2007 Supreme(SC) 926

2007(5) Supreme 81
Supreme Court of India
(From Kerala High Court)
H.K. Sema & P.K. Balasubramanyan, JJ.
Chairman & M.D., K.S.R.T.C. — Petitioner
versus
K.O. Varghese & Ors. — Respondents
Decided on : 09-07-2007
Appeal (civil) 2916 of 2007
[@ Special Leave Petition (Civil) No. 19383-19390 of 2004]

Important Point
The communication notifying Government’s policy decision on a direction by the High Court on the question of implementing the recommendations of the Fifth Pay Commission in respect of the employees of KSRTC, in the absence of a regulation, could obviously be only in terms of Section 34 of the Act.

Headnote:a)Road Transport Corporation Act, 1950 – Section 34 – Already held that a direction issued under Section 34 by the Government is a general direction and the Government ought not to issue a specific direction with regard to any particular case; and until regulations are made with the previous sanction of the State Government, the directions given under Section 34 in respect of conditions of service have got the force of law – The communication notifying Government’s policy decision on a direction by the High Court to take a policy decision on the question of implementing the recommendations of the Fifth Pay Commission in respect of the employees of KSRTC, in the absence of a regulation, could obviously be only in terms of Section 34 of the Act. (Paras 11 and 14)

       (2003) 12 SCC 293 – Referred to.

       (1977) 2 S.C.R. 925; (1976) 2 S.C.C. 862 – Relied upon.

       b)Road Transport Corporation Act, 1950 – Section 34 – Being an autonomous Corporation established under the Road Transport Corporation Act, 1950 the KSRTC can regulate the service of its employees by making appropriate regulations in that behalf – Until such regulations are framed, it is entitled to take note of its financial health in considering whether a particular recommendation for enhanced pay or pension in respect of Government employees should be adopted by it and if it is to adopted by it, from what point of time, of course, subject to any direction that may be issued by the State Government in terms of Section 34. (Para 15)

       AIR 1994 SC 2221–Referred to.

       c)Kerala Service Rules – Part III – There is no compulsion on KSRTC on the mere adoption of Part III of KSR, to automatically give all enhancements in pension and other benefits given by the State Government to its employees – There is no provision in Part III of KSR containing such a stipulation – The direction to adopt Part III of KSR and the order adopting it by KSRTC would not denude KSRTC of its power to fix a cut-off date for adopting and implementing the recommendations of the Fifth Pay Commission. (Para 16)

       d)Road Transport Corporation Act, 1950 – Section 34 – The State Government’s communication “It has been decided that grant of benefits of the Fifth Pay Commission to the pensioners of KSRTC may be deferred for better times” means that the very question of adopting the recommendations of the Fifth Pay Commission stood postponed for better times – It is not possible to read and understand it as directing that pension had to be paid in terms of the recommendations of the Fifth Pay Commission but its actual payment may be postponed. (Para 17)

       e)Labour Laws – Pay revision – In view of the unsound financial condition of the KRSTC, the decision taken by the State Government not to implement the recommendations of the Fifth Pay Commission for KSRTC now and the KSRTC’s decision based on it by are fully justified – Certainly, the decision cannot be said to be vitiated by any extraneous consideration or perverse appreciation of the circumstances obtaining. (Para 18)

       Facts of the case :

       KSRTC is a Corporation established under the Road Transport Corporation Act, 1950. The Corporation was formed on 15.3.1965. On 22.3.1965, the employees of the Transport Department of the Government of Kerala were absorbed in KSRTC which became functional with effect from 1.4.1965. In the general instructions issued on 22.3.1965 in exercise of power under Section 34(1) of the Act, the Government while transferring the existing transport undertakings and their assets and liabilities to KSRTC, also made applicable to it, all orders and notifications thereunto issued by the Government, which were not inconsistent with the provisions of the Act, until their alteration or repeal. Part II thereof dealt with the staff.

       On 27.3.1984, the Government of Kerala authorized KSRTC to pay pension to its employees as per Kerala Service Rules, hereinafter referred to as “KSR”. On 5.5.1984, an order was issued by the Managing Director of KSRTC that all Corporation employees who retire after 1.4.1984 would be paid pension subject to the employees fulfilling the stipulations therein.

       Consequent to the IV Pay Commission a memorandum of settlement was agreed between the management and the employees unions. As per that memorandum, the benefits of the settlement were postponed till September 1991. The benefits were made available thereafter.

       Pursuant to acceptance of the V Pay Commission by the Government, the benefits relating to pension and allied matters were made applicable to persons who retired from service prior to 1988 and the wage revision was given effect to from 2.2.1990. The financial condition of KSRTC being precarious, it wrote to the Government seeking its approval for implementation of the recommendations of the Fifth Pay Commission in the Corporation. Ultimately, the State Government advised KSRTC to defer the implementation for better times.

       This led to litigation which ultimately reached the Supreme Court and it noticed that the High Court had not considered the effect of Part III of KSR being made applicable to KSRTC and whether the letter dated 16.5.1995 was in fact a direction in terms of Section 34 of the Act. This Court therefore directed the High Court to reconsider those aspects and also consider the question whether KSRTC as a statutory Corporation, did not have the power to fix a date different from the date fixed for the government employees for implementation of the recommendations of the Fifth Pay Commission regarding pensionary benefits and wage revision.

       Thus on remand, the High Court held that the adoption of Part III of KSR by KSRTC, was an exercise of legislation by reference and if and when the government adopted the recommendation of the Fifth Pay Commission in respect of its employees governed by Part III of KSR, KSRTC was also obliged to implement the recommendation in respect of its employees with effect from the same date. The Division Bench further held that the letter of the Government dated 24.9.1992, was not a direction in terms of Section 34 of the Act. The High Court also held that KSRTC did not have the competence to fix a different cut-off date in respect of its employees.

       Findings of the Court:

       Being an autonomous Corporation established under the Road Transport Corporation Act, 1950 the KSRTC can regulate the service of its employees by making appropriate regulations in that behalf. Until such regulations are framed, it is entitled to take note of its financial health in considering whether a particular recommendation for enhanced pay or pension in respect of Government employees should be adopted by it and if it is to adopted by it, from what point of time, of course, subject to any direction that may be issued by the State Government in terms of Section 34.