Supreme Court clarifies Modified Assured Career Progression Scheme: Directorate of Enforcement vs. K. Sudheesh Kumar (28 January 2022)

Date of the Judgment: 28 January 2022

Citation: Civil Appeal No. 442 of 2022

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

Can an employee be granted a grade pay higher than what is prescribed under the Modified Assured Career Progression (MACP) Scheme? The Supreme Court of India addressed this question in a recent case concerning the Directorate of Enforcement. The core issue revolved around whether employees are entitled to the next promotional post’s grade pay or the next higher grade pay within the existing pay band upon financial upgradation under the MACP Scheme. The judgment was delivered by a two-judge bench comprising Justice M.R. Shah and Justice Sanjiv Khanna, with Justice M.R. Shah authoring the opinion.

Case Background

The case involves K. Sudheesh Kumar and another employee (referred to as Respondent Nos. 1 and 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. According to Clause 8.1 of the MACP Scheme, the grade pay of Rs. 5400 was placed in two pay bands, PB-2 and PB-3, and these were to be treated as separate grade pays for the purpose of upgradations under the MACP Scheme. Initially, when the third financial upgradation was granted on 17.11.2009, the respondents were given a grade pay of Rs. 6600 in PB-3, which was later corrected to Rs. 5400 following an objection by the Audit Department. This correction led the respondents to approach the Central Administrative Tribunal, Ernakulam Bench, seeking to retain the initial grade pay of Rs. 6600.

Timeline

Course of Proceedings

The Central Administrative Tribunal, Ernakulam Bench, dismissed the original application (OA) filed by the respondents, upholding the correction of their grade pay to Rs. 5400. The Tribunal relied on Clause 8.1 of the MACP Scheme, which specified that the grade pay of Rs. 5400 in PB-2 and PB-3 should be treated as separate for upgradation purposes. Aggrieved, the respondents filed an original petition before the High Court of Kerala. The High Court allowed the petition, setting aside the Tribunal’s order and directing that the respondents be granted a grade pay of Rs. 6600, reasoning that the next promotional post of Assistant Director (Deputy Director) carries a grade pay of Rs. 6600. The Directorate of Enforcement then appealed to the Supreme Court against this decision of the High Court.

Legal Framework

The core of the dispute lies in the interpretation of the Modified Assured Career Progression (MACP) Scheme, specifically Clause 8.1. The MACP Scheme was introduced by the Government of India, Ministry of Personnel, Public Grievances and Pensions (Department of Personnel and Training). Clause 8.1 states:

‘consequently upon the implementation of Sixth CPC’s recommendations, grade pay of Rs.5400 is now in two pay bands viz., PB-2 and PB-3. It further provided that the grade pay of Rs.5400 in PB-2 and Rs.5400 in PB-3 shall be treated as separate grade pays for the purpose of grant of upgradations under MACP Scheme’.

This clause indicates that for the purpose of financial upgradations under the MACP scheme, the grade pay of Rs. 5400 in PB-2 and PB-3 are to be considered separate. The Supreme Court also referred to Section 1, Part A of the First Schedule of the CCS (Revised Pay) Rules, 2008, which provides the structure of pay bands and grade pays.

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 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 provides for 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.
• The appellants emphasized that as per Clause 8.1 of the MACP Scheme, PB-2 and PB-3 both carry a grade pay of Rs. 5400, and these are to be treated as separate grade pays for the purpose of upgradation under the MACP Scheme. Therefore, the respondents were only entitled to a grade pay of Rs. 5400 in PB-3.
• Granting a grade pay of Rs. 6600 would be a modification of the MACP Scheme and would amount to granting a benefit of three steps upward, which is not permissible under the scheme.

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

• The respondents argued that an employee should be entitled to the next higher pay. Accepting the appellants’ submission that both PB-2 and PB-3 carry a grade pay of Rs. 5400 would frustrate the purpose of a higher grade pay.
• They submitted that while the High Court had wrongly used the term “next promotional post,” the question was actually about the next higher grade pay, which is Rs. 6600.
• In the alternative, relying on the decision of the Supreme Court in State of Rajasthan Vs. Mahesh Kumar Sharma (2011) 4 SCC 257, they argued that if the Court were to accept the appellant’s submissions, no recovery of the difference in pay should be ordered, as the respondents had already retired and the difference in pension was minimal.

Issues Framed by the Supreme Court

The core issue before the Supreme Court was:

1. Whether the respondents were entitled to the grade pay of Rs. 6600 on their third financial upgradation under the MACP Scheme, or whether they were only entitled to the grade pay of Rs. 5400 as per Clause 8.1 of the MACP Scheme and Section 1, Part A of the First Schedule of the CCS (Revised Pay) Rules, 2008.

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 judgment of the High Court and restoring the order of the Central Administrative Tribunal. 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 emphasized that the MACP scheme has nothing to do with the next promotional post and that the employee would be entitled to the immediate next higher grade pay in the hierarchy of the recommended revised pay bands and grade pay as given in the CCS (Revised Pay) Rules, 2008.

How each authority was viewed by the Court?

• The Supreme Court relied on Union of India and others Vs. M.V. Mohanan Nair (2020) 5 SCC 421* stating that the MACP scheme is a matter of government policy and has nothing to do with the next promotional post.
• The Court also relied on Clause 8.1 of the MACP Scheme, which specifies that the grade pay of Rs. 5400 in PB-2 and PB-3 are separate for upgradation purposes.
• The Court considered Section 1, Part A of the First Schedule of the CCS (Revised Pay) Rules, 2008 to determine the structure of pay bands and grade pays.
• The Court considered State of Rajasthan Vs. Mahesh Kumar Sharma (2011) 4 SCC 257* and held that there shall be no recovery of the difference in pension for the period prior to December, 2021.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the explicit provisions of the MACP Scheme, particularly Clause 8.1, and the interpretation of the scheme in previous judgments. The Court emphasized that the MACP Scheme is a matter of government policy and that the scheme has nothing to do with the next promotional post. The Court also considered that the recommendations of the pay commission were accepted by the government and implemented. The Court also considered the fact that the respondents were retired employees and it would be difficult for them to refund the difference in pay and pension.

Logical Reasoning:

The Court considered the interpretation of the MACP scheme and held that the High Court had erred in granting the grade pay of Rs. 6600 by considering the next promotional post of Deputy Director. The Court stated:

“Thus, 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.”

The Court also observed that the High Court had modified the MACP Scheme, which was framed by the government based on the recommendations of the pay commission. The Court stated:

“By the impugned judgment and order and while granting grade pay of Rs.6600 to respondent Nos.1 & 2 virtually, the High Court has modified the MACP Scheme which has been framed by the Government on the recommendations of the expert body like the pay commission and its recommendations for the MACP Scheme.”

The Court also noted that the MACP scheme is a matter of government policy and interfering with the recommendations of the expert body would have serious impact on the public exchequer. The Court stated:

“the ACP which is now superseded by MACP Scheme is a matter of Government policy and interfering with the recommendations of the expert body like the pay commission and its recommendations for the MACP Scheme would have serious impact on the public exchequer.”

The Court also clarified that if any employee is aggrieved by Clause 8.1 of the MACP scheme, they can challenge it, but as the same was not under challenge in the present case, the Court had to go by the scheme as it is.

Key Takeaways

• The MACP Scheme provides for financial upgradation to the immediate next higher grade pay, and not to the grade pay of the next promotional post.
• The grade pay of Rs. 5400 in PB-2 and PB-3 are treated as separate grade pays for the purpose of upgradation under the MACP scheme.
• Courts should not interfere with government policies, such as the MACP Scheme, which are based on the recommendations of expert bodies like the pay commission.
• Retired employees are usually protected from recovery of overpaid amounts, especially when the overpayment is due to an error in the interpretation of the scheme by the employer.
• Employees who are aggrieved by any clause of the MACP scheme can challenge the same before the appropriate forum.

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.
• The respondents were entitled to the grade pay of Rs. 5400 and not Rs. 6600.
• Their pensions were to be refixed accordingly.
• There would 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.
• The respondents were to be paid pension as per the refixed grade pay of Rs. 5400 from January, 2022 onwards.

Development of Law

The ratio decidendi of this case is that the Modified Assured Career Progression (MACP) Scheme provides for financial upgradation to the immediate next higher grade pay, and not to the grade pay of the next promotional post. This judgment reinforces the principle that the MACP scheme is a matter of government policy and should be interpreted as it is, without modifications by the courts. The Supreme Court reiterated its position in Union of India and others Vs. M.V. Mohanan Nair (2020) 5 SCC 421, clarifying that the MACP scheme has nothing to do with the next promotional post.

Conclusion

The Supreme Court’s judgment in Directorate of Enforcement vs. K. Sudheesh Kumar clarifies the interpretation of the Modified Assured Career Progression (MACP) Scheme, emphasizing that financial upgradation under the scheme is based on the immediate next higher grade pay, not the grade pay of the next promotional post. The Court upheld the validity of Clause 8.1 of the MACP Scheme and underscored the need for judicial restraint in interfering with government policies based on expert recommendations. The decision also provides relief to retired employees by waiving recovery of overpaid pension amounts.