Summary
The Supreme Court held that once KSRTC pensioners are entitled to dearness relief linked to inflation, enhancing it at a lower rate (11%) than dearness allowance for serving employees (14%) violates Article 14. Both benefits serve the common object of offsetting inflation, which affects both groups alike, so the differentiation has no rational nexus to that object. Financial constraint may justify deferring benefits but not unequal rates once the benefit is granted.
Issues
- Whether, when dearness allowance and dearness relief are both payable and linked to inflation, the State or KSRTC can enhance dearness allowance for serving employees at a higher rate than dearness relief for pensioners.
- Whether financial constraints of KSRTC justify such differential rates.
Provisions considered
- Article 14, Constitution of IndiaApplying the twin tests of intelligible differentia and rational nexus, with the burden on the State, the Court held that because DA and DR share the object of mitigating inflation, which hits serving and retired employees equally, a lower rate of increase for DR had no nexus to the object and was discriminatory and arbitrary. (¶¶ 22, 23, 24, 25, 26, 27, 28)
- Article 16, Constitution of IndiaNoted, with Article 14, as striking at arbitrariness in State action relating to public employment. (¶ 22)
Held
- Article 14 permits classification only if it rests on an intelligible differentia having a rational nexus with the object sought to be achieved; the State must establish both, and arbitrary State action is itself a denial of equality. (¶¶ 22, 23, 24)
- Dearness allowance for serving employees and dearness relief for pensioners have the common object of meeting inflation, and inflation affects both alike; differentiating between them in the rate of increase has no rational nexus with that object and is discriminatory and arbitrary, violating Article 14. (¶¶ 21, 25, 26, 27)
- Decisions upholding cut-off dates or denial of new benefits to retirees on financial grounds do not apply where entitlement to the benefit is undisputed and the only question is the rate at which an inflation-linked benefit is enhanced. (¶¶ 26, 27)
- Financial crunch may justify deferring disbursement of benefits or fixing different implementation dates, but once a decision is taken to provide and increase inflation-linked allowances, fixing a higher rate of increase for serving employees than for retirees is arbitrary and violates Article 14. (¶ 28)
Result
Appeals by the State of Kerala and KSRTC dismissed; High Court Division Bench judgment granting pensioners dearness relief at par affirmed; no order as to costs; pending applications disposed of.