Special Allowance For Bank Employees On Deputation Cannot Be Excluded From Pay Fixation: Bombay HC

Bombay High Court: Justices Mangesh S. Patil and Prafulla S. Khubalkar ruled that employees of nationalized banks deputed to Debts Recovery Tribunals (DRTs) are entitled to include “special allowance” for the purpose of fixation. The court quashed part of a 2020 government communication that excluded the allowance from pay fixation. It held that the 2020 communication contradicted the letter issued by the Ministry of Finance in 2009. It also noted that the 2020 letter misconstrued the 2015 Bipartite Settlement, and quashed it to the extent that it excluded “special allowance” from pay fixation for deputed bank employees. Background The petitioners—employees of different nationalized banks—were deputed to work at the DRT under a 2017 Ministry of Finance circular. Before deputation, their salaries included a “special allowance” component, which was also considered for calculating dearness allowance (DA). However, a government letter dated October 1, 2020, excluded “special allowance” from pay for pensionary benefits and pay fixation. The petitioners challenged this, claiming it was contrary to earlier communications and the Bipartite Settlement of 2015. The latter, is an agreement between Indian banks and employees' unions that outlines what components qualify as “pay” for calculating pension, DA, etc. They argued that this abrupt change reduced their effective salaries during deputation. Arguments of the Petitioners The petitioners, represented by Mr. Avinash Deshmukh, argued that the exclusion of “special allowance” was arbitrary and violated the Bipartite Settlement of 2015. They explained that the settlement explicitly defined “pay” to include stagnation increment, professional qualification pay, and special allowance for DA calculation. They argued that contradicting these provisions would unfairly alter the petitioners' terms of deputation. They further contended that the exclusion caused financial losses, defeating the purpose of deputation. They also highlighted an inconsistency with a prior 2009 Ministry of Finance communication that required such allowances to be considered during pay fixation. The respondents, represented by Mr. S.S. Deve, defended the 2020 letter as a clarification rather than a policy change. They argued that “special allowance” was always a separate component, distinct from basic pay, and was not meant to be included in pay fixation. They dismissed the petitioners' claim as a misreading of the settlement and policy documents. The respondents maintained that all benefits were calculated correctly, and the petitioners had no grounds for complaint. Court's Reasoning The court noted that the petitioners' pay fixation during deputation was governed by a 2009 Ministry of Finance communication. It held that the 2009 communication explicitly ordered the inclusion of allowances, including special allowance, for DA calculation. Thus, the court held that excluding special allowance, as directed in the 2020 letter, was inconsistent with this framework. Further, the court observed that the 2020 letter misconstrued the 2015 Bipartite Settlement. It noted that while the settlement excluded special allowance from pensionary benefits, it specifically included it as part of pay for DA calculations. Thus, the court concluded that the respondents' reliance on the settlement to justify the exclusion of special allowances was misplaced. It also emphasized that the change in policy after the petitioners had already opted for deputation was arbitrary and inconsistent with prior communications. Thus, the court partially allowed the petition. It quashed the 2020 government communication to the extent that it excluded “special allowance” from pay fixation for deputed bank employees. The court directed the respondents to fix the petitioners' pay in accordance with the 2009 communication. Case title: Adarsh Kumar Jain and Others v. Union of IndiaCitation: 2024 LiveLaw (Bom) 642 Counsel for the Petitioners: Mr. Avinash S. Deshmukh with Mr. P.B. Chandel Counsel for the Respondents: Mr. S.S. Deve Click Here To Read/Download The Order

Special Allowance For Bank Employees On Deputation Cannot Be Excluded From Pay Fixation: Bombay HC

Pranav Kumar

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