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Odisha State Financial Corporation vs Odisha State Financial Corporation Employees Union

SLP(C) · 2022 INSC 391Decided 5 Apr 2022
SLP(C) No. 1111 of 2020
Ajay Rastogi · Sanjiv Khanna

Background

Following the State Government's revision of pay scales for its own employees (per the 6th Central Pay Commission), a scheme was extended to eligible State public sector undertakings (PSUs) subject to strict eligibility conditions, including that the PSU be profit-making and not in default of statutory or loan payments. The Odisha State Financial Corporation's Board of Directors approved implementing the revised pay scale for its employees, but the State's Administrative Department later refused to approve it, finding the Corporation was financially distressed, in default on a loan to SIDBI, and unable to pay staff salaries on time. The Employees' Union nonetheless obtained orders from the Single Judge and the High Court's Division Bench directing the Corporation to pay arrears under the revised pay scale from April 2012.

Decision Breakdown

The Supreme Court held that under the Government's own resolution, PSUs could only get revised pay scales after their proposal was approved by both the relevant Administrative Department and the Finance Department: approval which was expressly and admittedly withheld here due to the Corporation's poor finances. It found the High Court had overlooked this mandatory two-step approval requirement and had wrongly proceeded merely on the Corporation's own Board resolution and a counsel's statement in court, without regard to the government's clear refusal to approve the pay revision. The Court set aside the High Court's judgment directing payment of arrears, holding that without the required governmental approvals, the revised pay scale was never lawfully available for implementation to the Corporation's employees.

Lesson Learnt

A public sector employer's own Board decision to grant a benefit is not, by itself, enough to create an enforceable right for employees if the applicable government scheme makes that benefit conditional on further approvals: those conditions must actually be satisfied before courts will order payment.

Official source (sci.gov.in)View Judgment (PDF)

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