Holding

The State Government's letter deferring the Fifth Pay Commission pension benefits is a valid direction under Section 34 of the Road Transport Corporation Act, 1950, and KSRTC may lawfully postpone implementation due to its financial condition.

Summary

The Kerala State Road Transport Corporation (KSRTC), an autonomous corporation established under the Road Transport Corporation Act, 1950, sought to defer the implementation of enhanced pension benefits recommended by the Fifth Kerala Pay Commission due to its precarious financial condition. The State Government, after a High Court direction to take a policy decision, issued a letter on 16 May 1995 stating that the grant of these benefits could be deferred for better times. The High Court held that KSRTC was bound to implement the recommendations on the same date as government employees and that the Government's letter was not a valid direction under Section 34. The Supreme Court held that the letter constituted a proper direction under Section 34, allowing KSRTC to defer implementation, and that adoption of Part III of the Kerala Service Rules does not automatically compel KSRTC to grant enhanced pensions. Consequently, the Supreme Court set aside the High Court's decision and allowed the appeals, dismissing the writ petitions of the pensioners.

Issues considered

The communication dated 16 May 1995 is a direction under Section 34 of the Road Transport Corporation Act, 1950.
Whether adoption of Part III of the Kerala Service Rules binds KSRTC to implement the Fifth Pay Commission recommendations on the same date as government employees.
Whether KSRTC, as an autonomous corporation, can fix its own cut‑off date for implementing pension enhancements subject to Section 34 directions.
Whether the financial condition of KSRTC justifies deferral of the pension benefits.
Whether the High Court erred in compelling KSRTC to implement the pension benefits immediately.

Legislation cited

Road Transport Corporation Act, 1950s. 34

Subjects

service lawpensionautonomous corporationRoad Transport Corporation ActSection 34Fifth Pay CommissionKerala Service Rulesfinancial viabilitydirectionimplementation

Judgment

A CHAIRMAN & M.D., K.S.R.T.C.
v.
K.O. VARGHESE AND ORS.

JULY 9, 2007

B
[H.K. SEMA AND P.K. BALASUBRAMANY AN, JJ.]

Service Law:

C Pension-Kera/a Service Rules-Part /II-Recommendations by 5th
Kera/a Pay Commission relating to grant of enhanced pensionary benefits-
Dispute with regard to implementation of the recommendations in KSRTC,
an autonomous Corporation-Court intervened and directed the State
Government to take a policy decision-In view of the precarious financial
position of KSR~C. direction by State Government to KSRTC that grant of
.
.,

D benefits of 5th ~ay Commission to pensioners of KSRTC be deferred until ·
better times-Held: The directiOn meant that the very question of adopting
the recommendations of 5th Pay Commission stood postponed for better
times-Financial position of KSRTC being not sound, decision taken by the
State Government not to implemet:it. here and now, the recommendations of
.E 5th Pay Commissidn for KSRTC and the decision based on it by KSRTC are
fully justiji~d-The decision cannot be said to be vitiated by any ~traneous
consideration or perverse appreciation of the circumstances obtaining-
Road Transport Corporation Act, 1950--s.34.

The Government of Kerala authorized KSRTC, an autonomaus
F Corporation established under the Road Transport Corporation Act, 1950, to
pay pension to its employees as per the Kerala Service Rules (KSR). The 5th
Kerala Pay Commission made recommendations relating to grant of enhanced
pensionary benefits and other allowances to retired employees. Dispute arose
with regard to implementation of the recommendations of the Pay Commission
in KSRTC. Pursuant to intervention of the Court, the Government of Kerala
G took a policy decision to direct KSRTC notto give the benetit' of the Sth Pay
Commission to the pensioners of KSRTC until better times in view of the
precarious financial condition of KSRTC. ~

High Court, vide the impugned judgment, held that the adoption of Part

H 164
CHAIRMAN & M.D., K.S.R.T.C. v. K.O. VARGHESE 165
III of KSR by KSRTC, was an exercise of legislation by reference and if and A
when the Government adopted the recommendation of the Fifth Pay
Commission in respect of its employees governed by Part.Ill of the KSR,
KSRTC was also obliged to implement the recommendation in respect ofits
employees with effect from the same date. The Court held that in the absencie
of any specific regulation being framed by KSRTC and in the absence of a
direction under Section 34 of the Act by the State Government to KSRTC tp B
fix a different cut-off date, KSRTC was bound to implement the
.J recommendation of the Fifth Pay Commission and to grant revised pensionary
benefits and dearness relief to all its employees on par with the government
employees. Hence the present appeals.

Allowing the appeals, the Court
c
HELD: 1.1. KSRTC is an autonomous Corporation established under
the Road Transport Corporation Act, l 950. It 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 D
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 be
adopted by it, from what point of time. This, of course, would be subject to any
direction that may be issued by the State Government in terms of Section 3'4
of the Act. (Para 151 (175-8-DI
E
1.2. When the Court intervened and directed the Government to take a
policy decision and not leave the matter pending in view of the fact that the
pensioners were generally senror citizens, t.he Government reconsidered the
question and after examining the position in detail in the context of the
financial position of KSRTC, took a decision that the grant of benefits of the F
Fifth Pay Commission to the pensioners of KSRTC may be deferred for better
times. This was a direction to KSRTC in terms of Section 34 of the Ac~.
KSRTCwas therefore bound to implement this direction in the absence of1a
regulation in that behalf. (Para 151 (175-E-FJ

Kera/a State Road Transport Corporation v. K.O. Varghese & Ors., G
(2003112 SCC 293; Mysore State Road Transport Corporation v. Babajan
Conductor & Anr., (197712 S.C.R. 925; General Manager, Mysore State Road
TransportCorpqration-v.. Dew:aj Urs. & A11r., 1197612 S.C.C. 862 and Union
.of India v. P.N. Menon & Ors., AIR (1994) SC 2221, referred to. . .

2. The High Court is not correct in holding that there is any compulsion H
166 SUPREME COURT REPORTS (2007) 8 S.C.R.

A 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. It only provides for payment of pension. The mere adopting of Part
III of KSR does not therefore shackle or control the power of KSRTC to take
B a· decision in the absence of any regulation already framed, that the enhanced
pensionary benefits as recommended by the Fifth Pay Commission need not
be paid commencing on the same date as the State Government employees but
the question of enhancing pension could be considered at a later point of time.
L
There is nothing in Part III of KSR to control the power of KSRTC to decide
that the rec'Jmmendations of the Fifth Pay Commission may be implemented
C with effect from a particular date or that it need not be implemented at all in
view of the precarious financial condition of KSRTC. The reasoning therefore
that the direction to adopt Part Ill ofKSR and the order adopting it by KSRTC
would denude KSRTC of its power to fix a cut-off date for adopting and
implementing the recommendations of the Fifth Pay Commission is not
D sustainable. tpara 16) (175-G-H; 176-A-C)

3. The direction of the Government was that sin-:e the financial position
'was not sound, the question had to be deferred. This communication means
that the very question of adopting the recommendations of the Fifth Pay
Commission stood postponed for better times and it is not possible to read
E 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. The grant itself was put off to a later point of time by the said
communication. tpara 17) (176-E-G)

4. The financial position of a Corporation like KSRTC is certainly
F relevant when the Corporation "takes a decision as to whether it should
implement a recommendation for enhanced emoluments and pension. Since
the financial position of KSRTC is not sound, the decision taken by the State
Government not to implement, here and now, the recommendations of the Fifth
Pay Commission for KSRTC and the decisi9n based on it by KSRTC are fully
justified. Certainly, the decision cannot be said to be vitiated by any extraneous
G consideration or perverse appreciation of the circum~tances obtaining.
[Para 18) (176-H; 177-A-B)

5. Hence, the High Court was in error in its decision and in directing \
that pension had to be paid in terms of the recommendations of the Fifth Pay
H Commission. (Para 19) (177-C)
CHAIRMAN & M.D., K.S.R.T.C. v. K.O. VARGHESE [BALASUTJRAMANYAN, J.] 167

.....,
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2916 of 2007 . A
From the Judgment and Order dated 24.03.2004 of the High Court of
Keralaat Ernakulam in Writ Appeal No. 890/19938, WA No. 12/1~94, WA No.
833/1995, WA No. 258/l997A, WA No. 897/1997, WA No .. 1363/19978; WA
No. 124/1998C and WA No. 2122/1999C.
B
L. Nageshwara Rao, Sr. Adv., Haris Beeran and Radha Shyam Jena for
the Appellant.
.I
Sunil Gupta and Jawahar Lal Gupta, Sr. Advs., A. Raghunath, A.D. Sikri,
R. Sathish, M.T. George, Nidhi Gupta, Vinod Shukla, Deepak G., S. Janaqi, K.
Sarada Devi, B.V. Deepak and T.T.K. Deepak & Co. for the Respondents. c
The Judgment of the Court was delivered by

P.K. BALASUBRAMANYAN, J. Leave granted.

Heard learned counsel on all sides. D
1. This appeal by the Kerala State Road Transport Corporation,
hereinafter referred to as KSRTC, challenges the decision of the High Court
of Kerala in a series of Writ Appeals rendered on 24.3.2004 pursuant t6 an
order of remand made by this Court in Civil Appeal Nos. 6651-6654 of 2000
and the connected cases. The decision remanding, was rendered on 17.4.2p03 E
and the same is reported as Kera/a State Road Transport Corporation v.
K.O. Varghese & Ors., [2003] 12 SCC 293.

2. KSRTC is a Corporation established under the Road Transport
Corporation Act, 1950, hereinafter called, "the Act". The Corporation )Vas
.> formed on 15.3.1965. On 22.3.1965, the employees of the Transport Department F
of the Government of Kerala were absorbed in KSRTC. KSRTC became
1

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
G
provisions of the Act, until their alteration or repeal. Part II thereof dealt with
~
the staff. It would be profitable to set down paragraphs 10 to 12 of that Order
I
at this stage:
"l 0. All persons employed by Government in the State Transport H
168 SUPREME COURT REPORTS (2007] 8 S.C.R.

A Department and appointed substantively to a permanent post in that -('

Department who would have continued in the service of Government
but for the transfer of the management of the State Undertaking to the ,
Corporation, shall be treated as permanently transferred to the
Corporation for appointment under Section 14(2) of the Road Transport
Corporation Act, 1950 (Central Act, LXIV of 1950) and on such transfer
B they will be deemed to have vacated office under Government and to
have been offered and to have accepted employment_ under the
Corporation.

Provided that the provision shall not apply to persons, ifany, appointed
in the State Transport Department to the posts of Director of Transport
c and Chief Mechanical Engineer, and such persons shall continue as
supernumeraries under Government service until further orders.

11. The Corporation shall guarantee continued employment to all such -
personnel as are transferred for service under the Corporation, under
the same terms and conditions of service as were applicable to them
D
under Government immediately before such transfer.

12. _The Corporation shall pay to the employees so transferred their
pension, gratuity and provident fund according to the reievant rules,
notifications and orders of Government in force and applicable to
\ them immediately before such transfer as and when such benefits
E
accrue."

In paragraph 15, it was provided that the past services of the transferred
employees with the Government, would count for the purposes of promotion,
leave, pension and such other benefits. Thus the -transferred employees who
F retired from KSRTC were eligible for pension in terms of their conditions of
absorption. But in terms of clause 10 they ceased to be employees of the
Government.

3. On 27.3.1984, the Government of Kerala authorized KSRTC to pay
pension to its employees as per Kerala Service Rules, hereinafter referred to
G as "KSR". The said communication is on the following terms.

"In continuation of the letter cited above, I am directed to convey
I
-'t.
the Government decision authorizing the KSRTC to pay pension to its_ "'
employees as per KSR and introduce GPF instead of contributory
provident fund with effect from 1.4.1984.
H
-
CHAIRMAN&:. M D. K.S.R.T.C r. K.O. VARGHESE [BALASUBRAMANYAN. J.] 169
-..., The KSRTC will obtain written undertaking from each employee A
to refund the management share of contribution to GPF as well as
family pension fund hitherto made in consultation with the Regional
Provident Fund Commissioner."

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 B
subject to the employees fulfilling the stipulations therein.

4. Then came the recommendations of the IV Pay Commission and it;>
acceptance by the State Government. But due to its precarious financial
position, the Board of Directors of KSRTC took a decision on 19.3.1986 to
implement only some of the recommendations with effect from 1.1 l.1986 and c
an order in that regard was also issued. On 2.2.1990, a Memorandum of
Settlement was drawn up, based on the understanding arrived at between the
management and the recognized Labour Unions. As per that memorandum,
-'I.
the benefits of the settlement were postponed till September 1991. The benefits
·,
were thereafter made available. D
5. This was followed by the report of the Fifth Pay Commission and the
acceptance by the Government of its recommendations. 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 frorn
2.2.1990. The financial condition ofKSRTC was precarious. On 17:5.1991, E
KSRTC wrote to the Government seeking its approval'for implementation of
the recommendations of the Fifth Pay Commission in the Corporation. This
was followed by letters detailing the financial crisis faced by the Corporation.
Ultimately, by letter dated 24.9.1992, the State Government advised KSRTC
j that it may defer for better times, the implementation. We quote the letter
hereunder:
F

"Sir,

Sub: KSR TC Recommendations of the 5th Kerala Pay Commission
relating to pension and allied matters-reg.
G
Ref.: Your Lr. No. PLA 10/32886/90 dated 17.5.1991.

~ ) Referring to the above, I am directed to inform you that since the
financial position of KSRTC is not sound this may be deferred for
·.better times."
H
170 SUPREME COURT REPORTS [2007) 8 S.C.R.

A Thus, the reliefs regarding revision of pensionary benefits as recommended
was not immediately implemented.

6. Some of the employees of KSRTC filed a writ petition in the High
Court challenging this non-implementation. The High Court allowed the writ
petition, O.P. 7176 of 1993 and directed KSRTC to pay the arrears of the
B enhanced Dearness Allowance from l.7.1991 till 31.10. l991. KSRTC appealed
to the Division Bench in W.A. 890 of 1993. An interim order of stay of the
directions issued by the single judge was also obtained. Meanwhile, in another
writ petition, O.P. No. 13233 of 1992, another single judge directed the· ,_
Government to take a policy decision on whether, the benefits of the Fifth Pay
C Commission should be extended to the pensioners of KSRTC.

7. Pursuant to the above direction and in compliance with it, the State
Government by letter dated 16.5.1995 informed KSRTC as follows:

"The matter has been examined by the Government in detail and as .:
the financial position of KSRTC is not sound, it has been decided that
D
grant of benefits of the Fifth Pay Commission to the pensioners of
KSRTC may be deferred for better times."

Thus, the policy decision taken by the State Government was to direct KSRTC
not to give the benefit of the Fifth Pay Commission until better times.
E Meanwhile, the writ appeals filed by KSRTC were dismissed by the Division
Bench which also allowf'd appeals filed by some of the writ petitioners.
KSRTC challenged those decisions before this Court by way of Special Leave
to Appeal. This Court entertained the appeals and by the judgment dated
17.4.2003, set aside the judgment of the High Court and directed the High
Court to reexamine the question. This Court noticed that the High Court has
F not considered what exactly was 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
G
of the recommendations of the Fifth Pay Commission regarding pensionary
benefits and wage revision.

8. Back in the High Court, the Division Bench held that the adoption
.
of Part III of KSR by KSRTC, was an exercise of legislation by reference and
H if and when the government adopted the recommendation of the Fifth Pay
CHAIRMAN & M.D., K.S.R.T.C. v. K.O. VARGHESE [BALASUBRAMANYAN, J.] 171
Commission in resped of its employees governed by Part III ofKSR, KSRTC A
-,
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 KSR TC did not have the
competence to fix a different cut-off date in respect of its employees. It
ultimately held that in the absence of any specific regulation being framed by ~
KSRTC and in the absence of a direction under Section 34 of the Act by the
State Government to KSRTC to fix a different cut-off date, KSRTC was bound
...; to implement the recommendation of the Fifth Pay Commission and to grant
revised pensionary benefits and dearness relief to all its employees whether
,.. originally transferred from the government department or subsequently c
employed by KSRTC. itself, on a par with the government employees. Thus,
the appeals filed by the employees were allowed and those filed by KSRTC
were dismissed. It is this decision rendered after remand, that is challenged
again in these appeals.

9. Learned counsel for the KSRTC, the appellant, submitted that the D
High Court was in error in holding that KSRTC, an autonomous corporation,
'. was not entitled to fix a date of its own for, implementation of revised
pensionary benefits as per the recommendation of the Fifth Pay Commission.
He further submitted that the financial position ofKSRTC was precarious and
in the face of that fact, the High Court was in error in compelling KSRTC to
E
implement the recommendation of the Fifth Pay Commission regarding pension
and dearness allowance and a direction that would lead to the winding up of
the corporation itself, should not have been issued in such a casual manner.
Learned counsel further submitte<l that the High Court had earlier, on 6.3. I 995,
directed the government to take a policy decision which would obviously be
only one in terms of Section 34 of the Act and pursuant to that direction, the F
government had taken a decision and conveyed it to the corporation by its
communication, letter No.I 1969/L3/95/PW&T dated 16.5.1995 and this
communication, in the context, can only be understood as a direction under
Section 34 of the Act. The High Court has not properly adverted to or
considered the effect of this communication. Learned counsel submitted that
Part III of KSR had only been adopted for KSRTC or by KSRTC and it was
G
neither a case of legislation by incorporation nor a case of legislation by
reference. For either of that to occur, there must be two legislations or
)
enactments, one of which must adopt the other. Th~s, the High Court was
wrong :n holding that the adoption of Part III of KSR in KSRTC was a
legislation by reference. Learned counsel submitted that there was no provision H

~
172 SUPREME COURT REPORTS [2007] 8 S.C.R.

A in .Part III fixing any date for revising pension or for the grant of it.
.,-.
10. In answer, learned counsel for the employees of KSRTC submitted
that as per the earlier direction of the State Government, Part III of KSR had
been made applicable to employees of KSRTC and once Part III of KSR was
made applicable, the employees were entitled to pensionary benefits as provided ,'
B therein and that would include the right to enhanced pension as and when
they a:re enhanced. Right to pension included the right to it from a given date;
Here, the date was the one adopted by the State Government. He submitted
that the direction issued by the Government dated 27.3.1984 authorizing
\_
KSRTC to pay pension clearly justified this position. He also submitted that
c the High Court was correct in holding that the communication dated 24.9.1992,
was not a direction under Section 34 of the Act. He pointed out that no
formalities were complied with and the direction was not even notified. It was
merely a reply to a letter sent by KSRTC. The communication dated 27.3.1984
would be a direction in terms of Section 34 of the Act and KSRTC was bound
to pay any enhancement as and when it is given by the State Government
D to its employees. Counsel representing those employees who were originally
...
employees of the Government added that those employees could not be
prejudiced by not giving them the same· benefits as employees of the
Government in view of the order of their absorption in KSRTC dated 22.3.1965.

11. Before going into the other questions, we think it proper to consider
E whether in the circumstances of the case there has been a direction by the
State Government in terms of Section 34 of the Act. Section 34 reads:

"34. Direction by the State Government.~!) The State Government
may, after consulta!ion with a Corporation established by such
Government, give to the Corporation general instructions to be
F followed by the Corporation, and such instructions may include
directions relating to the recruitment, conditions of service and training ..
of its employees, wages to be paid to the employees, reserves to be
maintained by it and disposal. of its profits or stocks.

(2) In the exercise of its powers and performance of its duties under
G this Act; the Corporation shall not depart from any general instructions
issued under sub-section (I) except with the previous permission of
the State Government."
\
---
This Court has earlier indicated that a direction issued under Section 34 by
the Government is a general direction and the Government ought not to issue
H

t.
CHAIRMAN & M.D., K.S.R.T.C. v. K.O. VARGHESE [BALASUBRAMANYAN, J.] 173
a specific direction with regard to any particular case. (See Mysore State Road A
Transport Corporation v. Babajan Conductor & Anr., [1977] 2 S.C.R. 9l5].
This Court has also held that until regulations are made with the prevfous
sanction of the State Government, the directions given under Section 34 in
respect of conditions of service have got the force of law (See Gen<1ral
Manager, Mysore State Road Transport Corporation v. Devraj Urs. & Anr., B
[1976] 2 S.C.C. 862. It is in this context that the communication issued by the
State Government to KSRTC in respect of implementation of the 1

recommendations of the Fifth Pay Commission regarding pensionary benefits
has to be considered.

12. It is clear from the communication dated 24.9.1992 that KSRTC had C
written a letter to the Government dated 17.5.1991 regarding the payment of
additional benefits based on the recommendations of the Fifth Pay Commission.I
The Government by that letter dated 24.9.1992, informed KSRTC that since' the
financial position of KSRTC was not sound, the proposal may be deferred foi
better times. It was in that context that writ petitions were filed _in the High D
Court by certain empJoyees of the Corporation. The High Court by judgment
dated 6.3.1995 noticed the stand of KSRTC in its counter affidavit that it was
not in a position financially to meet the requirements, on accepting ,the
recommendations of the Fifth Pay Commission and KSRTC was facing great
financial difficulty. The Court also noticed the submission of learned counsel
for KSRTC that since the matter related to a policy decision, the advice of the E
State Government had to be given due weightage and in the face of the earlier
letter, the matter had been referred to the Government and KSRTC will take
a decision as and when the Government approved the policy of giving the
benefits of Fifth Pay Commission to the pensioners of KSR TC. The cburt
noticed that the pensioners were senior citizens and therefore an expeditious F
decision by the State Government was warranted. The court directed:
+
"It is for the State Government to take a decision in the mater having
due regard to all the relevant circumstances including the financial
stability of the Corporation. Therefore, I direct the Government to take
a decision in the matter within a reasonable time and the Corporation G
shall take further action pursuant to the decision to be taken by the
Government. A decision in this regard shall be taken within a period
of six months of the date of receipt of a copy of this judgment."

13. Pursuant to this direction of the High Court obtained by employees
or pensioners of .KSRTC, the Government considered the matter and with H
174 SUPREME COURT REPORTS [2007] 8 S.C.R.

A particular reference to the order in the writ petitions, infonned KSRTC by letter
dated 16.5.1995 that having examined the matter in detail and since the
financial position of KSR TC was not sound, it was decided that grant of
benefits of the Fifth Pay Commission to the pensioners -of KSRTC may be
deferred for better times.

B 14. As we understand this communication in the context in which it was
issued, we are of the view that this amounts to a direction in terms of Section
34 of the Act. It must be remembered that this communication was issued
when the Government was directed by the High Court to take a policy
decision on the question of implementing the recommendations of the Fifth
..
C Pay Commission in respect of the employees ofKSRTC. Such a policy decision
in the absence of a regulation, could obviously be only in terms of Section
34 of the Act. Therefore, when in compliance with the direction of the High
Court, the Government took a policy decision and communicated the same to
KSRTC to defer the implementation of the recommendations of the Fifth Pay
Commission, it could be understood only as a direction in terms of Section
D 34 of the Act. The context in which the communication dated 16.5.1995 was
issued, according to us, clearly shows that it was intended to be a direction
in terms of Section 34 of the Act and the argument that formalities had not
been complied with or that the same had not been notified, does not enable
the court to hold that the communication dated 16.5.1995 must be understood
E only as a mere letter in reply and nothing more. The power to issue such a
direction is clearly traceable to Section 34 of the Act and the High Court had
obviously directed the _Government to take that decision having in mind
Section 34 of the Act. It is therefore clear that the direction dated 16.5.1995
is a direction in terms of Section 34 of the Act. The High Court, in our opinion,
has not considered the effect of the direction issued in O.P. No. 13233of1992-
F · A and connected cases, and the decision taken by the Government pursuant
to that direction and the status of the communication dated 16.5.1995.

15. The High Court has rested its decision on the direction of the
Government dated 27.3.1984 authorizing KSRTC to pay pension to its employees
as per KSR and the acceptance of the same by KSR TC by issue of the order
G dated 5.9. I 984, obeying the direction and providing for payment of pension
in terms of KSR as an incorporation of KSR by reference. Proceeding from
this, the High Court has held that pension is payable to all the employees of
KSRTC in terms of Part III ofKSR and this led to the position even as regards
the date of payment as fixed by the Government for its employees. The High
H Court, though it noticed the decision in Union of India v. P.N. Menon & Ors.,
CHAIRMAN & M.D., K.S.R.T.C. v. KO. VARGHESE [BALASUBRAMANYAN, J.] } 75

AIR (1994) SC 2221 regarding the entitlement ofKSRTC to look into various A
aspects like its financial ability to pay, has proceeded to reason that in view
of the adoption of Part III of KSR, the Corporation had lost its right to fix a
cut-off date in the absence of any direction under Section 34 of the Act. The
court has also held that communication of the Government dated 24.9.1992
had only directed deferring of payment of pension as recommended by Fifth B
Pay Commission and this meant that the Corporation had no right to fix a cut-
off date especially in the absence of any regulation framed by it. We are not
in a position to endorse this reasoning or conclusion of the High Court.
KSRTC is an autonomous Corporation established under the Road Transport
Corporation Act, 1950. It can regulate the service of its employees by making
appropriate regulations in that behalf. Until such regulations are framed, it is C
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. This, of course, would be subject to any direction that may be
issued by the State Government in terms of Section 34 of the Act. In the letter D
dated 24. 9.1992 referred to by the High Court, the Government had indicated
\· that since the financial position of KSRTC was not sound, the question of
accepting the recommendations of the Fifth Pay Commission relating to
pension and allied matters may be deferred for better times. When the High
Court intervened and directed the Government to take a policy decision and
not leave the matter pending in view of the fact that the pensioners were E.
generally senior citizens, the Government reconsidered the question and after
examining the position in detail in the context of the financial position of
KSRTC, took a decision that the grant of benefits of the Fifth Pay Commissior.
to the pensioners of KSRTC may be deferred for better times. We have already
held that this was a direction to KSRTC in terms of Section 34 of the Act.
KSRTC was therefore bound to implement this direction in the absence of a F
regulation in that behalf.

16. The High Court, in our view, is not correct in thinking that there is
any compulsion on KSRTC on the mere adoption of Part Ill of KSR, to
automatically give all enhancements .in pension and other benefits given by G
the State Government to its employees. There is no provision in Part Ill of
KSR containing such a stipulation. It only provides for payment of pension.
The question of revision or enhancement of pension to its employees is left
J to KSRTC, an autonomous Corporation, subject of course to any direction
that may be issued by the State Government under Section 34 of the Act. The
mere adopting of Part III of KSR does not therefore shackle or control the H
176 SUPREME COURT REPORTS [2007] 8 S.C.R.
'I

A power of KSRTC to take a decision in the absence of any regulation already
framed, that the enhanced pensionary benefits as recommended by the Fifth
Pay Commission need not be paid commencing on the same dRte as the State
Government employees but the question of enhancing pension could be
considered at a later point of time. There is nothing in Part III of KSR to
B control the power of KSRTC to decide that the recommendations of the Fifth
Pay Commission may be implemented with effect from a particular date or that
it need not be implemented at all in view of the precarious-financial condition
of KSRTC. The reasoning therefore that the direction to adopt Part Ill of KSR
and the order adopting it by KSRTC would denude KSRTC of its power to
fix a cut·off date for adopting and implementing the recommendations of the
C Fifth Pay Commission is found to be not sustainable.

17. Learned counse I for the respondents argued that. what the
Government has directed is only to defer the payment of pension and that
mearit. that pension as recommended by the Fifth Pay Commission had become
payable but only the actual payment stood deferred to a future point of time.
D In the context of what has happened here, this argument cannot be accepted.
Obviously, the issue was whether the recommendations of the Fifth Pay -'
Commission regarding enhanced payment of pension and other allowances to
retired employees should be implemented by KSRTC in the situation in which
it was placed and the direction of the Government was that since the financial
E po;ition was not sound, the question had to be deferred. The letter dated
16.5.1995 uses.the expression:

"It has been decided that grant of benefits of the Fifth Pay Commission
to the pensioners of KSRTC may be deferred for better times." .
t

F As we understand it, this communication means that the very question of
adopting the recommendations of the Fifth Pay Commission stood postponed
for better times and it is not possible to read and understand it as directing
~hat pension had to be paid in terms of the recommendations of the Fifth Pay
Commission but its actual payment may be postponed. The grant itself was
put off to a later point of time by the said communication. We, therefore,
G overrule this submission on behalf of the respondents.
I
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18. Even before us, also, it has been clearly pleaded by KSRTC that its
financial position is unsound. In fact, the High Court has also noticed it. This
Court has held that the financial position of a Corporation like KSRTC is \
t
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certainly relevant when the Corporation takes a decision as to whether it
H

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CHAIRMAN & M.D., K.S.R.T.C. v. K.O. VARGHESE [BALASUBRAMANYAN, J.) 177
should implement a recommendation for enhanced emoluments and pension. A
Since we find from the relevant aspects brought out that the financial position
of KSRTC is not sound, we are of the view that the decision taken by the
State Government not to implement, here and now, the recommendations of
the Fifth Pay Commission for KSRTC and the decision based on it by KSRTC
are fully justified. Certainly, t.he decision cannot be said to be vitiated by any
extraneous consideration or perverse appreciation of the circumstances B
obtaining.

19. The result of this discussion is to hold that the High Court was in
error in its decision and in directing that pension had to be paid in terms of
the recommendations of the Fifth Pay Commission. We therefore allow these
appeals and setting aside the decisions of the High _Court dismiss the writ c"
petitions filed by the writ petitioners. We make no order as to costs.

8.8.B. Appeals allowed.

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