Bank of India & Ors Vs. K.P. Subbaiah & Ors  Insc 294 (16 July 2003)
V. Patil & Arijit Pasayat
APPEAL NOS. 4621-24 OF 2003 (Arising out of SLP(C) Nos.15808-15811/1998) WITH CIVIL
APPEAL NOS.4625-26 OF 2003 (Arising out of SLP(C) Nos.2998-2999/1999) ARIJIT
PASAYAT, J Leave granted in SLP (C) Nos.15808-15811/98 and 2998- 2999/99.
appeals have their base on a judgment of the High Court of Karnataka at Bangalore disposing of writ petitions
Nos.3426-27/1986 and writ petition Nos. 6432-35/1987.
background scenario in which the present dispute appears, lies within a very
narrow factual compass. Six persons who are the respondents in the appeal Nos.
4312- 4317/98 (hereinafter referred to as 'the employees') were ex-servicemen
in the Indian Army. They are appellants in the other appeals. After discharge
from Army service they were employed by the State Bank of India (in short 'the Bank'). They were
discharged from defence services during the period from 1.4.1982 to 1.9.1984
and joined the Bank on different dates during the period from 11.8.1983 to
7.6.1984. In terms of the Government of India's policy, the basic pay and the
dearness allowance last drawn by them while in military service was to be
protected while fixing their pay on absorption into public sector banks. During
the period when the employees joined the bank, the pay and allowances payable
to employees of the Bank were governed by the Third Bipartite Settlement which
was operative from 1.9.1978. Having regard to the Government's policy and as
per the decision of the Indian Banks Association (in short 'the Association'),
all public sector banks followed the norms in the matter of fixation of pay as
per the Third Bipartite Settlement. The Fourth Bipartite Settlement became
retrospectively operative from 1.7.1983. Under the said settlement, there is an
upward revision in the pay scales and the basic pay of the employees were
revised on stage to stage basis. The annual increments were also given to the
concerned employees. When the matters stood thus, the Bank issued a Circular
dated 12.10.1985 regarding fixation of pay relating to ex-servicemen employed
in the public sector banks. This was the starting point of controversy. By
Staff Circular dated 24.11.1986, the Bank notified that while dearness
allowance and interim relief drawn by ex-servicemen shall qualify for
protection as components of D.A., the other allowances like city compensatory
allowance and H.R.A. did not qualify for such protection. Eleven types of emoluments
admissible in defence services were to be protected on re-employment in the
Bank. On the basis of the aforesaid Circulars dated 12.10.1985 and 24.11.1986
the pay last drawn by the employees stood reduced. This reduction was
challenged by the employees before the High Court.
questions were formulated by the High Court for consideration.
When the IV Bipartite Settlement was signed on 17.9.1984 bringing into force
new scales of pay, with retrospective effect from 1.7.1983, what was the proper
course to be adopted by the Bank, in the case of petitioners (who were
appointed between 1.7.1983 and 17.9.1984):-
whether the pay of petitioners had to be revised by fitment in the new scales
of pay, on a stage to stage basis, with reference to the pay fixed under the
III Bipartite Settlement, retrospectively from the date of petitioners entering
with service (as contended by the petitioners); or
Whether a fresh fitment in the new pay scales (under IV Bipartite Settlement)
should have been effected to protect the pay and allowances last drawn when in Defence
Service, in place of the earlier fitment in the old pay scales under the III
Bipartite Settlement (as contended by the Bank).
If the revision of pay of petitioners, by fitment in the new scales of pay, on
stage to stage basis, was contrary to the scheme under which petitioners were
appointed, whether the Bank could subsequently rectify the error by re-
fixation of pay of petitioners, by fitment in the new pay scales (under IV Bipartite
Settlement) with reference to the last pay drawn in Defence Service.
Whether by resorting to such refixation the Bank can reduce the salary of the
petitioners to a level which is less than the salary at which they were
appointed when they joined the services of the Bank even though the refixed
salary protects the last pay drawn while in Defence service." On
consideration of rival stands, the High Court observed that Part (a) of first
question was to be answered in the negative while part (b) of the said question
was to be answered in the affirmative. Question No.(ii) was to be answered in
the affirmative; question No.(iii) in the negative and finally it was concluded
that the Bank's Circulars dated 12.10.1985 and 24.11.1986 were upheld subject
to conclusions at paragraph 23(d) of the judgment.
memos prepared by the Bank revising the pay at the time of entry of the
employees in the banks were quashed. It was declared that the Bank was entitled
to correct the mistake committed by them in revising the pay of the employees
by fitment in the new pay scales under IV Bipartite Settlement on stage to
stage basis and were also entitled to re-fix the pay and D.A. on the basis of
their entry into service with reference to the new pay scales under the IV Bipartite
Settlement. But while doing so, the total pay packet of the employees should
not be less than the total pay fixed when the employees entered the service of
the Bank. In other words, the total pay fixed by the Bank when the employees
entered its service should be protected. Consequently, while re-fixing the pay
and allowances payable to the employees as on the date of entry into service
under Circulars dated 12.10.1985 and 24.11.1986, the basic pay and D.A. of the
employees should not be less than Rs.1319.99, Rs.1596.12, Rs.1380.50,
Rs.1319.99, Rs.1582.61 and Rs.1582.61 respectively.
relevance of these figures shall be dealt with a little later.
further held that the employees were entitled to further allowances on the
basis of re-fixation subject to the minimum mentioned above.
K.N. Raval, Learned Solicitor General appearing for the appellants-Bank
submitted that the conclusions of the High Court are erroneous because it
proceeded on the basis as if a scale of pay was to be protected not the pay in
terms of the policy decision. A bare reading of the relevant circular of the
Government of India makes the position crystal clear that the protection was of
the pay. It obviously meant that the employees were not to receive any amount
below the last pay drawn by them. It had nothing to do with any scale of pay.
The anomaly has arisen because the Fourth Bipartite Settlement was made
retrospectively operative. In order to protect the pay, fixation of a scale was
without an alternative. The employees cannot claim a double advantage by
seeking a corresponding increase in the pay scale. Had the pay scale been in
contemplation at the time of fixing the salary structure, the basic pay could
not have been fixed at a higher figure and that would have avoided the claim of
a corresponding scale of pay. It was submitted that if the High Court's view is
accepted, it would mean conferring double benefit on the employees which was
not a contemplated idea in protecting the pay.
contra, learned counsel appearing for the employees submitted that fixation of
pay and retrospective operation of the Fourth Bipartite Settlement were within
the choice of the employer-Bank and employees had nothing to do with it.
indicating a particular scale of pay at the time of absorption, a right is
conferred on the employee to get a corresponding higher scale of pay as and
when there is revision of the scale of pay. Undisputedly, the employees were
fitted in a particular scale of pay and as a natural corollary and consequence
they were entitled to the corresponding scale of pay in terms of the subsequent
Bipartite Settlement. He also submitted that the High Court was not justified
in denying certain benefits for which the employees have filed appeals.
rival contentions need careful consideration.
a plea had been taken by the employees that unilateral revision of the scale of
pay was violative of principles of natural justice, the same was abandoned by
learned counsel for the employees during hearing of the case. It was submitted
that all the relevant materials were placed before the High Court and,
therefore, the issues should be decided on merits.
would be relevant to quote the Circular dated 12.10.1985, which, inter alia,
reads as follows:
of salary in cases of the ex-servicemen who joined the Bank's service after the
revision of pay scale in September 1978 is being done on the basis of the
protection of pay drawn by them prior to their retirement. Pursuant thereto,
ex- servicemen employees who have joined the Bank on or after 1.7.1983 i.e. the
date from which the wage revision of award staff in terms of the Fourth
Bipartite Settlement came into effect retrospectively, but before 17.9.1984
(the date of settlement) have been fitted in the old scale of pay, on the basis
of the protection of pay last drawn by them in the Armed Forces prior to their
The question as to how their salary should be re-fixed under the Fourth
Bipartite Settlement has been examined by the Central Office in consultation
to IBA guidelines:
The pay fixation in the case of ex-servicemen, who joined the Bank's service on
or after July 1, 1983 may be made on the basis of protection of pay drawn in
the Armed Forces or at a stage where the new basic pay plus dearness allowance
corresponds to the basic pay plus dearness allowance drawn by them in the Armed
Forces, whichever is higher.
the cases of those ex-servicemen who joined the Bank between July 1, 1983 and
September 17, 1984 and were given the fitment in the scale of pay under the
Third Bipartite Settlement, they may be given re- fixation in the above manner,
but if as a result of such re- fixation, their salary (pay + D.A.) is reduced,
the recovery of excess payment for the period July 1, 1983 to September 17,
1984 be waived. Recoveries for subsequent period will be made where necessary
in three to four instalments.
has been decided to accept the IBA guidelines referred to above." The
effect of the Circulars dated 12.10.1985 and 24.11.1986 can be figuratively
crystallized as follows:
Stage Effective date Basic Pay Permissible Total Allowances Employee A
14.6.1982 535/- 404.00 939.00 in W.P. 3426/1986 B 7.6.1984 545/- 774.99 1319.99
(K.P. Subbaiah) C 7.6.1984 875/- 498.75 1373.75 D 7.6.1984 615/- 350.55 965.55
Employee A 1.4.1982 700/- 625.60 1325.60 in W.P. 3427/1986 B 11.8.1983 705/-
891.12 1596.12 (M. Shamanna) C 11.8.1983 1125/- 528.75 1653.75 D 11.8.1983
930/- 437.10 1367.10
Employee A 1.6.1984 550/- 687.90 1237.90 in W.P. 6432/1987 B 22.5.1984 580/-
900.50 1380.50 (M. Meenakshi ) C 22.5.1984 930/- 530.00 1460.00 Sundaram D
22.5.1984 820/- 467.40 1287.40
Employee A 1.9.1984 520/- 655.40 1175.40 in W.P. 6433/1987 B 22.5.1984 545/-
774.99 1319.99 (K.Sakkarias) C 22.5.1984 875/- 498.75 1373.75 D 22.5.1984 775/-
Employee A 29.2.1984 595/- 736.30 1331.30 in W.P. 6434/1987 B 22.5.1984 620/-
962.61 1582.61 (S. Balasubramaniam) C 22.5.1984 990/- 564.30 1554.30 D
22.5.1984 875/- 498.75 1373.75
Employee A 1.9.1984 520/- 595.40 1115.40 in W.P. 6435/1987 B 22.5.1984 620/-
962.61 1582.61 (Kewal Kumar Vaid) C 22.5.1984 990/- 564.30 1554.30 D 22.5.1984
730/- 416.10 1146.10
Note (i) Stage 'A' refers to the Stage when the employees were discharged from
Stage 'B' refers to the stage when the employees joined the service of the Bank
and pay was fixed as per the Third Bipartite Settlement scales of pay.
Stage 'C' refers to the stage when the pay was revised on stage to stage basis,
as per the Fourth Bipartite Settlement, with retrospective effect from 1.7.1983
(or in the case of employees from the date of their entry into service)
corresponding to the salary fixed under the Third Bipartite Settlement.
Stage 'D' refers to the stage when pay and allowance was refixed by the Bank in
pursuance of its Circular dated 12.10.1985.
While calculating permissible allowances, HRA, and CCA have been omitted. Only
DA, ADA, GCB and IR taken for Stage 'A' and only DA taken for stages B, C and
was some amount of controversy as to what was to be protected. With reference
to Government of India's letter dated 28.1.1983 it was submitted by learned
counsel for the employees that dearness allowance was to be excluded. We,
however, notice that the stand was different before the High Court which
proceeded on the basis that the protection was to be given in respect of the
last pay drawn which was inclusive of D.A. It is also relevant to take note of the
Association's letter dated 28.4.1982 in which a reference has been made to
Government of India, Ministry of Finance's communication to the following
has been decided that while fixing the pay of ex-servicemen in nationalized
banks the basic pay plus D.A. last drawn by them in the military service would
be protected and in this process their pension upto Rs.125/- per month would be
banks may now be advised to take necessary action in this regard under
intimation to us." One thing is clear from various documents based on
record that the intention as reflected in the policy of Government of India was
to protect the last pay drawn of the concerned ex-servicemen in the armed
Solicitor General is, therefore, right in his submission that the protection
related to pay and not to a scale of pay. Submission of learned counsel for the
employees that after having been fitted to a scale of pay in force at the time
of absorption as a natural corollary and consequentially a corresponding scale
of pay in the subsequent settlement at first flush appears attractive.
does not stand closer scrutiny. The apparent intention was to ensure that the
ex-serviceman at the time of employment in the public sector bank does not get
an amount as pay lesser than what he was drawing while in defence service.
Perforce a scale of pay was to be fixed.
stands to logic that the employer while fixing pay has to fix it at a level of
pay which would ensure compliance with the requirement that it is not less than
the last pay drawn. The scale of pay on the basis of Third Bipartite Settlement
applicable to clerical cadre was Rs.325-20-405-
25-455-30-545-35-580-40-660-45-750-50-800-60-1160. After retrospective
operation of the Fourth Bipartite Settlement, the scale became
speaking, there is no fitment to a particular scale as contended by the
employees. The fitment into a particular scale has to be considered in the
background of the policy decision to ensure the payment of an amount not less
than the last pay drawn. In that sense, it cannot be said that there was any
fitment to a particular scale to attract the corresponding scale of pay in
terms of subsequent settlement.
Service jurisprudence the expressions 'pay' and 'Pay scale' are conceptually
different connotations. Pay is essentially a consideration for the services
rendered by an employee and is the remuneration which is payable to him.
is the recurring payment for services rendered during the tenure of employment.
Pay and salary are necessarily not interchangeable concepts. Their meanings
vary depending upon the provisions providing for them.
Concise Oxford Dictionary 8th Edn. (1990), the word 'pay' in its ordinary
significance in relation to service means "to give what is due for
in the Service Jurisprudence, the expression 'pay' has technical connotation of
its own. Fundamental Rule 9(21) throws some light on this aspect. The
definition itself is as follows:
Pay means the amount drawn monthly by a Government servant as-
the pay, other than special pay or pay granted in view of his personal
qualifications, which has been sanctioned for a post held by him substantively
or in an officiating capacity, or to which he is entitled by reasons of his
position in a cadre, and
overseas pay, special pay and personal pay, and
other emoluments which may be specially classed as pay by the President."
There are different types of pay like substantive pay, special pay, additional
pay, personal pay and presumptive pay.
services comprise of different grades and, therefore, different pay scales are
provided for different grades. The pay of an employee is in that background
fixed with reference to a pay scale. This is necessary to be done because the
pay of an employee does not remain static.
to be noted that an employee starts with a particular pay which is commonly
known as initial pay and the periodical increases obtained by him are commonly
known as increments. When the highest point is reached, the concerned employee
becomes entitled to what is known as ceiling pay. It is, therefore, a graded
fixation of pay scales is essentially a function of the executive. They are
closely inter-linked with evaluation of duties and responsibilities attached to
the posts and the pay scales are normally linked with conclusions arrived at by
expert bodies like the Pay Commission.
degrees of skill, strain of work, experience involved, training required,
responsibility undertaken, mental and physical requirements, disagreeableness
of the tasks, hazard attendant on work and fatigue involved are some of the
relevant factors which go into the process of fixing the pay scale. [See Delhi Veterinary Association v. Union of India and Ors.
(1984 (3) SCC 1)] As noted above, a pay scale has different stages starting
with initial pay and ending with ceiling pay. Each stage in the scale is
commonly referred to as basic pay. The emoluments which an employee gets is not
only the basic pay at a particular stage, but also the additional amounts to
which he is entitled as allowances e.g. D.A. etc. Therefore, when a question of
pay protection comes, the basic feature is that the fitment or fixation of pay
in a particular scale must be such as to ensure that the total emoluments are
a pay structure is evolved keeping in mind several factors, for example
at which recruitment is made,
hierarchy of service in a given cadre,
educational/technical qualifications required,
nature of duties and responsibilities,
horizontal and vertical relativities with similar jobs,
employer's capacity to pay etc.
carefully evolved pay structure ought not to be ordinarily disturbed as it may
upset the balance and cause avoidable ripples in other cadres as well. [See
Secretary, Finance Department and Ors. v. West Bengal Registration Service
Association and Ors. (AIR 1992 SC 1203)] The Government of India, Ministry of
Finance, Department of Economic Affairs (Banking Division) by its letter dated
28.1.1983 had indicated what was to be protected. It is clearly spelt out therefrom
that for the purpose of fixation of pay of ex-servicemen re-employed in the
public sector banks, protection was to be given to total emoluments i.e. pay
plus D.A. (instead of only pay) last drawn by ex-servicemen before their
retirement from the Armed Forces. The initial guidelines were fixed by letter
dated 2.2.1980 and the Indian Banks Association Circular dated 28.4.1982. The
guidelines were partially modified by letter dated 28.1.1983 and it was
stipulated that pay fixation in the case of ex-servicemen who joined service
after revision of pay scale in September 1978 will be on the basis of
protection of pay instead of pay plus D.A. drawn by them prior to retirement.
In other words, their pay fixation will be in accordance with the office
memorandum issued by the Ministry of Finance, Department of Expenditure dated
25.11.1958, 16.1.1964 and 19.7.1978. The stress, as is evident from various
documents noted above, was on protection of total emoluments received by the
concerned employee before retirement from the Armed Forces. The obvious
intention was to, as indicated supra, see that the total emoluments do not fall
below what was being received by him as pay plus last D.A. in Armed Forces. The
Office memorandum dated 28.1.1983 is of considerable importance and is quoted
Government of India Ministry of Finance Department of Economic Affairs (Banking
division) New Delhi, dated the 28th January, 1983 To The Chairman & Mg.
Director (20 Nationalised Banks) The Chairman, State Bank of India, Bombay.
Mg. Directors: 7 subsidiaries of SBI The Chief Officer, DPP. Reserve Bank of India, Bombay The Chairman & Mg. Director: IDBI/IROI/IFCI.
Subject:- Ex-servicemen re-employed in
Public Sector banks – fixation of pay.
Sir, I am directed to invite reference to this Department's letter of even
number dated 2.2.1980 and the Indian Banks' Association's circular No.
PD/76/589/865 dated 28.4.1982 on the above subject. These two letters to be
read together and accordingly for the purpose of fixation of pay of
ex-servicemen re-employed in the public sector banks, protection was to be
given to total emoluments i.e. 'pay+DA' (instead of only pay) last drawn by
ex-servicemen before their retirement from the Armed Forces.
partial modification of the guidelines, conveyed through the aforesaid letters,
it has been decided that :
respect of ex-servicemen, absorbed in banks' service prior to September 1978,
if no recoveries were made on account of pension and pension equivalent of
gratuity in excess of Rs.125/- p.m. such recovery may not be made with
in future the adjustment of pension will be made in accordance with the
Department of Expenditure O.M.No.18(34)-E.III(B)/57 dated 25.11.1958 (copy
enclosed) read with IBA's circular No.PD/76/589/865 dated 28.4.1982.
The pay fixation in the case of ex- servicemen who joined Banks' service after
the revision of pay scales in September, 78 will however be on the basis of
protection of "pay" (instead of pay + DA) drawn by them prior to
retirement. In other words, their pay fixation will be in accordance with the
following office memorandum issued by the Ministry of Finance, Deptt. Of
O.M. No.18(34)-E.III(B)/57 dated 25.11.1958.
O.M. No.7(34)-E.III/62 dated 16.1.1964.
O.M. No.5(14)-E.III(B)/77 dated 19.7.1978.
of these OMs are enclosed)
the purpose of qualifying service, necessary to avail of housing loan,
conveyance loan, etc. service rendered by the ex-servicemen in defence forces
may be taken into account.
certain number of years of service are prescribed as a minimum eligibility
criteria for promotion from one cadre to another, rules in this regard may be
suitably modified to give weightage to ex- servicemen on the basis of their
service in the Defence Forces.
Receipt of this letter may please be acknowledged and action taken reported to
this Department at an early date.
version of this letter will follow.
faithfully, Sd/- (Ahmad Fareed) Under Secretary to the Government of
India." There was no intention to protect any particular scale of pay.
That being the position, the demand of a corresponding pay scale has no
rational. The High Court was, therefore, clearly in error in holding that the
scale of pay was the determinative factor. The direction that while re- fixing
the pay and D.A. the total pay fixed when the petitioner entered into the bank's
service has to be protected within the corresponding scale of pay, cannot be
maintained and is indefensible.
Appeal nos. 4312-4317 of 1998 are accordingly allowed.
connected appeals filed by the employees, challenge is to the observations of
the High Court as noted above. It could not be shown as to how they suffer from
any infirmity. We do not find anything wrong in the impugned conclusions of the
High Court challenged by the employees to warrant interference. The appeals are
dismissed. There shall be no order as to costs in all the appeals.