Supreme Court Upholds Kerala Water Authority Pay Revision: T.I. Jose vs. Managing Director (2019)

Date of the Judgment: 13 February 2019

Citation: Civil Appeal No. 4676 of 2012

Judges: Dr. Dhananjaya Y Chandrachud, J. and Hemant Gupta, J.

Can an employer reduce the pay scale of its employees after removing an illegally created post? The Supreme Court of India, in this case, examined the legality of the Kerala Water Authority’s decision to revise the pay scales of Head Operators after the High Court struck down the creation of an intermediate post. The core issue revolved around whether the removal of the intermediate post of Senior Operator, which was created by an administrative order and later deemed illegal, could lead to a reduction in the pay scale of Head Operators. The two-judge bench, comprising Justice Dr. Dhananjaya Y Chandrachud and Justice Hemant Gupta, delivered the judgment.

Case Background

The appellants were working as Head Operators and Operators at the Kerala Water Authority (KWA). KWA implemented three pay revisions on 13 February 1990 (effective from 1 July 1988), 24 April 1995, and 19 August 1999 (effective from 1 March 1997). Qualified operators were entitled to grade promotions upon completion of 10, 18, and 25 years of service (later reduced to 23 years under the 1999 revision).

Prior to the third pay revision, the hierarchy was Operator, Head Operator, and Mechanical Superintendent. Their pre-revised pay scales were Rs 1090-1695, Rs 1455-2440, and Rs 1760-3050 respectively. During the 1999 revision, an intermediate post of Senior Operator was created. This post was given the same pay scale as the Head Operator, and consequently, the Head Operator was given the pay scale of the Mechanical Superintendent. The revised pay scales were: Operators (Rs 3440-5385), Senior Operators (Rs 4710-7710), and Head Operators (Rs 5635-9135).

The creation of the Senior Operator post was challenged in the High Court of Kerala. The High Court ruled that an intermediate post could not be created through an administrative order but required an amendment to the Special Rules. Therefore, the High Court held that the introduction of the Senior Operator post should not affect the appellants’ chances of getting grade pay as per the existing rules.

Following the High Court’s decision, the State Government issued a Government Order (GO) on 18 March 2004, deleting the post of Senior Operator and refixing the pay scales to correspond with the pre-revised scales. This resulted in Head Operators’ pay being reduced from Rs 5635-9135 to Rs 4710-7710. The appellants challenged this reduction in pay.

Timeline

Course of Proceedings

The High Court of Kerala, in its initial ruling, held that the creation of the intermediate post of Senior Operator was illegal as it was done through an administrative order and not through an amendment to the Special Rules. The single judge ruled that the introduction of the Senior Operator post should not affect the appellants’ chances of getting grade pay as per the existing rules. The High Court directed that the appellants should not be prevented from availing the benefit of the pay revision, but the existing benefit under statutory rules could not be taken away without amending the Rules.

Following these decisions, the State Government issued a Government Order (GO) on 18 March 2004, deleting the post of Senior Operator and refixing the pay scales to correspond with the pre-revised scales. Review Petitions were filed by KWA against the orders dated 12 March 2003 and 3 September 2003, which were dismissed on 8 July 2004. The High Court held that the GO cannot affect the right of the appellants flowing from the judgment. The State and KWA then preferred Writ Appeals against the original judgments of the learned Single Judges as well as the decision in review. The Division Bench allowed the Writ Appeals, leading to the appeal before the Supreme Court.

Legal Framework

The core of the legal framework in this case involves the rules and regulations governing the pay scales and promotions of employees at the Kerala Water Authority (KWA). The KWA, being a statutory body established by the State of Kerala, is bound by its own set of rules and regulations, which include the Special Rules governing the service conditions of its employees. The key aspect of the legal framework is that any changes to the service conditions, such as the creation of new posts or changes in pay scales, must be done through amendments to the Special Rules and not through administrative orders. The High Court emphasized that the creation of the intermediate post of Senior Operator was illegal because it was done through an administrative order and not by amending the statutory rules.

The relevant legal provisions include:

• The statutory rules governing the service conditions of employees of the Kerala Water Authority.
• The principles of service law that require any changes in pay scales or the creation of new posts to be done through proper legal channels, such as amendments to the relevant rules.

The High Court’s decision was based on the principle that statutory rules cannot be overridden by administrative orders. The Supreme Court upheld this view, emphasizing that the pay scales of Head Operators were revised to correspond with the pre-revised pay scales after the intermediate post of Senior Operator was abolished.

Arguments

Appellants’ Arguments:

• The appellants, represented by Mr. C.S. Rajan, argued that the Government Order (GO) dated 18 March 2004, reduced the pay scales of Head Operators from Rs 5635-9135 to Rs 4710-7710.
• They contended that while the State Government was complying with the High Court’s judgment that an intermediate post could not be created by an administrative circular, it not only deleted the post but also reduced the pay scale of Head Operators.
• The appellants submitted that this reduction in pay was an arbitrary exercise of power.

Respondents’ Arguments:

• The respondents, represented by Mr. Nishe Rajen Shonker, argued that the higher pay scale given to Head Operators under note 13 was due to the creation of the intermediate post of Senior Operators.
• They submitted that once the intermediate post was abolished, the pay scale of Head Operators was restored to the equivalent pay scale under the revised scales of pay, corresponding to their pre-revised pay scales.
• The respondents contended that the Government Order (GO) dated 18 March 2004, merely clarified that Operators, Head Operators, and Mechanical Superintendents would draw equivalent revised scales of pay corresponding to their pre-revised pay scales.
• They argued that the action was consistent with law and that the High Court had fairly issued a direction that no recoveries should be made.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame specific issues in a numbered list. However, the core issue that the court addressed was:

• Whether the State Government’s action of reducing the pay scale of Head Operators, after abolishing the illegally created intermediate post of Senior Operator, was justified and in accordance with law.

The sub-issue that the court dealt with was:

• Whether the High Court was correct in holding that the higher pay scale given to Head Operators was due to the creation of the intermediate post of Senior Operators.

Treatment of the Issue by the Court

The following table demonstrates how the Court decided the issues:

Authorities

The Supreme Court did not explicitly cite any cases or books in its judgment. However, the court did consider the following legal provisions:

• The statutory rules governing the service conditions of employees of the Kerala Water Authority.
• The principles of service law that require any changes in pay scales or the creation of new posts to be done through proper legal channels, such as amendments to the relevant rules.

The court also considered the following administrative orders:

• The Government Order (GO) dated 18 March 2004, which abolished the intermediate post of Senior Operator and refixed pay scales.
• Note 13 in Annexure 2 of the third pay revision, which created the intermediate post of Senior Operator.

Judgment

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

How each authority was viewed by the Court?

• The court emphasized that the statutory rules governing the service conditions of employees of the Kerala Water Authority were paramount and that any changes to pay scales or the creation of new posts must be done through proper legal channels, such as amendments to the relevant rules.
• The court applied the principles of service law that require any changes in pay scales or the creation of new posts to be done through proper legal channels, such as amendments to the relevant rules.
• The court viewed the Government Order (GO) dated 18 March 2004, as a necessary measure to rectify the situation after the High Court found the creation of the intermediate post to be illegal.
• The court examined Note 13, which created the intermediate post of Senior Operator and led to the higher pay scale for Head Operators.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle that any changes in pay scales or the creation of new posts must be done through proper legal channels, such as amendments to the relevant rules. The court emphasized that the creation of the intermediate post of Senior Operator was illegal because it was done through an administrative order and not by amending the statutory rules. The court’s decision was also influenced by the fact that the higher pay scale given to Head Operators was a direct consequence of the creation of the intermediate post. Once that post was abolished, the pay scale of Head Operators was rightly restored to its equivalent revised pay scale, corresponding to their pre-revised pay scales.

Fact:Law Ratio

The court’s reasoning was primarily based on legal principles and the need to adhere to proper legal procedures. The factual aspects of the case, such as the specific pay scales and the creation of the intermediate post, were considered in the context of these legal principles.

Logical Reasoning:

The court considered the argument that the pay scale of Head Operators was reduced arbitrarily but rejected it, holding that the reduction was a necessary correction after the High Court found the creation of the intermediate post to be illegal. The court emphasized that the pay scales were restored to their equivalent revised pay scales, corresponding to their pre-revised pay scales. The court did not consider any alternative interpretations of the law or the facts.

The Supreme Court held that “the higher pay scale which was given to Head Operators under note 13 was occasioned by the creation of an intermediate post of Senior Operators.” The court further stated that “once the intermediate post was abolished since it was found to be ultra vires by the High Court, the pay scale of Head Operators was restored to the exactly corresponding pay scale under the revised scales of pay.” The court also noted that “this action was consistent with law.”

There were no dissenting opinions in this case. The two-judge bench was unanimous in its decision.

Key Takeaways

• Adherence to Rules: Any changes in pay scales or the creation of new posts must be done through proper legal channels, such as amendments to the relevant rules. Administrative orders cannot override statutory rules.
• Restoration of Pay Scales: If an intermediate post is created illegally and subsequently abolished, the pay scales of the affected employees can be restored to their original, corresponding revised pay scales.
• No Unjust Enrichment: The court’s decision ensures that employees do not benefit from illegally created posts.

Potential Future Impact: This judgment reinforces the importance of following proper legal procedures when making changes to service conditions. It also clarifies that pay scales can be adjusted to reflect the correct hierarchy and pay structure after an illegally created post is removed. This decision could have implications for other cases involving similar issues in service law.

Directions

The Supreme Court upheld the High Court’s direction that no recoveries shall be made from the employees or pensioners of the KWA on the basis of the pay revision order, which would not have been payable on account of GO(P) No.18/04/WRD, but which was disbursed on or before the date on which the judgment sought to be reviewed was passed.

Development of Law

The ratio decidendi of this case is that any changes in pay scales or the creation of new posts must be done through proper legal channels, such as amendments to the relevant rules. Administrative orders cannot override statutory rules. This case reaffirms the principle that if an intermediate post is created illegally and subsequently abolished, the pay scales of the affected employees can be restored to their original, corresponding revised pay scales. There was no change in the previous position of law.

Conclusion

The Supreme Court dismissed the appeal, upholding the High Court’s decision. The court held that the State Government’s action of reducing the pay scale of Head Operators after abolishing the illegally created intermediate post of Senior Operator was justified and in accordance with law. The court emphasized that the higher pay scale given to Head Operators was a direct consequence of the creation of the intermediate post and that once that post was abolished, the pay scale of Head Operators was rightly restored to its equivalent revised pay scale, corresponding to their pre-revised pay scales. The court also upheld the High Court’s direction that no recoveries shall be made from the employees or pensioners of the KWA.

Category

Parent Category: Service Law

Child Categories:

• Pay Revision
• Kerala Water Authority
• Administrative Order
• Statutory Rules
• Service Conditions
• Grade Promotion
• Government Order
• High Court of Kerala

Parent Category: Kerala Water Authority Rules

Child Category: Pay Scales of Head Operators

FAQ

Q: What was the main issue in the T.I. Jose vs. Managing Director case?

A: The main issue was whether the Kerala Water Authority could reduce the pay scales of Head Operators after removing an illegally created intermediate post of Senior Operator through a Government Order.

Q: Why was the intermediate post of Senior Operator considered illegal?

A: The intermediate post was considered illegal because it was created through an administrative order and not by amending the statutory rules governing the service conditions of employees of the Kerala Water Authority.

Q: What did the Supreme Court decide in this case?

A: The Supreme Court upheld the High Court’s decision, ruling that the reduction in pay scale for Head Operators was justified after the removal of the illegally created post. The court emphasized that the pay scales were restored to their equivalent revised pay scales, corresponding to their pre-revised pay scales.

Q: Can an employer change pay scales through an administrative order?

A: No, any changes in pay scales or the creation of new posts must be done through proper legal channels, such as amendments to the relevant rules and not through administrative orders.

Q: What does this judgment mean for employees in similar situations?

A: This judgment clarifies that if an intermediate post is created illegally and subsequently abolished, the pay scales of the affected employees can be restored to their original, corresponding revised pay scales. It also emphasizes the need for employers to follow proper legal procedures when making changes to service conditions.