Associate
Bank's Officers' Association Vs. State Bank of India & Ors [1997] INSC 772
(15 October 1997)
SUJATA
V. MANOHAR, D.P. WADHWA
ACT:
HEADNOTE:
[With
Writ Petitions {Civil} Nos. 763/89 and 819/90}
Mrs. Sujata
V. Manohar, J.
"Equal
pay for equal work for both men and women is one of Directive Principles of
State Police laid down in Article 39(d) of the Constitution. Article 37 makes
it non- justiciable. Yet it must be borne in mind by the legislature while
making laws. In Randhir Singh vs. Union
of India and Ors. (1982 1 SCC 618), this
Court construed Articles 14 and 16 in the light of the preamble to the
Constitution to read into their scheme the principle of equal pay for equal
work.
The
principle has since been applied in cases of irrational discrimination in the
pay-scales of workers doing the same or similar work in an organisation. It has
not been applied when there is a basis an explanation for the difference.
Historical,
equal pay for work of equal value has been a slogan of the women's movement.
Equal pay laws, therefore, usually deal with sex-based discrimination in the
pay-scales of men and women doing the same or equal work in the same organisation.
For example, the Equal Remuneration Act 1976 provides for payment of equal
remuneration to men and women workers and is meant to prevent discrimination on
the ground of sex against women in the matter of employment. The Equal Pay Act
1970 and the Equal Pay (Amendment) Regulations 1983 in Great Britain are for a similar purpose. The same
doctrine has also sought to protect disadvantaged groups against similar
discrimination. We have interpreted and applied the doctrine even more widely
to prevent discriminatory pay-scales within an organisation which is owned by
or is an instrumentality of the State, provided that the different pay-scales
exist in one organisation, are applied to employees doing work of equal value,
and there is no rational explanation for the difference.
When
the same principle is sought to be extended to compare pay-scales in one organisation
with pay-scales in another organisation, although between employees doing
comparable work, the stretching of the doctrine, if at all it is done, must be
done with caution lest the doctrine snaps. Many ingredients go into the shaping
of wage structure in any organisation. Historically it may have been shaped by
negotiated settlements with employees' unions, or through industrial
adjudication. It may have been revised or reshaped with the help of expert
committees. The economic capability of the employer also plays a crucial part
in it;
as
also its capacity to expand business or earn more profits. If the employing organisation
functions in a competitive area, it may, if it is economically strong, offer
higher wages than its competitors doing similar work to attract better talent.
Or it may offer higher wages to the better qualified. A simplistic approach,
granting higher remuneration to other workers in other organisations because
another organisation has granted them, may lead to undesirable results. Even
within the same organisation, when the differential wage structure is based on
similar considerations, the application of the doctrine would be fraught with
danger, and may seriously affect the efficiency, and at times, even the
functioning of the organisation. The doctrine is designed to correct irrational
and inexplicable pay differentiation which can be looked upon as discrimination
against an employee or a given set of employees. It is easier to identify such
discriminated groups when the discriminated group is sex-based (women) or colour-based
(Blacks in the USA) or caste-based (scheduled castes
etc.): and more difficult to identify in other cases.
But
unless there is such identifiable discrimination, the doctrine should not be
applied. Mere difference is not discrimination.
In the
case before us the Unions of employees of various banks which are subsidiaries
of the State Bank of India have claimed higher terminal
benefits, better medical benefits and extra increments in their pay-scale on
the ground that such benefits are available to the employees holding equivalent
or similar ranks in the State Bank of India.
The
State Bank of India was constituted under the State
Bank of India Act, 1955. Under the Act the undertaking of the Imperial Bank was
transferred to the State Bank of India which was the new bank constituted under the said Act to carry on
banking business. The Preamble to the Act states that for the extension of
banking facilities on a large scale, more particularly in the rural and semi-urban
areas, and for diverse other public purposes it is expedient to constitute a
State Bank of India and to transfer to it the undertaking of the Imperial Bank
of India.
Four
years later, the State Bank of India
(Subsidiary Banks) Act, 1959 was passed. The Statement of Objects and Reasons
states, inter alia, that the future of certain major State-associated banks
which are owned in part by the State Governments or with which such Governments
have been closely associated, has been under consideration for some time. The
question has recently been comprehensively re-examined, with particular
reference to the necessity for making adequate and proper provision for the
management of treasuries and sub-treasuries in the area served by these banks
and the need for the expansion of these banks in these areas; and the view of
the banks themselves have been ascertained. The management and the shareholders
of the Bank of Bikaner, the Bank of Indore, the bank of Jaipur, the Bank of Mysore
and the Travancore Bank have agreed to the proposal to reconstitute these banks
as subsidiaries of the State Bank.
The
reconstitution on similar lines of the State Bank of Saurashtra, the Bank of Patiala
and the State Bank of Hyderabad has also been agreed to.
The
scheme for reconstitution provides for the transfer to and vesting in the State
Bank of India of the share capital of each of the
eight banks which have accepted the proposals.
Under
Section 3 of the State Bank of India
(Subsidiary Banks) Act, 1959, the new banks are constituted. Section 4 provides
that every new bank shall be body corporate with perpetual succession and a
common seal and shall sue and be sued in its name. Under Section 7 all shares
in the issued capital of a new bank shall, on the appointed day, stand allotted
to the State Bank of India. Under Section 9, on the
constitution of a new bank, all shares in the capital of the corresponding
bank, where such corresponding bank has a share capital, shall stand
transferred to, and shall vest in, the State Bank, free of all trusts,
liabilities and encumbrances. Section 11 deals with the transfer of services of
employees of existing banks. Under Section 24, the State Bank may, from time to
time, give directions and instructions to a subsidiary bank in regard to any of
its affairs and business, and that bank shall be bound to comply with the
directions and instructions so given. Subject o any such directions and
instructions, the general superintendence and conduct of the affairs and
business of a subsidiary bank shall, as from the appointed day, vest in a Board
of Directors who may, with the assistance of the managing director, exercise
all powers and do all such acts and things as may be exercised or done by that
bank. Under sub-section (3) of Section 3, the Board of Directors of a
subsidiary bank shall, in discharging its functions under this Act, act on
business principles, regard being had to public interest.
Section
25 deals with the composition of the Board of Directors. The Chairman of the
State Bank of India is the ex officio Chairman. The
managing director is to be appointed under Section 25 by the State Bank of India after consulting the Board of
Directors of the subsidiary bank and with the approval of the Reserve Bank. The
Board of Directors will have an officer of the Reserve Bank nominated by that
bank;
not
more than five directors to be nominated by the State Bank, of whom not more
than three shall be officers of that bank; one Director from among the
employees (Workers) of the subsidiary bank to be appointed as set out therein;
one Director from amongst such employees of the subsidiary bank as are not
workmen, to be appointed as set out therein and two directors to be elected in
the prescribed manner by the shareholders other than the State Bank. The
section also provides for a director to be nominated by the Central Government
in consultation with the State Bank.
Under
Section 36, a subsidiary bank shall, if so required by the State Bank, act as
agent of the State Bank at any place in India for the purpose of certain businesses specified therein. There is a
similar provision for a subsidiary bank acting as an agent of the Reserve Bank
if so required by the Reserve Bank.
Based
on these provisions, it is submitted before us that the business of each of the
subsidiary banks is under the control and management of the State Bank of India
and, therefore, the employees of the subsidiary banks should be considered as,
in effect, employees of the State Bank of India. Sub section (2) of Section 50,
however, of the State Bank of India
(Subsidiaries Banks) Act, 1959 provides as follows:
"50(2):
For the removal of doubts, it is hereby declared that the officers, advisers
and employees of a subsidiary bank, in whatever capacity engaged, shall not be
deemed to be officers, advisers or employees of the State Bank for any purpose,
unless otherwise provided in the contract or agreement of service of any such
officer, adviser or employee." Despite this section, it is contended by
the petitioner-associations that since the subsidiary bank shares a common
chairman of its Board of Directors with the State Bank of India, and since the
State Bank of India has the power to nominate five directors on the Board of
the subsidiary bank and has power to give directions to the subsidiary bank,
the subsidiary bank in fact, is a [art of the State Bank of India. In the
alternative it is under the control of the State Bank of India. Hence the employees of the
subsidiary banks are entitled to claim the same benefits as the employees of
the State Bank of India.
In its
counter affidavit the State Bank of India has, however, pointed out that the subsidiary bank is an independent
bank. Undoubtedly it is a subsidiary of the State Bank of India and the State Bank of India owns almost the entire shareholding
of the subsidiary banks. It also exercised certain control over the subsidiary
banks as provided in the said Act. But the State Bank of India was constituted much earlier under
a different Act. The other banks have not amalgamated with the State Bank of India.
These
other banks or each of them remain a distinct entity with their own Board of
Directors. They have their own capital structure, their own business, their own
employees and their own individual identity. The associated banks were
constituted as subsidiaries instead of being amalgamated because it was
considered desirable to maintain the separate character of the State-associated
banks as also their existing contacts and traditions. It was considered
desirable to prevent sudden changes in their working methods and policies and
at the same time to offer them adequate incentives on the development of their
respective areas of operation. It is the stand of the State Bank of India that they play the rule of an
enlightened stock-holder. In the administration of their affairs the subsidiary
banks are autonomous and the State Bank of India in any event cannot be considered as an employer of the staff of the
subsidiary banks. Section 50 quite clearly provides that the officers and
employees of a subsidiary bank cannot be considered as the officers and
employees of the State Bank of India for any
purpose. The officers and employees of subsidiary bank are governed by the
terms and conditions of employment of the subsidiary bank by which they are
employed and they are borne on the cadre of employees of the subsidiary bank.
These
submissions have considerable merit.
Even
with regard to the Board of Directors of a subsidiary bank, the State Bank of India has contended that they have power
to nominate five Directors. Out of them, the three non-official Directors who
are nominated by the State Bank of India represent various areas of specialisation
such as agriculture, accountancy, small scale industry etc, with a view to
ensure that the Board of Directors of the subsidiary banks is broad-based and
is in a position to be really useful to the bank. A nominee Director does not
cease to be independent and must act in the best interests of the subsidiary
bank. The policies are laid down in consultation with the Reserve Bank of India and the Government of India.
The
State Bank of India, in turn, is also subject to
similar control by the Reserve Bank of India and the Central Government.
The
narrow question which we have to consider is whether looking to the nature of
the relationship between the State Bank of India and each of the subsidiary banks, can the employees of the subsidiary
banks be considered as employees of the State Bank of India? In view of the clear provisions of
Section 50, it is not possible to come to a conclusion that the employees of
the subsidiary banks are, for all practical purposes, employees of the State
Bank of India. Even dehors Section 50, looking to
the scheme of the State Bank of India (Subsidiary Banks) Act, 1959, it is quite
clear that each of the subsidiary banks is set up as a separate bank. Each
subsidiary bank has its own capital structure, its own operations. Each of the
banks has its own staff with its own terms and conditions of service.
Therefore,
the employees of the subsidiary bank cannot be treated as the employees of the
State Bank of India. The employees of the subsidiary
banks are not entitled to claim the same benefits as the employees of the State
Bank on the ground that they are, in effect, the employees of the State bank of
India.
It is
submitted before us by the petitioner- associations in the alternative, that in
any event, they are employees of an organisation which does work which is
similar to the State Bank of India. The
duties and responsibilities of their officers and employees are similar to the
duties and responsibilities of the officers and employees of the State Bank of India. Hence they should be given the
same terminal benefits, the same medical benefits and the same increments as
the officers and employees of the State Bank of India. IN the case of Union Territory Chandigarh v. Krishan Bhandari
(1996 11 SCC 348), this Court held that the doctrine of equal pay for equal
work is inapplicable when the alleged discrimination is between employees of
two different authorities functioning as a State Under Article 12. In the
present case the petitioners are faced with a further difficulty. They claim
parity also regarding other benefits. There is no disparity in pay- scales.
Looking
briefly at the nature of the grievance in respect of terminal or retiral
benefits, the employees of the subsidiary banks are entitled to provident fund
or pension, and they are also entitled to service gratuity. The employees of
the State Bank of India are entitled to provident fund and
pension. They are also entitled to gratuity under the payment of Gratuity Act. According
to the petitioners. the employees of the subsidiary bank should also be given
pension in addition to the terminal benefits which they already have. It is,
however, pointed out by the State Bank of India that the terminal benefits in a subsidiary bank are comparable to the
terminal benefits in nationalised banks, where also there is an option between
pension or contributory provident fund. Regarding gratuity, the employees of a nationalised
bank are entitled to service gratuity or gratuity as per the Payment of
Gratuity Act, whichever is higher, which is the position in the subsidiary
banks also. Looking to this comparative position, we do not see any reason to
infer discrimination.
In respect
of medical benefits, the hospitalisation scheme in the State Bank of India provides for 100% payment for self
and 75% payment for the family which is similar to the hospitalisation scheme
for subsidiary banks. However, in respect of certain operations the ceiling on
admissible amounts is different. For home treatment, the subsidiary banks have
prescribed ceiling on the amount payable. It is not as if no medical benefits
are provided to subsidiary banks' employees. The employees are provided
substantial medical benefits, though they are not identical with the medical
benefits given by the State Bank of India.
With
regard to pay-scales, the grievance which is made before us as of now, is only
with regard to four increments which are given to the officers of the State
Bank of India at the time of joining though the
pay-scales are the same.
This
is not done in the subsidiary banks. The State Bank of India has submitted that in order to
attract suitable persons, looking to the scale of their operations and responsibilities
involved, this has been done. The subsidiary banks are not in a comparable
position. Nor are their scales of operation comparable to the State Bank of India. The responsibilities of their
officers are not comparable in view of the extent of operations of the
subsidiary banks. In these circumstances, if the State Bank of India has offered increments to persons
joining the State Bank of India, the
same cannot be given to the officers joining the subsidiary banks.
All
the grievances centre around these benefits. We do not think that the State
Bank of India and the subsidiary banks are in a
comparable position in this regard. It is also submitted by learned counsel for
the State Bank of India that the benefits which are
extended to the employees of the subsidiary banks are negotiated settlements
with the unions of their employees. The benefits which are conferred are in
accordance with the agreements which have been reached between the unions of
the employees and the management of each bank. In these circumstances, we fail
to see how the principle of "equal pay for equal work" can be applied
in the present set of facts.
The
writ petitions are, therefore, dismissed. There will be no order as to costs.
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