Karnataka High Court
M/S Hmt Machine Tools Limited vs Sri Jayaram Vl on 11 June, 2024
Bench: Chief Justice, Krishna S Dixit
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 11TH DAY OF JUNE, 2024
PRESENT
THE HON'BLE MR. N.V. ANJARIA, CHIEF JUSTICE
AND
THE HON'BLE MR. JUSTICE KRISHNA S DIXIT
WRIT APPEAL NO. 955 OF 2023 (S-RES)
BETWEEN:
1. M/S HMT MACHINE TOOLS LIMITED
A COMPANY REGISTERED
UNDER THE PROVISIONS OF THE
COMPANIES ACT
HAVING ITS OFFICE AT
BANGALORE COMPLEX, JALAHALLI P.O
BANGHALORE - 560 013
REPRESENTED BY ITS
TECHNICAL GENERAL MANAGER
MR. S.P.DAS
2. M/S HMT LTD
HMT BHAVAN
NO.59, BELLARY ROAD
BANGALORE - 560 032
REPRESENTED BY MR. S.P.DAS
GENERAL TECHNICAL MANAGER (MBX)
3. UNION OF INDIA
MINISTRY OF HEAVY INDUSTRIES
AND PUBLIC ENTERPRISES
DEPARTMENT OF HEAVY INDUSTRY
UDYOG BHAVAN
NEW DELHI-110001
REPRESENTED BY ITS SECRETARY
...APPELLANTS
2
(BY SRI GANAPATI NARAYAN HEGDE, SENIOR ADVOCATE
A/W SRI RAYAPPA Y. HADAGALI, ADVOCATE FOR
APPELLANTS 1 & 2 A/W SRI P. CHIDANANDA, CGC
FOR APPELLANT NO.3)
AND:
1. MR. JAYARAM V.L.
S/O MR. V. LAKSHMAIAH
AGED ABOUT 67 YEARS
RETIRED ASST. GENERAL MANAGER
NO.156, II BLOCK, 13TH MAIN
HMT LAYOUT
VIDYARANYAPURA
BENGALURU - 560 097
2. MR. H. RAVINDRA
S/O MR. N HANUMANTHA RAO
AGED ABOUT 68 YEARS
RETIRED DY. MANAGER (HR & TRG)
NO.13, 1ST CROSS
YELLAPPA GARDEN
BSK 3RD STAGE
BANAGIRINAGARA
BENGALURU - 560 085
3. MR. M.R. VISWANATH
S/O MR. M.V. RAMASWAMY
AGED ABOUT 69 YEARS
RETIRED DEPUTY GENERAL MANAGER
NO.567/37, 13TH 'A' CROSS
BHUVANESHWARANAGARA
HEBBAL-KEMPAPURA
BENGALURU - 560 024
4. MR. PILLAPPA N
S/O MR. S.M.NANJAPPA
AGED ABOUT 69 YEARS
RETIRED WORKERS SUPERVISOR
NO.307, 6TH CROSS, 3RD BLOCK
HMT LAYOUT, VIDYARANYAPURA
BENGALURU - 560 097
3
5. MR. THYAGARAJU M
S/O LATE MUNITHIMMAIAH
AGED ABOUT 71 YEARS
RETIRED DY. GENERAL MANAGER
NO.21, 6TH CROSS
VASANTHNAGAR
BENGALURU - 560 052
6. MR. PRAKASH M
S/O LATE GANGADHARAN M.R.
AGED ABOUT 67 YEARS
RETIRED DY. MANAGER
NO.45, 2ND MAIN
NATARAJA LAYOUT
(OPP. RBI LAYOUT)
J.P. NAGAR, 7TH PHASE
BENGALURU - 560 078
7. MR. MADHAVA R
S/O LATE RAMACHANDRA RAO S
AGED ABOUT 67 YEARS
RETIRED MANAGER (ASSY. PROG)
NO.144, 5TH CROSS
MODEL HOUSE STREET
BASAVANAGUDI
BENGALURU - 560 004
8. MR. B SUDHAKAR
S/O GUNDU RAO
AGED ABOUT 66 YEARS
RETIRED ASST. GENERAL MANAGER
"SUMERU", NO. 45/1
RATHNA VILAS ROAD
BASAVANAGUDI
BENGALURU - 560 004
9. MR. MUNIYAPPA
S/O LATE MUNISWAMAPPA K
AGED ABOUT 70 YEARS
RETIRED AGM
(PLANT MAINTENANCE)
NO.615, 3RD CROSS
7TH MAIN, HMT LAYOUT
4
R.T. NAGAR
BENGALURU - 560 032
... RESPONDENTS
(BY SRI DHANANJAY V. JOSHI, SENIOR ADVOCATE A/W
MS. SHREYA MATHEW, ADVOCATE FOR
SMT. KAVITA DAMODARAN, ADVOCATE FOR C/R-1)
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT, PRAYING TO SET ASIDE THE
ORDER DATED 04.07.2023 PASSED BY THE LEARNED SINGLE
JUDGE IN W.P.NO.2175/2022 (S-RES) AND CONSEQUENTLY
DISMISS THE SAID WRIT PETITION AND ETC.
THIS WRIT APPEAL HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT, COMING ON FOR
PRONOUNCEMENT OF JUDGMENT THIS DAY, CHIEF JUSTICE
DELIVERED THE FOLLOWING:
JUDGMENT
Whether selection of a posterior date factored on financial position for implementing the pay scale revision in a sick company to be applicable to those employees who were on the roll of employment on such fixed date, to the exclusion of the segment of employees not in employment on that date having retired, stands valid on the touchstone of reasonableness and rationality, is the question arising to be analysed and answered in this appeal. 5
2. Preferred by original respondents, the challenge in the present appeal is addressed to judgment and order dated 4th July 2023 of learned Single Judge. Thereby, the petition filed by the petitioners-respondents herein came to be allowed by setting aside order dated 31st March 2014 issued by Union of India, Ministry of Heavy Industries- respondent No.1. The consequential order dated 10th June 2014 issued by appellant No.1-HMT Ltd. was also set aside. Appellant Nos.1 and 2-original Respondent Nos.2 and 3- HMT Machine Tools Ltd. and HMT Ltd. respectively, were directed to extend the benefit of the pay scale revision of 1997 with effect from 1st January 1997 with payment of consequential benefits and the arrears. 2.1 By aforementioned communication dated 31st March 2014, the Ministry of Heavy Industries and Public Enterprises intimated respondent No.2-HMT Ltd. that the Cabinet Committee on Economic Affairs in its meeting dated 28th February 2024 along with other clearances, had approved to implement 1997 pay revision from the date of approval, with one-time relaxation of the Department of Public Enterprises Guidelines (DPE Guidelines). It also 6 contemplated enhancement of age of retirement. In other words, the decision was communicated that from the date of approval, that is 28th February 2014, the pay revision of 1997 would be implemented for the employees of Appellant No.1-HMT Machine Tools Ltd.
2.2 Appellant No.1-HMT Machine Tools Ltd. is 100% subsidiary company of appellant No.2-HMT Ltd. It is a loss making Central Public Sector Enterprise, which was referred to the Board for Industrial and Financial Reconstruction under the Sick Industrial Companies (Special Provisions) Act, 1995.
2.3 In response and pursuance to the aforesaid communication, HMT Machine Tools Ltd. revised the pay scales and dearness allowances with effect from 28th February 2014, for the Officers on the roll of HMT Machine Tools Ltd. on the said date, who had been holding the post below the Board level. Those who were not continuing on the roll of employment of appellant No.1 were not given the benefit.
72.4 During the pendency of the present appeal in which the respondent-original petitioners filed an application for correction of the order of learned Single Judge under challenge dated 4th July 2023, the application came to be allowed by learned Single Judge and the appellant Nos.1 and 2 were directed to extend the benefits of 2007 pay scale revision with effect from 1st January 2007 by his order dated 5th December 2023. In this appeal, it is contended that the said order dated 5th December 2023 rectifying and inserting 2007 pay scale revision with effect from 1st January 2007 in the judgment and order dated 4th July 2023 was also bad in law.
3. It was to challenge the aforesaid decision, that the petition came to be filed by the petitioners who are the retired employees in the office cadre of respondent No.2- HMT Ltd. and who were superannuated from respondent No.3 subsidiary Company. Petitioner No.1 was earlier working as Assistant Manager and retired on 31st October 2013. Similarly, the other petitioners previously held the post of Deputy Manager, HRD, Deputy General Manager (M), Deputy General Manager (SR), etc. and retired on 8 different dates. It was stated that the respondent No.2- HMT Ltd. was incorporated in the year 1953, which was initially profit making Company, but subsequently declined into incurring of losses.
3.1 It was stated that the Central Government introduced in the year 1992, pay revision to be implemented in all Public Sector Undertakings between March and April 1994. It was stated that measures were undertaken to implement 1992 pay scales during October 1995 with retrospective effect. It was stated that on account of the way of implementation, the officers were stagnated. The further revision in the scales became due on 1st January 1997. It was stated that Justice Mohan Committee Report for revision of pay scales was approved in the year 1997, however, it was not implemented in HMT Ltd. on account of financial constraints.
3.1.1 As part of turnover plan for the revival of HMT Ltd., five subsidiary companies were brought into existence, one of which was respondent No.3-Hindustan Machine Tools Ltd. It was stated that in view of the subsidiarisation, the 9 petitioners came to be shifted to respondent No.3 subsidiary Company. It is the case of the petitioners that another subsidiary Company HMT (International) Ltd. implemented the 1997 pay revision for its officers from 1st January 1997, also adopted the extension of retirement age. It was then stated respondent No.2 Company itself also implemented the same in its Tractor Division. 3.1.2 Regarding adoption of 1997 pay scales in Public Sector Enterprises, the guidelines by Department of Public Enterprises (DPE) dated 25th June 1999, inter alia provide and stipulate thus, "(1) As Presidential directives would be issued by all the administrative Ministries/Departments indicating these scales as a ceiling, as the actual payments would depend on the capacity to pay of the enterprises. The resources for meeting the increased obligation for salaries and wages must be internally generated and must come from improved performance in terms of productivity and profitability and not from Government subvention. The procedure for approval and adoption of new scales of pay on IDA Pattern by CPSEs, as laid down in DPE's above O.M. inter alia stipulated the following:
(a) PSEs which have been making profit consistently for the last 3 years viz.10
1996-97, 1997-98 and 1998-99 would be allowed to adopt the scales of pay for the executives holding posts at and below the Board level and non-unionised supervisors strictly in accordance with these guidelines.
(b) PSEs which did not make profit during the last 3 years viz.
1996-97, 1997-98 and 1998-99 or had incurred net loss during any of these financial years would also be allowed to adopt these scales of pay of their executives holding posts at and below the board level and non-unionised supervisors with the approval of the Government i.e. the administrative Ministry acting in consultation with the DPE, provided they give an estimate as to how resources would be generated by them to meet the extra expenditure.
(d) In respect of sick enterprises referred to Board for Industrial and Financial Reconstructions (BIFR), revision of pay sales for all employees following IDA pattern would be strictly in accordance with the rehabilitation packages approved or to be approved by the BIFR and after providing for the additional expenditure on account of pay revision in these packages."
3.1.3 It was stated that appellant No.1 company, which is a Government Company and a Central Public Sector Undertaking (CPSE) and also subsidiary of HMT Ltd., is under the authority of Heavy Industries, Government of 11 India is bound by the directions and guidelines issued regarding service conditions from time to time. 3.2 The grievance raised in the writ petition was that the pay revision for the petitioners was not acted upon, with effect from 1st January 1997; it was done only from 28th February 2014 as per the impugned decision. The petitioners stated that repeated representations were made which came to be rejected by the Company, all on the ground that lack of financial capacity, stating that the purse-crunch would not permit the Company to give effect to the 1997 pay scale revision from any anterior date. 3.3 The solitary ground raised by the petitioners in the writ petition was that the poor financial position could not be the justification for non-implementation of the pay scale revision. About retirement age, it was the contention that employees of Central Government and Public Sector Undertakings were extended the benefit of Sixty years, but the petitioners were discriminated. It is only the first part of the grievance about pay scale revision which is subject 12 matter of consideration, as was the controversy in the writ proceedings.
3.4 It may be relevant to note that prior to filing the instant petition, the petitioners had filed S.A. No.53729 to 53778 of 2016 seeking direction to implement the 1997 pay scale revision with effect from 1st January 1997, in the Company as well as in the subsidiary companies, which was withdrawn and fresh petition came to be filed as per the liberty given.
3.5 In the statement of objections filed on behalf of respondent Nos.2 and 3, it was stated that respondent No.2 was incorporated in the year 1953, whereas respondent No.3 subsidiary-HMT Machine Tools Ltd., came to be incorporated as per the Certificate of Incorporation dated 9th August 1999. It was further stated that Ministry of Heavy Industries and Public Enterprises issued communication dated 31st March 2014 providing for assistance for reviving of HMT Machine Tools Ltd. and implementing the pay scales from 28th February 2014. It was stated that in view of the said stipulation, the pay 13 revision was acted upon from 28th February 2014 with a prospective effect. It was stated that out of the subsidiaries created, HMT (International) Ltd. which was already a separate Company, continued as profit making entity.
3.6 Respondent Nos.2 and 3 stated that the revision of pay scales was always dependent upon the financial position of the Company and that it was not feasible to extend the benefits retrospectively from 1st January 1997 to the retired employees as the Company incurred losses continuously for last two decades and that financial burden was huge to be unable to be borne, costing the very existence of the Company.
3.7 It was stated that despite motivation from the Government, the Companies failed to perform to come out of losses. It was pointed out that in the similar set of circumstances, the High Court of Kerala considered the issue whether the relief of the nature could to be granted to the same class of retired employees at Kerala Unit of HMT Machine Tools by applying the pay revision retrospectively. 14 3.8 Learned Single Judge while allowing the petition and granting the relief, extensively relied on decision of the Supreme Court in Maharashtra State Financial Corporation Ex-employees Association and others vs. State of Maharashtra and others [2023 SCC Online SC 100], in which the issue addressed by the Apex Court was about fixation of date of the implementation of the Fifth Pay Committee recommendations to the employees of the Maharashtra State Financial Corporation. Relying on the principle emanating from the decision in D.S.Nakara vs. Union of India [(1983) 1 SCC 305], the Apex Court held that denial of the scheme to implement the Fifth Pay Commission scales to the employees who retired prior to 29th March 2010 was bad and arbitrary in asmuch as they were liable to be grouped together.
4. Heard learned Senior Advocate Mr.Ganapati Narayan Hegde for learned advocate Mr.Rayappa Y. Hadagali for appellant Nos.1 and 2, learned Central Government Counsel Mr.P.Chidananda for appellant No.3 and learned Senior Advocate Mr.Dhananjay V.Joshi for learned advocate 15 Ms.Shreya Mathew and learned advocate Mrs.Kavita Damodaran for respondents.
4.1 Assailing the impugned judgment and order, learned Senior Counsel for the appellants-original respondents submitted that learned Single Judge while allowing the petition overlooked and disregarded the following material aspects,
(i) The Ministry of Heavy Industries and Department of Public Enterprises set out the guidelines for approval and adoption of the new scales of pay-1997 pay scales, and such procedural guidelines were contained in Office Memorandum dated 25th June 1999,
(ii) The appellant- HMT Machine Tools Ltd. was a loss making Company and was referred to the Board for Industrial and Financial Reconstruction (BIFR) under the Sick Industrial Companies (Special Provisions) Act, 1995.
(iii) The resources for meeting the increased obligation for salary and wages were required to be internally generated to come from improved performance. HMT Machine Tools 16 Ltd. however did not comply with the criteria for 1997 pay revision.
(iv) The Ministry of Heavy Industries issued direction dated 20th May 2014 directing appellant No.1 to implement 1997 pay scales from the date of approval, that is from 28th February 2014 in relaxation of DPE Guidelines, pursuant to which impugned order dated 10th June 2014 was issued.
(v) After the aforementioned orders, a settlement dated 2nd July 2014 had been arrived at between the Management and Workers' Union. As per clause 1:3:1, it was agreed that wage revision of 1997 would be implemented from 28th February 2014, in accordance with DPE Guidelines.
(vi) Since the said Company did not have the sufficient funds to clear the additional burden of 1997 pay revision, the Government of India provided budgetary support in the form of non-plan loan of Rs.61.04 crores at 7% interest spread over two years, for effecting pay revision from 28th February 2014.
17
(vii) For the implementation of 1997 pay revision from 28th February 2024, the classification was "those who were in service on that date" and "those who were not in service as on date". The revision of pay in HMT Ltd. was similarly effected with effect from 18th April 2013 upon approval of.
(viii) The implementation of the revised pay scale accordingly was rational.
(ix) The classification was valid in the eye of Article 14 of the Constitution, as was based on rational criteria.
(x) In respect of identically placed employees the Kerala Unit of the very appellant No.1-HMT Machine Tools Ltd., the same issue has been arising herein, was examined by the Kerala High Court.
4.2 The main plank of submission on behalf of the respondents-original petitioners is that the financial consideration cannot be a criteria for applying the 1997 pay revision. It was submitted that a single class is divided by excluding those employees who had retired prior to 28th February 2014. It was submitted that the law laid down in 18 D.S.Nakara (supra) would apply. It was vehemently submitted that the learned Single Judge was right in allowing the petition by relying on the judgment in Maharashtra State Financial Corporation Ex- Employees Association & others (supra). The very contentions which were raised in the writ petition were sought to be advanced and reagitated before this Court.
5. Recollecting and revisiting with certain important facts and aspects, as far as the revision of 1997 pay scale was concerned, they are implemented with effect from 18th April 2013 in appellant No.2-HMT Ltd., which is the holding Company, whereas in the appellant No.1-subsidiary, the 1997 pay scales were implemented with effect from 28th February 2014 as aforesaid. The employees on the rolls of service on 28th February 2014 became entitled to pay revision. It was a revision implemented from the said date and that the former employees who were not in service on the said date, were not to receive the 1997 pay scales. The classification was between those who were in service on 28th February 2014 and those who had ceased to be in service on that date.
195.1 For implementing the 1997 pay scales from 28th February 2014 in HMT Machine Tools Ltd., the reason was that HMT Machine Tools Ltd., had been incurring losses since two decades. Balance sheet, it was stated, disclosed losses for many years. It was sick company. It is the case that the Company did not come under the eligibility criteria even to implement the 2007 pay scales on this ground alone.
5.1.1 As stated, the Union of India, Ministry of Heavy Industries and Public Enterprises, Department of Heavy Industry issued order dated 31st March 2014 for providing non-plan financial assistance for reviving HMT Machine Tools and to implement 1997 pay scale revision from the date of approval which was 28th February 2014. Paragraph 7 of the Department of Public Enterprises (DPE) Guidelines dated 25th June 1999, as reproduced in paragraph 3.1.2 above, inter alia indicated that the actual payments would depend on the capacity of the enterprise to pay and that the resource for meeting the increasing liability for salaries and wages must be internally generated and must come 20 from the improved performance in terms of productivity and profitability and not from Government subvention. 5.1.2 Budgetary support as mentioned above, was provided towards the additional impact on implementation of 1997 pay scales. Therefore, what the Union of India proposed for appellant No.1- HMT Ltd., was essentially a revival package and in the process, for implementation of 1997 pay scales for its employees as an incentive for the employees in that way.
5.1.3 Relevant it is to mention that before the impugned order dated 10th June 2014 came to be passed by the appellant No.1-HMT Machine tools, the Ministry of Heavy Industries and Public Enterprises, Department of Heavy Industry of Union of India issued an order dated 20th May 2014 in relation to 1997 pay revision, which is extracted herein, "(1) The pay revision of 1997 would be implemented strictly in accordance with the DPE Guidelines issued vide their O.M. No.2(49)/98-DEP(WC), dated 25.06.1999, w.e.f. 28.02.2014....(iii) Pay revision would be restricted only to the regular executives and non-unionised supervisors of the company who were on 21 the rolls of the company as on 28.02.2014."
5.2 Proceeding to discuss now with aid of facts of the case attended by legal principles on the issue, not only that Hindustan Machine Tools is a Company which did not fulfill the criteria mentioned in the DPE Guidelines for revision of pay scales, undisputedly it is a sick Company. The very rationale which emerged for implementing 1997 pay scales only with effect from 28th February 2014 and not from a date apriori is that in terms of financial resource capacity, it was not possible to implement the pay scales except from the said date. The Union of India through its Ministry of Heavy Industries took a decision to implement the same with budgetary support and revival plan. As could be succinctly seen from the decisions of the Apex Court referred to and highlighted in the succeeding paragraphs, if the operation of cut-off date for extension of a benefit including the pay scale scheme has a rationale of financial resource available with the Government, such cut-off date could not be termed as arbitrary or unreasonable, even as by virtue of the selection of such cut-off date, a class of the 22 employees may stand ousted from the conferment of the benefit.
5.3 Learned Single Judge indeed erred in relying on the decision in Maharashtra State Financial Corporation Ex-Employees Association & others (supra) as the facts involved in that case were different and distinguishable. In the present case, the appellant No.1- HMT Machine Tools Limited as well as in the appellant No.2- HMT Ltd., the pay revision was implemented from the respective dates of approval by Government of India without any discrimination. Those employees working in Maharashtra State Financial Corporation as on 29th March 2010 were given the benefit of pay revision with effect from 1st January 2006 and those who retired or died between 1st January 2006 to 28th March 2010 were not granted the benefit.
5.3.1 A close look of the facts involved in the decision in Maharashtra State Financial Corporation Ex- Employees Association & others (supra) would go to show that the set of facts and their dimensions were 23 entirely different. The revision was implemented with retrospective effect from 1st January 2006, as a result of the report of Fifth Pay Commission. The appellant association consisting of the employees who had either superannuated or opted for voluntarily retirement scheme challenged the judgment of the Bombay High Court complaining of discrimination of the decision dated 29th March 2010 of the Industries Department, Government of Maharashtra, which denied them the benefit of revision of pay scale as per the Fifth Pay Commission. The employees of the Corporation who had retired or died during the period from 1st January 2006 to 29th March 2010 were denied the benefit.
5.3.2 Noticeably the Supreme Court in Maharashtra State Financial Corporation Ex-Employees Association & others (supra) has unequivocally observed that the framing of a policy concerning fixation of pay for its employees, the extent of this revision and even the date of its implementation are the matters in the domain of Executive and is referable to the decision making power by the Executive.
245.3.3 The revision was given effect from 1st January 2006. In that case, the appellants had contended before the High Court that their services were continuous and that they had even received the benefit of interim revision pending finalization of the pay scales pursuant to the Pay Commission Report. The context was therefore different. The Supreme Court itself in the first paragraph highlighted the scope of the issues arising which included the manner of implementation and timing of applicability of the scheme. 5.3.4 A fine distinction has to be comprehended between a cut-off date simplicitor on the basis of a mere date of retirement which was the issue in Maharashtra State Financial Corporation Ex-Employees Association & others (supra), and on the other hand, the dividing line determined for implementing the benefit from particular date to the class of persons where a sick employer in the process of reviving itself to the road of economic health confer and implement the benefit rationalising its action to be guided by host of considerations, in which the financial constraint would be paramount.
25
6. Surveying the decisions relevant to and throwing light on the issue involved, in A.K. Bindal and another vs. Union of India and others [(2003) 5 SCC 163], the Supreme Court had an occasion to consider the issue of pay revision in Public Sector Enterprises in the context of financial capacity of the employer. It was observed that the financial capacity of the employer was to be an important consideration. In that case, it was a sick Government Company and the Court held that the employees of such Company cannot claim that their pay must be revised and that the Government should meet additional expenditure incurred due to such revision. 6.1 The Supreme Court observed that even if the entire share-holding of a Company is owned by the Central Government, it will not make the Company part of the Central Government and its identity would remain distinct from the Government. It was observed, "..... they have absolutely no legal right to claim that the Government should pay their salary or that the additional expenditure incurred on account of revision of their pay scale shuld be met by the Government. Being employees of 26 the companies it is the responsibility of the companies to pay them salary and if the company is sustaining losses continuously over a period and does not have the financial capacity to revise or enhance the pay scale, the petitioners cannot claim any legal right to ask for a direction to the Central Government to meet the additional expenditure which may be incurred on account of revision of pay scales." (para 17) 6.1.1 The Supreme Court emphatically negated the proposition that non-grant of pay revision would infringe the fundamental right under Article 21 of the Constitution. In paragraph 18, it is observed, "......but to hold that mere non-revision of pay scale would also amount to a violation of the fundamental right guaranteed under Article 21 would be stretching it too far and cannot be countenanced". It was further observed that "the salary structure of similarly placed persons working in other public sector undertakings may also be relevant". 6.1.2 The Court then proceeded to emphasise that financial viability or economic capacity are the crucial factors which the employer may not overlook, "The economic viability or the financial capacity of the employer is an 27 important factor which cannot be ignored while fixing 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. The material on record clearly shows that both FCI and HFC had been suffering heavy losses for the last many years and the Government had been giving a considerable amount for meeting the expenses of the organizations. In such a situation, the employees cannot legitimately claim that their pay scales should necessarily be revised and enhanced even though the organizations in which they are working are making continuous losses and are deeply in the red." (para 22) 6.2 While in Maharashtra State Financial Corporation Ex-Employees Association & others (supra), the decision in D.S.Nakara (supra) could be properly relied on in light of the facts involved in that case. In Government of Andhra Pradesh and others vs. N. Subbarayudu and others [(2008) 14 SCC 702], the Supreme Court examined the scenario of law post-D.S.Nakara (supra) with reference to the judicial review and the parameters on the basis of which the cut-off date for extending the benefits could be accepted as valid or becomes liable to be 28 rejected treating it to be arbitrary, as the case may be. 6.2.1 The two Judge Bench held that the cut-off date is an executive function based on several factors like economic conditions, financial constraints as well as administration and other circumstances. The Supreme Court observed inter alia that fixing cut-off date lies in the domain of Executive authority and the Court should not interfere in the fixation of cut-off date by the executive authority unless such order appears to be on the face of it completely discriminatory and arbitrary. The Supreme Court referred to its own earlier decision in State of Punjab vs. Amar Nath Goyal [(2005) 6 SCC 754]. 6.2.2 It was observed by the Supreme Court thus in N. Subbarayudu and others (supra), "6. No doubt in D.S. Nakara v.
Union of India this Court had struck down the cut-off date in connection with the demand of pension. However, in subsequent decisions, this Court has considerably watered down the rigid view taken in Nakara case as observed in para 29 of the decision of this Court in State of Punjab v. Amar Nath Goyal."
296.2.3 The Apex Court in N. Subbarayudu and others (supra) proceeded to observe even as under, "8. .......... It follows, therefore, that even if no reason has been given in the counter affidavit of the government or the executive authority as to why a particular cut-off date has been chosen, the court must still not declare that date to be arbitrary and violative of Article 14 unless the set cut-off date needs to some blatantly capricious or outrageous result." 6.3 The principle that the financial constraint is an important factor was reiterated by the Supreme Court in Punjab State Cooperative Milk Producers Federation Ltd. and another vs. Balbir Kumar Walia and others [(2021) 8 SCC 784]. The Supreme Court in this case considered the relevance of consideration of financial aspect classifying the employers into three categories namely, (i) employers in the organization sector, (ii) employers in public sector undertaking including Board and Corporations and other establishments and (iii) the Central and State Governments themselves as employers. It was observed that in determining and revisiting the wage structure, there are numerous complex factors, some of which are economic 30 and some spring social philosophy to be born in mind while determining wage structure.
6.3.1 Referring the third category of cases, namely the Central and State Government, the Supreme Court in terms stated, "In third category of cases, in respect of Central or State Government, factor of financial constraint of employer is relevant when liberalized benefits are granted from a particular date. In Amar Nath Goyal, (2005) 6 SCC 754, limiting benefits only to employees who had retired or died on or after 1.4.1995 after calculating financial implications was held to be justified. Financial and economic implications are very relevant and germane for any policy decision touching the administration of the Central/State Government." (para 30) 6.3.2 It was stated that the financial position of the employer has to be recognized. What is observed in respect of modulating and applying the wage structure could be correct for its principle and rationality, where the employer seeks to implement the scheme of benefit or applies the benefits like pay scales.
316.4 In A.K. Bindal (supra), the Supreme Court elaborated about the relevance of the financial capacity of the employer in fixing the wages, when it after referring to its own decision in South Malabar Gramin Bank v. Coordination Committee of South Malabar Gramin Bank Employees' Union and S.M.G.B. Officers' Federation [(2001) 4 SCC 101], as also of Associate Banks Officers' Association v. State Bank of India [(1998) 1 SCC 428], as also of All India Regional Rural Bank Officers Federation v. Government of India [(2002) 3 SCC 554] and observed that many ingredients go into the shaping and implementing the wages and that the economic capacity of the employer plays a crucial part in it. It was held that capacity to expand business or to earn profit also becomes relevant. It was pertinently observed that a simplistic approach granting high remuneration to one set of employees in the organization only because other organization had granted would be fraught with serious effects, often costing the efficiency and functioning of the organization.
6.4.1 The Court proceeded to observe, 32 "......it appears to be the consistent view of this Court that the economic viability or the financial capacity of the employer is an important factor which cannot be ignored while fixing 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. The material on record clearly shows that both FCI and HFC had been suffering heavy losses for the last many years and the Government had been giving a considerable amount for meeting the expenses of the organisations. In such a situation, the employees cannot legitimately claim that their pay scales should necessarily be revised and enhanced even though the organisations in which they are working are making continuous losses and are deeply in the red." (para 22) 6.5 The Division Bench of this Court in K.Srinivasa Iyer vs. Ministry of Heavy Industries and Public Enterprise, HMT (International) Limited, HMT Ltd. and another, which was Writ Appeal No.92 of 2022 decided on 6th February 2023 dealt with the controversy wherein the appellants who were the Manager (Legal) pay scale grade-E5 and Deputy Managers (Project) pay scale grade-E4 and had retired from service of the respondent company on 31st March 2011 and 30th November 2010, 33 wanted the benefit of very 1997 pay revision. The respondent No.2 Company had implemented the revised pay scales with effect from 1st April 2012 instead of 1st January 2007 as the implementation was from 2012. The petitioners who retired in 2010 and 2011, stood deprived of the benefit denying relief to the petitioners who wanted the retrospective operation of the benefits. 6.5.1 The Division Bench upholding the judgment of learned Single Judge referred to the decisions of the Supreme Court in N. Subbarayudu and others (supra) and Union of India vs. M.B. Mahananda Nair [(2020) 5 SCC 42], to hold it was a discretion of the executive officer to fix the cut-off date and that such date cannot be dubbed as arbitrary. It was observed that this Court cannot sit as an appellate authority over the decision taken by the executive authority of respondent Nos.2 and 3 to fix the cut-off date and it is the domain of the Executive Authority.
7. Reverting back to the present case, a bearing and germane aspect may be noticed. The employees of HMT, 34 Kalamassery Unit in Kerala State, one of the six units in appellant No.1-HMT Machine Tools, filed Writ Petition No.29442 of 2016 before the Kerala High Court raising the identical issue about date of implementing 1997 pay revision. The High Court of Kerala directed the Secretary, Ministry of Heavy Industries to nominate a representative of the petitioners and afford an opportunity of being heard to them and take decision as to when and how the 1997 pay revision could be and should be implemented in HMT Machine Tools Ltd., taking into account the financial position of the Company, and pass appropriate orders. After deliberations, it was concluded that it was not feasible to accept to the request of the petitioners for implementation of the 1997 pay revision with retrospective effect from 1st January 1997, as the Company was in financially precarious condition and it was difficult for it to keep afloat.
7.1 The Government of India, pursuant to the directions of the High Court of Kerala reiterated by order dated 7th September 2017 that the 1997 pay scales could be revised only prospectively from 28th March 2014 to be applicable to 35 the employees on rolls of the company on that date, to be not applicable to those employees retired prior to 28th March 2014. It will be useful to extract relevant part from the order dated 7th September 2017 passed by the Ministry in relation to the identically situated employees of the Kerala based unit in compliance of the directions of the High Court of Kerala.
7.1.1 The relevant portion extracted herein of para
2(4) of the order,
"2(4) On the basis of
recommendation of the Board of
Recruiting of Public Sector Enterprises (BRPSE); Government on 28-02-2014 approved the Revival Plans of HMT Machine Tools Limited which included the implementation of 1997 pay scales with one time relaxation of DPE guidelines and the same was implemented with prospective effect from 28-02-2014 along with rising the retirement age from 58 to 60 years in respect of 10% of employees retiring in any financial year to retain the skilled employees in key areas. The employees of HMT Machine Tools Ltd.
were not eligible for pay revision of 1997 as per the DPE guidelines. However, with a view to boost the morale of employees and revive the Company's performance, the Government approved pay revision as per the BRPSE's recommendations.
Accordingly, the 1997 pay scales were implemented prospectively with effect 36 from the date of approval of the proposal by the Government. No arrears were payable to the employees as the 1997 wage revision was implemented with prospective effect. In view of the above, payment of arrears of 1997 pay scales from 01-01-1997, the date from which it was applicable in the deserving profit making CPSEs and wage revision of 2007 as per DPE Guidelines is not admissible and practically infeasible in case of HMT Machine Tools Ltd."
7.1.2 In para-3, following was stated, "3. The respondent No.3 (Union of India /Department of Heavy Industry) has considered the application of the petitioners seriously and is of the view that the wage revision as per 1997 pay scales in HMT Machine Tools Ltd. with effect from the date of approval of the proposal on 28-02-2014 with the prospective effect, in relaxation of DPE guidelines was correct and it was applicable only for the employees who were on the rolls of the company as on that date. The Company has correctly implemented the Presidential directives on wage revision with effect from 28-02- 2014. It is further stated that such directions were also issued in respect of several ailing companies in this period where the benefits were given with the prospective effect. Any relaxation considered in this case is likely to also have an impact on other such cases where such decisions have been taken." 37 7.1.3 In the meeting convened by Union of India of all stakeholders, the issue was deliberated to culminate into the order of the Government of India dated 7th September 2017.
7.1.4 The situation thus obtained is that in relation to a segment of the identically situated employees of the Kerala Unit of HMT Machine Tools Ltd., the decision applying 1997 pay scales from 28th March 2014 stand to operate. It rests on the ground of financial condition of the Company which is a continuously loss making Company which was to be put on the road of revival.
8. While the petitioners relied on the aspect that in another subsidiary which is HMT (International) Ltd. the pay scales of 1997 were implemented from 1st January 1997, there was a conspicuous difference between the case of HMT (International) Ltd. and appellant No.2- HMT Machine Tools Ltd. The pay scale in HMT (International) Ltd. were implemented without any budgetary support from the Ministry. HMT (International) Ltd. fulfilled the criteria contemplated in the DPE Guidelines. The said Company 38 had been operating entirely in different sphere of business which was related to export of wide range of products. On the other hand, HMT Machine Tools as appellant No.1 is involved in the manufacturing of different machine tools with local use. HMT (International) Ltd. was a profit making Company, whereas HMT Machine Tools has been incurring heavy losses with huge liability piled up. Therefore, the comparison on this count and the ground raised by the petitioners on this score is could hardly gather any ground.
9. When the Government of India implemented 1997 pay scales in appellant No.1 Company with effect from 28th February 2014, all relevant considerations had gone into the decision. Since HMT Machine Tools Ltd., was a sick Company on the path of revival, it was not possible to apply the 1997 pay scales with regard to the past period from 1st January 1997 or any other anterior date, but it was decided to implement from the date of approval which was 28th February 2014. It is not possible to hold that when an evident reason of financial difficulty guided the decision to apply the pay scale from 28th February 2014 to those 39 employees on the rolls on that date, it could not be said that the same was unreasonable or arbitrary or that the classification resulting by virtue of selection of the date of 28th February 2014 was invalid in the context of Article 14 of the Constitution.
9.1 Thus on consideration of the attendant facts and aspects highlighted above and the principles of law applicable, it has to be held that when the Union of India, Ministry of Heavy Industries took a decision to revive the sick and loss making HMT Machine Tools Ltd., thus the appellant No.1 by introducing the non-plan financial assistance and in the process to implement for its class of employees 1997 pay scale revision from a particular date which was 28th February 2014, it was a rational exercise based on scientific process.
9.2 The conferment of benefit was required to be restricted. The germane factors were taken into account and the relevant criteria were gone into amongst those was the economic constraint and for that it was not possible to give the benefit of the pay scale revision from 1st January 40 1997 and the date of 28th February 2014 was applied which was in turn a date of approval. Resultantly, the employees on the rolls of the Company on that date became entitled to the 1997 pay scale revision to the exclusion of employees who fell on the wrong side of the said date, not in service and not on the rolls of the Company.
9.3 It is repeatedly held by the Supreme Court that fixation of pay scale is the executive function as also the cut-off date. The classification brought out in the present case was rational and reasonable based on relevant criteria permissible in law. In the facts of the case, the financial constraint is an acceptable criteria for having a particular date chosen for applying the 1997 pay revision. It had a rational nexus with the object proposed to be achieved, and the object was to ensure that the appellant No.1 Company which was a sick company does not get degenerated further in its functioning and existence. No fault could be pinned in the date applied for extending the pay scale revision.
10. For the aforesaid reasons and discussion, the judgment and order of learned Single Judge setting aside 41 the impugned decision could not sustain. No relief could have been granted to petitioners.
10.1 Resultantly, the judgment and order dated 4th July 2023 passed by the learned Single Judge whereby learned Single Judge directed respondent Nos.2 and 3 to extend the benefit of 1997 pay scale revision with effect from 1st January 1997 with consequential benefits and arrears is hereby set aside. Also set aside is the modified order dated 5th December 2023 granting pay scale revision with effect from 1st January 2007.
11. The present appeal accordingly stands allowed.
Sd/-
CHIEF JUSTICE Sd/-
JUDGE AHB
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