Full Judgment Text
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PETITIONER:
ASSOCIATE BANK’S OFFICERS’ASSOCIATION
Vs.
RESPONDENT:
STATE BANK OF INDIA & ORS.
DATE OF JUDGMENT: 15/10/1997
BENCH:
SUJATA V. MANOHAR, D.P. WADHWA
ACT:
HEADNOTE:
JUDGMENT:
[With Writ Petitions {Civil} Nos. 763/89 and 819/90}
J U D G M E N T
Mrs. Sujata V. Manohar, J.
"Equal pay for equal work for both men and women is one
of Directive Principles of State Police laid down in Article
39(d) of the Constitution. Article 37 makes it non-
justiciable. Yet it must be borne in mind by the legislature
while making laws. In Randhir Singh vs. Union of India and
Ors. (1982 1 SCC 618), this Court construed Articles 14 and
16 in the light of the preamble to the Constitution to read
into their scheme the principle of equal pay for equal work.
The principle has since been applied in cases of irrational
discrimination in the pay-scales of workers doing the same
or similar work in an organisation. It has not been applied
when there is a basis an explanation for the difference.
Historical, equal pay for work of equal value has been
a slogan of the women’s movement. Equal pay laws, therefore,
usually deal with sex-based discrimination in the pay-scales
of men and women doing the same or equal work in the same
organisation. For example, the Equal Remuneration Act 1976
provides for payment of equal remuneration to men and women
workers and is meant to prevent discrimination on the ground
of sex against women in the matter of employment. The Equal
Pay Act 1970 and the Equal Pay (Amendment) Regulations 1983
in Great Britain are for a similar purpose. The same
doctrine has also sought to protect disadvantaged groups
against similar discrimination. We have interpreted and
applied the doctrine even more widely to prevent
discriminatory pay-scales within an organisation which is
owned by or is an instrumentality of the State, provided
that the different pay-scales exist in one organisation, are
applied to employees doing work of equal value, and there is
no rational explanation for the difference.
When the same principle is sought to be extended to
compare pay-scales in one organisation with pay-scales in
another organisation, although between employees doing
comparable work, the stretching of the doctrine, if at all
it is done, must be done with caution lest the doctrine
snaps. Many ingredients go into the shaping of wage
structure in any organisation. Historically it may have been
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shaped by negotiated settlements with employees’ unions, or
through industrial adjudication. It may have been revised or
reshaped with the help of expert committees. The economic
capability of the employer also plays a crucial part in it;
as also its capacity to expand business or earn more
profits. If the employing organisation functions in a
competitive area, it may, if it is economically strong,
offer higher wages than its competitors doing similar work
to attract better talent. Or it may offer higher wages to
the better qualified. A simplistic approach, granting higher
remuneration to other workers in other organisations because
another organisation has granted them, may lead to
undesirable results. Even within the same organisation, when
the differential wage structure is based on similar
considerations, the application of the doctrine would be
fraught with danger, and may seriously affect the
efficiency, and at times, even the functioning of the
organisation. The doctrine is designed to correct irrational
and inexplicable pay differentiation which can be looked
upon as discrimination against an employee or a given set of
employees. It is easier to identify such discriminated
groups when the discriminated group is sex-based (women) or
colour-based (Blacks in the USA) or caste-based (scheduled
castes etc.): and more difficult to identify in other cases.
But unless there is such identifiable discrimination, the
doctrine should not be applied. Mere difference is not
discrimination.
In the case before us the Unions of employees of
various banks which are subsidiaries of the State Bank of
India have claimed higher terminal benefits, better medical
benefits and extra increments in their pay-scale on the
ground that such benefits are available to the employees
holding equivalent or similar ranks in the State Bank of
India.
The State Bank of India was constituted under the State
Bank of India Act, 1955. Under the Act the undertaking of
the Imperial Bank was transferred to the State Bank of India
which was the new bank constituted under the said Act to
carry on banking business. The Preamble to the Act states
that for the extension of banking facilities on a large
scale, more particularly in the rural and semi-urban areas,
and for diverse other public purposes it is expedient to
constitute a State Bank of India and to transfer to it the
undertaking of the Imperial Bank of India.
Four years later, the State Bank of India (Subsidiary
Banks) Act, 1959 was passed. The Statement of Objects and
Reasons states, inter alia, that the future of certain major
State-associated banks which are owned in part by the State
Governments or with which such Governments have been closely
associated, has been under consideration for some time. The
question has recently been comprehensively re-examined, with
particular reference to the necessity for making adequate
and proper provision for the management of treasuries and
sub-treasuries in the area served by these banks and the
need for the expansion of these banks in these areas; and
the view of the banks themselves have been ascertained. The
management and the shareholders of the Bank of Bikaner, the
Bank of Indore, the bank of Jaipur, the Bank of Mysore and
the Travancore Bank have agreed to the proposal to
reconstitute these banks as subsidiaries of the State Bank.
The reconstitution on similar lines of the State Bank of
Saurashtra, the Bank of Patiala and the State Bank of
Hyderabad has also been agreed to.
The scheme for reconstitution provides for the transfer
to and vesting in the State Bank of India of the share
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capital of each of the eight banks which have accepted the
proposals.
Under Section 3 of the State Bank of India (Subsidiary
Banks) Act, 1959, the new banks are constituted. Section 4
provides that every new bank shall be body corporate with
perpetual succession and a common seal and shall sue and be
sued in its name. Under Section 7 all shares in the issued
capital of a new bank shall, on the appointed day, stand
allotted to the State Bank of India. Under Section 9, on the
constitution of a new bank, all shares in the capital of the
corresponding bank, where such corresponding bank has a
share capital, shall stand transferred to, and shall vest
in, the State Bank, free of all trusts, liabilities and
encumbrances. Section 11 deals with the transfer of services
of employees of existing banks. Under Section 24, the State
Bank may, from time to time, give directions and
instructions to a subsidiary bank in regard to any of its
affairs and business, and that bank shall be bound to comply
with the directions and instructions so given. Subject o any
such directions and instructions, the general
superintendence and conduct of the affairs and business of a
subsidiary bank shall, as from the appointed day, vest in a
Board of Directors who may, with the assistance of the
managing director, exercise all powers and do all such acts
and things as may be exercised or done by that bank. Under
sub-section (3) of Section 3, the Board of Directors of a
subsidiary bank shall, in discharging its functions under
this Act, act on business principles, regard being had to
public interest.
Section 25 deals with the composition of the Board of
Directors. The Chairman of the State Bank of India is the ex
officio Chairman. The managing director is to be appointed
under Section 25 by the State Bank of India after consulting
the Board of Directors of the subsidiary bank and with the
approval of the Reserve Bank. The Board of Directors will
have an officer of the Reserve Bank nominated by that bank;
not more than five directors to be nominated by the State
Bank, of whom not more than three shall be officers of that
bank; one Director from among the employees (Workers) of the
subsidiary bank to be appointed as set out therein; one
Director from amongst such employees of the subsidiary bank
as are not workmen, to be appointed as set out therein and
two directors to be elected in the prescribed manner by the
shareholders other than the State Bank. The section also
provides for a director to be nominated by the Central
Government in consultation with the State Bank.
Under Section 36, a subsidiary bank shall, if so
required by the State Bank, act as agent of the State Bank
at any place in India for the purpose of certain businesses
specified therein. There is a similar provision for a
subsidiary bank acting as an agent of the Reserve Bank if so
required by the Reserve Bank.
Based on these provisions, it is submitted before us
that the business of each of the subsidiary banks is under
the control and management of the State Bank of India and,
therefore, the employees of the subsidiary banks should be
considered as, in effect, employees of the State Bank of
India. Sub section (2) of Section 50, however, of the State
Bank of India (Subsidiaries Banks) Act, 1959 provides as
follows:
"50(2): For the removal of doubts,
it is hereby declared that the
officers, advisers and employees of
a subsidiary bank, in whatever
capacity engaged, shall not be
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deemed to be officers, advisers or
employees of the State Bank for any
purpose, unless otherwise provided
in the contract or agreement of
service of any such officer,
adviser or employee."
Despite this section, it is contended by the
petitioner-associations that since the subsidiary bank
shares a common chairman of its Board of Directors with the
State Bank of India, and since the State Bank of India has
the power to nominate five directors on the Board of the
subsidiary bank and has power to give directions to the
subsidiary bank, the subsidiary bank in fact, is a [art of
the State Bank of India. In the alternative it is under the
control of the State Bank of India. Hence the employees of
the subsidiary banks are entitled to claim the same benefits
as the employees of the State Bank of India.
In its counter affidavit the State Bank of India has,
however, pointed out that the subsidiary bank is an
independent bank. Undoubtedly it is a subsidiary of the
State Bank of India and the State Bank of India owns almost
the entire shareholding of the subsidiary banks. It also
exercised certain control over the subsidiary banks as
provided in the said Act. But the State Bank of India was
constituted much earlier under a different Act. The other
banks have not amalgamated with the State Bank of India.
These other banks or each of them remain a distinct entity
with their own Board of Directors. They have their own
capital structure, their own business, their own employees
and their own individual identity. The associated banks were
constituted as subsidiaries instead of being amalgamated
because it was considered desirable to maintain the separate
character of the State-associated banks as also their
existing contacts and traditions. It was considered
desirable to prevent sudden changes in their working methods
and policies and at the same time to offer them adequate
incentives on the development of their respective areas of
operation. It is the stand of the State Bank of India that
they play the rule of an enlightened stock-holder. In the
administration of their affairs the subsidiary banks are
autonomous and the State Bank of India in any event cannot
be considered as an employer of the staff of the subsidiary
banks. Section 50 quite clearly provides that the officers
and employees of a subsidiary bank cannot be considered as
the officers and employees of the State Bank of India for
any purpose. The officers and employees of subsidiary bank
are governed by the terms and conditions of employment of
the subsidiary bank by which they are employed and they are
borne on the cadre of employees of the subsidiary bank.
These submissions have considerable merit.
Even with regard to the Board of Directors of a
subsidiary bank, the State Bank of India has contended that
they have power to nominate five Directors. Out of them, the
three non-official Directors who are nominated by the State
Bank of India represent various areas of specialisation such
as agriculture, accountancy, small scale industry etc, with
a view to ensure that the Board of Directors of the
subsidiary banks is broad-based and is in a position to be
really useful to the bank. A nominee Director does not cease
to be independent and must act in the best interests of the
subsidiary bank. The policies are laid down in consultation
with the Reserve Bank of India and the Government of India.
The State Bank of India, in turn, is also subject to similar
control by the Reserve Bank of India and the Central
Government.
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The narrow question which we have to consider is
whether looking to the nature of the relationship between
the State Bank of India and each of the subsidiary banks,
can the employees of the subsidiary banks be considered as
employees of the State Bank of India? In view of the clear
provisions of Section 50, it is not possible to come to a
conclusion that the employees of the subsidiary banks are,
for all practical purposes, employees of the State Bank of
India. Even dehors Section 50, looking to the scheme of the
State Bank of India (Subsidiary Banks) Act, 1959, it is
quite clear that each of the subsidiary banks is set up as a
separate bank. Each subsidiary bank has its own capital
structure, its own operations. Each of the banks has its own
staff with its own terms and conditions of service.
Therefore, the employees of the subsidiary bank cannot be
treated as the employees of the State Bank of India. The
employees of the subsidiary banks are not entitled to claim
the same benefits as the employees of the State Bank on the
ground that they are, in effect, the employees of the State
bank of India.
It is submitted before us by the petitioner-
associations in the alternative, that in any event, they are
employees of an organisation which does work which is
similar to the State Bank of India. The duties and
responsibilities of their officers and employees are similar
to the duties and responsibilities of the officers and
employees of the State Bank of India. Hence they should be
given the same terminal benefits, the same medical benefits
and the same increments as the officers and employees of the
State Bank of India. IN the case of Union Territory
Chandigarh v. Krishan Bhandari (1996 11 SCC 348), this Court
held that the doctrine of equal pay for equal work is
inapplicable when the alleged discrimination is between
employees of two different authorities functioning as a
State Under Article 12. In the present case the petitioners
are faced with a further difficulty. They claim parity also
regarding other benefits. There is no disparity in pay-
scales.
Looking briefly at the nature of the grievance in
respect of terminal or retiral benefits, the employees of
the subsidiary banks are entitled to provident fund or
pension, and they are also entitled to service gratuity. The
employees of the State Bank of India are entitled to
provident fund and pension. They are also entitled to
gratuity under the payment of Gratuity Act. According to the
petitioners. the employees of the subsidiary bank should
also be given pension in addition to the terminal benefits
which they already have. It is, however, pointed out by the
State Bank of India that the terminal benefits in a
subsidiary bank are comparable to the terminal benefits in
nationalised banks, where also there is an option between
pension or contributory provident fund. Regarding gratuity,
the employees of a nationalised bank are entitled to service
gratuity or gratuity as per the Payment of Gratuity Act,
whichever is higher, which is the position in the subsidiary
banks also. Looking to this comparative position, we do not
see any reason to infer discrimination.
In respect of medical benefits, the hospitalisation
scheme in the State Bank of India provides for 100% payment
for self and 75% payment for the family which is similar to
the hospitalisation scheme for subsidiary banks. However, in
respect of certain operations the ceiling on admissible
amounts is different. For home treatment, the subsidiary
banks have prescribed ceiling on the amount payable. It is
not as if no medical benefits are provided to subsidiary
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banks’ employees. The employees are provided substantial
medical benefits, though they are not identical with the
medical benefits given by the State Bank of India.
With regard to pay-scales, the grievance which is made
before us as of now, is only with regard to four increments
which are given to the officers of the State Bank of India
at the time of joining though the pay-scales are the same.
This is not done in the subsidiary banks. The State Bank of
India has submitted that in order to attract suitable
persons, looking to the scale of their operations and
responsibilities involved, this has been done. The
subsidiary banks are not in a comparable position. Nor are
their scales of operation comparable to the State Bank of
India. The responsibilities of their officers are not
comparable in view of the extent of operations of the
subsidiary banks. In these circumstances, if the State Bank
of India has offered increments to persons joining the State
Bank of India, the same cannot be given to the officers
joining the subsidiary banks.
All the grievances centre around these benefits. We do
not think that the State Bank of India and the subsidiary
banks are in a comparable position in this regard. It is
also submitted by learned counsel for the State Bank of
India that the benefits which are extended to the employees
of the subsidiary banks are negotiated settlements with the
unions of their employees. The benefits which are conferred
are in accordance with the agreements which have been
reached between the unions of the employees and the
management of each bank. In these circumstances, we fail to
see how the principle of "equal pay for equal work" can be
applied in the present set of facts.
The writ petitions are, therefore, dismissed. There
will be no order as to costs.