Service Law– Pay revision – Application of Fifth Pay Commission to the employees of Maharashtra State Financial Corporation with effect from retrospective cut-off date, but limited to only existing employees in service as on the date of implementation – Former employees (including retirees, legal representatives of those who had expired, and those who had availed of voluntary retirement scheme) who were in service as on the retrospective cut-off date, but not on the date of implementation, filed writ petition complaining of discrimination – Held: Decision to grant pay revision from cut-off date cannot be faulted with, but to not grant any revision to those who were not in service when the order implementing the pay revision was issued and confining it to those in employment, is clearly discriminatory – Limiting pay revision only to existing employees has no rational nexus with the object of pay revisions which is to mitigate rise in cost of living – Further classification in the same class is violative of Article 14 – Those who retired upon attaining superannuation or those who died while in service are entitled to relief – VRS employees and those dismissed/terminated from service not on same footing – Constitution of India – Art. 14.
Constitution of India –Separation of powers – Policy regarding fixation of pay, extent of revision, date of implementation – Exclusively within executive decision making powers – However, jurisdiction of courts arises in questions of larger public interest – On manner of implementation, timing of applicability of scheme, impact, and especially where it results in exclusion or discrimination of certain sections of public employees from the benefit –Art. 14. Constitution of India – Rationale of pay revisions – Larger public interest involved - State and public employers obligated to periodically address ill-effects of rise in cost of living – Other objectives include enthusing commitment and loyalty towards public employment, to deter public servants from lure of gratification – Art. 43.
Partly allowing the appeal, the Court
HELD: 1.1 Framing a policy concerning fixation of pay for the salaries of its employees, the extent of its revision, and even the date of its implementation, are undoubtedly exclusively within executive decision making powers. However, the manner of its implementation, the timing of applicability of a scheme, and its impact, especially where it results in exclusion of a certain section of public employees from the benefit, are subject matters of scrutiny by the court. Especially, when the complaint is of discrimination and violation of Article 14 of the Constitution, as is the present case. [Para 1][1175-B-C]
1.2 Maharashtra State Financial Corporation-MSFC did not finalise whether to adopt Fifth Pay Commission (which had been given effect from 01.01.1996 by the State Government) for its employees and sent the proposal to the State Government as per Section 39 of the State Financial Corporations Act, 1951. Benefit of interim relief of pay revision was granted to all existing employees who were on pay rolls of MSFC between 01.01.1996 and 29.03.2010. Only on 29.03.2010, based on communication received from the State Government, MSFC implemented the pay revision recommendations effective only in respect of existing employees and limited the arrears payable from 01.01.2006. The reason for the cut-off date (approved by the State Government) was “in order to motivate the present staff to recover maximum amount in NPA Accounts”. Second justification for denying benefit of pay revision was that fixation of cut-off date falls within state policy domain, which involves among others - the state’s financial concerns, which the courts should not interfere in. [Para 21-23, 26][1181-F-G; 1182-A-C; 1186-D]
1.3 A larger public interest is involved, impelling revision of pay of public officials and employees. The rationale for periodic pay revisions is to ensure that the salaries and emoluments that public employees enjoy, should keep pace with the increased cost of living and the general inflationary trends, and ensure it does not adversely impact employees. Pay revisions also subserve other objectives, such as enthusing a renewed sense of commitment and loyalty towards public employment. Another important public interest consideration, is that such revisions are meant to deter public servants from the lure of gratification; of supplementing their income by accepting money or other inducements for discharging their functions. Article 43 of the Constitution obliges the State to ensure all workers are provided with living wage and assured of a decent standard of living. Need for providing a mechanism to neutralize price increase, through dearness allowance (which is to be on a “sliding scale”) has been emphasized in past decisions of this court. As a measure of public interest, the State and public employers, have an obligation to periodically address ill-effects of rise in cost of living, on account of price rise, which results in fall in real wages. However, there is no straitjacket formula as to when, and to what extent pay revision should take place. [Para 27-29][1186-E-H; 1187-A-B; 1188-C-D]
Hindustan Lever Ltd. v. B.N. Dongre [1994] 2 Suppl. SCR 217 : (1994) 6 SCC 157 – relied on.
1.4 Whilst the fixation of cut-off date for the grant of benefits cannot be questioned, what is within the domain of the court, is to examine the impact of such fixation and whether it results in discrimination. The State and MSFC decided not to implement the pay commission recommendation from the date it came into effect (01.01.1996), but with effect from a decade later (01.01.2006), because the benefit given to employees (or arrears) on the rolls of MSFC as on 29.03.2010 were limited to arrears payable from 01.01.2006. At the same time, fitment and fixation of salary was with effect from 01.01.1996.The fitment formula envisioned the fixation in the new scales, even if notionally, from 01.01.1996. Arrears were made payable, based on that fitment and fixation, with effect from 01.01.2006. Another significant fact is that interim relief had been directed and was made payable, to all employees, between 01.01.1996 and 29.03.2010, and it was not to be recovered. This demonstrates that those who retired between these dates, and those who continued in service, form part of the same class. Further, there is also no distinction between those in service as on 01.01.2006 but retired before 29.03.2010, and those who continued thereafter. [Para 30-31][1188-E, H; 1189A-B]
1.5 The question is whether the classification, excluding employees who retired before 29.03.2010 and confining pay revision benefits (albeit with effect from 01.01.2006) results in discrimination. This court has struck down such instances in the past: a condition making only graduates among those holding post of forest guard, eligible for a limited departmental exam, amounted to creating a class within a class, which is impermissible (Maharashtra Forest Guards & Foresters Union v. State of Maharashtra); denying pay revisions to those teachers who had retired during a specified period (i.e., discrimination on the basis of date of retirement) was arbitrary, as it resulted in discrimination between teachers working in government colleges and in nongovernmental colleges which would mean treating equals unequally (U.P. Raghavendra Acharya &Ors. v. State of Karnataka &Ors.); classification caused by formula of pension whereby those retiring before a cut-off date were given lower rate of revised pension, as compared to those retiring later held to be discriminatory (All Manipur Pensioners Association by its Secretary v. State of Manipur &Ors.). [Para 32-35][1189-C-D; 1190-E-F; 1192-A-B]
State of J&K v. Triloki Nath Khosa [1974] 1 SCR 771: (1974) 1 SCC 19; Maharashtra Forest Guards &
Foresters Union v. State of Maharashtra [2017] 14 SCR
446 : (2018) 1 SCC 149; U.P. Raghavendra Acharya & Ors. v. State of Karnataka & Ors. [2006] 2 Suppl. SCR 582: (2006) 9 SCC 630; All Manipur Pensioners Association by its Secretary v. State of Manipur & Ors. [2019] 9 SCR 905 : (2020) 14 SCC 625 – relied on.
1.6 In the present case the employees who retired prior to 29.03.2010 discharged the same duties as in the case of those who did thereafter. The quality and content of responsibilities assigned to them were the same. The respondents’ decision not to grant arrears prior to 01.01.2006 cannot be found fault with; however, not to grant any revision to those who were not in service when the order implementing the pay revision was issued and confining it to those, in employment is clearly discriminatory. The rationale that granting such pay revision only to existing employees would be to enthuse them to recover NPA amounts payable to MSFC has no rational nexus with the object sought to be achieved by the pay revision, which is to benefit employees and protect them from the rise in the cost of living. There is no distinction between those who retired (or died in service) before 29.03.2010 and those who continued in service (and were given pay revision). They fell in the same class and a further distinction could not be made. The fact that the MSFC did not recover any interim relief or amount disbursed towards the 5 th Pay Commission reaffirms that these ex-employees belonged to the same class. The exclusion of the retired employees, who retired between 01.01.2006 and 29.03.2010 on achieving their date of superannuation, is violative of Article 14 of the Constitution of India. [Para 36-37][1194-E-H; 1195-A-B]
1.7 However, employees who secured VRS benefits and left the service of MSFC voluntarily during this period, stand on a different footing. They cannot claim parity with those who worked continuously, discharged their functions, and thereafter superannuated. VRS employees chose to opt and leave the service of the corporation; they found the VRS offer beneficial to them. Apart from the normal terminal benefits they were entitled to, the additional amount each of them was given - was an ex-gratia amount, equal to a month’s salary for each completed year of service. Other retired employees were never given such amounts. [Para 38][1195-B-D]
A.K. Bindal v. Union of India [2003] 3 SCR 928: (2003)
5 SCC 563– relied on.
1.8 Those who retired from the services of MSFC between retrospective cut-off date and date of implementation, and the legal heirs/representatives of those who died during that period, shall be entitled to arrears based on pay revision. VRS employees, and those who were dismissed or terminated from service, cannot claim parity for benefit of pay revision. [Para 39, 40][1196-E-F]
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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