ODISHA STATE FINANCIAL CORPORATION VS ODISHA STATE FINANCIAL CORPORATION EMPLOYEES UNION & ORS.

ODISHA STATE FINANCIAL CORPORATION VS ODISHA STATE FINANCIAL CORPORATION EMPLOYEES UNION & ORS.

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले


NON-REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
 CIVIL APPEAL NO(S). OF 2022
 (Arising out of SLP(Civil) No(s). 1111 of 2020)
ODISHA STATE FINANCIAL CORPORATION ….APPELLANT(S)
VERSUS
ODISHA STATE FINANCIAL CORPORATION
EMPLOYEES UNION & ORS. ….RESPONDENT(S)
J U D G M E N T
Rastogi, J.
1. Leave granted.
2. The instant appeal has been preferred by the Odisha State
Financial Corporation assailing the judgment of the Division Bench
of the High Court dated 31st January, 2019 directing the Corporation
to pay the arrear benefits under the revised scale of pay from 1st April,
2
2012 in terms of the decision of the Board of Directors of the
Corporation.
3. The brief facts of the case culled out from the record are that
the appellant is a statutory corporation, namely, Odisha State
Financial Corporation(for short “OSFC”). The State Government
constituted a Fitment Committee in Finance Department Resolution
dated 9th September, 2008 to examine revision in the pay scale of the
State Government employees and on the recommendations made by
the Committee constituted by the Government vide notification dated
16th December, 2008, revised scales of pay were introduced for the
State Government employees.
4. After the revised scales of pay were introduced by the
Government of Orissa for the State Government employees, as usual,
there was a demand for revision of pay as per recommendations of
6th Central Pay Commission by the State Public Sector
Undertakings(hereinafter being referred to as the “PSUs).
Accordingly, the Government of Orissa, consequent upon revision of
scale of pay of whole time State Government employees as per
recommendations of 6th Central Pay Commission by introduction of
Orissa Revised Scales of Pay Rules, 2008(hereinafter being referred
3
to as the “ORSP Rules 2008”) considered the revision of scale of pay
of State PSUs w.e.f. 1st January, 2006 vide its Resolution dated 8th
May, 2009, subject to fulfilment of the eligibility criteria as per ORSP
Rules 2008.
5. The Resolution dated 8th May, 2009 by Government of Orissa
regarding revision of scale of pay of State Public Sector Undertakings
on the basis of ORSP Rules, 2008 relevant for the purpose is
reproduced as under:-
“….
Keeping in view the demand of various service associations of
the State PSUs and having regard to the present wide disparity
in the pay structures of both executive and non-executive cadres
of different PSUs, the state government have been pleased to
allow the revision of scale of pay of State PSUs w.e.f. 01.01.2006
subject to fulfilment the following eligibility criteria as per ORSP
Rules, 2008:-
(i) The Public Sector Undertakings must be a profit making
one and its balance sheet must show cumulative profit
at least for the last consecutive two years.
(ii) The Public Sector Undertaking must not have defaulted
in payment of statutory dues of the employees such as
provident Fund and ESI etc.
(iii) The Public Sector Undertaking must not have defaulted
in payment of loan to any financial institution or State
Government. The Public Sector Undertaking must be
up to date in payment of guarantee fee/royalty/divided
to the State Government, whichever is applicable.
4
(iv) The Public Sector Undertaking must have completed
statutory audit upto date.
(v) The Public Sector Undertaking has to meet the
expenditure for payment of revised scale of pay to the
employees from its internal resources and must not
depend on Government for any financial support on
such expenditure.
The eligible PSUs who satisfy the above eligibility norms will first
obtain approval of their Board of Directors regarding fitment of scale
of pay of their employees post wise and cadre wise, on the basis of
ORSP Rules, 2008 and send the same to their Administrative
Department. The concerned Administrative Department will
examine the suitable of the said PSU on the basis of above five
conditions and send to this Department after getting prior approval
of the Finance Department for sanction of the same will
modification, if any, on case to case basis.
This has been concurred in by the Finance Department vide their
UOR No. 1902 dt. 14.02.2009.”
6. In terms of the Resolution of the Government of Orissa dated
8th May 2009, apart from fulfilment of the eligibility criteria as
referred to therein, taking note of the financial conditions of PSUs
and whether the undertakings be in a position to meet the
expenditure by payment of revision scale of pay, it was clarified that
the payment of revision of scale of pay to the employees will be meted
out by PSUs from its internal resources and must not depend upon
Government for any financial assistance on such expenditure. At the
given time, it was also clarified that the eligible PSUs who satisfy the
5
above eligibility norms, in the first instance, will first seek approval
of the Board of Directors regarding fitment of scale of pay of their
employees on the basis of ORSP Rules, 2008 and, thereafter, the
suitability of the said PSU be examined by the concerned
Administrative Department which, in the instant case, is Micro Small
and Medium Enterprises(in short “MSME”), will examine the
suitability on the basis of the conditions been fulfilled and send back
to the Department after getting prior approval of the Finance
Department for sanction of the same with modification, if any.
7. Indisputedly, in the instant case, although the
recommendations made by the Committee of the Corporation were
approved by the Board of Directors in its 368th meeting held on 18th
June, 2012 but the administrative department in its meeting held on
10th August, 2016 did not approve the same.
8. The extract of the minutes of the meeting held under the
Chairmanship of the Principal Secretary of the Government of India,
MSME Department dated 10th August, 2016 relevant for the purpose
is reproduced as under:-
“…..
Form the records, it is revealed that the OSFC has defaulted to the
tune of Rs. 8.28 crore towards payment of loan to SIDBI. Besides,
6
presently, the total salary burden of OSFC is about Rs. 68.00 lakh
per month which is met out of day to day recovery. It was also
revealed that the OSFC employees have not received their salary for
last three months viz. (a) May (b) June (c ) July of 2016 as there is
no fund. The OSFC is required to pay the loan of SIDBI in
instalments which the OSFC has failed to pay and has become a
defaulter. This has created an adverse situation because the default
in the payment of loan to SIDBI has resulted in breach of agreement.
So the OSFC is not meeting the criteria stipulated by both Finance
Department and PE department of the Government for payment of
Revised Pay Scale.
Accordingly, after careful deliberations on the issues involved, it is
felt that the OSFC is not running under severe financial constraints
and yet to fulfil the eligibility criteria as stipulated by the Public
Enterprises Department vide their Resolution No. 1386 dated
8.5.2009. Although the Board of Directors of OSFC resolved in their
meeting held on 18.06.2012 to implement the Revised Pay Scale
w.e.f. 01.04.2012, but the same was not with the PE Department
concurrence. The present situation of the Corporation is not
conducive for allowing the revised pay as PE Department/Finance
Department guidelines. Therefore, after careful consideration, as
per the direction of Hon’ble High Court, in PWC No. 6469/2014, it
is decided that the proposal for implementation of Revised Pay Scale
to the employees of OSFC may not be considered at this stage. The
meeting ended with a vote of thanks to the Chair.”
9. Since the recommendations were not approved by the
Administrative Department, the stage of seeking approval by the
Finance Department did not arise at this stage, the writ petition came
to be preferred by the employees Union before the learned Single
Judge under Article 226 of the Constitution of India.
10. The learned Single Judge recorded the statement of the State
counsel that the Administrative Department in the minutes of
7
meeting dated 10th August, 2016 has decided not to implement the
scale of pay as suggested by the Board still proceeded on the
statement made by the counsel appearing for the Corporation that
the Corporation would pay the arrear benefits under revised scale of
pay w.e.f. 1st April, 2012 as per the decision of the Board and
disposed of the writ petition under its Order dated 10th April, 2018.
11. It may be relevant to note at this stage that the revised scale of
pay under ORSP Rules, 2008 could not have been implemented
without being approved by the Administrative Department and the
Department of Finance, Government of Orissa. Thus, the directions
of the learned Single Judge under Order dated 10th April, 2018 in
itself were not sustainable.
12. When the appeal came to be preferred at the instance of the
appellant, the Division Bench of the High Court, even after recording
the statement of the counsel that the recommendations of the
Corporation not being approved by the Administrative
Department/Finance Department, still dismissed the writ appeal on
the premise that the financial condition of a State functionary is not
a ground to refuse legitimate dues of its employees without noticing
the fact that the ORSP Rules, 2008 introduced for the State
8
Government employees vide notification dated 16th December, 2008
could not have been extended to PSUs and particularly to the
employees of the Corporation, unless recommendations made by
PSUs being approved by the concerned administrative Department,
i.e., MSME, in the instant case, and after getting approval of the
Finance Department for sanction of the scheme.
13. Indisputedly, as already observed, the recommendations were
neither approved by the Administrative Department nor the Finance
Department, Government of Orissa. In the given circumstances, the
recommendations made by the Corporation/Board of Directors to
implement the ORSP Rules, 2008 to the employees of the Corporation
were not available for its implementation and this has been
completely overlooked by the Division Bench of the High Court while
dismissing the appeal filed by the present appellant.
14. Learned counsel for the respondents has tried to justify that
there was no such financial loss to the Corporation and the profit
and loss account for the years 2005-2006 to 2008-2009 shows the
profits earned by the Corporation. Although, it may not have any
material bearing on the issue for our consideration but one of the
condition of eligibility as being resolved by the Government of Orissa
9
in its Resolution dated 8th May, 2009 for taking decision to implement
ORSP Rules, 2008 to the employees of the State PSUs to keep in view
the previous balance sheets of the undertakings which must show
cumulative profit at least for the last consecutive two years and the
material placed on record justify that the balance sheet of the
Corporation reflects accumulated financial losses in the preceding
years.
15. We have heard learned counsel for the parties and, in our
considered view, the recommendations made by the Corporation in
introducing the ORSP Rules, 2008 for the employees of the
Corporation in the absence of being approved by the Administrative
Department, i.e., MSME, in the instant case, and by the Finance
Department were not available for implementation and the finding
which has been recorded by the learned Single Judge and affirmed
in appeal, in our considered view, is not sustainable and deserves to
be set aside.
16. Consequently, the appeal succeeds and accordingly allowed.
The order of the Division Bench dated 31st January, 2019 is quashed
and set aside. No costs.
10
17. Pending application(s), if any, stand disposed of.
 ……………………….J.
(AJAY RASTOGI)
 ……………………….J.
(SANJIV KHANNA)
NEW DELHI
APRIL 05, 2022

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