By TIOL News Service

NEW DELHI, MAY 28, 2014: THE present judgment disposes two writ petitions which impugn the order of the Central Administrative Tribunal ("CAT") dated 28.10.2010, dismissing OA No. 2839/2009 and OA No. 526/2010. The challenge in both the Original Applications stems from the selection process for three posts of the Vice-President of the Income Tax Appellate Tribunal ("ITAT"), in which both Petitioners were not selected.

The petitioner in WP(C) 8369/2010, (referred to as "Tolani") was selected as a Judicial Member of the ITAT on 9.2.1998 and Mr. S.K. Yadav ("Yadav") was selected on 21.3.1998 (after undergoing a two years probationary period from 21.3.1996). The grievance in both cases arises from an order of the Central Government, dated 23.11.2009 appointing four members of the ITAT as Vice-Presidents, allegedly overlooking the two petitioners. Those appointed were K.L. Karwa, Judicial Member (Lucknow), O.K. Narayanan, Accountant Member (Ahmedabad), Bhartvaja Shankar (Chandigarh) and G.C. Gupta, Judicial Member (Hyderabad) - all referred to collectively as "the private respondents". Subsequently, after receiving the minutes of the meetings of the Selection Committee on 5.9.2009 and 9.9.2009, and in view of the proposal to appoint Shri D.K. Tyagi as a Vice- President of the ITAT, the grievance was again made by the petitioners.

The claims made before the CAT were, first, that appointment of the Vice-President from amongst members was by way of direct recruitment, rather than promotion, and, therefore, the obligation to reserve posts in favour of the Other Backward Castes ("OBC") group was violated;

Secondly, and in the alternative, it was claimed that in view of the equality of pay scales of Members and Vice-Presidents after the recommendations of the sixth Central Pay Commission ("the sixth CPC") were enforced, appointment to the post of Vice-President would be a designation which would go by seniority, and in any case, seniority-cum-merit. It was argued that in either of these cases, the petitioners were senior to four of the five members appointed as Vice-Presidents, except K.L. Karwa, and have equally good, if not better, Annual Confidential Reports ("ACRs") in their favour. It was argued in this context that this crucial change in hierarchy of ITAT members brought about the Sixth CPC was not brought to the notice of the Selection Committee, and thus, the decision-making process was itself flawed and based on irrelevant considerations.

It was thirdly argued that the Selection Committee exceeded its jurisdiction by evolving its own procedure and terms as to the selection, which was not open to it. It was argued that in terms of Rule 13 of the Service Rules, the seniority-cum-merit method bond the Selection Committee, and as such, supersession was impermissible.

It was lastly argued that the Selection Committee did not prepare any chart of comparison between the various members being considered for the post of Vice-President, and as no other material was available before the Selection Committee except for the ACRs (which, the petitioners claim record their diligence and excellence in service), the decision-making process is liable to be interfered with.

The CAT rejected all the grounds and the aggrieved Members are before the High Court.

High Court Observed,

In the present case, the revision of pay through the sixth pay Commission might have brought about parity in pay and emoluments between Members and Vice Presidents of ITAT; yet the separate mention of these two categories in the Rules, which have not been changed, and the fact that Vice Presidents are to be selected on the basis of merit, from amongst members sets at rest any idea that the pay parity did away with the distinction; the post of Vice President is clearly a higher post in the hierarchy of judicial offices in the ITAT.

Promotion can be broadly categorized into three modes depending on whether purely by merit, purely by seniority or whether it is a mixture of the two, i.e. a) Departmental Examination; b) Seniority-cum-fitness (seniority subject to unfitness); and c) Selection (merit-cum-seniority).

It is also undisputed - as a matter of fact - that the Selection Committee did not conduct interviews or meet the candidates at any point in the selection process, nor were orders written by the candidates in their capacity as members of the ITAT placed before the Selection Committee. The only material before the Selection Committee was the Annual Confidential Reports ("ACRs") of the candidates. It is on this basis that the selection of five candidates was made, as the minutes of the Selection Committee records, on the basis of "available character rolls, knowledge and suitability."

The Court, has to be cautious in ensuring that its inquiry does not translate into a ‘merit review' of the decision of the Selection Committee, but also that the Selection Committee cannot be faulted for failing to provide reasons for choosing particular candidates, and rejecting others. However, whilst the grounds for review are limited, the Court can - and must - insist that the decisions are based on relevant material. i .e. the various components of the service record of the individual, which includes the ACRs. In this case, the ACRs which were the only material before the Selection Committee. These ACRs provide for the basic inputs on the basis of which assessment of the Government servant is made for appointment to a higher post. Normally, they categorize a government servant into any among the following: a) Outstanding; b) Very Good; c) Good; d) Average ; or e) not yet fit. These remarks are then considered by the Selection Committee in reaching its conclusion .

In the present case, since there was no comparison chart prepared by the Selection Committee, nor was any material other than the ACRs before it, the ACRs - as it appears from the record - constituted the only basis on which the decision was made. Thus, in this case, the ACR grading was important. The ACR remarks for the five years preceding the selection process indicate that Mr.Tolani had five ‘Very Good' remarks, Mr.Yadav had one ‘Very Good' and four ‘Good' remarks. Amongst the candidates selected for the post, their grading was as follows: (1) five ‘Good', (2) four ‘Very Good' plus one ‘Outstanding', (3) two ‘Very Good' plus three ‘Good', (4) five ‘Very Good', and (5) One ‘Average' plus one ‘Good' plus three ‘Very Good'.

Thus, on the basis of this grading - which was the only material that the Selection Committee had to assess merit - the conclusion that the two petitioners were not selected, whilst others, with a lower cumulative grading, were, appears to be anomalous. This is not to say that the two petitioners are more merited or qualified than those selected by the Selection Committee. That determination lies outside the domain of the Court. While the Selection Committee determines which candidate possesses greater merit, such a determination must be based on some objective fact which is capable of leading to that conclusion. Needless to say, a ‘Very Good' grade is better than a ‘Good' grade, and so on, in terms of consideration for promotion. Thus in this case, given the grading of the candidates in their ACRs, the conclusion that the two petitioners were less merited - on the basis of that material - seems illogical. An ACR evaluates the performance of the public officials, and based on certain objective bench-marks , provides a grading, which reflects the quality of the service rendered by that official. This grading thus is then used for determining comparative by DPCs.

In the present facts and circumstances too the Selection Committee was not bound by the ACRs; however, it adopted some other consideration in the absence of any material. The Selection Committee could have adopted the view that the petitioners were not merited, if it formed this opinion on the basis of other material present before it, as for example, sample judgments of the members, their disposal rates, cases turned on appeal etc. If such a course had been followed, the assessment of the Selection Committee would lie outside the Court's limited power of judicial review. Yet, since no material was before the Selection Committee which could testify as to those factors, and since none of the candidates were interviewed by the Selection Committee (which did not have any occasion to interact with them), the comparative merit as judged by the ACRs leads to a conclusion contrary to that returned by the Selection Committee.

During the proceedings, the Central Government's position was that even though materials other than the character rolls (ACRs) of the candidates was not considered while at the same time the ACR gradings were not conclusive, it was also contended that given the wide experience in income tax matters of the Chairman, i.e. Justice Kapadia (who later became the Chief Justice of India) and his having considered numerous orders of the ITAT, as well as the experience of the President of ITAT, in the given facts of the case, there was sufficient knowledge about the candidates merit, to warrant the selection. Furthermore, it was argued that there was no allegation of bias or mala fides nor was any proof of it forthcoming. In these circumstances, the appointment and selection should not be interfered with.

This Court is of the opinion that to allay any future apprehensions, it would be necessary for the Central Government, in consultation with all concerned, including the President of ITAT, to evolve some guidelines applicable for future cases. This could be in the form of some minimum information about each candidate who applies for the post of Vice President, Senior Vice President and President, in regard to the last three years or five years' performance, such as the number of orders written or delivered, each year; the units/appeals disposed of; a certain number of orders, i.e. about five or ten (may be chosen in advance by the Chairman of the Committee) to assess their quality, and personal interaction. The committee might, for its own assistance, in accordance with such guidelines, evolve an appropriate marking mechanism. This would lend objectivity and a greater degree of scrutiny of the quality of candidates and avoid the odium of arbitrary or unfair procedure.

This Court is of the opinion that members of tribunals such as the ITAT perform crucial judicial functions, which can have an adverse bearing on individuals, and at times, vast commercial and fiscal ramifications . In these circumstances, the Central Government should seriously consider continuous oversight through the concerned High Courts, given that High Courts exercise appellate (and supervisory writ) jurisdiction over the orders and proceedings of ITAT and its benches. Some reporting mechanism, preferably centralized, to oversee the quality of the orders of ITAT is essential because the President of ITAT's powers over members of ITAT and Vice President are not appellate , they are administrative . Creation of this mechanism would result in adding a new and possibly crucial dimension to ensure greater scrutiny of ITAT and its orders and also provide a link in the decision making process of selection to senior judicial positions within ITAT.

The High Court however dismissed the writ petitions.

(See 2014-TIOL-851-HC-DEL-SERVICE)