Supreme Court on Revision of Pay Scale and Financial Difficulties of Employer

 

INTRODUCTION

On today’s show, we will discuss the case of Punjab State Co-operative Milk Producers Federation Ltd. and Another v. Balbir Kumar Walia and Others, 2021 SCC OnLine SC 461, wherein the Hon’ble Supreme Court discussed an important question relating to the financial difficulties faced by an employer and its effect on the wages of the employees, specifically in the context of governmental establishments.

 

FACTS

The brief facts of the case are certain Petitions were filed by the employees of Punjab State Co-operative Milk Producers Federation Ltd. seeking that Punjab State Co-operative Milk Producers Federation Ltd. is ‘State’ within the meaning of Article 12 of the Constitution of India and therefore, its employees are entitled to pay scale equivalent to their counterparts working with the State of Punjab from 01.01.1986. Such Petitions were allowed by the High Court and Punjab State Co-operative Milk Producers Federation Ltd. appealed this Order before the Supreme Court of India.

 

PERTINENT POINTS

Before deciding the issue, the Hon’ble Supreme Court discussed the background of government employment. According to the Court, there are broadly three sets of employees: -

 

1. Industrial Workers

 

2. Public Sector Undertakings, Boards and Corporations

 

3. Central and State Government Employees

 

Thereafter the Court discussed the types of wages that are: -

 

1. Basic Minimum Wage that is the bare subsistence wage.

 

2. Fair Wage that is above the Basic Minimum Wage

 

3. Living wage that is over and above the Fair Wage.

 

For calculating the Basic Minimum Wage, the Court discussed the Report given by the Commission of Enquiry on “Emoluments and Conditions of Service of Central Government Employees, 1957-1959, that provided that while calculating Minimum Wages, following points should be considered: -

 

1. A working class family should be taken to consist of 3 consumption units for one earner.

 

2. Minimum food requirement should be calculated on the basis of net intake of calories.

 

3. Clothing requirements should be estimated at a per capita consumption of 18 yards per annum.

 

4. For housing, minimum area provided for under Government's Industrial Housing Scheme should be taken into consideration.

 

5. Fuel, lighting and miscellaneous expenses should constitute 20% of the minimum wages.

 

6. Kid’s education, medical requirements, recreation etc. should further constitute 25% of the minimum wages.

 

OBSERVATIONS BY THE COURT

Thereafter the Court observed that since the status of the Federation or the Appellant as ‘State’ within Article 12 has not been disputed, it would not go into such question and decide the matter as if the Appellant is State.

 

Next, the Court discussed that it is not a rigid and inexorable convention that the wage structure once fixed by Industrial Tribunals can never be changed to the prejudice of workmen. According to the Court, the financial difficulties faced by an employer ought to be considered while deciding the wage structure otherwise the unit itself may not be able to function and may have to close down which will inevitably have disastrous consequences for the employees themselves. It was further discussed that though the demands of social justice and fair distribution of resources are important, yet it is a settled principle of law that non-revision of pay scale in every case would not amount to a violation of the fundamental rights of the concerned persons.

 

In the present case, the Appellant/Federation contended that based on the recommendation of various reports and considering the circumstances, it has taken a conscious decision to not to grant revised pay scale from 01.01.1986 in view of its precarious financial condition and the Federation is itself receiving financial assistance from other state instrumentalities owing to its poor economic health.

 

In such light, the Court opined that judicial restraint is exercised in overturning administrative decisions since the Courts do not have the expertise to sit over administrative decisions and judicial scrutiny in the realm of administration and contracts may impose heavy administrative burden that may not be conducive for the well being of the state instrumentality. Whether an economic policy is wise or not is not a question for which judicial review should be done. The Courts interfere only where there is manifest arbitrariness, irrationality, unreasonableness, bias and mala fide.

 

Therefore, the Court held that in the present case, there is nothing on record to show that the decision of the Federation to not to grant revised pay-scale suffers from illegality, irrationality and procedural impropriety and hence, the Orders passed by the High Court allowing grant of revised pay-scale were set aside as being in excess of the power of judicial review.

 

That was all about the case. So, what are my concluding remarks?

 

CONCLUDING REMARKS

I found this to be a curious case. The Court acknowledged applicability of Article 12, it also acknowledged that wages that are given by the State should be comprehensive, but despite all these factors, financial problems of the Federation were also given due consideration. The employees of any Unit or Establishment work hard to fulfil their duties and they have a reasonable expectation to get pay hikes at regular intervals. Such expectations are completely justified, but equally justified is the expectation that an Undertaking can do only so much to the extent its financial health allows it to do. Though it is heart breaking to see that state employees are not being granted revised pay scales, yet the harsh economic realities of this country are not hidden from anyone. Many state instrumentalities are financially distressed leading to such problems. I hope that with time, the economic conditions in this country improve.