New Delhi, April 10 The Supreme Court on Friday held that the State cannot differentiate between serving employees and pensioners when enhancing allowances meant to counter inflation.
In a significant judgment upholding the right to equality for retirees, a bench comprising Justice Manoj Misra and Justice Prasanna B Varale dismissed appeals filed by the State of Kerala and the Kerala State Road Transport Corporation (KSRTC) and affirmed that inflation affects both serving and retired employees with "equal force".
"Equality is a dynamic concept with many aspects and dimensions, and it cannot be restricted to traditional or doctrinaire limits. From a positivist point of view, equality is antithetical 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," Justice Mishra, who authored the judgment, said.
Referring to Article 14 (right to equality) of the Constitution, the verdict said it prohibits class legislation but permits reasonable classification which must satisfy twin tests.
According to the twin tests, the classification must be based on an intelligible differentia that distinguishes those that are grouped together from others, and second "that differentia must have a rational nexus with the object sought to be achieved by the Act", it added.
The bench said that the judgments cited by KSRTC do not deal with a situation where there is no dispute regarding the entitlement to the benefit in question.
"Here, the retired employees are entitled to both a pension and dearness relief, which is revisable from time to time, based on inflation. Therefore, the issue is not about entitlement to the benefit, but about the differential rates at which those benefits are provided, depending on whether the recipient is a serving or a retired employee," it said.
"When these 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 are clearly discriminatory as well as arbitrary," the bench said.
It said that financial constraints might be a guiding factor to defer the disbursement of certain benefits or may justify separate dates for the implementation of beneficial schemes.
"But once a decision is taken to provide certain allowances as well as to increase them, based on inflation, fixing a higher rate of increase for those who are serving than those who have retired, would be arbitrary and violate Article 14…," it said.
The case originated from a 2021 Government Order by the Kerala government. To meet inflationary pressures, the government sanctioned a 14 per cent enhancement of Dearness Allowance (DA) for KSRTC employees while limiting the Dearness Relief (DR) for pensioners to only 11 per cent.
Retired employees challenged this discrepancy in the Kerala High Court.
While a single-judge bench originally dismissed their plea, a division bench later ruled in favour of the pensioners, prompting the state and KSRTC to move the Supreme Court.