Supreme Court Upholds Equal Pay for Deputation Employees: Bihar State Beverages Corporation Ltd. vs. Naresh Kumar Mishra (2019)

Date of the Judgment: 05 February 2019

Citation: (2019) INSC 79

Judges: L. Nageswara Rao, J., M. R. Shah, J.

Can employees on deputation claim equal pay for equal work? The Supreme Court of India recently addressed this question in a case involving the Bihar State Beverages Corporation Ltd. The core issue revolved around whether employees working on deputation in the Corporation were entitled to the same pay scale as other employees doing similar work, particularly concerning the implementation of the 6th Pay Revision Committee recommendations. The judgment was delivered by a two-judge bench comprising Justice L. Nageswara Rao and Justice M. R. Shah, with Justice M.R. Shah authoring the opinion.

Case Background

The Bihar State Beverages Corporation Ltd. (the Corporation) was established in 2006 to improve the excise revenue of the Bihar Government. Instead of direct recruitment, the Corporation opted to employ staff on contract or deputation from other government boards and corporations, as well as retired employees. An advertisement on 18 August 2006, invited applications for various posts, specifying pay scales based on the 5th Pay Revision Committee recommendations. The original writ petitioners, employees of various Bihar State corporations, applied and were selected for positions in the Corporation.

A dispute arose when the Corporation denied its employees the benefit of the 6th Pay Revision Committee recommendations. Initially, the Board of Directors of the Corporation resolved on 18 May 2010, to grant the revised pay scale to deputation/contract employees. However, the Finance Department objected, advising that the 6th Pay Revision benefits should only be given to permanent employees of the Corporation. Consequently, on 27 March 2012, the Board resolved that employees on deputation would receive the pay scale of their parent organizations plus a deputation allowance. This led the employees to file writ petitions in the High Court of Judicature at Patna.

Timeline:

Course of Proceedings

The employees filed writ petitions before the High Court of Judicature at Patna, seeking the pay scale of the 6th Pay Revision Committee. A single judge dismissed the petitions, citing that granting the 6th Pay Revision to deputation employees would create disparities since their parent organizations had not implemented the same. However, the single judge allowed the employees to file individual representations to address the disparity, with any favorable decision to be effective from 15 May 2012.

The employees then appealed to a Division Bench of the High Court, which allowed the appeals, quashing the Corporation’s resolution of 27 March 2012. The Division Bench directed the Corporation to follow the principle of “equal pay for equal work” and to implement the 6th Pay Revision Committee recommendations based on the Board of Directors’ resolution dated 18 May 2010. Aggrieved by this decision, the Corporation appealed to the Supreme Court.

Legal Framework

The case primarily involves the interpretation and application of the principle of “equal pay for equal work” and the rules governing deputation under the Bihar Service Code. The relevant rules are:

• Rule 282 of the Bihar Service Code: This rule was referred to by the Single Judge while dismissing the writ petitions.
• Rule 283 of the Bihar Service Code: This rule specifies the pay that a government servant is to receive in foreign service. It states:
  
  “Rule 283: (a) The pay which a Government servant is to receive in foreign service shall be precisely specified in the order sanctioning his transfer. If it is intended that he shall receive any remuneration, or enjoy any concession of pecuniary value, in addition to pay proper, the exact nature of such remuneration, or concession shall be similarly specified; and no Government servant shall be permitted to receive any remuneration or to enjoy any concession which is not to be so specified.
  (b) In determining an appropriate rate of pay, the authority sanctioning a transfer to foreign service, shall take into account the value of any concessions which the Government servant may be permitted to enjoy, such as –
  (i)The payment by the foreign employer of contributing towards, leave salary and pension;
  (ii)the grant of free residential accommodation and any benefit or advantages connected therewith; and
  (iii)the grant of traveling allowance at special rates, and the use of tents, conveyances, animals etc., belonging to the foreign employer.
  (c)The terms granted to a Government servant who is transferred to foreign service shall not be so greatly in excess of remuneration which he would receive in Government service, as to render foreign service appreciably more attractive than Government service.
  (d)No order of transfer to foreign service shall be issued by the State Government without previous consultation with the Finance Department.
  (e)In cases where the power to sanction such transfer has been delegated to a subordinate authority, the initial pay of the Government servant transferred shall not, without the special orders of the State Government, exceed by more than 25 percent, the substantive pay last drawn by him in Government service and no concessions in addition to pay shall be sanctioned except the following:­ (i) the payment by the foreign employer of contributions towards leave salary and pensions; and (ii) the grant of travelling allowance on the scale prescribed in the Bihar Travelling Allowance Rules.”

Arguments

Arguments by the Appellant Corporation:

• The Division Bench erred in setting aside the resolution of 27 March 2012, and directing the grant of pay scales as per the 6th Pay Revision Committee.
• The Division Bench did not properly consider Rules 282 and 283 of the Bihar Service Code, which mandate that employees on deputation should receive the pay scale of their parent organizations.
• The Corporation had not fixed any pay scale before engaging the employees, and the pay scale was based on what they were receiving in their parent organizations.
• The principle of “equal pay for equal work” does not apply as the employees are not equal to State Government employees or permanent employees of the Corporation. They are on deputation or contract, and their lien continues with their parent organizations.
• The Corporation is a separate legal entity, and deputation is a foreign service.

Arguments by the Respondent Employees:

• The Division Bench’s decision is in line with Rules 282 and 283 of the Bihar Service Code, which allow for higher pay and benefits for employees on deputation.
• The rules of the Bihar Service Code are not applicable to the employees as none of them are employees of the Government.
• The principle of “equal pay for equal work” applies as there cannot be different pay scales for employees doing the same or similar work.
• The advertisement for recruitment specified pay scales for each post, and paying less would be a change in service conditions.
• The Corporation itself had decided to adopt the 6th Pay Revision in 2010, but did not implement it due to the Finance Department’s advice, which was a non-application of mind.

The innovativeness of the argument by the employees lies in their emphasis on the fact that the Corporation itself had initially decided to grant the benefits of the 6th Pay Revision, and that the Finance Department’s advice was not based on a proper understanding of the Corporation’s unique situation, where all employees were either on deputation or contract.

Issues Framed by the Supreme Court

The Supreme Court addressed the following key issues:

1. Whether the Division Bench of the High Court was correct in quashing the resolution of the Corporation dated 27.3.2012?
2. Whether the Division Bench of the High Court was right in directing the Appellant Corporation to grant pay scale to the Respondents in terms of the 6th Pay Revision Committee?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

How each authority was viewed by the Court?

• Rule 282 of the Bihar Service Code: The Court found that this rule was not applicable in the present case.
• Rule 283 of the Bihar Service Code: The Court interpreted this rule to mean that a deputation employee could be paid more than what they were getting in their parent department, and not necessarily the same.
• State of Haryana v. Charanjeet Singh (2006) 9 SCC 321: The Court distinguished this case and held that the principle of equal pay for equal work applies in the present case.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• The principle of “equal pay for equal work.”
• The fact that the Corporation itself had initially decided to grant the benefits of the 6th Pay Revision.
• The fact that the Finance Department’s advice was a non-application of mind as the Corporation does not have any permanent employees.
• The need to avoid disparity in pay among employees doing similar work.
• The fact that pay scales were advertised and cannot be reduced later.

The court’s reasoning was primarily based on legal principles, particularly the principle of equal pay for equal work, and the interpretation of the Bihar Service Code. The court also considered the factual aspects of the case, such as the Corporation’s initial decision to grant the 6th Pay Revision and the fact that the Corporation does not have any permanent employees.

The Court considered the argument that the employees were not permanent employees of the Corporation, but rejected it as the Corporation did not have permanent employees. The Court also considered the argument that the Corporation was a separate legal entity and deputation was a foreign service, but rejected this argument by applying the principle of equal pay for equal work.

The Court quoted the following from the judgment:

• “Therefore, the Division Bench of the High Court has rightly applied the ‘Principle of Equal Pay for Equal Work’ and has rightly quashed and set aside the resolution dated 27.3.2012.”
• “As rightly held by the Division Bench of the High Court, the advice by the Finance Department was non­application of mind, inasmuch so far as the Corporation is concerned, there is not a single employee appointed by the Corporation on permanent basis and the entire staff is either on deputation or on contract basis from other Boards/organizations.”
• “However, at the same time, it is to be clarified that they will get the pay scale as per the 6th PRC so long as they continue to work with the Appellant Corporation and as and when they are repatriated, in that case, they shall be governed by the pay scale paid to the employees in the parent Board/Organization.”

The Supreme Court upheld the Division Bench’s decision, clarifying that the employees would receive the 6th Pay Revision benefits only while working with the Corporation. Upon repatriation to their parent organizations, they would be governed by the pay scales of those organizations. There was no dissenting opinion.

Key Takeaways

• Employees on deputation are entitled to the same pay scale as regular employees doing similar work, based on the principle of “equal pay for equal work”.
• Organizations cannot reduce the pay scale offered at the time of recruitment.
• The interpretation of deputation rules should not lead to a disparity in pay for employees doing similar work.
• The Supreme Court clarified that the employees would receive the 6th Pay Revision benefits only while working with the Corporation.

Directions

The Supreme Court directed that the original writ petitioners shall be entitled to the pay scale as recommended by the 6th PRC so long as they work in the Appellant Corporation. In case they are repatriated to their parent Board/Organization, they shall be governed by the pay scales paid to the employees of the concerned parent Board/Organization.

Development of Law

The ratio decidendi of the case is that employees on deputation are entitled to the same pay scale as regular employees doing similar work, based on the principle of “equal pay for equal work.” This case clarifies that the interpretation of deputation rules should not lead to a disparity in pay for employees doing similar work. The Supreme Court upheld the principle of equal pay for equal work, even for employees on deputation, and clarified that the pay scales offered at the time of recruitment cannot be reduced later.

Conclusion

The Supreme Court dismissed the appeals filed by the Bihar State Beverages Corporation Ltd., upholding the High Court’s decision that employees on deputation are entitled to the same pay scale as regular employees doing similar work. The Court emphasized the principle of “equal pay for equal work” and clarified that the employees would receive the 6th Pay Revision benefits only while working with the Corporation. This judgment reinforces the importance of fair compensation practices for employees on deputation and ensures that they are not discriminated against in terms of pay.