Calcutta High Court (Appellete Side)
West Bengal State Electricity ... vs West Bengal State Electricity ... on 17 September, 2021
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IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
APPELLATE SIDE
Before:
The Hon'ble Justice Soumen Sen,
The Hon'ble Justice Saugata Bhattacharyya,
MAT 501 of 2020
West Bengal State Electricity Transmission Co. Ltd. & Ors.
Versus
West Bengal State Electricity Board Engineers Association & ors.
With
MAT 502 OF 2020
West Bengal State Electricity Distribution Co. Ltd. & Ors.
Versus
West Bengal State Electricity Board Engineers Association & ors.
For the State : Mr. Kishore Dutta, Advocate General,
Mr. Biswaroop Bhattacharyya, Adv.
Mr. Sandip Dasgupta, Adv.
Mr. S.S. Siddiqui, Adv.
Mr. Victor Chatterjee, Adv.
For the Respondents : Mr. Soumya Majumder, Adv.
Hearing concluded on : 13th August, 2021
Judgment on : 17th September, 2021
Soumen Sen, J.:- These two appeals raise an identical issue of
enforceability of the dearness allowance under the Revision of Pay and
Allowances Rules 2009 at the instance of the employees.
The learned Single Judge, in deciding the writ petitions, has, on
consideration of the provision relating to dearness allowance, held that the
employer is obliged to extend the dearness allowance to its employees at
such rate, on and from 1st January, 2009, as may be notified by the Central
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Government from time to time and that under no circumstances the said
facilities can be denied, even if the management of the two companies, i.e.
the appellants herein can demonstrate poor financial condition.
Before we advert to the submissions made on behalf of the parties, we
state the facts in a nutshell.
The members of the respondent no.1 in both the writ petitions are the
erstwhile employees of the West Bengal State Electricity Board (in short
'WBSEB'). Pursuant to a scheme dated 25th January, 2007 the said board
was bifurcated into West Bengal State Electricity Transmission Company
Limited (in short 'WBSETCL') and the West Bengal State Electricity
Distribution Company Limited (in short 'WBSEDCL'). The scheme was duly
notified in exercise of powers under Section 131(4) of the Electricity Act,
2003. By reason of the said scheme, all properties, interests, rights and
liabilities of West Bengal State Electricity Board were transferred to and
vested in the State Government, and re-vested thereof by the State
Government in the two Companies, namely, WBSETCL (or "the electricity
transmission company) and WBSEDCL (or "the electricity distribution
company").
The two clauses of the said scheme, namely, clause 3 and clause 5(a)
relating to transfer of property to the State and transfer of personnel are
relevant to the present appeal. The said clauses 3 and 5 (a) read as follows:
"Clause 3. On such transfer and subject to the provisions of the
Act and provisions of this scheme, the personnel shall form a part
of the services of WBSEDC and the rank, scale of pay and inter-
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seniority as existing in WBSEB on the effective date of transfer
shall be maintained."
"Clause 5. The transfer of personnel shall be further subject to the
following conditions, namely: -
(5)(a) That the terms and conditions of service applicable to the
personnel on the effective date of transfer shall not, in any way, be less
favourable than those applicable to them immediately before the said
effective date of transfer."
The two newly-created government companies were empowered by the
Government to independently decide issues relating to, inter alia, the service
conditions of employees, keeping in view the corresponding compensation(s)
available in similar public sector companies in the country, with a further
specific condition that such compensation packages of the employees will
not cause the successor entities to require any financial support from the
government. The order issued by the Principal Secretary to the Government
of West Bengal dated 5th March, 2008 empowering the two newly-created
government companies to take such independent decision is reproduced
below:
"Government of West Bengal
Department of Power & NES
New Secretarial Buildings (7th Floor)
1. Kiran Shankar Roy Road
Kolkata-700 001
No.79/PO/O/Cell-III/3R-29/2006 Wednesday, March 05, 2008
ORDER
Whereas State Government in a meeting of the Cabinet held on 24th
January 2007, approved this Department's proposal for the restructuring of
the West Bengal State Electricity Board (WBSEB) into 2 Government-owned
corporate successor entities viz. West Bengal State Electricity Transmission
Company Ltd. (WBSETCL) comprising the Transmission and State Load
Despatch Centre functions of WBSEB and West Bengal State Electricity
Distribution Company Ltd. (WBSEDCL) comprising the Distribution and Hydel
Generation functions of WBSEB; And
Whereas in pursuance to this decision, both Companies have been
incorporated as Government Companies under the provisions of Companies
Act 1956 and have commenced functioning from 1st April, 2007; and
Whereas State Government in the above referred meeting of the
Cabinet, also approved this Department's proposal for empowering the
aforesaid successor entities viz. WBSETCL and WBSEDCL to decide
independently issues of personnel recruitment and selection, objective
performance assessment and performance linked promotion, compensation
and incentives subject to the said successor entities keeping in view that
corresponding compensation packages available in similar Public Sector
Companies in the Country while determining the compensation packages for
their respective employees and subject further, to a specific condition that this
empowerment shall in effect, not cause the successor entities to require any
financial support from Government with proviso for this empowerment being
withdrawn in the event of its breach.
Therefore, the Governor is pleased to empower the successor entities
viz. WBSETCL and WBSEDCL to decide independently issues of personnel
recruitment and selection, objective performance assessment and
performance linked promotion, compensation and incentives subject to the
said successor entities keeping in view, the corresponding compensation
packages available in similar Public Sector companies in the country while
determining the compensation packages for their respective employees and
subject further to a specific condition that this empowerment shall in effect,
not cause the successor entities to require any financial support from
Government with proviso for this empowerment being withdrawn in the event
of its breach.
This order will take retrospective effect from 1st April, 2007 i.e. the date
of respective commencement of functioning of WBSETCL and WBSEDCL.
By order of the Governor,
Sd/-
(Sunil Mitra)
Principal Secretary to the
Government of West Bengal"
(emphasis added)
The revision of pay and allowances of employees of the two electricity
companies thus formed was finalised by an order dated 25th February, 2009
keeping in view the necessity to bring in some structural and procedural
changes appropriate for achieving the vision and mission of the company.
The said Rules were commonly known as the West Bengal State Electricity
Distribution Company Limited (ROPA) Rules, 2009 and the West Bengal
State Electricity Transmission Company Limited (ROPA) Rules 2009
respectively. Both the rules hereinafter shall be referred to as "the said
Rules of 2009."
In the present appeal, we are concerned with clause 9 of the scheme.
which is reproduced below:
"Dearness allowance (DA)
The Dearness Allowance admissible to all categories of employees of
the Company shall be payable on Basic pay + Grade Pay + Non
practicing allowance (NPA), if any, from the dates mentioned below at
the following rates: -
Date from which payable Rate of Dearness Allowance per
month
From 1.1.2006 No Dearness Allowance
From 1.7.2006 2% of basic Pay+NPA, where
applicable
From 1.1.2007 6% of the basic Pay+NPA, where
applicable
From 1.7.2007 9% of the basic Pay+NPA, where
applicable
Henceforth, Dearness Allowance will be applicable to the employees of
the Company at such rate and from such date as may be notified by the
Central Government from time to time." (emphasis supplied)
There is no dispute that the employees of both the companies received
dearness allowance in terms of the said Rules of 2009, both arrears as well
as current payments, until the year 2016. To be more precise and specific,
the Central Government rates of dearness allowance were paid until 2016 to
the said employees which was higher than the rates the employees of the
State Government used to receive during the aforesaid period. However,
after 2016 the company continued to pay 125 per cent of the basic pay as
dearness allowance and post July 2019, the employees were paid dearness
allowance at 135 per cent of the basic pay. In spite of demand for release of
the differential amount both the companies refused and/or neglected to pay
the balance amount.
This refusal to pay dearness allowance at the Central Government rate
has resulted in two writ petitions being filed by the employees' association of
the two respective electricity companies.
Mr. Kishore Dutta, the learned Advocate General, appearing on behalf
of the appellants submitted that the contract is not enforceable in writ
jurisdiction. The writ of mandamus cannot be issued directing the appellant
to pay DA which is a non-justiciable claim. The writ petitioners have no
legal right to claim DA as a matter of right. It is in the nature of an ex-gratia
payment and not justiciable. It imposes no duty on the appellants to grant it
at the Central Government rate. In this regard, reliance is placed on State
of M.P. v. C. Mandawar, reported in 1955(1) SCR 599: AIR 1954 SC 493
(paragraphs 1,2,4,5 and 9) and State of Karnataka v. Karnataka State
Patels Sangha, reported in 2007(4) SCC 207 (paragraph 4). The learned
Advocate General has taken us through the said Rules of 2009 to
demonstrate that while some Rules mandatorily require the appellants to
pay certain sums, the other Rules creating obligation to make payment are
not mandatory. In this regard, the learned Advocate General has referred to
Rule 4, 6, 7, 8 and 9 and submitted that while Rule 6, 7 and 8 are
mandatory in nature as they use the verb 'shall' instead of the verb 'will' and
oblige the employer to pay the amounts under the said Rules of 2009,
namely, fixation of initial pay in the reformed pay structure, property tax
and grade pay. The wordings in clause 9 are differently worded as opposed
to words in other clauses which are mandatory in nature like basic salary
etc. The payment of DA is based on various factors. It is submitted that the
payment of DA, House Rent Allowance and Medical Allowance mentioned in
Rules 9, 10 and 12 are merely advisory and are in nature of allowances as
opposed to salary. It is submitted that the learned Single Judge erred in
holding that the expression 'admissible' in Rule 9 must be treated as
synonymous with the expression 'applicable'.
The learned Advocate General submits that while the government
companies can, under no circumstances, deny the payment of basic salary
or basic wages they may withdraw or refuse to pay any allowance in the
nature of ex gratia if there are justiciable reasons. These are all additional
benefits which the government company can withdraw or refuse to pay.
The right to claim such benefits is extremely weak as opposed to a claim for
salary and, accordingly, this right to claim dearness allowance is not a legal
right vested by any statute upon the writ petitioners.
The learned Advocate General submits that protection of pay and
grade pay are the other two obligations which are attached to the salary and
what the government is expected to do and has done is securing the
protection of pay and grade pay along with fixation of initial pay. It is
submitted that the observation of the learned Single Judge that the
dearness allowance cannot be denied to the writ petitioners even if the
management of two companies can demonstrate poor financial conditions is
a tall order unsustainable in law. It is also submitted that the employer can
restructure the dearness allowance to the disadvantage of employees, albeit
it has to prove to the tribunal that the wage structure is above the minimum
level and the management is financially not in a position to the bear the
burden. In support of his submission, reliance is placed on Workmen v.
Reptakos Brett. & Co. Ltd., reported in 1992 (1) SCC 290 at paragraph
28, Crown Aluminium Works v. Workmen, reported in AIR 1958 SC 30 at
paragraph 1, and Ahmedabad Millowners Assocn. v. Textile Labour
Assocn., reported in AIR 1966 SC 497 at paragraphs 31, 70-72. The
learned Advocate General points out that the Central government, in view of
the current pandemic, vide circular no. 131 dated 28th April, 2020 has
decided to freeze the additional instalment of DA payable to Central
Government employees till July, 2021. Mr Dutta states that a judgment of
the Delhi High Court in WP (C) No. 3308 of 2020 (Hitesh Bharadwaj vs.
Ministry of Finance, Union of India & Ors.) dated 1st June, 2020 has
negated a challenge to the said circular. He also makes reference to the
office memorandum dated 28th August, 2020 on the Periodic Review of
Central Government Employees for amending Rule 56 of the Fundamental
Rules and Rule 48 of the CCS (Pension), 1972, whereby a government
servant may be required to retire in the public interest after 30 years of
qualifying service. Therefore, it cannot be contended that the terms and
conditions of service of an employee working with the appellants ought never
to be varied to their disadvantage.
The learned Advocate General has further submitted that there is no
justification on the part of the writ petitioners in claiming dearness
allowance at Central Government rates which would place its members or
the employees of the appellant at par with Central Government employees.
The appellant's employees are not comparable with Central Government
employees. The appellant and the Central Government are not comparable
entities/concerns in terms of financial resources, nature and extent/volume
of business or other activities, standing, strength of employees and labour
force, presence or absence and the extent of reserves, and on several other
aspects.
Mr. Dutta submits that it is well settled that fixation of wages and
dearness allowance is based on industry-cum-region formula. Under this
formula, stress should be laid on the industry part of the formula if there
are a large number of concerns in the same region carrying on activities in
the same industry; in such a case in order that production cost may not be
unequal and there may be equal competition, wages should generally be
fixed on the basis of the comparable industries, that is, if industries of the
same kind in a particular region is small it is the region part of the industry-
cum-region formula which assumes importance. Since the appellant can
never be compared to the Central Government for fixing dearness allowance,
the industry-cum-region formula cannot be applied for fixing dearness
allowance. At the same time to give effect to the demand for payment of
dearness allowance, adjudication must always take into account the
problem of the additional burden which such dearness allowance structure
would impose upon the appellant and whether the appellant can reasonably
be called upon to bear such burden. In this regard reliance is placed on
Bengal Chemical and Pharmaceutical Works Ltd. v. Workmen & Anr.,
reported in AIR 1969 SC 360, Precision Bearings India Ltd. v. Baroda
Mazdoor Sabha & Anr., reported in 1978 (1) SCC 235, Tamil Nadu
Electricity Board v. Tneb-Thozhilalar Aykkiya Sangam reported in
2019 (15) SCC 235, Workmen of Gujarat Electricity Board, Baroda v.
The Gujarat Electricity Board, Baroda, reported in 1969 (1) SCC 266,
Officers & Supervisors of I.D.P.L v. Chairman & M.D. I. D. P.L & Ors.,
reported in 2003 (6) SCC 490, Kamani Metals & Alloys Ltd. v.
Workmen, reported in AIR 1967 SC 1175, Mihiai Lal Passi vs. C.E.S.C.
Ltd. & Ors., reported in 2003 (3) CHN 357.
The learned Advocate General has submitted that dearness allowance
is an ex-gratia payment and the only purpose of dearness allowance is to
enable a worker in the event of rise in cost of living to basic necessities as
before. In other words, dearness allowance neutralise rise in prices as far as
possible and practicable. It is an additional financial burden on the
employer which the court needs to asses before allowing the claim for
dearness allowance. It is submitted that the learned Single Judge, without
considering the financial capacity of the employer to bear such burden has
made a sweeping observation that under no circumstances, dearness
allowance can be denied to the petitioners. Mr. Dutta submits that the Trial
Court was not equipped to factor in the various living cost indices to work
out the necessity of dearness allowance and the capability of the appellants
to pay the said allowance. It is submitted that it is axiomatic that the state
is obliged to grant dearness allowance only to the very lowest class of
manual labourers whose income is just sufficient to keep body and soul
together, and it would be impolitic and unwise to neutralise the entire rise in
the cost of living by dearness allowance and, more so, in the case of the
middle classes. Dearness allowance should ordinarily be on a sliding scale
and provide for an increase due to rise in the cost of living and decrease due
to a fall in the cost of living.
In order to demonstrate that the financial condition of the two
companies may not permit payment of dearness allowance at the Central
Government rate reference is made to the affidavit-in-opposition filed in WP
No. 3292(W) of 2019 (West Bengal State Electricity Board Engineer's
Assocn. & Ors. v. State of West Bengal & Ors.). The learned Advocate
General has referred to the following paragraphs from the affidavit-in-
opposition:
"It is relevant to state here that in the Clause 5.4.1(e) of the Tariff order of
the respondent no.2 for the year 2017-2018, as fixed and issued by the West
Bengal Electricity Regulatory Commission (in short, WBERC), it has been
specifically discussed to the effect that for the projection of terminal benefits
expenditure same was calculated on the actual value of pension, gratuity
and leave encachment benefits. The WBERC considered that the compound
annual growth rate (CAGR) with regard to terminal benefit expenditure for
2017-2018 would be 3.23% higher to the rate for 2016-2017. It has been
further mentioned therein that the Respondent no.2 proposed to the WBERC
for a hike of 15% on such projection during the financial year 2016-2017 over
2015-2016 but the WBERC did not allow such hike on projection and
directed to resubmit the proposal during turning up for the financial year
2017-2018.
In clause 5.4.3 of the Tariff order in question the WBERC approved
increment of 3% on basis with relevant hike of Dearness Allowance (DA) for
the year 2016-2017 over the actual for the year 2015-2016.
Photocopies of the relevant pages of the Tariff order for the year 2017-
2018 is annexed herewith and marked with the letter R-1.
With regard to the statements made in paragraphs 8, 9 and 10 to the said
petition I do not admit anything beyond what would appear from admitted
records.
It is most humbly submitted that the employees of the Respondent no.2
authority cannot or may not claim the disbursement of dearness allowance at
the central Government rate as a matter of right. There are some other
relevant factors to be considered while claiming the dearness allowance as
Central government rate and it does not confer any right to the employees to
establish their demand lawfully.
Moreover, with regard to the point taken as violation of the ROPA 2009, I
submit that entitlement of dearness allowance at par with the Central
Government employees may not be considered as legitimate right. It is
pertinent to indicate that may other factors like financial constraints of the
Respondent no.2 should be taken into consideration while demanding the
Dearness allowance at par with Central Government employees by the
petitioner."
It is submitted that it would appear from the above-mentioned
paragraphs that although the appellants have prayed for 15% hike in the
tariff for the financial year 2016-17 over 2015-16 but the WBERC did not
allow such hike and directed resubmission of the proposal during turning
up for the financial year 2017-18. The learned Advocate General, however,
has submitted that there are further details which were not brought on
record favouring financial difficulty and thereby justify non-payment of
dearness allowance at the Central Government rates.
In view of the aforesaid submission and having regard to the affidavit-
in-reply filed by the writ petitioners disclosing materials in justification of
the dearness allowance at the Central Government rate, we felt that an
opportunity should be given to the writ petitioners to file an affidavit dealing
with the averments made by the writ petitioners in paragraph 7 to 12 of the
affidavit in reply. Accordingly, by an order dated 18th September, 2020 we
directed the appellants to file an affidavit dealing with paragraphs 7 to 12 of
the affidavit in reply, wherein the writ petitioners submit various documents
to justify the said claim.
In the affidavit-in-reply, the writ petitioners have disclosed the annual
report and accounts for the relevant years along with documents to show
that the appellants were ensuring compliance of Corporate Social
Responsibility as a profit making company.
For the sake of comprehensiveness, the said paragraphs are
reproduced below:-
8. I further say that the Annual Report and Accounts of 2017-18 (page
249) mentions that for the financial year 20170-18. Dearness Allowance of
Rs.341.81 crores was booked in the accounts against salary of Rs.255.03
crores (Basic + Grade Pay) which is approximately of 134% of the Basic +
Grade Pay.
A copy of the relevant page 249 of the annual report and accounts for
2017-18 is annexed and marked as "P-10".
From page 283 of Annual Report and Accounts of the respondent
Company for 2017-18 it is seen that WBSEDCL is ensuring GAP of 4 paise by
selling one unit of electricity. From the note No.29.4 at page 244 of annual
report and accounts for 2017-18, it is also seen that WBSEDCL did not
receive any revenue subsidy/grant during the financial year 2016-17 and
2017-18.
From note No.15.2 (page 219) of the Annual Report and Accounts for 2017-
18 it is seen that the Company repaid its debt of loans in time.
WBSEDCL is ensuring Corporate Social Reasonability activities as a profit
making Company and the same will appear from page 261 of the Annual
Report and Accounts of 2017-18.
Copies of the aforesaid page nos.219, 244, 261 and 263 of the annual
report and accounts for the year 2017-18 are annexed and marked as "P-
11", "P- 12", "P- 13"and "P- 14".
9. I say that for a substantial long period of time, the respondent No.2 has
been earning profit and the same will appear from a summarized table
herein below:-
Year Profit (Rupees in Crores)
2013-14 19.07
2014-15 19.82
2015-16 22.51
2016-17 32.27
2017-18 43.77
I say that in reply to a query made under the R.T.I. Act, 2005, the State
Public Information Officer of WBSEDCL has answered that a sum of Rs.4.80
crores per month will be required to pay dearness allowance at the Central
Government rate. Presently, the expenses incurred towards payment of
dearness allowance to the employees of WBSEDCL is Rs.24.93 crores per
month. Therefore, there is sufficient fund to absorb the additional liability
towards Dearness Allowance at the Central Government rate.
I say that Dearness Allowance at the Central Government rate was paid
for the last time in 2016 when the respondent company employed 14,678
employees. The Dearness Allowance related expenditure in July 2016 was
Rs. 28.12 crores per month. The profit after tax in 2015-16 was Rs. 22.51
crores. In April 2019, the total number of employees eligible to get Dearness
Allowance at the Central Government rate is 13410. The expense borne in
this account by the respondent company was Rs.24.93 crores. If the Central
Government rate of Dearness Allowance is paid, there will be an additional
monthly expenditure of Rs.4.8 crores. In 2017-18, the profit after tax has
increased to Rs.43.77 crores.
The aforesaid facts will appear from the Annual Accounts of the
respondent company for the relevant year as uploaded on the official website
of the company as well as the reply given by the company dated 03.01.19 to
an application filed under the Right to Information Act, 2005, copies of such
Annual Accounts and the RTI reply dated 03.01.19 are annexed and
collectively marked as Annexure "P-15".
Thus the decision to curtail the existing right of employees to get Dearness
Allowance at the Central Government rate under ROPA, 2009 is not based on
objective criteria; rather with increasing profit, there has been an adverse
affectation of the rights of the employees.
A copy of the office memorandum reflecting the current rate of Dearness
Allowance paid to the employees of respondent no.2 is annexed and marked
as Annexure "P- 16".
11. ........... I say that the contention of the answering respondents is
contrary to records, if not misleading. During the period from Feb, 2017 to
Feb, 2019 the respondent company has notified for recruitment of 2319
permanent employees and during this period 983 nos. Permanent employees
have joined in the organization. This will appear from copies of employment
notifications dated 20.02.17, 10.3.17, 21.4.17, 26.10.18, 22.12.18 and
25.02.19.
Copies of the employment notifications are annexed and marked as
Annexure "P- 17".
12. With reference to paragraph 7 of the said Opposition, I reiterate the
contentions in paragraph 11 of the writ petition as well as those contained
hereinbefore and anything contrary thereto and/or inconsistent therewith is
denied.
As per ROPA 2009, the respondent company had continued to make
payment of dearness allowance at the Central Government rate as and when
the same had been enhanced. I say that up to January, 2016, the
Respondent Company had given the Central Government rate of dearness
allowance to the employees, paid in July 2016. That was for the period of
2016-17 covered by tariff order. The revised rate of dearness allowance
effective from July, 2016 has not been paid; rather the same has been
frozen. Every year, the change in the rate of dearness allowance is declared
twice. The answering respondents have not explained as to why for the
period 2016-17 they had implemented the ROPA 2009 in respect of Central
Government rate of dearness allowance for part of the year, and stopped
implementing the same for the remaining part. The answering respondents
are estopped form doing so. In any event, it is the admission of the
answering respondents in the paragraph under reply, that in the tariff orders
for 2017-18, dearness allowance had been considered at the rate of 139%
and consumers have been charged with that tariff even for the year 2018-19
and are continued to be charged till date." (emphasis added)
Pursuant to our order dated 18th September, 2020, the electricity
transmission company and the electricity distribution company have filed
affidavits. In the affidavit of the electricity transmission company, in
justifying the denial of dearness allowance by the transmission company to
its employees at the Central Government rates, the following averments have
been made:
"It is submitted that at present the appellant is paying to its
employees dearness allowance at the rate 10% over and above the State
Government employees.
Without prejudice to the above, I beg to place on record the method
of tariff fixation and resource generation and outgoings of the appellant for
gracious consideration of this Hon'ble Court:
i. The appellant, 120 days before the start of a control period, which
may be one year or two years or three years, furnishes before the West
Bengal State Electricity Regulatory Commission (hereinafter referred to as
'WBERC' for short) its projected tariff for the next control period. Based on
such projected tariff, a tentative tariff order is issued by the WBERC.
ii. This tentative tariff order is applied by the appellant for
recovering its project costs from the distribution companies during the
control period.
iii. After completion of each year, in the month of September/October
of the following year, Annual Performance Review (based on its audited
accounts) is filed by the appellant with the WBERC. Considering such
Annual Performance Review, WBERC issues the Annual Performance
Review order, which is the final fixation of tariff.
iv. In respect of the appellant the last Annual Performance Review
order was issued for the year 2013-14. Since then no other Annual
Performance Review which has been finalised.
v. The appellant does not deal with individual consumers. They
deal with distribution licencees. The appellant does not generate
electricity. It is engaged in transmission of electricity to the distribution
companies/licencees.
vi. For transmitting electricity, the appellant executes projects for
such transmission based on requirement of distribution
companies/licencees.
vii. On the requisition/requirement of distribution
companies/licencees Project Investment Proposal is filed by the appellant
with the WBERC. WBERC grants approval to the Project Investment
Proposal whereupon tenders are floated and contractors are engaged by
the appellant for executing the projects.
viii. After execution of the Project, the Project cost is recovered by the
WBSETCL from the distribution companies/licescees through levy of
Transmission Charges over a period varying from 25 to 35 years
depending upon the nature of equipment/project.
ix. Therefore, the amount invested by the appellant for executing a
project from its own resources and borrowings is recovered over a period
spread over 25 to 35 years.
x. The profit earned by the appellant is used in the execution of
projects and the shortfall is brought in through borrowings.
xi. The appellant does not receive any government
assistance/subsidy and have to depend entirely on its own funds for
running its day to day affairs. The entire profit which is earned is utilized
for future projects with some amount of borrowings. The borrowings are
repaid from the profit earned by the appellant in the subsequent years.
xii. Without these Projects, uninterrupted power supply across the
State will be badly affected. The profit which is earned is ploughed back
for investment in capital expenses and investment in capital expenditure is
required for uninterrupted power supply."
In the affidavit filed by the electricity distribution company, the
following averments have been made in justification for denial of dearness
allowance to its employees at the Central Government rates:
"It is submitted that at present the appellant is paying to its
employees dearness allowance at the rate of 10% over and above the State
Government employees.
The appellant, 120 days before the start of a control period, which
may be one year or two years or three years, furnishes before the West
Bengal State Electricity Regulatory Commission (hereinafter referred to as
WBERC for short) its projected tariff for the next control period. Based on
such projected tariff, a tentative tariff order is issued by the WBERC. The
appellant raises its bills on its consumers based on such tentative tariff
order during the control period.
After completion of each year, in the month of September/October of
the following year, Annual Performance Review ('APR' for short) and Fuel
and Power Purchase Cost Adjustment ('FPPCA' for short) (both based on its
audited accounts) is filed by the appellant with the WBERC. Considering
such APR and FPPCA, WBERC issues the Annual Performance Review
order, which is the final fixation of tariff which is finally recovered from its
consumers in the subsequent years.
In respect of the appellant the last Annual Performance Review
order was issued for the year 2012-13. The revisions for the years 2011-
12 and for 2012-13 are also pending and last APR order was issued for
the year 2012-13. Since then no other Annual Performance Review which
has been finalised. Consequently, the appellant has not recovered its
actual costs since 2011 which has accumulated to Rs.15,519.14 crores as
on date.
The appellant recorded Book Profit since its inception i.e. 2007-08 to
2019-20 considering the regulatory receivables as per Regulations.
However, the appellant is incurring significant amount of operating loss
during the last five years which is evident from the Profit & Loss statement
of the appellant as enumerated below:-
Year 2015-16 2016-17 2017-18 2018-19 2019-20
Operating Loss -2134.25 -1267.13 -982.50 -1275.76 -1788.61
Regulatory 2135.63 1243.80 942.20 1230.54 2378.42
Receivables
Re-measurement 33.78 71.98 97.52 112.94 504.24
of post
employment
benefit
Tax 13.6 17.32 16.37 19.78 22.44
Book profit after 21.57 31.33 40.85 47.93 63.13
tax
The reason for such huge operating loss is mainly due to delay in
issue of Regulatory orders. The Tariff order was last issued for the year
2017-18. The present Tariff as being recovered from the consumers is as
per tariff fixed by the Regulator for the financial year 2016-17. Further
the Annual Performance Review order (APR) are pending since 2013-14.
Under the circumstances there is huge accumulation of Regulatory
receivables considered in the accounts of the appellant as per regulations
which are supposed to be passed on through Regulatory orders. The
accumulated Regulatory receivables at the end of F.Y. 2019-20 is stated
as Rs.15519.14 crores. Total net profit of last five years was Rs.204.81
crores, whereas the requirement of fund for arrear DA (as per Central
Government Rate) with interest upto 01.01.2020 was Rs.212.22 crores.
This is pertinent to mention that the appellant company has suffered
operating loss amounting to Rs.-7,448.25/- crore from the F.Y. 2015-16 to
2019-20. Accordingly, the appellant company had to obtain a significant
amount of working capital loan which was Rs.7573 crore as on 31st
March, 2020.
All power utilities in the State of West Bengal (including the
appellant) submits Multi Year Tariff (MYT) application indicating Projected
Aggregate Revenue Requirement (ARR) and expected Revenue from
Charges at proposed tariff for the ensuing years before Hon'ble West
Bengal Electricity Regulatory Commission (WBERC).
Based on the application and considering objections/suggestions
received from all stake holders, Hon'ble WBERC approves the ARR and
fixed year wise retail tariff of consumers of the appellant.
After completion of a financial year, WBSEDCL submits Fuel and
Power Purchase Cost adjustments (FPPCA) for adjustment of actual
variable cost and Annual Performance Review (APR) application for
adjustment of fixed cost based on actual expenditure and income as per
Audited Annual Accounts against the approved ARR for the financial
year.
Annual Performance Review Order (APR) of WBSEDCL is pending
before Hon'ble WBERC since 2013-14 upto 2017-18. Total outstanding
amount as per APR application pending before the WBERC is Rs.16740
crores. This amount has already been spent by the appellant but not yet
ordered for recovery from its consumers.
Although huge amount is recoverable against APR order and
review application, but the appellant has to continue the power supply to
its consumers. The appellant has to take heavy amount of short term
working capital loan from different financial Institution to pay bills of
generators, transmission agencies and other agencies whose service is
utilised in providing services to consumers.
As a result of such huge operating loss there was continuous
requirement of borrowings from banks and financial institutions for the
purpose of both working capital and capital projects. The total borrowing
at the end of F.Y 2019-20 was Rs.14062.46 crores.
Since the appellant has no internal generation of fund from its
operation, such requirement of fund is arranged either from Central/State
Government grant or through borrowing. Further the revenue deficit due
to operating loss, is funded through borrowing to meet up the requirement
of operating expenses.
In addition to the above scenario, during the current year the
appellant had to incur substantial expenses due to the impact of super
cyclone AAMPHAN. The appellant had to restore the damaged
infrastructure on war footing basis to restore the electricity supply at the
earliest. The estimated cost of such restoration may be around
Rs.1224.46 crore which has significant impact on the financial health of
the appellant.
Moreover, the effect of the Pandemic COVID -19 situation has also
caused significant reduction of electricity demand, mainly amongst
industrial/commercial consumers. It is estimated that during the F.Y.
2020-21 there will be revenue shortfall of around Rs.3500 crores.
From the above status it is obvious that to manage the entire
operation of the appellant, there will be acute crisis of working capital
during the F.Y. 2020-21 and onwards.
Further due to the present borrowing level and status of pending
regulatory orders causing huge accumulation of Regulatory assets
amounting Rs.15519 crore, the arrangement of fund for both working
capital and capital projects will be a concern for the appellant since
banks/financial institutions are expressing reluctance to provide further
loans considering the financial health of the appellant.
Under the circumstances, any further financial burden cannot be
sustained by the appellant.
Per contra, Mr. Soumya Majumdar, the learned Counsel appearing on
behalf of the writ petitioners/respondents in this proceeding, has submitted
that the writ petition was filed to enforce ROPA, 2009 framed for the
Company and for arrears of dearness allowance at the Central Government
rate after January, 2016 as payable in terms of the said Rules 2009. Both
the companies, it is argued, paid dearness allowance at Central Government
rates up to January, 2016. Thereafter, dearness allowance was paid @
125%, that is to say, at the State Government dearness allowance rate. For
the tariff period 2017-18, when Central Government rate of dearness
allowance was 139%, the WB Tariff Commission allowed 139% DA, however,
only 125% DA was paid to the employees. From July 2019, DA has been
paid @ 135% up to 31.12.2019. By that time the Central Government rate of
DA was increased to 154%.
By a statutory notification, and in implementation of the Transfer
Scheme dated 25th January, 2007, WBSEB was bifurcated into WBSEDCL
and WBSETCL. The scheme provides that the terms and conditions of
service of the employees would not be less favourable than those applicable
before the effective date of transfer. Accordingly, as dearness allowance was
all along a condition of service for the employees of the erstwhile power
companies WBSEB the Rules of 2009 provisions have been made in fixing
dearness allowance at the Central Government rate with effect from 1st
January, 2006. It is submitted that as per Rules, 2009, the specified rate of
dearness allowance in the said Rules was also at the Central Government
rate, for the retrospective period admissible to all employees.
The scheme clearly holds out a promise that from 25th February, 2009
dearness allowance at Central Government rate as may be notified from time
to time by the Central Government would be paid to the said employees. The
companies in fact paid at such rate till January, 2016. After January 2016,
dearness allowance at various Central Government rates revised and
notified from time to time was not paid. Mr. Majumdar has referred to pages
117 to 122 of the writ petition to show the increase in the dearness
allowance rate of the Central Government employees. It is submitted that
though Tariff Commission allowed Central Government dearness allowance
rate for 2017-2018 @ 139%, the said two companies paid only 125%
dearness allowance.
It is submitted that the said Rules of 2009 had two parts for dearness
allowance, namely,
a) Arrears from 1st January, 2006 to 31st December, 2008, and
b) From 25th February, 2009 onwards.
The question of "admissibility" is only with regard to employees for the
retrospective period from 1st January, 2006 to 31st December, 2008.
Prospectively, from implementation of the said Rules 2009 there is no
question of "admissibility".
Dearness Allowance is a condition of service and the rate was fixed by
the said Rules 2009. This cannot be altered unilaterally by the two
companies. The question is not of fixation or entitlement, but it is about
payment of dues in terms of the service conditions already fixed. The writ
petition sought enforcement of a crystallized right and not creation of a right
and the learned Single Judge has only followed such principle.
It is submitted that the arrears of dearness allowance at the Central
Government rate may be directed to be released with 10% interest in terms
of the order dated March 3, 2020 passed by the Appeal Court earlier.
In India, the word 'Pay' in relation to public services has a technical
connotation of its own depending upon the provisions providing for the same
and its contextual interpretation thereof. It is evident from the definition of
'Pay' contained in various Service Rules that these definitions have certain
common characteristics.
Under most of those service Rules, Dearness Allowance is basically a
component of 'Pay' which is a fixed percentage of basis pay, aimed at
hedging the impact of inflation.
In the year 1939, the World War II engulfed the world which
completely overhauled the consumer pattern and prices of essential
commodities.
Dearness Allowance was introduced to meet increase in the cost of
living which was initially known as 'Food Allowance'. It is a concept peculiar
to India, Ceylon, Pakistan and Bangladesh. While dealing with the concept
of Dearness Allowance to find out neutralisation formula for industrial
workers in Hindustan Lever Limited vs. Hindustan Lever Employees
Union & Ors. reported in 1995 AIR (SCW) 602, the Apex Court observed as
follows:
"11. The concept of dearness allowance, the second most important
element in a worker's wage-plan next to the basic wage, was
introduced during the second world war to meet the increase in the cost
of living caused by inflation. It was either linked to the cost of living
index or was given by way of flat increases. When linked to the former,
it was granted to all the income groups at a flat rate or was graded on a
scale admissible to different income groups diminishing with rise in
income. Basically, the concept of dearness allowance was designed to
combat inflation and protect real wages and therefore it would appear
that there should be cent per cent neutralization. This is a concept
peculiar to India, Ceylon, Pakistan and Bangladesh." .......... (emphasis
supplied) (See. W.P.S.T. No. 45 of 2017 Confederation of State
Government Employees, West Bengal & Ors. vs. The State of
West Bengal & Ors.)
The issues raised in these appeals turn on the interpretation of Rule 9
of the said Rules of 2009. If the said Rule truly means that the two
companies are mandatorily required to pay dearness allowance at Central
Government rates, then a right accrues in favour of the employees of the two
companies and a writ of mandamus can be issued to ensure payment of
dearness allowance at Central Government rates, for it is a proposition of
law requiring no citation of authority that a writ may be issued to secure
and enforce a legal right. However, if the nature of the said Rule is, properly
speaking, permissive and does not depend on the terms of employment with
regard to the payment of dearness allowance, then no right accrues and a
writ of mandamus cannot be issued in favour of the petitioners, as held in
State of M.P. v. C. Mandawar, reported in AIR 1954 SC 493 at
paragraphs 5-6.
Both sides have advanced various interpretive factors in support of
either mandatory or permissive interpretation. The task of the Court shall
be to weigh these factors and decide towards which kind of interpretation
the balance tilts. As stated by Lord Denning M.R., writing extra judicially:
'Let the advocates one after the other put the weights on to the scales- the
"nicely calculated less or more"-but the judge at the end decides which way
the balance tilts, be it ever so slightly.' (The Due Process of Law (1980) at p.
60, See also: Bennion on Statutory Interpretation (5th Edn.) at p. 524.
There are various interpretive factors that have been stacked on the
juristic scales by both sides. Favouring a permissive interpretation, we
have, firstly, the learned Advocate General's point that Rule 9 only makes
the dearness allowance 'admissible' which is to be paid according to the
formula provided therein. His point is buttressed by the fact that other
Rules like Rule 8 state that grade pay "shall" be drawn. To the learned
Advocate General, the use of the word "admissible" in Rule 9 instead of the
word "shall" which is found in other Rules, proves that rule 9 is non-
mandatory. In rebuttal to this, Mr. Majumdar states that Rule 9 is actually
divisible into two parts. He states that indeed for the first part, which deals
with arrears of dearness allowance from 1st January, 2006 to 31st December,
2008, the question of dearness allowance is merely admissible. But for the
second part, which deals with the payment of dearness allowance from 25th
February, 2009 onwards, the Rule is clear that payment has to be made in
accordance with Central Government rates.
The second interpretive factor advanced in favour of a permissive
interpretation is the general context of the said Rules of 2009. The learned
Advocate General illuminates the general nature of dearness allowance as
an ex gratia payment as opposed to, say, fixation of pay or basis pay. He
asserts that payment of dearness allowance is predicated on various general
factors such as the financial health of the company, the status of the
employees as State/Central Government employees, the fact that under the
order dated 5th March, 2008 (see above), the companies do not receive State
support, the industry cum region formula, the relative wealth or poverty of
the employees, and so on. He implies that so construe Rule 9 as
mandatorily requiring payment of dearness allowance would go against the
grain of all of these factors and the context in which the said rules of 2009
were composed. On the other hand, Mr. Majumdar adds weight to his
preferred interpretation by stating that dearness allowance at Central
Government rates was paid till January, 2016 and was contemplated to be
so paid after the two companies were created under Clause 5(a) of the
Transfer Scheme (see above), which stated that the terms and conditions of
service of the employees of the two companies would not be any less
favourable than they were immediately before the said Scheme was
implemented. To Mr. Majumdar Rule 9 is the crystallisation of the earlier
promise that the dearness allowance would be paid at Central Government
rates, and therefore, the implication is that the general factors sought to be
asserted by the learned Advocate General are irrelevant.
Putting the two sets of interpretive factors side by side, we are inclined
to tilt in favour of Mr. Majumdar. In regards the first set of interpretive
factors, we notice that Rule 9 is truly split into two components. The first
part states that dearness allowance is "admissible" for employees to be paid
according to a certain formula up to 31st December, 2008. Undoubtedly, the
use of word "admissible" makes the payment of dearness allowance up to
the said date to be non-mandatory. But then, the next sub-paragraph of the
Rule clearly states: "Henceforth, Dearness Allowance will be applicable to the
employees of the Company at such rate and from such date as may be
notified by the Central Government from time to time." This signals a clear
break from the earlier sub-paragraph, as evidenced by the word
"henceforth", which means that post the last period mentioned in the table
appurtenant to the earlier sub-paragraph, dearness allowance "will be
applicable to the employees of the Company at such rate and from such date
as may be notified by the Central Government from time to time."
We do not see reason to quibble over whether the use of the word
"will" instead of "shall" indicates that the said sub-paragraph is non-
mandatory in nature. Indeed, the use of the verb "will" usually gives us a
narrative of the future when it is used in the future tense and in the third
person, instead of giving us an obligation that has to be fulfilled by the third
person in the future.
Due to the use of the auxiliary verb "be" right after the word "will" in
the said subparagraph of the said Rule 9, the use of the said word "be"
changes the tense of the said subparagraph to the future perfect tense.
When the word "will" is used along with the word "be" to give us a sentence
in the future perfect tense, we give both a narration of future events whilst
also creating an expectation that they will occur. Analogously, when it is
stated that dearness allowance will be applicable to employees of the two
companies at Central Government rates, it means that they are to expect
such allowance at Central Government rates and not merely to know that
such allowance is applicable to them. Therefore, the said sub-paragraph of
the said Rule clearly states that the two companies are bound to pay such
dearness allowance at Central Government rates.
The second set of interpretive factors, upon analysis, only supports
such a textual interpretation. The judgments cited by the learned Advocate
General on the nature of dearness allowance are based on different statutes,
making them ex facie inapplicable in the context of interpreting Rule 9. His
arguments on the financial condition of the companies, the kind of workers
to whom dearness allowance is given, and so on, are not relevant in
understanding the particular object and purpose of the said Rule 9, and the
judgments cited thereto merely provide the jurisprudence on how the wage
structure is to be determined (or revised) in the first place. They do not
provide authority on how the wording of the said Rule 9 should be legally
construed. So, they simply lack force in moving us away from what we see is
the plain meaning of the said Rule 9.
We have already summarised the facts at the beginning. The record
would unmistakably show that the employees of both the companies
received dearness allowance in terms of the ROPA 2009 both arrears as well
as current until January, 2016 at the Central Government rates. It cannot
be disputed that the ROPA Rules applicable to the power companies have
been framed in exercise of power conferred by Article 309 of the Constitution
of India and it is statutory in nature. In fact, the rate of dearness allowance
paid for the period of 1st April, 2007 till 1st July, 2008 was at the Central
Government rates. The last sentence of the said clause, namely, "Henceforth,
Dearness Allowance will be applicable to the employees of the company at
such rate and from such date as may be notified by the Central Government
from time to time" makes it clear that the rate of dearness allowance for the
future period would be at such rate as may be notified by the Central
Government from time to time. The reference of the Central Government in
the aforesaid sentence makes it abundantly clear that the power companies
would be obliged to pay the DA at the rate as may be notified by the Central
Government from time to time. In fact, DA for the subsequent periods till
2016 was paid at the Central government rates only. However, there cannot
be any doubt that in the event, the financial condition of the said companies
deteriorate and the financial condition does not permit DA to be paid at the
rate notified by the Central Government, the power companies can refuse to
pay DA at such rate depending upon the various factors on which the DA
can be reduced as the DA is distinguished from Basic Pay. At the same
time, if all other parameters justify payment of DA at the rate at which the
Central Government employees are being paid, the power companies cannot
refuse payment of DA at such rate as may be notified by the Central
Government from time to time. The word 'admissible' in clause 9 does not in
any way dilutes the claim of the writ petitioners in claiming DA at the
Central Government rate. The word 'admissible' in the context means
'applicable' and does not control the rates at which DA would be payable to
the employer. It plainly states the components to be considered in
computing DA for all categories of employees of the appellant companies.
Once the power companies have accepted that its employees would be
entitled to DA at rates that are applicable to the Central Government
employees, it creates a legally enforceable right on its employees to get the
DA.
Moreover, we accept the point made by Mr. Majumdar that that
dearness allowance at Central Government rates was paid till January, 2016
and that it was contemplated to be so paid after the two companies were
created under Clause 5(a) of the Transfer Scheme. The said Clause 5(a)
states that the terms and conditions of service of the employees of the two
companies would not, at the effective date of transfer, be any less favourable
than they were immediately before the said Scheme was implemented.
Indeed, that does not preclude variation of the terms and conditions of
service post transfer, but the fact that dearness allowance was paid till
January 2016 under the said Rule 9 at Central Government rates indicates
that the said Rule 9 did not present a departure from the pre-transfer status
quo and that, manifestly, the said Rule was intended to be treated as (and
has been treated as) mandatory post 25th February, 2009.
Thus, the inexorable conclusion is that the said Rule 9 of the said
Rules of 2009 confers a right on the petitioners to payment of dearness
allowance at Central Government rates. A writ of mandamus can be issued
for enforcement of rights created by statute. The respondents have prayed
for enforcement of statutory rates. Dearness Allowance is a condition of
service recognised by ROPA 2009. However, given our writ jurisdiction
under Article 226 is a discretionary jurisdiction, it is necessary to consider if
a discretion is to be exercised in favour of the writ petition.
The annual accounts for the period subsequent to January, 2016
shows that the appellants have made substantial profits and the payment of
DA at the Central Government rate would cause an insignificant erosion in
the profit after tax which was estimated by WBSETCL in the financial year
2017-18 at Rs.43.77 crores and WBSET at Rs.63.13 crores. Even for the
earlier periods when the power companies were earning profits much less
than the subsequent years DA was paid for such periods at the Central
Government rates. The affidavits filed by the power companies does not
justify avoidance of the contractual terms towards payment of DA at the
Central Government rates that were paid till January, 2016. When there
has been a significant rise in the profit earned by the companies the
financial inability to make payment towards DA which is a benefit required
to be extended to the respondents in terms of ROPA 2009 at the Central
Government rate cannot be denied. The financial inability not being
established we are of the view that the learned Single Judge was justified in
allowing the writ petition. We reiterate that the appellants have not been
able to establish its incapability or inability to pay DA at the Central
Government rates. We, however, accept the submission on behalf of the
learned Advocate General that in the event the companies are able to
demonstrate poor financial condition the DA may not be payable at the
Central Government rate. The observation of the learned Single Judge to
the effect that the DA cannot be denied to the writ petitioners even if the
management of two companies can demonstrate poor financial condition
has to be read in the context of the observation made in the other
paragraphs of the said judgment and not in isolation. However, if it means
that irrespective of the financial condition the two companies were obliged to
pay DA at the Central Government rate in terms of Clause 5(a) the same
would be contrary to law as the DA cannot be equated to basic pay or basic
wages. The phrase in Clause 5 that the terms and conditions of service of
transfer shall not, in any way, be less favourable than those applicable to
them immediately before the said effective date of transfer has to be
assessed on the financial ability of the companies after the transfer. DA is a
part of the larger component of salary. Salary is bifurcated into basic salary
and other allowances of which DA is one to make good of the hardship
caused due to rise in prices. DA is introduced to neutralise inflation and the
percentage of DA is related to cost of living index or on any acceptable
rational basic like AICPI and cannot be fixed arbitrarily by the employer. It
must have a nexus to the deprivation of benefits in terms of money suffered
due to rise in the cost of living. The appellants also did not say that DA is
not payable at all. In the facts and circumstances of these cases having
regard to the materials on record we are of the view that the appellant
companies are capable of paying DA to the writ petitioners at the Central
Government rates under ROPA 2009.
For the aforesaid reasons the appeals are dismissed.
The impugned judgment and order of the learned Single Judge is
upheld.
However, there shall be no order as to costs.
Urgent xerox certified copy of this judgment, if applied for, be given to
the parties on usual undertaking.
(Soumen Sen, J.)
I agree
(Saugata Bhattcharyya, J.)
Later
17.09.2021
After the judgment is delivered Mr. Biswaroop Bhattacharyya, the
learned Counsel representing for the appellants has prayed for stay of the
operation of the judgment. Such prayer is, however, refused.
(Soumen Sen, J.)
(Saugata Bhattacharyya, J.)
