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