Regularization Date and Pay Scale are Employer's Prerogative, No Parity Across Different Regularization Periods: Supreme Court - 2025-03-18

Supreme Court Affirms Employer's Discretion in Setting Regularization Dates and Pay Scales

New Delhi, India – In a recent judgment, the Supreme Court of India has reiterated the principle that the date of regularization and the grant of pay scales for employees are primarily the prerogative of the employer. The court set aside orders of the Rajasthan High Court that had directed the Rajasthan State Electricity Board (RSEB) to grant regular pay scales to workers from an earlier date than their regularization.

The case arose from an appeal against a judgment of the Division Bench of the High Court of Judicature for Rajasthan, Jaipur Bench, which had upheld a Single Judge's order. Both lower court orders had favored daily wage workers who sought regular pay scales from April 1, 1983, instead of April 1, 1989, the date from which they were actually regularized.

Background of the Dispute

The respondents in the appeal were initially engaged as unskilled laborers on daily wages by the RSEB in 1980. Due to financial constraints and surplus staff, RSEB froze its employee strength as of May 31, 1980. While these workers were declared "work charged employees" for a brief period in 1981, they claimed to have completed two years of service by March 31, 1982.

Later, RSEB issued orders in 1987, 1988, and 1989 to screen and regularize workers who had completed two years of service. Based on the recommendation of a Screening Committee, the respondents were regularized and granted regular pay scales from April 1, 1989.

Dissatisfied with the effective date of the regular pay scale, the workers approached the Rajasthan High Court in 1990, arguing for parity with employees regularized in earlier periods, specifically seeking pay scales from April 1, 1983. The High Court ruled in their favor, a decision that was subsequently upheld by the Division Bench, leading to the present appeal before the Supreme Court.

Supreme Court's Observations and Ruling

The Supreme Court bench, after hearing arguments from both sides, emphasized the established legal position that employers have the discretion to determine the date of regularization and pay scale implementation. The court cited its previous ruling in Jodhpur Vidyut Vitran Nigam Ltd. V. Nanu Ram and Others (2006) which underscored that numerous factors influence this decision, including:

• Nature of work
• Number of vacant posts
• Employer's financial condition
• Additional financial burden
• Suitability of workmen
• Initial appointment process

The Supreme Court highlighted that "no parity can be claimed based on regularization made in respect of the earlier years," as each regularization exercise depends on the specific circumstances and resources at that time. Referring to Jodhpur Vidyut Vitran Nigam Ltd. V. Nanu Ram and Others , the judgment reiterated that the constitution of a Screening Committee is at the discretion of the employer and not an annual obligation.

The Court quoted extensively from The Rajasthan Rajya Vidyut Utpadan Nigam Limited, Kota v. Shri Karam Singh (2016), reinforcing that while a worker might be entitled to a regular pay scale, its grant is contingent upon the "availability of a post carrying that pay-scale." In this case, as the post became available from April 1, 1989, the regularization date, the High Court's decision to grant pay scales from an earlier date (1983) was deemed unsustainable.

Final Verdict

Ultimately, the Supreme Court allowed the appeal, setting aside the judgments and orders of both the Division Bench and the Single Judge of the Rajasthan High Court. The court concluded that the High Court was "not justified in directing payment of arrears and in fixing the grant of regular pay-scale w.e.f. 01.04.1983." The initial regularization and pay scale grant effective from April 1, 1989, by RSEB was upheld, reinforcing the employer's prerogative in such matters. The parties were directed to bear their own costs.

This judgment clarifies the legal position regarding regularization and pay scales, emphasizing the employer's discretion and cautioning against claims of parity based on different regularization periods. It underscores the importance of factors like financial viability and post availability in determining the effective date of regularization and associated benefits.