Holding

The Federation’s decision to grant revised pay scales from 1 January 1994 was lawful, not illegal, irrational or procedurally improper, and the High Court’s order was beyond its jurisdiction and is set aside.

Summary

The Punjab State Co-operative Milk Producers Federation Ltd. (the Federation) appealed against a Punjab and Haryana High Court order that granted its employees pay scales equivalent to Punjab government employees from 1 January 1986, despite the Federation having introduced revised pay scales only from 1 January 1994 due to financial stringency. The employees had invoked the principle of equal pay for equal work, arguing that Grade‑I and Grade‑II Milk Procurement Assistants performed comparable duties and should receive the same remuneration. The Supreme Court examined whether the Federation’s decision to defer the pay‑scale revision was illegal, irrational, or procedurally improper, and whether the High Court had exceeded its jurisdiction in reviewing the administrative discretion. Relying on the statutory framework, the Committee’s recommendation, and the Federation’s financial constraints, the Court held that the decision was within the scope of lawful administrative discretion and not subject to judicial interference. Consequently, the High Court’s order was set aside and the writ petitions dismissed, allowing the Federation’s appeal.

Issues considered

The Federation’s decision to implement revised pay scales from 1 January 1994 instead of 1 January 1986 – was it illegal, irrational or procedurally improper?
Do the employees qualify for equal pay for equal work under Articles 14 and 16, given the distinction between Grade‑I and Grade‑II Milk Procurement Assistants?
Is the Punjab and Haryana High Court's exercise of judicial review beyond the permissible limits under Article 226?
Whether the Federation, as a statutory co‑operative society, falls within the definition of a "State" under Article 12 for the purpose of pay‑scale parity.
Whether the classification of pay scales based on qualifications and responsibilities is constitutionally valid.

Legislation cited

Subjects

pay scale revisionequal pay for equal workfinancial stringencyjudicial reviewco-operative societyadministrative discretionArticle 12Article 14Article 16wage fixation

Judgment

[2021] 6 S.C.R. 395 395

PUNJAB STATE CO-OPERATIVE MILK PRODUCERS A
FEDERATION LTD. & ANR.
v.
BALBIR KUMAR WALIA & ORS.
(Civil Appeal No. 7427 of 2011) B
JULY 09, 2021
[SANJAY KISHAN KAUL AND HEMANT GUPTA, JJ.]
Punjab State Co-operative Milk Producers Federation
Services (Common Cadre) Rules, 1980: Revised pay scale –
C
Entitlement to, from 1.1.1986 – Writ petitions by the respondents-
employees seeking entitlement to pay scale equivalent to their
counterparts in the State of Punjab from 1.1.1986, though the revised
pay scale was allowed by the Punjab State Co-operative Milk
Producers Federation Ltd w.e.f. 1.1.1994 – Federation’s case that
they were suffering with acute financial stringency – High Court D
allowed the writ petitions holding that the financial stringency was
no longer an excuse to not revise the pay scales and thus held that
the date of implementation to grant revised pay scales as 1.1.1994
was absolutely unfair – On appeal, held: Objective of the Federation
was not to give employment but to increase milk production in the
E
State – Employees are facilitators of the employer to achieve such
objective and thus demanding enhanced wages without considering
the objective and financial condition of the employer would not be
ideal – Employer and the employees have to work together to
achieve the objective of the organization-white revolution – Decision
of not to grant revised pay scale from 1.1.1986 was taken keeping F
in view the financial condition of the Federation – Process to arrive
at such decision can be said to be flawed only on the permissible
grounds of illegality, irrationality and procedural impropriety –
Neither the decision-making process, nor the decision itself suffers
from any such vice - Income generated by the Federation is not to
G
be expanded only on payment of salary but is also required for
upgradation of technology, renovation and expansion of plants etc
- Order of the High Courtis unjustified and in excess of the power
of judicial review conferred on the High Court - Orders passed by
the High Court is set aside.
H
395
396 SUPREME COURT REPORTS [2021] 6 S.C.R.

A Pay scale – Entitlement to – Employees seeking pay scale
equivalent to their counterparts in the State of Punjab from 1.1.1986,
though revised pay scale was allowed by the Federation w.e.f.
1.1.1994 – High Court holding that employees were entitled to pay
scale – Held: Not justified – Principle of equal pay for equal work
not applicable to them in as much as Grade I is a higher post having
B
higher duties and responsibilities than Grade II – Milk Procurement
Assistants Grade-I is a promotion alavenue for Milk Procurement
Assistants Grade-II – Educational qualifications and the
responsibilities of the two posts are quite different.
Allowing the appeals, the Court
C
HELD: 1.1 In the instant case, it was contended that the
Federation-Punjab State Co-operative Milk Producers Federation
Ltd is a statutory Co-operative Society which is having its Common
Cadre Rules. Any amendment in the Common Cadre Rules is to
be approved by the Registrar (Co-operative Societies). The State
D Government communicated on 1.3.1990 and 9.7.1993 that the
pay scale as applicable to the Punjab Government employees is
not to be adopted by the Public Sector Undertakings without
taking into consideration the financial health of the other statutory
Boards and Corporations. The Federation thus took a conscious
E and concerted decision to not follow the report of the Anomaly
Committee of the State Government to grant revised pay scale
from 1.1.1986 in view of precarious financial condition. Moreover,
financial assistance had to be availed by the Federation from the
State Government as well as from the National Dairy Development
Board. A Committee was constituted to examine the grievance
F of the employees for grant of revised pay scale. The Committee
also recommended that pay scale be given w.e.f. 1.1.1994 on
account of financial stringency being faced by the Federation. The
Board of Directors approved the recommendation of the
Committee, which was accepted by the Registrar (Co- operative
G Societies). Therefore, the decision of not to grant revised pay
scale from 1.1.1986 was taken keeping in view the financial
condition of the Federation. [Para 41, 42][423-C-G]
1.2 Judicial review of administrative action is permissible
on grounds of illegality, irrationality and procedural impropriety.
H
PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION 397
LTD. v. BALBIR KUMAR WALIA

An administrative decision is considered as flawed if it is illegal, A
and a decision is illegal if it pursues an objective other than that
for which the power to make the decision was conferred. The
discretion exercised by the decision maker is subject to judicial
scrutiny if a purpose other than the specified purpose is pursued.
[Para 48][430-A-B]
B
1.3 The decision that the Federation was in financial
difficulties is based upon relevant material before the Federation.
The process to arrive at such decision can be said to be flawed
only on the permissible grounds of illegality, irrationality and
procedural impropriety. Neither the decision-making process, nor
the decision itself suffers from any such vice. [Para 49][430-G- C
H]
1.4 The information received under the Right to Information
Act to show that the Federation was in profit in the year 1996-
1997, is not relevant to determine the financial condition
fortheperiod from 1.1.1986 to 1.1.1994. The Federation has D
categorically stated that because of the remedial steps taken by
the Federation, there was turn around only after 1994.Still further,
the profits in the balance sheet are not meant to be appropriated
towards wages of the employees alone. Though the profits had to
be shared by the members of the Co-operative Society,but the E
employees of the Federation are not its members.
The income generated by the Federation is not to be
expanded only on payment of salary but is also required for
upgradation of technology, renovation and expansion of plants
etc.Therefore, entire profit is not to be appropriated towards the F
wages of the employees alone. The Federation was established
as a step towards white revolution. The objective of the
Federation was not to give employment but to increase milk
production in the State.The employees are facilitators of the
employer to achieve such objective and thus demanding enhanced
wages without considering the objective and financial condition G
of the employer would not be ideal. The employer and the
employees have to work together to achieve the objective of the
organisation i.e. white revolution rather frittering a way the gains

H
398 SUPREME COURT REPORTS [2021] 6 S.C.R.

A made by the joint efforts of the management and employees by
giving increased wages to the employees irrespective of its
capacity to bear such expenses. [Para 50][431-A-E]
1.5 The submission that there will not be financial burden
on the federation in view of the fact that the High Court has
B ordered payment of arrears for a period of 3 years and 2 months
before the date of filing of writ petitions is again not tenable. The
High Court has granted revised pay scales with effect from
01.01.1986 instead of revised pay scales granted to the employees
of the federation with effect from 01.01.1994.Therefore,
restricting it for a period of 3 years and 2 months will not be
C helpful in respect of the financial condition of the Federation as
during the relevant time the federation was suffering from huge
losses. In view thereof, the order of the High Court is unjustified
and in excess of the power of judicial review conferred on the
High Court.The orders passed by the High Court are hereby
D set aside and the writ petitions are dismissed. [Para 51, 52]
[431-E-H]
2.1 As regards, CA No. 7432 of 2011, is directed against an
order passed by the High Court wherein it was held that the
employees are entitled to pay scale equivalent to their
E counterparts in the State of Punjab from 1.1.1986, though revised
pay scale was allowed by the Federation w.e.f. 1.1.1994. It was
contended that the argument of the employees claiming equal
pay for equal work was not examined by the High Court. The
employees have not filed any appeal against the impugned
judgment of the High Court. The employees cannot raise any
F grievance in an appeal preferred by the Federation to claim equal
pay for equal work.The employees are not aggrieved against the
judgment of the High Court. Therefore, the employees cannot
raise an argument which was not raised before the High Court.
However, their arguments are examined. It was argued that the
G claim of the employees is not of revised pay scale from 1.1.1986
but that the categorization of Milk Procurement Assistants as
Grade-I & II is unconstitutional and they would be entitled to
the same pay as is being paid to Milk Procurement Assistants
Grade-I on the principle of equal pay for equal work. [Paras 53,
54, 55][432-A-E]
H
PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION 399
LTD. v. BALBIR KUMAR WALIA

2.2 As per the staffing pattern, the educational qualifications A
for Milk Procurement Assistants Grade-I are Bachelor’s Degree
with minimum three years’ experience of Organisation of Milk
Producers Co-operative Societies affiliated with Milk Producers
Co-operative Unit whereas for Milk Procurement Assistant
Grade II, the qualification is Graduation preferable in Agriculture
B
with one year experience of workingas Secretary in a Co-
operative Milk Supply Society. The pay scale prescribed for the
Milk Procurement Assistants Grade-I is Rs.700-1200 whereas
the pay scale prescribed for the Milk Procurement Assistants
Grade-II is Rs.480-880. It is sought to be contended that, infact,
Milk Procurement Assistants Grade-I is a promotional avenue C
for Milk Procurement Assistants Grade-II. The educational
qualifications and the responsibilities of the two posts are quite
different. Therefore, the principle of equal pay for equal work
would not be applicable to them in as much as Grade I is a higher
post having higher duties and responsibilities than Grade II.
D
There is no merit in the argument claiming equal pay for the
alleged equal work. The orders passed by the High Court are
hereby set aside. [Para 57-59][433-A-E]
3.1 As regards, CA No. 7434 of 2011, is directed against an
order passed by the Division Bench of the High Court wherein it
was held that the employees are entitled to pay scale equivalent E
to their counterparts in the State of Punjab from 1.1.1986, though
revised pay scale was allowed by the Federation w.e.f. 1.1.1994.
It was contended that the argument of the employees claiming
equal pay for equal work was not examined by the High Court.
[Para 60][433-F] F
3.2 The respondent Nos. 1 to 4 are Milk Procurement
Assistants Grade-I in the pay scale of Rs.700-1200 whereas
respondent No. 5 is Animal Husbandry Assistant in the same pay
scale of Rs.700-1200 w.e.f. 1.8.1980. Such employees are claiming
parity in the matter of pay with the Area Officers including Deputy G
Manager (Procurement) and Dairy Extension Officer in the pay
scale of Rs.850-1700. The employees have pleaded that w.e.f.
2.2.1987, the designation of Milk Procurement Assistants Grade-
I has been changed to Milk Procurement Supervisor and now

H
400 SUPREME COURT REPORTS [2021] 6 S.C.R.

A the workload has increased inasmuch as fifty societies are to be
supervised as against eight societies which were supervised,
without any increase in the pay scale. It was pointed out that the
employees and the Deputy Manager (Procurement)/Dairy
Extension Officer do not constitute one class as the posts are
not similar on the points of qualifications and duties to be
B
performed by the incumbents. The classification on the basis of
qualifications, educational or by experience, for the fixation of
pay is permissible under the Constitution. The qualifications of
Milk Procurement Assistant Grade-I or Animal Husbandry
Assistant is Graduation/Matriculation with live-stock Diploma
C course whereas the essential qualifications for the post of Dairy
Extension Officer and for the post of Deputy Manager
(Procurement) is B.Sc. Dairy Husbandry/Dairy Technology
with two to three years’ experience. [Paras 61, 62][433-G-H;
434-A-D]
D 3.3 The order passed by the High Court has not been
challenged in appeal by the employees. Secondly, the classification
of different pay scales is permissible based upon educational
qualifications, experience and nature of duties. In view of the
said facts, the employees are not entitled to the pay scale as
claimed in the writ petition. The orders passed by the High Court
E are set aside. [Para 63-64][434-E-F]
Tata Cellular v. Union of India (1994) 6 SCC 651 :
[1994] 2 Suppl. SCR 122 – relied on.
Purshottam Lal & Ors. v. Union of India & Anr., (1973)
F 1 SCC 651; Union of India & Anr. v. S.B. Vohra & Ors.
(2004) 2 SCC 150 : [2004] 1 SCR 36 – distinguished.
M.M.R. Khan & Ors. v. Union of India & Ors., 1990
(Supp.) SCC 191 : [1990] SCR 687; Haryana State
Minor Irrigation Tubewells Corporation & Ors. v. G.S.
G Uppal & Ors., (2008) 7 SCC 375 : [2008] 6 SCR 662;
High Court Employees Welfare Assn., Calcutta & Ors.
v. State of W.B. & Ors., (2004) 1 SCC 334 : [2003] 5
Suppl. SCR 712; Supreme Court Employees Welfare
Association v. Union of India & Anr., (1989) 4 SCC
187 : [1989] 3 SCR 488; A.K. Bindal & Anr. v. Union
H
PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION 401
LTD. v. BALBIR KUMAR WALIA

of India & Ors. (2003) 5 SCC 163 : [2003] 3 SCR A
928; State of Punjab & Ors. v. Amar Nath Goyal &
Ors. (2005) 6 SCC 754 : [2005] 2 Suppl. SCR 549;
Crown Aluminium Works v. Workmen AIR 1958 SC 30
: [1958] SCR 651; Standard Vacuum Refining Co. of
India v. Workmen & Anr. AIR 1961 SC 895 : [1961]
B
SCR 536; Hindustan Times Ltd., New Delhi v. Workmen
(1963) 1 LLJ 120; Workmen v. Reptakos Brett. & Co.
Ltd. (1992) 1 SCC 290 : [1991] 2 Suppl. SCR 129 ;
South Malabar Gramin Bank v. Coordination Committee
of South Malabar Gramin Bank Employees’
Union.(2001) 4 SCC 101 : [2001] 1 SCR 742; Associate C
Bank Officers’ Association v. State Bank of India & Ors.
(1998) 1 SCC 428 : [1997] 4 Suppl. SCR 475; Officers
& Supervisors of I.D.P.L. v. Chairman & M.D., I.D.P.L.
& Ors.(2003) 6 SCC 490 : [2003] 1 Suppl. SCR 720;
S.C. Chandra & Ors. v. State of Jharkhand & Ors.
D
(2007) 8 SCC 279 : [2007] 9 SCR 130; Mineral
Exploration Corporation Ltd. v. Arvind Kumar Dixit &
Anr. (2015) 2 SCC 535 : [2014] 11 SCR 255; State of
Haryana v. Shri Des Raj Sangar & Anr. (1976) 2 SCC
844 : [1976] 2 SCR 1034; The Employees of Tannery
and Footwear Corporation of India Ltd. & Anr. v. Union E
of India & Ors. 1991 Supp. (2) SCC 565; Union of
India & Anr. v. S.B. Vohra & Ors. (2004) 2 SCC 150 :
[2004] 1 SCR 36; General Manager, Kisan Sahkari
Chini Mills Ltd., Sultanpur, U.P. v. Satrughan Nishad
& Ors.(2003) 8 SCC 639:[2003] 4 Suppl.SCR 349;
F
K.T. Veerappa & Ors. v. State of Karnataka & Ors.
(2006) 9 SCC 406; Balco Employees’ Union (Regd.)
v.Union of India & Ors. (2002) 2 SCC 333 : [2001] 5
Suppl. SCR 511; Jagdish Mandal v.State of Orissa &
Ors. (2007) 14 SCC 517 : [2006] 10 Suppl. SCR 606;
West Bengal Central School Service Commission & Ors. G
v. Abdul Halim & Ors. (2019) 18 SCC 39 : [2019] SCR
1089; Municipal Council, Neemuch v. Mahadeo Real
Estate & Ors.(2019) 10 SCC 738 : [2019] 12 SCR 532;
Harshit Agarwal & Ors. v. Union of India & Ors.
(2021) 2 SCC 710 – referred to.
H
402 SUPREME COURT REPORTS [2021] 6 S.C.R.

A Case Law Reference
[1990] 1 SCR 687 referred to Para 14
[2008] 6 SCR 662 referred to Para 14
[2003] 5 Suppl. SCR 712 referred to Para 14
B [1989] 3 SCR 488 referred to Para 14
(1973) 1 SCC 651 distinguished Para 34
[2003] 3 SCR 928 referred to Para 14
[2005] 2 Suppl. SCR 549 referred to Para 14
C
[1958] SCR 651 referred to Para 34
[1961] 3 SCR 536 referred to Para 21
(1963) 1 LLJ 120 referred to Para 22
[1991] 2 Suppl. SCR 129 referred to Para 23
D
[2001] 1 SCR 742 referred to Para 25
[1997] 4 Suppl.SCR 475 referred to Para 25
[2003] 1 Suppl. SCR 720 referred to Para 27
[2007] 9 SCR 130 referred to Para 28
E
[2014] 11 SCR 255 referred to Para 29
[1976] 2 SCR 1034 referred to Para 31
1991 Supp. (2) SCC 565 referred to Para 36

F [2004] 1 SCR 36 distinguished Para 38
[2003] 4 Suppl.SCR 349 referred to Para 39
(2006) 9 SCC 406 referred to Para 40
[1994] 2 Suppl. SCR 122 relied on. Para 43
G [2001] 5 Suppl. SCR 511 referred to Para 44
[2006] 10 Suppl. SCR 606 referred to Para 45
[2019] 9 SCR 1089 referred to Para 46
[2019] 12 SCR 532 referred to Para 47
H (2021) 2 SCC 710 referred to Para 48
PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION 403
LTD. v. BALBIR KUMAR WALIA

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7427 A
of 2011.
From the Judgment and Order dated 19.03.2009 of the High Court
of Punjab and Haryana at Chandigarh in C.W.P. No. 4418 of 1992.
With
Civil appeal nos. 7429,7430,7431,7432,7433,7434 and 7435 of 2011 B
P. S. Patwalia, Sr. Adv., Ashok K. Mahajan, Advs. for the
Appellants.
Govind Goel, Ankit Goel. Ravi Kapur, Raghav Kapur, Himinder
Lal, R. C. Kohli, Ms. Kaveeta Wadia, Karan Bharihoke, Siddhant
Sharma, Advs. for the Respondents. C
The Judgment of the Court was delivered by
HEMANT GUPTA, J.
CIVIL APPEAL NO. 7427 OF 2011, CIVIL APPEAL NO.
7429 OF 2011, CIVIL APPEAL NO. 7430 OF 2011, CIVIL
APPEAL NO. 7431 OF 2011, CIVIL APPEAL NO. 7433 OF 2011 D
AND CIVIL APPEAL NO. 7435 OF 2011
1. The present appeals are directed against an order passed by
the Division Bench of the High Court of Punjab & Haryana at Chandigarh
on 19.3.2009 whereby the writ petitions filed by the respondents 1 herein
were allowed holding that the Punjab State Co-operative Milk Producers E
Federation Ltd.2 is a State within the meaning of Article 12 of the
Constitution of India and that the employees are therefore entitled to
pay scale equivalent to their counterparts in the State of Punjab from
1.1.1986, though the revised pay scale was allowed by the Federation
w.e.f. 1.1.1994.
F
2. The milk producers in the State launched the setting up of
Cooperative Societies at village level which are known as Primary Milk
Producers Cooperative Societies. Such Primary Milk Producers
Cooperative Societies are in turn members of The District Cooperative
Milk Producers Union. These District Level Unions are ultimately the
members of the Federation. The employees have claimed pay scale as G
revised by the Punjab Government Anomaly Committee w.e.f. 1.1.1986.
3. Before the High Court, an objection was raised by the Federation
that since it is not a State within the meaning of Article 12 of the
1
Hereinafter referred to as the ‘employees’
2
For short, the ‘Federation’ H
404 SUPREME COURT REPORTS [2021] 6 S.C.R.

A Constitution, therefore, the writ petitions were not maintainable. However,
before this Court, Mr. Patwalia, learned senior counsel appearing for
the Federation has submitted that the question whether the Federation is
a State or not is not being raised in the present appeals. The main
grievance of the Federation is regarding grant of revised pay scale w.e.f.
1.1.1986 though the Federation was suffering with acute financial
B
stringency in those days and had therefore granted revised pay scales
from 1.1.1994.
4. It is pointed out that The Registrar (Cooperative Societies)
accorded approval for implementation of the report of the Third Pay
Commission on 2.6.1989. The Federation granted revised pay scale and
C allowances w.e.f. 1.1.1986 as per the report of the Pay Commission.
Thereafter, on 15.2.1990, the State Government revised pay scale of
Veterinary Officers of the Animal Husbandry Department, Punjab
Government from Rs.850-1700 to Rs.2200-4000 and that after eight
years of service, the pay scale of Veterinary Officers would be Rs.3000-
4500 and after eighteen years of service, it would be Rs.3700-5300 with
D
effect from 1.1.1986 on the basis of report of an Anomaly Committee
constituted to consider the grievances of the employees of the State. It
is the said pay scale which was claimed by the filing of writ petitions
before the High Court.
5. It was argued that the Federation was facing acute financial
E crisis inasmuch as the State had granted a loan of Rs.8 (sic 12) crores
on 9.5.1990 which the Federation could not repay and, therefore, the
said amount was converted into the share capital of the State Government
with the Federation. In addition thereto, keeping in view the financial
stringency, the National Dairy Development Board gave a loan of Rs. 4
F crores on 2.5.1990 to the Federation. After the loan was granted by the
National Dairy Development Board, there was a change in the
management which led to restructuring of the Federation.
6. The service conditions of the employees of the Federation are
governed by the Punjab State Co-operative Milk Producers Federation
Services (Common Cadre) Rules, 19803. The Common Cadre Rules
G were resolved to be amended on 10.8.1990 by the Board of Directors of
the Federation. The same were approved by the Registrar (Co-operative
Societies) on 30.10.1990. It is thereafter that the Federation issued a
notice under Section 9-A of the Industrial Disputes Act, 1947 on
12.11.1990 (Annexure P-12) to all the employees on the ground of
H 3
Hereinafter referred to as the ‘Common Cadre Rules’
PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION 405
LTD. v. BALBIR KUMAR WALIA [HEMANT GUPTA, J.]

financial stringency showing its intention to effect the changes specified A
in the annexure annexed with the said notice.
7. The employees of the Federation raised protest; therefore, a
committee was constituted on 6.12.1994 to examine the following issues:
“(i) Whether the upward revision should be adopted for the
employees of Milkfed and Milk Unions? B
(ii) Whether the revision is to be given with effect from 1.1.1986
or any subsequent date by giving the benefit of notional fixation?
(iii) Whether the upward should confine only to the categories
covered in the report of Government Anomaly Committee or
categories enjoying identical scales (unimproved) need to be C
covered (a) repercussion if revision is confined to the categories
covered in the Government report (b) impact, if any, of pending
writ petitions, resolutions of BOD of M.U., Ludhiana and BOD
of Milkfed?
(iv) Whether there is any necessity of changing the qualification/
D
improving designations of certain categories being placed in higher
scales?
(v) Any other point/issue identical to or connected with the above?”
8. The Committee, inter alia, made the following
recommendations:
E
“4. The Committee finds that in case the revision of pay scales is
taken up w.e.f. 1.1.1986, the amount of arrears upto 31.12.1993
works out to Rs.1.5 crore approx., i.e. about 60 lacs in case of
those categories for which the scales have been improved and
about Rs.90 lac in case of identical categories. Taking into
consideration the financial health of the Milkfed and more F
particularly majority of Milk Unions, Committee strongly feels that
payment of arrears will further shatter the financial health of the
Milkfed and Milk Unions and it will not be possible to pay such a
huge amount in the shape of arrears. Committee feels that the
employees concerned also understand this position and will most G
probably be agreeable to the grant of improved pay scales w.e.f.
any subsequent date. The 2nd alternative of granting benefit from
1.1.1994 with notional fixation of BP w.e.f. 1.1.1986 has also been
examined. In this case, more than 750 employees will be financially
benefited and the financial burden will be Rs.2.0 lac pm. This is
also considered to be a huge liability, especially when the H
406 SUPREME COURT REPORTS [2021] 6 S.C.R.

A recommendations of the IVth Pay Commission are expected and
the liability on its implementation is also likely to be heavy. Further,
the Committee has been told that the liability of the arrears n
account of Prop. set up from 1.1.1986 to 31.8.1992 are still
outstanding. The Committee after considering the above as well
as various other aspects, recommends that the improved pay scales
B
may be implemented w.e.f. 1.1.1994 without giving the benefit of
even notional pay fixation w.e.f. 1.1.1986. Adoption of the Punjab
Government pattern of Pay Scales has been felt necessary with a
view to make parity in the scales for future revisions etc. This
would save the organisation from a huge liability of the payment
C of arrears and will also give scope to the employee for placement
in better pay scale and getting benefit which might accrue as a
result next revision of pay scale likely to be made w.e.f. 1.1.1994
on Punjab Government pattern.”
9. The report of the Committee was considered and the grant of
revised pay scale w.e.f. 1.1.1994 was approved by the Board of Directors
D
of the Federation. The minutes of the meeting of the Board of Directors
of Federation held on 30.8.1996 read as under:
“After discussion, it is unanimously resolved that in view of the
recommendations of the Departmental Committee, constituted by
the Milkfed on 6.12.1994, contained in the report enclosed at
E Annexure-3, approval is granted to the implementation of the
revised pay scales and Master Pay Scale to the concerned
employees of the Milkfed and the Milk Unions in accordance
with the report of the Anomaly Committee constituted under the
Third Pay Commission by the Punjab Government, with effect
F from 1.1.1994. Its approval may also be obtained from the
Registrar, Cooperative Societies, Punjab.”
10. The decision of the Board was approved by the Registrar
(Co-operative Societies) on 29.4.1997. Thus, subsequently, revised scales
with effect from 1.1.1994 were granted to the employees.
11. Mr. Patwalia referred to the communication of the Punjab
G
Government dated 1.3.1990 that grant of allowances or concessions
should not automatically be made applicable to the employees of Public
Sector Undertakings/Cooperative Institutions, without examining the
liabilities involved, the available resources of the Undertakings and the
extent of concessions already being availed by their employees. The
H State Government communicated as under:
PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION 407
LTD. v. BALBIR KUMAR WALIA [HEMANT GUPTA, J.]

“It has accordingly been decided that instructions, regarding grant A
of any allowance/perks/concessions etc. by whatever name called,
issued by State Government from time to time for its employees
should not automatically be made applicable to the employees of
Public Sector Undertakings/Cooperative Institutions. Before
making such instructions applicable to your employees/officers,
these should thoroughly be examined by B.O.D. with reference B
to the liabilities involved, capacity of the Undertakings to bear the
additional financial burden, availability of the resources and the
extent/nature of the similar allowances/concessions already being
availed of and the views of Department of Finance (B.P.E.) should
also invariably be obtained through the Administrative C
Department.”
12. The State Government reiterated on 9.7.1993 that whenever
instructions for revision of allowances/pay scale are issued by the Punjab
Government for its employees, they are adopted by Public Sector
Undertakings and are applied to its employees without examining the D
liability involved and the capacity to pay, which results in loss and Public
Sector Undertakings add the same to their costs. It was suggested that
these practices may be discontinued as the State Government would not
be supporting the PSUs financially in such cases. It was communicated
as under:
E
“It has been noticed that whenever any instructions regarding
revision of allowances/pay are issued by the Punjab Government
for its employees these are adopted by Public Sector Undertakings
and applicable to its employees without examining the liability
involved and the Public Sector Undertakings capacity to pay with
the result that the loss incurring Public Sector Undertakings keep F
adding to their costs. This practice may be discontinued. The
establishment cost of per unit of product or service in Public Sector
Undertakings has increased very much. Therefore, no further
additives should be encouraged and Governments revision is not
justifiable pretext to consider similar increase in the Public Sector
Undertakings should see their financial condition, rising cost in G
relation to productivity and the fact that Governments is not going
to support the Public Sector Undertakings financially.”
13. The High Court allowed the writ petitions filed by the employees
holding that the financial stringency was no longer an excuse to not
revise the pay scales and thus held that the date of implementation to H
408 SUPREME COURT REPORTS [2021] 6 S.C.R.

A grant revised pay scales as 1.1.1994 was absolutely unfair. The Federation
is in appeal herein against such order. This Court had stayed the recovery
pending further orders on 6.11.2009.
14. Mr. Patwalia, learned counsel for the Federation, submitted
that the High Court erred in law in holding that the date of implementation
B to grant revised pay scales as 1.1.1994 was absolutely unfair and that
financial stringency was not an excuse for refusing to revise the pay
scales from 1.1.1986. It was contended that the judgments4 referred to
by the High Court have no applicability to the facts of the present case.
Mr. Patwalia also relied upon judgments of this Court reported as A.K.
Bindal & Anr. v. Union of India & Ors.5 and State of Punjab & Ors.
C v. Amar Nath Goyal & Ors.6 wherein the Court had upheld financial
stringency as a ground to deny higher pay scales etc.
15. Mr. Govind Goel, appearing for the respondents in Civil Appeal
No. 7433 of 2011 argued that the writ petition before the High Court
was filed on behalf of one Head Draftsman, two Draftsman, two Junior
D Draftsman and two Surveyors. It was contended that such seven
employees of the Federation have not been provided the benefit of
recommendations of the Committee as was granted to the other
employees of the Federation w.e.f. 1.1.1994. Thus, it was argued that
the decision to not grant the revised pay scale on the basis of the report
of the Committee of the Federation w.e.f. 1.1.1994 was wholly arbitrary
E and discriminatory. It was contended that out of the 1573 employees of
the Federation, these seven employees alone have been discriminated.
It was also argued that the High Court has restricted the arrears
consequent to its directions to grant arrears of the revised pay scale for
a period of 3 years and 2 months from the date preceding the date of
filing of respective writ petitions. While contesting the ground of financial
F
stringency preferred by the Federation, it was stated that though there
were losses for some years, the information disclosed under the Right to
Information Act on 22.7.2011 shows that the Federation has been in
profit since 1996-1997. Hence, such ground of financial stringency is
not tenable.
G 4
M.M.R. Khan & Ors. v. Union of India & Ors., 1990 (Supp.) SCC 191; Haryana State
Minor Irrigation Tubewells Corporation & Ors. v. G.S. Uppal & Ors., (2008) 7 SCC
375; High Court Employees Welfare Assn., Calcutta & Ors. v. State of W.B. & Ors.,
(2004) 1 SCC 334; Supreme Court Employees Welfare Association v. Union of India &
Anr., (1989) 4 SCC 187 and Purshottam Lal & Ors. v. Union of India & Anr., (1973) 1
SCC 651
5
(2003) 5 SCC 163
H 6
(2005) 6 SCC 754
PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION 409
LTD. v. BALBIR KUMAR WALIA [HEMANT GUPTA, J.]

16. Mr. Goel relied upon a Constitution Bench judgment of this A
Court reported as Purshottam Lal,referred to by the High Court as
well, to contend that revision of pay scale recommended by the Pay
Commission after acceptance by the Government could not be denied to
a category of employees as it would be an act of discrimination.
17. Mr. Patwalia controverted the arguments raised by Mr. Goel B
and pointed out that the writ petitioners are the employees of the
Federation who have no work of the post to which they were appointed.
Instead of abolishing the post to which the writ petitioners were appointed,
the Committee had nevertheless dealt with the grant of revised pay scales
to them in the following manner:
Sr. Nam e of Unrevis ed Al ready Pay R emarks R ecom men datio ns of th e C
No. the Pay scale RPS scale C om mitt ee fo r
Catego ries before w.r.f. no w i mp ro vem ent fro m 1 .1 .94
1.1 .8 6 1.1.8 6 revised
by
Gov t.
xx x
15 Head 70 0-12 00 16 40 - 22 00 - Th ere is o nly on e Head
Draftsm an 29 25 35 00 Draftsman , for wh om the
deptt . h as no wor k has
been pu t on alternate job
D
i n a M ilk Unio n. There is
al so no li keliho od of n ew
ci vil works to be
un dertaken. So th e pay
s cale o f 18 00 -3 20 0 is
reco mmen ded for this
po st. No fin an cial burd en.
16 Draftsm an 57 0-10 80 15 00 - 18 00 - J r. Draftsman Th ere are 3 drafts men .
26 40 32 00 s hall be eligib le Th e civ il wo rk s have E
fo r p ro mo tion as al mos t b een completed
drafts man in t he an d th ere i s n o likelih oo d
s cale of Rs .1 80 0- of new civ il wo rks to b e
320 0 after a un dertaken. Two o f t hem
m ini mu m period have been p ut on alt ern at e
of 1 2 y ears. j ob s, as they are surp lus .
S o th e co mm ittee feels
t hat th e existi ng p ay s cal e
of Rs .1 50 0-26 40
s ufficient fo r them . So n o
is F
i mp ro vem ent is
reco mmen ded .
17 . Tracers 40 0-60 0 95 0- 12 00 - To be desi gnat ed Th ere are 4 tracers . Non e
18 00 21 00 as J r. draftsman of them is dep loy ed on his
an d q ualification j ob , bu t hav e b een put o n
t o b e rais ed to al tern at e jobs, which are
m atric with t wo cl erical, to p rovi de this
years ITI wo rk. Th ere is n o
certificate of l ikelih oo d of ci vil work G
drafts man. fo r th em in futu re. So n o
i mp ro vem ent is
reco mmen ded .
18 Survey or 400-60 0 95 0- 12 00 - Th ere are two Su rveyo rs ,
18 00 21 00 wh o hav e b een p ut o n
al tern at e job s. So n o
i mp ro vem ent is
reco mmen ded for this
categ ory to o.
H
410 SUPREME COURT REPORTS [2021] 6 S.C.R.

A 18. It was thus argued that the Committee had taken a conscious
decision not to grant pay scale as revised by the Government. Instead of
granting enhanced pay scale at par with what was approved by the
State Government, a higher pay than the recommendations of the Pay
Commission was granted. The Federation thus exercised this option instead
of abolishing the post. Therefore, the decision of the Committee does
B
not warrant any interference in exercise of the power of judicial review.
19. We have heard learned counsel for the parties and find that
the judgment and order of the High Court cannot be sustained. In our
country, there are broadly three sets of employers such as employers in
the organized sector like the Industrial workers; secondly, Public Sector
C Undertakings including Boards and Corporations and all other
establishments, which meet the test of a State within the meaning of
Article 12 of the Constitution; and thirdly, Central or State Government
employees.
20. One of the early judgments of this Court is Crown Aluminium
D Works v. Workmen7,wherein the question examined was as to whether
in view of financial conditions, the wages of workmen can be
reduced.This Court held that it would not be right to hold that there is a
rigid and inexorable convention that the wage structure once fixed by
Industrial Tribunals can never be changed to the prejudice of workmen.
This Court thus held as under:
E
“11. … In dealing with a claim for such revision, the Tribunal may
have to consider, as in the present case whether the employer’s
financial difficulties could not be adequately met by retrenchment
in personnel already effected by the employer and sanctioned by
the Tribunal. The Tribunal may also enquire whether the financial
F difficulties facing the employer are likely to be of a short duration
or are going to face the employer for a fairly long time. It is not
necessary, and would indeed be very difficult, to state exhaustively
all considerations which may be relevant in a given case. It would,
however, be enough to observe that, after considering all the
relevant facts, if the Tribunal is satisfied that a case for reduction
G
in the wage structure has been established then it would be open
to the Tribunal to accede to the request of the employer to make
appropriate reduction in the wage structure, subject to such
conditions as to time or otherwise that the tribunal may deem fit
or expedient to impose. …”
H 7
AIR 1958 SC 30
PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION 411
LTD. v. BALBIR KUMAR WALIA [HEMANT GUPTA, J.]

21. In respect of Industrial workers, this Court, while dealing with A
wage structure ina judgment reported as Standard Vacuum Refining
Co. of India v. Workmen & Anr.8,held that it is usual to divide wages
into three broad categories: the basic minimum wage which is the bare
subsistence wage, above it is the fair wage, and beyond the fair wage is
the living wage. The said three categories of wages are described as the
B
poverty level, the subsistence level and the comfort or the decency level.
This Court accepted the Report by the Commission of Enquiry on
“Emoluments and Conditions of Service of Central Government
Employees, 1957-1959” wherein the five norms which should guide all
wage fixing authorities including Minimum Wage Committees, Wage
Boards, adjudicators, etc. were stated by the Court inter alia as under: C
“9. It is well known that the problem of wage structure with which
industrial adjudication is concerned in a modern democratic State
involves on the ultimate analysis to some extent ethical and social
considerations. ……. As the social conscience of the general
community becomes more alive and active, as the welfare policy D
of the State takes a more dynamic form, as the national economy
progresses from stage to stage, and as under the growing strength
of the trade union movement collective bargaining enters the field,
wage structure ceases to be a purely arithmetical problem.
Considerations of the financial position of the employer and the
state of national economy have their say, and the requirements of E
a workman living in a civilised and progressive society also come
to be recognised.
19. ... With regard to the minimum wage fixation it was agreed
that the minimum wage was need-based to ensure the minimum
human needs of the industrial worker irrespective of any other F
considerations.
(i) In calculating the minimum wage, the standard working class
family should be taken to consist of 3 consumption units for one
earner; the earnings of women, children and adolescents should
be disregarded. G
(ii) Minimum food requirement should be calculated on the basis
of a net intake of calories, as recommended by Dr Aykroyd for an
average Indian adult of moderate activity.
8
AIR 1961 SC 895 H
412 SUPREME COURT REPORTS [2021] 6 S.C.R.

A (iii) Clothing requirements should be estimated at a per capita
consumption of 18 yards per annum which would give for the
average workers’ family of four, a total of 72 yards.
(iv) In respect of housing, the rent corresponding to the minimum
area provided for under Government’s Industrial Housing Scheme
B should be taken into consideration in fixing the minimum wage.
(v) Fuel, lighting and other ‘miscellaneous’ items of expenditure
should constitute 20% of the total minimum wage.”
22. This Court in Hindustan Times Ltd., New Delhi v. Workmen9
held that numerous complex factors, some of which are economic and
C some spring from social philosophy give rise to conflicting considerations
that have to be borne in mind and that such factors are not static in
nature. The financial position of the employer, state of national economy,
and the requirements of a workman living in a civilized and progressive
society also are to be recognized. This Court held as under:
D “5. The fixation of wage structure is among the most difficult
tasks that industrial adjudication has to tackle. On the one hand
not only the demands of social justice but also the claims of national
economy require that attempts should be made to secure to
workmen a fair share of the national income which they help to
produce, on the other hand, care has to be taken that the attempt
E at a fair distribution does not tend to dry up the source of the
national income itself On the one hand, better living conditions for
workmen that can only be possible by giving them a “living wage”
will tend to increase the nation’s wealth and income on the other
hand, unreasonable inroads on the profits of the capitalists might
F have a tendency to drive capital away from fruitful employment
and even to affect prejudicially capital formation itself. The rise in
prices that often results from the rise of the workmen’s wages
may in its turn affect other members of the community and may
even affect prejudicially the living conditions of the workmen
themselves. The effect of such a rise in price on the Country’s
G international trade cannot also be always ignored. Thus numerous
complex factors, some of which are economic and some spring
from social philosophy give rise to conflicting considerations that
have to be borne in mind. Nor does the process of valuation of the
numerous factors remain static. ……
H 9
(1963) 1 LLJ 120
PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION 413
LTD. v. BALBIR KUMAR WALIA [HEMANT GUPTA, J.]

6. In trying to keep true to the two points of social philosophy and A
economic necessities which vie for consideration, industrial
adjudication has set for itself certain standards in the matter of
wage fixation. At the bottom of the ladder, there is the minimum
basic wage which the employer of any industrial labour must pay
in order to be allowed to continue an industry. Above this is the
B
fair wage, which may roughly be said to approximate to the need
based minimum, in the sense of a wage which is “adequate to
cover the normal needs of the average employee regarded as a
human being in a civilised society.” Above the fair wage is the
“living wage” a wage “which will maintain the workman in the
highest state of industrial efficiency, which will enable him to C
provide his family with all the material things which are needed
for their health and physical well-being, enough to enable him to
qualify to discharge his duties as a citizen.” (Cited with approval
by Mr. Justice Gajendragadkar in Standard Vacuum Company’s
Case (1) from “The living Wage” by Philip Snowden).”
D
23. In Workmen v. Reptakos Brett. & Co. Ltd.10,this Court held
that a worker’s wage has the force of collective bargaining under the
labour laws. Each category of the wage structure has to be tested at the
anvil of social justice which is the live-fibre of our society today. The
Court held as under:
E
“12. The concept of ‘minimum wage’ is no longer the same as it
was in 1936. Even 1957 is way behind. A worker’s wage is no
longer a contract between an employer and an employee. It has
the force of collective bargaining under the labour laws. Each
category of the wage structure has to be tested at the anvil of
social justice which is the live-fibre of our society today. Keeping F
in view the socio-economic aspect of the wage structure, we are
of the view that it is necessary to add the following additional
component as a guide for fixing the minimum wage in the industry:
“(vi) children’s education, medical requirement minimum
recreation including festivals/ceremonies and provision for old G
age marriages etc. should further constitute 25 per cent of the
total minimum wage.”
13. The wage structure which approximately answers the above
six components is nothing more than a minimum wage at
10
(1992) 1 SCC 290 H
414 SUPREME COURT REPORTS [2021] 6 S.C.R.

A subsistence level. The employees are entitled to the minimum wage
at all times and under all circumstances. An employer who cannot
pay the minimum wage has no right to engage labour and no
justification to run the industry”.
24. Now, in respect of the establishments which meet the
B parameters of being a State within the meaning of Article 12, this Court
considered the question of financial stringency in A.K. Bindal. This Court
in the said case was examining the claim of revision of pay of the
employees of a public sector enterprise. The employers placed reliance
upon the Office Memoranda of the Government of India that the
Government would not provide any budgetary support for wage increase
C and the undertakings themselves would have to generate the resources
to meet the additional expenditure which would be incurred on account
of increase in the wages. It was thus held by this Court that the non-
revision of pay scale would not amount to violation of fundamental rights
guaranteed under Article 21 as it would be stretching too far and cannot
D be countenanced. It was held that even under industrial law, workmen
should get a minimum wage or a fair wage but not that the wages must
be revised and enhanced periodically. The Court held as under:
“17. …Being employees of the companies, it is the responsibility
of the companies to pay them salary and if the company is
E sustaining losses continuously over a period and does not have
the financial capacity to revise or enhance the pay scale, the
petitioners cannot claim any legal right to ask for a direction to the
Central Government to meet the additional expenditure which may
be incurred on account of revision of pay scales. It appears that
prior to issuance of the office memorandum dated 12-4-1993 the
F Government had been providing the necessary funds for the
management of public sector enterprises which had been incurring
losses. After the change in economic policy introduced in the early
nineties, the Government took a decision that the public sector
undertakings will have to generate their own resources to meet
G the additional expenditure incurred on account of increase in wages
and that the Government will not provide any funds for the same.
Such of the public sector enterprises (government companies)
which had become sick and had been referred to BIFR, were
obviously running on huge losses and did not have their own
resources to meet the financial liability which would have been
H incurred by revision of pay scales. By the office memorandum
PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION 415
LTD. v. BALBIR KUMAR WALIA [HEMANT GUPTA, J.]

dated 19-7-1995 the Government merely reiterated its earlier stand A
and issued a caution that till a decision was taken to revive the
undertakings, no revision in pay scale should be allowed. We,
therefore, do not find any infirmity, legal or constitutional in the
two office memorandums which have been challenged in the writ
petitions.
B
18. …But to hold that mere non-revision of pay scale would also
amount to a violation of the fundamental right guaranteed under
Article 21 would be stretching it too far and cannot be
countenanced. Even under the industrial law, the view is that the
workmen should get a minimum wage or a fair wage but not that
their wages must be revised and enhanced periodically. It is true C
that on account of inflation there has been a general price rise but
by that fact alone it is not possible to draw an inference that the
salary currently being paid to them is wholly inadequate to lead a
life with human dignity. What should be the salary structure to
lead a “life with human dignity” is a difficult exercise and cannot D
be measured in absolute terms….”
25. This Court also considered two earlier judgments11 that the
financial capacity of the employer cannot be held to be a germane
consideration for determination of the wage structure of the employees,
therefore, it must be confined to the facts of the aforesaid case. It was E
held that economic viability or the financial capacity of the employer is
an important factor which cannot be ignored while fixing the wage
structure, otherwise the unit itself may not be able to function and may
have to close down which will inevitably have disastrous consequences
for the employees themselves.
F
26. In South Malabar Gramin Bank, one of the contentions
raised was whether financial viability could be the sole criterion in deciding
the wage structure of the Regional Rural Bank (RRB) employees. The
Tribunal constituted to consider the wage structure inter alia held that
The Regional Rural Banks Act places special emphasis on the
development of rural economy by providing credit and other facilities to G
productive activities in the rural areas, particularly to small and marginal
farmers, agricultural labourers, artisans and small entrepreneurs. The
11
South Malabar Gramin Bank v. Coordination Committee of South Malabar Gramin
Bank Employees’ Union., (2001) 4 SCC 101 and Associate Bank Officers’ Association
v. State Bank of India & Ors., (1998) 1 SCC 428 H
416 SUPREME COURT REPORTS [2021] 6 S.C.R.

A objects and reasons of the Act provide a highway for the social welfare
and common good of the rural poor living in the priority sector. The
RRBs have brought about socio-economic revolution in the hitherto
unbanked underdeveloped priority sector by ameliorating the poverty
conditions of the underprivileged, SCs/STs and other weaker sections of
the society. That was the paramount objective of the Act. The Court
B
held that the RRBs are in fulfilment of the hopes and aspirations aroused
in the Preamble and the directive principles of the Constitution, and the
performance of such institutions in furtherance of those principles shall
not be judged from the curved angle of viability or from the point of view
of a private money lender or businessman or from mere profit and loss
C statements. This Court held as under:
“12. …This conclusion of the Tribunal has become final, the award
in question not having been assailed and on the other hand having
been implemented. In the aforesaid premises, it is a futile attempt
on the part of the employer as well as the Union of India to reagitate
D the dispute, which has already been resolved and has been given
effect to. In our considered opinion, therefore, the aforesaid
contention on behalf of the appellant cannot be sustained and it
would no longer be open, either for the Bank or the Union of India
to raise a contention that in determining the wage structure of the
employees of the RRBs, the financial condition would be a relevant
E factor.”
27. In a judgment reported as Officers & Supervisors of I.D.P.L.
v. Chairman & M.D., I.D.P.L. & Ors. 12, this Court held that the
employees cannot legitimately claim that their pay-scales should
necessarily be revised and enhanced when the organization in which
F they are working are making continuous losses and are deeply in the
red. It was held as under:
“11. In our view, the economic capability of the employer also
plays a crucial part in it, as also its capacity to expand business or
earn more profits. The contention of Mr. Sanghi, if accepted, that
G granting higher remuneration and emoluments and revision of pay
to workers in other governmental undertakings and, therefore,
the petitioners are also entitled for the grant of pay revision may,
in our opinion, only lead to undesirable results. Enough material
was placed on record before us by the respondents which clearly
12
H (2003) 6 SCC 490
PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION 417
LTD. v. BALBIR KUMAR WALIA [HEMANT GUPTA, J.]

show that the first respondent had been suffering heave losses A
for the last many years. In such a situation the petitioners, in our
opinion, cannot legitimately claim that their pay-scales should
necessarily be revised and enhanced even though the organisation
in which they are working are making continuous losses and are
deeply in the red. As could be seen from the counter affidavit, the
B
first respondent company which is engaged in the manufacture of
medicines became sick industrial company for various reasons
and was declared as such by the BIFR and the revival package
which was formulated and later approved by the BIFR for
implementation could not also be given effect to and that the
modifications recommended by the Government of India to the C
BIFR in the existing revival package was ordered to be examined
by an operating agency and, in fact, IDBI was appointed as an
operating agency under Section 17(3) of SICA. It is also not in
dispute that the production activities had to be stopped in the major
two units of the company at Rishikesh and Hyderabad w.e.f.
D
October, 1996 and the losses and liabilities are increasing every
month and that the payment of three instalments of interim relief
could not also be made due to the threat of industrial unrest and
the wage revision in respect of other employees is also due w.e.f.
1992 which has also not been sanctioned by the Government of
India.” E
28. This Court in a judgment reported as S.C. Chandra & Ors.
v. State of Jharkhand & Ors.13 was examining the question of equal
pay for equal work where the claim of the appellants was to release and
pay Dearness Allowance. Hon’ble Mr. Justice Markandey Katju in a
separate but concurring judgment held that the “Fixation of pay scale is F
a delicate mechanism which requires various considerations including
financial capacity, responsibility, educational qualification, mode of
appointment, etc. ….”
29. In Mineral Exploration Corporation Ltd.v.Arvind Kumar
Dixit & Anr.14,this Court was dealing with an appeal against an order of G
the High Court, which did not interfere with the award of Industrial
Tribunal who had extended the actual financial benefits to the respondents
by holding that they cannot be denied benefit of ‘Wage Revision’ by

13
(2007) 8 SCC 279
14
(2015) 2 SCC 535 H
418 SUPREME COURT REPORTS [2021] 6 S.C.R.

A notional fixation and re-computation of their retiral dues (severance
package). This Court referred to A.K.Bindal and Officers &
Supervisors of I.D.P.L. to accept the argument of the appellant that if
the wage revision office order is interpreted to include all the employees
who were superannuated/ voluntarily retired between 1.4.1997 to 1.4.2003,
it would frustrate the measures taken, including the Voluntary Retirement
B
Scheme, to improve the condition of Public Sector Undertaking. The
Court thus upheld the cutoff date in view of the financial constraints
faced by the appellant.
30. In the third category of cases, in respect of Central or State
Government, the factor of financial constraints has been found to be
C relevant when the liberalized benefits were granted from a particular
date. In Amar Nath Goyal, the question examined was whether limiting
of benefits only to the employees who retired or died on or after 1.4.1995
after calculating the financial implications was irrational or arbitrary, the
Court held as under:
D “26. It is difficult to accede to the argument on behalf of the
employees that a decision of the Central Government/State
Governments to limit the benefits only to employees, who retire
or die on or after 1-4-1995, after calculating the financial
implications thereon, was either irrational or arbitrary. Financial
E and economic implications are very relevant and germane for any
policy decision touching the administration of the Government, at
the Centre or at the State level.”
31. In State of Haryana v. Shri Des Raj Sangar & Anr.15,the
post of the Panchayati Raj Election Officer was abolished in view of the
F extreme financial stringency. This Court held as under:
“8. …… It was also stated in another affidavit filed on behalf of
the appellant State that the post of Panchayati Raj Election Officer
and the seven posts of field Deputy Directors were abolished as
an economy measure to meet financial stringency. We see no
G cogent ground to question the averments made in the above
affidavits. The averments show that the decision to abolish the
post of Panchayati Raj Election Officer was taken because of
administrative reasons. The question as to whether greater
economy could have been brought about by adopting some other

H 15
(1976) 2 SCC 844
PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION 419
LTD. v. BALBIR KUMAR WALIA [HEMANT GUPTA, J.]

course is not for the court to go into for the court cannot sit as a A
court of appeal in such matters. It may be that some of the
functions which were being previously performed by the
respondent are now being performed by Deputy Directors whose
posts have not been abolished, this fact would not show that the
decision to abolish the post held by the respondent was not taken
B
in good faith. After the posts of Deputy Directors had been created
and had been in existence along with the post of Panchayati Raj
Election Officer for a number of months, the Government, it would
appear, decided to abolish some of the posts to meet the financial
stringency. In taking the decision as to which post to abolish and
which not to abolish, the Government, it seems, took into account C
the relative usefulness of each post and decided to abolish the
seven posts of field Deputy Directors and the one post of
Panchayati Raj Election Officer. This was a matter well within
the administrative discretion of the Government and as the decision
in this respect appears to have been taken in good faith, the same
D
cannot be quashed by the court. The fact that the post to be
abolished is held by a person who is confirmed in that post and the
post which is not abolished is held by a person who is not permanent
would not affect the legality of the decision to abolish the former
post as long as the decision to abolish the post is taken in good
faith. We would, therefore, hold that the High Court was in error E
in quashing the order of the Government whereby the post of
Panchayati Raj Election Officer had been abolished.”
32. The Central or State Government is empowered to levy taxes
to meet out the expenses of the state. It is always a conscious decision
of the government as to how much taxes have to be levied so as to not F
cause excessive burden on the citizens. But the Boards and Corporations
have to depend on either their own resources or seek grant from the
Central/ State Government, as the case may be, for their expenditures.
Therefore, the grant of benefits of higher pay scale to the Central/State
Government employees stand on different footing than grant of pay scale
by an instrumentality of the State. G

33. The judgment in Purshottam Lal is a case where reference
was made to the Pay Commission to consider the pay revision of all
Central Government employees paid out of the Consolidated Fund of
India. The recommendation of the Pay Commission was accepted but
H
420 SUPREME COURT REPORTS [2021] 6 S.C.R.

A the benefit of revised pay scale was not given to the employees of the
Forest Research Institute and College, Dehradun. An argument was
raised that the report of the Pay Commission did not deal with the case
of the petitioners. The said argument was negated for the reason that
once the Government has accepted the recommendation of the Pay
Commission, which included all Central Government employees, the
B benefit of revised pay scale cannot be denied to the petitioners. This
Court has held as under:
“15. Mr Dhebar contends that it was for the Government to accept
the recommendations of the Pay Commission and while doing so
to determine which categories of employees should be taken to
C have been included in the terms of reference. We are unable to
appreciate this point. Either the Government has made reference
in respect of all government employees or it has not. But if it has
made a reference in respect of all government employees and it
accepts the recommendations it is bound to implement the
recommendations in respect of all government employees. If it
D
does not implement the report regarding some employees only it
commits a breach of Articles 14 and 16 of the Constitution. This
is what the Government has done as far as these petitioners are
concerned.”
34. We find that the judgment in Purshottam Lal is altogether on
E different facts. The said judgment is in the context where the report was
in respect of all Central Government employees but the benefit of the
report was not granted to the petitioners for the reason that there was
no specific reference in the Pay Commission report. In the case of the
writ petitioners herein represented by Mr. Govind Goel, the Committee
F has considered that there was no work for the writ petitioners. Still further,
instead of abolishing the post, the Federation granted revised pay scale
which was better than the pay scale recommended by the Pay
Commission but less than the pay scale granted by the State Government
in pursuance of the recommendations of the Anomaly Committee. Thus,
it cannot be said to be a discriminatory or arbitrary decision more so in
G exercise of power of judicial review. There exist good reasons not to
grant higher pay scale for the reason that there is no work of the post to
which they were appointed but were given alternate assignments.
35. The judgment in M.M.R. Khan is in respect of workers in the
canteen in different railway establishments. It was held that the
H Government has complete control over the canteens and the workers
PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION 421
LTD. v. BALBIR KUMAR WALIA [HEMANT GUPTA, J.]

employed therein are holders of civil posts within the meaning of Article A
311 of the Constitution. The issue was not of financial stringency on the
part of the Union to make the payment of wages to railway employees.
36. In a judgment reported as The Employees of Tannery and
Footwear Corporation of India Ltd. & Anr. v. Union of India &
Ors.16, the employees were claiming parity in pay and allowances with B
that of the Central Government employees. This Court held that pay
scales of the employees in the unionised cadre falling in four categories
in the respondent corporation should be revised in a way that the same
are at par with the pay scales of such employees employed with the
Cotton Corporation of India.
C
37. In G.S. Uppal, the Sub-Divisional Officer (SDO), Sub-
Divisional Engineer (SDE) and Assistant Engineer (AE) on deputation
from the Irrigation Department were granted revised pay scale but the
SDO, SDE and AE appointed in the appellant corporation were denied
the same benefit. An argument was raised that the appellant was running
in losses and thus cannot meet the financial burden on account of revision D
of pay scales. The Court while rejecting such argument held as under:
“33. The plea of the appellants that the Corporation is running
under losses and it cannot meet the financial burden on account
of revision of scales of pay has been rejected by the High Court
and, in our view, rightly so. Whatever may be the factual position, E
there appears to be no basis for the action of the appellants in
denying the claim of revision of pay scales to the respondents. If
the Government feels that the Corporation is running into losses,
measures of economy, avoidance of frequent writing off of dues,
reduction of posts or repatriating deputationists may provide the F
possible solution to the problem. Be that as it may, such a contention
may not be available to the appellants in the light of the principle
enunciated by this Court in M.M.R. Khan v. Union of India [1990
Supp SCC 191 : 1990 SCC (L&S) 632 : (1991) 16 ATC 541]
and Indian Overseas Bank v. Staff Canteen Workers’
Union [(2000) 4 SCC 245 : 2000 SCC (L&S) 471] . However, so G
long as the posts do exist and are manned, there appears to be no
justification for granting the respondents a scale of pay lower
than that sanctioned for those employees who are brought on
deputation. In fact, the sequence of events discussed above clearly
16
1991 Supp. (2) SCC 565 H
422 SUPREME COURT REPORTS [2021] 6 S.C.R.

A shows that the employees of the Corporation have been treated
on a par with those in Government at the time of revision of scales
of pay on every occasion.”
38. The judgment in Union of India & Anr. v. S.B. Vohra &
Ors.17 is distinguished from the present matter as the issue was regarding
B pay scale of the employees of the High Court on recommendation of the
Chief Justice. It was observed that financial implications vis-à-vis effect
of grant of a particular scale of pay may not always be a sufficient
reason and differences should be mutually discussed and tried to be
solved. It is, however, again not a case of financial stringency alone but
also the power of the Chief Justice to grant revised pay scales to the
C employees of the High Court.
39. General Manager, Kisan Sahkari Chini Mills Ltd.,
Sultanpur, U.P. v. Satrughan Nishad & Ors.18 is a judgment which
deals with the scope of Article 12 in respect of Cooperative Sugar Mills.
Mr. Patwalia has not raised any argument about the Federation being
D not a State. Therefore, the said judgment is not relevant to be examined
in the present appeals.
40. In K.T. Veerappa & Ors. v. State of Karnataka & Ors.19,
the Court upheld the principle that fixation of pay and parity in duties is
the function of the executive and financial capacity of the Government
E is also a relevant factor to be considered, though on facts, it was held
that the employees of the University were entitled to revision of pay at
par with the employees of the State. It was held as under:
“13. He next contended that fixation of pay and parity in duties is
the function of the executive and financial capacity of the
F Government and the priority given to different types of posts under
the prevailing policies of the Government are also relevant factors.
In support of this contention, he has placed reliance on State of
Haryana v. Haryana Civil Secretariat Personal Staff
Assn. [(2002) 6 SCC 72 : 2002 SCC (L&S) 822] and Union of
G India v. S.B. Vohra [(2004) 2 SCC 150 : 2004 SCC (L&S) 363]
. There is no dispute nor can there be any to the principle as
settled in State of Haryana v. Haryana Civil Secretariat
Personal Staff Assn. [(2002) 6 SCC 72 : 2002 SCC (L&S) 822]
17
(2004) 2 SCC 150
18
(2003) 8 SCC 639
H 19
(2006) 9 SCC 406
PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION 423
LTD. v. BALBIR KUMAR WALIA [HEMANT GUPTA, J.]

that fixation of pay and determination of parity in duties is A
the function of the executive and the scope of judicial review
of administrative decision in this regard is very limited.
However, it is also equally well settled that the courts should
interfere with administrative decisions pertaining to pay fixation
and pay parity when they find such a decision to be unreasonable,
B
unjust and prejudicial to a section of employees and taken in
ignorance of material and relevant factors.”
(Emphasis supplied)
41. In the present case, it is contended that the Federation is a
statutory Co-operative Society which is having its Common Cadre Rules. C
Any amendment in the Common Cadre Rules is to be approved by the
Registrar (Co-operative Societies). The State Government communicated
on 1.3.1990 and 9.7.1993 that the pay scale as applicable to the Punjab
Government employees is not to be adopted by the Public Sector
Undertakings without taking into consideration the financial health of
the other statutory Boards and Corporations. The Federation has thus D
taken a conscious and concerted decision to not follow the report of the
Anomaly Committee of the State Government to grant revised pay scale
from 1.1.1986 in view of precarious financial condition. Moreover,
financial assistance had to be availed by the Federation from the State
Government as well as from the National Dairy Development Board. E
42. A Committee was constituted to examine the grievance of the
employees for grant of revised pay scale. The Committee also
recommended that pay scale be given w.e.f. 1.1.1994 on account of
financial stringency being faced by the Federation. The Board of
Directors approved the recommendation of the Committee, which was F
accepted by the Registrar (Co-operative Societies). Therefore, the
decision of not to grant revised pay scale from 1.1.1986 was taken keeping
in view the financial condition of the Federation. The question now is
whether such a decision could have been interfered with in a writ petition
in exercise of power of judicial review.
G
43. The power of judicial review over the administrative decisions
of the State was examined by a judgment of this Court in Tata Cellular
v. Union of India20. Though, that is a case of grant of contract, but the
principles of law are very well applicable to the exercise of power of
20
(1994) 6 SCC 651 H
424 SUPREME COURT REPORTS [2021] 6 S.C.R.

A judicial review by the High Court in the administrative decisions of the
State within the meaning of Article 12 of the Constitution. The Court
held as under:
“77. The duty of the court is to confine itself to the question of
legality. Its concern should be:
B 1. Whether a decision-making authority exceeded its powers?
2. Committed an error of law,
3. committed a breach of the rules of natural justice,
4. reached a decision which no reasonable tribunal would have
C reached or,
5. abused its powers.
Therefore, it is not for the court to determine whether a particular
policy or particular decision taken in the fulfilment of that policy is
fair. It is only concerned with the manner in which those decisions
D have been taken. The extent of the duty to act fairly will vary
from case to case. Shortly put, the grounds upon which an
administrative action is subject to control by judicial review can
be classified as under:
(i) Illegality : This means the decision-maker must understand
correctly the law that regulates his decision-making power and
E
must give effect to it.
(ii) Irrationality, namely, Wednesbury unreasonableness.
(iii) Procedural impropriety.
The above are only the broad grounds but it does not rule out
F addition of further grounds in course of time. As a matter of fact,
in R. v. Secretary of State for the Home Department, ex
Brind [(1991) 1 AC 696] , Lord Diplock refers specifically to one
development, namely, the possible recognition of the principle of
proportionality. In all these cases the test to be adopted is that the
court should, “consider whether something has gone wrong of a
G
nature and degree which requires its intervention”.
xx xx xx
94. The principles deducible from the above are:
(1) The modern trend points to judicial restraint in administrative
H action.
PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION 425
LTD. v. BALBIR KUMAR WALIA [HEMANT GUPTA, J.]

(2) The court does not sit as a court of appeal but merely reviews A
the manner in which the decision was made.
(3) The court does not have the expertise to correct the
administrative decision. If a review of the administrative decision
is permitted it will be substituting its own decision, without the
necessary expertise which itself may be fallible. B
(4) The terms of the invitation to tender cannot be open to judicial
scrutiny because the invitation to tender is in the realm of contract.
Normally speaking, the decision to accept the tender or award
the contract is reached by process of negotiations through several
tiers. More often than not, such decisions are made qualitatively C
by experts.
(5) The Government must have freedom of contract. In other
words, a fair play in the joints is a necessary concomitant for an
administrative body functioning in an administrative sphere or
quasi-administrative sphere. However, the decision must not only D
be tested by the application of Wednesbury principle of
reasonableness (including its other facts pointed out above) but
must be free from arbitrariness not affected by bias or actuated
by mala fides.
(6) Quashing decisions may impose heavy administrative burden E
on the administration and lead to increased and unbudgeted
expenditure.
Based on these principles we will examine the facts of this case
since they commend to us as the correct principles.”
44. In Balco Employees’ Union (Regd.) v. Union of India & F
Ors.21, the Court was examining the policy of disinvestment of public
sector undertakings. It was held that wisdom and advisability of economic
policies of Government are not amenable to judicial review unless it can
be demonstrated that such policy is contrary to any statutory provision
or the Constitution. It is not for the Court to consider relative merits of
G
different economic policies and consider whether a wiser or better one
could be evolved. The Court held as under:
“92. In a democracy, it is the prerogative of each elected
Government to follow its own policy. Often a change in
21
(2002) 2 SCC 333 H
426 SUPREME COURT REPORTS [2021] 6 S.C.R.

A Government may result in the shift in focus or change in economic
policies. Any such change may result in adversely affecting some
vested interests. Unless any illegality is committed in the execution
of the policy or the same is contrary to law or mala fide, a decision
bringing about change cannot per se be interfered with by the
court.
B
93. Wisdom and advisability of economic policies are ordinarily
not amenable to judicial review unless it can be demonstrated that
the policy is contrary to any statutory provision or the Constitution.
In other words, it is not for the courts to consider relative merits
of different economic policies and consider whether a wiser or
C better one can be evolved. For testing the correctness of a policy,
the appropriate forum is Parliament and not the courts. Here the
policy was tested and the motion defeated in the Lok Sabha on 1-
3-2001.
xx xx xx
D
98. In the case of a policy decision on economic matters, the
courts should be very circumspect in conducting any enquiry or
investigation and must be most reluctant to impugn the judgment
of the experts who may have arrived at a conclusion unless the
court is satisfied that there is illegality in the decision itself.”
E
45. This Court in a judgment reported as Jagdish Mandal v.
State of Orissa & Ors.22 examined the scope of judicial review in the
matter of award of a contract. The Court held as under:
“22. Judicial review of administrative action is intended to prevent
F arbitrariness, irrationality, unreasonableness, bias and mala fides.
Its purpose is to check whether choice or decision is made
“lawfully” and not to check whether choice or decision is “sound”.
When the power of judicial review is invoked in matters relating
to tenders or award of contracts, certain special features should
be borne in mind. A contract is a commercial transaction.
G Evaluating tenders and awarding contracts are essentially
commercial functions. Principles of equity and natural justice stay
at a distance. If the decision relating to award of contract is bona
fide and is in public interest, courts will not, in exercise of power
of judicial review, interfere even if a procedural aberration or error
H 22
(2007) 14 SCC 517
PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION 427
LTD. v. BALBIR KUMAR WALIA [HEMANT GUPTA, J.]

in assessment or prejudice to a tenderer, is made out. The power A
of judicial review will not be permitted to be invoked to protect
private interest at the cost of public interest, or to decide contractual
disputes. The tenderer or contractor with a grievance can always
seek damages in a civil court. Attempts by unsuccessful tenderers
with imaginary grievances, wounded pride and business rivalry, to
B
make mountains out of molehills of some technical/procedural
violation or some prejudice to self, and persuade courts to interfere
by exercising power of judicial review, should be resisted. Such
interferences, either interim or final, may hold up public works for
years, or delay relief and succour to thousands and millions and
may increase the project cost manifold. Therefore, a court before C
interfering in tender or contractual matters in exercise of power
of judicial review, should pose to itself the following questions:
(i) Whether the process adopted or decision made by the authority
is mala fide or intended to favour someone;
OR D

Whether the process adopted or decision made is so arbitrary and
irrational that the court can say: “the decision is such that no
responsible authority acting reasonably and in accordance with
relevant law could have reached”;
E
(ii) Whether public interest is affected.
If the answers are in the negative, there should be no interference
under Article 226. Cases involving blacklisting or imposition of
penal consequences on a tenderer/contractor or distribution of
State largesse (allotment of sites/shops, grant of licences, F
dealerships and franchises) stand on a different footing as they
may require a higher degree of fairness in action.”
46. In a recent judgment reported as West Bengal Central School
Service Commission & Ors. v. Abdul Halim & Ors.23, this Court was
examining the candidature of a candidate for appointment in pursuance
G
of advertisement advertised by West Bengal Central School Service
Commission. One of the essential qualifications was Bengali as a subject
either at the Secondary level or at the Higher Secondary level or at the
graduation or postgraduation level. The candidature of selected candidate
was not interfered with by the Division Bench of the High Court although
23
(2019) 18 SCC 39 H
428 SUPREME COURT REPORTS [2021] 6 S.C.R.

A such candidate was not possessing Bengali as a language. The Court
held as under:
“27. It is well settled that the High Court in exercise of jurisdiction
under Article 226 of the Constitution of India does not sit in appeal
over an administrative decision. The Court might only examine
B the decision-making process to ascertain whether there was such
infirmity in the decision-making process, which vitiates the decision
and calls for intervention under Article 226 of the Constitution of
India.
28. In any case, the High Court exercises its extraordinary
C jurisdiction under Article 226 of the Constitution of India to enforce
a fundamental right or some other legal right or the performance
of some legal duty. To pass orders in a writ petition, the High
Court would necessarily have to address to itself the question of
whether there has been breach of any fundamental or legal right
of the petitioner, or whether there has been lapse in performance
D by the respondents of a legal duty.
29. The High Court in exercise of its power to issue writs, directions
or orders to any person or authority to correct quasi-judicial or
even administrative decisions for enforcement of a fundamental
or legal right is obliged to prevent abuse of power and neglect of
E duty by public authorities.
30. In exercise of its power of judicial review, the Court is to see
whether the decision impugned is vitiated by an apparent error of
law. The test to determine whether a decision is vitiated by error
apparent on the face of the record is whether the error is self-
F evident on the face of the record or whether the error requires
examination or argument to establish it. If an error has to be
established by a process of reasoning, on points where there may
reasonably be two opinions, it cannot be said to be an error on the
face of the record, as held by this Court in Satyanarayan
G Laxminarayan Hegde v. Millikarjun Bhavanappa
Tirumale [Satyanarayan Laxminarayan Hegde v. Millikarjun
Bhavanappa Tirumale, AIR 1960 SC 137]. If the provision of a
statutory rule is reasonably capable of two or more constructions
and one construction has been adopted, the decision would not be
open to interference by the writ court. It is only an obvious
H misinterpretation of a relevant statutory provision, or ignorance or
PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION 429
LTD. v. BALBIR KUMAR WALIA [HEMANT GUPTA, J.]

disregard thereof, or a decision founded on reasons which are A
clearly wrong in law, which can be corrected by the writ court by
issuance of writ of certiorari.
31. The sweep of power under Article 226 may be wide enough
to quash unreasonable orders. If a decision is so arbitrary and
capricious that no reasonable person could have ever arrived at it, B
the same is liable to be struck down by a writ court. If the decision
cannot rationally be supported by the materials on record, the
same may be regarded as perverse.
32. However, the power of the Court to examine the
reasonableness of an order of the authorities does not enable the C
Court to look into the sufficiency of the grounds in support of a
decision to examine the merits of the decision, sitting as if in appeal
over the decision. The test is not what the Court considers
reasonable or unreasonable but a decision which the Court thinks
that no reasonable person could have taken, which has led to
manifest injustice. The writ court does not interfere, because a D
decision is not perfect.
33. In entertaining and allowing the writ petition, the High Court
has lost sight of the limits of its extraordinary power of judicial
review and has in fact sat in appeal over the decision of
Respondent 2.” E

47. Later, a three-Judge Bench in a judgment reported as
Municipal Council, Neemuch v. Mahadeo Real Estate & Ors. 24
followed the aforesaid judgment and held as under:
“16. It could thus be seen that an interference by the High Court F
would be warranted only when the decision impugned is vitiated
by an apparent error of law i.e. when the error is apparent on the
face of the record and is self-evident. The High Court would be
empowered to exercise the powers when it finds that the decision
impugned is so arbitrary and capricious that no reasonable person
would have ever arrived at. It has been reiterated that the test is G
not what the Court considers reasonable or unreasonable but a
decision which the Court thinks that no reasonable person could
have taken. Not only this but such a decision must have led to
manifest injustice.”
24
(2019) 10 SCC 738 H
430 SUPREME COURT REPORTS [2021] 6 S.C.R.

A 48. In another recent judgment reported as Harshit Agarwal &
Ors. v. Union of India & Ors.25, this Court held that judicial review of
administrative action is permissible on grounds of illegality, irrationality
and procedural impropriety. An administrative decision is considered as
flawed if it is illegal, and a decision is illegal if it pursues an objective
other than that for which the power to make the decision was conferred.
B
The discretion exercised by the decision maker is subject to judicial
scrutiny if a purpose other than the specified purpose is pursued. The
Court observed that:
“10. Judicial review of administrative action is permissible on
grounds of illegality, irrationality and procedural impropriety. An
C administrative decision is flawed if it is illegal. A decision is illegal
if it pursues an objective other than that for which the power to
make the decision was conferred [De Smith’s Judicial Review,
(6th Edn., p. 225)] . There is no unfettered discretion in public law
[Food Corpn. of India v. Kamdhenu Cattle Feed Industries,
D (1993) 1 SCC 71] . Discretion conferred on an authority has to be
necessarily exercised only for the purpose provided in a statute.
The discretion exercised by the decision maker is subject to judicial
scrutiny if a purpose other than a specified purpose is pursued. If
the authority pursues unauthorised purposes, its decision is rendered
illegal. If irrelevant considerations are taken into account for
E reaching the decision or relevant considerations have been ignored,
the decision stands vitiated as the decision maker has misdirected
himself in law. It is useful to refer to R. v. Vestry of St.
Pancras [R. v. Vestry of St. Pancras, (1890) LR 24 QBD 371
(CA)] in which it was held: (QBD pp. 375-76)
F “… If people who have to exercise a public duty by exercising
their discretion take into account matters which the courts consider
not to be proper for the guidance of their discretion, then in the
eye of the law they have not exercised their discretion.”
49. Thus, we find that the decision that the Federation was in
G financial difficulties is based upon relevant material before the Federation.
The process to arrive at such decision can be said to be flawed only on
the permissible grounds of illegality, irrationality and procedural
impropriety. We find that neither the decision-making process, nor the
decision itself suffers from any such vice.
25
H (2021) 2 SCC 710
PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION 431
LTD. v. BALBIR KUMAR WALIA [HEMANT GUPTA, J.]

50. Learned counsel for the writ petitioners have referred to the A
information received under the Right to Information Act to show that
the Federation was in profit in the year 1996-1997. We do not find that
such information is relevant to determine the financial condition for the
period from 1.1.1986 to 1.1.1994. The Federation has categorically stated
that because of the remedial steps taken by the Federation, there was
B
turn around only after 1994. Still further, we find that the profits in the
balance sheet are not meant to be appropriated towards wages of the
employees alone. Though the profits had to be shared by the members
of the Co-operative Society, but the employees of the Federation are not
its members. The income generated by the Federation is not to be
expanded only on payment of salary but is also required for upgradation C
of technology, renovation and expansion of plants etc. Therefore, entire
profit is not to be appropriated towards the wages of the employees
alone. The Federation was established as a step towards white revolution.
The objective of the Federation was not to give employment but to
increase milk production in the State. The employees are facilitators of
D
the employer to achieve such objective and thus demanding enhanced
wages without considering the objective and financial condition of the
employer would not be ideal. The employer and the employees have to
work together to achieve the objective of the organisation i.e. white
revolution rather frittering away the gains made by the joint efforts of
the management and employees by giving increased wages to the E
employees irrespective of its capacity to bear such expenses.
51. The submission that there will not be financial burden on the
federation in view of the fact that the High Court has ordered payment
of arrears for a period of 3 years and 2 months before the date of filing
of writ petitions is again not tenable. The High Court has granted revised F
pay scales with effect from 01.01.1986 instead of revised pay scales
granted to the employees of the federation with effect from 01.01.1994.
Therefore, restricting it for a period of 3 years and 2 months will not be
helpful in respect of the financial condition of the Federation as during
the relevant time the federation was suffering from huge losses.
G
52. In view of the above, we find that the order of the High Court
is unjustified and in excess of the power of judicial review conferred on
the High Court. Consequently, the appeals are allowed. The orders passed
by the High Court are hereby set aside and the writ petitions are
dismissed.
H
432 SUPREME COURT REPORTS [2021] 6 S.C.R.

A CIVIL APPEAL NO. 7432 OF 2011
53. The present appeal is also directed against an order passed by
the Division Bench of the High Court of Punjab & Haryana at Chandigarh
on 19.3.2009 wherein it was held that the employees are entitled to pay
scale equivalent to their counterparts in the State of Punjab from 1.1.1986,
B though the revised pay scale was allowed by the Federation w.e.f.
1.1.1994. The argument raised is that the contention of the employees
claiming equal pay for equal work has not been examined by the High
Court.
54. The employees have not filed any appeal against the impugned
C judgment of the High Court. We find that the employees cannot raise
any grievance in an appeal preferred by the Federation to claim equal
pay for equal work. The employees are not aggrieved against the judgment
of the High Court. Therefore, the employees cannot raise an argument
which was not raised before the High Court.
D 55. But still, we have examined the argument raised. It was argued
that the claim of the employees is not of revised pay scale from 1.1.1986
but that the categorization of Milk Procurement Assistants as Grade-I
& II is unconstitutional and they would be entitled to the same pay as is
being paid to Milk Procurement Assistants Grade-I on the principle of
equal pay for equal work.
E
56. The said contention of the employees is controverted by the
Federation, inter alia, on the ground that the Milk Procurement Assistants
are not the employees of the Apex Society i.e. Punjab State Co-operative
Milk Producers Federation but they are employees of the District Co-
operative Milk Producers Union which is a separate entity. The staffing
F pattern for District Co-operative Milk Producers Union, as approved by
the Registrar (Co-operative Societies), shows that different educational
qualifications and experience is prescribed for appointment to Milk
Procurement Assistants Grade-I & II. It has also been pointed out that
there is qualitative difference in the responsibilities of the two sets of
G employees. Milk Procurement Assistants Grade-II are allotted 10 to 12
villages at the village-level Milk Producers Co-operative Society for
supervising their work with regard to milk collection, testing, record
keeping, payment to producers of milk, transportation of milk and to
attend the other problems of the societies whereas the duty of the Milk
Procurement Assistants Grade-I is to supervise the work of Milk
H Procurement Assistant Grade-II. One Milk Procurement Assistant Grade
PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION 433
LTD. v. BALBIR KUMAR WALIA [HEMANT GUPTA, J.]

I officer supervises the work of six to seven Milk Procurement Assistants A
Grade II.
57. As per the staffing pattern, the educational qualifications for
Milk Procurement Assistants Grade-I are Bachelor’s Degree with
minimum three years’ experience of Organisation of Milk Producers
Co-operative Societies affiliated with Milk Producers Co-operative Unit B
whereas for Milk Procurement Assistant Grade II, the qualification is
Graduation preferable in Agriculture with one year experience of working
as Secretary in a Co-operative Milk Supply Society. The pay scale
prescribed for the Milk Procurement Assistants Grade-I is Rs.700-1200
whereas the pay scale prescribed for the Milk Procurement Assistants
Grade-II is Rs.480-880. It is sought to be contended that, in fact, Milk C
Procurement Assistants Grade-I is a promotional avenue for Milk
Procurement Assistants Grade-II.
58. As stated, the educational qualifications and the responsibilities
of the two posts are quite different. Therefore, the principle of equal pay
for equal work would not be applicable to them inasmuch as Grade I is D
a higher post having higher duties and responsibilities than Grade II.
59. We do not find any merit in the argument claiming equal pay
for the alleged equal work. Consequently, the appeal is allowed. The
orders passed by the High Court are hereby set aside.
E
CIVIL APPEAL NO. 7434 OF 2011
60. The present appeal is also directed against an order passed by
the Division Bench of the High Court of Punjab & Haryana at Chandigarh
on 19.3.2009 wherein it was held that the employees are entitled to pay
scale equivalent to their counterparts in the State of Punjab from 1.1.1986, F
though revised pay scale was allowed by the Federation w.e.f. 1.1.1994.
It was contended that the argument of the employees claiming equal
pay for equal work was not examined by the High Court.
61. The respondent Nos. 1 to 4 are Milk Procurement Assistants
Grade-I in the pay scale of Rs.700-1200 whereas respondent No. 5 is
G
Animal Husbandry Assistant in the same pay scale of Rs.700-1200 w.e.f.
1.8.1980. Such employees are claiming parity in the matter of pay with
the Area Officers including Deputy Manager (Procurement) and Dairy
Extension Officer in the pay scale of Rs.850-1700. The employees have
pleaded that w.e.f. 2.2.1987, the designation of Milk Procurement
Assistants Grade-I has been changed to Milk Procurement Supervisor H
434 SUPREME COURT REPORTS [2021] 6 S.C.R.

A and now the workload has increased inasmuch as fifty societies are to
be supervised as against eight societies which were supervised, without
any increase in the pay scale. It was argued that the duties and functions
of the employees and the other Area Officers including Deputy Manager
(Procurement) and Dairy Extension Officer are the same as such posts
are interchangeable.
B
62. In the written statement filed before the High Court, the stand
of the Federation was that the employees have since long been
permanently transferred to the Milk Union, Ludhiana. It was pointed out
that the employees and the Deputy Manager (Procurement)/Dairy
Extension Officer do not constitute one class as the posts are not similar
C on the points of qualifications and duties to be performed by the
incumbents. The classification on the basis of qualifications, educational
or by experience, for the fixation of pay is permissible under the
Constitution. The qualifications of Milk Procurement Assistant Grade-I
or Animal Husbandry Assistant is Graduation/Matriculation with live-
D stock Diploma course whereas the essential qualifications for the post
of Dairy Extension Officer and for the post of Deputy Manager
(Procurement) is B.Sc. Dairy Husbandry/Dairy Technology with two to
three years’ experience.
63. We have heard learned counsel for the parties. Firstly, the
E order passed by the High Court has not been challenged in appeal by the
employees. Secondly, the classification of different pay scales is
permissible based upon educational qualifications, experience and nature
of duties. In view of the said facts, we do not find that the employees
are entitled to the pay scale as claimed in the writ petition.

F 64. We do not find any merit in the argument claiming equal pay
for the alleged equal work. Consequently, the appeal is allowed. The
orders passed by the High Court are hereby set aside.

Nidhi Jain Appeals allowed.

G

H