage of effecting promotion against the 

additional posts. The Tribunal committed serious illegality by striking 

down para 14 of letter dated 9.10.2003. Matters relating to creation and 

abolition of posts, formation and structuring/restructuring of cadres, 

prescribing the source/mode of recruitment and qualifications, criteria of 

selection, evaluation of service records of employees fall within the 

exclusive domain of employer. What steps should be taken for improving 

 19

 efficiency of the administration is also the preserve of the employer. 

 Power of judicial review can be exercised in such matters only if it is 

 shown that the action of the employer is contrary to any constitutional or 

 statutory provision or is patently arbitrary or is vitiated by mala fides. The 

 court cannot sit in appeal over the judgment of the employer and ordain 

 that a particular post be filled by direct recruitment or promotion or by 

 transfer. The court has no role in determining the methodology of 

 recruitment or laying down the criteria of selection. It is also open to the 

 court to make comparative evaluation of the merit of the candidates. The 

 court cannot suggest the manner in which the employer should structure or 

 restructure the cadres for the purpose of improving efficiency of 

 administration."

 (emphasis supplied) 

In Pushpa Rani, this Court while considering a scheme contained in the 

letter dated 9.10.2003 held that it provided for a restructuring exercise 

resulting in creation of additional posts in most of the cadres and there was a 

conscious decision to fill-up such posts from promotion from all eligible and 

suitable employees and, therefore, it was a case of promotion and, 

consequently, reservation rules were applicable. 

21. On a careful analysis of the principles relating to promotion and 

upgradation in the light of the aforesaid decisions, the following principles 

emerge :

(i) Promotion is an advancement in rank or grade or both and is a step 

towards advancement to higher position, grade or honour and dignity. 

Though in the traditional sense promotion refers to advancement to a higher 

post, in its wider sense, promotion may include an advancement to a higher 

pay scale without moving to a different post. But the mere fact that both - 

 20

that is advancement to a higher position and advancement to a higher pay 

scale - are described by the common term `promotion', does not mean that 

they are the same. The two types of promotion are distinct and have different 

connotations and consequences. 

(ii) Upgradation merely confers a financial benefit by raising the scale of 

pay of the post without there being movement from a lower position to a 

higher position. In an upgradation, the candidate continues to hold the same 

post without any change in the duties and responsibilities but merely gets a 

higher pay scale.

(iii) Therefore, when there is an advancement to a higher pay scale without 

change of post, it may be referred to as upgradation or promotion to a higher 

pay scale. But there is still difference between the two. Where the 

advancement to a higher pay-scale without change of post is available to 

everyone who satisfies the eligibility conditions, without undergoing any 

process of selection, it will be upgradation. But if the advancement to a 

higher pay-scale without change of post is as a result of some process which 

has elements of selection, then it will be a promotion to a higher pay scale. 

In other words, upgradation by application of a process of selection, as 

contrasted from an upgradation simplicitor can be said to be a promotion in 

its wider sense that is advancement to a higher pay scale. 

(iv) Generally, upgradation relates to and applies to all positions in a 

category, who have completed a minimum period of service. Upgradation, 

can also be restricted to a percentage of posts in a cadre with reference to 

seniority (instead of being made available to all employees in the category) 

 21

and it will still be an upgradation simplicitor. But if there is a process of 

selection or consideration of comparative merit or suitability for granting the 

upgradation or benefit of advancement to a higher pay scale, it will be a 

promotion. A mere screening to eliminate such employees whose service 

records may contain adverse entries or who might have suffered punishment, 

may not amount to a process of selection leading to promotion and the 

elimination may still be a part of the process of upgradation simplicitor. 

Where the upgradation involves a process of selection criteria similar to 

those applicable to promotion, then it will, in effect, be a promotion, though 

termed as upgradation. A

(v) Where the process is an upgradation simplicitor, there is no need to 

apply rules of reservation. But where the upgradation involves selection 

process and is therefore a promotion, rules of reservation will apply.

(v) Where there is a restructuring of some cadres resulting in creation of 

additional posts and filling of those vacancies by those who satisfy the 

conditions of eligibility which includes a minimum period of service, will 

attract the rules of reservation. On the other hand, where the restructuring of 

posts does not involve creation of additional posts but merely results in some 

of the existing posts being placed in a higher grade to provide relief against 

stagnation, the said process does not invite reservation. 

22. In this case, the BCR scheme did not involve creation of additional 

posts but merely restructured the existing posts as a result of which 10% of 

the posts in Grade III were placed in a higher grade (Grade IV) to give relief 

 22

against stagnation. This is evident from the terms of the BCR scheme and 

the clarification contained in the letter dated 7.5.1993 that no posts were 

sanctioned, as far as 10% BCR was concerned.

23. In this case, the BCR scheme dated 16.10.1990 provided that the 

persons who had completed 26 years of service would be screened by a duly 

constituted Review Committee to assess the performance and suitability for 

advancement. The screening was for the limited purpose of finding out 

whether the service record of the employee contained any adverse entries or 

whether the employee had suffered punishment. The screening process did 

not involve consideration of comparative merit nor involve any selection. 

The 10% posts were upgraded strictly by seniority subject to screening. This 

is evident from the terms of BCR scheme and the Circular dated 13.12.1995 

which provided that the promotions to Grade IV were to be based on 

seniority in the basic grade from among the officers in Grade III, subject to 

fitness determined as per OTBP manner, that is screening to ascertain 

whether there are any adverse comments or punishment against the 

employee concerned.

24. To sum up, the BCR scheme was an upgradation scheme to give relief 

against stagnation. It did not involve creation of any new posts. It did not 

 23

involve advancement to a higher post. It did not involve any process of 

selection for conferment of the benefit of higher pay-scale. The upgradation 

was given to the senior most 10% of BCR scale employees in Grade III 

strictly as per seniority. BCR scheme as per circular dated 16.10.1990 was 

thus a scheme for upgradation simplicitor without involving any creation of 

additional posts or any process of selection for extending the benefit. Such a 

scheme of upgradation did not invite the rules of reservation. 

25. We accordingly allow these appeals, set aside the orders of the High 

Court and the Tribunal and dismiss the Original Applications challenging 

the order of the telecom department dated 8.9.1999. 

 .................................J.

 (R V Raveendran)

New Delhi; .................................J.September 6, 2011. (Markandey Katju) 

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