Supreme Court Directs Fresh Review of Tamil Nadu Pay Scales: Tamil Nadu Rural Development Engineers vs. Government of Tamil Nadu (28 November 2019)

Date of the Judgment: 28 November 2019

Citation: Civil Appeal No.10029 of 2017

Judges: Uday Umesh Lalit, J., Indu Malhotra, J.

Can a State Government reduce the pay scales of its employees after initially granting them higher pay based on a Pay Commission’s recommendations? The Supreme Court of India addressed this question in a case involving the Tamil Nadu government and its employees. The core issue revolved around the legality of the State Government’s decision to reduce the pay scales of certain categories of employees after initially increasing them. The Supreme Court, in this judgment, directed the State Government to re-examine the matter through a newly constituted Pay Grievance Redressal Committee (PGRC). The bench comprised Justices Uday Umesh Lalit and Indu Malhotra.

Case Background

In March 2008, the 6th Central Pay Commission made recommendations for revising pay scales. Following this, the Tamil Nadu Government formed an Official Committee, which submitted its report on 27 May 2009. This report recommended revised pay scales on a “pay-scale to pay-scale” basis, which the State Government accepted through GO No. 234, dated 1 June 2009. This GO also addressed the revised pay scales for promotees and direct recruits, placing certain middle management posts in Pay Band-3 with a grade pay of Rs. 5,400. Notional effect was given from 1 January 2006, with monetary benefits accruing from 1 January 2007.

Subsequently, a One Man Commission was established to address pay anomalies arising from the implementation of GO No. 234. This commission submitted its report on 31 March 2010, and the State Government accepted its recommendations through GOs No. 254 to 340. For example, GO No. 312, dated 26 August 2010, revised the pay scales for certain posts in the Public Works Department. As a result, Assistant Engineers were placed in the revised pay scale of Rs. 15,600-39,100 with a grade pay of Rs. 5,400.

However, the State Government issued GO No. 71 on 26 February 2011, scaling down some of the benefits granted earlier, without prior notice or hearing to the affected employees. This action downgraded 52 categories of posts to lower pay scales, while ensuring that previous payments would not be recovered. The State also formed a Pay Grievance Redressal Cell (PGRC) to address employee grievances.

Timeline

Course of Proceedings

Several writ petitions were filed by employees challenging GO No. 71. A Single Judge of the High Court dismissed these petitions on 8 March 2012. The Single Judge directed the State Government to reconstitute the PGRC, as the services of the then-head of the committee were unavailable. The employees then filed Writ Appeals against the Single Judge’s decision. The Division Bench of the High Court granted an interim stay on 27 March 2012, except for the reconstitution of the PGRC.

The State Government then issued GO No. 123 on 10 April 2012, reconstituting the PGRC. The PGRC received 4376 representations and conducted hearings on 9, 10, 11 July and 16 August 2012. The PGRC recommended that the pay scale of Assistant Engineers be reduced to Pay Band-2 at Rs. 9,300-34,800 with a Grade Pay of Rs. 5,100, citing parity with Central Public Works Department and the need to maintain local pay relativity. The State Government accepted these recommendations and issued GO No. 242 on 22 July 2013.

This led to further writ petitions challenging GO No. 242. The Division Bench of the High Court addressed these petitions and the pending writ appeals together. The Division Bench found that the reduction in pay scales was done without following principles of natural justice, and directed the government to reconsider the issue after giving all concerned parties an opportunity to be heard, and constituted a new Pay Grievance Redressal Committee headed by a retired judge.

Legal Framework

The case primarily revolves around the interpretation and implementation of pay scales for government employees. The initial pay revisions were based on the recommendations of the 6th Central Pay Commission. The State Government’s actions were taken under its executive powers to regulate the service conditions of its employees.

The core issue is whether the State Government can unilaterally reduce the pay scales of its employees after initially granting them higher pay based on the recommendations of a pay commission. The principles of natural justice, particularly the right to be heard, were central to the High Court’s decision. The High Court also considered the need for expert input in determining pay scales, noting that the Central Government had appointed retired judges to head previous pay commissions. The Supreme Court also noted the complexities involved in prescribing pay scales, citing the need for expert bodies like Pay Commissions to assess the nature and quality of duties performed by employees.

Arguments

Arguments of the Government Employees and their Associations:

• The employees argued that once the State Government accepted the recommendations of the One Man Commission and granted benefits, it could not later reduce the pay scales.
• They contended that the One Man Commission had conducted a proper exercise, and the State Government had accepted its recommendations after careful consideration.
• They also argued that the reduction in pay scales was done without following the principles of natural justice.

Arguments of the State Government:

• The State Government submitted that the acceptance of the One Man Commission’s recommendations resulted in greater anomalies.
• The State argued that the level of Assistant Engineers was wrongly clubbed with other entry-level services, and the upward revision for Assistant Engineers widened the gap between them and subordinate ranks, while bringing them closer to the promotional level of Assistant Executive Engineers.
• The State contended that the pay scales afforded to equivalent ranks in the Central Government were normally higher, but the entry level of Assistant Engineers in the State Government was far higher than their counterparts in the Central Government after the One Man Commission’s recommendations.
• The State also argued that the PGRC was constituted to address these anomalies after giving due opportunity to the concerned employees and their Associations.

The innovativeness of the argument from the State was that the entry level of Assistant Engineers in the State Government was far higher than their counterparts in the Central Government, which is not the norm.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issue before the court was:

1. Whether the State Government was justified in reducing the pay scales of its employees after initially granting them higher pay based on the recommendations of the One Man Commission, and whether the process adopted by the State Government was valid.

Treatment of the Issue by the Court

Authorities

The Supreme Court relied on the following authorities:

On the expertise required for pay scale determination:

• Dy. Director General of Geological Survey of India and another v. R. Yadaiah and others [ (2001) 10 SCC 563 ] – Supreme Court of India: The Court observed that courts should not interfere with the fitment of officers in a particular group or their pay scales, leaving it to the discretion of expert bodies like Pay Commissions.
• State of Bihar and others v. Bihar Veterinary Association and others [ (2008) 11 SCC 60 ] – Supreme Court of India: The Court stated that disturbing pay scale recommendations could have a cascading effect and disrupt the financial balance of the state.
• Hukumchand Gupta v. ICAR [ (2012) 12 SCC 666 ] – Supreme Court of India: The Court emphasized that prescribing pay scales is a complex exercise requiring assessment of duties and responsibilities, and that even if posts have the same name, they may not be identical in every manner.

Authorities Considered by the Court

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 Dy. Director General of Geological Survey of India and another v. R. Yadaiah and others [ (2001) 10 SCC 563 ]* to emphasize that pay scale determination is a matter for expert bodies and not courts.
• The Court cited State of Bihar and others v. Bihar Veterinary Association and others [ (2008) 11 SCC 60 ]* to highlight the potential for cascading effects and financial disruption if pay scales are disturbed by courts.
• The Court referred to Hukumchand Gupta v. ICAR [ (2012) 12 SCC 666 ]* to underscore the complexity of pay scale prescription and the need for expert assessment of duties and responsibilities.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily driven by the need to balance the State’s prerogative to manage its finances and the employees’ right to fair treatment. The Court recognized that the State had valid reasons to address pay anomalies that arose from the One Man Commission’s recommendations. However, the Court also emphasized that any reduction in pay scales must be done following principles of natural justice, including providing a fair hearing to the affected employees. The Court’s reasoning was also influenced by the need to ensure that pay scales are determined by expert bodies and not by courts, and that any changes should be based on sound principles of pay parity and financial prudence.

The Court also considered the fact that the initial pay revisions were made based on the recommendations of the 6th Central Pay Commission, which is a body of experts, and that the One Man Commission’s recommendations were far in excess of what was accepted by GO No. 234, which was in tune with the recommendations of the 6th Central Pay Commission. The Court also noted that the PGRC had made recommendations without giving proper notice and hearing to the affected employees. This was why the Court decided to direct the State to constitute a new PGRC headed by a retired judge.

Fact:Law Ratio

Logical Reasoning

Key Takeaways

• The State Government has the authority to address pay anomalies, but any reduction in pay scales must be done following principles of natural justice.
• Pay scale determination is a complex exercise requiring expert input, and courts should generally defer to the expertise of Pay Commissions.
• Any changes in pay scales should be prospective and should not result in recovery of previously paid amounts.
• The Supreme Court emphasized the need for a fair process in addressing pay grievances, highlighting the importance of proper notice and hearing.
• The Court also clarified that the observations made in the judgment were purely from the standpoint of considering the correctness of the State Government’s decision in constituting the PGRC and not by way of reflection on merits of the matter.

Directions

The Supreme Court issued the following directions:

1. A new Pay Grievance Redressal Committee (PGRC) shall be constituted, headed by Mr. Justice D. Murugesan, formerly Chief Justice, High Court of Delhi.
2. The Chairman of the PGRC may co-opt any two experts as members, who shall be paid honorarium by the State Government.
3. The PGRC shall be given specific terms of reference by the Government, with a request to submit a report for taking fresh decision regarding the enhancement/reduction of pay scales.
4. The State Government shall constitute the PGRC within a week and provide adequate office space and staff.
5. All concerned individuals/associations shall file their representations within two weeks of the constitution of the PGRC.
6. The honorarium of the Chairman of the PGRC is fixed at Rs. 3.5 lakhs per month.
7. Any amount paid by way of financial benefit extended to and enjoyed by the concerned employees shall not be recovered.
8. The PGRC is requested to conclude the entire exercise within four months.
9. The affected categories shall not be permitted to migrate to 7th Central Pay Commission scales on the basis of the higher scales till such time as the final decision is taken.

Specific Amendments Analysis

There were no specific amendments discussed in this judgment.

Development of Law

The ratio decidendi of the case is that while the State Government has the authority to address pay anomalies, any reduction in pay scales must be done following principles of natural justice, including providing a fair hearing to the affected employees. This case reinforces the principle that pay scale determination is a complex exercise requiring expert input, and courts should generally defer to the expertise of Pay Commissions. The judgment also clarifies that any changes in pay scales should be prospective and should not result in recovery of previously paid amounts. This case does not change any previous position of law but reinforces the need for fair process in addressing pay grievances.

Conclusion

The Supreme Court’s judgment in Tamil Nadu Rural Development Engineers and Assistant Engineers Association vs. Government of Tamil Nadu and Others directs the Tamil Nadu government to re-examine its decision to reduce the pay scales of certain government employees. The Court emphasized the need for a fair process, including proper notice and hearing, and directed the constitution of a new Pay Grievance Redressal Committee headed by a retired judge. The Court also underscored the importance of expert input in pay scale determination and ensured that previously paid benefits would not be recovered. This decision highlights the balance between the State’s financial management and the employees’ right to fair treatment.

Category

Parent Category: Service Law

Child Categories: Pay Scales, Government Employees, Natural Justice, Tamil Nadu Government, Pay Grievance Redressal Committee

Parent Category: Constitution of India

Child Category: Article 14, Constitution of India

FAQ

Q: What was the main issue in the case?

A: The main issue was whether the Tamil Nadu government could reduce the pay scales of its employees after initially granting them higher pay based on a Pay Commission’s recommendations.

Q: What did the Supreme Court decide?

A: The Supreme Court directed the Tamil Nadu government to re-examine the matter through a newly constituted Pay Grievance Redressal Committee (PGRC) headed by a retired judge, emphasizing the need for a fair process and expert input.

Q: Why did the Supreme Court intervene?

A: The Supreme Court intervened because the High Court had found that the State Government had reduced the pay scales without following the principles of natural justice, and the Court agreed with this finding.

Q: What is the Pay Grievance Redressal Committee (PGRC)?

A: The PGRC is a committee set up to address grievances related to pay scales. In this case, the Supreme Court directed the State Government to set up a new PGRC headed by a retired judge to re-examine the pay scale reductions.

Q: Will the employees have to return the extra money they received?

A: No, the Supreme Court clarified that any amount paid by way of financial benefit already enjoyed by the employees will not be recovered. Any reduction in pay scales will be prospective.

Q: What is the significance of this judgment?

A: This judgment reinforces the principle that while the State Government has the authority to manage its finances, it must follow principles of natural justice when making decisions that affect its employees’ pay scales. It also highlights the importance of expert input in pay scale determination.