Supreme Court Clarifies Financial Upgradation Under MACP Scheme: Union of India vs. M.V. Mohanan Nair (2020)

Introduction

Date of the Judgment: March 05, 2020
Citation: (2020) INSC 227
Judges: R. Banumathi, J., A.S. Bopanna, J., Hrishikesh Roy, J.

Does the Modified Assured Career Progression (MACP) scheme grant financial upgrades to the next grade pay, or does it elevate employees to the grade pay of their next promotional position? The Supreme Court of India recently addressed this critical question, which impacts numerous government employees. This judgment clarifies the scope of financial upgradations under the MACP scheme, settling a dispute that had arisen from differing interpretations of the scheme. The bench comprised Justices R. Banumathi, A.S. Bopanna, and Hrishikesh Roy, with the majority opinion authored by Justice R. Banumathi.

Case Background

The case involves a batch of appeals filed by the Union of India against various High Court orders. These High Courts had upheld decisions of the Central Administrative Tribunal (CAT), which granted financial upgradation to employees based on the promotional hierarchy, relying on the judgment in Union of India and others v. Raj Pal and another. The core dispute revolves around whether the MACP scheme entitles employees to the next grade pay or the grade pay of the next promotional post. The respondents, various government employees, contended that the MACP scheme should provide financial upgradation in the promotional hierarchy, similar to the earlier Assured Career Progression (ACP) scheme.

Timeline

Course of Proceedings

The Central Administrative Tribunals (CAT) and various High Courts had largely ruled in favor of the employees, granting financial upgradation based on the promotional hierarchy, relying on the Raj Pal case. The tribunals and High Courts rejected the Union of India’s argument that under the MACP scheme, employees are only entitled to the next grade pay. Aggrieved by these decisions, the Union of India filed appeals in the Supreme Court.

Legal Framework

The core legal framework for this case includes the Assured Career Progression (ACP) Scheme introduced on 09.08.1999, and the Modified Assured Career Progression (MACP) Scheme, which replaced the ACP Scheme on 01.09.2008.

The ACP Scheme aimed to address stagnation by granting two financial upgradations to Group ‘B’, ‘C’, and ‘D’ employees upon completion of 12 and 24 years of service. These upgradations were placements in a higher pay scale without a functional promotion.

The MACP Scheme, introduced via Office Memorandum dated 19.05.2009, provides three financial upgradations in the next grade pay after 10, 20, and 30 years of service. The scheme aimed to rectify disparities arising from the ACP Scheme by ensuring uniform benefits irrespective of the promotional hierarchy.

The Central Civil Services (Revised Pay) Rules, 2008, which implemented the Sixth Central Pay Commission’s recommendations, also play a crucial role. These rules define the revised pay structure, including pay bands and grade pays, which are central to the MACP scheme.

Key provisions include:

• Para 2 of the MACP Scheme: “MACP Scheme envisages merely placement in the immediate next higher grade pay in the hierarchy of the recommended revised pay bands and grade pay.”
• Para 10 of the MACP Scheme: “no stepping up of pay in the pay band or grade pay would be admissible with regard to junior getting more pay than the senior on account of pay fixation under the MACP Scheme.”
• Para 11 of the MACP Scheme: “the differences in pay scales on account of financial upgradations under the ACP Scheme and MACP Scheme would not be construed as anomaly.”
• Para 19 of the MACP Scheme: “The MACPS contemplates merely placement on personal basis in the immediate higher Grade pay /grant of financial benefits only and shall not amount to actual functional promotion of the employees concerned.”
• Para 20 of the MACP Scheme: “financial upgradations shall be purely personal to the employee and shall have no relevance to the seniority position.”

Arguments

The Union of India argued that the MACP scheme clearly stipulates financial upgradation to the next grade pay, not the grade pay of the next promotional post. They contended that the Sixth Central Pay Commission introduced the MACP scheme to address disparities caused by the ACP scheme. The Union of India asserted that employees cannot selectively claim benefits from both the ACP and MACP schemes. It was also argued that the government has the prerogative to set pay scales and incentives, and courts should not interfere unless the scheme is discriminatory or arbitrary.

The employees, on the other hand, argued that financial upgradation should be in the next promotional hierarchy, not merely the next grade pay. They contended that pay, allowances, and financial upgradation are conditions of service that cannot be altered at the employer’s will. They also argued that the term “hierarchy” in the MACP scheme should be linked to recruitment and conditions of service, implying a promotional hierarchy. The employees further argued that the MACP scheme is disadvantageous compared to the ACP scheme, leading to financial hardship and discrimination.

The amicus curiae argued that the MACP scheme should be interpreted to grant financial upgradation to the grade pay of the next promotional post, not just the next grade pay in the pay rules. The amicus curiae also contended that the MACP scheme, if interpreted as granting the next grade pay, would lead to discriminatory treatment, violating Article 14 of the Constitution of India.

The following table demonstrates the sub-submissions categorized by main submissions of all sides pertaining to the issue:

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether the MACP scheme entitles financial upgradation of pay to the next grade pay or to the grade pay of the next promotional post as envisaged under the ACP scheme? Whether MACP Scheme envisages grant of financial upgradation in Grade Pay Hierarchy and not in promotional hierarchy?
2. As contended by the respondents, whether the MACP scheme is disadvantageous to the employees in comparison to the ACP scheme as long as the financial upgradation is granted in the hierarchy of grade pay under MACP scheme?
3. Whether respondents are entitled to stepping up of their grade pay to be at par with grade pay of their juniors who were getting the higher grade pay on account of implementation of MACP Scheme?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court considered the following authorities:

Cases:

• Union of India and another v. P.V. Hariharan and another (1997) 3 SCC 568 – The Supreme Court held that the government, acting on the recommendations of a Pay Commission, is the proper authority to decide on pay scales.
• State of U.P. and Others v. U.P. Sales Tax Officers Grade II Association (2003) 6 SCC 250 – The Supreme Court observed that decisions of expert bodies like the Pay Commission are not ordinarily subject to judicial review.
• Secretary, Government (NCT of Delhi) and others v. Grade-1 Officers Association and others (2014) 13 SCC 296 – The Supreme Court upheld the ACP Scheme and its conditions, refusing to interfere with government policy.
• State of Tamil Nadu v. S. Arumugham (1998) 2 SCC 198 – The Supreme Court observed that the government has the right to frame policies for efficiency and proper administration.
• State of Haryana and Another v. Haryana Civil Secretariat Personal Staff Association (2002) 6 SCC 72 – The Supreme Court held that courts should approach matters of pay fixation with restraint and interfere only when the government’s decision is patently irrational.
• Union of India v. All India Service Pensioners’ Association and another (1988) 2 SCC 580 – The Supreme Court held that when reasons are given for dismissing a Special Leave Petition (SLP), the decision attracts Article 141 of the Constitution.
• Supreme Court Employees Welfare Association v. Union of India and Others (1989) 4 SCC 187 – The Supreme Court held that the dismissal of an SLP by a non-speaking order does not lay down any law under Article 141 of the Constitution.

Legal Provisions:

• Assured Career Progression (ACP) Scheme, Office Memorandum dated 09.08.1999
• Modified Assured Career Progression (MACP) Scheme, Office Memorandum dated 19.05.2009
• Central Civil Services (Revised Pay) Rules, 2008
• Article 141 of the Constitution of India

The following table shows how the authorities were considered by the court:

Judgment

The following table shows how each submission made by the parties was treated by the Court:

The following table shows how each authority was viewed by the Court:

The Supreme Court held that the MACP scheme clearly stipulates financial upgradation to the next grade pay, not the grade pay of the next promotional post. The Court reasoned that the MACP scheme was introduced to address inter-departmental disparities caused by the ACP scheme. The Court emphasized that the Sixth Central Pay Commission, an expert body, had comprehensively examined the issues and recommended the MACP scheme, which was accepted by the government.

The Court rejected the argument that the MACP scheme is disadvantageous compared to the ACP scheme, noting that the MACP scheme provides three financial upgradations in a shorter time span with higher pay bands. The Court also held that employees cannot selectively claim benefits from both the ACP and MACP schemes.

The Supreme Court also addressed the issue of the Raj Pal case, which was relied upon by the High Courts. The Court clarified that the Raj Pal case was dismissed by the Supreme Court due to delay in refiling the Special Leave Petition and not on merits. Therefore, it could not be considered a binding precedent.

The Court observed that the government has the right to frame policies for efficiency and proper administration and that courts should approach such matters with restraint. The Court also noted that the fixation of pay and determination of responsibilities is a complex matter for the executive to decide.

The Supreme Court emphasized that the MACP scheme was introduced based on the recommendations of an expert body and the government’s acceptance of these recommendations. The Court stated that interference with such policy decisions would have a serious impact on the public exchequer.

The Supreme Court also highlighted that the term “hierarchy” in the MACP scheme refers to the hierarchy of pay bands and grade pay, not the promotional hierarchy.

The Court stated that the MACP scheme was introduced to remove inter-departmental disparities and does not violate Article 14 of the Constitution.

The Court also observed that while the MACP scheme provides for financial upgradation to the next grade pay, it does not grant the responsibilities of the next promotional post.

The Court stated that the MACP scheme is a matter of government policy and that interference with the recommendations of the expert body like Pay Commission would have serious impact on the public exchequer.

The Court quoted from Union of India and another v. P.V. Hariharan and another (1997) 3 SCC 568:

“It is the function of the Government which normally acts on the recommendations of a Pay Commission. Change of pay scale of a category has a cascading effect. Several other categories similarly situated, as well as those situated above and below, put forward their claims on the basis of such change. The Tribunal should realise that interfering with the prescribed pay scales is a serious matter.”

The Court quoted from State of U.P. and Others v. U.P. Sales Tax Officers Grade II Association (2003) 6 SCC 250:

“There can be no denial of the legal position that decision of expert bodies like the Pay Commission is not ordinarily subject to judicial review obviously because pay fixation is an exercise requiring going into various aspects of the posts held in various services and nature of the duties of the employees…”

The Court quoted from State of Haryana and Another v. Haryana Civil Secretariat Personal Staff Association (2002) 6 SCC 72:

“It is to be kept in mind that the claim of equal pay for equal work is not a fundamental right vested in any employee though it is a constitutional goal to be achieved by the Government. Fixation of pay and determination of parity in duties and responsibilities is a complex matter which is for the executive to discharge.”

The Court also noted that the dismissal of a Special Leave Petition (SLP) by a non-speaking order does not lay down any law under Article 141 of the Constitution, as stated in Supreme Court Employees Welfare Association v. Union of India and Others (1989) 4 SCC 187.

The Court also clarified that the dismissal of Raj Pal’s case was due to delay and not on merits, and therefore, it was not a binding precedent.

The Court stated that the MACP scheme was introduced based on the recommendations of an expert body and the government’s acceptance of these recommendations. The Court stated that interference with such policy decisions would have a serious impact on the public exchequer.

The Court concluded that the High Courts erred in interfering with the government’s policy by relying on the Raj Pal case and that the impugned orders could not be sustained.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the explicit language of the MACP scheme, which clearly states that financial upgradation is to the “immediate next higher grade pay.” The Court emphasized the expert nature of the Sixth Central Pay Commission and the government’s prerogative in implementing its recommendations. The Court also focused on the need for consistency in applying the MACP scheme uniformly across all departments, avoiding the disparities that arose under the ACP scheme.

The Court was also influenced by the fact that the MACP scheme was not challenged by the respondents. The court also noted that the scheme provides for three financial upgradations in a shorter time span and has higher pay bands, making it more beneficial overall.

The Court’s decision was also influenced by the fact that the Raj Pal case was not a binding precedent as it was dismissed on the grounds of delay and not on merits.

The Court also emphasized the need for restraint in interfering with government policies, especially those related to pay and service conditions.

The following table shows the ranking of sentiment analysis of reasons given by the Supreme Court:

The following table shows the ratio of fact:law percentage that influenced the court to decide:

The Court’s reasoning was primarily based on the legal interpretation of the MACP scheme and the government’s policy decisions, with a lesser emphasis on the factual aspects of individual employee cases.

The following flowchart demonstrates the logical reasoning of the court for Issue 1:

Key Takeaways

• The MACP scheme provides financial upgradation to the immediate next higher grade pay, not the grade pay of the next promotional post.
• The MACP scheme is intended to address disparities caused by the ACP scheme and is uniformly applicable across departments.
• The government has the prerogative to set pay scales and incentives, and courts should exercise restraint in interfering with such policies.
• The recommendations of expert bodies like the Pay Commission are given significant weight by the courts.
• Dismissal of a Special Leave Petition (SLP) by a non-speaking order does not create a binding precedent.
• Employees cannot selectively claim benefits from both the ACP and MACP schemes.

The judgment clarifies the scope of financial upgradations under the MACP scheme, which will have a significant impact on government employees across various departments. It reinforces the principle that the government has the right to frame policies for efficiency and proper administration. The judgment also sets a precedent for how courts should interpret government policies and the recommendations of expert bodies.

The Supreme Court directed the following:

• The appeals filed by the Union of India were allowed.
• The impugned judgments and orders of the High Courts and Tribunals were set aside.
• The issue regarding stepping up of pay was de-tagged and listed separately for further consideration.