Holding

The Court held that the notification does not comply with the earlier judgment but does not amount to contempt as the violation was not deliberate, ordering implementation of paragraph (i), quashing paragraphs (ii) and (iii), and directing payment of arrears in three instalments.

Summary

The A.I. Regional Rural Bank Officers Federation filed a contempt petition alleging that the Government of India's 11‑April‑2001 notification on pay scales for Regional Rural Bank (RRB) employees contravened the Supreme Court’s earlier judgment in Civil Appeal No. 2218/1999. The notification granted parity of pay with Nationalised Commercial Banks but conditioned current salary increases and arrears on cash‑outflow limits, which the petitioners claimed violated the Court’s directions. The Supreme Court examined whether the government could invoke its financial constraints to defer implementation and whether the breach amounted to deliberate contempt. It held that the notification was not in compliance with the earlier judgment, but the breach was not deliberate, so no contempt proceedings were warranted. Consequently, paragraph (i) of the notification was ordered to be implemented immediately, paragraphs (ii) and (iii) were quashed, and arrears were directed to be paid in three equal instalments on 30 April 2002, 2003 and 2004, with the first instalment deposited in the employees’ provident fund account.

Issues considered

Whether the Government's 11‑April‑2001 notification complies with the Supreme Court’s judgment in Civil Appeal No. 2218/1999 regarding pay parity for RRB employees.
Whether the alleged non‑compliance constitutes contempt of court under the Contempt of Courts Act, 1971.
Whether the Government can rely on its financial capacity to defer or modify the implementation of the Court’s directions.

Legislation cited

Contempt of Courts Act, 1971s. 2(b)
Regional Rural Banks Act, 1976s. 17

Subjects

pay parityregional rural bankssalary arrearscontempt of courtimplementation of judgmentgovernment notificationSection 17financial capacity

Judgment

A A.I. REG. RURAL BANK OFFICERS FED. AN,D ORS.
v. ~-
...
GOVERNMENT OF INDIA AND ORS.

MARCH 7, 2002

B [G.B. PATTANAIK, S.N. PHUKAN AND S.N. VARIAVA, JJ.]

Service Law:

Regional Rural Banks Act, 1976: Section 17.
c -<·
Pay Scales-Regional Rural Banks (RRBs) and Nationalised Commercial
Banks (NCBs)-Employees of-Parity between-Paragraph (i) of Central
Government Notification stipulated parity ofpay scales between employees of
RRBs and NCBs but paragraphs (ii) and (iii) made payment ofcurrent increase
in salary and arrears dependent upon cash outflow which was not to exceed
D 50% ofthe operating profit in a particular year-Validity of-Held, Paragraph
(i) valid and should be immediately implemented-But paragraps (ii) and (iii)
quashed-Arrears to be paid in three equal annual instalments i.e. on 30.4.2002, '
>
30.4.2003 and 30.4.2004-Arrears not to be made dependent on cash outflow-·
There cannot be any distinction between RRBs incurring loss and RRBs making
E profit-However, first instalment to be deposited in the employees' provident
fund account-But the other instalments to be paid in cash-Government of
India, Ministry of Finance, Department ofEconomic Affairs (Banking Division)
Notification dated 11.4.2001.
-\
Contempts of Courts Act, 1971:
F
Section 2(b)-Civil Contempt-Government issued notification pursuant
to judgment of Supreme Court-But the notification not found to be in
compliance with the saidjudgment-Held, Although the notification is in direct
contravention of Supreme Court judgment no action is proposed agqinst the
alleged contemnors as the case is not one of deliberate viO/ation.
G ::r
The respondent-Government of India, Ministry of Finance, Department
of Economic Affairs (Banking Division), pursuant to a judgment of this Court
'· (CA No. 2218of1999), issued a notification dated 11-4-2001. Paragraph (i)
of the said notification stipulated parity of pay scales between employees of
Regional Rural Banks (RRBs) and Nationalised Commercial Banks (NCBs),
H 318
A.I. REG. R.URAL BANK OFFICERS FED. v. GOVERNMENT OF 1NDIA 3) 9

but paragraphSc(li) and (iii) made payment of current increase in salary and A
arrears dependent upon cash outflow. ··

The petitioners filed the present contempt petition on the ground that
the notification was contrary to the judgment of this Court and was wilful
disrespect to and, in deliberate violation of, the judgment and directions of
this Court. B
On behalf of the respondents it was contended that the Government .
faced a severe financial crisis and, th.erefore, the monetary benefit of the
employees of RRBs would have to be so modulated that the RRBs were not
ultimately closed down by merely paying the salaries of the employees.
c
Disposing of the petition, the Court

HELD : 1. The issuance of the notification dated 11-4-2001 by the
Government of India, Ministry of Finance, Department of Economic Affairs
(Banking Division) cannot be held to be in compliance with the judgment and
directions of this Court in CA No. 2218 of 1999. But at the same time, the D
appropriate authority need not be punished under the provisions of the

-- - Contempt of Courts Act, 1971, even if the notification is in direct contravention
of the judgment of this Cour;t, as this is not a case of deliberate violation.

- Therefore, no action is proposed against the alleged contemnors. (324-F-GI

2.1. The financial capa~ity of the Government cannot be pleaded as a E
ground for non-implementation of the directions of the Court. Since financial
capacity of the employer cannot be held to be a germane consideration for
determination of the wage structure of the employees and the Parliament
enacted the Regional Rural Banks Act, 1976 for bringing into existence the
Regional Rural Banks (RRBs) with the idea of helping the rural mass of the p
country, the employees of such RRBs cannot suffer on account of the financial
incapacity of the employer. (324-F( •

2.2. Paragraph (i) of the notification dated 11-4-2001 should be
immediately implemented and the employees should be paid accordingly.
Paragraphs (ii) and (iii) of the notification are quashed and the Central G
Government is directed to issue a fresh notification for proper implementation
of the judgment of this Court. (325-AI

2.3. The arrears of salary accruing to the employees should be paid to
them in three equal annual instalments, the first being on 30-4-2002, the second
on 30-4-2003 and the third on 30-4-2004. This payment has to be made as H
320 SUPREME COURT REPORTS [2002] 2 S.C.R.

A aforesaid without being in any way dependent upon any other considerations
and there cannot be any distinction between the RRBs incurring loss and the
RRBs making profit Further, the question of anticipated cash outflow on
account of increase in salary if exceeds 50% of the operating profit, then the
current payment is only restricted up to 50% is absolutely of no relevance,
B which was indicated in the impugned notification dated 11-4-2001. (325-C]

3. Having regard to the financial condition of the Government as well
as the RRBs, the instalment to be paid on 30-4-2002, pursuant to this order,
may be deposited in the employees' provident fund account But all other
instalments will have to be paid in cash. (325-D]
c CIVIL ORIGINAL JURISDICTION :

I.A. No. I

IN

D Transfer Petition (C) No. 403 of 1999.

WITH

I.A. No. 3 in C.A. No. 2219/99, C.P. (C) No. 162/200 l in C.A. No.
2218/99, C.P. (C) No. 222/200 l in C.A. No. 2218/99, C.P. (C) No. 220/200 l
...
E in W.P. (C) No. 516 of 2000)

Mukul Rohtagi, Additional Solicitor General, V.R. Reddy, S.K. Dholakia,
L.N. Rao, Vasudevan Raghavan, C.K. Sasi, B.K. Sinha, Subhash Chandra,
B.K. Satija, B.K. Pal, Rajiv Mehta, K.T. Anantharaman, K.K. Rai, Ashok K.
F Srivastava, Ms. Sushma Suri, T. V. Ratnam, K. Subba Rao and Ms. Malini
Poduval for the appearing parties.

The Judgment of the Court was delivered by

PATT ANAIK, J. These Interlocutory Applications aud Contempt
G Petitions are all off shoots of the Judgment of this Court dated 31.1.200 l in
Civil Appeal No. 2~ 18 of 1999 and the subsequent circular issued by the
Government of India, Ministry of Finance, Department of Economic Affairs ·
(Banking Division) in implementation of the directions of this Court. According
to. the applicants, the circular issued by the Government of India in the
Ministry of Finance (Banking Division), purported to be one in complirnce
H with the directions of the Court in Judgment dated 31.1.200 l in effect, is
A.I. REG. RURAL BANK OFFICERS FED. 1·. GOVERNMENT OF INDIA [PA TTANAIK, J.) 321

., contrary to the Judgment of the Court and is a willful disrespect to and in
deliberate violation of the judgment and directions of the Court and as such,
A
-1
must be held to be grossly contemptuous and the contemnors should be duly
punished for the same.

: The main controversy in the Civil Appeal was, whether on acceptance
of any bipartite settlement between the management and the employees of B
the sponsor bank, the employees and officers of the Regional Rural Banks
ipso facto would be entitled to the revision of their wages? While the
management and the Union of India vehemently contended that there cannot
be an ipso facto revision of wages of the employees of the Regional Rural
--,.._ Banks as and when a settlement is arrived at between the management and
c
employees of the sponsor bank and the appropriate authority of the Central
Government would be required to exercise power under Section 17 of the
Regional Rural Banks Act, 1976, the employees on the other hand, strongly
relied upon the Report of Justice Obul Reddi Tribunal and submitted that in
view of the conclusion of the tribunal that parity should be maintained between
the employees of the Regional Rural Banks as well as the employees of the D
sponsor nationalised commercial banks, the so-called decision making power
under Section 17(1) of the Act, is in fact a formal and clerical one. Ultimately,
this Court accepted the contention of the Union Government as well as the
Management of the Bank and came to hold that it would be the power of the
Central Government to decide the pay structure of the employees of the
Regional Rural Banks under Section 17(1) of the Act and in so doing, the E
Government would be duty bound to maintain parity between the pay structure

- ~
of the employees of the nationalised commercial banks and the employees of
the Regional Rural Banks in the same sense and spirit as Justice Obul Reddi
had decided. This Court ultimately issued this further direction as under:
F
"In view of the aforesaid conclusions of ours on the different
contentions raised and in view of the fact that the Union of India in
its Interlocutory Application had already indicated that the employees
of the RRBs will be granted the new scales w.e.f. 1.4.2000 in the line
with scales granted to commercial bank employees of equivalent level,
we direct that the said determination be a determination under the G
' second proviso to sub-section (I) of Section 17 of the RRB Act and
as such the salary of the employees of the Regional Rural Banks
" w.e.f. 1.4.2000 be determined accordingly.

We also further direct that for maintaining the parity between the
... employees of the commercial banks and the employees of the Regional H
.·

322 SUPREME COURT REPORTS (2002] 2 S.C.R.

A Rural Banks, the said Union Government shall decide the question as
to what would be the salary of the employees of the -RRBs subsequent
to the 6th Bipartite Settlement having been given effect t~:'in,case of
· employees of the commercial banks and with effect from what date · ·
and the benefit flowing from s~ch decisiQn be given to the· RRB
empfoyees. The decision in question shall be taken ~itbin a period '9f
B six months fr?D1 today."
' ' .
It may be ·stated that the Union of India had filed an interlocutory application,"
wherein in the larger interest of the employees and depositors of the Regional
Rural Banks, it had proposed to give a package, but that package however
C had not been accepted by the employees of the Regional Rural Banks and,
therefore, the Court ultimately heard the matter and delivered the judgment.
In implepientation of the directions of the Court as aforesaid, the Government
of India, Ministry of Finance, Department of Economic Affairs (Banking
Division) issued a notification dated 11.4.2001, the relevant paragraphs of
which are quoted herein-below in extenso:
D
"(i) The new basic pay of each RRB employees as on I .4.2000 would
be detennined by notionally granting the benefit of 6th and 7th bipartite
settlement and officers wage revision w.e.f. ·I. I I .1992 and I .1I.I997
respectively: The formula for fitment of salary in various scales may ,
_also remain the same as was adopted for commercial bank employees. '
E Thus· as on I .4.2000, the pay scales of the· RRB employees would
become equal to that_ of their counterparts in commercial banks.

(ii) The current payment of increase in the salary due to grant of new
pay scales shall be niade in such a manner that the cash outflow in
a particular year on this account is not more than 50% of.the operating
F profit of the concerned RRB as per the previous year's ·published
balance sheet. The RRBs who have incurred operating losses in the
previous year would not be able to make current payment of increased
of
portion the revised salary and the amount due on account of increase
in ~alary shall be transf~rred to the· arrear account. Similarly, if
G anticipated cash out flow on account of the increase in the salary is
exceeding
.
50% of the operating ... profit
. \.'
in. the last
.. year,
.
the current
.
payment may be restricted only to 50% of the operating profit and
the rest shall be transferred to arrear account which is to be· treated
in the manner stated hereund.er. · · ·

H · (iii) There shalf be a two year moratorium on the payment of arrears
A.I. REG._RURAL BANK OFFICERS FED. 1•. GOVERNMENT OF INDIA [PATTANAIK, J.) 323

i.e. upto 31.3.2002 and during this period no arrear shall be payable A
by any RRB. After the moratorium period, the arrears may be paid
in such a manner that the cash outflow on that account and the increase
in wages during the' current year on account of implementation of this ·
package do not exceed 50% of the operating profit of the respective
RRB for the immediate previous year. Arrears would mean increase
in salary i.e. basic pay, DA and CCA due to the RRB ·employees by. B
notionally granting to them wage revisipn w.e.f. 1.11.1992 and
1.11.1997 at par with the commercial bank employees and residual
amount if any arising out of clause (ii) above.

(iv) The House Rent Allowance (HRA) and City Compensatory C
Allowance (CCA) would be payable at the same rate as applicable to
comparable employees in the sponsor banks and would be given
prospective effect i.e. date of issue of these orders as is done in
Commercial Banks.

(v) As far as other allowances are concerned, individual sponsor banks D
shall negotiate the same with the respective RRBs. The revised
allowances shall be paid w.e.f. 1.4.2000. The ceiling on the payment
shall however be as per the formula stated in (iii) above.

The RRBs may issue a comprehensive order based on the above
orders indicating the revised pay scales in respect of each category of E
employees after getting approval of their Board of Direciors.

The princip.les for current payment and payment of arrears ·speltout in
these orders should be strictly adhered to."

Paragraph (i) of this Notification, making the pay-scales of the employees of
Regional Rural Banks equal to their counterparts in commercial banks on F·
1.4.2000 is in consonance with the directions of this Court and there is no
grievance on that score from any quarter. But paragraphs (ii) and (iii) of the
aforesaid circular are the identical paragraphs of the package, which the
Union of India had submitted in course of hearing and which had not been
G
. accepted by the employees of the Regional Rural Banks. Even the current
payment of increase in salary, after determination being made became
dependant upon the cash outflow in a particular year and then there was a
moratorium on the payment of the arrears for a period of two years i.e. upto
31.3.2002. The aforesaid period however is coming to an end. ·

H
... According to Mr. S.K. Dholakia and other.counsel appearing for different
324 SUPREME COURT REPORTS [2002] 2 S.C.R.

A set of employees of Regional Rural Banks, the direction not to make the
current payment of the increase in salary due to the grant of the new pay-
scale is directly in contravention of the judgment of this Court and, therefore,
such attitude of the authorities, must be severely condemned and they should
be duly punished.

B Mr. Mukul Rohtagi, the learned Additional Solicitor General, however
tried to impress upon us the circumstances under which the notification had
been issued, the same being severe financial crisis and the learned Additional
Solicitor General further urged that the monetary benefits of the employees
of the bank will have to be so modulated so that the banks should not
C ultimately be closed down by merely paying the salary of the employees. ~(-

Even though the financial position of the banks may not be disputed, but
having regard to the directions issued by this Court, while disposing of the
civil appeal and having regard to the circumstances under which such directions
had been given, it would be difficult for us to sustain the plea of the Union ..
· Government that the Notification is in compliance with the judgment and
D directions of this Court. The financial capacity of the Government cannot be
pleaded as a ground for non-implementation of the directions of the Court
inasmuch as even in the matter of determination of the pay-scale of the ,
employees of the Regional Rural Banks and maintenance of parity with their '
counterparts, serving under the sponsorer commercial banks, Justice Obul
E Reddi had not accepted the said plea and that award reached its finality.
Since the financial capacity of the employer cannot be held to be a germane
cori~ideration for determination of the wage structure of the employees and
the Parliament enacted the Act for bringing into existence these regional rural
banks with the idea of helping the rural mass of the country, the employees
of such rural banks cannot suffer on account of financial incapacity of the
F employer. We have ·no hesitation in coming to the conclusion that the issuance
of notification dated 1.4.7001, by the Government of India cannot be held to
be in compliance with the judgment and directions of this Court in Civil
Appeal No. 2218 of 1999. But at the same time, we are of the opinion that
the appropriate authority need not be punished under the provisions of the
G Contempt of Courts Act, even if the notification is in direct contravention of
the judgment of this Court, as we do not find a case of deliberate violation.
While, therefore, we do not propose to take any action against the alleged
contemnors, we direct that the employees of the ~egional Rural Banks should
be paid their current salaries on the basis of determination made under the
notification dated 11.4.2001, the new basic pay having arrived at, as on
H 1.4.2000 forthwith. Paragraph (i) of the aforesaid notification dated 11.4.2001
A.I. REG. RURAL BANK OFFICERS FED. v. GOVERNMENT OF INDIA [PATTANAIK, J.J 325
should be immediately implemented and the employees should be paid A
1
-1 accordingly. Paragraphs (ii) and (iii) of the notification are quashed and the
Central Government is directed to issue a fresh notification for proper
implementation of the Judgment of this Court. We make it clear that the
period of moratorium with regard to the payment of arrears, since is going
to be over on 31.3.2002, the arrear salary accruing to the employees be paid
to them in three equal annual installments, the first being on 30th of April, B
2002, the second on 30th of April, 2003 and the third on 30th April, 2004.
This payment has to be made as aforesaid without being any way dependant
upon any other considerations and there cannot be any distinction between
the regional rural banks incurring loss and the regional rural banks, making
profit. Further, the question of anticipated cash out-flow on account of increase c
in salary if exceeds 50% of the operating profit, then the current payment
would be restricted only upto 50% is absolutely of no relevance, which was
indicated in the impugned notification dated 11.4.2001. Having regard to the
financial condition of the Government as well as these banks, the installment
to be paid on 30.4.2002, pursuant to this order of ours, the same may be
deposited in the employees' provident fund account. But all other installments D
will have to be paid in cash.

- All these Interlocutory Applications and Contempt Petitions are disposed
of accordingly.

v.s.s. I.As and Petitions disposed of. E

I"
~