Scheme-Based Contractual Employees Cannot Be Subjected to 'Artificial Breaks' in Service, But Have No Right to Regularization: Madras High Court - 2025-10-03

Madras High Court Protects Contractual Workers from 'Artificial Breaks' in Service, Denies Salary Arrears

Chennai, TN - In a significant ruling affecting contractual employees under government schemes, the Madurai Bench of the Madras High Court has directed the Tamil Nadu government to cease the practice of imposing "artificial breaks" in service. While providing this relief, the Court, led by Dr. Justice A.D. Maria Clete, upheld the government's decision to divert unspent salary arrears and reiterated that scheme-based appointees have no claim to regularization.

The judgment was delivered in a writ petition filed by D. Annalakshmi and 119 other individuals employed as Block and Assistant Technology Managers under the centrally-sponsored Agricultural Technology Management Agency (ATMA) scheme.

Background of the Case

The petitioners were appointed on a contractual basis across various districts in Tamil Nadu under the ATMA scheme, which is jointly funded by the Central and State governments. They challenged a Government Order, G.O.(D).No.171 dated 19.06.2017, which permitted the state to divert ₹25.82 crore—funds earmarked for their revised salary arrears from April 2014 to November 2016—to other agricultural extension activities.

The petitioners sought to quash this order and demanded the disbursement of their salary arrears, regularization of their services, and an annual 10% salary enhancement as per the scheme's guidelines.

Arguments from Both Sides

The petitioners argued that the Central Government had revised their pay structure in 2014, increasing the salary for Assistant Technology Managers to ₹15,000 and Block Technology Managers to ₹25,000 per month, with a 10% annual increment. However, the State Government failed to implement this revision until November 2016. They contended that the subsequent diversion of the accumulated arrears, which rightfully belonged to them, was illegal.

In response, the State Government asserted that the petitioners, being contractual appointees, had no vested right to the arrears. They stated that the revised pay scale was implemented only prospectively from 23.11.2016. The government defended the diversion of the ₹25.82 crore, arguing that the funds were utilized for the welfare of farmers under the same ATMA scheme and that the state exchequer has the authority to allocate unspent funds for other useful purposes.

Court's Reasoning and Precedent

Dr. Justice A.D. Maria Clete's judgment heavily relied on a previous common order passed by the same court on 22.03.2018 in a batch of similar writ petitions. By adopting the reasoning from the earlier order, the Court addressed the key issues raised by the petitioners.

On the matter of fund diversion, the Court found merit in the government's submission. It was observed that since the petitioners' rights were not directly infringed by the government's decision to reallocate funds within the same scheme, the challenge to the Government Order could not be sustained.

However, the Court took a strong stance against the state's practice of creating artificial breaks in the service of contractual employees—a method often used to prevent claims of continuous employment. Citing landmark Supreme Court judgments, including Rattan Lal & Others Vs. State of Haryana & Others (1985) and MD. Abdul Kadir & Another Vs. Director General of Police, Assam & others (2009) , the Court highlighted that the state, as a model employer, should not resort to such unfair labour practices.

The Court quoted the pivotal directions from the earlier 2018 order:

"(i). It is made clear that the scheme appointees could have no claim for regularisation. But then so long as the scheme continues, subject to one being fit and not found guilty of any misconduct, the scheme appointee can continue in the said post so long as the scheme is in force.

(ii). ...This Court makes it clear that the practice of giving artificial breaks shall be discontinued henceforth. The benefits payable to the petitioners/Scheme appointees in terms of the scheme norms, shall be disbursed. In view of the comprehensive nature of the relief given to the petitioners herein, there shall be of no claim for payment of past arrears."

Final Verdict and Implications

Disposing of the writ petition, the Madras High Court ordered that the case be governed by the same terms laid out in the 2018 judgment.

The final decision implies: 1. No Arrears: The petitioners' claim for salary arrears for the period of 01.04.2014 to 22.11.2016 was denied. 2. No Regularization: The Court affirmed that contractual employees under a scheme cannot claim regularization of their services. 3. Job Security: Petitioners can continue in their posts as long as the ATMA scheme remains in force, provided they are fit for the role and not found guilty of any misconduct. 4. End of 'Artificial Breaks': The state was explicitly directed to discontinue the practice of terminating and re-engaging employees after 11 months to create an artificial service break. 5. Future Increments: The government must provide future annual increments as per the scheme's regulations.

This judgment provides a crucial balance, safeguarding the job continuity of thousands of contractual employees under government schemes while upholding the administration's financial autonomy.