TAMIL NADU ELECTRICITY BOARD REP. BY ITS CHAIRMAN versus TNEB-THOZHILALAR AYKKIYA SANGAM BY ITS GENERAL SECRETARY on 13 February 2019

150 SUPREME COURT REPORTS [2019] 2 S.C.R.[2019] 2 S.C.R. 150

ATAMIL NADU ELECTRICITY BOARDREP. BY ITS CHAIRMAN

v.

TNEB-THOZHILALAR AYKKIYASANGAM BY ITS GENERAL SECRETARY

B(Civil Appeal No. 1653 of 2019)

FEBRUARY 13, 2019

[R. BANUMATHI AND INDIRA BANERJEE, JJ.]

Labour Laws:

Payment of Dearness Allowance – Settlement between theCemployer-Board and its workmen u/s. 18 of Industrial Disputes Act –As per one of the terms of settlement Dearness Allowance rateswere to be revised twice in a year i.e. on 1[st] January and 1[st] Julytaking into account the variations in previous 12 months averageof All India Consumer Price Index Numbers – Pursuant to theDsettlement, in the proceedings of the employer-Board it was decidedthat Dearness Allowance would be sanctioned to the employees ofthe Board as granted by the State Government to its employees atthe same rate and from the same date – State Government, due tofinancial crunch revised the Dearness Allowance later than it wasgranted to the Central Government employees for the relevant year –EEmployer-Board also adopted the order of State Government inrevising the Dearness Allowance – Respondent-Workers’ Union filedwrit petitions seeking direction to pay Dearness Allowance at therate and from the date when it was paid to the Central Governmentemployees – Single Judge of High Court allowed the petitions –FDivision Bench of High Court affirmed the order of Single Judge –On appeal, held: Payment of Dearness Allowance was governedby the Settlement and the Board Proceedings – All along, the revisionof Dearness Allowance had been paid at par with the employees ofthe State Government – There is no rule or obligation on the StateGovernment to always adopt the Dearness Allowance as revised byGCentral Government – The revision of wage or Dearness Allowancewould depend upon the ability and financial position of the employer–The employer-board is run by the State Government – It was withinthe power of the Board to set a cut-off date for payment of revisedDearness Allowance keeping in view financial constraints of theHState – Therefore, employees’ demand for revision in Dearness

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Allowance at a higher rate than what was granted by the StateGovernment to its employees is not warranted – Industrial DisputesAct, 1947 – s. 18.

Allowing the appeals, the Court

HELD: 1. Payment of Dearness Allowance was governedby the Wage Settlement dated 08.07.1998 and the BoardProceedings BP (FB) No.58 dated 18.07.1998. The increases inDearness Allowance which fell due w.e.f. 01.07.1998, 01.01.1999,01.07.1999, 01.01.2000, 01.07.2000, 01.01.2001 and 01.07.2001were all paid as per the above agreed term only. As per settlementdated 08.07.1998, the Dearness Allowance rates were to berevised twice in a year i.e. on 1[st] January and on 1[st] July takinginto account the variations in the previous twelve months averageof the All India Consumer Price Index Numbers adopting thesame formula as followed by the State Government. The BoardProceeding BP(FB) No.58 dated 18.07.1998 stipulated that therevised Dearness Allowance would be sanctioned to theemployees of the Board as granted by the State Government totheir employees at the same rate and from the same date. In thesubsequent wage settlement entered into between the appellant-Board and the respondent-union on 15.10.2005 (w.e.f. 01.12.2002)stipulates the existing practice of sanction of Dearness Allowanceto the employees of the Board as granted by the State Governmentto their employees at the same rate and from the same date. Thesubsequent settlement also reiterates that all along, the revisionof Dearness Allowance to the employees of the Board was on parwith the employees of the State Government. [Para 19][161-C-F]

2. The respondent(s) union having agreed that the revisedDearness Allowance will be sanctioned as granted by the StateGovernment to their employees, the appellant-Board has beenconsistently adopting the revised rates of Dearness Allowancefollowing various State Government orders. Having agreed forthe grant of revised Dearness Allowance on par with the StateGovernment employees, the respondent(s) union cannot seekfor revision in Dearness Allowance at a higher rate than whatwas granted by the State Government to its employees.[Para 19][161-G-H]

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A3. The High Court did not keep in view the well settledprinciples that the revision of wage or Dearness Allowance woulddepend upon the ability and the financial position of the employer.In G.O. Ms. No.346 in and by which the Government of TN revisedthe Dearness Allowance from 45% to 49% (w.e.f. 01.10.2002), itwas made clear that the Government of TN was facing extremelyBdifficult financial position and therefore, decided to sanctionadditional four per cent (45% to 49%) of Dearness Allowance tothe employees of the State Government w.e.f. 01.10.2002. Havingregard to the difficult finance situation which the State and theBoard were facing and having regard to the terms of theCsettlement, respondent(s) union cannot seek for sanction ofenhanced rate of Dearness Allowance on par with the CentralGovernment employees. [Para 21][162-C-D]

4. There is no rule or obligation on the State Governmentto always adopt the Dearness Allowance as revised by the CentralDGovernment. It is absolutely not necessary for the StateGovernment to adopt the Dearness Allowance rates fixed by theCentral Government. It should be looked from the financialposition of the State Government to adopt its own rates/revisedrates of Dearness Allowance. The Board, being the StateGovernment undertaking, the money has to come from the StateEGovernment. Keeping in view the extremely difficult financialposition of the State Government, Board’s order revising theDearness Allowance rate from 45% to 49% only from 01.10.2002cannot be said to be arbitrary or in violation of the terms of thesettlement. [Para 22][162-E-G]F5. It is not disputed that Board is run by the StateGovernment and unless the funds are provided by the StateGovernment, the Electricity Board would not have adequate fundsof its own to pay the wages. It is within the power of the Board toset a cut-off date for payment of revised Dearness Allowancekeeping in view its financial constraints. Moreover, theGsettlement agreement and the decisions taken by the Board inthe Board Proceedings are to be harmoniously construed. Havingregard to the financial difficulties which the State Governmentwas facing, appellant-Board being a State Government H

undertaking, decided to adopt the State Government’s revisedDearness Allowance at the same rate and from the same date. Inview of extremely difficult financial situation, not only the StateGovernment employees but all the employees of various othercorporations were granted revised Dearness Allowance at therate of 49% only w.e.f. 01.10.2002 and 52% w.e.f. 01.07.2003. Inthat factual scenario, the decision of the Board to adopt the rateof Dearness Allowance as granted by the State Governmentcannot be said to be arbitrary. The respondent(s) union cannotinsist for revision of Dearness Allowance at a higher rate thanwhat was being paid to the State Government employees.[Paras 28 and 31][164-F-H, 165-A, 166-D-E]

6. It is not correct to say that the Board has unilaterallyaltered the terms of settlement between the parties that DearnessAllowance rates will be revised twice in a year taking into accountthe variations in the previous twelve months average of theAll India Consumer Price Index numbers. Board’s proceedingBP (FB) No.58 dated 18.07.1998, inter alia provides for variousother terms like work norms, retrenchment etc. It is not thecase of the respondent(s) union that those terms of thesettlement were not acted upon. The respondent(s) union arenot right in taking one clause from the Board proceeding dated18.07.1998 and contending that in so far as payment ofDearness Allowance is concerned, the Settlementdated 08.07.1998 has been unilaterally altered. The respondent(s)have not challenged that portion of the Board’s proceedingBP(FB) No.58 dated 18.07.1998; the respondent(s) cannotapprobate and reprobate the Board Proceedings dated 18.07.1998.[Paras 29 and 30][165-D, G-H, 166-A-B]

Workmen of Gujarat Electricity Board, Baroda v.Gujarat Electricity Board, Baroda (1969) 1 SCC 266 :[1969] 1 SCR 174; Bengal Chemical &Pharmaceutical Works Ltd. v. Its Workmen [1969] 2 SCR113; Kamani Metals & Alloys Ltd. v. Their Workmen[1967] 2 SCR 463; T.N. Electricity Board v. R.Veerasamy and Ors. (1999) 3 SCC 414 : [1999] 2 SCR221; State of Punjab and Others v. Amar Nath Goyaland Others (2005) 6 SCC 754 : [2005] 2 Suppl.SCR 549 – relied on.

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Case Law Reference

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CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1653

of 2019

CFrom the Judgment and Order dated 27.03.2015 of the HighCourt of Judicature at Madras in W.A. No. 497 of 2015

With

Civil Appeal No. 1654 of 2019.

DK. Ramamoorthy, Sr. Adv., C. Paramasivam, Vinodh Kanna B.,Pushkin Rajkumar, C. K. Chandrasekhar, S. R. Setia, Ms. Asmita Singh,Gautam Narayan, Advs. for the appearing parties.

The Judgment of the Court was delivered by

R. BANUMATHI, J. 1. Leave granted.

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2. These appeals arise out of the judgment dated 27.03.2015 inW.A. No.497 of 2015 and judgment dated 21.08.2015 in W.A. No.1166of 2015 in and by which the High Court affirmed the order of the learnedSingle Judge directing the appellant-Board to pay Dearness Allowanceat the rate of 49% w.e.f. 01.01.2002 to the members of respondent(s)-Funion on par with the Central Government employees.

3. These appeals relate to the claim of employees of theappellant-Board for the payment of difference of Dearness Allowance(DA) for a period of nine months as under:-

- 4% of DA (difference of 49% - 45%) from 01.01.2002 to30.06.2002

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- 7% of DA (difference of 52% - 45%) from 01.07.2002 to30.09.2002

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4. Brief facts giving rise to these appeals are as under:-

A Memorandum of Settlement dated 08.07.1998 was recordedunder Section 18(1) of the Industrial Disputes Act, 1947 between theappellant-Tamil Nadu Electricity Board (Board) and its workmenrepresented by unions for settlement of pay related issues. The Settlementcovered about eighty thousand employees of the Board in Class III andIV service and it was for a period of four years from 01.12.1996 to30.11.2000. The terms of settlement also dealt with the payment ofDearness Allowance. As per Clause 5 of the terms of settlementagreement, it was agreed that the Dearness Allowance rates will berevised twice in a year i.e. on 1[st] January and on 1[st] July taking intoaccount the variations in the previous twelve months average of the AllIndia Consumer Price Index numbers, adopting the same formula asfollowed by the State Government. In pursuance of the said settlement,order dated 18.07.1998 was issued by the appellant-Board in BoardProceedings BP (FB) No.58 wherein, it was inter alia provided that therevised Dearness Allowance would be sanctioned to the employees ofthe Board as granted by the State Government to their employees at thesame rate and from the same date. The Board by its various proceedingshas been adopting the revised rate of Dearness Allowance payable toState Government employees at the same rate and from the same date.

5. The Government of India, Ministry of Finance, ExpenditureDepartment vide Office Memorandum dated 20.03.2002 enhanced theDearness Allowance payable to Central Government employees fromthe existing rate of 45% to 49% w.e.f. 01.01.2002. The State Governmentfaced acute financial crisis during the period 2001-2002 due to which,Government of Tamil Nadu was paying Dearness Allowance at the rateof 45% on that date to its employees. The appellant-Board also followedthe same rate of DA at 45%. On 07.05.2002 and 12.07.2002, therespondent-CITU submitted representations to the Board. After givingpersonal hearing to the representatives of the respondent, the Chairmanof the Board rejected the representation on 13.09.2002 stating that asper the settlement dated 08.07.1998, Dearness Allowance would besanctioned to the employees of the Board as granted by the StateGovernment to their employees at the same rate and from the samedate.

6. The Government of Tamil Nadu subsequently vide G.O.Ms.No.346 dated 21.10.2002 issued an order revising the Dearness A

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AAllowance from existing rate of 45% to 49% w.e.f. 01.10.2002 in viewof its difficult financial position. The appellant-Board also adopted G.O.Ms. No.346 dated 21.10.2002 and issued orders in BP(FB) No.58 dated29.10.2002 revising the Dearness Allowance to 49% from 01.10.2002to its employees on par with the State Government employees.

B7. The Central Government revised the rates of payment ofDearness Allowance to Central Government employees from the existingrate of 49% to 52% w.e.f. 01.07.2002. The Government of Tamil Naduvide G.O. No.215 dated 27.06.2003 revised the rate of DearnessAllowance to its employees w.e.f. 01.07.2003 from the existing rate of49% to 52%. The appellant-Board adopting the G.O. No.215 datedC27.06.2003 revised the Dearness Allowance to its employees to 52%from 01.07.2003 on par with the State Government employees.

8. Respondent-Union filed the writ petition in WP No.9525 of2003 before the High Court of Madras seeking direction to pay DearnessAllowance at the rate of 49% of the basic pay w.e.f. 01.01.2002 toD30.06.2002 and at the rate of 52% of the basic pay w.e.f. 01.07.2002respectively. Similarly, another respondent union-CITU filed the writpetition in WP No.36197 of 2002 with the same prayer. By order dated14.09.2012, the learned Single Judge allowed the Writ Petition No.36197of 2002 observing that the question involved was already concluded inW.P. No.10474 of 1999 and held that it is not open to the Board toEpostpone the arrears of Dearness Allowance and credit the same to theGeneral Provident Fund account of the employee without the consent ofthe employees.

9. By order dated 22.03.2013, Writ Petition No.9525 of 2003was also allowed in terms of the order passed in Writ Petition No.36197Fof 2002 by holding that the Board cannot postpone the arrears of DearnessAllowance and credit the same to the General Provident Fund of theemployee without the consent of the employees. The appeal preferredby the appellant-Board also came to be dismissed with the direction thatthe appellant-Board was liable to pay Dearness Allowance at the revisedrate w.e.f. 01.01.2002 to 30.09.2002.G

10. Mr. Ramamoorthy, learned senior Counsel for the appellant-Board has submitted that as per the settlement dated 08.07.1998, theDearness Allowance rates will be revised twice in a year i.e. on 1[st]January and on 1[st] July taking into account the variations in the previous twelve months average of the All India Consumer Price Index numbersadopting the same formula as followed by the State Government. It wassubmitted that the above settlement has been followed in BoardProceedings BP (FB) No.58 dated 18.07.1998 which stipulates that therevised Dearness Allowance will be sanctioned as granted by the StateGovernment to its employees and respondent(s) cannot seek for revisionof Dearness Allowance contrary to what was granted by the StateGovernment to its employees. It was submitted that the High Court didnot keep in view the well settled principle that the obligation to payenhanced Dearness Allowance depends upon the employer’s financialposition and other factors. It was contended that the High Court erred inholding that the issue is covered by judgment in W.P. No.10474 of 1999which relates to entirely a different issue i.e. payment of arrears ofDearness Allowance in cash instead of crediting the arrears of DearnessAllowance into the General Provident Fund account of the employeesconcerned. Learned senior counsel urged that at the relevant time andalso presently, appellant-Board is facing extremely difficult financialposition and the payment of revised Dearness Allowance for the disputedperiod to more than eighty thousand of its employees would have a hugefinancial implication on the Board.

11. Per contra, Mr. Chandrasekhar, learned counsel for therespondent has submitted that the employees of TNEB are notgovernment servants and there is no parity in their service conditionsand status and hence, comparison of the Board employees with theemployees of the State Government will be inapposite. Learned counselinter-alia submitted that employees of TNEB are governed by the labourlaws like Industrial Disputes Act, Payment of Wages Act, Payment ofBonus Act, etc. and when the settlement dated 08.07.1998 stipulatesthat the revision in Dearness Allowance depends upon the All IndiaConsumer Price Index number, the Board by its Board Proceedings BP(FB) No.58 dated 18.07.1998 ought not to have unilaterally changed theterms of the settlement restricting the payment of Dearness Allowanceto the Board employees on par with the employees of the StateGovernment. It was further submitted that restricting the payment ofrevised Dearness Allowance only from 01.10.2002 instead of giving effectfrom 01.01.2002 is contrary to the agreed terms in the settlement dated08.07.1998.

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158 SUPREME COURT REPORTS [2019] 2 S.C.R.

A12. We have carefully considered the submissions and perusedthe impugned judgment and materials on record. The following pointsarise for consideration:-

(i) Pursuant to the Memorandum of Settlement dated08.07.1998 recorded under Section 18(1) of the IndustrialDisputes Act, 1947 and BP (FB) No.58 dated 18.07.1998, whenBthe Board has been adopting the formula of the State Governmentin revising the rate of Dearness Allowance on par with the StateGovernment employees, whether the High Court was right indirecting the appellant-Board to pay the revised DA at the rate f49% from 01.01.2002 and 52% from 01.07.2002?

C(ii) When the settlement dated 08.07.1998 between theappellant and the unions has been followed by the Boardstipulating that the revision of Dearness Allowance would be onpar with the rate sanctioned by the State Government to itsemployees, in deviation therefrom, whether the respondents areright in insisting upon revision of Dearness Allowance at theDabovesaid rates?

13. In the settlement dated 08.07.1998 recorded under Section18(1) of the Industrial Disputes Act, 1947 between the appellant-Boardand the respondent-CITU, Clause 5 of the settlement deals with DearnessAllowance which reads as under:-E“5. Dearness Allowance The revised rates of Dearness Allowance for various payranges will be as indicated in Annexure III. The DearnessAllowance rates will be revised twice in a year on 1[st] Januaryand 1[st] July taking into account the variations in the previousFtwelve months average of the All India Consumer Price Indexnumbers, adopting the same formula as followed by the StateGovernment.”

On 18.07.1998, orders were issued by the Board in BoardProceedings BP (FB) No.58 in accordance with the terms of theprovisions of the settlement dated 08.07.1998 stating that the revisedGDearness Allowance would be sanctioned to the employees of the Boardas granted by the State Government to their employees at the same rateand from the same date. The relevant portion of the order in BP (FB)No.58 which deals with Dearness Allowance reads as under:- “III Dearness Allowance (a) The existing pay structure has been revised at All IndiaConsumer Price Index of 1510 points and the revised dearnessallowance will be sanctioned to the employees of the Board asgranted by the State Government to their employees at thesame rates and from the same date.”

14. Pursuant to the settlement and Board ProceedingsBP(FB)No.58 dated 18.07.1998, the Board passed various orders/proceedings adopting the revised Dearness Allowance rates as per theState Government orders revising Dearness Allowance to the StateGovernment employees. We may refer to few earlier Government ordersfollowed by the Board orders adopting the same rate of revised DearnessAllowance rates with effect from the same date:-

(i) On 12.05.2001, Proceedings (Per) BP (FB) No.24 wasissued by the Board whereby the Board adopted the revisedDA rates as per GO No.188 dated 26.04.2001 i.e. 43%w.e.f. 01.01.2001.

(ii) On 31.12.2001, by G.O. No.525, the Tamil NaduGovernment had revised the rate of DA to 45% to the StateGovernment employees from 01.07.2001. Adopting therevised Dearness Allowance rates as per G.O No.525 dated31.12.2001, Board vide its proceedings BP (FB) No.3 dated17.01.2002 adopted the revised Dearness Allowance ratesi.e. 45% w.e.f. 01.07.2001.

It is clear from the above that the Board has been sanctioningthe revised rates of Dearness Allowance at the same rate and from thesame date as has been sanctioned by the State Government to itsemployees.

15. On 20.03.2002, the Government of India enhanced theDearness Allowance for the Central Government employees from 45%to 49% w.e.f. 01.01.2002. Due to extremely difficult financial positionwhich the State Government was facing, the State Government waspaying the Dearness Allowance at the rate of 45% on the said datewithout enhancing it to 49%. Accordingly, the appellant-Board alsofollowed the same rate i.e. 45% as paid by the State Government on thesaid date. As pointed out earlier, Chairman of the Board rejected therespondent-CITU’s representation on 13.09.2002 stating that as per thesettlement dated 08.07.1998 followed by Board Proceedings BP (FB)No.58 dated 18.07.1998, Dearness Allowance would be sanctioned to A

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Athe employees of the Board as granted by the State Government to theiremployees at the same rate and from the same date. While rejectingCITU’s representation, it was made clear that the State Governmenthad not issued any order revising Dearness Allowance at the rate of49% w.e.f. 01.01.2002 on par with the Central Government employees.

B16. On 21.10.2002, the Government of TN issued G.O.Ms.No.346 revising the Dearness Allowance from 45% to 49% w.e.f.01.10.2002 in view of extremely difficult financial position faced by theState Government. Para 3 of the said G.O. reads as under:- “3. In view of the extremely difficult financial position facedby the Government, the Government after having discussionsCwith the Tamil Nadu Government Officer’s Union, Tamil NaduArasu Aluvalarkazhagam (C&D Group) and Tamil NaduSecretariat Association, has decided to sanction one additionalinstalment of Dearness Allowances at 4% to the employeesof the State with effect from 01.10.2002. Accordingly, theDGovernment now sanction the revised rate of DearnessAllowance to the State Government employees as indicatedbelow:- Date from which payableRevised rate ofDA (per month)E1[st] October 200249 per cent of pay Following the State Government’s G.O. Ms.No.346, appellant-Board videorders in BP (FB) No.58 dated 29.10.2002 revised the DearnessAllowance to its employees from 45% to 49% w.e.f. 01.10.2002 andthus followed the terms of the settlement dated 08.07.1998 followed byFthe Board Proceedings BP (FB) No.58 dated 18.07.1998.

17. Likewise, when Government of India revised the rate ofDearness Allowance from 49% to 52% w.e.f. 01.07.2002, the StateGovernment as well as the Board have been paying Dearness Allowanceat the rate of 49% only. On 27.06.2003, the State Government issuedG.O. No.215 revising the Dearness Allowance from 49% to 52% w.e.f.G01.07.2003. Accordingly, on 09.07.2003, Board issued orders revisingthe Dearness Allowance from 49% to 52% from 01.07.2003 adoptingthe G.O. No.215 dated 27.06.2003.

18. Comparative table of the Dearness Allowance paid to theemployees of the Central Government, State Government and the BoardHin the relevant period are as under:- TNEB v. TNEB-THOZHILALAR AYKKIYA SANGAM[R. BANUMATHI, J.]

AFromPercentage ofPercentage ofPercentageDearnessDearnessof DearnessAllowanceAllowanceAllowanceallowed by theallowed by theallowed byCentralStatethe appellantGovernmentGovernmentBoard01.01.200249%45%45%B01.07.200252%45%45%01.10.200252%49%49%01.01.200355%49%49%01.07.200359%52%52%

19. As discussed earlier, payment of Dearness Allowance isgoverned by the Wage Settlement dated 08.07.1998 and the BoardProceedings BP (FB) No.58 dated 18.07.1998. The increases in DearnessAllowance which fell due w.e.f. 01.07.1998, 01.01.1999, 01.07.1999,01.01.2000, 01.07.2000, 01.01.2001 and 01.07.2001 were all paid as perthe above agreed term only. As per settlement dated 08.07.1998, theDearness Allowance rates will be revised twice in a year i.e. on 1[st]January and on 1[st] July taking into account the variations in the previoustwelve months average of the All India Consumer Price Index numbersadopting the same formula as followed by the State Government. TheBoard Proceeding BP(FB) No.58 dated 18.07.1998 stipulated that therevised Dearness Allowance would be sanctioned to the employees ofthe Board as granted by the State Government to their employees at thesame rate and from the same date. It is pertinent to note that in thesubsequent wage settlement entered into between the appellant-Boardand the respondent-union on 15.10.2005 (w.e.f. 01.12.2002) stipulatesthe existing practice of sanction of Dearness Allowance to the employeesof the Board as granted by the State Government to their employees atthe same rate and from the same date. The subsequent settlement alsoreiterates that all along the revision of Dearness Allowance to theemployees of the Board was on par with the employees of the StateGovernment. The respondent(s) union having agreed that the revisedDearness Allowance will be sanctioned as granted by the StateGovernment to their employees, the appellant-Board has been consistentlyadopting the revised rates of Dearness Allowance following various StateGovernment orders. Having agreed for the grant of revised DearnessAllowance on par with the State Government employees, therespondent(s) union cannot seek for revision in Dearness Allowance ata higher rate than what was granted by the State Government to itsemployees.

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A20. The appellant-Board has been adopting the formula of theState Government in revising the rate of Dearness Allowance, whichwas settled under Section 18(1) of the Indian Disputes Act, 1947 andthe settlement between the appellant-Board and the respondent union.The appellant-Board is not bound to adopt the revised rate of CentralGovernment, when the settlement prescribes the formula to be adoptedBfrom the rates of the State Government.

21. The High Court, in our view, did not keep in view the wellsettled principles that the revision of wage or Dearness Allowance woulddepend upon the ability and the financial position of the employer. InG.O. Ms. No.346 in and by which the Government of TN revised theCDearness Allowance from 45% to 49% (w.e.f. 01.10.2002), it was madeclear that the Government of TN was facing extremely difficult financialposition and therefore, decided to sanction additional four per cent (45%to 49%) of Dearness Allowance to the employees of the StateGovernment w.e.f. 01.10.2002. Having regard to the difficult financeDsituation which the State and the Board were facing and having regardto the terms of the settlement, respondent(s) union cannot seek forsanction of enhanced rate of Dearness Allowance on par with the CentralGovernment employees.

22. Each State Government following their own rate of DearnessEAllowance payable to their employees may be adopting the revisedDearness Allowance of the Central Government. There is no rule orobligation on the State Government to always adopt the DearnessAllowance as revised by the Central Government. It is absolutely notnecessary for the State Government to adopt the Dearness Allowancerates fixed by the Central Government. It should be looked from theFfinancial position of the State Government to adopt its own rates/revisedrates of Dearness Allowance. The Board, being the State Governmentundertaking, the money has to come from the State Government. Keepingin view the extremely difficult financial position of the State Government,Board’s order revising the Dearness Allowance rate from 45% to 49%only from 01.10.2002 cannot be said to be arbitrary or in violation of theGterms of the settlement.

23. The main source of finance of the Electricity Board is theState Government; the Board is run by the State Government. Unlessthe funds are provided by the State Government, the Electricity Boardwould not have sufficient funds of its own to pay the wages and theHrevised Dearness Allowance to its employees. Considering the financial difficulties which the State Government was facing, the revision of theDearness Allowance from the above said dates at above said rate cannotbe said to be arbitrary or without any reason.

24. While considering the grievance of wage structure orDearness Allowance, the importance of considering the financialimplications while providing benefits to employees has been noted bythe Supreme Court in number of judgments. The Supreme Court inWorkmen of Gujarat Electricity Board, Baroda v. Gujarat ElectricityBoard, Baroda (1969) 1 SCC 266 while dismissing the appeal preferredby the workmen, has confirmed the view taken by the Tribunal whichrejected the demand of the employees of the Board for DearnessAllowance that it should be fixed with the scale prescribed for theAhmedabad Mill Owners’ Association on the ground that the Boarddoes not have the capacity to meet the additional expenditure that wouldhave to be incurred if such demands are acceded to.

25. The Supreme Court in Bengal Chemical &Pharmaceutical Works Ltd. v. Its Workmen [1969] 2 SCR 113afterreferring to Kamani Metals & Alloys Ltd. v. Their Workmen [1967] 2SCR 463 has laid down that one-hundred per cent neutralisation is notadvisable as it will lead to inflation and therefore, dearness allowance isoften a little less than one-hundred per cent neutralisation. Explainingthe purpose of Dearness Allowance and that it should depend upon theability of the employer to bear such burden, the Supreme Court held asunder:- “1. Full neutralization is not normally given, except to thevery lowest class of employees.

2. The purpose of dearness allowance being to neutralise aportion of the increase in the cost of living, it should ordinarilybe on a sliding scale and provide for an increase on the risein the cost of living and a decrease on a fall in the cost ofliving.

3. The basis of fixation of wages and dearness allowance isindustry-cum-region.

4. Employees getting the same wages should get the samedearness allowance, irrespective of whether they are workingas clerks or members of subordinate staff or factory workmen.

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A5. The additional financial burden which a revision of thewage structure or dearness allowance would impose uponan employer, and his ability to bear such burden, are verymaterial and relevant factors to be taken intoaccount…………[underlining added]”

B26. In T.N. Electricity Board v. R. Veerasamy and Ors. (1999)3 SCC 414 which has been relied upon by the respondent, in whichTNEB itself was the appellant, the Supreme Court while dealing withthe prospective application of a pension scheme observed that financialconstraint is a valid ground for introducing a cut-off date and took noteof the financial burden that the Board will have to borne if the schemeCwould be made effective retrospectively.

27. In State of Punjab and Others v. Amar Nath Goyal andOthers (2005) 6 SCC 754, the Supreme Court negatived the contentionof the employees that the decision of the Central Government/StateGovernments to limit the benefit only to certain employees afterDcalculating the financial implications thereon, was irrational or arbitraryand held as under:- “28. ………the final recommendations of the PayCommission were not ipso facto binding on the Government,as the Government had to accept and implement theErecommendations of the Pay Commission consistent with itsfinancial position. This is precisely what the Government did.Such an action on the part of the Government can neither becharacterised as irrational, nor as arbitrary so as to infringeArticle 14 of the Constitution.”

F28. It is within the power of the Board to set a cut-off date forpayment of revised Dearness Allowance keeping in view its financialconstraints. Moreover, the settlement agreement and the decisions takenby the Board in the Board Proceedings are to be harmoniously construed.Having regard to the financial difficulties which the State Governmentwas facing, appellant-Board being a State Government undertaking,Gdecided to adopt the State Government’s revised Dearness Allowanceat the same rate and from the same date. In view of extremely difficultfinancial situation, not only the State Government employees but all theemployees of various other corporations were granted revised DearnessAllowance at the rate of 49% only w.e.f. 01.10.2002 and 52% w.e.f.01.07.2003. The respondent(s) union cannot insist for revision ofH

Dearness Allowance at a higher rate than what was being paid to theState Government employees.

29. Mr. C.K. Chandrasekhar, learned counsel for respondent(s)submitted that as per Clause 5 of the settlement dated 08.07.1998,Dearness Allowance rates will be revised twice in a year taking intoaccount the variations in the previous twelve months average of the AllIndia Consumer Price Index numbers adopting the same formula asfollowed by the State Government and based on the same, the employeeswere periodically given revision of Dearness Allowance in every sixmonths without any deviation on par with Central Government DearnessAllowance by applying the State Government formula. It was submittedthat B.P. (FB) No.58 dated 18.07.1998 issued by the Board to payDearness Allowance only on par with the State Government and basedon the same revising the Dearness Allowance from 45% to 49% from01.10.2002 instead of giving effect from 01.01.2002 was contrary to thesettlement dated 08.07.1998. It was submitted that in BP(FB) No.58dated 18.07.1998, the Board has unilaterally altered the terms of thesettlement and even though All India Consumer Price Index was revisedand Dearness Allowance increased from 45% to 49% with effect from01.01.2002, the Board’s unilateral action is contrary to the terms of thesettlement. It was urged that instead of following the formula forDearness Allowance based on All India Consumer Price Index, theBoard’s action in restricting the payment from 01.10.2002 following StateGovernment order in G.O. No.346Finance Department dated 21.10.2002is contrary to the binding settlement dated 08.07.1998. As per Clause 3of the Board Proceeding BP(FB) No.58 dated 18.07.1998, DearnessAllowance will be sanctioned to the employees of the Board as grantedby the State Government to their employees at the same rate and fromthe same date. Based on the same, the employees were periodicallygiven revision of DA in every six months without any deviation by applyingthe State Government formula, at the same time, it was on par with theCentral Government dearness allowance.

30. There is no merit in the contention that by BP (FB) No.58dated 18.07.1998, the Board has unilaterally altered the terms ofsettlement between the parties. On perusal of Board’s proceeding BP(FB) No.58 dated 18.07.1998, it is seen that Clause 2of the Boardproceedings inter alia provides for various other terms like work norms,retrenchment etc. It is not the case of the respondent(s) union thatthose terms of the settlement were not acted upon. The respondent(s)

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Aunion are not right in taking one clause from the Board proceeding dated18.07.1998 and contending that in so far as payment of DearnessAllowance is concerned, the Settlement dated 08.07.1998 has beenunilaterally altered. It is pertinent to note that the respondent(s) have notchallenged that portion of the Board’s proceeding BP(FB) No.58 dated18.07.1998; the respondent(s) cannot approbate and reprobate the BoardBProceedings dated 18.07.1998. Therefore, the contention that revisionof Dearness Allowance as granted by the State Government to theiremployees is the unilateral alteration of the terms of settlement lacksmerit.

31. Contention of the respondent(s) is that the employees of theCappellant-Board are not State Government employees and they cannotbe treated on par with the State Government employees. It is not thecontention of the appellant-Board that the employees of the Board areto be treated on par with the State Government employees nor the sameis the issue for consideration before us. It is not disputed that Board isDrun by the State Government and unless the funds are provided by theState Government, the Electricity Board would not have adequate fundsof its own to pay the wages. In that factual scenario, the decision of theBoard to adopt the rate of Dearness Allowance as granted by the StateGovernment cannot be said to be arbitrary.

32. The learned Single Judge as well as the Division BenchEproceeded under the erroneous footing that the issue has been coveredby the orders of the High Court issued in the two batches of W.P.Nos.8574-8578 of 1992 and W.Ps. No.10474 of 1999 etc. The orders inthose batch of writ petitions were only against crediting of the arrears ofDearness Allowance sanctioned. After referring to the earlier judgmentFin W.P. Nos.8574-8578 of 1992 dated 16.10.1992 and W.Ps. No.10474of 1999 dated 11.08.1999, the High Court held that “there is no stipulationin the settlement that the arrears of Dearness Allowance for the pastperiod would be credited to the General Provident Fund account of theindividual employee and in the absence of any stipulation in the settlement,it is not open to the Board to credit arrears of Dearness Allowance forGthe earlier period to the credit of General Provident Fund account of therespective employee unless individual employee gives the writtenconsent”. The orders of the High Court in those earlier writ petitionswere only against crediting of the arrears of the Dearness Allowance inthe respective provident fund account of the employees, wherein, theHcourt directed the Board to pay arrears in cash and restrained the Board from deducting any arrears of the Dearness Allowance and creditingthe same into the General Provident Fund account of the workmen.

33. Of course, in the earlier batch of writ petitions i.e. WritPetition Nos.8574-8578, the High Court inter-alia held that the Boardcannot unilaterally transgress from the terms of the settlement andobserved as under:- “The settlement, as long as it is in force, will govern both theparties. One of the parties cannot unilaterally transgress theterms of the agreement or ignore the same. Caluse-4 referredto above does not enable the respondent to make the paymentin the mode adopted by the Government. Clause-4 onlydirects that the formula which is followed by the Governmentshould be adopted by the Board and that is only for thepurpose of calculating the dearness allowance on the basisof the Price Index and nothing more than that. Hence, thecontention that the respondent is bound to adopt the methodfollowed by the Government for payment is without anysubstance.”

34. The learned Single Judge as well as the Division Bench didnot keep in view that in the present dispute, settlement dated 08.07.1998was followed by BP(FB) No.58 dated 18.07.1998 which clearly stipulatesthat the Dearness Allowance would be paid to the employees of theBoard as granted by the State Government to its employees. It is pertinentto note that the representation of respondent-CITU dated 12.07.2002was rejected by the Board vide order dated 13.09.2002 which refers toBP(FB) No.58 dated 18.07.1998 to the effect that the revised DearnessAllowance would be sanctioned to the employees of the Board as grantedby the State Government to their employees at the same rate and fromthe same date. The learned Single Judge and the Division Bench erredin not considering the matter in the proper perspective and erred in holdingthat the issue has been covered by the earlier judgment in Writ PetitionNo.10474 of 1999 dated 11.08.1999.

35. The learned Single Judge and the Division Bench did notkeep in view the terms of the Settlement and the Board ProceedingBP(FB) No. 58 dated 18.07.1998 which stipulates that DearnessAllowance would be revised on par with the State Government employeesand that it has been consistently followed by the appellant-Board. TheHigh Court erred not keeping in view the extremely difficult financial A

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Aposition of the State Government and the Board and also the additionalfinancial burden which would be imposed upon the appellant-Board ifthe demands of the respondent(s)-union are acceded to. The High Court,in our view, was clearly in error in allowing the writ petition and theimpugned judgment cannot be sustained and liable to be set aside.

B36. In the result, the impugned judgments of the High Court inW.A. No.497 of 2015 and W.A. No.1166 of 2015 dated 27.03.2015 and21.08.2015 respectively are set aside and these appeals are allowed. Nocosts.

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Kalpana K. Tripathy

Appeals allowed.

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