DIRECTOR, CENTRAL PLANTATION CROPS RESEARCH INSTITUTE, KESARAGOD AND ORS.versusM. PURUSHOTHAMAN AND ORS.

    DIRECTOR, CENTRAL PLANTATION CROPS RESEARCH                                 A'
           INSTITUTE, KESARAGOD AND ORS.

                                     '"
                  M. PURUSHOTHAMAN AND ORS.

                              JULY 26, 1994
                                                                                B
             (P.B. SAWANT AND MK MUKHERJEE, HJ

      Sen>ice Law :

         Fi111dame111al R11/es-R11/es 9(2l){a)a11d 44-<iovemmelll of l11dia Of- C
[ice l\fe111ora11d11111 dated 27.11.1965.

        House Rem A/lowa11ce-£mployees offered official accommodatio11-
Ref11sa/ to occ11py tile same-£11tit/eme11t to House Relll Allowance-Held
1101 elllit/ed to.
                                                                                D
       The respondents are employees In th appellant-organisation. They
were allotted official quarters, and on their rerusal to occupy the quarters,
the appellant denied them the benefit or House Rent Allowance. This was
challenged by the respondents berore the High Court _and the petitions
were subsequently transrerred to the Central Administrative Tribunal, and       E
it held that the employees cannot be compelled to occupy official quarters
and their rerusal cannot lead to denial or benefit URA. The Tribunal
observed that only those employees who had applied ror official accom-
modation and who refused to occupy the same were liable to rorrelt the
benefit of URA and not others, and that URA is a part of wages and no
deduction from wages can be made merely on account or the refusal to            F
accept the official accommodation. The appellant-organisation preferred
the present appeal.

      Allowing the appeal, this Court

      HELD : 1.1. There Is no doubt that paragraphs 4(a)(I) and (Ii) of         G
the Office Memorandum dated 27.11.1965 state that an application has to
be made to secure accommodation. However, that does not mean that
Government or the organisation such as the appellant-organisation to
which the said provisions apply, cannot on their own offer accommodation
to the employees. Hence the reason given by the Tribunal that It Is only If     H
                                    U.7
    268                    SUPREME COURT REPORTS [1994) SUPP. 2 S.C.R.

A   the ~n1ployee applies for such accon1modation and he refuses to accept the
    same when offered that he would be disentitled to the HRA, is not correct.
    The Government or the organisation of the kind of the appellant spends
    huge public funds for constructing quarters for their employees both for
    the convenience of the management as well as of the employees. The
B   investment thus made in constructing and maintaining the quarters "ill
    be a waste if they are to lie unoccupied. [271-F-G]

            1.2. House Rent Allowance is not a matter of right. It is in lieu of the
    accommodation not made available to the employees. This being the case,
    it follows that·whenever the accommodation is offered the employees have
c   either to accept it or to forfeit the HRA. The management cannot be
    saddled with double liability, viz., to construct and maintain the quarters
    as well as to pay the HRA. [271-H]

           1.3. The provisions of paragraphs 4(b)(i) are independent of the
D provisions of paragraph 4(a)(i) and (ii). Whereas paragraphs 4(a)(i) and
      (ii) speak of procedure to be followed by the employees who are in need of
      accommodation, paragraph 4(v)(i) provides for the forfeiture of the HRA
      even when the accommodation has been offered on its own by the manage·
      ment, whether the application for the same has been made or not. There
E     is no distinction made in this provision between those who have applied
    . and those who have not applied for accommodation. Even otherwise, the
      distinction sought to be made by the Tribunal is on the face of it, irrational,
      particularly taking into consideration the resources spent on constructing
      the quarters. [272-B-D]

F         2. The Tribunal is not right in including the HRA in the definition
     of wages. It should have perused the definition of wages. It should have
     persuade the definitions of "pay and compensatory allowance" given in the
     Fundamental Rules before pronouncing that HRA is a part of the wages
     or pay and, ·therefore, cannot be disturbed. HRA would be covered by the
G    definition of Compensatory Allowance. It is compensation in lieu of accom·
     modation. This definition itself further makes if clear that compensatory
     allowance is not to be used as a source of profit. It is given only to
     compen.safe for the amenities which are not available or provided to the
     employee. The moment therefore, the amenities are provided or offered,
H    the employee should cease to be in receipt of the compensation which is
        CENTRALPLANTATIONCROPSRES.INSf. v. M.PURUSHOTIJAMAN              269


given for want of it. (272-E, 273·C·D)                                          A

      3. As agreed· to by the appellant, HRA would be denied to the
employee only for the period the quarter lies vacant consequent upon his
refusal. (273-F)

        CIVIL APPELLATE JURISDICTION : Civil Appeal No. 885 of                  B
1993.

      From the Judgment and Order dated .28.10.88 of the Central Ad·
ministrative Tribunal, Madras Bench of Ernakulam in RP.No. K· 47 of
1988.                                                                           c;
        Ranjit Kumar and Ms. Bina Tamta for the Appellant.

        The following Order of the Court was delivered :

      This short question that falls for consideration in this appeal is        D
whether the employees of the appellant-organisation, viz., the Central
Plantation Corps. Research Institute are entitled to House Rent Allowance
(HRA) although •they are offered official accommodation and they refuse
to occupy the same.

       The respondent-employees are occupying various posts in the appel-       E
lant-organisation. Orders allotting official quarters they were entitled to,
were passed by the appellant-organisation. However, the employees
declined to occupy the sarrie for one reason or the other. On their refusal
to occupy the quarters, the appellant issued orders denying to them the
benefit of HRA which they were till then drawing. The respondent-               F
employees challenged these orders before the High Court. Their writ
petitions were subsequently transferred to the Central Administrative
Tribunal and the Tribunal by the impugned common decision dated
5.5.1988, held that the employees cannot be compelled to occupy the
official quarters and hence on their refusal to occupy the same, they cannot    G
be denied the benefit of the HRA. To arrive at this conclusion the Tribunal
has given two reasons. The first is that under the relevant provisions, it is
only those employees who had applied for official accommodation and who
refused to occupy the same, are liable to forfeit the benefit of the HRA
and not others. The second reason given by the Tribunal is that the HRA
is a part of wages and no deduction from the wages can be made merely           H
    270                   SUPREME COURT REPORTS (1994) SUPP. 2 S.C.R.

A   on account of the refusal to accept the accommodation.

           We are unable to agree with either of the said reason. It is obvious
    that the Tribunal has misread both the relevant provisions governing the
    entitlement of the accommodation and the HRA as- well as the rules which
    define "pay".
B
           It cannot be disputed! and it does not appear to have been disputed
    before the Tribunal that i1t is para 4 of the Office Memorandum dated
    27.11.1965 of the Governtlllent of India, Ministry of Finance which would
    govern the present case. T'he relevant portion of the said paragraph reads
C   as follows :

            "4·:''I'he grant of house rent allowance shall be subject to the
            following conditions:

          (a) (i) To those Government servants who are eligible for Govern-
D
                   ment accommodation, the allowance will be admissible only
                   if they have applied for such accommodation in accordance
                   with the prescribed procedure, if any; but have not heen
                 · provided wi.th it, in places where due to availability of surplus
                   -Government accommodation, special orders are issued by the
E                  Ministry of Works and Housing from time to time making it
                   obligatory for employees concerned to obtain and furnish 'no
                   accommodation' certificate in respect of government residen-
                   tial accommodation at their place of posting. In all other
                 • places no such certificate is necessary.
F
            (ii) Government servants posted in localities where there is at
                 present no residential accommodation in the general pool
                 owned or requisitioned by the Central Government for allot-
                 ment to them, need not apply for government residental
                 accommodation in order to become eligible for house rent
G                allowance. But where Government quarters are available for
                 the staff of specified Departments or for specified categories
                 of staff, the procedure for applying for accommodation will
                 be regulated under the rules of allotment of the Department
                 concerned or of the local office of the Central Public Works
H                Department, as the case may be.
          CENrRAL PLANTATION CROPS RES. lNSf. v. M. PURUSHOTIIAMAN         271


          [b] (i) The allowance shall not be admissible to those who occupy A
                  accommodation provided by Government or those to whom
                  accommodation has been offered by Government but who
                  have refused it." In the latter case, the allowance will not be
                  admissible for the period for which a Government servant is
                  debarred from further allotment of Government accommoda-
                                                                                  B
                  tion under the allotment rules applicable to him.

            ·(ii) The house rent allowance drawn by a Government servant,
                  who accepts allotment of Goverruiient accommodation, shall
                  be stopped from the date of occupation, or from the eight
                  day after the date of allotment of Government accommoda- C
                  tion, whichever, is earlier. In case of refusal of allotment of
                  Government accommodation, house rent allowance shall
                  cease to be admissible from the date of allotment of Govern-
                  ment accommodation. In case of surrender of Government
                  accommodation, the house rent allowance, if otherwise" ad- D
                  missible, will be payable from the date of such surrender."

             It is clear from the aforesaid provisions that paragraphs 4 [a] (i) and
     (ii) .Jay down the procedure for making application for accommodation.
     Paragraph 4 (b] (i) lays down the consequences on refusal to accept the
     accommodation when offered. There is no doubt that paragraphs 4[a) (i) E
     and (ii) state that an application has to be made to secure accommodation.
     However, that does not mean that Government or the organisation such as
     the appellant - organisation to which the said provisions apply, cannot on
     their own offer accommodation to the employees. Hence the reason given
     by the Tribunal that it is only if the employee applies for such accommoda- F
     lion and he refuses to accept the same when offered that he would be
     disentitled to the HRA, is not correct. It must be remembered in this
     connection that the Government or the organisation of the kind of the
     appellant spends huge public funds for constructing quarters for their
     employees both for the convenience of the management" as well as of the
     employees. The investment thus made in constructing and maintaining the G
     quarters will be a waste if they are to lie unoccupied. The HRA is not a
     matter of right. It is in lieu of the accommodation not made available to
     the employees. This being the case, it follows that whenever the accom-
     modation is offered the employees have either to accept it or to forfeit the
     HRA. The management cannot be saddled with double liability, viz., to H


'.
    272                    SUPREME COURT REPORTS [1994] SUPP. 2 S.C.R.

A construct and maintain the quarters as well as to pay the HRA. This is the
    rationale of the provisions of paragraph 4 of the said Goverrunent Office
    Memorandum.

           It is for this reason again that paragraph 4 [b] (I) provides that the
    HRA shall not be admissible to those who occupy accommodation
B   provided for them as well as to those to whom accommodation has been
    offered but who have refused to accept it. The provisions of paragraph 4
    [b] (i) are independent of the provisions of paragraph 4 [a] (i) and (ii).
    Whereas paragraphs 4 [a] (i) and (ii) speak of procedure to be followed
    by the employees who are in need of accommodation, paragraph 4 [v] (i)
C   provides for the forfeiture of the HRA even when the accommodation has
    been offered on its own by the management whether the application for
    the same has been made or not. There is no distinction made in this
    provision between those who have applied and those who have not applied
    for accommodation. Even otherwise, we are of the view that the distinction
    sought to be made by the Tribunal is on the face of it, irrational, particular-
D   ly taking into consideration the resources spent on constructing the
    quarters.

          We are also afraid that the Tribunal is not right in including the.BRA
    in the definition of wages. The Fundamental Rule 9(21] (a) which is
E   applicable to the respondent-employees defines "pay" as follows :

             "9[21] (a) Pay means the amount drawn monthly by a Government
             servant as

                  [i]     the pay, other than special pay granted in view of his
                          personal qualifications, which has been sanctioned for
F
                          a post held by him substantively or in an officiating
                          capacity, or to which he is entitled by reason of his
                          position in a cadre; and

                  [ii]    overseas pay, special pay and personal pay; and
G
                  [iii]   any other emoluments which may be specially classed
                          as pay by the President."

          It is obvious from this definition that HRA is not part of "pay".
    Further, Fundamental Rule 44 defines "Compensatory Allowance" as fol-
H   lows:
       CENTRALPLANfATION CROPS RES. INST. v. M. PURUSHOTIIAMAN         273


         "F.R. 44. Compensatory allowance. - Subject to the general rule     A
         that the amount of compensatory allowance should be so regulated
         that the allowance is not on the whole a source of profit to the
         recipient, the Central Government may grant such allowances to
         any Government servant under its control and may make rules
         prescribing their amounts and the conditions under which they may   B
                     11
         be drawn.

        The HRA would be covered by the definition of Compensatory
Allowance. It is compensation in lieu of accommodation. This definition
itself further makes it clear that compensatory allowance is not to be used
as a source of profit. It is given only to compensate for the amenities which C
are not available or provided to the employee. The moment, therefore, the
amenities are provided or offered, the employee should cease to be in
receipt of the compensation which is given for want of it. We wish the
Tribunal had perused the definition of "pay and compensatory allowance"
given in the Fundamental Rules before pronouncing that the HRA is a part D
of the wages or pay and, therefore, cannot be disturbed.

      For both these reasons, therefore, we are unable to accept the
conclusion of the Tribunal.

      Shri Ranjit Kumar, learned counsel appearing for the appellant-        E
organisation pointed out a letter dated 13.8.1986 addressed by the Under
Secretary of the Indian Council of Agricultural Research to the appellant
wherein it is stated that the matter was examined and it was held that the
HRA should be denied to the employee who refuses to take the allotment
made or when offered to him till such time the quarter in question lies
vacant for want of any other taker. This would mean that the HRA would       F
be denied to the employee only for the period the quarter lies vacant
consequent upon his refusal. While, therefore, setting aside the impugned
order and allowing the appeal, we direct the appellant-organisation to
deduct the HRA from the salary of the Respondent-employees only for the
period the quarters which were offered to the employees remained vacant.     G
The appeal is allowed accordingly with no order as to cost.

G.N.                                                     Appeal allowed.