Judgment · High Court · 2007

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 12.4.2007CORAM:THE HONOURABLE MR.JUSTICE DHARMARAO ELIPEANDTHE HONOURABLE MR.JUSTICE S.TAMILVANANWrit Petition Nos.28349, 28350 and 29180 of 2004W.P.Nos.28349 and 28350 of 2004:The Madras High Court Staff Association, represented by its Secretary W.Solomon, Chennai-104.. PetitionerVs.

1.Government of Tamil Nadu, rep.by The Chief Secretary to Government, Secretariat, Chennai-600009.

2.Development Commissioner & Principal Secretary to Government Finance (Pay Cell) Department, Secretariat, Chennai-600009.

3.The Accountant General (A&E), Teynampet, Chennai-600018.

4.The Registrar General, High Court of Madras, Chennai-600104.... RespondentsW.P.No.29180 of 2004:Government College Teachers" Manram (Tamil Nadu)represented by its General SecretaryM.Mohamed Ibrahim, No.4/8, Lenin Street, Chitlapakkam, Chennai-600064.... PetitionerVs. https://hcservices.ecourts.gov.in/hcservices/

Government of Tamil Nadu, represented by The Chief Secretary to Government, Secretariat, Chennai-600009.

Development Commissioner & Principal Secretary to Government Finance (Pay Cell) Department, Secretariat, Chennai-600009.

The Accountant General (A&E), Teynampet, Chennai-600018.... Respondents* * *W.P.No.28349 of 2004 has been filed under Article 226 of the Constitution of India, praying to issue a Writ of Certiorarified Mandamuscalling for the records relating to the impugned Order in G.O.Ms.No.414Finance (Pay Cell) Department, dated 31.7.2004 issued by the second respondent and quash the same and direct the first and second respondents to pay the entire arrears of pay revision for the period from 1.1.1996 to31.3.1998 forthwith with interest at 12% p.a. from the date they became due and till the date of payment in cash.W.P.No.28350 of 2004 has been filed under Article 226 of the Constitution of India, praying to issue a Writ of Certiorarified Mandamuscalling for the records relating to the impugned order in G.O.Ms.No.413Finance (Pay Cell) Department, dated 31.7.2004 issued by the second respondent and quash the same and direct the first and second respondents to pay the entire arrears of pay revision for the period from 1.1.1996 to31.3.1998 to all those who retired during the period from 1.1.1996 to31.3.2004 with interest at 12% in cash from the date they became due and till the date of payment in cash.

During arguments, the learned Advocate-General stressed on the point that due to financial restrains, the Government has decided to pay the pay commission arrears in instalments and transferred the 60% pay commission arrears along with interest upto 31.3.2003 to the non-interestbearing deposit head of account to avoid further accumulation of interest. To support the case of the respondents in earmarking the cut-off date as31.3.2003, the learned Advocate-General has relied on the judgments of the Apex Court in (1) T.N.ELECTRICITY BOARD vs. R.VEERASAMY AND OTHERS [(1999)3 SCC 414] and (2) STATE OF BIHAR AND OTHERS vs. BIHAR PENSIONERS SAMAJ[(2006) 5 SCC 65].

On the contrary, the learned counsel for the petitioners submitted that financial inability cannot be a legally sustainable reason to evade payment of arrears and relied on a Division Bench judgment of this Courtin THE MADRAS HIGH COURT STAFF ASSOCIATION, REPRESENTED BY ITS SECRETARY,Mr.W.SOLOMON, CHENNAI vs. GOVERNMENT OF TAMIL NADU, REPRESENTED BY THECHIEF SECRETARY TO GOVERNMENT, SECREATARIAT, CHENNAI AND OTHERS (2004-I-MLJ 223).

Considering all the facts and circumstances of the case and upon hearing the learned counsel for both, the point that arises for consideration is 'whether the respondents are justified in transferring the pay commission arrears payable to each employee calculated upto31.3.2003 with interest to a non-interest bearing public deposit account'?7. Provident Fund is an effective old-age survivorship benefit and abeneficent measure enacted by the Government for the welfare of the employees. It is intended for the better future of the employees on their retirement and also for their dependents in the event of the death of the employee, during his employment. A Government servant, who is continuously employed for not less than six months, will be required to subscribe to the Provident Fund, irrespective of the fact whether he is atemporary or a regular Government servant. The contribution by an employee towards the Provident Fund is compulsory in nature and the minimum rate of subscription, fixed by the Authorities, is payable by each subscriber based on his emoluments. Voluntary increase of the subscription over and above the rate of subscription is made permissible https://hcservices.ecourts.gov.in/hcservices/ by an employee, but not to reduce the subscription below the minimum rate of subscription. The payment of subscription, withdrawal and all other matters connected to the Provident Fund are governed by the ProvidentFunds Act, 1925 and the General Provident Fund (Tamil Nadu) Rules framed by the Government of Tamil nadu in exercise of the powers conferred by Rules 41, 42 and 44(d) of the Civil Services (classification, Control and Appeal) Rules. (so far as the employees of the Tamil Nadu StateGovernment are concerned).

Provident Fund is intended to provide for the welfare and financial security of the contributor-employee. The moment the contribution is terminated, the person concerned becomes entitled to get the amount with the accrued interest. If there is delay, the custodianviz. the Government cannot morally and legally claim the unjust enrichment accruing on the contribution by way of interest on the amount contributed and lying in the credit of the employee. Being governed by the statute, it is a compulsory deposit payable only after completion of service. True, the rules provide for advances. Therefore, the Government is only the custodian. The custodian has to respect the trust and it shall not misappropriate.

When such is the avowed object of the introduction of the GeneralProvident Fund by the Government to its employees, making it a compulsory subscription, even to the temporary employees, a duty is cast upon the Government to maintain the said fund, a life saving of the employees, properly, keeping up their promise of paying interest, at the rate fixed by the Government itself, to all the payments made by the employees towards the contribution to the Provident Fund and any deviation from the said promise would not only be detrimental to the interest of the employees, but also a promissory estoppel for the Government.

Doctrine of 'promissory estopel' has been evolved by the courts, on the principles of equity, to avoid injustice. The doctrine of'promissory estoppel' or 'equitable estoppel' is well established in the administrative law of the country. The doctrine represents a principle evolved by equity to avoid injustice. The basis of the doctrine is that where any party has by his word or conduct made to the other party an unequivocal promise or representation by word or conduct, which is intended to create legal relations or effect a legal relationship to arisein the future, knowing as well as intending that the representation, assurance of the promise would be acted upon by the other party to whom it has been made and has in fact been so acted upon by the other party, the promise, assurance or representation should be binding on the party making it and that party should not be permitted to go back upon it, if it would be inequitable to allow him to do so, having regard to the dealings, which have taken place or are intended to take place between the parties. It has been settled by the Court of law that the doctrine of promissory estoppelis applicable against the Government also particularly where it is https://hcservices.ecourts.gov.in/hcservices/ necessary to prevent fraud or manifest injustice.

In MOTILAL PADAMPAT SUGAR MILLS CO.LTD. Vs. STATE OF U.P. [(1979)2 SCC 409], the doctrine of promissory estoppel was applied to the executive action of the State Government and also denied t the State the doctrine of executive necessity as a valid defence. It was held that 'ina republic governed by the rule of law, no one high or low, is above the law. Every one is subject to the law as fully and completely as any other and the government is no exception. The Government cannot claim immunity from the doctrine of promissory estoppel'.

In the case on hand, though the Government has offered interest for the pay commission arrears till 31.3.2003, thereafter, they have transferred the said amounts to a non-interest bearing accounts, which caused grievance to the petitioners. The only strong plea raised on the part of the Government is financial constraints on the part of the Government. The learned Advocate-General relied on the judgment of aThree Judge Bench of the Apex Court in T.N.ELECTRICITY BOARD vs.R.VEERASAMY AND OTHERS [(1999) 3 SCC 414], wherein while considering the question 'whether the appellant Electricity Board was bound to extend benefit of pension scheme introduced by it w.e.f. 1.7.1986 to all employees, who already stood retired before this date and had availed of benefit of contributory Provident Fund Scheme (CPF Scheme)', the ApexCourt has held that 'the appellant-Board has not acted illegally or contrary to law in introducing pension scheme prospectively from 1.7.1986and the employees who retired before 1.7.1986 cannot compel the appellant-Board to extend benefit of pension scheme with retrospective effect.'

This judgment can be factually distinguishable from the facts of the case on hand. In the case on hand, the Government has, all of asudden, transferred the pay commission arrears of the employees to a non-interest bearing account, after 31.3.2003. It is to be mentioned that all along the amount is lying in the GPF Account of the employees, in other words, under the control of the Government. It is not the question of giving a retrospective application to a Scheme, as was in the case before the Supreme Court, but only an arbitrary exercise of the power by the Government in going back their promise, without notice or intimation to any of the subscriber. Therefore, the above judgment of the Apex Court isin no way helpful to the case of the Government.

Likewise, the learned Advocate-General also relied on a judgment of the Apex Court in STATE OF BIHAR AND OTHERS vs. BIHAR PENSIONERS SAMAJ[(2006) 5 SCC 65], wherein, when the State Government declined to pay the arrears from 1.1.1986 on the ground of financial consideration, the ApexCourt held that 'fixing of a cut-off date for granting of benefits is well within the powers of the Government as long as the reasons therefor are not arbitrary and are based on some rational consideration.' https://hcservices.ecourts.gov.in/hcservices/

We are in conformity with the proposition of law that the StateGovernment has power to fix a cut-off date. But, in this case, on the ground of financial constrains, the Government has not paid the pay commission arrears to the employees, but deposited them in the individualProvident Fund accounts of the employees in a interest bearing account. But, suddenly and arbitrarily, the amounts were ordered to be transferred to a non-interest bearing account. As has already been observed, it has been done in an arbitrary exercise of the power by the Government, bygoing back their promise, without notice or intimation to any of the subscriber. Therefore, the above judgment of the Apex Court cannot bemade applicable to the facts of the case and the same is well distinguishable from the facts of the case.

The learned Advocate General strongly contended that there is no culpable delay or intention on the part of the Government to deny interest to the employees. It is not the question of culpability or bona fidedelay that should be considered, but the curtailment of an existing right of a Government servant, without affording any opportunity of being heard to him.

In STATE OF MADHYA PRADESH vs. RANOJIRAO SHINDE AND ANOTHER (AIR1968 SC 1053), the Constitutional Bench of the Supreme Court has held that: "Any legislation which empowers the State to appropriate someoneelse's property for itself solely with a view to augment theresources of the State Government cannot be construed as areasonable restriction in the interest of the general public....If Art.19(5) is interpreted to mean that the State can take by authority of law anyone's property for the purpose of increasing its estates or revenues guarantee given by the Art.19(1)(f)would become illusory. "

In HINDUSTAN PETROLEUM CORPORATION LIMITED vs. H.L.TREHAN ANDOTHERS etc. [(1989) 1 SCC 764, the Apex court has held that"There can be no deprivation or curtailment of any existing right, advantage or benefit enjoyed by a Government Servantwithout complying with the rules of natural justice by giving the government servant concerned an opportunity of being heard and that any arbitrary or whimsical exercise of powerprejudicially affecting the existing conditions of service of aGovernment servant will offend against the provision of Art.14of the constitution. "

By applying the above principles laid down by the Apex Court, it can be held that the Government cannot enrich itself at the cost of its employees i.e. by denying the interest on the Pay Commission arrears deposited to the respective Provident Fund accounts of the employees, without giving any opportunity for the employees to put forth their https://hcservices.ecourts.gov.in/hcservices/ grievances. Thus, the actions of the Government are hit by their arbitrary and whimsical exercise of powers.

The other ground raised on the part of the respondents is that out of about 12 lakh employees, excluding the petitioner Association, who are around 1500 members, the other employees have fully appreciated the huge financial burden on the State exchequer and the policy of the Government to allow interest on 60% Pay Commission arrears only upto31.3.2003 and to make payments of the said arrears to all the serving employees in three instalments commencing from August 2007 and as such, the plea of the petitioners to allow interest does not deserve consideration. The argument of the respondents appears to be that'might is right'. Just for the reason that other employees of the Government have not raised such an issue before this Court, it cannot be said that the rights of the employees, agitated by the persons aware ofit, should be denied on such a flimsy stand of the Government that might is right. Therefore, we are unable to appreciate the stand taken by the Government.

Except to mention that there are financial constrains on the part of the Government, no acceptable reason has been offered on the part of the Government for transferring the amounts to a non-interest bearing account. It is also a well established principle of law now that financial inability cannot be a legally sustainable reason for the Government to go against their promise and denying the legally flown benefits of its employees.

The learned Advocate-General also brought to our notice that now the Government has permitted the employees to withdraw the pay revision arrears in three equal annual instalments in cash commencing from August,2006. But, however, we are unable to appreciate action taken by the Government in transferring the amounts of the employees to a non-interestbearing account, from a interest bearing account much against the interest of the employees and going back its own promise.

The learned Advocate General contended that if the plea of the petitioner association is considered, then the same have to be extended to all the serving employees also till the final payment is made to them in2008-2009 and the additional interest commitment on the 60% of PayCommission Arrears of Rs.1035.29 crores at 8% p.a. interest works out toRs.516.32 crores since a large number of employees were involved and therefore, the cost will be heavy. A similar type of submission was well meted out and nullified by the Apex Court in KATHEEJA BAI vs.SUPERINTENDING ENGINEER [(1984) 3 SCC 518] wherein it has been held: "There was then the usual lament that a large number of employees were involved and, therefore, the cost will be heavy. We do not understand this argument at all. Does it mean that beneficent legislations and beneficent schemes must be confined https://hcservices.ecourts.gov.in/hcservices/ to small establishments employing a few workers only? On the other hand, it is misleading to say that the cost is heavy. Thecost is made to appear heavy divorced from the size of the establishment. If the establishment is huge and if a large number of workmen are employed , the total wage-bill may appear to be heavy, but is it really so? Is it disproportionate to thesize of the establishment, its resources, its revenues and its other expenditure? Is the individual wage-bill also very high?To talk of heavy cost without reference to other circumstances is to present an entirely unfaithful picture. We need make no further comment. "We need not have to add anything further to reject the argument of the learned Advocate General and as already adverted to above, the above judgment of the Apex Court is a straight answer to the argument advanced by the learned Advocate General.

The learned Advocate General also contended that it is a policy decision of the Government to transfer the amounts to a non-interestbearing account. In this context, it is to be mentioned that it is now awell established principle of law that there are no excluded categories of State policy or practice, which can claim exemption from the judicial consideration, vide O.KONALOV vs. COMMANDER, COAST GUARD REGION [(2006) 4SCC 620].