Holding

Differential enhancement rates for DA and DR, when both aim to offset inflation and affect serving and retired employees equally, lack a rational nexus to the objective and therefore violate Article 14.

Summary

Retired employees of the Kerala State Road Transport Corporation (KSRTC) challenged a Government Order that enhanced dearness allowance (DA) for serving employees by 14% but dearness relief (DR) for pensioners by only 11%, alleging violation of Article 14 of the Constitution. The High Court held the differential rates discriminatory, while the State and KSRTC argued that serving and retired staff constitute separate classes and financial constraints justified the distinction. The Supreme Court examined the classification under the twin tests of reasonable classification, emphasizing that both DA and DR share the same objective of mitigating inflationary hardship. It found that inflation affects serving and retired employees equally, and the lower rate for DR lacks a rational nexus to the objective, rendering the classification arbitrary and violative of Article 14. Consequently, the Court affirmed the High Court’s decision and dismissed the appeals.

Issues considered

Whether the differential rates of enhancement for dearness allowance (DA) to serving employees and dearness relief (DR) to pensioners violate Article 14 of the Constitution.
Whether the classification of serving employees and pensioners for the purpose of granting DA/DR at different rates satisfies the twin tests of reasonable classification.

Legislation cited

Constitution of Indias. Art.14

Headnote

Issue for Consideration If Dearness Allowance (DA) and Dearness Relief (DR) are to be added on salary and pension payable to serving employees and retired employees, respectively, whether there could be a higher rate for enhancement of DA than what it is for DR. Headnotes† Constitution of Dearness Allowance and Dearness Relief – Retired employees of KSRTC filed a writ petition questioning the lower rate fixed for enhancement of DR on pension than what was fixed for enhancement of DA on salary – Their grievance was that the serving employees got enhancement of DA by 14

Subjects

Dearness AllowanceDearness ReliefArbitrary actionObject of Dearness allowance and Dearness reliefBurden of ProofTwin tests of reasonable classificationMitigate the hardshipConcept of EqualityPensionersEmployeesEnhancement of DA/DRInflationInflationary pressures

Judgment

[2026] 5 S.C.R. 119 : 2026 INSC 352

The State of Kerala
v.
M. Vijayakumar & Ors.
(Civil Appeal No(s). 4347-4348 of 2026)
10 April 2026
[Manoj Misra* and Prasanna B. Varale, JJ.]

Issue for Consideration
If Dearness Allowance (DA) and Dearness Relief (DR) are to be
added on salary and pension payable to serving employees and
retired employees, respectively, whether there could be a higher
rate for enhancement of DA than what it is for DR.

Headnotes†
Constitution of India – Art.14 – Dearness Allowance and
Dearness Relief – Retired employees of KSRTC filed a writ
petition questioning the lower rate fixed for enhancement of
DR on pension than what was fixed for enhancement of DA on
salary – Their grievance was that the serving employees got
enhancement of DA by 14 per cent whereas the pensioners’
DR was enhanced by 11 per cent – They claimed violation of
Art.14 of the Constitution – The Single Judge of the High Court
dismissed the writ petitions – However, the Division Bench of
the High Court held that benefit extended was discriminatory
and violative of Art.14 of the Constitution – Whether the High
Court was justified in holding the same to be discriminatory
and violative of Art.14:
Held: The object and purpose of dearness allowance/dearness relief
is to mitigate the hardship faced by salaried employees/pensioners
on account of inflation – The Government Order in question increases
the rate of DA by 14% and DR by 11% even though the increase is
to serve a common object, which is to mitigate the hardship faced
by the serving employees and pensioners on account of inflation –
Indisputably, inflation hits both serving and retired employees with
equal force, therefore, differentiating the two qua the rate of increase
of DA and DR, has no rational nexus to the object sought to be
achieved – Therefore, the High Court was justified in holding the
same to be discriminatory and violative of Article 14. [Paras 25, 26]
* Author
120 [2026] 5 S.C.R.

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Constitution of India – Art.14 – Test of reasonable classification –
Burden of proof:
Held: Art.14 of the Constitution forbids class legislation but permits
reasonable classification which must satisfy twin tests: (1) that the
classification must be founded on an intelligible differentia which
distinguishes those that are grouped together from others, and (2)
that differentia must have rational nexus with the object sought
to be achieved by the Act – The differentia which is the basis
of the classification and the object of the Act are distinct things
and what is necessary is that there must be a nexus between
the two – Legislative and executive action may accordingly be
sustained if it satisfies the twin tests of reasonable classification
and the rational principle correlated to the object sought to be
achieved – The burden of proof lies on the State to affirmatively
establish that these twin tests have been satisfied – The State
must therefore not only establish the rational principle on which
classification is founded but correlate it to the objects sought to
be achieved. [Para 22]
Constitution of India – Art.14 – Concept of Equality – Equality
is antithetic to arbitrariness – Discussed. [Para 22]

Case Law Cited
Ajay Hasia and Others v. Khalid Mujib Sehravardi and Others [1981]
2 SCR 79 : (1981) 1 SCC 722; State of Punjab & Ors. v. Davinder
Singh & Ors. [2024] 8 SCR 1321 : (2025) 1 SCC 1 – relied on.
Kallakkurichi Taluk Retired Officials Association, Tamil Nadu and
Ors. v. State of Tamil Nadu [2013] 4 SCR 883 : (2013) 2 SCC
772; State of West Bengal v. Anwar Ali Sarkar [1952] 1 SCR
284 : (1952) 1 SCC 1; Budhan Choudhary & Others v. State of
Bihar [1955] 1 SCR 1045 : (1954) 2 SCC 791; E.P. Royappa v.
State of Tamil Nadu and Another [1974] 2 SCR 348 : (1974) 4
SCC 3 – referred to.
The Managing Director of KSRTC v. M. Venugopalan Nair,
W.A. No.176/2014; : M. Venugopalan Nair vs. The Chairman
and Managing Director, KSRTC, Writ Petition (C) No.
13798/2012 – referred to.
T.N. Electricity Board v. R. Veerasamy & Ors. [1999] 2 SCR 221 :
(1999) 3 SCC 414; State of Punjab and Ors. v. Amar Nath Goyal
[2026] 5 S.C.R. 121

The State of Kerala v. M. Vijayakumar & Ors.

and Ors. [2005] Supp. 2 SCR 549 : (2005) 6 SCC 754; State of
Rajasthan and Anr. v. Amrit Lal Gandhi and Ors. [1997] 1 SCR
121 : (1997) 2 SCC 342; Chairman & MD, Kerala SRTC v. K.O.
Varghese and Ors. [2007] 8 SCR 164 : (2007) 8 SCC 231; Himachal
Road Transport Corporation and Anr. v. Himachal Road Transport
Corporation Retired Employees Union [2021] 2 SCR 104 : (2021)
4 SCC 502 – held inapplicable.

List of Acts
Constitution of India.

List of Keywords
Dearness Allowance; Dearness Relief; Arbitrary action; Object of
Dearness allowance and Dearness relief; Burden of Proof; Twin
tests of reasonable classification; Mitigate the hardship; Concept
of Equality; Pensioners; Employees; Enhancement of DA/DR;
Inflation; Inflationary pressures.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No(s).
4347-4348 of 2026
From the Judgment and Order dated 22.11.2022 of the High Court
of Kerala at Ernakulam in WA Nos. 131 and 202 of 2022
With
Civil Appeal No. 4349 of 2026

Appearances for Parties
Advs. for the Appellant(s):
P.V. Dinesh, Jaideep Gupta, Sr. Advs., Deepak Prakash, Nachiketa
Vajpayee, Ms. Divyangna Malik, Ms. Jyoti Pandey, Rahul Suresh,
Ms. Shivangi Rajawat, Chetan Jadon, Ms. Anna Oommen, C. K.
Sasi, Ms. Meena K Poulose, Riddhi Bose, Ms. Racheeta Chawla,
Ms. Sampriti Bakshi, Siddharth Banerjee.
Advs. for the Respondent(s):
V. Chitambaresh, Sr. Adv., Vipin Nair, Aditya Narendranath, Mohd
Aman Alam, Ms. M. B. Ramya, Ms. Deeksha Gupta, C. K. Sasi,
Ms. Meena K Poulose, Deepak Prakash.
122 [2026] 5 S.C.R.

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Judgment / Order of the Supreme Court

Judgment

Manoj Misra, J.

1. Leave granted.
2. These two appeals impugn a common judgment and order of the
High Court of Kerala at Ernakulam1 dated 22.11.2022 passed in
Writ Appeal Nos.131 and 202 of 2022 which arose from W.P. (C)
No.12062 of 2021 and W.P. (C) No.6411 of 2021. As these appeals
impugn a common judgment, they were heard together and are
being decided by a common judgment.

ISSUE
3. The short question posited for our consideration in these appeals is:
If dearness allowance2 and dearness relief 3 are to be added on salary
and pension payable to serving employees and retired employees,
respectively, whether there could be a higher rate for enhancement
of DA than what it is for DR?

FACTS
4. Retired employees of Kerala State Road Transport Corporation4 filed
a writ petition questioning the lower rate fixed for enhancement of DR
on pension than what was fixed for enhancement of DA on salary.
Their grievance was that the serving employees got enhancement
of DA by 14 per cent whereas the pensioners’ DR was enhanced by
11 per cent. Claiming that there was no rationale for different rates,
and the same violated the mandate of Article 145 of the Constitution
of India6, writ petitions were filed before a Single Judge of the High
Court.

1 The High Court
2 DA
3 DR
4 KSRTC
5 Article 14. – The State shall not deny to any person equality before the law or the equal protection of the
laws within the territory of India.
6 Constitution
[2026] 5 S.C.R. 123

The State of Kerala v. M. Vijayakumar & Ors.

5. The learned Single Judge, vide order dated 14.12.2021, dismissed
the writ petitions holding that serving employees and pensioners do
not constitute one class, and therefore, different rates of enhancement
are permissible.
6. Aggrieved by the order of the learned Single Judge, intra court
appeals were filed before a division bench of the High Court.
7. The Division Bench, after considering the submissions, formulated
the following question for its consideration:
“Whether, after having taken a decision to extend the
benefits of the order of the State Government declaring the
enhancement of DA/DR to its employees and pensioners,
to the KSRTC and its employees and pensioners, the
State Government/KSRTC could effect a classification
between the employees and pensioners of KSRTC
for the purposes of granting the DA/DR at differential
rates?”
8. After considering several decisions of this Court, the High Court
held as under:
“15. The principles that can be gleaned from the aforesaid
decision, when applied in the context of the cases before
us, compel us to hold that the action of the State and the
KSRTC in restricting the benefit of enhancement of DR
to the pensioners of KSRTC to 109 % with effect from
March, 2021, while extending the benefit of enhanced DA
to its employees @ 112 % with effect from March, 2021,
is to be seen as discriminatory and violative of Article
14 of our Constitution. It cannot be disputed that a valid
classification must be justified vis-a-vis the object that is
sought to be achieved through the measure that is adopted
by the Government. In the cases before us, the object of
extending an enhanced rate of DA/DR was essentially to
balance the effects of ongoing inflation so as to ensure that
the inflation does not interfere with the enjoyment of life
to which an employee /pensioner is accustomed. Through
the payment of the allowances in question, the objective
aforesaid was to be attained, both in respect of employees
124 [2026] 5 S.C.R.

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as well as the pensioners. A restriction of the enhanced
benefit to employees alone to the exclusion of pensioners
on the specious plea of reasonable classification, appears
to us to be violative of the equality clause enshrined in
our Constitution. As already noticed, while it was open
to the State Government / KSRTC to take into account
the possible financial burden that would be fastened
on them through the grant of enhanced DA/DR, while
deciding whether or not to grant the said benefit to the
employees / pensioners of KSRTC, once they decided
to extend the benefit to the said employees/pensioners,
there could not be discrimination between them in the
course of implementation of the decision. It is trite that the
question as to whether a classification is reasonable or
not must necessarily be tested against the object sought
to be achieved for which the classification is held. In the
instant cases, and vis-a-vis the particular object that was
sought to be achieved through the grant of enhanced
DA/DR, we feel that a classification between employees
and pensioners was not justified. Thus, we find ourselves
unable to sustain the impugned judgment of the learned
Single Judge. We set aside the same, and allow the Writ
Appeals and the Writ Petitions, with consequential reliefs
to the appellants herein.”
9. Aggrieved by the decision of the Division Bench of the High Court, the
State of Kerala and KSRTC have separately filed appeals before us.
10. We have heard Mr. Jaideep Gupta, learned senior counsel, for the
State of Kerala; Mr. P.V. Dinesh, learned senior counsel, for KSRTC;
and Mr. V. Chitambaresh, learned senior counsel, for the retired
employees (respondents).

SUBMISSIONS ON BEHALF OF THE STATE
11. On behalf of the State, it was submitted that retired employees and
serving employees constitute different classes. Therefore, different
rates for DA /DR qua two separate classes do not violate the right
to equality as enshrined in Article 14 of the Constitution. Besides,
financial reasons alone can justify different rates for two separate
classes.
[2026] 5 S.C.R. 125

The State of Kerala v. M. Vijayakumar & Ors.

SUBMISSIONS ON BEHALF OF KSRTC
12. Learned counsel representing KSRTC adopted the submissions
made on behalf of the State of Kerala and added that KSRTC is
facing a resource crunch, therefore, considering its financial health,
a conscious decision was taken to provide dearness relief to the
pensioners at a rate lesser than the one at which dearness allowance
is to be provided to the serving employees.

DECISIONS CITED ON BEHALF OF APPELLANT(S)
13. In support of their submissions, the learned counsel for the State
and KSRTC have cited following decisions:
i. T.N. Electricity Board vs. R. Veerasamy & Ors7. Therein the
question that arose for consideration was “whether the appellant
Board acted illegally or contrary to law in introducing the pension
scheme to the employees, who were hitherto not governed by
such pension scheme, prospectively from 01.07.1986. That is,
whether the employees who retired before 01.07.1986 after
receiving all retiral benefits available to them as per the law
existing on their dates of retirement, can compel the appellant/
Board to extend the benefit of newly introduced pension scheme
with retrospective effect”. Upholding the Board’s decision, this
court held that the employees who retired before 01.07.1986
cannot compel the appellant/Board to extend the benefit of the
newly introduced pension scheme with retrospective effect.
While holding so, this Court accepted the explanation of the
Board that there were financial constraints in making the scheme
applicable to all.
ii. State of Punjab and Ors. vs Amar Nath Goyal and Ors.8
Therein the Government took a decision that those who retired
or died on or after 01.04.1995 were entitled to get retirement
gratuity/ death gratuity on the basis of addition of certain portion
of the dearness allowance to the basic pay. The employees
who retired prior to 01.04.1995, being deprived of its benefits,
laid a challenge to such deprivation. Negativing the challenge,

7 (1999) 3 SCC 414
8 (2005) 6 SCC 754
126 [2026] 5 S.C.R.

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this Court held that financial and economic implications are
very relevant and germane for any policy decision touching
the administration of the Government. Therefore, the decision
of the Government, after assessing the financial implications
thereof, to limit the benefits only to employees who retired, or
died, on or after 01.04.1995, was neither irrational nor arbitrary.
iii. State of Rajasthan and Anr. vs. Amrit Lal Gandhi and Ors.9
Therein the validity of the cut-off date from which the pension
scheme was made applicable was under challenge. As per the
decision of the Government, the scheme was made applicable
with effect from 01.01.1990. The challenge laid to the said cut-off
date was accepted by the High Court and a direction was issued
to make it applicable from 01.01.1986 as the recommendations
were forwarded in 1986. This Court set aside the order of the
High Court holding that recommendations made in 1986 did not
contain a specific date with effect from which the pension scheme
was to be made applicable. Moreover, the recommendations
were subject to approval. Additionally, the Court accepted the
explanation of the State that the decision for the cut-off date of
01.01.1990 was “wholly economic”. Besides, it was observed
that “financial impact of making the regulations retrospective
can be the sole consideration while fixing a cut-off date.”
iv. Chairman & MD, Kerala SRTC vs. K.O. Varghese and Ors.10
In this case, the issue was regarding the decision to defer
release of the benefits of 5th Pay Commission to the pensioners
of KSRTC. The Government of Kerala had authorized KSRTC
to pay pension to its employees as per the Kerala Service
Rules. Pursuant thereto, KSRTC took a decision to pay pension
to all those employees who retired after 01.04.1984, subject
to fulfilling certain conditions. When 5th Pay Commission
recommendations were accepted by the State Government, due
to precarious financial position of KSRTC, a decision was taken
to implement only some of the recommendations with effect from
01.11.1986. Further, the implementation of the recommendations
of 5th Pay Commission relating to pension and allied matters

9 (1997) 2 SCC 342
10 (2007) 8 SCC 231
[2026] 5 S.C.R. 127

The State of Kerala v. M. Vijayakumar & Ors.

was deferred. Some of the employees of KSRTC filed a writ
petition in the High Court challenging non-implementation of
the recommendations. Those writ petitions were disposed of
with direction to the Government to take a policy decision on
whether the benefits of 5th Pay Commission recommendations
should be extended to the pensioners of KSRTC. Pursuant
thereto, a decision was taken by the State Government deferring
the implementation of the recommendations for better times.
The matter ultimately came to this Court. This Court held that
KSRTC is an autonomous corporation established under the
Road Transport Corporations Act, 1950. It can regulate the
service conditions of its employees by making appropriate
regulations in that behalf. Until such regulations are framed, it is
entitled to take note of its financial health in considering whether
a particular recommendation for enhanced pay or pension in
respect of government employees should be adopted by it, and
if it is to be adopted by it, from what point of time. Additionally,
it was observed that financial condition of a corporation like
KSRTC is a relevant factor. Consequently, this Court upheld
the decision of KSRTC to defer the implementation of 5th Pay
Commission recommendations.
v. Himachal Road Transport Corporation and Anr. vs. Himachal
Road Transport Corporation Retired Employees Union11.
Therein, this Court held that employees who were governed
by CPF scheme and retired prior to 05.06.1995 by availing
benefit of the scheme and employees who were in service and
continued after 05.06.1995 cannot be treated as a homogenous
class. Besides, fixing the cut-off date is an executive function
based on several factors like economic conditions, financial
constraints, administrative and other circumstances. This Court
also observed that it is always open for the employer to introduce
new schemes and benefits, having regard to financial health of
the employer. It was further observed that whenever such new
benefit is extended for the existing employees, retired employees
cannot seek such benefit merely on the ground that they too
were the former employees of the Corporation.

11 (2021) 4 SCC 502
128 [2026] 5 S.C.R.

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14. By relying on the aforesaid decisions, it was contended that serving
and retired employees cannot be equated and financial decisions
are not amenable to challenge, as the employer is the best judge of
which scheme is to be brought and implemented, and to what extent.

SUBMISSIONS ON BEHALF OF THE RETIRED EMPLOYEES/
RESPONDENTS
15. On behalf of the pensioners, it was submitted that this is not a case
where eligibility to pension or dearness relief is in issue. The State
Government has authorized KSRTC to give pensionary benefits to
its employees. Pursuant thereto, KSRTC has taken a conscious
decision to pay pension to its employees. Therefore, there is no
doubt regarding eligibility to pension, and there is no dispute that
DR, which is linked to inflation, is payable to pensioners. However,
the issue is whether DR could be enhanced at a rate lower than at
which DA is enhanced for the serving employees. In that context,
it is submitted that the object of DA as well as DR is to ensure that
serving employees / pensioners do not suffer on account of inflation.
But since inflation is common for both serving and non-serving/
retired employees, there is no rationale for differential rates. Hence,
the High Court’s decision does not warrant any interference.
16. In support of his submissions, the learned counsel for the petitioner
relied on:
(i) Kallakkurichi Taluk Retired Officials Association, Tamil
Nadu and Ors. vs. State of Tamil Nadu.12 In this case, it was
observed that the object of extending DA and Dearness Pay,
which is equivalent to DR, to employees / retired employees is
to balance the effects of ongoing inflation. Since the component
of inflation similarly affects all employees and all pensioners
irrespective of the date of their entry into service or retirement,
it is not per se possible to accept different levels of dearness
pay to remedy the malady of inflation.
(ii) Kerala High Court judgment in Writ Petition (C) No.13798/2012:
M. Venugopalan Nair vs. The Chairman and Managing
Director, KSRTC, dated 03.07.2013. Therein it was held as
follows:

12 (2013) 2 SCC 772
[2026] 5 S.C.R. 129

The State of Kerala v. M. Vijayakumar & Ors.

“Learned Standing Counsel contended that the
serving employees and retired employees are two
different and distinct classes. Once KSRTC takes a
decision to disburse such benefits to distinct classes
on different dates, no discrimination can be attributed,
is the contention. It is to be accepted that serving
employees and pensioners fall within two distinct and
different categories. But question to be considered
is as to whether the decision for giving benefits on
different dates among those categories is justified or
not. When it comes to the question of sustainability
or justification of such decision, the objective has to
be looked into. Merely because they fall within two
categories, there cannot have different yardsticks
in the matter of payment of benefits. Once KSRTC
takes a decision to implement the revision of D.A.,
the same should have been uniformly applied. Unless
there is any nexus with any objective sought to be
achieved, no justifiable reasoning can be there for
the differentiation among the two categories, and
in such situation, it will amount to discrimination.
Therefore, I am of the view that there is justification in
the claim made by the petitioner seeking declaration
for uniform treatment.”
(iii) Division bench decision of the Kerala High Court in W.A.
No. 176/2014: The Managing Director of KSRTC vs. M.
Venugopalan Nair, dated 09.02.2017. In this case, the High
Court had observed:
“Though serving employees and pensioners fall
under two distinct and different categories, there
cannot be different yardsticks in the matter of
payment of benefits on revision of DA. Once the
appellant corporation takes a decision to implement
the revision of DA the same should have been
uniformly applied. Unless there is any nexus with
any objective sought to be achieved, no justifiable
reasoning can be there for the differentiation among
the two categories, and in such situation, it will
amount to discrimination.”
130 [2026] 5 S.C.R.

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17. Relying on the above decisions, the learned counsel for the
respondents submitted that as KSTRC had taken a decision to
provide DR to meet inflationary pressure, there was no justification
to have a different rate for increase of DR than what it is for DA,
when the inflation index is common.

REJOINDER SUBMISSIONS
18. In his rejoinder submission, learned counsel for the State invited our
attention to paragraph 37 of the judgment in Kallakkurichi Taluk
(supra), wherein it was observed as follows: -
“37. The issue in hand needs to be examined from another
perspective as well. It must be clearly understood that no
employee has a right to draw “dearness allowance” as
“dearness pay” till such time as the State Government
decides to treat “dearness allowance” as “dearness pay”.
And therefore, the State Government has the right to
choose whether or not “dearness allowance” should be
treated as “dearness pay”. As such, it is open to the State
Government not to treat any part of “dearness allowance” as
“dearness pay”. In case of financial constraints, this would
be the most appropriate course to be adopted. Likewise,
the State Government has the right to choose how much
of “dearness allowance” should be treated as “dearness
pay”. As such, it is open to the State Government to treat
a fraction, or even the whole of “dearness allowance” as
“dearness pay”. Based on Rule 30 of the Pension Rules,
it is clear that the component of “dearness pay” would
be added to emoluments of an employee for calculating
pension. In a situation where the State Government
has chosen, that a particular component of “dearness
allowance” would be treated as “dearness pay”, it cannot
discriminate between one set of pensioners and another,
while calculating the pension payable to them (for the
reasons expressed in the preceding paragraphs). Of
course, a valid classification may justify such an action.
In this case, the State Government has not come out with
any justification/basis for the classification whereby one
set of pensioners has been distinguished from others for
differential treatment.”
[2026] 5 S.C.R. 131

The State of Kerala v. M. Vijayakumar & Ors.

19. We have considered the rival submissions and have perused the
materials on record.

DISCUSSION
20. Before we dwell on the question framed above, it would be apposite
to have a glimpse at the undisputed facts. There is no dispute inter
se parties that the State of Kerala, vide G.O. (Rt) No.98/2021/TRANS
dt. 25.02.2021, to meet inflationary pressures had sanctioned a
certain sum of money, by way of temporary relief, while enhancing
DA to 112% (an increase of 14%) for KSRTC employees and DR
to 109% (an increase of 11%) for pensioners, effective March 2021.
Thus, what is clear is that DR is payable to pensioners of KSRTC
and the same is to be increased from time to time. The issue is that
why should DR be raised at 11% when DA has been raised at 14%,
when both are linked to inflation index.
21. DA is paid to serving employees whereas DR is paid to pensioners.
The object of both DA and DR is common, which is to enable the
serving employees /pensioners meet the exigencies of inflation. As
the object of both DR/ DA is common, which is to meet inflationary
pressures, and the inflation index is common to both the serving and
the non-serving/ retired employees, qua the measure, that is, the
rate(s) of increase of DA/ DR, could serving and retired employees
be differentiated, is the issue which we shall address.
22. Article 14 of the Constitution forbids class legislation but permits
reasonable classification which must satisfy twin tests: (1) that the
classification must be founded on an intelligible differentia which
distinguishes those that are grouped together from others, and (2)
that differentia must have rational nexus with the object sought to
be achieved by the Act – The differentia which is the basis of the
classification and the object of the Act are distinct things and what
is necessary is that there must be a nexus between the two. 13
Legislative and executive action may accordingly be sustained if it
satisfies the twin tests of reasonable classification and the rational
principle correlated to the object sought to be achieved. The burden
of proof lies on the State to affirmatively establish that these twin tests

13 See: (1952) 1 SCC 1 : 1952 SCC OnLine SC 1 : State of West Bengal v. Anwar Ali Sarkar; (1954) 2 SCC
791 : 1954 SCC OnLine SC 19 : Bhudhan Choudhary & Others v. State of Bihar
132 [2026] 5 S.C.R.

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have been satisfied. The State must therefore not only establish the
rational principle on which classification is founded but correlate it to
the objects sought to be achieved14. Besides, equality is a dynamic
concept with many aspects and dimensions, and it cannot be cribbed,
cabined and confined within traditional and doctrinaire limits. From a
positivistic point of view, equality is antithetic to arbitrariness. In fact,
equality and arbitrariness are sworn enemies; one belongs to the rule
of law in a republic while the other, to the whim and caprice of an
absolute monarch. Where an act is arbitrary, it is implicit in it that it
is unequal both according to political logic and constitutional law and
is therefore violative of Article 14, and if it affects any matter relating
to public employment, it is also violative of Article 16. Articles 14 and
16 strike at arbitrariness in State action and ensure fairness and
equality of treatment. They require that State action must be based
on valid relevant principles applicable alike to all similar situate and
it must not be guided by any extraneous or irrelevant considerations
because that would be denial of equality15.
23. In Ajay Hasia and others v. Khalid Mujib Sehravardi and others16,
this Court observed that doctrine of classification is the judicial
formula for determining whether the legislative or executive action
in question is arbitrary and therefore constituting denial of equality.
If the classification is not reasonable and does not satisfy the two
conditions referred to above, the impugned legislative or executive
action would plainly be arbitrary and the guarantee of equality
under Article 14 would be breached. Wherever therefore there is
arbitrariness in State action whether it be of the legislature or of the
executive or of an authority under Article 12, Article 14 immediately
springs into action and strikes down such State action.
24. In State of Punjab & Ors. v. Davinder Singh & Ors17, Dr. D.Y.
Chandrachud, C.J. (as His Lordship then was), while explaining the
contours of Article 14, wrote:
“85. The Constitution permits valid classification if two
conditions are fulfilled. First, there must be an intelligible

14 (1983) 1 SCC 305 : D.S. Nakara & Others v. Union of India, paragraphs 15 and 16
15 (1974) 4 SCC 3 : E.P. Royappa v. State of Tamil Nadu and Another, paragraph 85.
16 (1981) 1 SCC 722, paragraph 16
17 (2025) 1 SCC 1
[2026] 5 S.C.R. 133

The State of Kerala v. M. Vijayakumar & Ors.

differentia which distinguishes persons grouped together
from others left out of the group. The phrase “intelligible
differentia” means difference capable of being understood.
The difference is capable of being understood when
there is a yardstick to differentiate the class included and
others excluded from the group. In the absence of the
yardstick, the differentiation would be without a basis and
hence, unreasonable. The basis of classification must be
deducible from the provisions of the statute; surrounding
circumstances or matters of common knowledge. In making
the classification, the State is free to recognize degrees of
harm. Though the classification need not be mathematical
in precision, there must be some difference between
the persons grouped and the persons left out, and the
difference must be real and pertinent. The classification
is unreasonable if there is little or no difference. Second,
the differentia must have a rational relation to the object
sought to be achieved by the law, that is, the basis of
classification must have a nexus with the object of the
classification”.
(Emphasis supplied)

25. Now, applying the twin-tests principle, we shall test the validity of the
Government Order to the extent it provides a lower rate of increase for
DR than what it provides for DA. The object and purpose of dearness
allowance/dearness relief is to mitigate the hardship faced by salaried
employees/pensioners on account of inflation. The Government
Order in question increases the rate of DA by 14% and DR by 11%
even though the increase is to serve a common object, which is to
mitigate the hardship faced by the serving employees and pensioners
on account of inflation. Indisputably, inflation hits both serving and
retired employees with equal force, therefore, differentiating the two
qua the rate of increase of DA and DR, in our view, has no rational
nexus to the object sought to be achieved.
26. The issue here is not about entitlement to DR on pension. Therefore, in
our view, the decisions cited by the learned counsel for the appellants
are not applicable on the facts of the case on hand. Besides, once
pension is admissible and, based on inflation, DR is admissible on
it, announcing DR at a rate lower than at what DA is provided, when
134 [2026] 5 S.C.R.

Supreme Court Reports

both are linked to inflation and serve a common object, would be
nothing but discriminatory as well as arbitrary. Therefore, in our view,
the High Court was justified in holding the same to be discriminatory
and violative of Article 14.
27. The decisions cited by the learned counsel for the State as well
as KSRTC do not deal with a situation where there is no dispute
as regards entitlement to the benefit in question. Here, the retired
employees are not only entitled to pension but also dearness relief,
which is revisable from time to time, based on inflation. Thus, the
issue is not of entitlement to the benefit but of differential rates at
which those benefits are provided, dependent on whether the recipient
is a serving or a retired employee. In our view, when those benefits
serve a common purpose and are linked to inflation, and inflationary
pressures do not discriminate between a serving employee and a
pensioner, fixing different rates of enhancement of dearness allowance
and dearness relief have no rational nexus to the object sought to
be achieved and is clearly discriminatory as well as arbitrary.
28. No doubt a financial crunch might be a guiding factor to defer
disbursement of certain benefits or may justify separate dates for
implementation of beneficial schemes. But once a decision is taken
to provide certain allowances as also to increase them, based on
inflation, fixing a higher rate of increase for the ones who are serving
than the ones who have retired, would be arbitrary and violative
of Article 14 of the Constitution. The question posited above, is
answered accordingly.
29. As a result, we do not find any merit in these appeals. The same
are accordingly dismissed. Pending application (s), if any, shall stand
disposed of. There is no order as to costs.

Result of the case: Appeals dismissed.

†
Headnotes prepared by: Ankit Gyan