The State Of West Bengal vs. Confederation Of State Government Employees, West Bengal

2026 INSC 123
REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. OF 2026
(Arising out of SLP(C)Nos.22628-22630 of 2022)

STATE OF WEST BENGAL
& ANR. …APPELLANT(S)

VERSUS

CONFEDERATION OF STATE
GOVERNMENT EMPLOYEES,
WEST BENGAL & ORS. …RESPONDENT(S)

WITH
CIVIL APPEAL NO.________________ of 2026
Arising out of SLP(C)Nos…………..of 2026
@DIARY NO.(s) 35252 of 2025

CIVIL APPEAL NO.________________ of 2026
Arising out of SLP(C)Nos…………of 2026
@DIARY NO.(s) 39626 of 2025

AND
CIVIL APPEAL NO.________________ of 2026
Arising out of SLP(C)Nos…………of 2026
Signature Not Verified
@DIARY NO.(s) 41566 of 2025

Digitally signed by
NAVEEN D
Date: 2026.02.05
11:52:24 IST
Reason:
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J U D G M E N T

SANJAY KAROL J.

This judgment is divided into the following parts :

INDEX

EXORDIUM ............................................................................................... 3

THE CONTROVERSY IN SUMMARIUM ............................................. 8
A GLOSSARY OF TERMS AND DEFINITIONS ................................. 8
RoPA Rules ........................................................................................... 10

First Memorandum ............................................................................... 19
PROCEEDINGS BEFORE THE TRIBUNAL ..................................... 25

BEFORE THE HIGH COURT-ROUND ONE ..................................... 28
ON REMAND BEFORE THE TRIBUNAL ......................................... 32
BEFORE THE HIGH COURT- ROUND TWO .................................. 38

RIVAL CONTENTIONS ........................................................................ 42
A. Submissions on behalf of the Appellant-State ............................. 42

B. Submissions of the Respondents ................................................... 49
QUESTIONS TO BE CONSIDERED ................................................... 53
ANALYSIS AND DISCUSSION ............................................................ 55

Dearness Allowance .................................................................................. 55
Question 1: ARTICLE 309 ...................................................................... 61

Questions 2, 3 and 4 ................................................................................. 64
Question 5: ARBITRARINESS OF APPELLANT-STATE’S ACTION
AND LEGITIMATE EXPECTATION OF ITS EMPLOYEES ......... 78
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Question 6 and 7: CONFLICT, IF ANY, BETWEEN LIST I AND II
th
OF THE VII SCHEDULE AND FINANCIAL AUTONOMY OF
THE STATE ............................................................................................. 93
Question 8: EFFECT OF FINDINGS IN FIRST ROUND OF
LITIGATION ......................................................................................... 103
Question 9: WHETHER THE RESPONDENTS ARE ENTITLED TO
DA TWICE A YEAR? ........................................................................... 106

Question 10: DOES PAUCITY OF FUNDS DEFEAT A LEGAL
RIGHT? .................................................................................................. 107
Question 11: FISCAL POLICY AND JUDICIAL REVIEW ............ 112
Question 12: DEARNESS ALLOWANCE - A FUNDAMENTAL
RIGHT? .................................................................................................. 118

Question 13: DELAY AND LATCHES ............................................... 118
DIRECTIONS AND CONCLUSIONS ................................................ 121


Leave Granted.

These appeal(s) are at the instance of the State of West
Bengal and arise out of two prior rounds of litigation wherein the
State suffered judgments against itself.


EXORDIUM

1. The idea of a welfare state casts a positive duty upon the
State to ensure the social and economic well-being of its citizens.
The role of the State is as such not limited to maintaining law and
order or facilitating markets, but extends to creating or easing the
way for conditions in which individuals can live with security,
dignity, and a reasonable standard of living. One of the most
persistent threats to this objective that has become a permanent
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‘ bad penny ’, is inflation, which steadily erodes purchasing
power, thereby placing a disproportionate burden on salaried and
lower-income groups. In this context, Dearness Allowance
emerges as a practical instrument of protection in the hands of
the welfare state, which protects its employees from the adverse
effects of rising prices.

2. Dearness Allowance is designed to neutralise the impact
of inflation. When the cost of essential goods increases, salaries
that do not account for the same and remain in a bygone era, often
fail to meet the basic needs, leading to a decline in living
standards. By way of periodic adjustment to salaries in response
to changes in the cost of living, the State attempts to ensure that
employment continues to provide economic security. This
reflects a core concern of the welfare state that its employees
should not be pushed into hardship due to economic forces
beyond their control. Put differently, Dearness Allowance is not
an additional benefit but a means to maintain a minimum
standard of living.

3. The importance of preserving a reasonable standard of
living is closely tied to the constitutional idea of dignity. Human
dignity does not mean mere physical survival. Access to food,
clothing, healthcare, shelter and the ability to participate
meaningfully in social life are crucial aspects. Dignity is
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compromised when individuals are unable to meet these basic
needs. This link is recognized in our Constitution under Article
21, which guarantees the right to life and personal liberty. Judicial
interpretation has consistently held that the right to life includes
the right to live with human dignity, encompassing livelihood,
adequate nutrition, shelter, and basic amenities. This right, under
Article 21, would lose its substantive meaning without a
minimum standard of living.

4. PN Bhagwati J. (as his Lordship then was) felicitously
captured this constitutional diktat in the following words in
Francis Coralie Mullin v. Administrator, Union Territory of
1
Delhi :
“ 8. But the question which arises is whether the right to
life is limited only to protection of limb or faculty or does
it go further and embrace something more. We think that
the right to life includes the right to live with human
dignity and all that goes along with it, namely, the bare
necessaries of life such as adequate nutrition, clothing
and shelter and facilities for reading, writing and
expressing oneself in diverse forms, freely moving about
and mixing and commingling with fellow human beings.
Of course, the magnitude and content of the components
of this right would depend upon the extent of the
economic development of the country, but it must, in any
view of the matter, include the right to the basic
necessities of life and also the right to carry on such
functions and activities as constitute the bare minimum
expression of the human-self. Every act which offends
against or impairs human dignity would constitute
deprivation pro tanto of this right to live and it would

1
(1981) 1 SCC 608
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have to be in accordance with reasonable, fair and just
procedure established by law which stands the test of
other fundamental rights…”
(Emphasis Supplied)

A bench of three judges, nearly two decades later, echoed a
2
similar sentiment. In Common Cause v. Union of India , it was
observed:
175. “Right to Life”, set out in Article 21, means
something more than mere survival or animal existence.
(See: State of Maharashtra v. Chandrabhan Tale [(1983)
3 SCC 387 : 1983 SCC (L&S) 391 : 1983 SCC (Cri) 667
: AIR 1983 SC 803 : (1983) 3 SCR 337] .) This right also
includes the right to live with human dignity and all that
goes along with it, namely, the bare necessities of life
such as adequate nutrition, clothing and shelter over the
head and facilities for reading, writing and expressing
oneself in different forms, freely moving about and
mixing and commingling with fellow human beings…”

(Emphasis Supplied)

5. The Preamble of the Constitution, right at the outset of our
founding charter, establishes this connection between dignity and
material conditions of life. By committing the State to social and
economic justice, equality, and fraternity assuring the dignity of
the individual, the Preamble sets the philosophical foundation of
the Indian welfare state. With large sections of the population still
been unable to achieve and maintain basic standards of living, it
is clear that much is left to be desired when it comes to the ideals
of socio-economic justice. Inequality and deprivation attack the

2
(1999) 6 SCC 667
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very core of social cohesion. Thus, the constitutional vision of
dignity necessarily presupposes policies that protect living
standards.

6. The strongest justification for Dearness Allowance in
India, though statutory in nature, lies in its constitutional
grounding, especially in the Directive Principles of State Policy.
Articles 38, 39 and 43 thereof implore upon the State to promote
social and economic justice, reduce inequalities, and secure a
living wage and decent conditions of work. Dearness Allowance
gives practical effect to the above-mentioned stipulations of the
Constitution providing a barrier against salaries being
compromised in value beyond sustenance. It is, as such, a tool for
the realization of lived economic reality, ensuring that the

promise of a living wage retains its substance.

7. Dearness Allowance represents a clear intersection of
principles of welfare state and those enshrined by the
constitutional vision. By protecting standards of living, it furthers
the right to live with dignity under Article 21 and advances the
goals articulated in the Preamble thereby being a concrete
expression of the State’s constitutional responsibility .

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THE CONTROVERSY IN SUMMARIUM

3
8. The State of West Bengal in these appeals by special
leave, questions the legality and correctness of the final
th
judgments and orders dated 20 May 2022 passed in WPST
nd
No.102 of 2020; 22 September 2022 in RVW No.159 of 2022,
and CAN 1 of 2022, passed by the High Court at Calcutta. At
heart, the grievance of the State is that the High Court declared
4
Dearness Allowance as a facet of Article 21 of the Constitution
5
of India and directed the State Government to pay to the
respondents the said allowance at the rate prevalent in the Central
Government in accordance with the All-India Consumer Price
6
Index . Here, we are concerned with the disbursement of arrears
of DA as claimed by the employees of the appellant-State for the
period 2008-2019.
For the purpose of clarity, it is stated that the position of
the parties is referred to as before this Court.

A GLOSSARY OF TERMS AND DEFINITIONS

9. Certain terms, which will be repeatedly used throughout
this judgment, may be explained/defined at the beginning, before

3
appellant-State
4
DA
5
Constitution
6
AICPI
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we proceed to the matter in issue, to facilitate ease of
understanding:

Dearness Allowance : Dearness Allowance or ‘DA’ is defined as
that amount of money which is added to a person's basic pay
or pension, by the employer because of rising prices and
7
.
other costs In similar terms are the “ Cost of Living Adjustments ”
which is defined as “an increase in a person's wages, pension,
etc. that is made once a year according to how much the prices
8
of things such as food, transport, and housing have increased”.

Inflation: The International Monetary Fund defines ‘ inflation ’ as
the rate of increase in prices over a given period. “ Inflation is
typically a broad measure, such as the overall increase in prices
or the increase in the cost of living in a country. But it can also
be more narrowly calculated - for certain goods, such as food, or
for services, such as a haircut, for example. Whatever the
context, inflation represents how much more expensive the
relevant set of goods and/or services has become over a certain
9
period, most commonly a year”.

Consumer Price Index :- The United States Bureau of Labour
Statistics, defines the Consumer Price Index as “a measure of the

7
https://dictionary.cambridge.org/dictionary/english/dearness-allowance
8
https://dictionary.cambridge.org/dictionary/english/cost-of-living-adjustment
9
https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-
Basics/Inflation
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average change over time in the prices paid by urban consumers
10
for a market basket of consumer goods and services.”

BACKGROUND TO THE LEGAL PROCEEDINGS

11
10. The appellant-State set up the Fifth Pay Commission in
2008 to examine the structure of emoluments to be paid to the
State Government employees. In the report submitted, the
Commission made several recommendations, including the
revision of the DA to be paid. In furtherance of such
recommendations, the appellant - State, in accordance with the
powers conferred under Article 309 of the Constitution, brought
into force the West Bengal (Revision of Pay and Allowance)
12 rd
Rules, 2009 , by Notification dated 23 February 2009. The
said Rules provide for revision of pay and allowances, viz.,
Dearness Allowance, House-Rent allowance, Medical
Allowance, and Non-Practicing Allowance, and were to have
st
retrospective effect, i.e., from 1 January 2006. .

RoPA Rules
11. The relevant rules are as under, for ready reference:
“Rules

10
https://www.bls.gov/cpi/
11
Commission
12
RoPA Rules
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1. Short title and commencement – (1) These rules may
be called the West Bengal Services (Revision of Pay and
Allowance) Rules, 2009.
(2) They shall be deemed to have come into force on the
first day of January, 2006.

x------------------------------x----------------------------x

3. Definitions . – (1) In these rules, unless the context
otherwise requires, –
… … …

(c) “existing emoluments” mean the aggregate of –
(ii) existing basic pay,
(iii) dearness pay appropriate to the basic pay, and
(iv) dearness allowance appropriate to the basic pay plus
dearness pay at index average 536 (1982 =100);

x-----------------------------x---------------------------------x

7. Fixation of initial pay in revised pay structure – (1)
The initial pay of a Government employee who elects or
is deemed to have elected under rule 6 to be governed by
st
the revised pay structure on and from the 1 day of
January, 2006, shall, unless in any case the Governor by
special order otherwise directs, be fixed separately in
respect of his substantive pay in the permanent post on
which he holds a lien, or would have held a lien had his
lien not been suspended, and in respect of his pay in the
officiating post held by him in the following manner
namely:–

(a) in case of all employees, –
(i) the pay in the pay band of a Government
st
employee who continued in service after 31
December, 2005, shall be determined notionally as
st
on 1 day of January, 2006, by way of multiplying
his existing basic pay by a factor of 1.86 and
rounding off the resultant figure to the next
multiple of 10:

Provided that if the minimum of the
revised pay band is higher than the amount so
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arrived at in accordance with the provisions of this
item, the pay shall be fixed at the minimum of the
revised pay band;

(ii) after the pay in the pay band so
determined, grade pay corresponding to the
existing scale shall be added;
(b) in case of medical officers and veterinarians
who are in receipt of non-practising allowance, the pay in
the revised pay structure shall be fixed notionally in
accordance with the provisions of clause (a):

Provided that the pre-revised dearness allowance
appropriate to the existing non-practising allowance
admissible at index average of 536 (1982=100) shall be
added while fixing the pay in the revised pay band, and
the amount of non-practising allowance at the rate as
specified in Part F of Schedule I shall be drawn with effect
st
from the 1 day of January, 2006 or the date of option for
revised pay structure notionally, in addition to the pay so
fixed in the revised pay structure.

Note 1 .– A Government employee who is on leave on the
date of commencement of these rules and is entitled to
leave salary, shall become entitled to pay in the revised
pay structure from the date of actual effect of the revised
emoluments. Similarly, where a Government employee is
on study leave shall get the benefit of these rules.

Note 2 .– A Government employee under suspension, shall
continue to draw subsistence allowance based on existing
scale of pay and his pay in the revised pay structure shall
be subject to the final order of the pending disciplinary
proceedings.

Note 3 .–Where the amount of existing emoluments
exceeds the revised emoluments in respect of any
Government employee, the difference amount shall be
allowed as personal pay to be absorbed in future increases
in pay.

Note 4 .– Where in the fixation of pay under sub-rule (1),
the pay of a Government employee, who, immediately
st
before the 1 day of January, 2006, was drawing more pay
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in the existing scale than another Government employee
junior to him in the same cadre, gets fixed in the revised
pay band at a stage lower than that of such junior, his pay
shall be stepped upto the same stage in the revised pay
band as that of the junior.
Note 5 . – In the case where a senior Government
st
employee promoted to a higher post before the 1 day of
January, 2006, draws less pay in the revised pay structure
than his junior who is promoted to the higher post on or
st
after the 1 day of January, 2006, the pay in the pay band
of senior Government employee shall be stepped up to an
amount equal to the pay in the pay band as fixed for his
junior in that higher post. The stepping up shall be done
by the Government with effect from the date of promotion
of the junior Government employee subject to the
fulfillment of the following conditions:–
(i) both the junior and the senior
Government employees should belong to
the same cadre and the posts in which
they have been promoted should be
identical in the same cadre;

(ii) the pre-revised scale of pay and the
revised grade pay of the lower and higher
posts in which they are entitled to draw
pay should be identical;


(iii) the senior Government employee at the
time of promotion should have been
drawing equal or more pay than the
junior;

(iv) the anomaly should arise directly as a
result of the application of the provisions
of the normal rule or any other rule or
order regulating fixation of pay on such
promotion in the revised pay structure. If
even in the lower post, the junior officer
was drawing more pay in the pre-revised
scale than the senior by virtue of any
advance increments granted to him, the
provisions of this Note shall not be
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applicable to step up the pay of the senior
officer.

Note 6 . – Where a Government employee is in receipt of
st
personal pay on the 1 day of January, 2006, which
together with his existing emoluments exceeds the revised
emoluments, the difference representing such excess shall
be allowed to such Government employee as personal pay
to be absorbed in future increases of the pay.

(2) Subject to provisions of rule 5, if the pay as
fixed in the officiating post under sub-rule (1) is lower
than the pay fixed in the substantive post, the former shall
be fixed at the same stage as the substantive pay.

x-------------------------------x--------------------------------x

10. Date of increment in revised pay structure .– (1) In
respect of all Government employees, there shall be a
uniform date of annual increment and such date of annual
increment shall be the 1st day July of every year:

Provided that in case of a Government employee
who had been drawing maximum of the existing scale of
st
pay for more than a year on the 1 day of January, 2006,
the next increment in the unrevised pay scale shall be
st
allowed on the 1 day of January, 2006 and thereafter the
provision of this rule shall apply.

Note 1. – In case of Government employees completing
six (6) months and above in the revised pay structure as
st
on 1 day of July, shall be eligible to be granted the
increment. The first increment after fixation of pay on
st
the 1 day of January, 2006 in the revised pay structure
st
shall be granted notionally on the 1 day of July, 2006
for those employees for whom the date of next increment
st st
was between 1 July, 2006 to 1 January, 2007.

Note 2 . – In case of the Government employees who
earned their last increment between the period
nd
commencing from the 2 day of January, 2005 and
st
ending on the 1 day of January, 2006, after fixation of
their pay under revised pay structure, such Government
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st
employee should get next increment on the 1 day of
July, 2006.


Note 3 . – In case of the Government employees whose
st
date of next increment falls on the 1 day of January,
2006, after granting an increment in the pre-revised pay
st
scale as on the 1 day of January, 2006, their pay in the
st
revised pay structure should be fixed on the 1 day of
January, 2006 and such Government employees should
st
get their next increment on the 1 day of July, 2006.

Note 4 . – If a Government employee opts to come under
st
revised pay structure after any date between the 1 day of
st
January, 2006 to the 1 day of July, 2006, his pay in the
revised pay structure should be fixed accordingly, but his
st
date of next increment should be 1 day of July, 2007.

x--------------------------------x--------------------------------x

12. Payment of arrears .– (1) Notwithstanding anything
contained elsewhere in these rules, or in any other rules
for the time being in force, no arrears of pay to which a
Government employee may be entitled in respect of the
st st
period from the 1 day of January, 2006 to the 31 day of
March, 2008, shall be paid to the Government employee.

(2) (a) The arrears of pay to which the Government
employee may be entitled to in respect of the period from
st st
the 1 day of April, 2008 to the 31 day of March, 2009,
shall be paid in three consecutive equal yearly
installments in cash from the year 2009-2010.

(b) A Government employee, who retired on any date
st st
between the 1 day of January, 2006 to the 31 day of
March, 2008, shall not be entitled to any arrears of pay for
st
the period up to the 31 day of March, 2008.

A Government employee, who retired between the
st st
periods from the 31 day of March, 2008 to the 1 day of
April, 2009, but before publication of these rules in the
Official Gazette , shall receive arrears pay for the period
st
from the 1 April, 2008 to the date of his retirement, in
cash.
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Explanation .– For the purpose of this rule, “arrears of
pay”, in relation to a Government employee, means the
difference between the aggregate of pay and allowances
to which he is entitled on account of the revision of pay
and allowances under these rules for the period in question
and the aggregate of the pay and allowances to which he
would have been entitled for that period had his pay and
allowances not been so revised. The revised allowance
(except for dearness allowance and non-practicing
st
allowance) shall be payable only with effect from the 1
day of April, 2009.

Note .– Non-practising allowance at the new rate on the
revised pay structure shall be admissible to the officers of
the West Bengal Homeopathic Educational Service, the
West Bengal Ayurvedic Educational Service, the West
Bengal Homeopathic Health Service and the West Bengal
st
Ayurvedic Health Service with effect from 1 day of
April, 2009.


x-------------------------------x--------------------------------x

14. Overriding effect of rules .– The provisions of these
rules shall have effect notwithstanding anything to the
contrary contained in any other rules, orders or
notifications for the time being in force, and all such rules,
orders and notifications including the West Bengal
Service Rules, Part I, shall have effect subject to the
provisions of these rules.

15. Relaxation of rules . – Where the Governor is satisfied
that the operation of all or any of the provisions of these
rules causes undue hardship in any particular case or class
of cases, he may, by order, dispense with or relax the
requirement of all or any of these rules to such extent and
subject to such conditions as he may consider necessary
for dealing with the case or class of cases in a just and
equitable manner.”
(Emphasis Supplied)



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Clarificatory Memorandum

“Government of West Bengal
Finance Department
Audit Branch

rd
No. 1691-F D ated the 23 February, 2009
MEMORANDUM

Subject: Clarificatory Memorandum on the West Bengal
Services (Revision of Pay & Allowance) Rules, 2009
and on allied matters dealt with by the Fifth Pay
Commission.
In Finance Department Resolution No. 6020-F
th
dated the 28 August, 2008 the Government constituted
a Pay Commission –
(1) to examine the present structure of pay and conditions of
service after taking into account the total package of
benefits available to the following categories of
employees and to suggest changes which may be
desirable and feasible keeping in view the decisions of
Central Government on the recommendations of the
Sixth Central Pay Commission:-


(a) employees under the rule making control of the
Government of West Bengal except members of the All
India Services, West Bengal Judicial Service and the
members of the services to whom the University Grants
Commission Scales of pay and AICTE scales of pay
are applicable;

(b) teaching and non-teaching employees of
Government sponsored or aided –
(i) educational institutions,
(ii) Training Institutions of Primary Teachers,
(iii) Libraries,
(iv) Polytechnics and Junior Technical
Schools;
(c) non-teaching employees of non-Government
Colleges (Sponsored or Aided);

(d) employees of the Municipalities, Municipal
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Corporations, Notified Area Authorities, District
Primary School Councils and Panchayat Bodies;

(2) to examine the existing promotion policies and related
issues and to suggest changes which may be desirable
and feasible, having regard to need for improving
people orientation, social accountability and efficiency
of the administration;
(3) To examine special allowance and other allowances,
concessions including leave travel concession and
benefits in kind which are available to the employees in
addition to pay and suggest changes which may be
desirable and feasible;

(4) To examine issues relating to retirement benefits; and



(5) To make recommendations on each of the above having
regard inter alia to the prevailing pay structure under the
Central Government, Public Sector Undertakings and
other State Governments etc., the economic conditions
of the country, financial responsibility to the
Government of India and the pattern of allocation of
revenues to the State, the resources of the State
Government and the demands thereon on account of the
commitment of the State Government to developmental
activities.

th
The Commission submitted its report on the 12 February,
2009. After due consideration of the recommendations of the
Commission, the Governor has been pleased to make the
decisions set out in the following paragraphs in respect to the
employees under category 1(a) above :-

2. Scales of Pay – The Government has accepted the
recommendation of the Commission in respect of
running pay bands and grade pay corresponding to each
scale of pay without any modification.

The revised pay structure which has been
prescribed by the Government are set out in –

(a) Schedule I to the West Bengal Services
(Revision of Pay and Allowance) Rules, 2009 relating to
services generally published with the Finance
rd
Department Notification No. 1690-F dated the 23
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February, 2009.

(b) Rules relating to Subordinate Executive
Staff of the Police Force, published with notification No.
rd
688-PL, 689-PL and 690-PL dated the 23 February,
2009.


(c) Regulations relating to the officers and
staff of the West Bengal National Volunteer Force,
published with the notification No. 342-CD dated the
rd
23 February, 2009.

(d) Regulations relating to the officers and staff of
the Public Service Commission, West Bengal, published
with the Finance Department notification No. 1693-F
rd
dated the 23 February, 2009.

These rules and regulations have been published in
the extraordinary issue of Kolkata Gazettee dated the
rd
23 February, 2009.
… … …
10. Dearness Allowance – Consequent upon revision of pay
of Government employees in accordance with the West
Bengal Services (Revision of Pay and Allowance)
Rules, 2009, the dearness allowance to which a
Government employee is entitled from time to time since
st
the 1 day of January, 2006 needs to be related to pay in
the revised pay structure. Necessary Government Order
in this regard has been issued with Finance Department
rd
Memo. No. 1692-F dated the 23 February, 2009.
… … …”
(Emphasis Supplied)



First Memorandum
“Government of West Bengal
Finance Department
Audit Branch

No.1692-F Dated the 23rd February,2009

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MEMORANDUM


Subject: Drawal of Dearness Allowance in the revised
pay structure under the West Bengal Services (Revision
of pay and Allowance) Rules, 2009.

Consequent upon the revision of Pay Scales of
Government employees under the provisions of West
Bengal Services (Revision of Pay and Allowance) Rules,
2009. It has become necessary to relate Dearness
Allowance admissible to a Government employee to his
basic pay in the revised pay structure in the case he has
elected or is deemed to have elected to draw pay in the
revised pay structure prescribed under the aforesaid Rules.

2. As it has been laid down in Rule 12 of the West Bengal
Servies (Revision of pay and Allowance) Rules, 2009, that
no arrears of pay and allowances to which any Government
employee may be entitled in respect of the period from the
1st January,2006 to 31st March 2008, shall be paid to the
Government employee, the Dearness Allowance admissible
to a Government employee needs to be related to his pay in
the revised pay structure with effect from the 1st April,
2008 only.

3. Accordingly the Governor is pleased to decide that the
Dearness Allowance payable to a Government employee
with effect from 1st April, 2008, shall be at the following
rates :-

Period for which payable Rate of Dearness Allowance
per month on basic pay


01.04.2008 to 31.05.2008 2%
01.06.2008 to 31.10.2008 6%
01.11.2008 to 28.02.2009 9%
01.03.2009 to 31.03.2009 12%
01.04.2009 onwards 16%

4. The payment of Dearness Allowance under this order
from the dates indicated above shall be made after adjusting
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the instalments of Dearness Allowance already sanctioned
and paid to the State Government employee with effect
from 01.04.2008, 01.06.2008, 01.11.2008 and 01.03.2009,
vide Order No. 13-F dated 01.01.2008, No. 4236-F dated
12.06.2008, No.8195-F dated 04.11.2008 and 1370-F dated
12.02.2009 respectively.

5. The term ‘basic pay’ for the purpose of calculation of
Dearness Allowance shall mean the Pay drawn in the
revised pay band including the Grade Pay and NPA, where
admissible, but shall not include any other type(s) of pay.
In the case of those employees who do not opt for revised
pay structure as per the West Bengal Services (Revision of
Pay and Allowance) Rules 2009, the ‘Pay’ shall mean the
Basic pay in the scales of pay as per the West Bengal
Services (Revision of Pay and Allowance) Rules, 1998 plus
Dearness Allowance as sanction to the State Government
employees with effect from 01.04.2007, vide Finance
Department Memo. No. 2416-F dated 27.03.2007.

6. The Dearness Allowance admissible in the para 4 of this
memorandum shall be rounded off to the nearest rupee in
each case.

By Order of the Governor,
Sd/- S.K. Chattopadhyay
Special Secretary to the Governor of West Bengal ”

(Emphasis Supplied )

12. At this stage itself, it is imperative to take note of the
position regarding the payment of DA prevalent in the
Central Government at the relevant point in time.

“MINISTRY OF FINANCE
(Department of Expenditure)
NOTIFICATION
New Delhi, the 29th August, 2008

G.S.R. 622 (E).- In exercise of the powers conferred by
the proviso to article 309, and clause (5) of article 148 of
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 21 of 124


the Constitution and after consultation with the
Comptroller and Auditor General in relation to persons
serving in the Indian Audit and Accounts Department, the
President hereby makes the following rules, namely : -

3. Definitions- In these rules, unless the context
otherwise requires -
(1) "existing basic pay" means pay drawn in the
prescribed existing scale of pay, including stagnation
increment(s), but does not include any other type of pay
like 'special pay', etc.
… … …

(3) "existing emoluments" mean the sum of (i) existing
basic pay, (ii) dearness pay appropriate to the basic pay
and (iii) dearness allowance appropriate to the basic pay
'+ dearness pay at index average 536 (1982=100)
… … …”
(Emphasis Supplied)

13. The appellant - State clarified by way of the above said
Clarificatory Memorandum that DA would be linked to revised
st
pay, from 1 January 2006. Also, it was stated in the First
Memorandum issued on the same day, to the effect that starting
st
from 1 April 2008 rate of DA would be increased periodically,
st th
to 16% from 1 April 2009. On 9 December 2009, DA was
st
revised with effect from 1 December 2009 to 22%. The rate at
which DA would be payable was further revised.

14. A table depicting the same as also the change carried out
by the Central Government, facilitating comparison thereof, as
submitted by the appellant State, is as follows:

C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 22 of 124


Government of West Bengal

Government of India

13 th
Notification on record reveals the actual date to be 9 January 2015
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 23 of 124

although various revisions were made to the DA, it was not paid
st st
to the employees between 1 July 2010 and 1 January 2012.
After the latter date when DA was paid, it was paid at a rate
different to what was paid to Central Government employees.
st
Further revisions were made to the DA payable, on 31
December 2012, to be applicable henceforth @ 52%. The same
th
was increased to 58% for the next year on 16 December 2013;
th
then to 65% for the following year on 9 January 2015, with
effect from the beginning of the year; and then further to 75% for
th
the year following, on 14 December 2015.

15. Since the employees were not paid the DA as per the rates
notified, hence a representation was made to the officials of the
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 24 of 124


th
Government of the appellant - State on 10 August 2016
regarding the non-payment of DA.

PROCEEDINGS BEFORE THE TRIBUNAL

14
16. Respondents, employees and their Union , filed O.A. No.
1154 of 2016 under Section 19 of the Administrative Tribunal
Act, 1985 alleging that the State had not granted DA in terms of
the recommendation of the Commission. It was submitted that
the real value of the salary earned by the employees of the State
has continuously been eroded due to the pressures of inflation. It
was highlighted that there is stark difference between the pay
structures of the appellant-State and the Central Government
(75% of basic pay vis-à-vis 125% of basic pay) and the former
had not followed a uniform pattern of payment along with large
delay in disbursal of funds. There is further disparity, it is
submitted, between the employees of the appellant-State serving
in the State and those who serve outside the State i.e. ‘ Banga
Bhawan in New Delhi ’ and ‘ State Youth Service Department in
Chennai, Tamil Nadu ’ since the latter enjoy DA at the rates
prevalent in the Central Government. The payment of DA is not
a bounty or grace. Lastly, it was submitted that since the

14
Respondent no.1 is the Confederation of the Employees, West Bengal;
Respondent no.2 is Unity Forum; Respondent no.3 is Indranil Mitra, Member of
Respondent no.1; Respondent no.4 is Gopal Majumder, member of Respondent
no.2
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 25 of 124


employees of the appellant-State are not in any way responsible
for the increasing rates of inflation, they cannot be expected to
suffer at hand thereof. It was, therefore, prayed that the DA
st
payable from 1 July 2010 be paid to the employees. The
following reliefs were sought:
“a) A direction upto the respondents authorities to
forthwith release the 50% dearness allowances which is due
to up to January, 2006 Immediately within a period of
1(one) month from the date of receiving of the order.

b) A direction upon the respondent authorities to
immediately comply with the report and the
th
recommendations of the 5 pay Commission Report
positively and without fail within a period of 1 (one) month
from the communication of the order,


c) A direction upon the respondent authorities to
release the 50% of dearness allowances as the State
Government without releasing the 50% dearness allowance
th
for mere eye wash set up a 5 pay Commission who
recommended for 10% interim relief upon the basic pay,
But no whisper about due 50% dearness allowances and
unless the court Intervene into it there may be every
possibility of forfeiture of that 50% due dearness
allowances which is the penultimate goal and gain of the
State Government and the applicants will Suffer Irreparable
loss and Injury.

d) The applicants pray for relief order directing the
respondent authorities to grant 50% of the Dearness
Allowance as that of the, Central Government with arrear
up to January, 2015, within a period of two weeks, from
the data of order.”

16 . 1 The appellant-State in response submitted as follows:
(a) There exists no justification for seeking the
payment of DA at rates equivalent to the Central
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 26 of 124


Government particularly since payment thereof is
subject to the availability of resources with the State;

(b) Insofar as the employees of the appellant-State
serving outside the State, it was said that such
employees were not affected by inflation in the same
manner as those employed within the State and as such
no infringement or discrimination, that would be
offensive to Article 14 of Constitution of India, can be
found;

(c) Given that the rules on the basis of which claim
for DA is being made, were brought into force under
Article 309 of the Constitution of India, the
respondents ought to have taken a different remedy and
that the application was not maintainable;

(d) The reliance of the Respondents herein on the
Consumer Price Index has been termed as a ‘ hilarious
error ’, since the concept of DA has a wartime origin
and therefore for employees to claim discrimination for
payment to one and non-payment to another is
misconceived.

C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 27 of 124


th
16.2 By order dated 16 February 2017, the Tribunal
dismissed the application making the following observations:
(a) The payment of DA is not a legal right of an
employee, and it is the discretion of the employer, in this
case, the State Government;

(b) The results and recommendations of the Pay
Commission are at best a persuasive value and cannot
be held to be mandatory;


(c) The question of discrimination between the
employees of the State serving in and outside the State,
no finding was given observing that, “we feel the issue
cannot be grappled and no analogy on the basis of the
same can be derived in this context.”

BEFORE THE HIGH COURT-ROUND ONE

17. Aggrieved by such findings of the Tribunal, the
15
respondents appealed to the High Court . It was submitted inter
alia that for the Tribunal to hold that the DA is not an accrued
right of the employees is ex facie illegal since DA forms a part of
pay; that once the recommendations of the Commission have
been accepted, the appellant-State commenced itself to act

15
WPST No. 45 of 2017
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 28 of 124


thereupon and the said recommendation can no longer be said to
hold only persuasive value.
16
17.1 The learned Division Bench framed the following
issues for its consideration:
“ A. Whether the claim of the employees serving under
the Government of West Bengal for Dearness Allowance
is a legally enforceable right?

B. Whether the claim of the employees serving under the
Government of West Bengal for Dearness Allowance on
the basis of the recommendations of the 5th Pay
Commission is legally enforceable right?

C. Whether the discrimination in the matter of payment
of Dearness Allowance to the Employees of the State of
West Bengal with their counterparts serving in Banga
Bhawan at New Delhi and Youth Hostel in Chennai
including the Employees of West Bengal State Electricity
Development Corporation required consideration?”

17.2 On the first question the High Court observed that
“there is no doubt that the Government of West Bengal
accepted Dearness Allowance basically as a component of
pay which is a fixed percentage of basic pay” . It was held
that once this is the accepted position, the Tribunal could not
have come to the conclusion that the DA was the absolute
prerogative of the State. It was further held that the right to
DA stands recognized by the State as per Rule 12 of RoPA
Rules and office memoranda to that effect have also been
issued. In other words, the recommendations of the

16 st
Judgment dated 31 August 2018. Hereafter “ Judgement in Round One”
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 29 of 124


Commission have been accepted and acted upon thereby
constituting a legal right in favour of the respondents herein.


17.3 On the second issue it was observed that the State
th
Government has accepted the recommendations of the 5 Pay
st
Commission till the period of 1 April 2009 leaving the
calculation for the subsequent period for its future
consideration at a rate on the basis of the accepted guidelines
and therefore the Tribunal could not have rejected the right
of the employees on the basis of general theory of law.

17.4 The third question for its consideration was decided
by the High Court saying that the different effects of inflation
as per the region, cannot be accepted as a basis for differing
payment of DA, particularly when the logical and evidentiary
basis thereof was not allowed to be brought on record, by the
Tribunal. It was observed that the Central Government,
irrespective of region, has similar slabs for payment of DA
throughout the country, in the same manner, so should the
State.

17.5 The conclusions of the High Court are as follows:
“82. In view of the discussions and observations
made hereinabove, I sum up as follows:-

(i) The claim of the employees
serving under the Government of West
Bengal for Dearness Allowance is based on
legally enforceable right on the all
employees serving under the Government
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 30 of 124


of West Bengal up to such extent of the
recommendations of the 5th Pay
Commission which has been accepted by
the Government of West Bengal by virtue
of the provisions of sub-rule (1) Rule 12 of
ROPA Rules, 2009 read with paragraph 10
of the clarificatory memorandum bearing
No.1691- F dated February 23, 2009 on
ROPA Rules, 2009 issued by the
Government of West Bengal, Finance
Department, Audit Branch, and paragraph
3 of memorandum bearing No.1692-F
dated February 23, 2009 in the matter of
drawl of Dearness Allowance in revised
pay structure under the ROPA Rules, 2009
issued by the Government of West Bengal,
Finance Department, Audit Branch.

(ii) The claim of the employees
serving under the Government of West
Bengal to get Dearness Allowance at a rate
equivalent to that of the employees of the
Central Government requires adjudication
upon consideration of the relevant
materials on record for the purpose
indicated hereinabove.


(iii) The claim of the employees
serving under the Government of West
Bengal for Dearness Allowance at a rate
equivalent to that of the employees
discharging their functions in Banga
Bhawan at New Delhi and in Youth Hostel
at Chennai requires consideration of the
materials which may be brought on record
by the Government of West Bengal for
adjudication of the issue of arbitrariness in
payment of Dearness Allowance at
differential rates.”
(Emphasis Supplied)

C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 31 of 124


17.6 Having observed as above, the matter was remanded
to the Tribunal for adjudication of two issues:
“ (i) Whether the claim of the employees serving
under the Government of West Bengal for Dearness
Allowance at a rate equivalent to that of the
employees of the Central Government, and (ii)
Whether the discrimination in the matter of payment
of Dearness Allowance to the Employees of the State
of West Bengal with their counterparts serving in
Banga Bhawan at New Delhi and Youth Hostel in
Chennai…”

ON REMAND BEFORE THE TRIBUNAL

18. The parties were heard on the two issues framed by the
learned Division Bench and judgment was delivered thereupon
th
by the Tribunal on 26 July 2019, the observations wherein are
summarised hereinbelow:
(a) It was noted that the learned counsel for the State had
accepted that when the DA as revised by the RoPA Rules
st
was at 16% w.e.f. 1 April 2009, it was done following the
pattern of the Central Government;

(b) On comparison, the policies followed for computation
of DA, by the Central and State Governments respectively,
th
are the same. The Central Government, as per the 6
Commission, has released DA twice a year and the
appellant-State initially did the same, but has since faltered.
The relevant observations are as follows:
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 32 of 124


“29. On comparison of payment of DA by the
Central Government to its employees and by the
State Government to its employees, we find that
the principles followed by the State Government
in terms of relationship between DA and basic
pay, use of AICPI as a measure of inflation,
relationship between DA and AICPI, and
computation of DA are the same as that of the
Central Government. The State Government has
followed the same principles for computation and
payment of DA on basic pay fixed under 5th State
Pay Commission as has been done by the Central
Government under 6th Central Pay Commission.
The Central Government has revised DA twice in
a year on 1st January and 1st July and paid them
within 3rd month on which the DA is payable,
whereas the State Government initially paid DA
twice in a year, but discontinued to pay twice in a
year after the year 2010 and has delayed
payments of DA without following any principle
in an arbitrary manner…”
(Emphasis Supplied)

(c) If the real value of pay decreases due to inflation, the
employees of the appellant-State have a right to be
compensated therefor, and if it is not so done, their legal
right stands infringed;

(d) The appellant-State has failed to place on record any
other method for calculation of DA other than what has been
followed by the Central Government as per AIPCI number,
i.e., (1982=100), which is used throughout the country. It
was held:
“31. We have already observed that the payment
of rate of DA on the basic pay is calculated to
mitigate the loss of value of basic salary
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 33 of 124


consequent upon inflation on the basis of AICPI
number. The State respondents have failed to place
any material on record to establish that there is any
other mode of calculation of rate of DA for its
employees. On the contrary, the State respondents
have followed the pattern of releasing rate of DA
on basic pay as followed by the Central
Government for payment of DA for its employees,
though the State Government has been releasing
DA at a lesser rate and with effect from subsequent
date. In the absence of production of materials to
establish any alternative mode of calculation for
release of DA to the employees by the State
Government, we are constrained to hold that the
State Government is duty bound to pay DA to its
employees by taking into consideration inflation
measured by Labour Bureau by publication of
AICPI number with the base year 1982
(1982=100), which is used for determination of
rate of DA of the Government employees of the
entire country.”
(Emphasis Supplied)

(e) The appellant-State not being in a position, fiscally, to
clear the backlog of DA payable to the employees, due to
lack of financial resources, cannot be accepted as a ground
for non-payment of the same;


(f) In view of the lack of mandate either statutory, or in
the RoPA Rules, it could not be held that the employees of
the appellant-State are entitled to DA at the same rate as
Central Government employees. It was although held that
the former are entitled to get DA, determined by the AICPI,
th
for the time prior to the setting up of the 6 Pay Commission
by the appellant-State. It would be within the discretion
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 34 of 124


thereof either to pay the amounts due in cash, or by
depositing the same in the General Provident Fund, with
suitable restrictions on withdrawing the amount. The
pertinent observations are as follows:
“33. We have already observed that there is no
mandate either under the statutory rules viz. ROPA
Rules, 2009 or in the administrative directions
issued by the State Government in the form of
Memorandum No. 1691-F dated February 23,
2009 and Memorandum No. 1692-F dated
February 23, 2009 that the DA will be paid to the
employees by the State Government at a rate and
from the date as paid by the Central Government
to its employees. In the absence of any mandate
under the statutory rules or the administrative
directions, we are unable to hold that the State
Government employees are entitled to get DA at a
rate payable to its employees by the Central
Government. However, from the discussion made
by us hereinabove, we can hold without hesitation
that the State Government employees are entitled
to get DA on the basic pay at the rate to be
calculated on the basis of AICPI number published
from time to time by taking the base year 1982
(1982=100). It is the bounden duty of the State
Government to evolve norms/principles for
payment of DA to its employees by calculating the
same on the basis of AICPI on the basic pay fixed
in terms of ROPA Rules, 2009 till the date of
giving effect to the recommendation of 6th Pay
Commission set up by the Government of West
Bengal. The State Government is also duty bound
to pay arrears of DA to its employees after fixing
the rate on the basis of AICPI number before
implementation of the report of 6th Pay
Commission set up by the Government of West
Bengal. We would like to observe that the State
Government has the discretion to make payment of
arrears of DA to its employees either in cash or by
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 35 of 124


giving direction for depositing the same in the
General Provident Fund (GPF) with suitable
restriction on withdrawal of the same within
specific period of time. The first issue whether the
employees of the State Government are entitled to
get DA at the rate payable to its employees by the
Central Government is decided accordingly.”
(Emphasis Supplied)

(g) When it comes to the employees of the appellant-State
posted at the ‘ Banga Bhawan ’ in New Delhi or at the ‘ State
Youth Service Department ’, Chennai it is held that given
that the manner of recruitment, terms and conditions of
service, promotional avenues, and retirement benefits of
those employees are the same as the others who are posted
in the State; they cannot be justifiably treated as a separate
class so far as Article 14 is concerned, following the
17
principle laid down in Air India v. Nargesh Meerza , D.S
18
Nakra v. Union of India and Harakchand Ratanchand
19
Banthia v. Union of India . There is nothing that stops the
appellant-State from granting those posted in Delhi and
Chennai, special allowances;


(h) Inflation, which is sought to be combatted by the grant
of DA, is calculated by the Labour Bureau, Shimla for the

17
(1981) 4 SCC 335
18
(1983) 1 SCC 305
19
(1969) 2 SCC 166
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 36 of 124


whole country. The appellant-State, cannot justifiably grant
DA at a separate rate.
The concluding paragraphs of the order of the Tribunal
and the directions issued therein are as follows: -
“38. The function of the pleadings is only to state the
material facts and it is for the Court or Tribunal to
determine the legal result of those facts and to mould the
relief in accordance with that result, as decided by the
Federal Court in "Messers Moolji Jaitha and Co. v.
Khandesh Spinning and Wearing Mills Co. Ltd."
reported in AIR 1950 FC 83:1950 SCC online FC3.
Accordingly, we would like to give the following
directions on the basis of the findings made by us. The
respondent No. 1, Chief Secretary to the Government of
West Bengal is directed to evolve norms/principles
within a period of three months from the date of this
order for release of DA on the basic pay of the State
Government employees fixed in terms of ROPA Rules,
2009 by taking into consideration inflation on the basis
of AICPI number (1982=100), so that DA can be paid to
the State Government employees at least twice in a year
th
till the date of giving effect to the recommendation of 6
Pay Commission set up by the Government of West
Bengal for its employees. The respondent No. 1 is
directed to implement the norms/principles evolved as
per direction of the Tribunal within a period of six
months from the date of the order. The respondent No. 1
is further directed to make payment of arrears of DA on
the basic pay to the State Government employees by
taking into account level of inflation on the basis of
AICPI number (1982=100) by following the
norms/principles evolved as per direction of the Tribunal
within a period of one year from the date of this order or
th
before giving effect to the recommendation of 6 Pay
Commission set up by the Government of West Bengal,
whichever is earlier. The respondent No. 1 is at liberty
to decide the mode and manner of payment of arrears of
DA to the State Government employees within the
period of time fixed by us. The respondent No. 1 is also
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 37 of 124


directed not to give any effect to the office
orders/memorandums issued for payment of DA to the
State Government employees posted in New Delhi and
Chennai at a rate payable to the employees of the Central
Government, but the respondent No. 1 will not make any
recovery for excess payment of salary to those State
Government employees. The respondent No.1 is at
liberty to give incentive to the State Government
employees working in New Delhi and Chennai by
payment of special allowance or any other allowances as
the State Government may deem fit and proper. With the
above directions, the original application stands
disposed of.”
(Emphasis Supplied)



BEFORE THE HIGH COURT- ROUND TWO

19. Aggrieved by the findings of the Tribunal, the appellant-
State once again approached the High Court. It is these
proceedings that led to the judgment under challenge before this
Court. The findings of the impugned judgment (Two Judges
writing separate but concurring opinions) are:
First , that the appellant-State had accepted the
recommendations of the Commission, and that accordingly, DA
was a part of ‘ existing emoluments ’ as defined under RoPA.
Second , it was observed that the first round of litigation
before the High Court, which recognized the right to DA as an
enforceable right had also stood the test of review, and therefore,
had become binding. Further, reference was made to another
judgment of the High Court in West Bengal State Electricity
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 38 of 124


Transmission Company Limited v. West Bengal State
20
Electricity Board Engineers Association which held that the
employees of the former were entitled to DA at a rate equal to
that payable to Central Government Employees.
Third , it was held that the right to receive DA while is
unquestionably, a statutory right, is also a facet of Article 21 of
the Constitution of India. Denial of this right to those employees
who keep the State Government running cannot be allowed to be
adversely affected, on account of financial difficulties or
inability. The Writ Petition was, therefore, dismissed.
The concurring opinion records in some detail, the origins
of Dearness Allowance. It says that in view of the conclusions
arrived at by the High Court in the first round of litigation, the
only question before the Tribunal on remand and therefore, the
Division Bench, was regarding the modalities by which the same
shall be made. The learned judge specifically rejected a
contention made by the appellant-State that DA is variable as per
‘ place of posting ’, as held by this Court in Indian General
21
Navigation and Railway Co. v. Workmen & Ors . The rejection
was because, in the said factual situation, there were no rules
governing the grant of DA, as in the present case. It was then
rd
observed that the Clarificatory Memorandum issued on 23

20
MAT 501 of 2020 with MAT 502 of 2020
21
AIR 1960 SC 1286
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 39 of 124


February 2009 relating to the release of DA leaves no room for
any doubt as to it being imperative on the State to pay DA,
calculated as per index average 536(1982=100). In other words,
there can be no departure from statutory text, and the
Government cannot, to save itself from the same, take a defense
of inability. It was observed:
“…The said rule manifestly exposes the lucid and
explicit intention of the Government in a doctrine of the
th
recommendation of the 5 Pay Commission and while
defining “existing emoluments” under Clause 3(C)
thereof. The method of ascertaining the DA has been
clearly spelt out to be based upon at the index average
536 (1982=100) . It is logically inferred from the
aforesaid stand of the State that the rate of DA declared
by the Central Government though at the index average
536 (1982=100) cannot be extended to the State
Government employee because of the variability in the
living cost price within the State but the State
Government cannot deny the applicability of the index
average 536 (1982=100) under the said statutory rules.
On the same day when the said rule was published in
the official gazette, the Memorandum 1690-F dated
rd
23 February, 2009 was issued by the Special
Secretary, Government of West Bengal indicating the
conscious decision of the Government relating to the
release of the DA admissible to the Government
employees in the revised pay structure but the DA
st
between the period from 1 January, 2006 to
st
31 March, 2008 was decided not to be paid to such
employees. Consequent upon the said Memorandum,
the clarification was made vide Memo No. 1691-F
rd
dated 23 February, 2009 wherein the DA which the
State Government employees were entitled from time
st
to time since 1 January, 2006 was to be paid in terms
rd
of the said Memo No. 1692-F dated 23 February,
2009. The subsequent memorandum clarifying the
stand of the Government leaves no ambiguity that it is
imperative on the part of the State to pay the DA to its
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 40 of 124


st
employees on and from 1 April, 2008 at the rate
calculated on the basis of the index average
536 (1982=100) . There cannot be any departure from
the provisions of the statutory rules nor the State
Governments can act contrary thereto taking shelter
under the incapability and/or incapacity to meet such
requirement. In fact, the Tribunal also held that it would
not be proper to direct the State Government to pay the
DA at the rate of the Central Government but in view
of the discussions made hereinabove, there is no
infirmity in the direction passed by the Tribunal for
evolving the norms/principles in fixing the DA on the
basis of the AICPI 536 (1982=100) …. ”

(Emphasis Supplied)




Continuing further, it was observed that the directions of the
Tribunal to compute DA as per AICPI were found to be in
consonance with law. Once the method of releasing DA twice a
year has been adopted, which was indeed so adopted, the same
cannot be deviated from, save and except in view of valid and
compelling reasons. In so far as the employees of the appellant-
State posted at New Delhi or at Chennai are concerned, it was
concluded that the RoPA Rules make DA payable at AICPI rates
to all employees of the appellant-State. They, therefore, form a
homogenous class. Even though ‘ class within a class ’ is
permissible, one AICPI is the base for all, different DA based on
location cannot be accepted.

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RIVAL CONTENTIONS

20. Mr. Kapil Sibal, Mr. Shyam Divan and Mr. Huzefa
Ahmadi, learned senior counsel, presented arguments on behalf
of the appellant-State. The Respondents were represented by
Mr. Gopal Subramaniam, Mr. P.S Patwalia, Mr. Bikash Ranjan
Bhattacharya and Ms. Karuna Nundy, learned senior counsel. We
have heard them at great length and also perused the respective
written submissions filed.

A. Submissions on behalf of the Appellant-State
I. At the outset, it is submitted that the High Court
misunderstood the order of the Tribunal and, therefore,
proceeded on a wrong assumption that the Tribunal issued
directions on both issues in favour of the respondents. It is
their case that one issue had in fact been decided against
them, that being the one regarding parity with the
employees of the Central Government.

II. The direction to release DA to the employees of the
appellant-State twice a year is without any basis as the
RoPA Rules do not provide for the same. The legislative
intent is clear that the State did not want to keep itself open
to that possibility. There is no material on record to suggest
that the State has accepted this as the norm.
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III. It is argued that, in the ‘ judgment in Round One ’ the
respondents herein had specifically contended that DA
should be paid twice a year as per the pattern of the
Central Government, but the same was not accepted.
Since that judgment has attained finality, the subsequent
Division Bench, in its impugned judgment, in view of res
judicata, could not have directed as such.

IV. The finding of the Court that DA is a fundamental
right has been disputed as having grave ramifications,
making the same payable even if the State does not have
the financial capacity to do so. Such a finding, it is
submitted, is in contravention of a judgment of this Court
reported as Tamil Nadu Electricity Board v. TNEB
22
Thozhilalar Aykkiya Sangam . [See also: Mahatma
23
Gandhi Mission v. Bhartiya Kamgar Sena & State of
24
Madhya Pradesh v. C. Mandawar ]
V. The appellant - State has already paid DA in
accordance with RoPA Rules to the extent of 125% of
basic pay in 2019. This position stands acknowledged by
the Tribunal. An approximate sum of Rs.1,79,874 crores
stood paid as DA between 2008 and 2019, as under:

22
(2019) 15 SCC 235
23
(2017) 4 SCC 449
24
AIR 1954 SC 493
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Rs.76,189 crores for the years 2008 to 2016 and Rs.1,03,
685 crores for the years 2016 to 2019. The effect of this
order, if it is allowed to stand, it is submitted, would be
an additional liability of approximately Rs.41,770.95
crores which, in view of TNEB Thozhilalar Aykkiya
Sangam (supra) the Respondents would not be entitled
to. Further relying on Bengal Chemical and
25
Pharmaceutical Works Ltd v. Workmen and Anr. it
was submitted that the appellant-State is not bound to
provide hundred percent neutralisation to its employees
as the same would lead to inflation. The extent of DA has
to depend on the ability of the employers since it is them
who must bear the burden.

st
VI. The judgment and order dated 31 August 2018
only contemplated a limited remand to the Tribunal. It is
submitted that the Tribunal went over and above the
limited remand. The part of the order which oversteps the
limited remand was a direction to the Chief Secretary of
the appellant-State to evolve norms for payment of DA in
accordance with AICPI. This aspect was not considered
when the matter travelled in appeal to the High Court,
once again. The said direction is also unnecessary since

25
AIR 1969 SC 360
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the State is already following the determination of DA in
accordance with AICPI.
VII. Employees of the Central Government and State
Government, are separate classes of employees as
th
evidenced by Entry 70 of List I of the VII Schedule of
the Constitution and in Entry 41 of List II thereof. This
implies that if the former chooses to pay DA at a
particular rate or not to pay at all, it is not incumbent upon
the latter to follow the same. The only right that vests with
the respondents is to seek enforcement of payment of DA
consistent with the notifications issued by the State
Government.
VIII. The Union Legislature may issue directions on
matters under the control of the State under Articles 252
and 73 of the Constitution, with the consent of the State.
The imposition of AICPI, in this particular manner,
would be without the consent of the State and therefore,
would deprive it of the legislative and executive functions
in perpetuity, taking away from its control, all discretion
in the fixation of DA.
IX. In support of its position, the appellant - State
further submits that there are as many as 12 other States
who do not follow the same rates, as far as DA is
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 45 of 124


concerned, as declared by the Central Government. It is
highlighted that should this Court pass an order directing
that DA be paid the same rate, the effect thereof shall be
felt across all these States and, therefore, these States
should also have the opportunity to make their case. Still
further, examples are drawn from the State of
Chhattisgarh which, similar to the appellant-State,
includes Dearness Allowance in its definition of ‘ existing
emoluments ’ but posited it is, that the index average to be
st
used is as on 1 January 2016. The DA rate payable there
is 53%. The State of Himachal Pradesh employees index
st
average of 1510 (1960 = 100) as on 1 January 1996; the
DA rate payable there is 45%. The State of Meghalaya
employs, for the purposes of DA the index average as on
st
1 January 2017; the DA rate payable there is 49%; and
the State of Sikkim employs the Central Government
standard of index average 536 (1982 =100).
X. Given that it has been held by the Tribunal and
affirmed by the High Court that the employees of the
appellant-State are not entitled to get DA at the rate
payable to the Central Government employees and that
further it has been held that they are entitled to get DA on
the basis of the AICPI number, it is submitted that the
findings of the Tribunal are incorrect and contradictory,
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 46 of 124


since the directions are to bring about parity without there
being any statutory/constitutional basis for the same.
XI. Since there was no challenge to the provisions of
RoPA, they continue to hold the field and cannot be
bypassed. The entitlement to DA flows therefrom and
from the subsequent memoranda issued in respect
thereto. It is submitted that none of these memoranda
explicitly accept the recommendations of the
Commission, unconditionally, and in fact, wherever the
recommendation has been accepted, it is particularly
stated to be so.
XII. The RoPA Rules nowhere mandate DA rates to be
according to a particular index. Holding so would be
making an addition to the rules which, in effect, would
take away the discretion of the State. It would also
amount to judicial review of policy in which the Court is
not an expert. The discretion with the State is not
unguided and the rates fixed are so fixed after taking into
consideration various factors such as availability of
funds, financial benefits which already stand granted to
the employees etc. No arbitrariness whatsoever,
therefore, can be spoken of in this regard.

C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 47 of 124


XIII . Rule 3(1)(c) which defines the term ‘ existing
emoluments ’ is a definition and does not create any
obligation/entitlement. The phrase ‘ existing emoluments ’
bears importance only insofar as the fixation of initial pay
in the revised pay structure under Rule 7.

XIV. The employees of the appellant-State posted at
New Delhi and Chennai, were considered by the State to
be a separate class of employees given their geographic
location. In the former, the separate notification applied
only to 34 employees posted there and in the latter 35
employees. The said notifications were issued under para
rd
10 of Memorandum No. 1691 – F_dated 23 February
2009.

XV. The period that forms the claims of the respondents
st st
is 1 April 2008 to 31 December 2019. This claim is
affected by delays and laches since the original
application before the Tribunal was filed only in
November 2016, and it is the matter of record that the
State differed with the rates employed by the Central
Government from 2008 itself.

XVI. A list of judicial pronouncements has also been
provided, demonstrating as to how the judgments relied
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on by the Respondents would not be applicable to the
instant case. We have perused the same.
B . Submissions of the Respondents

I. Firstly, it is submitted that the entitlement to DA in
terms of RoPA Rules as held by the Division Bench in
the ‘ judgment in Round One ’, has attained finality.

II. The DA, which the Tribunal and the High Court,
both held the employees of the appellant-State to be
entitled to, was to be construed in terms of RoPA, and
nothing more or above what is provided therein.
III. The AICPI index number i.e., 536 (1982 = 100) has
been admitted by the appellant-State for the purposes of
calculation of ‘ existing emoluments ’ which, as per the
definition provided in the Rules, includes DA.

IV. Regarding the ‘ obligation ’ of the appellant-State to
pay DA twice a year, it is submitted that the grant of this
amount is to protect the employees against the effect of
inflation in the market. It is not an additional benefit but
is the minimum protection provided. Arbitrariness, it is
submitted, has led the State to stop the practice of
adjusting/updating the DA twice a year, as it initially did
after the enforcement of RoPA Rules. Discrimination is
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also alleged between the respondents’ and the employees
of the appellant-State serving in New Delhi and Chennai
on the ground that DA for the latter is still
adjusted/updated twice a year.

V. It has been held by a bench of five learned judges of
this Court in Purushottam Lal and Ors v. Union of India
26
& Anr that if a State accepts the recommendations of a
Pay Commission, the same must be implemented in
respect of all government employees. It is submitted that
while it is true that there will be significant variance in
cost of living between States, at the same time, there shall
be significant variance of different cities within the State.
That on its own cannot be a ground for different DA. The
different DA payable through the employees of the
appellant-State only on account of location is therefore
arbitrary, capricious and in violation of Article 14 of the
Constitution. In this regard, reference is made to E.P.
27
Royappa v. State of T.N .

VI. The appellant - State’s reliance on Mandawar
( supra ) is untenable as the same is distinguishable on
facts. In that judgment, the Rules referred granted

26
(1973) 1 SCC 651
27
(1974) 4 SCC 3
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discretion to the State whereas, in the present facts, the
Rules reflect a particular decision having been made
which is that emoluments to be paid to employees, in
accordance with RoPA Rules will be calculable as per the
index rate set out therein. The Court in Mandawar
(supra) had observed that the claim before it was not of
arrears of DA which had occurred due to the rules in force
relating thereto. It is highlighted that, taking support of
this judgment, the appellant-State, in the review petition
preferred against the impugned judgment before the High
Court argued that binding precedent had been ignored
and repelling such contention, the High Court
distinguished the present facts.

VII. There are number of States that do not follow the
rate adopted by the Central Government. An example is
drawn from the State of Kerala, where the State has
devised its own method of calculation based on an index
which is prepared by research centres located at different
places in the State. If the State chooses not to accept the
process and the rates laid down by the Central
Government, it ought to devise its own method and
mechanism. In the present facts, there is a complete
absence of facts and figures collected and analysed by the
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State and as such the decision not to follow AICPI is
arbitrary.

VIII. The first and subsequent memoranda issued by
the appellant-State are not in conformity with RoPA as
they do not reflect the incorporation of the AICPI
number 536 (1982 = 100) even though the appellant-State
had accepted the same. The former, therefore, cannot
override the latter in view of Rule 14 in the latter. The
well-established position that circulars/memoranda
cannot override statutory provisions has been echoed in
28
Ajaya Kumar Das v. State of Orissa & Ors and Ashok
29
Ram Parhad v. State of Maharashtra .
IX. Paucity of funds is not a ground to deny the
employees of the appellant-State, the payment of DA.
Reliance is placed on Haryana State Minor Irrigation
30
Tube Wells Corporation v. GS Uppal ; Punjab State
Cooperative Agricultural Development Bank Ltd v.
31
Registrar Co-Operative Societies and Ors and State of
Andhra Pradesh & Anr v. Dinavahi Lakshmi
32
Kameswari .

28
(2011) 11 SCC 136
29
(2023) 18 SCC 768
30
(2008) 7 SCC 375
31
(2022) 4 SCC 363
32
2021 SCC OnLine SC 237
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X. A sliding scale is inbuilt in the structure of calculation
of DA, is the next submission advanced with reference to
33
Hindustan Times Ltd v. Workmen .

QUESTIONS TO BE CONSIDERED


From the aforesaid, in our considered view following
questions require consideration:-

1. What is the scope and extent of the power under Article
309 of the Constitution of India?

2. What is the scope and extent of the Rules framed by the
appellant-State i.e., RoPA Rules and the First Memorandum
rd
dated 23 February 2009? Whether the Notifications/Official
memoranda issued subsequent to the clarificatory memoranda
rd th th
dated 23 February 2009 i.e., 9 December 2009; 6 April 2010;
rd th st
23 November 2010; 12 December 2011; 31 December 2012;
th th th
16 December 2013; 9 January 2015 and 14 December 2015
issued by the appellant-State revising the rates of DA are in
consonance with RoPA Rules?

3. Given that the definition of ‘ existing emoluments ’ in RoPA
is identical to the Central Government Rules, i.e., legislation by
incorporation, could the State have then deviated from the index

33
1962 SCC OnLine SC 190
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being adhered to by the Central Government? In other words, was
the incorporation of the AICPI number a one-time measure?

4. Whether DA, as a concept, is static or dynamic and
whether, by the act of legislative recognition of a particular
index, does the character thereof, change?

5. Whether the actions of appellant-State are vitiated by
manifest arbitrariness as also negatively affecting the legitimate
expectation accruing in favour of the employees?


6. Whether adoption of the AICPI, would render the distinct
legislative domains under List I Entry 70 and List II Entry 41,
otiose?

7. What is the impact of the direction of the Tribunal for the
State to follow the AICPI, in so far as the financial autonomy of
the State is concerned in the federal structure of the country?

8. What is the effect of the findings returned by the High
Court in the first round of litigation?

9. Do the Respondent-employees have any right to receive
DA twice a year in line with the pattern of the Central
Government?

10. Is financial capability of a State, a ground available to deny
the payment of DA, if under the existing rules, the same is held
to be a legal right?
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 54 of 124


11. Since the question involved in this lis is the payment of
DA which is an aspect of fiscal policy of a State, what is the
extent of judicial review which is permissible?

12. Can DA be said to be a fundamental right under Article 21
of the Constitution of India as held by the High Court?

13. The claim of the respondents is for the period 2008-19
however the legal redressal of the alleged grievance was only
initiated in 2016. Was the claim of the respondent affected by
delay and laches, as such, liable to be dismissed?

ANALYSIS AND DISCUSSION

In view of the submissions made, as noted hereinabove, and the
cases cited across the bar, which we have taken note and applied,
where relevant, we proceed to the merits of these appeals.

Dearness Allowance

21. Prior to proceeding to the merits of the matter, the position
held qua DA as recognized through judicial pronouncements
must necessarily be taken note of: –
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(A) Chief Justice Subba Rao, writing for the
Constitution Bench in Hindustan Antibiotics Ltd. v.
34
Workmen , observed:
“25…The doctrine of dearness allowance was only
evolved in India. Instead of increasing wages as it
is done in other countries, dearness allowance is
paid to neutralise the rise in prices. This process
was adopted in expectation that one day or other
we would go back to the original price levels. But,
when it was found that it was only a vain hope or
at any rate, it could not be expected to fall below a
particular mark, a part of the dearness allowance
was added to the basic wages, that is to say, the
wages, to that extent, were increased… Even on
the basis of the increased wages, dearness
allowance was necessary to neutralise the rise in
prices. That is exactly what the Tribunal has done.

(Emphasis Supplied)

35
(B) In Workmen v. Indian Oxygen Ltd. , a bench of
three learned judges held in respect of uniform rates of DA
to be applied in India, as follows:
“Uniformity, to an uninformed mind, appears to be
very attractive. But let it not be forgotten that
sometimes this uniformity amongst dissimilar
persons becomes counter-productive… But when
it comes to dearness allowance any attempt at
uniformity between workmen in such metropolitan
areas like Delhi, Bombay, Madras, Calcutta and in
smaller centres would be destructive of the concept
of dearness allowance. Dearness allowance is
directly related to the erosion of real wages by
constant upward spiralling of the prices of basic
necessities and as a sequel to the inflationary input,

34
1966 SCC OnLine SC 106
35
(1985) 3 SCC 177
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the fall in purchasing power of the rupee. It is a
notorious phenomenon hitherto unquestioned that
price rise varies from centre to centre. Dearness
allowance is inextricably intertwined with price
rise, it being an attempt to compensate loss in real
wages on account of price rise considered as a
passing phenomenon by compensation. That is
why it is called variable dearness allowance. Any
uniformity in the matter of dearness allowance
may confer a boon on persons employed in smaller
centres and those in big metropolitan areas would
be hard hit. Deafness allowance by its very form
and name has an intimate relation to the prevailing
price structure of basic necessities at the centre in
which the workman is employed. … This view to
some extent was affirmed in the Remington Rand
of India Ltd. v. Workmen [(1968) 1 SCR 164 :
(1967) 2 LLJ 866 : 33 FJR 133] . Leaving aside
basic wages in the matter of dearness allowance
especially the Court should lean in favour of
adjudication of dispute on the principle of
industry-cum-region because dearness allowance
is linked to cost of living index of a particular
centre which has a local flavour. If the concept of
uniformity on an all-India basis is introduced in the
matter of dearness allowance, it would work
havoc, because the price structure in a market
economy at places like Bombay, Madras, Calcutta,
Delhi, Ahmedabad has little or no relation to
smaller centres like Kanpur, Varanasi etc. If
workmen working in such disparate centres are put
on par in the matter of dearness allowance in the
name of proclaimed. all-India uniformity, not only
unequals will be treated as equals but the former
would suffer irreparable harm. Such an approach
would. deal a fatal blow to the well-recognised
principle of industrial adjudication based on
region-cum-industry developed by courts by a
catena of decisions. Realising this situation courts
have leaned in favour of determination of dearness
allowance linked to cost of living index, if
available for the centre where the workman is
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employed and in the matter of neutralisation on the
industry-cum-region principle.”
(Emphasis Supplied)

(C) A bench of three judges in Bengal Chemical &
36
Pharmaceutical Works Ltd. v. Workmen , after the
review of earlier decisions, formulated the following
principles:
“21. … … …
The following principles broadly emerge from the
above decisions:
“ 1 . Full neutralisation is not normally given,
except to the very lowest class of employees.
2 . The purpose of dearness allowance being to
neutralise a portion of the increase in the cost of
living, it should ordinarily be on a sliding scale and
provide for an increase on the rise in the cost of
living and a decrease on a fall in the cost of living.
3 . The basis of fixation of wages and dearness
allowance is industry-cum-region.
4 . Employees getting the same wages should get
the same dearness allowance, irrespective of
whether they are working as clerks or members of
subordinate staff or factory workmen.
5 . The additional financial burden which a revision
of the wage structure or dearness allowance would
impose upon an employer, and his ability to bear
such burden, are very material and relevant factors
to be taken into account.”
(Emphasis Supplied)

(D) In TNEB (supra) it was held-

36
1968 SCC OnLine SC 101

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“21. Each State Government following their own
rate of dearness allowance payable to their
employees may be adopting the revised dearness
allowance of the Central Government. There is no
rule or obligation on the State Government to
always adopt the dearness allowance as revised by
the Central Government. It is absolutely not
necessary for the State Government to adopt the
dearness allowance rates fixed by the Central
Government. It should be looked from the
financial position of the State Government to
adopt its own rates/revised rates of dearness
allowance. The Board, being the State
Government undertaking, the money has to come
from the State Government … ”

(Emphasis Supplied)

22. What flows from the above, and other judgments of this
Court is that the concept of DA is a distinctly Indian response to
the problem of inflation and its impact on wages, developed to
safeguard employees against the steady erosion of their real
income caused by rising prices. Different from the position in
other countries where the wages and salaries themselves undergo
a periodic adjustment, India introduced a DA as a compensatory
measure to address rises or jumps in the cost of living. While
originally conceived as a short-term arrangement, it acquired a
sense of permanence, given that it was almost within the realms
of certainty that the prices would not return to their original state.
When this expectation proved unrealistic and inflation appeared
to be a continuing feature of the economy, a portion of the DA
was absorbed into basic wages. Even after such wage revisions,
C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 59 of 124


however, the need for DA persisted, as prices continued to rise
and purchasing power continued to decline.

23. At its core, DA is not intended to provide complete
neutralisation of price rise for all employees, except in the case of
the lowest paid categories. Its purpose is to offer partial
compensation for increased living costs through a variable and
flexible mechanism, usually linked to a cost-of-living index. This
explains why DA is commonly structured on a sliding scale,
rising alongside prices.

24. Uniformity in DA, though seemingly attractive at first
glance, can be counter-productive when applied to regions with
vastly different price structures. Metropolitan centres such as
Delhi, Mumbai, Chennai and Kolkata experience levels of
inflation that bear little comparison with smaller towns and semi-
urban centres. Since DA is directly linked to the loss of real wages
caused by inflation, imposing a uniform rate across such disparate
regions would defeat its very purpose. It would confer undue
benefit on employees in lower-cost centres while seriously
disadvantaging those employed in high-cost metropolitan areas.

25. In determining DA, other relevant considerations include
parity among employees receiving the same wages and the
financial capacity of the employer to bear the additional burden.
These factors assume particular significance in the case of State
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26. At first instance, what is to be understood is the scope of

power under Article 309 of the Constitution. The Article reads as
follows:
“309. Subject to the provisions of this Constitution, Acts
of the appropriate Legislature may regulate the
recruitment, and conditions of service of persons
appointed, to public services and posts in connection
with the affairs of the Union or of any State:
Provided that it shall be competent for the President or
such person as he may direct in the case of services and
posts in connection with the affairs of the Union, and for
the Governor of a State or such person as he may direct
in the case of services and posts in connection with the
affairs of the State, to make rules regulating the
recruitment, and the conditions of service of persons
appointed, to such services and posts until provision in
that behalf is made by or under an Act of the appropriate
Legislature under this article, and any rules so made shall
have effect subject to the provisions of any such Act.”

Over the years, many-a-rule promulgated hereunder has been the
subject matter of controversy before the Courts. While the
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propriety of the exercise of power under this Article is not in
question in the instant lis , it would still be appropriate to refer to
judgments to understand the scope, enforceability, limitations
and other aspects.
(A) A Constitution Bench of this Court in B.N. Nagarajan
37
v. State of Mysore , held that insofar as rules made under
this Article direct something to be done in a specific manner,
the Government must abide thereby. The same cannot be
side-stepped by exercise of power under Article 162 of the
38
Constitution. [See: R.N. Nanjundappa v. T. Thimmiah ,]

(B) This power cannot be circumscribed by any agreement
or by function of estoppel. So was held in C.
39
Sankaranarayanan v. State of Kerala .

40
(C) State of Assam v. Basanta Kumar Das held that
executive instructions have less force than statutory rules.
No direction can be issued, which in effect is an amendment
to the rules framed under this Article. [See: S.L. Sachdev v.
41
Union of India ]


37
1966 SCC OnLine SC 7
38
(1972) 1 SCC 409
39
(1971) 2 SCC 361
40
(1973) 1 SCC 461
41
(1980) 4 SCC 562
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(D) If, in the rules enacted under this Article, there exist
some gaps, it is open for the Government to fill up such gaps
by way of administrative instructions. This Court held thus
42
in Distt. Registrar v. M.B. Koyakutty .


(E) The power exercised under this Article must be
exercised in a just, fair and reasonable manner for the same
is not immune to the tests of Articles 14 and 16 of the
43
Constitution. [See: Baleshwar Dass v. State of U.P . ]

44
(F) In Accountant-General v. S. Doraiswamy , the
rules made under this power, are generally prospective in
operation unless a statute conferring/asking for rules made
hereunder provides for such rules’ retrospective application.
When retrospective application is directed, the date from
which the rules in question are made retrospectively
applicable should have reasonable nexus to the provisions
contained in the rules.

(G) A bench of three judges held in Lila Dhar v. State of
45
Rajasthan , that unless oblique motives can be
demonstrated, it is not open for the Courts to redetermine

42
(1979) 2 SCC 150
43
(1980) 4 SCC 226
44
(1981) 4 SCC 93
45
(1981) 4 SCC 159
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methods of selection when the same has been done in
accordance with the rules framed under this power.
46
(H) K. Nagaraj v. State of A.P . , held that the power
under this Article to promulgate rules also carries with it,
the power to amend the same, even retrospectively.

The principles noticed hereinabove, are non-exhaustive.

Questions 2, 3 and 4

27. As is clearly established from the above, the power under
Article 309 is extensive and expansive. In the present case, the
exercise of this power has resulted in the promulgation of the
RoPA Rules. Even though the said rules conceived ‘ existing
emoluments ’ to be paid for by the State, to be employing the same
formula as given under the rules promulgated by the Central
Government known as the Central Civil Services (Revised Pay)
47
Rules 2008 , by the first and subsequent memoranda the rates
were changed, particularly when it came to DA. We must then
consider the power to issue such memoranda. It appears that the
Rules themselves do not provide the power to issue subsequent
memoranda/notifications. That being said , the position now will
be governed by the principle laid down in M.B. Koyakutty

46
(1985) 1 SCC 523
47
Central Government Rules
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(supra) as reiterated by the majority in Mahanadi Coalfields Ltd.
48
v. Rabindranath Choubey , which is to the effect that in the
absence of rules, executive instructions would be binding.
Obviously, such executive instructions would be subservient to
the rules, and the word ‘ absence ’ indicates that there would be a
gap, to which effect the executive instruction in question, stands
issued.
The question then is, whether the memoranda issued after
rd
23 February 2009, were indeed issued to fill in some gaps or in
the absence of statutory rules for the specific area.

28. It would be appropriate at this stage to consider the impact
of the definition of ‘ existing emoluments ’ being word for word
same as that of the Central Government rules.
In other words, the definition has been lifted from the
Central Government Rules and placed in RoPA Rules. This falls
within one of two types of legislation other than it being written
‘from scratch’. The two types are ‘ legislation by reference’ and
‘ legislation by incorporation’ . Plainly put, the former means that
the provision of another Act is referred to, and by act of such
reference, the provision is made applicable to the Legislation in
which it has been placed. The latter implies a bodily lifting of the

48
(2020) 18 SCC 71
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provision given elsewhere, and its insertion into the Legislation
being enacted subsequently.
This Court speaking through G.P Mathur J., in Rakesh Vij
49
v. Raminder Pal Singh Sethi (Dr.) ,while referring to an earlier
decision rendered by a co-ordinate bench of three judges in U.P.
50
Avas Evam Vikas Parishad v. Jainul Islam stated the general
position of law as follows:
“ 30. …. This Court, after referring to a large number of
earlier decisions, laid down the following principle in
para 17 of the report : (SCC pp. 480-81)
“ 17 . A subsequent legislation often makes a
reference to the earlier legislation so as to make
the provisions of the earlier legislation
applicable to matters covered by the later
legislation. Such a legislation may either be ( i )
a referential legislation which merely contains
a reference to or the citation of the provisions
of the earlier statute; or ( ii ) a legislation by
incorporation whereunder the provisions of the
earlier legislation to which reference is made
are incorporated into the later legislation by
reference. If it is a referential legislation the
provisions of the earlier legislation to which
reference is made in the subsequent legislation
would be applicable as it stands on the date of
application of such earlier legislation to matters
referred to in the subsequent legislation. In
other words, any amendment made in the earlier
legislation after the date of enactment of the
subsequent legislation would also be
applicable. But if it is a legislation by
incorporation the rule of construction is that
repeal of the earlier statute which is
incorporated does not affect operation of the

49
(2005) 8 SCC 504
50
(1998) 2 SCC 467
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subsequent statute in which it has been
incorporated. So also any amendment in the
statute which has been so incorporated that is
made after the date of incorporation of such
statute does not affect the subsequent statute in
which it is incorporated and the provisions of
the statute which have been incorporated would
remain the same as they were at the time of
incorporation and the subsequent amendments
are not to be read in the subsequent legislation.
In the words of Lord Esher, M.R., the legal
effect of such incorporation by reference ‘is to
write those sections into the new Act just as if
they had been actually written in it with the pen
or printed in it, and, the moment you have those
clauses in the later Act, you have no occasion
to refer to the former Act at all’. (See : Wood's
Estate, Re [(1886) 31 Ch D 607 : 55 LJ Ch 488]
Ch D at p. 615.) As to whether a particular
legislation falls in the category of referential
legislation or legislation by incorporation
depends upon the language used in the statute
in which reference is made to the earlier
legislation and other relevant circumstances.”

Regarding incorporation, the discussion made by the
Constitution Bench in Girnar Traders (3) v. State of
51
Maharashtra is also important for our purposes. Relevant
extracts are:
“ 89. … Reference to an earlier law in the later law could
be a simple reference of provisions of earlier statute or a
specific reference where the earlier law is made an
integral part of the new law i.e. by incorporation. In the
case of legislation by reference, it is fictionally made a
part of the later law. We have already noticed that all
amendments to the former law, though made subsequent
to the enactment of the later law, would ipso facto apply

51
(2011) 3 SCC 1
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and one finds mention of this particular aspect in Section
8 of the General Clauses Act, 1897. In contrast to such
simple reference, legal incidents of legislation by
incorporation is that it becomes part of the existing law
which implies bodily lifting provisions of one enactment
and making them part of another and in such cases
subsequent amendments in the incorporated Act could
not be treated as part of the incorporating Act.
91. Another feature of legislation by incorporation is
that the language is explicit and positive. This
demonstrates the desire of the legislature for legislation
by incorporation…. When the later law depends on the
former law for procedural/substantive provisions or is
to draw its strength from the provisions of the former
Act, the later Act is termed as supplemental to the
former law…”
(Emphasis Supplied)


29. Taking cue from the above it can be seen that the intent of
the Legislature at the relevant point in time is demonstrated by
incorporating the definition as given under the Central
Government Rules, i.e., to follow the pattern thereof. Now then,
it is to be examined, to bridge which gap or to fill in what void
left by the RoPA Rules, were the subsequent memoranda issued?

30. It may be argued that since DA is subject to regular change
to meet its basic purpose, the number as is given under Rule
3(1)(c), cannot be statically applied, and so, the subsequent
memoranda were intended to obviate the repeated necessity of
amending the RoPA Rules. This, however, was not advanced as
an argument. Instead, there appeared to be an adaptation of
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contrarian stands by the appellant - State. In the course of
submissions, initially, the learned senior counsel appearing for
the appellant - State submitted that DA is a static concept and that
the index average as stipulated in the Rules has to be followed
without change and therefore, the State cannot according thereto,
grant DA as per the rules or numbers currently followed by the
Central Government. In subsequent oral argument as also the
written arguments, however, the staticity of DA as a limb of
argument was given up. In our considered view though, even if
such an argument had been made, it was liable to be rejected. In
rules specifically designed to be for the purpose of revision of pay
and allowances, the understanding of ‘ existing emoluments ’ and
the particulars supplied thereunder, cannot by any stretch of
imagination be termed to be a gap or a void since the same is
undoubtedly the mainstay of the rules and when particular
intention has been demonstrated by inserting the definition, same
as the Central Government Rules. To say that the number that has
been explicitly put there is nothing more than a starting point or
reference point, after which the State is free to do as it wishes
under the garb of financial and fiscal policy, cannot be
countenanced.

31. When the State did set up a Pay Commission for the
purposes of revision of the pay rules nothing stopped the State
from undertaking its own exercise to determine what the
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appropriate rate would have been, keeping in view its own
financial resources and ability to pay. It is nobody’s case that such
a study had been undertaken, and an independent finding had
been arrived at. The Pay Commission in its wisdom adopted a
stand and in consideration thereof, the appellant-State exercises
its discretion to lay down a set of rules which would henceforth
govern matters connected or incidental to the payment of its
employees. Once it is so laid down, it is difficult to accept
discretion overshadowing legislative exercise. In Mahatama
52
Gandhi Mission v. Bhartiya Kamgar Sena :
“61. Once the Government of India accepted the
recommendations of the Pay Commission and issued
orders signifying its acceptance, it became the decision
of the Government of India. That decision of the
Government of India created a right in favour of its
employees to receive pay in terms of the
recommendations of the Sixth Pay Commission and the
Government of India is obliged to pay.”

In effect, memoranda which are a product of discretion, in
the current set up, trump Rules having legislative force. The only
way possible, as it appears to us, for the State to deviate from
what has been provided by the Rules is through a formal
amendment thereto. The impact of this, it is made clear, cannot
be taken to mean that the number as mentioned in the rule sets the
emoluments to be paid thereunder, in stone. That would be going
directly against its purpose, object and intent. It is not so much

52
(2017) 4 SCC 449
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the particular number or base year which is important, since that
is itself, by its very nature, fluid and subject to change, [See:
53
Hindustan Workmen (supra, Pharmed (P) Ltd. v. Workmen ]
but it is the statutory recognition of AICPI and the method for
calculating existing emoluments, which is essential.

32. The AICPI is compiled and published by the Labour Bureau,
under the aegis of the Ministry of Labour and Employment,
Government of India. The Bureau with its headquarters at Shimla
is tasked with overseeing the process, from start to finish, i.e.,
survey design and data collection to computation and publication.
Each month, price data are gathered through an extensive network
of field investigators covering 78 industrially significant centres
across the country. These data are drawn from representative
retail outlets and markets that reflect the consumption patterns of
industrial workers. After validation and aggregation, the Bureau
computes the All-India Index, which serves as a key measure for
revising DA and for wage indexation across both public and
private sectors.
The calculation of AICPI is a structured and statistically
rigorous procedure which tracks changes in the cost of living. The
process begins with the identification of a representative basket
of goods and services, ( which is determined per regional needs

53
(1969) 3 SCC 745
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and requirements ) determined through a Family Living Survey
54
conducted for the base year . This basket includes essential items
such as food, housing, clothing, fuel, healthcare, education, and
transport. Each item is assigned a weight according to the
proportion it occupies in the total household expenditure,
corresponding to the frequency of purchase for a particular item,
ensuring that a true picture is presented with more frequently
purchased items exerting a greater influence on the final index.
Every month, retail prices for all items in the basket are collected
from the 78 centres.
These individual item indices are then combined, using
their expenditure weights, to produce a centre-level-index. The
AICPI is derived as a weighted average of these centre indices,
where each centre’s weight reflects its relative industrial
workforce population. At the cost of brevity and repetition, the
55
relevant extract from the Labour Bureau is hereunder :
“The index is compiled by using Laspeyre’s base
weighted formula. In the first stage, price quotations of
an item in all outlets of all the markets in a month are
averaged for a centre. On the basis of this average centre
price, a price relative (over base period price) is worked
out. However, in case of items which are supplied
through subsidised outlets (fair price shop also) the

54
See generally, Manual on Consumer Price Index 2010 Government of India
Ministry of Statistics and Programme Implementation Central Statistics Office
Sansad Marg, New Delhi
Accessible at:
https://mospi.gov.in/sites/default/files/publication_reports/manual_cpi_2010.pdf?
utm_source=chatgpt.com
55
https://labourbureau.gov.in/CPI
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procedure is slightly different. In their case, first the
weighted average price of open market and fair price
outlets in each selected market of a centre is worked out
(weights being availability ratio in the respective outlets
in that month). In the next stage, a simple average of
these market prices is worked out to arrive at the centre
price. The sub-group/group Index is worked out as a
weighted average of item/sub-group Index, respectively,
the general index of a centre is worked out as weighted
average of group indices. Thus, the index for each centre
is derived in several stages, i.e. sub-group, group and
general (all combined). All-India index is a weighted
average of 78 centre indices. The weight assigned to
each centre is the proportion of the estimated consumer
expenditure of the centre to the aggregate consumer
expenditure of all the centres. These indices are
compiled on monthly basis with a time lag of one month
and are released through Press Note, Monthly Index
letter and Indian Labour Journal...”

This methodology ensures that the AICPI remains both
statistically sound and policy-relevant. By grounding the index in
real consumption data and periodically revising its base year and
weights, the Labour Bureau ensures that the AICPI continues to
accurately capture shifts in living costs and inflationary pressures
faced by industrial workers across India.

33. What the above primer on the calculation of AICPI shows
is that it is a number that comes together after taking into account
a complex web of factors and variables, duly calculated by a body
entrusted to do so. It is the diktat of logic then, that when a State
is to grant DA, and it has not, on its own, carried out a study to
determine rates, it ought to follow the rate as determined by a
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body that is otherwise authorized to do so. Logic is the lifeblood
of law. It is not only judicial action that is to be supported by logic
and reason. The issuance of memoranda is an administrative
action. These actions also must be governed by reason. If a State
decides to grant DA at a particular rate, it ought to be able to show
itself to have ‘done its homework’ in arriving at that particular
number. The respondents had made reference to the State of
Kerala, and its procedure for granting the same, emphasising that
the number adopted by the State had been arrived at by its own
centers having undertaken the requisite study.

34. Having dealt with AICPI at a concept level, as also
legislation by incorporation we now turn back to the issue of
executive memoranda. We have observed above that Rules do not
themselves provide for any rule making power to rest with the
Executive. It is also given that when rules are promulgated under
Article 309 it is done in the name of the Governor. The
Constitution also provides for the State to have executive powers
in so far as the subjects enumerated in List II and concomitantly
to issue instructions thereon. It reads as under:
“162. Extent of executive power of State: Subject to
the provisions of this Constitution, the executive power
of a State shall extend to the matters with respect to
which the Legislature of the State has power to make
laws:
Provided that in any matter with respect to which the
Legislature of a State and Parliament have power to
make laws, the executive power of the State shall be
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subject to, and limited by, the executive power expressly
conferred by the Constitution or by any law made by
Parliament upon the Union or authorities thereof.”

rd
35. It is not in doubt that the First Memorandum dated 23
February 2009 was issued under Article 309 of the Constitution.
We will come to this later (Question No 5). At first, we address
the memoranda issued thereafter. It appears that these
subsequent memoranda are issued under Article 162. We say so
for the reason that it has not been pleaded before us by the
appellant-State that the subsequent memoranda are also issued
under Article 309, when the power to issue the same was a
significant point of contention across the Bar. A coordinate
bench in R.N. Nanjundappa (supra) observed:

“26. The contention on behalf of the State that a rule
under Article 309 for regularisation of the appointment
of a person would be a form of recruitment read with
reference to power under Article 162 is unsound and
unacceptable. The executive has the power to appoint.
That power may have its source in Article 162. In the
present case the rule which regularised the appointment
of the respondent with effect from February 15, 1958,
notwithstanding any rules cannot be said to be in
exercise of power under Article 162. First, Article 162
does not speak of rules whereas Article 309 speaks of
rules. Therefore, the present case touches the power of
the State to make rules under Article 309 of the nature
impeached here. Secondly when the Government acted
under Article 309 the Government cannot be said to
have acted also under Article 162 in the same breath.
The two articles operate in different areas.
Regularisation cannot be said to be a form of
appointment...”
(Emphasis Supplied)
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36. The above extracted view has been accepted by a
56
Constitution Bench in State of Karnataka v. Uma Devi . In that
view of the matter what was to be shown is that the executive
instructions were issued only to supplement a gap in the original
Notification under Article 309, which the appellant-State has
been unsuccessful in doing.

37. The legislative exercise carried out provided for a clear basis
on which existing emoluments were to be calculated by
incorporating AICPI into the framework. Thereafter, when there
are no perceivable or justifiable gaps present, it was not open for
the appellant-State to deviate from the mechanism so provided,
more so when such deviation is by means of an otherwise inferior
form, i.e., executive memoranda.
It has to be observed that consequent to the above,
subsequent memoranda are hereby held to have been issued in an
improper exercise of power. Despite this improper exercise of
power, the RoPA Rules will remain unaffected. The doctrine of
severance as discussed in the case of Harakchand (supra) , would
apply to these memoranda as well. The relevant extract thereof is
as under:
“27. The only other point that remains to be decided is
whether as a result of some of the sections of the
impugned Act being struck down, what is left of the

56
(2006) 4 SCC 1
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impugned Act should survive or whether the whole of
the impugned Act should be declared invalid. We are of
opinion that the provisions which are declared invalid
cannot effect the validity of the Act as a whole. In a case
of this description the real test is whether what remains
of the statute is so inextricably bound up with the invalid
part that what remains cannot independently survive or
as it is sometimes put whether on a fair review of the
whole matter it can be assumed that the legislature would
have enacted at all that which survives without enacting
the part that is ultra vires. The matter is clearly put
in Cooley on Constitutional Limitations , 8th Edn. at p.
360:
“It would be inconsistent with all just
principles of constitutional law to adjudge
these enactments void because they are
associated in the same Act; but not
connected with or dependant on others
which are unconstitutional. Where,
therefore, a part of a statute is
unconstitutional, that fact does not
authorise the courts to declare the
remainder void also, unless all the
provisions are connected in subject-matter,
depending on each other, operating
together for the same purpose, or otherwise
so connected together in meaning, that it
cannot be presumed the legislature would
have passed the one without the other. The
constitutional and unconstitutional
provisions may even be contained in the
same section, and yet be perfectly distinct
and separable, so that the first may stand
though the last fall. The point is not whether
they are contained in the same section for
the distribution into sections is purely
artificial; but whether they are essentially
and inseparably connected in substance. If,
when the unconstitutional portion is striken
out, that which remains is complete in
itself, and capable of being executed in
accordance with the apparent legislative
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intent, wholly independent of that which
was rejected, it must be sustained.”

Applying the test to the present case we are of opinion
that the provisions held to be invalid are not inextricably
bound up with the remaining provisions of the Act.”

This principle would apply both to the First Memorandum
and the subsequent memoranda.
In sum, it is hereby concluded that DA by its very nature is
non-static, fluid and subject to change. How that change is to be
carried out is through AICPI. The First Memorandum as also the
subsequent memoranda fall prey to the fatal flaw that they do not
make reference to the AICPI which is absolutely essential to the
determination of DA which in turn is indispensable to the
computation of the total amount of ‘ existing emoluments ’. As a
necessary follow up thereto, it must be observed that the
incorporation of the AICPI cannot be termed as a one-time
measure and once DA was defined using it, to take a different
path would be impermissible. Questions 2, 3 and 4 are answered
accordingly.

Question 5: ARBITRARINESS OF APPELLANT-
STATE’S ACTION AND LEGITIMATE
EXPECTATION OF ITS EMPLOYEES
38. Once it is established as above, clearly, that no basis is
found for the rates at which DA was to be disbursed as per the
memoranda issued subsequent to RoPA Rules, another argument
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of the Respondents comes into play. They allege violation of
Article 14 of the Constitution. Article 14, as is well known and
understood, provides for equality before law or equal protection
57
of the law . It is also well understood that classification is
permitted by Article 14 so long as there are reasonable nexus and
intelligible differentia backing the same or the action under
question is not manifestly arbitrary. Equally so is the position in
law that all State action must pass the test of Article 14 or in other
words, State action must be reasonable and must not be arbitrary,
whimsical or capricious.
(a) Article 14 is one of the constituents of the golden
thread that wraps around the Constitution. It is necessary
to understand its importance in its true majesty. It is not a
declaration of formal uniformity, simpliciter; it is instead
a profound assertion of the rule of law itself. It only stands
to reason that amongst other things, exercise of State
power must also answer to fairness, justice and reason.
This evolution from formal equality to an embodiment of
the rule of law shows the development and maturing of
Indian constitutional thought. In the early articulation, the
aim and object of the Courts was to preserve legislative
flexibility while preventing arbitrary discrimination and
to do that there came to be evolved the twin test of

57
1958 SCCOnline SC 7
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reasonable nexus and intelligible differentia. In other
words, Article 14 in this avatar , was a restraint on
legislative excess rather than a principle of substantive
justice. As time moved further, a deeper understanding
emerged and the repeated phrase that arbitrariness is the
antithesis of equality became the new basis with rational
governance being infused into the much narrower interest
approach. Still further, its modern iteration is the test of
proportionality. The State’s legitimate objects must be
pursued through suitable means ensuring that individual
rights are not curtailed beyond necessity. This flows from
the idea of constitutional morality which insists on the
dignity of an individual, making that, the scales upon
which any and all exercise of authority is to be judged.

(b) It is within this moral and intellectual landscape that
the doctrine of manifest arbitrariness takes its place as the
natural culmination of the equality principle. The word
‘ manifest ’ confines the scope of judicial intervention to
those cases where reason is ex-facie absent or
compromised, or in other words, such reason is not
apparent on the face of the action or law in question. This
necessarily implies that the existence of arbitrariness is a
matter of plain deduction and not subjective opinion. The
remit of the Courts in applying this doctrine is to examine
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the possibility of whether the subjectivity of opinion has
creeped into a particular legislative exercise thereby
compromising its sanctity in as much as it may have no
rational basis or discernible principle in connection with
the object sought to be achieved. This morphs into
illegality. In Nergesh Meerza (supra) it was observed:
“71. This brings us now to the next limb of the
argument of Mr Setalvad which pertains to the
question as to whether and not the conditions
imposed on the AHs regarding their retirement
and termination are manifestly unreasonable or
absolutely arbitrary. We might mention here
that even though the conditions mentioned
above may not be violative of Article 14 on the
ground of discrimination but if it is proved to
our satisfaction that the conditions laid down
are entirely unreasonable and absolutely
arbitrary, then the provisions will have to be
struck down.”
(Emphasis Supplied)

This doctrine thus extends the reach of Article 14 to all
forms of State action. The Constitution, being supreme,
demands that every exercise of power, whether clothed in
the form of a statute or an executive order, must remain
subject to the discipline of rationality. Manifest
arbitrariness, in this sense, is not a departure from
legislative supremacy but its constitutional completion,
for the very legitimacy of law in a democratic order lies
in its reasoned foundation.


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58
(c) In Shayara Bano v. Union of India , Nariman J, for
the majority held:
“ 100. To complete the picture, it is important to
note that subordinate legislation can be struck
down on the ground that it is arbitrary and,
therefore, violative of Article 14 of the
Constitution. In Cellular Operators Assn. of
India v. TRAI [ Cellular Operators Assn. of
India v. TRAI , (2016) 7 SCC 703] , this Court
referred to earlier precedents, and held : (SCC
pp. 736-37, paras 42-44)
“ Violation of fundamental rights
42 . We have already seen that one of
the tests for challenging the
constitutionality of subordinate
legislation is that subordinate
legislation should not be manifestly
arbitrary. Also, it is settled law that
subordinate legislation can be
challenged on any of the grounds
available for challenge against
plenary legislation. [See Indian
Express Newspapers (Bombay) (P)
Ltd. v. Union of India [ Indian
Express Newspapers (Bombay) (P)
Ltd. v. Union of India , (1985) 1 SCC
641 : 1985 SCC (Tax) 121] , SCC at
p. 689, para 75.]
43 . The test of “manifest
arbitrariness” is well explained in
two judgments of this Court.
In Khoday Distilleries Ltd. v. State
of Karnataka [ Khoday Distilleries
Ltd. v. State of Karnataka , (1996) 10
SCC 304] , this Court held : (SCC p.
314, para 13)

58
(2017) 9 SCC 1

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‘ 13 . It is next submitted
before us that the amended
Rules are arbitrary,
unreasonable and cause
undue hardship and,
therefore, violate Article 14
of the Constitution.
Although the protection of
Article 19(1)( g ) may not be
available to the appellants,
the Rules must,
undoubtedly, satisfy the test
of Article 14, which is a
guarantee against arbitrary
action. However, one must
bear in mind that what is
being challenged here under
Article 14 is not executive
action but delegated
legislation. The tests of
arbitrary action which
apply to executive actions
do not necessarily apply to
delegated legislation. In
order that delegated
legislation can be struck
down, such legislation must
be manifestly arbitrary; a
law which could not be
reasonably expected to
emanate from an authority
delegated with the law-
making power . In Indian
Express Newspapers
(Bombay) (P) Ltd. v. Union
of India [ Indian Express
Newspapers (Bombay) (P)
Ltd. v. Union of India ,
(1985) 1 SCC 641 : 1985
SCC (Tax) 121] , this Court
said that a piece of
subordinate legislation does
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not carry the same degree of
immunity which is enjoyed
by a statute passed by a
competent legislature. A
subordinate legislation may
be questioned under Article
14 on the ground that it is
unreasonable;
“unreasonable not in the
sense of not being
reasonable, but in the sense
that it is manifestly
arbitrary ”. Drawing a
comparison between the
law in England and in India,
the Court further observed
that in England the Judges
would say, “Parliament
never intended the authority
to make such rules; they are
unreasonable and ultra
vires”. In India,
arbitrariness is not a
separate ground since it will
come within the embargo of
Article 14 of the
Constitution. But
subordinate legislation
must be so arbitrary that it
could not be said to be in
conformity with the statute
or that it offends Article 14
of the Constitution .’
44 . Also, in Sharma
Transport v. State of A.P. [ Sharma
Transport v. State of A.P. , (2002) 2
SCC 188] , this Court held : (SCC pp.
203-04, para 25)
‘ 25 . … The tests of arbitrary
action applicable to executive
action do not necessarily
apply to delegated legislation.
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In order to strike down a
delegated legislation as
arbitrary it has to be
established that there is
manifest arbitrariness. In
order to be described as
arbitrary, it must be shown
that it was not reasonable and
manifestly arbitrary. The
expression “arbitrarily”
means : in an unreasonable
manner, as fixed or done
capriciously or at pleasure,
without adequate
determining principle, not
founded in the nature of
things, non-rational, not done
or acting according to reason
or judgment, depending on
the will alone.’ ”

(emphasis in original)
… … …”

(d) In Assn. for Democratic Reforms (Electoral Bond
59
Scheme) v. Union of India :
“200. It is now a settled position of law that a
statute can be challenged on the ground that it is
manifestly arbitrary. The standard laid down by
Nariman, J. in Shayara Bano [ Shayara
Bano v. Union of India , (2017) 9 SCC 1 : (2017) 4
SCC (Civ) 277] , has been citied with approval by
the Constitution Benches in Navtej Singh
Johar [ Navtej Singh Johar v. Union of India ,
(2018) 10 SCC 1 : (2019) 1 SCC (Cri) 1]
and Joseph Shine [ Joseph Shine v. Union of India ,
(2019) 3 SCC 39 : (2019) 2 SCC (Cri) 84] . Courts
while testing the validity of a law on the ground of
manifest arbitrariness have to determine if the

59
(2024) 5 SCC 1
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statute is capricious, irrational and without
adequate determining principle, or something
which is excessive and disproportionate. This
Court has applied the standard of “manifest
arbitrariness” in the following manner:
… … …
204. The above discussion shows that manifest
arbitrariness of a subordinate legislation has to be
primarily tested vis-à-vis its conformity with the
parent statute. Therefore, in situations where a
subordinate legislation is challenged on the ground
of manifest arbitrariness, this Court will proceed to
determine whether the delegate has failed “to take
into account very vital facts which either expressly
or by necessary implication are required to be
taken into consideration by the statute or, say, the
Constitution.” [ Indian Express Newspapers
(Bombay) (P) Ltd. v. Union of India , (1985) 1 SCC
641] In contrast, application of manifest
arbitrariness to a plenary legislation passed by a
competent legislation requires the Court to adopt a
different standard because it carries greater
immunity than a subordinate legislation. We
concur with Shayara Bano [ Shayara
Bano v. Union of India , (2017) 9 SCC 1 : (2017) 4
SCC (Civ) 277] that a legislative action can also
be tested for being manifestly arbitrary. However,
we wish to clarify that there is, and ought to be, a
distinction between plenary legislation and
subordinate legislation when they are challenged
for being manifestly arbitrary.”

(e) Keeping in view the judgments referred to above,
the principle of manifest arbitrariness under Article 14
refers to legislation that is capricious, irrational, lacking
in reasoned principle, or excessive and disproportionate;
such arbitrariness vitiates both subordinate and plenary
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legislation alike. In the present facts, since a legislative
exercise did incorporate AICPI into the framework,
deviation therefrom without any basis as discussed
above falls in the ‘lacking in reasoned principle’ prong
of manifest arbitrariness, apart from legislative
competence. For the appellant-State to have deviated
from the recognised position to something else without
laying the groundwork therefor, compromises the
exercise by rendering it capricious.

39. This limb of ‘ manifest arbitrariness ’ within the discussion
of Article 14 would equally apply to the First Memorandum
rd
dated 23 February 2009. As already observed supra, an
exercise undertaken by means of Article 309 of the Constitution
has statutory force. Accordingly, the vires thereof can be
adjudicated on the same grounds as well. Having said that, we
notice that while the substantive RoPA Rules provide explicitly
for a method to calculate the ‘ existing emoluments ’ more
particularly DA by way of the AICPI, the First Memorandum
and the subsequent memoranda, issued, allegedly to clarify the
same, without any reference thereto, quite apparently departs
from the stipulation of the substantive law which was to follow
the AICPI. To say the least, it is quite strange that the First
Memorandum issued on the same day as the substantive law,
deviates therefrom at the very inception. Such an action, in our
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view, cannot stand judicial scrutiny, and will be hit by ‘ manifest
arbitrariness ’ for it fails to establish a link between the two i.e.,
the RoPA Rules and the First Memorandum. It does not show
adequate determining principle in so far as it completely ignores
the stipulation of AICPI within the RoPA Rules. As observed
herein, doing so would have been permissible had the State
carried out its own determinative exercise. The Memorandum
rd
dated 23 February 2009 would also accordingly have to be held
to be contrary to law. The doctrine of severance in
Harankchand (supra) would dictate the said Memorandum to
be ultra vires the substantive Rules.

40. Next, we now deal with the issue of legitimate expectation.
(a) The modern origins of this doctrine have
authoritatively been traced to a judgment of the House
of Lords, penned by Lord Denning in Schmidt v.
60
Secretary of State for Home Affairs . The doctrine
has, over time become well recognised in India also.
61
Sivanandan C T v. High Court of Kerala in
reference to Union of India v. Hindustan
62
Development Corporation culled out the following

60
[1969] 2 WLR 337
61
(2024) 3 SCC 799
62
(1993) 3 SCC 499
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factors to be considered for application of the
doctrine :
“25. …(i) legitimate expectation arises based on a
representation or past conduct of a public
authority;
(ii) legitimacy of an expectation can be inferred
only if it is founded on the sanction of law or
custom or an established procedure followed in
regular or natural sequence;
(iii) legitimate expectation provides locus standi to
a claimant for judicial review;
(iv) the doctrine is mostly confined to a right of a
fair hearing before a decision and does not give
scope to claim relief straightaway;
(v) the public authority should justify the denial of
a person’s legitimate expectation by resorting to
overriding public interest; and
(vi) the Courts cannot interfere with the decision
of an authority taken by way of policy or public
interest unless such decision amounts to an abuse
of power.”

63
(b) In Ram Pravesh Singh v. State of Bihar the
doctrine was explained as under:
“15. What is legitimate expectation? Obviously, it
is not a legal right. It is an expectation of a benefit,
relief or remedy, that may ordinarily flow from a
promise or established practice. The term
“established practice” refers to a regular,
consistent, predictable and certain conduct,
process or activity of the decision-making
authority.”
(Emphasis Supplied)



63
(2006) 8 SCC 381
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64
(c) In Jitendra Kumar v. State of Haryana this
Court observed:
“58. Application of doctrine of legitimate
expectation or promissory estoppel must also be
considered from the aforementioned viewpoint. A
legitimate expectation is not the same thing as an
anticipation. It is distinct and different from a
desire and hope. It is based on a right.
[See Chanchal Goyal (Dr.) v. State of
Rajasthan [(2003) 3 SCC 485 : 2003 SCC (L&S)
322] and Union of India v. Hindustan
Development Corpn. [(1993) 3 SCC 499] ] It is
grounded in the rule of law as requiring regularity,
predictability and certainty in the Government's
dealings with the public. We have no doubt that the
doctrine of legitimate expectation operates both in
procedural and substantive matters.”

(Emphasis Supplied)

(d) In Punjab State Coop. Agricultural
65
Development Bank Ltd. v. Coop. Societies , it was
observed :
“46. This Court, after taking note of the earlier
view on the subject further held in Railway
Board [ Railway Board v. C.R. Rangadhamaiah ,
(1997) 6 SCC 623 : 1997 SCC (L&S) 1527] as
under : (SCC pp. 637-38 & 640, paras 20, 24-25 &
33)
“ 20 . It can, therefore, be said that a rule
which operates in futuro so as to
govern future rights of those already in
service cannot be assailed on the
ground of retroactivity as being
violative of Articles 14 and 16 of the
Constitution, but a rule which seeks to

64
(2008) 2 SCC 161
65
(2022) 4 SCC 363
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reverse from an anterior date a benefit
which has been granted or availed of
e.g. promotion or pay scale, can be
assailed as being violative of Articles
14 and 16 of the Constitution to the
extent it operates retrospectively.

*
24 . In many of these decisions [ K.C.
Arora v. State of Haryana , (1984) 3
SCC 281 : 1984 SCC (L&S)
,
520] [ P.D. Aggarwal v. State of U.P. ,
(1987) 3 SCC 622 : 1987 SCC (L&S)
,
310] [ K. Narayanan v. State of
Karnataka , 1994 Supp (1) SCC 44 :
,
1994 SCC (L&S) 392] [ T.R.
Kapur v. State of Haryana , 1986 Supp
,
SCC 584] [ Union of India v. Tushar
Ranjan Mohanty , (1994) 5 SCC 450 :
,
1994 SCC (L&S) 1118] [ K.
Ravindranath Pai v. State of
Karnataka , 1995 Supp (2) SCC 246 :
1995 SCC (L&S) 792] the expressions
“vested rights” or “accrued rights”
have been used while striking down
the impugned provisions which had
been given retrospective operation so
as to have an adverse effect in the
matter of promotion, seniority,
substantive appointment, etc. of the
employees. The said expressions have
been used in the context of a right
flowing under the relevant rule which
was sought to be altered with effect
from an anterior date and thereby
taking away the benefits available
under the rule in force at that time. It
has been held that such an amendment
having retrospective operation which
has the effect of taking away a benefit
already available to the employee
under the existing rule is arbitrary,
discriminatory and violative of the
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rights guaranteed under Articles 14
and 16 of the Constitution . We are
unable to hold that these decisions are
not in consonance with the decisions
in Roshan Lal Tandon [ Roshan Lal
Tandon v. Union of India , (1968) 1
SCR 185 : AIR 1967 SC 1889] , B.S.
Vadera [ B.S. Vadera v. Union of
India , (1968) 3 SCR 575 : AIR 1969
SC 118] and Raman Lal Keshav Lal
Soni [ State of Gujarat v. Raman Lal
Keshav Lal Soni , (1983) 2 SCC 33 :
1983 SCC (L&S) 231]”

We have also perused various other judgments
concerning the doctrine of legitimate expectation viz.
66
State of Jharkhand v. Brahmputra Metallics ,
Navjyoti Coop. Group Housing Society v. Union of
67
India , ; Food Corporation of India v. Kamdhenu
68
Cattle Feed Industries .
Once it is the established that a right exists, the
following observation in G.C. Mandawar (supra)
becomes relevant:
“5. …Under this provision, it is a matter of
discretion with the Local Government whether it
will grant dearness allowance and if so, how much.
That being so, the prayer for mandamus is clearly
misconceived, as that could be granted only when
there is in the applicant a right to compel the
performance of some duty cast on the opponent.
Rule 44 of the Fundamental Rules confers no right
on the government servants to the grant of

66
2020 SCC OnLine SC 968
67
(1992) 4 SCC 477
68
(1993) 1 SCC 71
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dearness allowance; it imposes no duty on the
State to grant it. It merely confers a power on the
State to grant compassionate allowance at its own
discretion, and no mandamus can issue to compel
the exercise of such a power. Nor, indeed, could
any other writ or direction be issued in respect of
it, as there is no right in the applicant which is
capable of being protected or enforced.”

(Emphasis Supplied)

(e) We are of the view that in light of the principles
referred to above, legitimate expectation on the part of
the respondents did arise in view of the change of law
i.e., enactment of RoPA Rules and its recognition of
AICPI as the determinative factor for the computation
of DA.

Question 6 and 7: CONFLICT, IF ANY, BETWEEN
th
LIST I AND II OF THE VII SCHEDULE AND
FINANCIAL AUTONOMY OF THE STATE

41. In India, governance is through a federal structure. This
means that authority is divided constitutionally between
different levels of government allowing each of them to
legislate, administer and adjudicate in relation to matters
assigned to them by the Constitution. This division of power is
not a mere formality but is legal and enforceable precluding any
level from unilaterally encroaching upon the domain of the
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other. This enables constitutional recognition of diversity be it
geographical, cultural, linguistic or economic within a unified
political framework thereby balancing the scales of unity and
regional autonomy facilitating national cohesion.


42. In the context of federalism, while the central authorities
retain power on issues connecting the entire country such as
defence, foreign affairs, emergency provisions, residuary
powers etc., but at the same time States have the legislative,
executive and judicial authority for a variety of issues such as
public order, public health, fisheries, public debt etc. There is
another aspect which is equally important - the division of power
acts as a security blanket. Each level of Government has its
sphere of actions defined and cannot transgress. Should it do so,
the Judiciary is bound to step in to reinforce these boundaries. It
has to be importantly added here that a federal structure is not
only sustained by law making or executive power, it also
necessarily includes financial autonomy. In absence thereof, an
elected Government, which is installed by the participation of
the people in the electoral process, having put forth a vision
which is by such process, accepted, would be rendered
dependent and reliant on the otherwise all - powerful Central
Government for handouts. The constitutional vision has put in
place checks and balances to ensure that the States are not
reduced to destitution. This is most obviously displayed by
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separate consolidated funds being in place for the Centre and the
State, among other moorings within the Constitution that
reinforce this discipline.
Dr B.R. Ambedkar speaking in the Constituent Assembly
said the following significant words: (CAD Vol. 11)
“There is only one point of constitutional import to
which I propose to make a reference. A serious
complaint is made on the ground that there is too much
of centralisation and that the States have been reduced
to municipalities. It is clear that this view is not only
an exaggeration, but is also founded on a
misunderstanding of what exactly the Constitution
contrives to do. As to the relation between the Centre
and the States, it is necessary to bear in mind the
fundamental principle on which it rests. The basic
principle of federalism is that the legislative and
executive authority is partitioned between the Centre
and the States not by any law to be made by the Centre
but by the Constitution itself. This is what
Constitution does. The States under our Constitution
are in no way dependent upon the Centre for their
legislative or executive authority. The Centre and the
States are co-equal in this matter. It is difficult to see
how such a Constitution can be called centralism. It
may be that the Constitution assigns to the Centre too
large a field for the operation of its legislative and
executive authority than is to be found in any other
federal Constitution. It may be that the residuary
powers are given to the Centre and not to the States.
But these features do not form the essence of
federalism. The chief mark of federalism as I said lies
in the partition of the legislative and executive
authority between the Centre and the units by the
Constitution. This is the principle embodied in our
Constitution.”

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69
In State of W.B. v. Union of India , BP Sinha, CJI
writing for the majority explained the following features of
federalism:
“25… ( a ) A truly federal form of Government
envisages a compact or agreement between
independent and sovereign units to surrender partially
their authority in their common interest and vesting it
in a Union and retaining the residue of the authority in
the constituent units. Ordinarily each constituent unit
has its separate Constitution by which it is governed
in all matters except those surrendered to the Union,
and the Constitution of, the Union primarily operates
upon the administration of the units. Our Constitution
was not the result of any such compact or agreement :
Units constituting a unitary State which were non-
sovereign were transformed by abdication of power
into a Union,
( b ) Supremacy of the Constitution which cannot be
altered except by the component units. Our
Constitution is undoubtedly supreme, but it is liable to
be altered by the Union Parliament alone and the units
have no power to alter it.
( c ) Distribution of powers between the Union and the
regional units each in its sphere coordinate and
independent of the other. The basis of such
distribution of power is that in matters of national
importance in which a uniform policy is desirable in
the interest of the units authority is entrusted to the
Union, and matters of local concern remain with the
States.
( d ) Supreme authority of the courts to interpret the
Constitution and to invalidate action violative of the
Constitution. A federal Constitution, by its very
nature, consists of checks and balances and must
contain provisions for resolving conflicts between the
executive and legislative authority of the Union and
the regional units.

69
1962 SCC OnLine SC 27
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In our Constitution characteristic ( d ) is to be found in
full force ( a ) and ( b ) are absent. There is undoubtedly
distribution of powers between the Union and the
States in matters legislative and executive, but
distribution of powers is not always an index of
political sovereignty. The exercise of powers
legislative and executive in the allotted fields is
hedged in by numerous restrictions so that the powers
of the States are not coordinate with the Union and are
in many respects independent.”

70
In S.R. Bommai v. Union of India , PB Sawant J. for
himself and Kuldip Singh J., held as under:

“99. The above discussion thus shows that the States
have an independent constitutional existence and they
have as important a role to play in the political, social,
educational and cultural life of the people as the
Union. They are neither satellites nor agents of the
Centre. The fact that during emergency and in certain
other eventualities their powers are overridden or
invaded by the Centre is not destructive of the
essential federal nature of our Constitution. The
invasion of power in such circumstances is not a
normal feature of the Constitution. They are
exceptions and have to be resorted to only
occasionally to meet the exigencies of the special
situations. The exceptions are not a rule.”

K. Ramaswamy J., in the same judgment held as under:

“ 247. Federalism envisaged in the Constitution of
India is a basic feature in which the Union of India
is permanent within the territorial limits set in
Article 1 of the Constitution and is indestructible.
The State is the creature of the Constitution and the
law made by Articles 2 to 4 with no territorial
integrity, but a permanent entity with its boundaries
alterable by a law made by Parliament. Neither the
relative importance of the legislative entries in

70
(1994) 3 SCC 1
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Schedule VII, Lists I and II of the Constitution, nor
the fiscal control by the Union per se are decisive to
conclude that the Constitution is unitary. The
respective legislative powers are traceable to
Articles 245 to 254 of the Constitution. The State
qua the Constitution is federal in structure and
independent in its exercise of legislative and
executive power. However, being the creature of the
Constitution the State has no right to secede or claim
sovereignty. Qua the Union, State is quasi-federal.
Both are coordinating institutions and ought to
exercise their respective powers with adjustment,
understanding and accommodation to render socio-
economic and political justice to the people, to
preserve and elongate the constitutional goals
including secularism.”


43. Schedule VII embodies the federal structure and clearly
delineates the spheres of action referred to above. List I is the
exclusive domain of the Central Government while List II is for
the State. The overlapping aspects that were also touched upon
above are represented by List III.
S.M.Sikri CJI, for the majority in Union of India v. H.S.
71
Dhillon , while dealing with the question of the constitutional
validity of Section 24 of Finance Act 1969, observed as under
in connection with the law making power of the Parliament:

“14. Reading Article 246 with the three lists in the
Seventh Schedule, it is quite clear that Parliament has
exclusive power to make laws with respect to all the
matters enumerated in List I and this notwithstanding
anything in clauses (2) and (3) of Article 246. The
State Legislatures have exclusive powers to make

71
(1971) 2 SCC 779
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laws with respect to any of the matters enumerated in
List II, but this is subject to clauses (1) and (2) of
Article 246. The object of this subjection is to make
Parliamentary legislation on matters in Lists I and III
paramount. Under clause (4) of Article 246
Parliament is competent also to legislate on a matter
enumerated in State List for any part of the territory
of India not included in a State. Article 248 gives the
residuary powers of legislation to the Union
Parliament. It provides:
“248. (1) Parliament has exclusive power to make any
law with respect to any matter not enumerated in the
Concurrent List or State List.
(2) Such power shall include the power of making any
law imposing a tax not mentioned in either of those
lists.”
… … …”

72
In State of U.P. v. Lalta Prasad Vaish , it was held:

“50. The demarcation of legislative fields is based on
a deliberate design as well as on the principles of
federalism. Matters requiring coordination between
different regions of the country or of national
importance have been placed in the field of
Parliament. Matters requiring localised focus and
limited or no coordination between States have been
placed in the State List. Fields of legislation which
may require either uniform legislation for the entire
nation or context and region-specific
accommodation, depending on the circumstance, are
placed in the Concurrent List. Moreover, the three
Lists make a clear distinction between general entries
and taxation entries. The power of taxation cannot be
derived from a general entry. … The entries in the
legislative lists do not cast an obligation to legislate
or to legislate in a particular manner. Within the
confines of an entry, the legislature exercises plenary
power subject to the provisions of the Constitution.
[ United Provinces v. Atiqa Begum , 1940 SCC

72
(2024) 17 SCC 1
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OnLine FC 11 : (1940) 2 FCR 110 : AIR 1941 FC
16; Constitution of India , Article 13.]”

It is the appellant - State’s contention that since Entry 70 List I
and Entry 41 of List II, both dealing with public service
employees, have been separately mentioned in two distinct lists;
there can be no overlap and as such the central scheme of
payment of DA cannot apply to the States. There cannot be any
qualms with that argument, but at the same time, the State in its
independent wisdom incorporated the definition of ‘ existing
emoluments ’ from the Central Government Rules, and it is once
again the State who, despite having the requisite power to depart
from what has been laid down in RoPA Rules, chose not the
direct route but the side road, so to speak, to alter the rate of DA,
and that too, without any basis for the same. It is, therefore, not
open for the State to take the defence of separation of powers as
enumerated in the Constitution, for that would amount to having
your cake and eating it too.

44. Here itself we may deal with a further argument of the
appellant - State that the conclusion in this adjudication has
pan-India implications since there are as many as twelve States
that do not follow the Central Government pattern in payment
of DA whereas there are only four that do. It is submitted that
should the conclusion be that the appellant - State is to follow
the latter’s pattern, these other States would be in considerable
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trouble and difficulty. At first, this argument appears attractive
but on a considered view of the matter, we find it imprudent to
adjudicate the present lis keeping in view the supposed impact
on States who are not parties before us. It is not anybody’s case
that the position the appellant - State finds itself in, is a
consequence of a direction issued by the Central Government.
While making rules under Article 309, of its own wisdom, the
State incorporated for itself the definition employed by the
Central Government. A legislative exercise carried out by the
State presupposes that the requisite groundwork has been
completed and the culmination of all the information received
and collected along with the opinions of the necessary experts
among other things has resulted in such an exercise. Once this is
the position, judicial review thereof cannot account for
perceived negative impacts on others particularly when such a
decision is squarely within the financial autonomy of each body
(State). It is also to be noted that in the subsequent evolution of
wisdom, the successor Rules to the RoPA Rules that is, the
RoPA 2019 omits the reference to the AICPI 536(1982=100)
and instead provides for DA to be paid on the admissible rates
st
as on 1 January 2016.

45. Still further, it be observed that after the enactment of
RoPA 2009 it was entirely within the competence of the State to
deviate from the prior position and disburse DA in accordance
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with what had been stipulated in the said Rules of following the
pattern of the Central Government, but the appellant - State
chose to continue the same pattern. The above discussion sheds
light on the fact that the Constitution envisions sufficient
freedom upon the State to choose its path in financial matters.
The choice had been made by the State itself. The Central
Government has not imposed its definition of ‘ existing
emoluments ’/ any condition upon the former. In Mahatama
Gandhi Mission (supra), it has been observed:

“ 62. The fact that the Government of India accepted the
recommendations of the Sixth Pay Commission (for
that matter any Pay Commission) does not either oblige
the States to follow the pattern of the revised pay
structure adopted by the Government of India or create
any right in favour of the employees of the State or
other bodies falling within the legislative authority of
the State. The Government of India has no authority
either under the Constitution or under any law to
compel the States or their instrumentalities to adopt the
pay structure applicable to the employees of the
Government of India.”

The alleged conflict, in our considered view, is a figment
of imagination of the appellant - State. The argument seems to
have been conjured up in thin air. Where is the exercise of
power by the Union, legislative or executive, imposing any
condition on the appellant - State? On the contrary, the power
exercised is only by the appellant - State through the Governor,
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permissible under Constitutional scheme in terms of Article 309
of the Constitution.


Question 8: EFFECT OF FINDINGS IN FIRST
ROUND OF LITIGATION

46. When the findings returned by a Court are reaffirmed
through the dismissal of a review petition, such findings acquire
finality and become binding upon the parties to the litigation, in
the event that no appeal thereagainst, is filed before this Court.
The law recognizes that a review is not a rehearing of the matter,
but a narrow and exceptional jurisdiction intended only to
correct a patent error apparent on the face of the record, or to
consider newly discovered evidence which could not, with and
despite due diligence, have been produced earlier. The scope of
review is thus, limited in nature. When, upon due consideration,
the Court dismisses a review petition, it reaffirms the correctness
of its earlier judgment, declining to interfere with the findings
that stood returned. The inevitable consequence is that its
findings, having passed through the process of judicial scrutiny
a second time, attain conclusive finality as between the parties.

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47. This principle finds authoritative exposition in the
73
judgment of this Court in Lily Thomas v. Union of India ,
wherein it was emphatically held that the power of review
cannot be exercised to re-argue a matter already decided, and
that once a review is dismissed, the earlier decision stands
undisturbed and attains finality. The Court observed that review
jurisdiction exists only for the correction of a manifest error, and
not to substitute one view for another; hence, the dismissal of a
review petition signifies reaffirmation of the original
adjudication.

The principle of finality is further illuminated in
74
Kunhayammed & Ors. v. State of Kerala & Anr. , where the
Court expounded the doctrine of merger and clarified that once
the avenues of review are exhausted, the order under review
merges with the final order of dismissal, thereby acquiring
complete and binding effect. The discussion made therein
pertains to special leave petitions before this Court, the
underlying principle applies to the High Courts as well.

Thus, the dismissal of a review petition is not a mere
procedural event but a substantive judicial affirmation of the
correctness of the earlier decision. It signals the end of the
Court’s revisiting power and bestows upon the findings, a seal

73
(2000) 6 SCC 224
74
(2000) 6 SCC 359
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of finality, both factual and legal. The parties, having invoked
and exhausted their right to seek reconsideration, are thereafter
bound by those findings, which operate as res judicata in all
future proceedings. This doctrine safeguards the integrity and
conclusiveness of judicial decisions and ensures that litigation,
once finally adjudicated and reaffirmed, is not perpetually
reopened to uncertainty.

48. In the instant facts, the effect that flows from the above
discussion is that once the High Court in the ‘ Judgment in
Round One ’ had declared the receipt of DA to be a legally
enforceable right and a review sought against this judgment
stood dismissed with no appeal to this Court being filed, the
findings arrived at therein, would attain finality and thereby bind
the parties to that proceeding. Once a legally enforceable right
has been established, the defence of the appellant - State so as to
its financial ability or rather inability has to be kept at bay. The
only question that remains thereafter is, how such a right has to
be enforced, and considering the nature of the right, at what rate.
The answer to this question, as we have already discussed in the
preceding paragraphs of this judgment is that the right has to be
enforced in accordance with AICPI .

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Question 9: WHETHER THE RESPONDENTS ARE
ENTITLED TO DA TWICE A YEAR?

49. The short answer to the question framed above is ‘ no’ . This
is for the reason that the RoPA Rules which we have extracted
supra nowhere provide that DA will be or can be paid twice a
year. Anything that is not provided for in the Rules which
govern the distribution of ‘ existing emoluments ’ for the time
period in question, cannot be said to be a right accruing on any
party. The argument based on the principle of legitimate
expectation of the employees’ right of disbursal of DA twice a
year, as alleged to have been disbursed earlier, needs to be
repelled for the same does not emanate from the statutory text.
[See: Sivanandan C T (supra)] In Ashok Ram Parhad v. State
75
of Maharashtra , it has been held that service rules are liable
to prevail. The Government has power to issue resolutions that
are in consonance with the Rules or are aimed at expounding the
Rules but not in conflict with them. It is undisputed that the
RoPA Rules do not provide for disbursement of benefits such as
DA to be paid a specific number of times a year ( in this case
twice as originally prayed for by the applicants in the OA,
respondents herein ), the same cannot be introduced through
judicial direction. There is deliberate omission in the State’s

75
(2023) 18 SCC 768
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rules showing an intention to leave the same to discretion to
some extent rather than mandate a fixed payment structure. This
deliberate omission acquires significance since it pertains to an
issue which has a direct bearing on the fiscal affairs of the State
and is inextricably linked to budgetary planning, allocation of
resources, assessment of financial capacity. Judicial interference
therein amounts to intrusion with the fiscal autonomy of the
State which in the absence of any stipulation, would be entirely
unnecessary and therefore, avoidable. The direction of the
Tribunal for DA to be paid twice a year till the implementation
th
of the 6 Pay Commission of the State, in our view is without
the authority of law.


Question 10: DOES PAUCITY OF FUNDS DEFEAT
A LEGAL RIGHT?

50. One of the implications of accepting the respondent’s
contention as submitted by the appellant - State is that it will
lead to an incidence of thousands of crores on the State, thereby
having a great negative impact on the economy and financial
security of the State. We find this position difficult to accept.
This is so because once a legal right has been established, as is
the undoubted position in this case by virtue of the ‘ Judgment In
Round One ’, as also our discussion supra, irrespective of
whether it pertains to salary, pension, gratuity or other statutory
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benefits, it is not within the realm of permissible actions for the
State to refuse payment of the same on account of financial
inability/paucity of funds. The least that is expected of a State in
a democracy is that it honours its obligations and commitments,
arising from a legislation or judicial decisions, for such
obligations are not discretionary in any way, shape or form. This
clear position protects such statutory obligations for, if such a
ground of limited financial ability was readily available to the
State Government, which may undoubtedly in certain situations
face tough times, it would render these obligations illusory.
When it comes to employees’ dues, this proposition would be
extremely dangerous and stifling since the amounts received
thereby are not handouts or acts of charity but are earned
compensation / consideration for services given, and denial of
such consideration would have a direct impact on the right to
life and livelihood enshrined in Article 21 of the Constitution.
76
In State of H.P. v. H.P. State Recognised & Aided Schools , it
has been held by a bench of three judges that constitutional
duties cannot be evaded on the ground of paucity of funds.
Granted, we have not given any finding with respect to DA
being a facet of Article 21 but at the same time it has to be
acknowledged that DA is an integral part of salary which is the

76
(1995) 4 SCC 507
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means by which various other facets of right to life under Article
21 can be seen to a logical and desirable end.

(a) In Haryana State Minor Irrigation Tubewells
77
Corpn. v. G.S. Uppal , this Court observed as under:
“ 33. The plea of the appellants that the
Corporation is running under losses and it cannot
meet the financial burden on account of revision of
scales of pay has been rejected by the High Court
and, in our view, rightly so. Whatever may be the
factual position, there appears to be no basis for the
action of the appellants in denying the claim of
revision of pay scales to the respondents. If the
Government feels that the Corporation is running
into losses, measures of economy, avoidance of
frequent writing off of dues, reduction of posts or
repatriating deputationists may provide the
possible solution to the problem. Be that as it may,
such a contention may not be available to the
appellants in the light of the principle enunciated
by this Court in M.M.R. Khan v. Union of
India [1990 Supp SCC 191 : 1990 SCC (L&S) 632
: (1991) 16 ATC 541] and Indian Overseas
Bank v. Staff Canteen Workers' Union [(2000) 4
SCC 245 : 2000 SCC (L&S) 471] . ..”


(Emphasis Supplied)

(b) In State of A.P. v. Dinavahi Lakshmi
78
Kameswari :
“13. The direction for the payment of the deferred
portions of the salaries and pensions is
unexceptionable. Salaries are due to the employees
of the State for services rendered. Salaries in other

77
(2008) 7 SCC 375
78
(2021) 11 SCC 543
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words constitute the rightful entitlement of the
employees and are payable in accordance with
law. Likewise, it is well settled that the payment of
pension is for years of past service rendered by the
pensioners to the State. Pensions are hence a
matter of a rightful entitlement recognised by the
applicable rules and regulations which govern the
service of the employees of the State. …”
(Emphasis Supplied)

(c) In Punjab State Coop. Agricultural Development
79
Bank Ltd. v. Coop. Societies , this Court observed:

“57. In our view, non-availability of financial
resources would not be a defence available to the
appellant Bank in taking away the vested rights
accrued to the employees that too when it is for
their socio-economic security. It is an assurance
that in their old age, their periodical payment
towards pension shall remain assured. The pension
which is being paid to them is not a bounty and it
is for the appellant to divert the resources from
where the funds can be made available to fulfil the
rights of the employees in protecting the vested
rights accrued in their favour.”

51. It has often been recognised that the State must set an
example for other employers in the country by behaving as a
‘ model employer’ . Such a position should not be difficult to
attain given all the advantages that it has. Its power lies in the
volume of employment, its sovereign/constitutional authority to
tax, ability to borrow and manage public finances. In embodying
the ‘ model employer ’ the State not only fulfils its obligation but

79
(2022) 4 SCC 363
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also instils and maintains public confidence in the rule of law,
governance and administration of justice. Leading by example,
fulfilling its financial duties in times of fiscal strain, gives it the
moral authority to wield the sword of law against private
entities, should they not do so. The position stated by us above
has been recognised in a number of judgments of this Court. In
80
Bhupendra Nath Hazarika v. State of Assam , a coordinate
Bench took note of various past pronouncements as follows:
“61. Before parting with the case, we are compelled to
reiterate the oft stated principle that the State is a model
employer and it is required to act fairly giving due regard
and respect to the rules framed by it. But in the present
case, the State has atrophied the rules. Hence, the need
for hammering the concept.

62. Almost a quarter century back, this Court in Balram
Gupta v. Union of India [1987 Supp SCC 228 : 1988
SCC (L&S) 126 : (1987) 5 ATC 246] had observed thus:
(SCC p. 236, para 13)

“ 13. … As a model employer the
Government must conduct itself with high
probity and candour with its employees.”

In State of Haryana v. Piara Singh [(1992) 4 SCC 118 :
1992 SCC (L&S) 825 : (1992) 21 ATC 403] the Court
had clearly stated: (SCC p. 134, para 21)
“ 21. … The main concern of the court in
such matters is to ensure the rule of law and
to see that the Executive acts fairly and
gives a fair deal to its employees consistent
with the requirements of Articles 14 and
16.”
… … …


80
(2013) 2 SCC 516

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65. We have stated the role of the State as a model
employer with the fond hope that in future a deliberate
disregard is not taken recourse to and deviancy of such
magnitude is not adopted to frustrate the claims of the
employees. It should always be borne in mind that
legitimate aspirations of the employees are not
guillotined and a situation is not created where hopes end
in despair. Hope for everyone is gloriously precious and
a model employer should not convert it to be deceitful
and treacherous by playing a game of chess with their
seniority. A sense of calm sensibility and concerned
sincerity should be reflected in every step. An
atmosphere of trust has to prevail and when the
employees are absolutely sure that their trust shall not be
betrayed and they shall be treated with dignified fairness
then only the concept of good governance can be
concretised. We say no more.”


52. In that view of the matter, it is not open for the appellant-
State to shirk away from its responsibility from paying DA on
the count of financial difficulty that it may face in doing so. It is
an obligation arising out of the statute of its own creation and it
must be met.

Question 11: FISCAL POLICY AND JUDICIAL
REVIEW

53. The judicial review of a fiscal policy is a limited but
important domain. The various facets of fiscal policy such as
taxation, subsidies, public expenditure etc., are primarily
concerns of the Executive and Legislature, but are not beyond the
pale of judicial scrutiny. The brief that is entrusted to the
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Judiciary is to ascertain that such a policy flows from the
Constitution, is procedurally lawful and non-arbitrary. Article
265, for example mandates that no tax shall be levied in the
absence of the authority of law. Here, it would be the domain of
the Courts to examine that fiscal measures are not imposed by
executive fiat. Discipline in matters of fiscal policy is not only
judicially enforced but provided for in the Constitution itself by
virtue of Article(s) such as 266 and 283 by regulating the
custody, appropriation and withdrawal of public funds.

54. Separation of powers which is a feature of the basic
81
structure of the Indian Constitution postulates that the complex
assessment of economic conditions, social priorities etc., are
evaluated and assessed by those institutions possessing
democratic legitimacy. Herefrom arises the consistently
articulated judicial position that Courts do not adjudicate upon
the wisdom/adequacy or desirability of a chosen economic
policy. At the same time, it is unquestionably the role of the
judicial institutions to check fiscal policy that transgresses
constitutional limitations. While reasonable classification and
intelligible differentia are permitted, such classifications cannot
be discriminatory or devoid of rational nexus to the avowed
objectives thereof. That apart, Courts are also the arbiter of

81
Kesavananda Bharati v. State of Kerala, (1973) 4 SCC 225
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federal balance that is between the Centre and the State ensuring
that the two powers stay within their own lanes as prescribed by
Article 246. In essence, the role is to ascertain constitutional
compliance and is, thus, a position of calibrated deference but
most certainly not of abdication or no authority. In the context of
the above, the following judgments spell out the well-recognised
position:
(a) A bench of three Judges in BALCO Employees'
82
Union v. Union of India , observed:
“ 92. In a democracy, it is the prerogative of
each elected Government to follow its own
policy. Often a change in Government may
result in the shift in focus or change in
economic policies. Any such change may result
in adversely affecting some vested interests.
Unless any illegality is committed in the
execution of the policy or the same is contrary
to law or mala fide, a decision bringing about
change cannot per se be interfered with by the
court.
93. Wisdom and advisability of economic
policies are ordinarily not amenable to judicial
review unless it can be demonstrated that the
policy is contrary to any statutory provision or
the Constitution. In other words, it is not for the
courts to consider relative merits of different
economic policies and consider whether a wiser
or better one can be evolved. …”

(Emphasis Supplied)


82
(2002) 2 SCC 333
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(b) In State of T.N. v. National South Indian River
83
Interlinking Agriculturist Assn . :
“10… An examination of this issue must begin
with the primary question of the meaning of the
phrase “policy”. A policy is the reasoning and
object that guides the decision of the authority,
which in our case is the State of Tamil Nadu.
Statutes, notifications, Ordinances, or
government orders are means for the
implementation of the policy of the State.
Therefore, it is not possible to completely
appreciate the law without reference to the
policy behind the law. The judicially evolved
two-pronged test to determine the validity of
the law vis-à-vis Article 14 of the Indian
Constitution, refers to the objective of the law
because the “policy” behind the law is never
completely insulated from judicial attention.

11. However, it is settled law that the Court
cannot interfere with the soundness and wisdom
of a policy. A policy is subject to judicial
review on the limited grounds of compliance
with the fundamental rights and other
provisions of the Constitution. …It is also
settled that the Courts would show a higher
degree of deference to matters concerning
economic policy, compared to other matters of
civil and political rights. In R.K. Garg v. Union
of India [ R.K. Garg v. Union of India , (1981) 4
SCC 675 : 1982 SCC (Tax) 30] , …

“ 8 . Another rule of equal importance is
that laws relating to economic
activities should be viewed with
greater latitude than laws touching
civil rights such as freedom of speech,
religion, etc. It has been said by no less
a person than Holmes, J. [ Ed. : The

83
(2021) 15 SCC 534
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reference appears to be to Bain Peanut
Co. of Texas v. Pinson , 1931 SCC
OnLine US SC 34 : 7 L Ed 482 : 282
US 499 (1931). See also Missouri,
Kansas & Texas Railway Co. of
Texas v. Clay May , 1904 SCC OnLine
US SC 118 : 48 L Ed 971 : 194 US 267,
269 (1904).] , that the legislature
should be allowed some play in the
joints, because it has to deal with
complex problems which do not admit
of solution through any doctrinaire or
straitjacket formula and this is
particularly true in case of legislation
dealing with economic matters, where,
having regard to the nature of the
problems required to be dealt with,
greater play in the joints has to be
allowed to the legislature. The court
should feel more inclined to give
judicial deference to legislative
judgment in the field of economic
regulation than in other areas where
fundamental human rights are
involved. Nowhere has this admonition
been more felicitously expressed than
in Morey v. Doud [ Morey v. Doud ,
1957 SCC OnLine US SC 105 : 1 L Ed
2d 1485 : 354 US 457 (1957)] where
Frankfurter, J., said in his inimitable
style:
‘In the utilities, tax and
economic regulation cases,
there are good reasons for
judicial self-restraint if not
judicial deference to
legislative judgment. The
legislature after all has the
affirmative responsibility.
The courts have only the
power to destroy, not to
reconstruct. When these are
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added to the complexity of
economic regulation, the
uncertainty, the liability to
error, the bewildering conflict
of the experts, and the
number of times the Judges
have been overruled by
events — self-limitation can
be seen to be the path to
judicial wisdom and
institutional prestige and
stability.’”
(Emphasis Supplied)

55. The case of the appellant - State obviously is that the High
Court in terms of the impugned judgment has overstepped the
bounds of judicial review and that of the respondents is that the
High Court had only protected them against actions of the
appellant - State which are sans basis.
It has been noted above that the question of DA being a
legally enforceable right has already been put to rest. The time
period in question is 2008 to 2019 that is approximately a period
of eleven years. Each month that the requisite DA was not paid,
is a wrong committed against the respondents. Certainly, when
that is the case ‘ fiscal policy ’ cannot grant a cloak of protection
to the appellant - State. Should such an argument be accepted, the
very concept of judicial review would be shaken. No one denies
that it is within the State’s power to make decisions regarding
payments to its employees but once such a decision has been
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made, it cannot deviate therefrom. It is this deviation which is a
subject matter of judicial review.

Question 12: DEARNESS ALLOWANCE - A
FUNDAMENTAL RIGHT ?

56. In terms of the impugned judgment, the High Court held
that payment of DA was a facet of Article 21 of the Constitution
of India. Before this Court, however, the opposing parties have
jointly agreed that none will press this question, either way. That
being the accepted position we need not give any finding thereon
and leave the question open to be decided in an appropriate case.

Question 13: DELAY AND LATCHES

57. Delay and latches do not defeat a claim on mere passage of
time in all cases. It does defeat a claim, however, when the delay
in question is unreasonable, unexplained and inequitable.
Whether any of these vices affect a claim is to be determined
inter-alia on the anvil of forum that has been invoked, the right
that has been asserted and the consequences in granting the relief
asked for. It is a doctrine of equity informed by public policy and
judicial discretion. Delay is said to reflect acquiescence and
waiver of right. For example, if a claim for seniority is brought
after a long lapse of time, acceptance of such a claim would be
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few and far between, if at all, given that the parties involved
remained quiet for number of years and also that the consequence
of such an act would be that the seniority of other serving
members would be disturbed as a result. It has been recognised
that in cases where there is a continuing wrong/recurring cause
of action as against completed causes of action, delay in bringing
a challenge would not be fatal. [See: Union of India v. Tarsem
84 85
Singh ; M.R. Gupta v. Union of India ]

S.M.Sikri J. (as he then was) in Tilokchand & Motichand
86
v. H.B. Munshi , referred to Joseph Story’s Commentary on
Equity Jurisprudence as follows:
“16. Story on Equity Jurisprudence states the legal
position thus:
“It was, too, a most material ground, in all bills for
an account, to ascertain whether they were brought
to open and correct errors in the account recenti
facto; or whether the application was made after a
great lapse of time. In cases of this sort, where the
demand was strictly of a legal nature, or might be
cognizable at law, courts of equity governed
themselves by the same limitations as to entertain
such suits as were prescribed by the Statute of
Limitations in regard to suits in courts of common
law in matters of account. If, therefore, the ordinary
limitation of such suits at law was six years, courts
of equity would follow the same period of limitation.
In so doing, they did not act, in cases of this sort (that
is, in matter of concurrent jurisdiction) so much
upon the ground of analogy to the Statute of
Limitations, as positively in obedience to such

84
(2008) 8 SCC 648
85
(1995) 5 SCC 628
86
(1969) 1 SCC 110
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statute. But where the demand was not of a legal
nature, but was purely equitable; or where the bar of
the statute was inapplicable; courts of equity had
another rule, founded sometimes upon the analogies
of the law, where such analogy existed, and
sometimes upon its own inherent doctrine, not to
entertain stale or antiquated demands, and not to
encourage laches and negligence. Hence, in matters
of account, although not barred by the Statute of
Limitations, courts of equity refused to interfere
after a considerable lapse of time, from
considerations of public policy, from the difficulty
of doing entire justice, when the original transactions
had become obscure by time, and the evidence might
have been lost, and from the consciousness that the
repose of titles and the security of property are
mainly promoted by a full enforcement of the
maxim, vigilantibus, non dormientibus jura
subveniunt . Under peculiar circumstances, however,
excusing or justifying the delay, courts of equity
would not refuse their aid in furtherance of the rights
of the party; since in such cases there was no
pretence to insist upon laches or negligence, as a
ground for dismissal of the suit; and in one case
carried back the account over a period of fifty years.”
(Third Edn., p. 224, Section 529).”

58. In view of the discussion aforesaid and taking a cumulative
view of all the factors discussed in this judgment, we are of the
considered view that appellant - State’s contention as to delay
and latches must be rejected. This is more so for the reason that
when the law was set in motion the continuing non-payment of
appropriate rates of DA gave the respondent employees sufficient
cause of action and if recourse to law has been taken while the
cause of action subsists, there is obviously no question of
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dismissal of the same on delay. Also, were not the employees
pursuing the remedies available to them, relentlessly?


DIRECTIONS AND CONCLUSIONS

59. Apropos to the above, we pass the following order:
59.1 The appeals are partly allowed.

59.2 To receive dearness allowance is a legally
enforceable right that has accrued in favour of the
respondents-employees of the State of West Bengal.

59.3 Given its incorporation in RoPA Rules, the
AICPI is the standard to be followed by the appellant
– State of West Bengal for determination of ‘ existing
emoluments ’.

59.4 The employees of the appellant-State shall be
entitled to release of arrears in accordance with this
judgment for the time 2008-2019;
th
On 16 May 2025, we had passed the following
order:
“ O R D E R
1. Having heard Dr. Abhishek Manu Singhvi, Mr.
Huzefa Ahmadi learned senior counsel appearing
for the petitioners and Mr.P.S.Patwalia, learned
senior counsel appearing for the respondents, we
are of the considered view that the petitionerState
should release at least 25% of the amount due and
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payable to all the employees in terms of the
impugned judgment dated 20.05.2022 passed by
the High Court at Calcutta in WPST No.102/2020
titled “The State of West Bengal & Ors.
Vs.Confederation of State Government
Employees, West Bengal & Ors.” and order dated
22-09-2022 in RVW No. 159/2022 22-09-2022 in
CAN No. 1/2022, within a period of six weeks
from today.

2. We find the Tribunal and the High Court to have
adjudicated the right of the employees to receive
Dearness Allowance pursuant to the 5th Pay
Commission. The paucity of funds is a ground
which stands negated both by the Tribunal and the
High Court. Whether or not the right to receive
Dearness Allowance is a fundamental right is an
issue, amongst others, this Court is called upon to
consider. We shall do so. However pending such
consideration, we are of the considered view that
the employees need not be kept waiting endlessly
to receive the money in question.
… … …”
Interim directions issued as herein above shall be complied with
immediately.

59.5 On account of subsequent change in law, if any,
any amount that would be disbursed in compliance of
this judgment shall not be liable to be recovered;

59.6 Considering the financial implications involved
and also recognising the need for a structured release
of funds so as to not prejudicially impact State’s
exchequer while at the same time balancing the rights
of the employees to receive emoluments due to them,
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we find it fit to constitute a Committee, to monitor the
implementation of the directions issued herein above,
as follows:
1) A retired Supreme Court Judge namely,
Hon’ble Ms. Justice Indu Malhotra-
Chairperson.
2) Former Chief Justice/Judge of High Court
namely Justices Tarlok Singh Chauhan and
Goutam Bhaduri;
3) Comptroller and Auditor General of India or
senior most officer in his establishment,
nominated by him.



59.7 The import of the Committee shall be, in
consultation with the State authorities to determine:
a) total amount to be paid;
b) schedule of payments which then the State
shall be bound to follow;
c) Periodically verify the release of the amounts.

The exercise to determine (a & b) shall be carried out
th
before 6 March, 2026. The next consequential step
i.e. the payment of the first instalment, subject to the
st
determination of the Committee should be paid by 31
March, 2026.

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59.8 The Committee shall be accorded all facilities
and privileges including all necessary logistical
arrangements. The expenses shall be borne by the
appellant - State. In so far as the remuneration for the
Committee members is concerned, we leave the same
to the wisdom of the Chairperson.

59.9 It stands clarified that those employees of the
State who have retired in the pendency of this
litigation shall also be entitled to benefits in
accordance herewith.


60. Let the appellant - State, after payment of first instalment,
file a status report indicating the determination made by the
Committee, the schedule adopted, the status of the first payment.
th
List on 15 April, 2026 for compliance.

Pending applications, if any, shall stand closed. In the
circumstances there shall be no order as to cost.

…………………………………..J.
(SANJAY KAROL)


………………………..…………J.
(PRASHANT KUMAR MISHRA)

New Delhi;
February 5, 2026.

C.A. Nos. @ SLP(C) Nos.22628-22630 of 2022 & connected matters Page 124 of 124