2021 (7) TMI 1338 - SC - Indian Laws

Supreme Court: Financial Constraints Justify Delayed Pay Scales Implementation

Punjab State Co-operative Milk Producers Federation Ltd. and Ors. Versus Balbir Kumar Walia and Ors.

The Supreme Court held that the Punjab State Co-operative Milk Producers Federation Ltd. is a State within the meaning of Article 12 of the Constitution. ... Entitlement to pay scale equivalent to their counterparts in the State of Punjab from 1.1.1986, though the revised pay scale was allowed by the Federation w.e.f. 1.1.1994 - whether 'Federation' is a State within the meaning of Article 12 of the Constitution of India or not? - Whether the upward should confine only to the categories covered in the report of Government Anomaly Committee or categories enjoying identical scales (unimproved) or not - necessity of changing the qualification/improving designations of certain categories being placed in higher scales or not? - power of Judicial Review - HELD THAT:- The Central or State Government is empowered to levy taxes to meet out the expenses of the state. It is always a conscious decision of the government as to how much taxes have to be levied so as to not cause excessive burden on the citizens. But the Boards and Corporations have to depend on either their own resources or seek grant from the Central/State Government, as the case may be, for their expenditures. Therefore, the grant of benefits of higher pay scale to the Central/State Government employees stand on different footing than grant of pay scale by an instrumentality of the State. The judgment in Purshottam Lal [1973 (2) TMI 135 - SUPREME COURT] is a case where reference was made to the Pay Commission to consider the pay revision of all Central Government employees paid out of the Consolidated Fund of India. The recommendation of the Pay Commission was accepted but the benefit of revised pay scale was not given to the employees of the Forest Research Institute and College, Dehradun. An argument was raised that the report of the Pay Commission did not deal with the case of the Petitioners. The said argument was negated for the reason that once the Government has accepted the recommendation of the Pay Commission, which included all Central Government employees, the benefit of revised pay scale cannot be denied to the Petitioners. In K.T. Veerappa and Ors. v. State of Karnataka and Ors. [2006 (4) TMI 576 - SUPREME COURT], the Court upheld the principle that fixation of pay and parity in duties is the function of the executive and financial capacity of the Government is also a relevant factor to be considered, though on facts, it was held that the employees of the University were entitled to revision of pay at par with the employees of the State. In the present case, it is contended that the Federation is a statutory Co-operative Society which is having its Common Cadre Rules. Any amendment in the Common Cadre Rules is to be approved by the Registrar (Co-operative Societies). The State Government communicated on 1.3.1990 and 9.7.1993 that the pay scale as applicable to the Punjab Government employees is not to be adopted by the Public Sector Undertakings without taking into consideration the financial health of the other statutory Boards and Corporations. The Federation has thus taken a conscious and concerted decision to not follow the report of the Anomaly Committee of the State Government to grant revised pay scale from 1.1.1986 in view of precarious financial condition. Moreover, financial assistance had to be availed by the Federation from the State Government as well as from the National Dairy Development Board. The submission that there will not be financial burden on the federation in view of the fact that the High Court has ordered payment of arrears for a period of 3 years and 2 months before the date of filing of writ petitions is again not tenable. The High Court has granted revised pay scales with effect from 01.01.1986 instead of revised pay scales granted to the employees of the federation with effect from 01.01.1994. Therefore, restricting it for a period of 3 years and 2 months will not be helpful in respect of the financial condition of the Federation as during the relevant time the federation was suffering from huge losses. The order of the High Court is unjustified and in excess of the power of judicial review conferred on the High Court. Consequently, the appeals are allowed. The orders passed by the High Court are hereby set aside - Petition dismissed. Issues Involved:1. Whether the Federation is a State within the meaning of Article 12 of the Constitution.2. Whether the employees are entitled to revised pay scales from 1.1.1986.3. Whether financial stringency can be a valid ground for denying revised pay scales.4. Whether the principle of equal pay for equal work applies to the employees.Issue-wise Detailed Analysis:1. Whether the Federation is a State within the meaning of Article 12 of the Constitution:The High Court held that the Punjab State Co-operative Milk Producers Federation Ltd. (the Federation) is a State within the meaning of Article 12 of the Constitution of India. This determination was not contested before the Supreme Court by the Federation, as clarified by Mr. Patwalia, the learned Senior Counsel for the Federation.2. Whether the employees are entitled to revised pay scales from 1.1.1986:The employees claimed revised pay scales as per the Punjab Government Anomaly Committee's recommendations effective from 1.1.1986. The High Court allowed the writ petitions, holding that the employees were entitled to these pay scales from 1.1.1986. However, the Supreme Court found that the Federation was facing acute financial difficulties during that period, which justified the decision to implement the revised pay scales from 1.1.1994 instead. The Supreme Court emphasized that the Federation's decision was based on financial constraints and was not arbitrary or discriminatory.3. Whether financial stringency can be a valid ground for denying revised pay scales:The Supreme Court upheld financial stringency as a valid ground for denying higher pay scales, referencing several judgments, including A.K. Bindal and State of Punjab v. Amar Nath Goyal. The Court noted that financial viability is crucial for determining wage structures, and organizations facing continuous losses cannot be compelled to revise pay scales. The Federation's financial constraints were well-documented, and the decision to grant revised pay scales from 1.1.1994 was based on a thorough examination of its financial health.4. Whether the principle of equal pay for equal work applies to the employees:The principle of equal pay for equal work was contested by the employees, particularly regarding the categorization of Milk Procurement Assistants as Grade-I and Grade-II. The Supreme Court found that the educational qualifications and responsibilities of the two grades were different, justifying the disparity in pay. Similarly, the claim for parity in pay with Area Officers and Deputy Managers was rejected, as these positions required higher qualifications and different responsibilities. The Court concluded that the principle of equal pay for equal work did not apply in these cases due to the qualitative differences in job roles and responsibilities.Conclusion:The Supreme Court allowed the appeals, setting aside the High Court's orders and dismissing the writ petitions. The decision emphasized the importance of financial viability in determining wage structures and upheld the Federation's decision to implement revised pay scales from 1.1.1994 due to financial constraints. The principle of equal pay for equal work was found inapplicable due to the differences in qualifications and job responsibilities among the employees.