Equality — Dearness Allowance (DA) & Dearness Relief (DR) — Differential rates — Validity — Where DA payable to serving employees and DR payable to pensioners are both linked to inflation and serve identical purpose of mitigating inflationary hardship — Fixing higher rate of increase for DA than DR lacks rational nexus with object sought to be achieved — Such differential treatment is arbitrary and violative of Article 14. (Paras 21, 25–27)

advocatemmmohan

Constitution of India — Articles 14 & 16 — Equality — Dearness Allowance (DA) & Dearness Relief (DR) — Differential rates — Validity —

Where DA payable to serving employees and DR payable to pensioners are both linked to inflation and serve identical purpose of mitigating inflationary hardship — Fixing higher rate of increase for DA than DR lacks rational nexus with object sought to be achieved — Such differential treatment is arbitrary and violative of Article 14.

(Paras 21, 25–27)

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Equality — Reasonable classification — Twin test — Application —

Classification must satisfy:
(i) intelligible differentia, and
(ii) rational nexus with object sought to be achieved —

Where inflation impacts both serving and retired employees equally, classification based on status (employee/pensioner) fails nexus test when applied to rate of DA/DR increase.

(Paras 22, 25)

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Service law — Pensioners vs employees — Distinction — Limited relevance —

Though serving employees and pensioners constitute distinct classes, such distinction cannot justify differential treatment where benefit (DA/DR) is based on common factor of inflation — Distinction irrelevant for determining rate of increase.

(Paras 21, 27)

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Financial constraints — Scope —

Financial constraints may justify:

• deferment of benefits, or
• different dates of implementation,

but cannot justify differential rates of enhancement once benefit is granted for same purpose.

(Para 28)

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Administrative action — Arbitrariness — Test —

State action which lacks rational basis and nexus with object is arbitrary — Arbitrariness is antithetical to equality and violative of Article 14.

(Paras 22–23, 26)

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RATIO DECIDENDI 

Where dearness allowance and dearness relief are granted to address a common objective of mitigating inflation, fixing different rates of increase for serving employees and pensioners lacks rational nexus with the object and constitutes arbitrary and discriminatory State action violative of Article 14.

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RESULT

• Appeals dismissed
• High Court judgment affirmed

(Paras 28–29)