No Obligation On State Govt. To Always Adopt Dearness Allowance As Revised By Centre: SC [Read Judgment]

The bench comprising Justice R. Banumathi and Justice Indira Banerjee was considering appeal against Madras High Court order that directed Tamil Nadu Electricity Board to pay Dearness Allowance at the rate of 49% w.e.f. 01.01.2002 to its employees on par with the Central Government employees.

Assailing this order, the board had approached the apex court contending that it is facing extremely difficult financial position and the payment of revised Dearness Allowance for the disputed period to more than eighty thousand of its employees would have a huge financial implication on the Board.

The bench agreed with this contention of the board and said that the revision of wage or Dearness Allowance would depend upon the ability and the financial position of the employer. "Having regard to the difficult finance situation which the State and the Board were facing and having regard to the terms of the settlement, respondent(s) union cannot seek for sanction of enhanced rate of Dearness Allowance on par with the Central Government employees.", the bench added.

The court further observed that each State Government following their own rate of Dearness Allowance payable to their employees may be adopting the revised Dearness Allowance of the Central Government. "There is no rule or obligation on the State Government to always adopt the Dearness Allowance as revised by the Central Government. It is absolutely not necessary for the State Government to adopt the Dearness Allowance rates fixed by the Central Government. It should be looked from the financial position of the State Government to adopt its own rates/revised rates of Dearness Allowance. The Board, being the State Government undertaking, the money has to come from the State Government." the bench said.

Setting aside the High court order, the bench said: "The High Court erred not keeping in view the extremely difficult financial position of the State Government and the Board and also the additional financial burden which would be imposed upon the appellant-Board if the demands of the respondent(s)-union are acceded to."

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