TAMIL NADU ELECTRICITY BOARD REP. BY ITS CHAIRMANversusTNEB-THOZHILALAR AYKKIYA SANGAM BY ITS GENERAL SECRETARY

150               SUPREME COURT
                          [2019] 2 REPORTS
                                   S.C.R. 150             [2019] 2 S.C.R.


A                 TAMIL NADU ELECTRICITY BOARD
                        REP. BY ITS CHAIRMAN
                                     v.
                    TNEB-THOZHILALAR AYKKIYA
                 SANGAM BY ITS GENERAL SECRETARY
B                     (Civil Appeal No. 1653 of 2019)
                             FEBRUARY 13, 2019
             [R. BANUMATHI AND INDIRA BANERJEE, JJ.]
              Labour Laws:
              Payment of Dearness Allowance – Settlement between the
C     employer-Board and its workmen u/s. 18 of Industrial Disputes Act –
      As per one of the terms of settlement Dearness Allowance rates
      were to be revised twice in a year i.e. on 1st January and 1st July
      taking into account the variations in previous 12 months average
      of All India Consumer Price Index Numbers – Pursuant to the
D     settlement, in the proceedings of the employer-Board it was decided
      that Dearness Allowance would be sanctioned to the employees of
      the Board as granted by the State Government to its employees at
      the same rate and from the same date – State Government, due to
      financial crunch revised the Dearness Allowance later than it was
      granted to the Central Government employees for the relevant year –
E     Employer-Board also adopted the order of State Government in
      revising the Dearness Allowance – Respondent-Workers’ Union filed
      writ petitions seeking direction to pay Dearness Allowance at the
      rate and from the date when it was paid to the Central Government
      employees – Single Judge of High Court allowed the petitions –
F     Division Bench of High Court affirmed the order of Single Judge –
      On appeal, held: Payment of Dearness Allowance was governed
      by the Settlement and the Board Proceedings – All along, the revision
      of Dearness Allowance had been paid at par with the employees of
      the State Government – There is no rule or obligation on the State
      Government to always adopt the Dearness Allowance as revised by
G     Central Government – The revision of wage or Dearness Allowance
      would depend upon the ability and financial position of the employer–
      The employer-board is run by the State Government – It was within
      the power of the Board to set a cut-off date for payment of revised
      Dearness Allowance keeping in view financial constraints of the
H     State – Therefore, employees’ demand for revision in Dearness
                                       150
     TNEB v. TNEB-THOZHILALAR AYKKIYA SANGAM                         151


Allowance at a higher rate than what was granted by the State        A
Government to its employees is not warranted – Industrial Disputes
Act, 1947 – s. 18.
        Allowing the appeals, the Court
        HELD: 1. Payment of Dearness Allowance was governed
by the Wage Settlement dated 08.07.1998 and the Board                B
Proceedings BP (FB) No.58 dated 18.07.1998. The increases in
Dearness Allowance which fell due w.e.f. 01.07.1998, 01.01.1999,
01.07.1999, 01.01.2000, 01.07.2000, 01.01.2001 and 01.07.2001
were all paid as per the above agreed term only. As per settlement
dated 08.07.1998, the Dearness Allowance rates were to be
revised twice in a year i.e. on 1st January and on 1st July taking   C
into account the variations in the previous twelve months average
of the All India Consumer Price Index Numbers adopting the
same formula as followed by the State Government. The Board
Proceeding BP(FB) No.58 dated 18.07.1998 stipulated that the
revised Dearness Allowance would be sanctioned to the                D
employees of the Board as granted by the State Government to
their employees at the same rate and from the same date. In the
subsequent wage settlement entered into between the appellant-
Board and the respondent-union on 15.10.2005 (w.e.f. 01.12.2002)
stipulates the existing practice of sanction of Dearness Allowance
to the employees of the Board as granted by the State Government     E
to their employees at the same rate and from the same date. The
subsequent settlement also reiterates that all along, the revision
of Dearness Allowance to the employees of the Board was on par
with the employees of the State Government. [Para 19][161-C-F]
        2. The respondent(s) union having agreed that the revised    F
Dearness Allowance will be sanctioned as granted by the State
Government to their employees, the appellant-Board has been
consistently adopting the revised rates of Dearness Allowance
following various State Government orders. Having agreed for
the grant of revised Dearness Allowance on par with the State
                                                                     G
Government employees, the respondent(s) union cannot seek
for revision in Dearness Allowance at a higher rate than what
was granted by the State Government to its employees.
[Para 19][161-G-H]

                                                                     H
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A             3. The High Court did not keep in view the well settled
      principles that the revision of wage or Dearness Allowance would
      depend upon the ability and the financial position of the employer.
      In G.O. Ms. No.346 in and by which the Government of TN revised
      the Dearness Allowance from 45% to 49% (w.e.f. 01.10.2002), it
      was made clear that the Government of TN was facing extremely
B
      difficult financial position and therefore, decided to sanction
      additional four per cent (45% to 49%) of Dearness Allowance to
      the employees of the State Government w.e.f. 01.10.2002. Having
      regard to the difficult finance situation which the State and the
      Board were facing and having regard to the terms of the
C     settlement, respondent(s) union cannot seek for sanction of
      enhanced rate of Dearness Allowance on par with the Central
      Government employees. [Para 21][162-C-D]
              4. There is no rule or obligation on the State Government
      to always adopt the Dearness Allowance as revised by the Central
D     Government. It is absolutely not necessary for the State
      Government to adopt the Dearness Allowance rates fixed by the
      Central Government. It should be looked from the financial
      position of the State Government to adopt its own rates/revised
      rates of Dearness Allowance. The Board, being the State
      Government undertaking, the money has to come from the State
E     Government. Keeping in view the extremely difficult financial
      position of the State Government, Board’s order revising the
      Dearness Allowance rate from 45% to 49% only from 01.10.2002
      cannot be said to be arbitrary or in violation of the terms of the
      settlement. [Para 22][162-E-G]
F             5. It is not disputed that Board is run by the State
      Government and unless the funds are provided by the State
      Government, the Electricity Board would not have adequate funds
      of its own to pay the wages. It is within the power of the Board to
      set a cut-off date for payment of revised Dearness Allowance
      keeping in view its financial constraints. Moreover, the
G     settlement agreement and the decisions taken by the Board in
      the Board Proceedings are to be harmoniously construed. Having
      regard to the financial difficulties which the State Government
      was facing, appellant-Board being a State Government

H
     TNEB v. TNEB-THOZHILALAR AYKKIYA SANGAM                           153


undertaking, decided to adopt the State Government’s revised           A
Dearness Allowance at the same rate and from the same date. In
view of extremely difficult financial situation, not only the State
Government employees but all the employees of various other
corporations were granted revised Dearness Allowance at the
rate of 49% only w.e.f. 01.10.2002 and 52% w.e.f. 01.07.2003. In
                                                                       B
that factual scenario, the decision of the Board to adopt the rate
of Dearness Allowance as granted by the State Government
cannot be said to be arbitrary. The respondent(s) union cannot
insist for revision of Dearness Allowance at a higher rate than
what was being paid to the State Government employees.
[Paras 28 and 31][164-F-H, 165-A, 166-D-E]                             C
         6. It is not correct to say that the Board has unilaterally
altered the terms of settlement between the parties that Dearness
Allowance rates will be revised twice in a year taking into account
the variations in the previous twelve months average of the
All India Consumer Price Index numbers. Board’s proceeding             D
BP (FB) No.58 dated 18.07.1998, inter alia provides for various
other terms like work norms, retrenchment etc. It is not the
case of the respondent(s) union that those terms of the
settlement were not acted upon. The respondent(s) union are
not right in taking one clause from the Board proceeding dated
18.07.1998 and contending that in so far as payment of                 E
Dearness Allowance is concerned, the Settlement
dated 08.07.1998 has been unilaterally altered. The respondent(s)
have not challenged that portion of the Board’s proceeding
BP(FB) No.58 dated 18.07.1998; the respondent(s) cannot
approbate and reprobate the Board Proceedings dated 18.07.1998.        F
[Paras 29 and 30][165-D, G-H, 166-A-B]
       Workmen of Gujarat Electricity Board, Baroda v.
       Gujarat Electricity Board, Baroda (1969) 1 SCC 266 :
       [1969] 1 SCR 174; Bengal Chemical &
       Pharmaceutical Works Ltd. v. Its Workmen [1969] 2 SCR
       113; Kamani Metals & Alloys Ltd. v. Their Workmen               G
       [1967] 2 SCR 463; T.N. Electricity Board v. R.
       Veerasamy and Ors. (1999) 3 SCC 414 : [1999] 2 SCR
       221; State of Punjab and Others v. Amar Nath Goyal
       and Others (2005) 6 SCC 754 : [2005] 2 Suppl.
       SCR 549 – relied on.                                            H
154                 SUPREME COURT REPORTS                    [2019] 2 S.C.R.


A                              Case Law Reference
      [1969] 1 SCR 174                 relied on                Para 24
      [1969] 2 SCR 113                 relied on                Para 25
      [1967] 2 SCR 463                 relied on                Para 25
B     [1999] 2 SCR 221                 relied on                Para 26
      [2005] 2 Suppl. SCR 549          relied on                Para 27
                CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1653
      of 2019
C             From the Judgment and Order dated 27.03.2015 of the High
      Court of Judicature at Madras in W.A. No. 497 of 2015
                                        With
                Civil Appeal No. 1654 of 2019.

D            K. Ramamoorthy, Sr. Adv., C. Paramasivam, Vinodh Kanna B.,
      Pushkin Rajkumar, C. K. Chandrasekhar, S. R. Setia, Ms. Asmita Singh,
      Gautam Narayan, Advs. for the appearing parties.
                The Judgment of the Court was delivered by
                R. BANUMATHI, J. 1. Leave granted.
E
               2. These appeals arise out of the judgment dated 27.03.2015 in
      W.A. No.497 of 2015 and judgment dated 21.08.2015 in W.A. No.1166
      of 2015 in and by which the High Court affirmed the order of the learned
      Single Judge directing the appellant-Board to pay Dearness Allowance
      at the rate of 49% w.e.f. 01.01.2002 to the members of respondent(s)-
F     union on par with the Central Government employees.
              3. These appeals relate to the claim of employees of the
      appellant-Board for the payment of difference of Dearness Allowance
      (DA) for a period of nine months as under:-
                 - 4% of DA (difference of 49% - 45%) from 01.01.2002 to
G                30.06.2002
                 - 7% of DA (difference of 52% - 45%) from 01.07.2002 to
                 30.09.2002


H
      TNEB v. TNEB-THOZHILALAR AYKKIYA SANGAM                                155
                   [R. BANUMATHI, J.]

         4. Brief facts giving rise to these appeals are as under:-          A
         A Memorandum of Settlement dated 08.07.1998 was recorded
under Section 18(1) of the Industrial Disputes Act, 1947 between the
appellant-Tamil Nadu Electricity Board (Board) and its workmen
represented by unions for settlement of pay related issues. The Settlement
covered about eighty thousand employees of the Board in Class III and
                                                                             B
IV service and it was for a period of four years from 01.12.1996 to
30.11.2000. The terms of settlement also dealt with the payment of
Dearness Allowance. As per Clause 5 of the terms of settlement
agreement, it was agreed that the Dearness Allowance rates will be
revised twice in a year i.e. on 1st January and on 1st July taking into
account the variations in the previous twelve months average of the All      C
India Consumer Price Index numbers, adopting the same formula as
followed by the State Government. In pursuance of the said settlement,
order dated 18.07.1998 was issued by the appellant-Board in Board
Proceedings BP (FB) No.58 wherein, it was inter alia provided that the
revised Dearness Allowance would be sanctioned to the employees of
                                                                             D
the Board as granted by the State Government to their employees at the
same rate and from the same date. The Board by its various proceedings
has been adopting the revised rate of Dearness Allowance payable to
State Government employees at the same rate and from the same date.
         5. The Government of India, Ministry of Finance, Expenditure
Department vide Office Memorandum dated 20.03.2002 enhanced the              E
Dearness Allowance payable to Central Government employees from
the existing rate of 45% to 49% w.e.f. 01.01.2002. The State Government
faced acute financial crisis during the period 2001-2002 due to which,
Government of Tamil Nadu was paying Dearness Allowance at the rate
of 45% on that date to its employees. The appellant-Board also followed      F
the same rate of DA at 45%. On 07.05.2002 and 12.07.2002, the
respondent-CITU submitted representations to the Board. After giving
personal hearing to the representatives of the respondent, the Chairman
of the Board rejected the representation on 13.09.2002 stating that as
per the settlement dated 08.07.1998, Dearness Allowance would be
sanctioned to the employees of the Board as granted by the State             G
Government to their employees at the same rate and from the same
date.
         6. The Government of Tamil Nadu subsequently vide G.O.Ms.
No.346 dated 21.10.2002 issued an order revising the Dearness
                                                                             H
156                SUPREME COURT REPORTS                      [2019] 2 S.C.R.


A     Allowance from existing rate of 45% to 49% w.e.f. 01.10.2002 in view
      of its difficult financial position. The appellant-Board also adopted G.O.
      Ms. No.346 dated 21.10.2002 and issued orders in BP(FB) No.58 dated
      29.10.2002 revising the Dearness Allowance to 49% from 01.10.2002
      to its employees on par with the State Government employees.
B              7. The Central Government revised the rates of payment of
      Dearness Allowance to Central Government employees from the existing
      rate of 49% to 52% w.e.f. 01.07.2002. The Government of Tamil Nadu
      vide G.O. No.215 dated 27.06.2003 revised the rate of Dearness
      Allowance to its employees w.e.f. 01.07.2003 from the existing rate of
      49% to 52%. The appellant-Board adopting the G.O. No.215 dated
C     27.06.2003 revised the Dearness Allowance to its employees to 52%
      from 01.07.2003 on par with the State Government employees.
               8. Respondent-Union filed the writ petition in WP No.9525 of
      2003 before the High Court of Madras seeking direction to pay Dearness
      Allowance at the rate of 49% of the basic pay w.e.f. 01.01.2002 to
D     30.06.2002 and at the rate of 52% of the basic pay w.e.f. 01.07.2002
      respectively. Similarly, another respondent union-CITU filed the writ
      petition in WP No.36197 of 2002 with the same prayer. By order dated
      14.09.2012, the learned Single Judge allowed the Writ Petition No.36197
      of 2002 observing that the question involved was already concluded in
      W.P. No.10474 of 1999 and held that it is not open to the Board to
E
      postpone the arrears of Dearness Allowance and credit the same to the
      General Provident Fund account of the employee without the consent of
      the employees.
               9. By order dated 22.03.2013, Writ Petition No.9525 of 2003
      was also allowed in terms of the order passed in Writ Petition No.36197
F     of 2002 by holding that the Board cannot postpone the arrears of Dearness
      Allowance and credit the same to the General Provident Fund of the
      employee without the consent of the employees. The appeal preferred
      by the appellant-Board also came to be dismissed with the direction that
      the appellant-Board was liable to pay Dearness Allowance at the revised
G     rate w.e.f. 01.01.2002 to 30.09.2002.
               10. Mr. Ramamoorthy, learned senior Counsel for the appellant-
      Board has submitted that as per the settlement dated 08.07.1998, the
      Dearness Allowance rates will be revised twice in a year i.e. on 1st
      January and on 1st July taking into account the variations in the previous

H
      TNEB v. TNEB-THOZHILALAR AYKKIYA SANGAM                               157
                   [R. BANUMATHI, J.]

twelve months average of the All India Consumer Price Index numbers         A
adopting the same formula as followed by the State Government. It was
submitted that the above settlement has been followed in Board
Proceedings BP (FB) No.58 dated 18.07.1998 which stipulates that the
revised Dearness Allowance will be sanctioned as granted by the State
Government to its employees and respondent(s) cannot seek for revision
                                                                            B
of Dearness Allowance contrary to what was granted by the State
Government to its employees. It was submitted that the High Court did
not keep in view the well settled principle that the obligation to pay
enhanced Dearness Allowance depends upon the employer’s financial
position and other factors. It was contended that the High Court erred in
holding that the issue is covered by judgment in W.P. No.10474 of 1999      C
which relates to entirely a different issue i.e. payment of arrears of
Dearness Allowance in cash instead of crediting the arrears of Dearness
Allowance into the General Provident Fund account of the employees
concerned. Learned senior counsel urged that at the relevant time and
also presently, appellant-Board is facing extremely difficult financial
                                                                            D
position and the payment of revised Dearness Allowance for the disputed
period to more than eighty thousand of its employees would have a huge
financial implication on the Board.
         11. Per contra, Mr. Chandrasekhar, learned counsel for the
respondent has submitted that the employees of TNEB are not
government servants and there is no parity in their service conditions      E
and status and hence, comparison of the Board employees with the
employees of the State Government will be inapposite. Learned counsel
inter-alia submitted that employees of TNEB are governed by the labour
laws like Industrial Disputes Act, Payment of Wages Act, Payment of
Bonus Act, etc. and when the settlement dated 08.07.1998 stipulates         F
that the revision in Dearness Allowance depends upon the All India
Consumer Price Index number, the Board by its Board Proceedings BP
(FB) No.58 dated 18.07.1998 ought not to have unilaterally changed the
terms of the settlement restricting the payment of Dearness Allowance
to the Board employees on par with the employees of the State
Government. It was further submitted that restricting the payment of        G
revised Dearness Allowance only from 01.10.2002 instead of giving effect
from 01.01.2002 is contrary to the agreed terms in the settlement dated
08.07.1998.

                                                                            H
158                SUPREME COURT REPORTS                      [2019] 2 S.C.R.


A              12. We have carefully considered the submissions and perused
      the impugned judgment and materials on record. The following points
      arise for consideration:-
             (i) Pursuant to the Memorandum of Settlement dated
             08.07.1998 recorded under Section 18(1) of the Industrial
             Disputes Act, 1947 and BP (FB) No.58 dated 18.07.1998, when
B
             the Board has been adopting the formula of the State Government
             in revising the rate of Dearness Allowance on par with the State
             Government employees, whether the High Court was right in
             directing the appellant-Board to pay the revised DA at the rate f
             49% from 01.01.2002 and 52% from 01.07.2002?
C            (ii) When the settlement dated 08.07.1998 between the
             appellant and the unions has been followed by the Board
             stipulating that the revision of Dearness Allowance would be on
             par with the rate sanctioned by the State Government to its
             employees, in deviation therefrom, whether the respondents are
             right in insisting upon revision of Dearness Allowance at the
D
             abovesaid rates?
             13. In the settlement dated 08.07.1998 recorded under Section
      18(1) of the Industrial Disputes Act, 1947 between the appellant-Board
      and the respondent-CITU, Clause 5 of the settlement deals with Dearness
      Allowance which reads as under:-
E                “5. Dearness Allowance
                 The revised rates of Dearness Allowance for various pay
                 ranges will be as indicated in Annexure III. The Dearness
                 Allowance rates will be revised twice in a year on 1st January
                 and 1st July taking into account the variations in the previous
F                twelve months average of the All India Consumer Price Index
                 numbers, adopting the same formula as followed by the State
                 Government.”
               On 18.07.1998, orders were issued by the Board in Board
      Proceedings BP (FB) No.58 in accordance with the terms of the
      provisions of the settlement dated 08.07.1998 stating that the revised
G
      Dearness Allowance would be sanctioned to the employees of the Board
      as granted by the State Government to their employees at the same rate
      and from the same date. The relevant portion of the order in BP (FB)
      No.58 which deals with Dearness Allowance reads as under:-

H
      TNEB v. TNEB-THOZHILALAR AYKKIYA SANGAM                               159
                   [R. BANUMATHI, J.]

           “III Dearness Allowance                                          A
           (a) The existing pay structure has been revised at All India
           Consumer Price Index of 1510 points and the revised dearness
           allowance will be sanctioned to the employees of the Board as
           granted by the State Government to their employees at the
           same rates and from the same date.”                              B
         14. Pursuant to the settlement and Board Proceedings
BP(FB)No.58 dated 18.07.1998, the Board passed various orders/
proceedings adopting the revised Dearness Allowance rates as per the
State Government orders revising Dearness Allowance to the State
Government employees. We may refer to few earlier Government orders
followed by the Board orders adopting the same rate of revised Dearness     C
Allowance rates with effect from the same date:-
           (i) On 12.05.2001, Proceedings (Per) BP (FB) No.24 was
                issued by the Board whereby the Board adopted the revised
                DA rates as per GO No.188 dated 26.04.2001 i.e. 43%
                w.e.f. 01.01.2001.                                          D
           (ii) On 31.12.2001, by G.O. No.525, the Tamil Nadu
                Government had revised the rate of DA to 45% to the State
                Government employees from 01.07.2001. Adopting the
                revised Dearness Allowance rates as per G.O No.525 dated
                31.12.2001, Board vide its proceedings BP (FB) No.3 dated   E
                17.01.2002 adopted the revised Dearness Allowance rates
                i.e. 45% w.e.f. 01.07.2001.
         It is clear from the above that the Board has been sanctioning
the revised rates of Dearness Allowance at the same rate and from the
same date as has been sanctioned by the State Government to its
employees.                                                                  F
         15. On 20.03.2002, the Government of India enhanced the
Dearness Allowance for the Central Government employees from 45%
to 49% w.e.f. 01.01.2002. Due to extremely difficult financial position
which the State Government was facing, the State Government was
paying the Dearness Allowance at the rate of 45% on the said date           G
without enhancing it to 49%. Accordingly, the appellant-Board also
followed the same rate i.e. 45% as paid by the State Government on the
said date. As pointed out earlier, Chairman of the Board rejected the
respondent-CITU’s representation on 13.09.2002 stating that as per the
settlement dated 08.07.1998 followed by Board Proceedings BP (FB)
                                                                            H
No.58 dated 18.07.1998, Dearness Allowance would be sanctioned to
160                SUPREME COURT REPORTS                     [2019] 2 S.C.R.


A     the employees of the Board as granted by the State Government to their
      employees at the same rate and from the same date. While rejecting
      CITU’s representation, it was made clear that the State Government
      had not issued any order revising Dearness Allowance at the rate of
      49% w.e.f. 01.01.2002 on par with the Central Government employees.
B             16. On 21.10.2002, the Government of TN issued G.O.
      Ms.No.346 revising the Dearness Allowance from 45% to 49% w.e.f.
      01.10.2002 in view of extremely difficult financial position faced by the
      State Government. Para 3 of the said G.O. reads as under:-
              “3. In view of the extremely difficult financial position faced
              by the Government, the Government after having discussions
C             with the Tamil Nadu Government Officer’s Union, Tamil Nadu
              Arasu Aluvalarkazhagam (C&D Group) and Tamil Nadu
              Secretariat Association, has decided to sanction one additional
              instalment of Dearness Allowances at 4% to the employees
              of the State with effect from 01.10.2002. Accordingly, the
D             Government now sanction the revised rate of Dearness
              Allowance to the State Government employees as indicated
              below:-
              Date from which payable           Revised rate of
                                                DA (per month)
               st
E             1 October 2002                    49 per cent of pay
      Following the State Government’s G.O. Ms.No.346, appellant-Board vide
      orders in BP (FB) No.58 dated 29.10.2002 revised the Dearness
      Allowance to its employees from 45% to 49% w.e.f. 01.10.2002 and
      thus followed the terms of the settlement dated 08.07.1998 followed by
F     the Board Proceedings BP (FB) No.58 dated 18.07.1998.
               17. Likewise, when Government of India revised the rate of
      Dearness Allowance from 49% to 52% w.e.f. 01.07.2002, the State
      Government as well as the Board have been paying Dearness Allowance
      at the rate of 49% only. On 27.06.2003, the State Government issued
      G.O. No.215 revising the Dearness Allowance from 49% to 52% w.e.f.
G     01.07.2003. Accordingly, on 09.07.2003, Board issued orders revising
      the Dearness Allowance from 49% to 52% from 01.07.2003 adopting
      the G.O. No.215 dated 27.06.2003.
               18. Comparative table of the Dearness Allowance paid to the
      employees of the Central Government, State Government and the Board
H     in the relevant period are as under:-
      TNEB v. TNEB-THOZHILALAR AYKKIYA SANGAM                                161
                   [R. BANUMATHI, J.]

         From          Percentage of Percentage of Percentage                A
                       Dearness           Dearness          of Dearness
                       Allowance          Allowance         Allowance
                       allowed by the allowed by the allowed by
                       Central            State             the appellant
                       Government         Government Board
          01.01.2002        49%                45%              45%          B
          01.07.2002        52%                45%              45%
          01.10.2002        52%                49%              49%
          01.01.2003        55%                49%              49%
          01.07.2003        59%                52%              52%
         19. As discussed earlier, payment of Dearness Allowance is
governed by the Wage Settlement dated 08.07.1998 and the Board               C
Proceedings BP (FB) No.58 dated 18.07.1998. The increases in Dearness
Allowance which fell due w.e.f. 01.07.1998, 01.01.1999, 01.07.1999,
01.01.2000, 01.07.2000, 01.01.2001 and 01.07.2001 were all paid as per
the above agreed term only. As per settlement dated 08.07.1998, the
Dearness Allowance rates will be revised twice in a year i.e. on 1st         D
January and on 1st July taking into account the variations in the previous
twelve months average of the All India Consumer Price Index numbers
adopting the same formula as followed by the State Government. The
Board Proceeding BP(FB) No.58 dated 18.07.1998 stipulated that the
revised Dearness Allowance would be sanctioned to the employees of
the Board as granted by the State Government to their employees at the       E
same rate and from the same date. It is pertinent to note that in the
subsequent wage settlement entered into between the appellant-Board
and the respondent-union on 15.10.2005 (w.e.f. 01.12.2002) stipulates
the existing practice of sanction of Dearness Allowance to the employees
of the Board as granted by the State Government to their employees at        F
the same rate and from the same date. The subsequent settlement also
reiterates that all along the revision of Dearness Allowance to the
employees of the Board was on par with the employees of the State
Government. The respondent(s) union having agreed that the revised
Dearness Allowance will be sanctioned as granted by the State
Government to their employees, the appellant-Board has been consistently     G
adopting the revised rates of Dearness Allowance following various State
Government orders. Having agreed for the grant of revised Dearness
Allowance on par with the State Government employees, the
respondent(s) union cannot seek for revision in Dearness Allowance at
a higher rate than what was granted by the State Government to its
                                                                             H
employees.
162                 SUPREME COURT REPORTS                     [2019] 2 S.C.R.


A              20. The appellant-Board has been adopting the formula of the
      State Government in revising the rate of Dearness Allowance, which
      was settled under Section 18(1) of the Indian Disputes Act, 1947 and
      the settlement between the appellant-Board and the respondent union.
      The appellant-Board is not bound to adopt the revised rate of Central
      Government, when the settlement prescribes the formula to be adopted
B
      from the rates of the State Government.
               21. The High Court, in our view, did not keep in view the well
      settled principles that the revision of wage or Dearness Allowance would
      depend upon the ability and the financial position of the employer. In
      G.O. Ms. No.346 in and by which the Government of TN revised the
C     Dearness Allowance from 45% to 49% (w.e.f. 01.10.2002), it was made
      clear that the Government of TN was facing extremely difficult financial
      position and therefore, decided to sanction additional four per cent (45%
      to 49%) of Dearness Allowance to the employees of the State
      Government w.e.f. 01.10.2002. Having regard to the difficult finance
D     situation which the State and the Board were facing and having regard
      to the terms of the settlement, respondent(s) union cannot seek for
      sanction of enhanced rate of Dearness Allowance on par with the Central
      Government employees.
               22. Each State Government following their own rate of Dearness
E     Allowance payable to their employees may be adopting the revised
      Dearness Allowance of the Central Government. There is no rule or
      obligation on the State Government to always adopt the Dearness
      Allowance as revised by the Central Government. It is absolutely not
      necessary for the State Government to adopt the Dearness Allowance
      rates fixed by the Central Government. It should be looked from the
F     financial position of the State Government to adopt its own rates/revised
      rates of Dearness Allowance. The Board, being the State Government
      undertaking, the money has to come from the State Government. Keeping
      in view the extremely difficult financial position of the State Government,
      Board’s order revising the Dearness Allowance rate from 45% to 49%
      only from 01.10.2002 cannot be said to be arbitrary or in violation of the
G
      terms of the settlement.
              23. The main source of finance of the Electricity Board is the
      State Government; the Board is run by the State Government. Unless
      the funds are provided by the State Government, the Electricity Board
      would not have sufficient funds of its own to pay the wages and the
H     revised Dearness Allowance to its employees. Considering the financial
      TNEB v. TNEB-THOZHILALAR AYKKIYA SANGAM                                  163
                   [R. BANUMATHI, J.]

difficulties which the State Government was facing, the revision of the        A
Dearness Allowance from the above said dates at above said rate cannot
be said to be arbitrary or without any reason.
        24. While considering the grievance of wage structure or
Dearness Allowance, the importance of considering the financial
implications while providing benefits to employees has been noted by           B
the Supreme Court in number of judgments. The Supreme Court in
Workmen of Gujarat Electricity Board, Baroda v. Gujarat Electricity
Board, Baroda (1969) 1 SCC 266 while dismissing the appeal preferred
by the workmen, has confirmed the view taken by the Tribunal which
rejected the demand of the employees of the Board for Dearness
Allowance that it should be fixed with the scale prescribed for the            C
Ahmedabad Mill Owners’ Association on the ground that the Board
does not have the capacity to meet the additional expenditure that would
have to be incurred if such demands are acceded to.
         25. The Supreme Court in Bengal Chemical &
Pharmaceutical Works Ltd. v. Its Workmen [1969] 2 SCR 113after                 D
referring to Kamani Metals & Alloys Ltd. v. Their Workmen [1967] 2
SCR 463 has laid down that one-hundred per cent neutralisation is not
advisable as it will lead to inflation and therefore, dearness allowance is
often a little less than one-hundred per cent neutralisation. Explaining
the purpose of Dearness Allowance and that it should depend upon the           E
ability of the employer to bear such burden, the Supreme Court held as
under:-
         “1. Full neutralization is not normally given, except to the
         very lowest class of employees.
         2. The purpose of dearness allowance being to neutralise a
                                                                               F
         portion of the increase in the cost of living, it should ordinarily
         be on a sliding scale and provide for an increase on the rise
         in the cost of living and a decrease on a fall in the cost of
         living.
         3. The basis of fixation of wages and dearness allowance is
         industry-cum-region.                                                  G
         4. Employees getting the same wages should get the same
         dearness allowance, irrespective of whether they are working
         as clerks or members of subordinate staff or factory workmen.

                                                                               H
164                 SUPREME COURT REPORTS                     [2019] 2 S.C.R.


A             5. The additional financial burden which a revision of the
              wage structure or dearness allowance would impose upon
              an employer, and his ability to bear such burden, are very
              material and relevant factors to be taken into
              account…………[underlining added]”
B              26. In T.N. Electricity Board v. R. Veerasamy and Ors. (1999)
      3 SCC 414 which has been relied upon by the respondent, in which
      TNEB itself was the appellant, the Supreme Court while dealing with
      the prospective application of a pension scheme observed that financial
      constraint is a valid ground for introducing a cut-off date and took note
      of the financial burden that the Board will have to borne if the scheme
C     would be made effective retrospectively.
               27. In State of Punjab and Others v. Amar Nath Goyal and
      Others (2005) 6 SCC 754, the Supreme Court negatived the contention
      of the employees that the decision of the Central Government/State
      Governments to limit the benefit only to certain employees after
D     calculating the financial implications thereon, was irrational or arbitrary
      and held as under:-
               “28. ………the final recommendations of the Pay
               Commission were not ipso facto binding on the Government,
               as the Government had to accept and implement the
E              recommendations of the Pay Commission consistent with its
               financial position. This is precisely what the Government did.
               Such an action on the part of the Government can neither be
               characterised as irrational, nor as arbitrary so as to infringe
               Article 14 of the Constitution.”

F              28. It is within the power of the Board to set a cut-off date for
      payment of revised Dearness Allowance keeping in view its financial
      constraints. Moreover, the settlement agreement and the decisions taken
      by the Board in the Board Proceedings are to be harmoniously construed.
      Having regard to the financial difficulties which the State Government
      was facing, appellant-Board being a State Government undertaking,
G     decided to adopt the State Government’s revised Dearness Allowance
      at the same rate and from the same date. In view of extremely difficult
      financial situation, not only the State Government employees but all the
      employees of various other corporations were granted revised Dearness
      Allowance at the rate of 49% only w.e.f. 01.10.2002 and 52% w.e.f.
      01.07.2003. The respondent(s) union cannot insist for revision of
H
      TNEB v. TNEB-THOZHILALAR AYKKIYA SANGAM                                165
                   [R. BANUMATHI, J.]

Dearness Allowance at a higher rate than what was being paid to the          A
State Government employees.
         29. Mr. C.K. Chandrasekhar, learned counsel for respondent(s)
submitted that as per Clause 5 of the settlement dated 08.07.1998,
Dearness Allowance rates will be revised twice in a year taking into
account the variations in the previous twelve months average of the All      B
India Consumer Price Index numbers adopting the same formula as
followed by the State Government and based on the same, the employees
were periodically given revision of Dearness Allowance in every six
months without any deviation on par with Central Government Dearness
Allowance by applying the State Government formula. It was submitted
that B.P. (FB) No.58 dated 18.07.1998 issued by the Board to pay             C
Dearness Allowance only on par with the State Government and based
on the same revising the Dearness Allowance from 45% to 49% from
01.10.2002 instead of giving effect from 01.01.2002 was contrary to the
settlement dated 08.07.1998. It was submitted that in BP(FB) No.58
dated 18.07.1998, the Board has unilaterally altered the terms of the        D
settlement and even though All India Consumer Price Index was revised
and Dearness Allowance increased from 45% to 49% with effect from
01.01.2002, the Board’s unilateral action is contrary to the terms of the
settlement. It was urged that instead of following the formula for
Dearness Allowance based on All India Consumer Price Index, the
Board’s action in restricting the payment from 01.10.2002 following State    E
Government order in G.O. No.346Finance Department dated 21.10.2002
is contrary to the binding settlement dated 08.07.1998. As per Clause 3
of the Board Proceeding BP(FB) No.58 dated 18.07.1998, Dearness
Allowance will be sanctioned to the employees of the Board as granted
by the State Government to their employees at the same rate and from         F
the same date. Based on the same, the employees were periodically
given revision of DA in every six months without any deviation by applying
the State Government formula, at the same time, it was on par with the
Central Government dearness allowance.
        30. There is no merit in the contention that by BP (FB) No.58
                                                                             G
dated 18.07.1998, the Board has unilaterally altered the terms of
settlement between the parties. On perusal of Board’s proceeding BP
(FB) No.58 dated 18.07.1998, it is seen that Clause 2of the Board
proceedings inter alia provides for various other terms like work norms,
retrenchment etc. It is not the case of the respondent(s) union that
those terms of the settlement were not acted upon. The respondent(s)         H
166                 SUPREME COURT REPORTS                       [2019] 2 S.C.R.


A     union are not right in taking one clause from the Board proceeding dated
      18.07.1998 and contending that in so far as payment of Dearness
      Allowance is concerned, the Settlement dated 08.07.1998 has been
      unilaterally altered. It is pertinent to note that the respondent(s) have not
      challenged that portion of the Board’s proceeding BP(FB) No.58 dated
      18.07.1998; the respondent(s) cannot approbate and reprobate the Board
B
      Proceedings dated 18.07.1998. Therefore, the contention that revision
      of Dearness Allowance as granted by the State Government to their
      employees is the unilateral alteration of the terms of settlement lacks
      merit.
                31. Contention of the respondent(s) is that the employees of the
C     appellant-Board are not State Government employees and they cannot
      be treated on par with the State Government employees. It is not the
      contention of the appellant-Board that the employees of the Board are
      to be treated on par with the State Government employees nor the same
      is the issue for consideration before us. It is not disputed that Board is
D     run by the State Government and unless the funds are provided by the
      State Government, the Electricity Board would not have adequate funds
      of its own to pay the wages. In that factual scenario, the decision of the
      Board to adopt the rate of Dearness Allowance as granted by the State
      Government cannot be said to be arbitrary.
                32. The learned Single Judge as well as the Division Bench
E
      proceeded under the erroneous footing that the issue has been covered
      by the orders of the High Court issued in the two batches of W.P.
      Nos.8574-8578 of 1992 and W.Ps. No.10474 of 1999 etc. The orders in
      those batch of writ petitions were only against crediting of the arrears of
      Dearness Allowance sanctioned. After referring to the earlier judgment
F     in W.P. Nos.8574-8578 of 1992 dated 16.10.1992 and W.Ps. No.10474
      of 1999 dated 11.08.1999, the High Court held that “there is no stipulation
      in the settlement that the arrears of Dearness Allowance for the past
      period would be credited to the General Provident Fund account of the
      individual employee and in the absence of any stipulation in the settlement,
      it is not open to the Board to credit arrears of Dearness Allowance for
G
      the earlier period to the credit of General Provident Fund account of the
      respective employee unless individual employee gives the written
      consent”. The orders of the High Court in those earlier writ petitions
      were only against crediting of the arrears of the Dearness Allowance in
      the respective provident fund account of the employees, wherein, the
H     court directed the Board to pay arrears in cash and restrained the Board
      TNEB v. TNEB-THOZHILALAR AYKKIYA SANGAM                                  167
                   [R. BANUMATHI, J.]

from deducting any arrears of the Dearness Allowance and crediting             A
the same into the General Provident Fund account of the workmen.
         33.Of course, in the earlier batch of writ petitions i.e. Writ
Petition Nos.8574-8578, the High Court inter-alia held that the Board
cannot unilaterally transgress from the terms of the settlement and
observed as under:-                                                            B
         “The settlement, as long as it is in force, will govern both the
         parties. One of the parties cannot unilaterally transgress the
         terms of the agreement or ignore the same. Caluse-4 referred
         to above does not enable the respondent to make the payment
         in the mode adopted by the Government. Clause-4 only
         directs that the formula which is followed by the Government          C
         should be adopted by the Board and that is only for the
         purpose of calculating the dearness allowance on the basis
         of the Price Index and nothing more than that. Hence, the
         contention that the respondent is bound to adopt the method
         followed by the Government for payment is without any                 D
         substance.”
         34. The learned Single Judge as well as the Division Bench did
not keep in view that in the present dispute, settlement dated 08.07.1998
was followed by BP(FB) No.58 dated 18.07.1998 which clearly stipulates
that the Dearness Allowance would be paid to the employees of the              E
Board as granted by the State Government to its employees. It is pertinent
to note that the representation of respondent-CITU dated 12.07.2002
was rejected by the Board vide order dated 13.09.2002 which refers to
BP(FB) No.58 dated 18.07.1998 to the effect that the revised Dearness
Allowance would be sanctioned to the employees of the Board as granted
by the State Government to their employees at the same rate and from           F
the same date. The learned Single Judge and the Division Bench erred
in not considering the matter in the proper perspective and erred in holding
that the issue has been covered by the earlier judgment in Writ Petition
No.10474 of 1999 dated 11.08.1999.
         35. The learned Single Judge and the Division Bench did not           G
keep in view the terms of the Settlement and the Board Proceeding
BP(FB) No. 58 dated 18.07.1998 which stipulates that Dearness
Allowance would be revised on par with the State Government employees
and that it has been consistently followed by the appellant-Board. The
High Court erred not keeping in view the extremely difficult financial
                                                                               H
168                 SUPREME COURT REPORTS                  [2019] 2 S.C.R.


A     position of the State Government and the Board and also the additional
      financial burden which would be imposed upon the appellant-Board if
      the demands of the respondent(s)-union are acceded to. The High Court,
      in our view, was clearly in error in allowing the writ petition and the
      impugned judgment cannot be sustained and liable to be set aside.
B            36. In the result, the impugned judgments of the High Court in
      W.A. No.497 of 2015 and W.A. No.1166 of 2015 dated 27.03.2015 and
      21.08.2015 respectively are set aside and these appeals are allowed. No
      costs.

      Kalpana K. Tripathy                                      Appeals allowed.
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