REPORTABLE IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  1653    OF 2019 (Arising out of SLP(C) No.25005 of 2015)

TAMIL NADU ELECTRICITY BOARD             …Appellant REP. BY ITS CHAIRMAN

VERSUS

TNEB-THOZHILALAR AYKKIYA                  …Respondent SANGAM BY ITS GENERAL SECRETARY

WITH CIVIL APPEAL NO.  1654    OF 2019

(Arising out of SLP(C) NO.14627 OF 2016)

J U D G M E N T

R. BANUMATHI, J.

Leave granted.

2. These appeals arise out of the judgment dated 27.03.2015 in

W.A.  No.497  of  2015  and  judgment  dated  21.08.2015  in  W.A.

No.1166 of 2015 in and by which the High Court affirmed the order

of the learned Single Judge directing the appellant-Board to pay

Dearness Allowance at the rate of 49% w.e.f.  01.01.2002 to the

members  of  respondent(s)-union  on  par  with  the  Central

Government employees.

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3. These  appeals  relate  to  the  claim  of  employees  of  the

appellant-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  to 30.06.2002

- 7%  of  DA  (difference  of  52%  -  45%)  from  01.07.2002  to 30.09.2002

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

A  Memorandum  of  Settlement  dated  08.07.1998  was

recorded under Section 18(1) of the Industrial Disputes Act, 1947

between the appellant-Tamil Nadu Electricity Board (Board) and its

workmen  represented  by  unions  for  settlement  of  pay  related

issues. The Settlement covered about eighty thousand employees

of the Board in Class III and IV service and it was for a period of

four  years  from  01.12.1996  to  30.11.2000.  The  terms  of

settlement also dealt  with the payment  of  Dearness Allowance.

As per     Clause 5 of the terms of settlement agreement, it was

agreed that the Dearness Allowance rates will be revised twice in a

year  i.e.  on  1st January  and on  1st July  taking  into  account  the

variations in the previous twelve months average of the All India

Consumer  Price  Index  numbers,  adopting  the  same  formula  as

followed  by  the  State  Government.   In  pursuance  of  the  said

settlement, order dated 18.07.1998 was issued by the appellant-

Board in Board Proceedings BP (FB) No.58 wherein, it was inter alia

provided that the revised Dearness Allowance would be sanctioned

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to  the  employees  of  the  Board  as  granted  by  the  State

Government to their  employees at the same rate and from the

same  date.  The  Board  by  its  various  proceedings  has  been

adopting the revised rate of Dearness Allowance payable to State

Government employees at the same rate and from the same date.

5. The Government  of  India,  Ministry  of  Finance,  Expenditure

Department vide Office Memorandum dated 20.03.2002 enhanced

the  Dearness  Allowance  payable  to  Central  Government

employees from the existing rate of 45% to 49% w.e.f. 01.01.2002.

The  State  Government  faced  acute  financial  crisis  during  the

period 2001-2002 due to which, Government of Tamil Nadu was

paying Dearness Allowance at the rate of 45% on that date to its

employees.  The appellant-Board also followed the same rate of DA

at  45%.   On  07.05.2002  and  12.07.2002,  the  respondent-CITU

submitted  representations  to  the  Board.   After  giving  personal

hearing to the representatives of the respondent, the Chairman of

the Board rejected the representation on 13.09.2002 stating that

as  per  the  settlement  dated  08.07.1998,  Dearness  Allowance

would be sanctioned to the employees of the Board as granted by

the State Government to their employees at the same rate and

from the same date.

6. The Government  of  Tamil  Nadu subsequently  vide G.O.Ms.

No.346 dated 21.10.2002 issued an order revising the Dearness

Allowance from existing rate of 45% to 49% w.e.f. 01.10.2002 in 3

view of  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 dated 29.10.2002 revising the Dearness Allowance to

49%  from  01.10.2002  to  its  employees  on  par  with  the  State

Government employees.

7. The  Central  Government  revised  the  rates  of  payment  of

Dearness Allowance to Central Government employees from the

existing rate of 49% to 52% w.e.f. 01.07.2002.  The Government of

Tamil Nadu vide G.O. No.215 dated 27.06.2003 revised the rate of

Dearness Allowance to its employees w.e.f.  01.07.2003 from the

existing rate  of  49% to  52%.  The appellant-Board adopting the

G.O. No.215 dated 27.06.2003 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 of

2003 before the High Court  of  Madras seeking direction to pay

Dearness  Allowance at  the  rate  of  49% of  the  basic  pay  w.e.f.

01.01.2002 to 30.06.2002 and at the rate of 52% of the basic pay

w.e.f.  01.07.2002  respectively.  Similarly,  another  respondent

union-CITU filed the writ petition in WP No.36197 of 2002 with the

same prayer. By order dated 14.09.2012, the learned Single Judge

allowed  the  Writ  Petition  No.36197  of  2002  observing  that  the

question involved was already concluded in W.P. No.10474 of 1999

and held that it is not open to the Board to postpone the arrears of 4

Dearness Allowance and credit the same to the General Provident

Fund  account  of  the  employee  without  the  consent  of  the

employees.   

9. By order  dated 22.03.2013,  Writ  Petition No.9525 of  2003

was  also  allowed in  terms  of  the  order  passed  in  Writ  Petition

No.36197 of 2002 by holding that the Board cannot postpone the

arrears of Dearness Allowance and credit the same to the General

Provident  Fund  of  the  employee  without  the  consent  of  the

employees.  The  appeal  preferred  by  the  appellant-Board  also

came to be dismissed with the direction that the appellant-Board

was liable to pay Dearness Allowance at  the revised rate w.e.f.

01.01.2002 to 30.09.2002.

10. Mr. Ramamoorthy, learned senior Counsel for the appellant-

Board has submitted that as per the settlement dated 08.07.1998,

the Dearness Allowance rates will be revised twice in a year i.e. on

1st January and on 1st July taking into account the variations in the

previous twelve months average of the All India Consumer Price

Index numbers adopting the same formula as followed by the State

Government. It was submitted that the above settlement has been

followed  in  Board  Proceedings  BP  (FB)  No.58  dated  18.07.1998

which  stipulates  that  the  revised  Dearness  Allowance  will  be

sanctioned as granted by the State Government to its employees

and respondent(s) cannot seek for revision of Dearness Allowance

contrary  to  what  was  granted  by  the  State  Government  to  its 5

employees. It was submitted that the High Court did not keep in

view the well settled principle that the obligation to pay enhanced

Dearness  Allowance  depends  upon  the  employer’s  financial

position and other factors. It was contended that the High Court

erred  in  holding  that  the  issue  is  covered  by  judgment  in  W.P.

No.10474 of  1999 which relates to entirely a different issue i.e.

payment  of  arrears  of  Dearness  Allowance  in  cash  instead  of

crediting  the  arrears  of  Dearness  Allowance  into  the  General

Provident  Fund  account  of  the  employees  concerned.  Learned

senior counsel urged that at the relevant time and also presently,

appellant-Board is facing extremely difficult financial position and

the payment of revised Dearness Allowance for the disputed period

to more than eighty thousand of its employees would have a huge

financial implication on the Board.  

11. Per  contra,  Mr.  Chandrasekhar,  learned  counsel  for  the

respondent  has  submitted  that  the  employees  of  TNEB are  not

government  servants  and  there  is  no  parity  in  their  service

conditions  and  status  and  hence,  comparison  of  the  Board

employees with the employees of  the State Government will  be

inapposite. Learned counsel inter-alia submitted that employees of

TNEB are governed by the labour laws like Industrial Disputes Act,

Payment of Wages Act, Payment of Bonus  Act, etc. and when the

settlement  dated  08.07.1998  stipulates  that  the  revision  in

Dearness Allowance depends upon the All  India Consumer Price

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Index number, the Board by its Board Proceedings BP (FB) No.58

dated 18.07.1998 ought not to have unilaterally changed the terms

of the settlement restricting the payment of Dearness Allowance to

the  Board  employees  on  par  with  the  employees  of  the  State

Government. It was further submitted that restricting the payment

of  revised  Dearness  Allowance only  from 01.10.2002 instead of

giving effect from 01.01.2002 is contrary to the agreed terms in

the settlement dated 08.07.1998.

12. We have carefully considered the submissions and perused

the impugned judgment and materials on record.   The following

points arise for consideration:-

(i) Pursuant  to  the  Memorandum  of  Settlement  dated 08.07.1998 recorded under Section 18(1) of the Industrial Disputes Act, 1947 and BP (FB) No.58 dated 18.07.1998, when  the  Board  has  been  adopting  the  formula  of  the State  Government  in  revising  the  rate  of  Dearness Allowance on par with the State Government employees, whether  the  High  Court  was  right  in  directing  the appellant-Board to pay the revised DA at the rate of 49% from 01.01.2002 and 52% from 01.07.2002?

(ii) When  the  settlement  dated  08.07.1998  between  the appellant and the unions has been followed by the Board stipulating that the revision of Dearness Allowance would be  on  par  with  the  rate  sanctioned  by  the  State Government  to  its  employees,  in  deviation  therefrom, whether  the  respondents  are  right  in  insisting  upon revision of Dearness Allowance at the abovesaid rates?

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13. In the settlement dated 08.07.1998 recorded under Section

18(1) of the Industrial Disputes Act, 1947 between the appellant-

Board and the respondent-CITU, Clause 5 of the settlement deals

with Dearness Allowance which reads as under:-

“5.    Dearness Allowance                  The revised rates of Dearness Allowance for various pay

ranges will  be as indicated in Annexure III.  The Dearness Allowance  rates  will  be  revised  twice  in  a  year  on  1st January and 1st July taking into account the variations in the previous twelve months average of the All India Consumer Price  Index  numbers,  adopting  the  same  formula  as followed by the State Government.”

On  18.07.1998,  orders  were  issued  by  the  Board  in  Board

Proceedings BP (FB) No.58 in accordance with the terms of  the

provisions  of  the  settlement  dated  08.07.1998  stating  that  the

revised Dearness Allowance would be sanctioned to the employees

of  the  Board  as  granted  by  the  State  Government  to  their

employees at the same rate and 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  India Consumer Price Index of 1510 points and the revised dearness allowance will be sanctioned to the employees of the Board as granted  by  the  State  Government  to  their  employees  at  the same rates and from the same date.”  

14. Pursuant  to  the  settlement  and  Board  Proceedings

BP(FB)No.58  dated  18.07.1998,  the  Board  passed  various

orders/proceedings adopting the revised Dearness Allowance rates 8

as per the State Government orders revising Dearness Allowance

to the State Government employees. We may refer to few earlier

Government  orders  followed  by  the  Board  orders  adopting  the

same rate of revised Dearness Allowance rates with effect from the

same date:-

(i) On  12.05.2001,  Proceedings  (Per)  BP  (FB)  No.24  was issued  by  the  Board  whereby  the  Board  adopted  the revised DA 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  Nadu Government had revised the rate  of  DA to  45% to  the State Government employees from 01.07.2001. Adopting the revised Dearness Allowance rates as per G.O No.525 dated  31.12.2001,  Board  vide its  proceedings  BP  (FB) No.3  dated  17.01.2002  adopted  the  revised  Dearness Allowance rates i.e. 45% w.e.f. 01.07.2001.  

It is clear from the above that the Board has been sanctioning the

revised rates of Dearness Allowance at the same rate and from the

same date as has been sanctioned by the State Government to its

employees.  

15. On  20.03.2002,  the  Government  of  India  enhanced  the

Dearness Allowance for the Central Government employees from

45% to 49% w.e.f. 01.01.2002. Due to extremely difficult financial

position  which  the  State  Government  was  facing,  the  State

Government  was  paying the  Dearness  Allowance at  the rate  of

45% on the said date without enhancing it to 49%.  Accordingly,

the appellant-Board also followed the same rate i.e. 45% as paid

by the State Government on the said date.  As pointed out earlier,

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Chairman  of  the  Board  rejected  the  respondent-CITU’s

representation on 13.09.2002 stating that as per the settlement

dated 08.07.1998 followed by Board Proceedings BP (FB) No.58

dated 18.07.1998, Dearness Allowance would be sanctioned to the

employees of the Board as granted by the State Government to

their employees at the same rate and from the same date. While

rejecting CITU’s representation, it was made clear that the State

Government had not issued any order revising Dearness Allowance

at  the  rate  of  49%  w.e.f.  01.01.2002  on  par  with  the  Central

Government employees.   

16. 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

the State Government.  Para 3 of the said G.O. reads as under:-

“3. In view of the extremely difficult financial position faced by the Government, the Government after having discussions with the Tamil Nadu Government Officer’s Union, Tamil Nadu Arasu Aluvalarkazhagam  (C&D  Group)  and  Tamil  Nadu  Secretariat Association, has decided to sanction one additional instalment of Dearness Allowances at 4% to the employees of the State with effect  from  01.10.2002.  Accordingly,  the  Government  now sanction the revised rate of  Dearness Allowance to the State Government employees as indicated below:-

Date from which payable Revised  rate  of  DA (per month)

1st October 2002 49 per cent of pay

Following the State Government’s G.O. Ms.No.346, appellant-Board

vide orders  in  BP  (FB)  No.58  dated  29.10.2002  revised  the

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Dearness  Allowance  to  its  employees  from  45%  to  49%  w.e.f.

01.10.2002 and thus followed the terms of the settlement dated

08.07.1998 followed by the Board Proceedings BP (FB) No.58 dated

18.07.1998.  

17. Likewise,  when  Government  of  India  revised  the  rate  of

Dearness Allowance from 49% to 52% w.e.f. 01.07.2002, the State

Government  as  well  as  the  Board  have  been  paying  Dearness

Allowance  at  the  rate  of  49%  only.  On  27.06.2003,  the  State

Government issued G.O. No.215 revising the Dearness Allowance

from 49% to 52% w.e.f. 01.07.2003.   Accordingly, on 09.07.2003,

Board issued orders revising the Dearness Allowance from 49% to

52% from 01.07.2003 adopting the G.O. No.215 dated 27.06.2003.

18. Comparative  table  of  the  Dearness  Allowance  paid  to  the

employees of the Central Government, State Government and the

Board in the relevant period are as under:-

From Percentage  of Dearness Allowance allowed by the Central Government  

Percentage  of Dearness Allowance allowed by the State Government

Percentage of  Dearness Allowance allowed  by the appellant Board

01.01.2002 49% 45% 45% 01.07.2002 52% 45% 45% 01.10.2002 52% 49% 49% 01.01.2003 55% 49% 49% 01.07.2003 59% 52% 52%

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19. As  discussed  earlier,  payment  of  Dearness  Allowance  is

governed  by  the  Wage  Settlement  dated  08.07.1998  and  the

Board Proceedings BP (FB) No.58 dated 18.07.1998. The increases

in  Dearness  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

01.07.2001 were all paid as per the above agreed term only. As

per settlement dated 08.07.1998, the Dearness Allowance rates

will be revised twice in a year i.e. on 1st January and on 1st July

taking into account the variations in the previous twelve months

average of the All India Consumer Price Index numbers adopting

the  same  formula  as  followed  by  the  State  Government.   The

Board Proceeding       BP(FB) No.58 dated 18.07.1998 stipulated

that the revised Dearness Allowance would be sanctioned to the

employees of the Board as granted by the State Government to

their employees at the same rate and from the same date.  It is

pertinent to note that in the subsequent 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 Allowance to the employees of the Board as

granted by the State Government to their employees at the same

rate  and  from the  same date.  The  subsequent  settlement  also

reiterates that all along the revision of Dearness Allowance to the

employees of  the Board was on par with the employees of  the

State Government.  The respondent(s)  union  having agreed that

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the revised Dearness Allowance will be sanctioned as granted by

the State Government to their employees, the appellant-Board has

been  consistently  adopting  the  revised  rates  of  Dearness

Allowance  following  various  State  Government  orders.  Having

agreed for the grant of revised Dearness Allowance on par with the

State  Government  employees,  the  respondent(s)  union  cannot

seek for revision in Dearness Allowance at a higher rate than what

was granted by the State Government to its employees.

20. The appellant-Board has been adopting the formula of the

State  Government  in  revising  the  rate  of  Dearness  Allowance,

which was settled under Section 18(1) of the Indian Disputes Act,

1947 and  the  settlement  between  the  appellant-Board  and  the

respondent union.  The appellant-Board is not bound to adopt the

revised  rate  of  Central  Government,  when  the  settlement

prescribes the formula to be adopted from the rates of the State

Government.  

21. The High Court, in our view, did not keep in view the well

settled principles that the revision of wage or Dearness Allowance

would depend upon the ability  and the financial  position of  the

employer.  In G.O. Ms. No.346 in and by which the Government of

TN  revised  the  Dearness  Allowance  from  45%  to  49%  (w.e.f.

01.10.2002), it  was made clear that the Government of TN was

facing extremely difficult financial position and therefore, decided

to  sanction  additional  four  per  cent  (45% to  49%)  of  Dearness 13

Allowance  to  the  employees  of  the  State  Government  w.e.f.

01.10.2002.  Having regard to the difficult finance situation which

the State and the Board were facing and having regard  to  the

terms  of  the  settlement,  respondent(s)  union  cannot  seek  for

sanction of enhanced rate of Dearness Allowance on par with the

Central Government employees.

22. Each State Government following their own rate of Dearness

Allowance  payable  to  their  employees  may  be  adopting  the

revised Dearness Allowance of the Central Government.  There is

no rule or obligation on the State Government to always adopt the

Dearness Allowance as revised by the Central Government.  It  is

absolutely not necessary for the State Government to adopt the

Dearness  Allowance  rates  fixed  by  the  Central  Government.  It

should  be  looked  from  the  financial  position  of  the  State

Government  to  adopt  its  own  rates/revised  rates  of  Dearness

Allowance.  The Board, being the State Government undertaking,

the money has to come from the State Government. Keeping in

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 the terms of the settlement.   

23. The main source of  finance of  the Electricity  Board is  the

State  Government;  the  Board  is  run  by  the  State  Government.

Unless  the  funds  are  provided  by  the  State  Government,  the 14

Electricity Board would not have sufficient funds of its own to pay

the wages and the revised Dearness Allowance to its employees.

Considering the financial difficulties which the State Government

was facing, the revision of the Dearness Allowance from the above

said dates at above said rate cannot be said to be arbitrary or

without any reason.  

24. While  considering  the  grievance  of  wage  structure  or

Dearness Allowance, the importance of considering the financial

implications while providing benefits to employees has been noted

by the Supreme Court in number of judgments. The Supreme Court

in Workmen of Gujarat Electricity Board, Baroda v. Gujarat

Electricity Board, Baroda (1969) 1 SCC 266 while dismissing the

appeal preferred by the workmen, has confirmed the view taken by

the Tribunal which rejected the demand of the employees of the

Board for Dearness Allowance that it should be fixed with the scale

prescribed  for  the  Ahmedabad  Mill  Owners’  Association  on  the

ground that the Board does not have the capacity to meet the

additional  expenditure  that  would  have  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 113 after referring to

Kamani Metals & Alloys Ltd. v. Their Workmen [1967] 2 SCR

463 has laid down that one-hundred per cent neutralisation is not

advisable  as  it  will  lead  to  inflation  and  therefore,  dearness 15

allowance  is  often  a  little  less  than  one-hundred  per  cent

neutralisation. Explaining the purpose of Dearness Allowance and

that it should depend upon the ability of the employer to bear such

burden, the Supreme Court held as under:-  

“1. Full neutralization is not normally given, except to the very lowest class of employees. 2.  The  purpose  of  dearness  allowance  being  to  neutralise  a portion of the increase in the cost of living, it should ordinarily be on a sliding scale and provide for an increase on the rise in the cost of living and a decrease on a fall in the cost of living. 3.  The  basis  of  fixation  of  wages  and  dearness  allowance  is industry-cum-region. 4.  Employees  getting  the  same  wages  should  get  the  same dearness allowance, irrespective of whether they are working as clerks or members of subordinate staff or factory workmen.  5.  The additional financial burden which a revision of the wage structure  or  dearness  allowance  would  impose  upon  an employer, and his ability to bear such burden, are very material and  relevant  factors  to  be  taken  into  account ………… [underlining added]”

26. In  T.N.  Electricity  Board  v.  R.  Veerasamy  and  Ors.

(1999) 3 SCC 414 which has been relied upon by the respondent,

in which TNEB itself was the appellant, the Supreme Court while

dealing  with  the  prospective  application  of  a  pension  scheme

observed that financial constraint is a valid ground for introducing

a cut-off date and took note of the financial burden that the Board

will  have  to  borne  if  the  scheme  would  be  made  effective

retrospectively.

27. In State of Punjab and Others v. Amar Nath Goyal and

Others (2005)  6  SCC  754,  the  Supreme  Court  negatived  the

contention  of  the  employees  that  the  decision  of  the  Central

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Government/State Governments to limit the benefit only to certain

employees after calculating the financial implications thereon, was

irrational or arbitrary and held as under:-

“28.  ………the  final  recommendations  of  the  Pay  Commission were  not  ipso  facto binding  on  the  Government,  as  the Government had to accept and implement the recommendations of the Pay Commission consistent with its financial position. This is precisely what the Government did. Such an action on the part of  the Government can neither  be characterised as irrational, nor as arbitrary so as to infringe Article 14 of the Constitution.”

28. It is within the power of the Board to set a cut-off date for

payment  of  revised  Dearness  Allowance  keeping  in  view  its

financial constraints. Moreover, the settlement agreement and the

decisions taken by the Board in the Board Proceedings are to be

harmoniously construed. Having regard to the financial difficulties

which the State Government was facing, appellant-Board being a

State  Government  undertaking,  decided  to  adopt  the  State

Government’s revised Dearness Allowance at the same rate and

from  the  same  date.  In  view  of  extremely  difficult  financial

situation,  not only the State Government employees but all  the

employees  of  various  other  corporations  were  granted  revised

Dearness Allowance 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 of  Dearness Allowance at  a higher rate than what was

being paid to the State Government employees.  

29. Mr.  C.K.  Chandrasekhar,  learned counsel  for  respondent(s)

submitted  that  as  per  Clause  5  of  the  settlement  dated

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08.07.1998, Dearness Allowance rates will  be revised twice in a

year  taking  into  account  the  variations  in  the  previous  twelve

months average of  the All  India Consumer Price Index numbers

adopting the same formula as followed by the State Government

and based on the same, the employees were periodically given

revision of Dearness Allowance in every six months without any

deviation on par with Central Government Dearness Allowance by

applying the State Government formula. It was submitted that B.P.

(FB) No.58 dated 18.07.1998 issued by the Board to pay Dearness

Allowance only on par with the State Government and based on

the same revising the Dearness Allowance from 45% to 49% from

01.10.2002 instead of giving effect from 01.01.2002 was contrary

to  the  settlement  dated  08.07.1998.   It  was  submitted  that  in

BP(FB) No.58 dated 18.07.1998, the Board has unilaterally altered

the terms of the settlement and even though All India Consumer

Price Index was revised and Dearness Allowance increased from

45% to 49% with effect from 01.01.2002, the Board’s unilateral

action is contrary to the terms of the settlement. It was urged that

instead of following the formula for Dearness Allowance based on

All India Consumer Price Index, the Board’s action in restricting the

payment  from 01.10.2002  following  State  Government  order  in

G.O. No.346 Finance Department dated 21.10.2002 is contrary to

the binding settlement dated 08.07.1998. As per Clause 3 of the

Board  Proceeding  BP(FB)  No.58  dated  18.07.1998,  Dearness

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Allowance will  be sanctioned to the employees of  the Board as

granted by the State Government to their employees at the same

rate and from the same date. Based on the same, the employees

were periodically given revision of DA in every six months without

any deviation by applying the State Government formula, at the

same time, it was on par with the Central Government dearness

allowance.  

30. There is no merit  in the contention that by BP (FB) No.58

dated 18.07.1998, the Board has unilaterally altered the terms of

settlement between the parties. On perusal of Board’s proceeding

BP (FB) No.58 dated 18.07.1998, it is seen that Clause 2 of the

Board proceedings inter alia provides for various other terms like

work  norms,  retrenchment  etc.   It  is  not  the  case  of  the

respondent(s) union that those terms of the settlement were not

acted upon.  The respondent(s) union are not right in taking one

clause  from  the  Board  proceeding  dated  18.07.1998  and

contending that in so far  as payment of  Dearness Allowance is

concerned, the Settlement dated 08.07.1998 has been unilaterally

altered.  It  is  pertinent  to  note  that  the  respondent(s)  have not

challenged that portion of  the Board’s proceeding BP(FB) No.58

dated  18.07.1998;  the  respondent(s)  cannot  approbate  and

reprobate the Board Proceedings dated 18.07.1998. Therefore, the

contention that revision of Dearness Allowance as granted by the

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State Government to their employees is the unilateral alteration of

the terms of settlement lacks merit.  

31. Contention of the respondent(s) is that the employees of the

appellant-Board  are  not  State  Government  employees  and they

cannot be treated on par with the State Government employees. It

is not the contention of the appellant-Board that the employees of

the Board are to be treated on par with the State Government

employees nor the same is the issue for consideration before us. It

is  not disputed that Board is run by the State Government and

unless  the  funds  are  provided  by  the  State  Government,  the

Electricity Board would not have adequate funds of its own to pay

the wages. In that factual scenario, the decision of the Board to

adopt  the  rate  of  Dearness  Allowance as  granted by  the  State

Government cannot be said to be arbitrary.  

32. The  learned  Single  Judge  as  well  as  the  Division  Bench

proceeded under the erroneous footing that the issue has been

covered by 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  in  those  batch  of  writ  petitions  were  only  against

crediting of the arrears of Dearness Allowance sanctioned. After

referring to the earlier judgment in W.P. Nos.8574-8578 of 1992

dated 16.10.1992 and W.Ps. No.10474 of 1999 dated 11.08.1999,

the High Court held that “there is no stipulation in the settlement

that the arrears of Dearness Allowance for the past period would 20

be credited to the General Provident Fund account of the individual

employee and in the absence of any stipulation in the settlement,

it is not open to the Board to credit arrears of Dearness Allowance

for  the  earlier  period  to  the  credit  of  General  Provident  Fund

account  of  the  respective employee unless  individual  employee

gives the written consent”. The orders of the High Court in those

earlier writ petitions were only against crediting of the arrears of

the Dearness Allowance in the respective provident fund account

of the employees,  wherein, the court directed the Board to pay

arrears  in  cash  and  restrained  the  Board  from  deducting  any

arrears of the Dearness Allowance and crediting the same into the

General Provident Fund account of the workmen.  

33. Of  course,  in  the  earlier  batch  of  writ  petitions  i.e.  Writ

Petition  Nos.8574-8578,  the High Court  inter-alia held that the

Board  cannot  unilaterally  transgress  from  the  terms  of  the

settlement and observed as under:-

“The settlement, as long as it is in force, will govern both the parties.  One  of  the  parties  cannot  unilaterally  transgress  the terms of the agreement or ignore the same. Caluse-4 referred to above does not enable the respondent to make the payment in the  mode adopted  by  the  Government.  Clause-4  only  directs that the formula which is followed by the Government should be adopted  by  the  Board  and  that  is  only  for  the  purpose  of calculating  the  dearness  allowance  on  the  basis  of  the  Price Index and nothing more than that. Hence, the contention that the respondent is bound to adopt the method followed by the Government for payment is without any substance.”

34. The learned Single Judge as well as the Division Bench did

not  keep in  view that  in  the  present  dispute,  settlement  dated

08.07.1998 was followed by BP(FB) No.58 dated 18.07.1998 which 21

clearly stipulates that the Dearness Allowance would be paid to

the employees of the Board as granted by the State Government

to its employees. It is pertinent to note that the representation of

respondent-CITU dated 12.07.2002 was rejected by the Board vide

order  dated  13.09.2002  which  refers  to  BP(FB)  No.58  dated

18.07.1998  to  the  effect  that  the  revised  Dearness  Allowance

would be sanctioned to the employees of the Board as granted by

the State Government to their employees at the same rate and

from the same date.  The learned Single Judge and the Division

Bench  erred  in  not  considering  the  matter  in  the  proper

perspective and erred in holding that the issue has been covered

by the earlier judgment in Writ Petition No.10474 of 1999 dated

11.08.1999.

35. The learned Single Judge and the Division Bench did not keep

in  view the  terms of  the  Settlement  and  the  Board  Proceeding

BP(FB) No.  58 dated 18.07.1998 which stipulates that Dearness

Allowance would  be  revised on par  with  the  State  Government

employees  and  that  it  has  been  consistently  followed  by  the

appellant-Board.   The High Court  erred not  keeping in view the

extremely difficult financial position of the State Government and

the Board and also the additional financial burden which would be

imposed  upon  the  appellant-Board  if  the  demands  of  the

respondent(s)-union are acceded to.  The High Court, in our view,

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was clearly in error in allowing the writ petition and the impugned

judgment cannot be sustained and liable to be set aside.

36. In the result, the impugned judgments of the High Court in

W.A. No.497 of 2015 and W.A. No.1166 of 2015 dated 27.03.2015

and 21.08.2015 respectively are set aside and these appeals are

allowed. No costs.

………....……………………….J.                [R. BANUMATHI]  

                            …...………………………..J. [INDIRA BANERJEE]

New Delhi; February 13, 2019

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