Company's Order Reversing Pay Hike Upsets Employee's Financial Planning: Karnataka High Court Sets Aside HAL Circular

The Karnataka High Court has set aside a circular issued by Hindustan Aeronautics Limited (HAL), whereby it sought to re-fix the pay of Officers, which came to be increased, in the year 2017.A single judge, Justice S Sunil Dutt Yadav allowed the petition filed by 'Hindustan Aeronautics Officers Guild' and set aside the Circular dated 24.07.2021, issued by the employer. It also clarified that the pay fixation (presently being paid) would continue to hold the field. Further, it said, if the authorities are of the opinion that they would seek to re-do the exercise of revisiting the revision of pay scale rather than letting the matter to rest, it would have to afford an opportunity of hearing to the petitioner and other employees. Only, upon hearing, they would be obliged to place before the Government a report containing the views of the petitioner and other employees on audit objections for its appropriate consideration.On 01.01.2017, the revision of the pay scale and allowance of the Public Sector Enterprise was due. The Department of Public Enterprise (DPE) had notified the fitment methodology to arrive at the revised basic pay of officers on 01.01.2017 itself. Following the DPE Guidelines, the respondent had issued a circular revising the pay scales of Officers with effect from 01.01.2017. However, in the course of Government audit objections were raised regarding the manner of calculating the Dearness Allowance. In the light of the advice of the Ministry of Defence that pay fixation with effect from 01.01.2017 was not in conformity with the DPE guidelines which required compliance and accordingly, the Board of respondent-Company resolved to re-fix the pay of the officers on 16.07.2021. The petitioners argued there would be a huge recovery consequent to re-fixation, which would cause them undue hardship. Moreover, the reduction of the pay scale, which has civil consequences is issued, without affording an opportunity to hear to the employees. The respondents submitted that it was advised by the Government in light of the audit objections to correct the anomaly in pay. Thus, there was no discretion to the respondent but to re-fix the pay in terms of the audit objections.Findings: The bench noted that the revised pay was in operation between 01.07.2017 and 24.07.2021. The revision of pay admittedly, has the effect of reduction. The revised Pay Scale came into effect on 17.11.2017 and the enhanced pay scale has been enjoyed by the officers which is sought to be downgraded by re-fixation by order dated 24.07.2021.Observing that “It is an expectation that once the employer which is a Government Company and Government of India Undertaking has revised the pay and made payments in accordance with such revision for over four years, that the revision was to stay. The employees of such Establishments have an expectation that the revision was effected after adherence to Official Protocol.” The court took judicial notice of the pattern of economic planning of a salaried Employee/Officer. It said “The investment, savings and expenditure is planned and often on the basis of such certainty of income, long term commitments are made including taking of loans for property investment, etc. The economic planning is such that normally there would be no free funds available at the disposal of an individual. The nature of employment especially in a Government of India Undertaking instills comfort and confidence as regards conditions of service including emoluments.” Court referred to the doctrine of the right of legitimate expectation which involves the expectation of a citizen that public authority would follow a particular procedure before taking a decision.The court held, “In the present case, receipt of revised pay scale is by an order which refers to pay hike as being effected in terms of Guidelines which has continued for four years. It would be reasonable to presume that the Officers have arranged their economic affairs in a particular pattern. If this is sought to be disturbed, needless to state, it would affect the Employees/Officers admittedly visiting the employees with civil consequences.” It added, “An order which has the effect of reversing a pay hike on whatever reason or premise has the consequence of upsetting financial planning of employee visiting civil consequences which cannot be resorted to without affording an opportunity of hearing.” Accordingly, it allowed the petition and set aside the impugned circular. Appearance: Advocate Maitreyi Krishnan for Advocate Shilpa Prasad for Petitioner.Advocate Syed Kashif Ali for Respondent. Citation No: 2025 LiveLaw (Kar) 31Case Title: Hindustan Aeronautics Officers Guild AND Hindustan Aeronautics Ltd & ANRCase No: WRIT PETITION NO. 14734 OF 2021Click Here To Read/Download Order

Company's Order Reversing Pay Hike Upsets Employee's Financial Planning: Karnataka High Court Sets Aside HAL Circular

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