Supreme Court clarifies the grant of higher pay scale under the Scheme to Municipal Employees: Rushibhai Jagdishchandra Pathak vs. Bhavnagar Municipal Corporation (18 May 2022)

Introduction

Date of the Judgment: 18 May 2022
Citation: 2022 INSC 462
Judges: Hon’ble Mr. Justice Ajay Rastogi and Hon’ble Mr. Justice Sanjiv Khanna

Can a delay in approaching the court for a service-related claim limit the relief granted? The Supreme Court of India recently addressed this question in a case concerning the grant of higher pay scales to employees of the Bhavnagar Municipal Corporation. The core issue revolved around whether these employees were entitled to the pay scale of the next promotional post under a government scheme, and if so, from what date they were entitled to arrears. The bench comprised Justices Ajay Rastogi and Sanjiv Khanna, with the judgment authored by Justice Sanjiv Khanna.

Case Background

The appellants were initially appointed as ‘Junior Clerks’ on an ad hoc basis and later made permanent as ‘Data Entry Operators’ in the Computer Department of the Bhavnagar Municipal Corporation. They were placed in the pay scale of Rs. 4,000-6,000. On 19th February 2007, the Corporation adopted a modified version of a Gujarat government scheme aimed at addressing limited promotion opportunities for government employees. This scheme allowed for the grant of the pay scale of the next promotional post upon completion of 9, 18, or 27 years of service.

The appellants were granted the higher pay scale of Rs. 5,000-8,000 from different dates after furnishing undertakings. These undertakings stipulated that the employees would forgo the benefits under the scheme if they were denied a regular promotion. However, on 28th October 2010, the Corporation revised its decision, stating that the employees had been erroneously granted the higher pay scale of the next promotional post instead of the next stage in the hierarchy of pay scales. Consequently, the pay scales were revised to Rs. 4,500-7,000, and excess payments were recovered from the appellants.

In September 2017, the appellants filed Writ Petitions before the High Court of Gujarat, challenging the order dated 28th October 2010. They sought the pay scale of the next higher promotional post and payment of arrears, relying on a previous judgment in the case of Mukeshbhai Jaswantrai Joshi, where a similar interpretation of the Scheme was upheld.

Timeline:

Course of Proceedings

The appellants filed Writ Petitions before the High Court of Gujarat challenging the order dated 28th October 2010. They relied on the interpretation of the Scheme in the case of Mukeshbhai Jaswantrai Joshi, where the High Court had held that employees were entitled to the pay scale of the next promotional post upon financial upgradation.

The Division Bench of the High Court partially allowed the appeal filed by the Bhavnagar Municipal Corporation, restricting the grant of higher pay-scale with consequential benefits from the date of the judgment of the Single Judge on 31st July 2018, due to delay and laches on the part of the appellants in approaching the court. The prayer of the appellants for recovery of arrears from 2010 was declined. The respondent-Corporation was not required to refund any amount that they have recovered from the appellants pursuant to the order dated 28th October 2010.

Legal Framework

The case revolves around the interpretation of the Scheme of the Government of Gujarat, specifically concerning the grant of higher pay scales to employees upon completion of certain years of service. The Scheme, as modified and implemented by the Bhavnagar Municipal Corporation, aimed to address the issue of limited promotion opportunities.

The Scheme stipulated that employees on posts with more than one promotional post in different pay scales would have their higher grade pay considered as the pay scale of the lowest of the promotional posts. However, the interpretation of this clause became a point of contention, with the employees claiming entitlement to the pay scale of the next promotional post, while the Corporation initially granted them the next higher pay scale in the hierarchy.

Arguments

Appellants’ Submissions:

• The appellants argued that they were entitled to the higher pay scale of the next promotional post (Rs. 5,000-8,000) upon financial upgradation, based on the interpretation of the Scheme in the Mukeshbhai Jaswantrai Joshi case.
• They contended that the Corporation had wrongly revised their pay scales and recovered excess payments.
• The appellants sought arrears from 2010, when the initial higher pay scale was granted to them.
• They argued that the delay in approaching the court should not deprive them of their rightful dues.

Respondent’s Submissions:

• The Corporation submitted that the appellants were erroneously granted the higher pay scale of the next promotional post instead of the next stage in the hierarchy of pay scales.
• They argued that the revision of pay scales and recovery of excess payments were justified.
• The respondent contended that the appellants’ claims were barred by delay and laches, as they approached the court after a significant delay.

Analysis of Arguments:

The appellants relied heavily on the interpretation of the Scheme in the Mukeshbhai Jaswantrai Joshi case, where the High Court had held that the employee was entitled to the pay scale of the next promotional post, not just the next higher pay scale in the hierarchy. The respondent, on the other hand, focused on the delay and laches on the part of the appellants in approaching the court.

The innovativeness of the argument by the appellants lies in their reliance on the precedent set by the Mukeshbhai Jaswantrai Joshi case, arguing that the same interpretation should apply to them as well.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame specific issues in a dedicated section. However, the core issues that the Court addressed can be summarized as follows:

• Whether the appellants were entitled to the higher pay scale of the next promotional post of Rs. 5,000-8,000/- under the Scheme.
• If the appellants were entitled to the higher pay scale, from what date they were entitled to arrears, considering the delay in approaching the court.
• Whether the High Court was right in restricting the benefits from the date of the judgment of the Single Judge.

Treatment of the Issue by the Court

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

Authorities

The Supreme Court relied on several cases and legal principles to arrive at its decision. These are categorized below:

On Delay and Laches:

• Nav Rattanmal and Others v. State of Rajasthan, AIR 1961 SC 1704, Supreme Court of India: This case was cited to highlight the view that statutes of limitation are statutes of repose and peace.
• State of Kerala and Others v. V. R. Kalliyanikutty and Another, (1999) 3 SCC 657, Supreme Court of India: This case emphasized that the law of limitation rests on the foundations of greater public interest, including the need to avoid stale claims and ensure diligence.
• Popat and Kotecha Property v. State Bank of India Staff Association, (2005) 7 SCC 510, Supreme Court of India: This case was cited to explain that the principle of delay and laches is applied to secure the quiet of the community and prevent oppression.
• N. Balakrishnan v. M. Krishnamurthy, (1998) 7 SCC 123, Supreme Court of India: This case was referred to for the observation that rules of limitation are not meant to destroy the rights of the parties but serve a larger public interest.
• Moons Mills Ltd. v. M.R. Mehar, President, Industrial Court, Bombay and Others, AIR 1967 SC 1450, Supreme Court of India: This case quoted the view expressed by Sir Barnes Peacock in The Lindsay Petroleum Company AND. Prosper Armstrong Hurd, Abram Farewell, and John Kemp, (1874) LR 5 PC 221, on the doctrine of laches in Courts of Equity.

On Continuing Cause of Action:

• M.R. Gupta v. Union of India and Others, (1995) 5 SCC 628, Supreme Court of India: This case held that a fresh cause of action arises every month when an employee is paid salary on the basis of a wrong computation.
• Union of India and Others v. Tarsem Singh, (2008) 8 SCC 648, Supreme Court of India: This case clarified the principles of ‘continuing wrongs’ and ‘recurring/successive wrongs’ in service law disputes. It also restricted the relief relating to arrears to three years before the date of filing of the writ petition.
• Shiv Dass v. Union of India and Others, (2007) 9 SCC 274, Supreme Court of India: This case was quoted in Tarsem Singh, explaining that a belated resort to extraordinary remedy is not permitted.
• Balakrishna Savalram Pujari Waghmare and Others v. Shree Dhyaneshwar Maharaj Sansthan and Others, AIR 1959 SC 798, Supreme Court of India: This case explained the concept of continuing wrong in the context of Section 23 of the Limitation Act, 1908, corresponding to Section 22 of the Limitation Act, 1963.
• State of Madhya Pradesh and Others v. Yogendra Shrivastava, (2010) 12 SCC 538, Supreme Court of India: This case followed the ratio in Tarsem Singh.
• Asger Ibrahim Amin v. Life Insurance Corporation of India, (2016) 13 SCC 797, Supreme Court of India: This case also followed the ratio in Tarsem Singh.

On Uniform Application of Benefits:

• State of Uttar Pradesh and Others v. Arvind Kumar Srivastava and Others, (2015) 1 SCC 347, Supreme Court of India: This case emphasized that when a particular set of employees is given relief by the court, all other identically situated persons need to be treated alike by extending that benefit.

Judgment

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

How each authority was viewed by the Court?

• The Court relied on M.R. Gupta v. Union of India and Others [CITATION] to establish that a fresh cause of action arises every month when an employee is paid salary on the basis of a wrong computation.
• The Court extensively relied on Union of India and Others v. Tarsem Singh [CITATION] to clarify the principles of ‘continuing wrongs’ and ‘recurring/successive wrongs’ in service law disputes and to restrict the relief relating to arrears to three years before the date of filing of the writ petition.
• The Court referred to State of Uttar Pradesh and Others v. Arvind Kumar Srivastava and Others [CITATION], emphasizing that when a particular set of employees is given relief by the court, all other identically situated persons need to be treated alike by extending that benefit.

What weighed in the mind of the Court?:

The Court’s decision was primarily influenced by the need to balance the rights of the employees to receive their rightful dues with the principles of delay and laches. The Court acknowledged the delay on the part of the appellants in approaching the court but also recognized the continuing nature of the wrong caused by the incorrect pay scale. The Court’s reasoning was also influenced by the need to ensure uniformity in the application of benefits to similarly situated employees.

Logical Reasoning:

The Court considered the argument that the appellants’ claim should be rejected due to delay and laches. However, it also acknowledged the principle of a continuing cause of action in service matters, where a fresh cause of action arises every month when an employee is paid salary on the basis of a wrong computation. The Court rejected the High Court’s decision to restrict the benefits from the date of the Single Judge’s judgment, stating that only the date of filing of the writ petition is relevant.

The Court’s decision was based on a balance of legal principles and equitable considerations. The Court sought to provide relief to the employees while also adhering to the principles of limitation and delay.

The majority opinion was delivered by Justice Sanjiv Khanna, with Justice Ajay Rastogi concurring. There were no dissenting opinions.

The Court’s decision has implications for future cases involving similar issues of pay scale and arrears in service matters. It reinforces the principle that while delay and laches are important considerations, they should not be applied rigidly to deprive employees of their rightful dues, especially when a continuing wrong is involved.

The Court did not introduce any new doctrines or legal principles. It applied established principles related to delay and laches, continuing cause of action, and uniform application of benefits.

The Court’s decision also reaffirms the principle that when a court interprets a scheme or a rule, the benefit of that interpretation should be extended to all similarly situated employees, unless there are valid reasons for not doing so.

The Court quoted the following from the judgment:

“The appellants would, in consonance with the case law referred to above, be entitled to the arrears for three years before the date of filing of the Writ Petitions.”

“We are also inclined to grant interest to the appellants on the arrears at the rate of 7% per annum, which would be payable with effect from 1st September 2017.”

“The normal rule is that when a particular set of employees is given relief by the court, all other identically situated persons need to be treated alike by extending that benefit.”

Key Takeaways

• Municipal employees who were entitled to the higher pay scale of the next promotional post under the Scheme are entitled to arrears for three years prior to the date of filing of the Writ Petitions.
• The employees are also entitled to interest at the rate of 7% per annum on the arrears, with effect from 1st September 2017.
• The judgment reaffirms the principle that when a court interprets a scheme or a rule, the benefit of that interpretation should be extended to all similarly situated employees.
• The decision clarifies the application of the principles of delay and laches in service matters, especially where a continuing wrong is involved.

The judgment will likely encourage municipal corporations to uniformly apply benefits to similarly situated employees and to avoid unnecessary litigation. It also provides guidance on how courts should approach cases involving delay and laches in service matters.

Directions

The Supreme Court directed the following:

• The appellants would be entitled to arrears in the pre-revised pay-scale of Rs.5,000-8,000/- for three years prior to the date of filing of the Writ Petitions.
• The appellants would be entitled to interest at the rate of 7% per annum with effect from 1st September 2017.
• The arrears, with interest, would be paid within a period of four months from the date of pronouncement of this judgment.
• A computation sheet/statement of accounts on the basis of which payment is made by the respondent-Corporation shall be furnished to the appellants.

Development of Law

The ratio decidendi of the case is that employees are entitled tothe higher pay scale of the next promotional post under the Scheme, and while delay and laches are important considerations, they should not be applied rigidly to deprive employees of their rightful dues, especially when a continuing wrong is involved. The Court also clarified that when a court interprets a scheme or a rule, the benefit of that interpretation should be extended to all similarly situated employees.

The case did not introduce any new legal principles but reaffirmed existing principles related to delay and laches, continuing cause of action, and uniform application of benefits. The Court’s reliance on the Tarsem Singh case to limit arrears to three years prior to the date of filing of the writ petition is consistent with previous rulings on this issue.

The Court’s decision has clarified the application of these principles in the context of service matters, particularly in cases involving pay scale disputes. The Court’s direction to pay interest on the arrears also provides additional relief to the employees and reinforces the principle that employers should not benefit from their delay in implementing rightful dues.

Conclusion

The Supreme Court’s judgment in the case of Rushibhai Jagdishchandra Pathak vs. Bhavnagar Municipal Corporation has provided clarity on the grant of higher pay scales to municipal employees under the Scheme. The Court upheld the interpretation that employees are entitled to the pay scale of the next promotional post and clarified that while delay and laches are relevant, they should not be applied to deprive employees of their rightful dues, especially when a continuing wrong is involved. The Court’s decision to limit arrears to three years prior to the date of filing of the writ petition is consistent with previous rulings on this issue.

The judgment has significant implications for municipal employees and employers alike. It provides a clear framework for resolving pay scale disputes and emphasizes the need for uniform application of benefits to similarly situated employees. The Court’s direction to pay interest on the arrears also provides additional relief to the employees and reinforces the principle that employers should not benefit from their delay in implementing rightful dues.

Overall, the judgment is a significant contribution to service law jurisprudence and provides valuable guidance for future cases involving similar issues.