Supreme Court clarifies MACP Scheme: Grade Pay for Central Government Employees (28 January 2022)

LEGAL ISSUE: Interpretation of the Modified Assured Career Progression (MACP) Scheme regarding grade pay for central government employees.

CASE TYPE: Service Law

Case Name: The Director, Directorate of Enforcement & Anr. vs. K. Sudheesh Kumar & Ors.

Judgment Date: 28 January 2022

Date of the Judgment: 28 January 2022

Citation: (2022) INSC 84

Judges: M. R. Shah, J., Sanjiv Khanna, J.

What is the correct grade pay an employee is entitled to under the Modified Assured Career Progression (MACP) Scheme? The Supreme Court of India recently addressed this question, clarifying the method for determining grade pay upon financial upgradation for central government employees. The court examined whether the grade pay should be based on the next promotional post or the next higher grade pay within the existing pay band, ultimately siding with the latter interpretation. This judgment impacts how financial benefits are calculated for government employees under the MACP scheme. The bench consisted of Justice M. R. Shah and Justice Sanjiv Khanna, with the majority opinion authored by Justice M. R. Shah.

Case Background

The case involves K. Sudheesh Kumar and another employee (referred to as Respondent Nos. 1 & 2), who were appointed as Assistant Enforcement Officers (AEO) in 1976 and 1977 respectively. In 2009, the Government of India introduced the MACP Scheme for Central Government Civilian Employees. The scheme provided for financial upgradation based on the recommendations of the Sixth Central Pay Commission (CPC). Initially, when the third financial upgradation was granted on 17.11.2009, the respondents were given a grade pay of Rs. 6600 in Pay Band 3 (PB-3). However, the Audit Department raised an objection, stating that according to clause 8.1 of the MACP Scheme, PB-3 carried a grade pay of Rs. 5400. Consequently, the grade pay of the respondents was revised to Rs. 5400.

Aggrieved by this revision, the respondents approached the Central Administrative Tribunal, Ernakulam Bench, seeking the restoration of the Rs. 6600 grade pay. They argued that their next promotional post, Deputy Director, carried a grade pay of Rs. 6600. The Tribunal, however, dismissed their application, relying on clause 8.1 of the MACP Scheme, which specified that grade pay of Rs. 5400 in PB-2 and PB-3 should be treated as separate grade pays for the purpose of upgradation under the MACP Scheme.

Subsequently, the respondents filed an original petition before the High Court of Kerala at Ernakulam. The High Court allowed their petition, stating that the third financial upgradation should be equivalent to the next promotional post in the hierarchy, which carried a grade pay of Rs. 6600. The Director, Directorate of Enforcement, then appealed to the Supreme Court against the High Court’s decision.

Timeline

Course of Proceedings

The Central Administrative Tribunal, Ernakulam Bench, dismissed the original application filed by the respondents. The Tribunal upheld the decision of the department to revise the grade pay from Rs. 6600 to Rs. 5400, citing clause 8.1 of the MACP Scheme. The Tribunal reasoned that the MACP Scheme clearly states that the grade pay of Rs. 5400 in PB-2 and PB-3 are to be treated as separate for the purpose of upgradation.

The High Court of Kerala, however, overturned the Tribunal’s decision. The High Court held that the third financial upgradation should be equivalent to the grade pay of the next promotional post, which in this case was the Deputy Director with a grade pay of Rs. 6600. The High Court reasoned that the purpose of the MACP Scheme is to provide financial benefits equivalent to promotion, and thus, the next promotional post’s pay should be granted.

Legal Framework

The Modified Assured Career Progression (MACP) Scheme was introduced by the Government of India for Central Government Civilian Employees. The scheme aims to provide financial upgradation to employees who do not get regular promotions. The core of the dispute revolves around the interpretation of clause 8.1 of the MACP Scheme, which states:

“consequently upon the implementation of Sixth CPC’s recommendations, grade pay of Rs.5400 is now in two pay bands viz., PB­2 and PB­3. It further provided that the grade pay of Rs.5400 in PB­2 and Rs.5400 in PB­3 shall be treated as separate grade pays for the purpose of grant of upgradations under MACP Scheme.”

The relevant provisions also include Section 1, Part A of the First Schedule of the CCS (Revised Pay) Rules, 2008, which outlines the pay bands and grade pays for various posts.

The Supreme Court also considered the decision in the case of Union of India and others Vs. M.V. Mohanan Nair (2020) 5 SCC 421, where it was held that the MACP Scheme envisages placement in the immediate next higher grade pay in the hierarchy of the recommended revised pay bands and grade pay as given in Section 1, Part A of the First Schedule of the CCS (Revised Pay) Rules, 2008 and has nothing to do with the next promotional post.

Arguments

Arguments by the Appellants (Directorate of Enforcement)

• The appellants argued that the High Court’s judgment was contrary to the decisions of the Delhi High Court in the case of National Council of Educational Research & Training & Anr. Vs. Anita Gupta & Anr. 2016 SCC OnLine Del 4720 and the Supreme Court in Union of India and others Vs. M.V. Mohanan Nair (2020) 5 SCC 421.
• They contended that the MACP Scheme, as interpreted by the Supreme Court, provides for the immediate next higher grade pay in the hierarchy, not the grade pay of the next promotional post.
• The appellants highlighted clause 8.1 of the MACP Scheme, which clearly states that the grade pay of Rs. 5400 in PB-2 and PB-3 are to be treated as separate grade pays for the purpose of upgradation.
• They submitted that the High Court had effectively modified the MACP Scheme by granting a grade pay of Rs. 6600, which is three steps upward, instead of the immediate next higher grade pay of Rs. 5400 in PB-3.

Arguments by the Respondents (K. Sudheesh Kumar & Ors.)

• The respondents argued that the employee should be entitled to the next higher pay, and if both PB-2 and PB-3 carry a grade pay of Rs. 5400, the purpose of higher grade pay would be frustrated.
• They submitted that the High Court rightly directed the grant of a grade pay of Rs. 6600, as that is the next higher grade pay.
• They conceded that the High Court had wrongly used the term ‘next promotional post’ but maintained that the question was of the next higher grade pay.
• In the alternative, they relied on the decision of the Supreme Court in State of Rajasthan Vs. Mahesh Kumar Sharma (2011) 4 SCC 257, and prayed that if the court accepts the appellant’s submissions, no recovery of the difference in pay be ordered, as they are retired employees.

Submissions Table

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

1. Whether the respondents were entitled to a grade pay of Rs. 6600 on their third financial upgradation under the MACP Scheme, or if they were only entitled to the next higher grade pay of Rs. 5400 in PB-3.

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:

Judgment

The Supreme Court allowed the appeal, setting aside the High Court’s judgment and restoring the Central Administrative Tribunal’s order. The Court held that the respondents were entitled to a grade pay of Rs. 5400 and not Rs. 6600 as claimed by them.

The Court reiterated that the MACP Scheme envisages placement in the immediate next higher grade pay in the hierarchy of the recommended revised pay bands and grade pay as given in Section 1, Part A of the First Schedule of the CCS (Revised Pay) Rules, 2008. The Court also emphasized that the MACP Scheme has nothing to do with the next promotional post.

The Court observed that the High Court had modified the MACP Scheme by granting a grade pay of Rs. 6600, which was not in line with the scheme’s provisions. The Court further noted that the MACP Scheme is a matter of government policy, and interfering with it would have serious implications for the public exchequer.

The Court, however, directed that there shall be no recovery of the difference in pension between the grade pay of Rs. 5400 and Rs. 6600 for the period prior to December 2021, considering that the respondents are retired employees. Their pensions were to be refixed as per the judgment from January 2022 onwards.

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

The Court relied on the following authorities:

• Union of India and others Vs. M.V. Mohanan Nair (2020) 5 SCC 421: The Supreme Court followed this judgment, which interpreted the MACP Scheme to mean that employees are entitled to the immediate next higher grade pay as per the CCS (Revised Pay) Rules, 2008, not the next promotional post.
• National Council of Educational Research & Training & Anr. Vs. Anita Gupta & Anr. 2016 SCC OnLine Del 4720: The Delhi High Court’s decision was relied upon to support the interpretation that MACP provides for the immediate next higher grade pay.
• State of Rajasthan Vs. Mahesh Kumar Sharma (2011) 4 SCC 257: This case was relied upon for the alternative prayer of not ordering recovery of the amount already paid to the respondents.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the clear language of the MACP Scheme and the precedent set by its own judgment in M.V. Mohanan Nair (supra). The Court emphasized that the MACP Scheme is a government policy based on the recommendations of an expert body, and it should be interpreted as it is, without any modifications by the courts. The Court also considered the financial implications of modifying the scheme, noting that it would have a serious impact on the public exchequer.

Logical Reasoning

The Court’s reasoning was as follows:

1. The Court examined the MACP Scheme, particularly clause 8.1, which specifies that the grade pay of Rs. 5400 in PB-2 and PB-3 are to be treated as separate for the purpose of upgradation.
2. The Court relied on its previous decision in M.V. Mohanan Nair (supra), which clearly stated that the MACP Scheme provides for the immediate next higher grade pay in the hierarchy, not the grade pay of the next promotional post.
3. Based on these, the Court concluded that the respondents were entitled to the grade pay of Rs. 5400, which is the immediate next higher grade pay for PB-3, as per the scheme.

The Court rejected the interpretation that the next promotional post’s grade pay should be granted, emphasizing that the MACP Scheme does not consider the next promotional post. The Court also rejected the argument that both PB-2 and PB-3 having the same grade pay would frustrate the purpose of the scheme, stating that the scheme clearly differentiates between the two for upgradation purposes.

The Court also considered the alternative prayer of the respondents regarding the recovery of the amount already paid. While the Court held that the respondents were entitled to a grade pay of Rs. 5400, it also directed that there shall be no recovery of the difference in pension for the period prior to December 2021, considering that the respondents were retired employees.

The Court quoted the following from the judgment:

“MACP Scheme envisages placement in the immediate next higher grade pay in the hierarchy of the recommended revised pay bands and grade pay as given in Section 1, Part A of the First Schedule of the CCS (Revised Pay) Rules, 2008.”

“The High Court has committed a grave error in allowing the grade pay of Rs.6600 ­ the grade pay which was available to the next promotional post as Deputy Director.”

“However, we observe that the view which we are taking is on the premise that neither the MACP Scheme nor Clause 8.1 is under challenge and as per the law laid down by this Court in M.V. Mohanan Nair (supra), an employee is entitled to the higher grade pay as provided under MACP Scheme, more particularly, as per Section 1, Part A of the First Schedule of the CCS (Revised Pay) Rules, 2008.”

Key Takeaways

• The MACP Scheme provides for financial upgradation based on the immediate next higher grade pay in the hierarchy, not the grade pay of the next promotional post.
• The grade pay of Rs. 5400 in PB-2 and PB-3 are to be treated as separate for the purpose of upgradation under the MACP Scheme.
• Courts should not modify the MACP Scheme, which is a matter of government policy based on the recommendations of an expert body.
• While the Court upheld the correct interpretation of the MACP Scheme, it also provided relief to retired employees by directing no recovery of the difference in pension for the period prior to December 2021.
• Employees aggrieved by Clause 8.1 of the MACP Scheme can challenge it separately.

Directions

The Supreme Court directed that:

• The judgment and order passed by the High Court was quashed and set aside.
• The judgment and order of the Central Administrative Tribunal was restored.
• Respondents were entitled to the grade pay of Rs. 5400 and not Rs. 6600.
• Their pensions were to be refixed accordingly.
• There shall be no recovery of the difference in pension between the grade pay of Rs. 5400 and Rs. 6600 for the period prior to December 2021.
• On refixation of the pension as per the present judgment, they shall be paid the pension accordingly from January 2022 onwards.

Development of Law

The ratio decidendi of the case is that the Modified Assured Career Progression (MACP) Scheme envisages placement in the immediate next higher grade pay in the hierarchy of the recommended revised pay bands and grade pay as given in Section 1, Part A of the First Schedule of the CCS (Revised Pay) Rules, 2008, and has nothing to do with the next promotional post. This judgment reaffirms the position of law established in M.V. Mohanan Nair (supra) and clarifies the interpretation of the MACP Scheme.

Conclusion

The Supreme Court’s judgment in The Director, Directorate of Enforcement & Anr. vs. K. Sudheesh Kumar & Ors. clarifies the correct method for determining grade pay under the MACP Scheme. The Court reiterated that the scheme provides for the immediate next higher grade pay, not the grade pay of the next promotional post. This decision ensures that the MACP Scheme is interpreted consistently across all government departments and provides clarity on the financial benefits for government employees.