Supreme Court Rules on Implementation of Pay Commission for Absorbed Employees

The Supreme Court of India, in its judgment in M.P. Poorva Kshetra Vidyut Vitaran Co. Ltd. & Ors. vs. Uma Shankar Dwivedi, clarified the applicability of the Fifth, Sixth, and Seventh Pay Commission recommendations for employees absorbed into a new organization. The Court examined whether the appellants (M.P. Poorva Kshetra Vidyut Vitaran Co. Ltd.) were obligated to implement the pay commission benefits for employees originally belonging to the Rewa Rural Electrification Cooperative Society.

Background of the Case

The case arose when the respondent, Uma Shankar Dwivedi, an employee absorbed from the Rewa Rural Electrification Cooperative Society into the M.P. Poorva Kshetra Vidyut Vitaran Co. Ltd., sought parity in salary benefits. The crux of the matter was:

• Whether the Fifth Pay Commission recommendations applied to employees absorbed from a society where such recommendations had not been implemented.
• Whether the absorbed employees were entitled to Sixth and Seventh Pay Commission benefits on the same terms as regular employees of the appellant company.
• Whether discrimination existed between employees of different societies upon absorption into the company.

Arguments Presented

Appellants’ Arguments

The appellants (M.P. Poorva Kshetra Vidyut Vitaran Co. Ltd.) argued:

• The respondent belonged to the Rewa Society, where the Fifth Pay Commission recommendations had never been implemented. Hence, he could not claim benefits that were never applicable to his original employment.
• The company had absorbed multiple employees from different societies but only extended Fifth Pay Commission benefits to those coming from societies that had already implemented them.
• A government Notification dated April 27, 2006 explicitly stated that the 2001 pay revision of the appellant company would not be applicable to employees of Rural Electrification Cooperative Societies where the pre-revised pay scales were not in force.

Respondent’s Arguments

The respondent countered by arguing:

• Despite the exclusion clause in the 2006 notification, the appellant company had extended pay revision benefits to other employees from societies where the pre-revised pay scales were not applicable.
• Denying him the same benefits while granting them to similarly placed employees constituted unfair discrimination.
• As an absorbed employee, he was entitled to all the salary revisions and pay commission benefits applicable to regular employees of the appellant company.

Supreme Court’s Observations

The Supreme Court bench, comprising Justice Kurian Joseph and Justice Sanjay Kishan Kaul, examined the claims and ruled:

• If the appellant company had already extended Fifth Pay Commission benefits to employees from societies where such benefits were not previously implemented, it could not deny the same to the respondent.
• For Sixth and Seventh Pay Commission benefits, there was no dispute—the absorbed employees were entitled to those benefits from the date they were given to regular employees of the appellant company.
• If there were any arrears to be paid, the company must clear them within three months.

Final Judgment

The Supreme Court ruled:

• The respondent and similarly placed employees should not be discriminated against regarding Fifth Pay Commission benefits if such benefits were extended to others in the same situation.
• The Sixth and Seventh Pay Commission benefits must be implemented for all absorbed employees from the date they were granted to regular employees.
• All pending payments, including arrears, must be settled within three months.

Implications of the Judgment

The ruling sets a crucial precedent in employment law, especially concerning absorbed employees in government-controlled entities. The key takeaways include:

• Equal treatment for absorbed employees: Employers cannot selectively grant benefits to some employees while denying others in similar circumstances.
• Binding nature of pay commissions: Once a pay commission’s recommendations are implemented for regular employees, absorbed employees cannot be excluded arbitrarily.
• Timely payment of arrears: The ruling mandates prompt payment of outstanding dues, reinforcing employee rights.

By delivering this judgment, the Supreme Court reaffirmed its commitment to ensuring non-discriminatory employment practices and protecting the financial interests of absorbed employees.

Petitioner Name: M.P. Poorva Kshetra Vidyut Vitaran Co. Ltd. & Ors..
Respondent Name: Uma Shankar Dwivedi.
Judgment By: Justice Kurian Joseph, Justice Sanjay Kishan Kaul.
Place Of Incident: Madhya Pradesh.
Judgment Date: 05-09-2018.

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