The Supreme Court has clarified that when a State Government, exercising its legislative power under Article 309 of the Constitution, enacts statutory rules that incorporate a specific, objective standard for calculating employee emoluments, such as Dearness Allowance based on the All-India Consumer Price Index (AICPI), it creates a vested, legally enforceable right for the employees.
The Court held that any subsequent executive action, such as issuing memoranda, that deviates from this statutory mandate without amending the rules or providing a rational, non-arbitrary basis for the deviation, is ultra vires the parent statute and is void for being manifestly arbitrary under Article 14.
While emphasising that the State cannot plead financial inability or ‘paucity of funds’ as a ground to abdicate its responsibility to honour such a vested legal right, as it is obligated to act as a model employer and uphold the rule of law, the Court held that the employees of the State of West Bengal have a legally enforceable right to receive Dearness Allowance.
The Court pointed out that the AICPI is the standard to be followed by the State for determining DA for the period 2008-2019, as stipulated in the West Bengal (Revision of Pay and Allowance) Rules, 2009 (RoPA Rules). The Court directed the constitution of a three-member Committee, chaired by a retired Supreme Court Judge, to determine the total arrears payable and to formulate a schedule for payment, with the first instalment to be paid by 31st March 2026.
The direction of the Tribunal to pay DA twice a year was set aside as it was not mandated by the RoPA Rules. However, the question of whether DA is a fundamental right under Article 21 was left open.
The Division Bench comprising Justice Sanjay Karol and Justice Prashant Kumar Mishra observed that the “Dearness Allowance” is a mechanism of a welfare state to protect employees from the adverse effects of inflation by neutralizing the erosion of their purchasing power, thereby upholding a reasonable standard of living which is tied to the constitutional idea of dignity.
The Bench found that by enacting the RoPA Rules, 2009, under Article 309, the State of West Bengal performed an act of ‘legislation by incorporation’ when it adopted the definition of “existing emoluments”, including the specific AICPI number, from the Central Government Rules. This act demonstrated a clear legislative intent to follow the AICPI standard.
The memoranda issued by the State Government subsequent to the RoPA Rules, which prescribed DA rates deviating from the AICPI standard, were an improper exercise of executive power, added the Bench, while observing that these memoranda could not override the statutory RoPA Rules, as executive instructions can only supplement statutory rules, not contradict them, especially when the rules themselves are clear and leave no gaps to be filled.
The Bench held the State’s action of deviating from the statutorily adopted AICPI standard without conducting any independent study or providing any rational basis for the new rates, as manifestly arbitrary, and that such action, lacking a discernible principle and connection to the object of neutralizing inflation, is capricious and violates Article 14 of the Constitution.
The enactment of the RoPA Rules, which explicitly recognized the AICPI as the basis for DA calculation, created a legitimate expectation in the minds of the employees that their DA would be determined according to this established, predictable, and certain method, added the Bench.
The Bench opined that the State’s argument of ‘paucity of funds’ is not a valid defence to deny the payment of a legally enforceable right such as salary or other statutory benefits. The State, as a ‘model employer’, has a responsibility to honour its financial obligations arising from its own statutes and judicial decisions. Accordingly, the Bench concluded that the claim of the employees was not defeated by delay and laches, as the non-payment of DA at the appropriate rate constituted a ‘continuing wrong’, giving rise to a recurring cause of action.
Briefly, the dispute originated after the State enacted the West Bengal (Revision of Pay and Allowance) Rules, 2009 (RoPA Rules) under Article 309 of the Constitution, following the recommendations of the Fifth Pay Commission. Rule 3(1)(c) of these rules defined ‘existing emoluments’ to include DA ‘at index average 536’, a formula identical to that used by the Central Government.
However, the State, through a series of memoranda, began disbursing DA at rates lower than those determined by the AICPI and different from the Central Government rates. The employees’ unions had initiated litigation before the State Administrative Tribunal, which was initially dismissed but later, on remand from the High Court, ruled in the employees’ favour. The High Court, in two rounds of litigation, affirmed the employees’ legally enforceable right to DA and upheld the Tribunal’s direction to calculate it based on the AICPI.
Appearances:
Senior Advocates P.S. Patwalia and Bansuri Swaraj, AORs Mrigank Prabhakar, Kunal Mimani, Shekhar Kumar, and Uddyam Mukherjee, along with Advocates Guddu Singh, Swapnil Pattanayak, Agnibha Chatterjee, Davesh Vashishtha, Kratika Kushwaha, Sidesh Kotwal, and Ana Upadhyay, for the Appellant
Senior Advocates Bikash Ranjan Bhattacharyya, Rauf Rahim, P S Patwalia, Karuna Nundy, Gopal Subramanium, and Nachiketa Joshi, AORs Shekhar Kumar, Uddyam Mukherjee, and Mrigank Prabhakar, along with Advocates Firdous Samim, Ali Asghar Rahim, Gopa Biswas, Mohsin Rahim, Tania Tamanna, Guddu Singh, Swapnil Pattanayak, Agnibha Chatterjee, Davesh Vashishtha, Kratika Kushwaha, Ana Upadhyay, Sidesh Kotwal, Prabir Chatterjee, Shiv Mehrotra, Rishika Rishabh, Shivangshi Mitra, Sakshi Banga, Astha Singh, Siddhartha Banerjee, Bikram Banerjee, Chandrashekhar A. Chakalabbi, Sudipta Dasgupta, Somsubhra Ganguly, Debapriya Mitra, Adrita Dey, Sinjhoni Chakraborty, Prabir Chatterjee, Sakshi Banga, Shiv Mehrotra, and Astha Singh, for the Respondent
