2007 (7) TMI 717 - SC - Indian Laws

Summary

Issues Involved:
1. Applicability of Part III of Kerala Service Rules (KSR) to KSRTC employees.
2. Competence of KSRTC to fix a different cut-off date for implementing the Fifth Pay Commission recommendations.
3. Validity of the State Government's direction u/s 34 of the Road Transport Corporation Act, 1950.

Summary:

1. Applicability of Part III of KSR to KSRTC Employees:
The Kerala State Road Transport Corporation (KSRTC) was established under the Road Transport Corporation Act, 1950. Upon its formation, employees from the State Transport Department were absorbed into KSRTC with the same terms and conditions of service as per the Kerala Service Rules (KSR). On 27.3.1984, the Government of Kerala authorized KSRTC to pay pension to its employees as per KSR. The High Court held that the adoption of Part III of KSR by KSRTC was an exercise of legislation by reference, obligating KSRTC to implement the Fifth Pay Commission recommendations simultaneously with the State Government. However, the Supreme Court found that the adoption of Part III of KSR did not automatically bind KSRTC to implement all enhancements in pension and other benefits given by the State Government to its employees.

2. Competence of KSRTC to Fix a Different Cut-off Date:
The High Court ruled that KSRTC did not have the competence to fix a different cut-off date for implementing the Fifth Pay Commission recommendations. The Supreme Court disagreed, stating that KSRTC, being an autonomous corporation, could regulate the service of its employees and consider its financial health in deciding whether to adopt the recommendations and from what date. The Court emphasized that KSRTC's decision would be subject to any direction issued by the State Government u/s 34 of the Act.

3. Validity of the State Government's Direction u/s 34:
The Supreme Court examined whether the communication dated 16.5.1995 from the State Government, advising KSRTC to defer the implementation of the Fifth Pay Commission recommendations due to financial constraints, constituted a direction u/s 34 of the Act. The Court concluded that this communication was indeed a direction u/s 34, as it was issued in compliance with a High Court directive for the Government to take a policy decision. The Court held that KSRTC was bound to implement this direction in the absence of any regulation to the contrary.

Conclusion:
The Supreme Court allowed the appeals, setting aside the High Court's decision, and held that KSRTC was justified in deferring the implementation of the Fifth Pay Commission recommendations due to its precarious financial position. The writ petitions filed by the employees were dismissed.