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State Bank of India & Ors. v. Ravindra Nath & Ors.

Civil Appeal · 2019 INSC 184Decided 12 Feb 2019
Civil Appeal No. 12367 of 2017
Justice Uday Umesh Lalit · Justice Hemant Gupta

Background

The respondent, an SBI officer posted to Johannesburg in 2000, had his salary re-fixed downward in January 2001 by a government-mandated Standing Committee/Working Group, once updated Cost of Living Index data became available for South Africa. His original posting letter had expressly stated the salary was "subject to change from time to time." The Bombay High Court set aside the reduction, holding the officer had no privity of contract with the Standing Committee and that the reduction, coming within months of his posting, was unfair and arbitrary.

Decision Breakdown

The Supreme Court held that the officer's original salary letter and governing service conditions both expressly made the salary subject to revision, so there was no promise that it would remain fixed. The salary revision was made under Section 18 of the State Bank of India Act, 1955, pursuant to the Central Government's binding policy directions, and applied uniformly and non-discriminatorily to all Public Sector Bank officers posted abroad based on updated Cost of Living Index data, not targeted at this individual. The Court found the High Court's "no privity of contract" reasoning untenable, since an employee is bound by the salary structure the employer bank adopts, and held there was a reasonable, non-arbitrary basis for the reduction. The appeal was allowed, the High Court's order set aside, and the writ petition dismissed.

Lesson Learnt

An employment term that is explicitly stated to be "subject to change" cannot later be challenged as a vested, unchangeable right merely because the revision turned out to be unfavourable, especially where the revision follows a uniform, rational policy rather than singling out one employee.

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

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