U.P. Avas Vikas Parishad Employee Service Conditions: Supreme Court Refers to Larger Bench (10 February 2020)

Date of the Judgment: 10 February 2020
Judges: Ashok Bhushan, J. and M.R. Shah, J.
Can a state government control the service conditions of employees of a housing board? The Supreme Court of India has referred this crucial question to a larger bench. This case involves a dispute over the applicability of government pay scales and pension benefits to employees of the Uttar Pradesh Avas Evam Vikas Parishad (Housing and Development Board). The court is revisiting its earlier stance on the extent of the state government’s authority over the board’s employee matters.

Case Background

The Uttar Pradesh Avas Evam Vikas Parishad (the Board) was established under the Uttar Pradesh Avas Evam Vikas Parishad Adhiniyam, 1965 (the 1965 Act). The Board framed regulations in 1973 for a contributory provident fund for its employees. In 1995, the Board proposed a pension/family pension and gratuity scheme to replace the provident fund scheme. The State Government initially agreed but later directed a stay on the implementation of the pension scheme in 1997.

The State Government issued an order in 1999 for the implementation of the pension scheme with certain conditions. However, in 2005, the State Government stayed this order. Another order in 2007 stated that the pension scheme would not apply to employees covered by the Employees Provident Fund & Miscellaneous Provisions Act, 1952. This led to a legal challenge by the Board’s employees.

The High Court of Judicature at Allahabad, Lucknow Bench, ruled in favor of the employees, directing the Board to implement its pension scheme. The Supreme Court initially stayed the High Court’s order but later dismissed the State’s appeal in State of U.P. vs. Preetam Singh, (2014) 15 SCC 774, affirming that the State had no jurisdiction to interfere with the Board’s pension scheme.

Subsequently, the State Government implemented the 6th Pay Commission Report in 2008, but excluded employees of local bodies and public enterprises. The Board framed new pension regulations in 2009. The State Government approved revised pay scales for Board employees in 2010, but later clarified that arrears of revised pay from 2006 to 2010 would not be admissible to the Board employees. This led to further litigation by the Board’s employees seeking the benefits of the 6th Pay Commission.

Timeline:

Course of Proceedings

The High Court of Judicature at Allahabad, Lucknow Bench, initially ruled in favor of the employees in the case of Preetam Singh, directing the implementation of the Board’s pension scheme. The State of Uttar Pradesh appealed to the Supreme Court, which initially stayed the High Court order but ultimately dismissed the appeal.

Subsequently, the High Court again ruled in favor of the employees in writ petitions filed by Chandra Pal Singh and others, directing the implementation of the 6th Pay Commission benefits. The High Court held that the exclusionary part of the Government Order dated 08.12.2008, which exempted public enterprises, would have to be read down and held to be inapplicable to the employees of the Parishad. The State of U.P. and U.P. Avas Evam Vikas Parishad filed Special Leave Petitions (SLPs) against these orders.

The High Court also dismissed the Special Appeal filed by the State of U.P. against the order of the learned Single Judge dated 16.08.2017 in Writ Petition No.9033(S/S) of 2016 filed by the employees of the Board. The issues raised in these SLPs were similar to those in the SLPs filed against the judgment dated 16.03.2018.

Legal Framework

The core legal framework revolves around the Uttar Pradesh Avas Evam Vikas Parishad Adhiniyam, 1965 (the 1965 Act) and the Uttar Pradesh State Control Over Public Corporation Act, 1975.

Key provisions of the 1965 Act include:

• Section 3: Provides for the establishment of the Uttar Pradesh Avas Evam Vikas Parishad (the Board).
• Section 8: Deals with the appointment of officers and servants of the Board, stating that such appointments are “subject to such control and restrictions as may from time to time be imposed by the State Government, by special or general orders.”
• Section 15: Outlines the functions of the Board, which include framing and executing housing schemes, planning and coordinating housing activities, and providing technical advice. This section begins with the words “Subject to the provisions of this Act and the rules and regulations”.
• Section 92: Provides for the control of the State Government over the Board and other local authorities.
• Section 94(2)(nn): Empowers the State to make rules on any matter for which regulations may be made by the Board under Section 95.
• Section 95(1)(f): Empowers the Board to make regulations providing for “the conditions of service of officers and servants of the Board.”
• Section 95(2): States that if any regulation is repugnant to any rule, the rule shall prevail.

The Uttar Pradesh State Control Over Public Corporation Act, 1975, particularly Section 2(1), allows the State Government to issue directions on questions of policy to statutory bodies.

The Supreme Court also considered Entry 41 of List II of the VIIth Schedule of the Constitution, which empowers the State Legislature to frame laws on public services, and Article 162 of the Constitution, which extends the executive power of the State to matters on which it has legislative power.

Arguments

The State of U.P. argued that the Supreme Court’s previous judgment in Preetam Singh’s case was incorrect. The State contended that:

• The State Government has the power to issue directions regarding the service conditions of the Board’s employees, based on Sections 8, 92, and 94(2)(nn) of the 1965 Act.
• Section 8 of the 1965 Act states that the Board may appoint officers and servants subject to the control of the State Government, implying that the State can issue orders regarding the conditions of service of the employees.
• Section 92 of the 1965 Act provides for the control of the State Government over the Board and other local authorities.
• Section 94(2)(nn) of the 1965 Act empowers the State to make rules on any matter for which regulations may be made by the Board under Section 95, including service conditions.
• The conditions of service of the employees are the functions of the Board and the State Government.
• The State has the executive power to issue orders regarding service conditions under Article 162 of the Constitution.
• The State’s directions should prevail over the Board’s pension regulations.

The respondents (employees of the Board) argued that:

• The Supreme Court’s judgment in Preetam Singh’s case was correct and does not require reconsideration.
• The State’s power to issue directions under Section 92 of the 1965 Act is limited to the functions of the Board as enumerated in Section 15, which does not include service conditions.
• The issue of the validity of the Government Orders dated 13.09.2005 and 12.07.2007 was already settled in Preetam Singh’s case and cannot be re-examined.
• The State’s directions should be limited to the functions of the Board under Section 15 of the 1965 Act.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration by a larger bench:

1. Whether the judgment of this Court in Preetam Singh’s case, laying down that conditions of service of officers and employees do not constitute the functions of the U.P. Avas Evam Vikas Parishad, lays down the correct law, more so when the judgment does not refer to provisions of Sections 8, 92, 94(2)(nn) of the 1965 Act?
2. Whether the view expressed in Preetam Singh’s case that functions of the U.P. Avas Evam Vikas Parishad are only the specific functions enumerated in Section 15 of the 1965 Act, which does not include the service conditions of employees of the Board, lays down the correct law? Whereas the functions of the Board referred to in other provisions of the Act, Rules and Regulations, as has been expressly provided in Section 15(1) by use of the expression “subject to the provisions of this Act and the Rules and Regulations,” shall also be functions of the Board, which induces service conditions of officers and employees as per Section 95(1)(f) of the 1965 Act.
3. Whether the State Government had no jurisdiction to issue directions regarding service conditions of officers and employees of the U.P. Avas Evam Vikas Parishad under the provisions of the 1965 Act and 1975 Act and all other enabling powers with the State Government?

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:

The following legal provisions were considered:

Judgment

The Supreme Court, after considering the arguments and legal provisions, concluded that the judgment in Preetam Singh’s case needs reconsideration. The Court held that the conditions of service of the employees are a function of the Board and that the State Government has the jurisdiction to issue directions regarding service conditions.

The Court observed that the Bench in Preetam Singh’s case did not consider other relevant provisions of the 1965 Act, such as Sections 8, 92, and 95(1)(f), and the expression “subject to the provisions of this Act, rules and regulations” as occurring in Section 15(1).

The Court noted that Section 8 of the 1965 Act provides that the Board may appoint officers and servants subject to the control and restrictions imposed by the State Government. Also, Section 95(1)(f) empowers the Board to make regulations regarding service conditions, which is also a function of the Board.

The Court also noted that the State Government has the power to make rules on any matter for which regulations may be made by the Board under Section 95, and that rules made by the State have an overriding effect over regulations made by the Board.

The Court also held that the State has the executive power under Article 162 of the Constitution to issue orders regulating the conditions of service of the officers and servants employed in the affairs of the State.

The Court formulated three questions to be considered by a larger bench, pertaining to the correctness of the judgment in Preetam Singh’s case, the scope of the Board’s functions, and the State Government’s jurisdiction to issue directions regarding service conditions.

The Supreme Court considered the following authorities and how they were used for its reasoning:

• State of U.P. vs. Preetam Singh, (2014) 15 SCC 774*: The Court questioned the correctness of the judgment in Preetam Singh’s case, stating that it did not consider relevant provisions of the 1965 Act.
• Rai Sahib Ram Jawaya Kapur and others vs. The State of Punjab, AIR 1955 SC 549*: The Court relied on this case to explain that the executive power of the State extends to matters on which it has legislative power.
• A.B. Krishna and others vs. State of Karnataka and others, (1998) 3 SCC 495*: The Court relied on this case to explain that the power to make laws regulating service conditions is vested in the State Legislature.

What weighed in the mind of the Court?

The Supreme Court’s decision to refer the matter to a larger bench was primarily driven by the following factors:

• Oversight of Relevant Provisions: The Court found that the previous judgment in Preetam Singh’s case had not considered key provisions of the 1965 Act, including Sections 8, 92, and 95(1)(f). This oversight led to a flawed understanding of the relationship between the State Government and the Board regarding service conditions.
• Scope of Board’s Functions: The Court recognized that the functions of the Board are not limited to the specific functions enumerated in Section 15 of the 1965 Act but also include other functions as per the Act, rules, and regulations. This broader interpretation meant that the conditions of service of employees could be considered a function of the Board.
• State’s Jurisdiction: The Court acknowledged that the State Government has ample jurisdiction to issue directions regarding service conditions, based on the 1965 Act, the 1975 Act, and the executive power under Article 162 of the Constitution.
• Need for Clarity: The Court felt the need to clarify the legal position to ensure that the employees of the Board receive their due benefits. The Court also noted that the issues to be answered in the present SLPs are pertaining to mostly retired employees whose payment of arrears of pension/family pension and gratuity are involved.

Logical Reasoning

The Court considered alternative interpretations but rejected the view in Preetam Singh’s case that the State had no jurisdiction over the service conditions of the Board’s employees. The Court held that the State has ample jurisdiction to issue directions regarding service conditions.

The Court’s reasoning was based on the need to correct the errors made in the previous judgment and to ensure that the employees of the Board receive their due benefits. The Court also noted that the issues to be answered in the present SLPs are pertaining to mostly retired employees whose payment of arrears of pension/family pension and gratuity are involved.

The Supreme Court’s decision to refer the matter to a larger bench was based on the need to ensure that the legal position is clarified and that the employees of the Board receive their due benefits. The Court also noted that the issues to be answered in the present SLPs are pertaining to mostly retired employees whose payment of arrears of pension/family pension and gratuity are involved.

The Court quoted the following from the judgment:

“the conditions of service of employees do not constitute the functions of the Vikas Parishad”

“the functions of the Vikas Parishad are relatable only to the functions stipulated in Section 15 of the 1965 Act.”

“subject to the provisions of this Act and the rules and regulations”

Key Takeaways

• The Supreme Court has referred the issue of the State Government’s control over the service conditions of employees of the U.P. Avas Evam Vikas Parishad to a larger bench.
• The Court questioned its previous judgment in Preetam Singh’s case, holding that it did not consider relevant provisions of the 1965 Act.
• The Court held that the conditions of service of the Board’s employees are a function of the Board.
• The State Government has jurisdiction to issue directions regarding service conditions under the 1965 Act, 1975 Act, and Article 162 of the Constitution.
• The decision has significant implications for the employees of the Board, particularly retired employees, as it could affect their pension and other benefits.