“Objective of Milk Federations is not to give employment but increase milk production”; SC reverses HC order favouring employees in a revised pay scale dispute

Supreme Court: The Division Bench comprising of Sanjay Kishan Kaul and Hemant Gupta*, JJ., overruled the decision of Punjab & Haryana High Court wherein the High Court had held that the employees of Punjab Co-operative Milk Producers Federation Ltd. were entitled to pay scale equivalent to their counterparts in the State of Punjab from 01-01-1986, though the revised pay scale was allowed by the Federation w.e.f. 01-01-1994. The Bench stated,

“The objective of the Federation was not to give employment but to increase milk production in the State. The employees are facilitators of the employer to achieve such objective and thus demanding enhanced wages without considering the objective and financial condition of the employer would not be ideal. The employer and the employees have to work together to achieve the objective of the organisation i.e. white revolution…”

Factual Matrix of the Case

The case of the Federation was that it was suffering with acute financial stringency, due to which the State had granted a loan of Rs 8 (sic 12) crores which the Federation could not repay and, therefore, the said amount was converted into the share capital of the State Government with the Federation. Keeping in view the financial stringency, the National Dairy Development Board gave a loan of Rs. 4 crores to the Federation, which lead to the change in management, thereby, causing restructuring of the Federation. It was in that backdrop that the Federation issued a notice under Section 9-A of the Industrial Disputes Act, 1947 to all the employees on the ground of financial stringency showing its intention to effect the changes of revised pay scale from 01-01-1994 instead of following the recommendations Punjab Government Anomaly Committee with regard to grant of revised pay scale w.e.f. 01-01-1986.

The employees of the Federation raised protest and a committee was constituted to examine the dispute. The committee’s findings were that,

In case the revision of pay scales is taken up w.e.f. 1.1.1986, the amount of arrears upto 31.12.1993 works out to Rs.1.5 crore approx., Taking into consideration the financial health of the Federation, the Committee was of the view that payment of arrears would further shatter the financial health of the Federation and it would not be possible for it to pay such a huge amount in the shape of arrears. Hence, the Committee after considering the above as well as various other aspects, recommended that the improved pay scales may be implemented w.e.f. 01-01-1994 without giving the benefit of even notional pay fixation w.e.f. 01-01-1986.

The report of the Committee was considered and the grant of revised pay scale w.e.f. 01-01-1994 was approved by the Board of Directors of the Federation as well as the Registrar (Cooperative Societies). Thus, subsequently, revised scales with effect from 01-01-1994 were granted to the employees.

Grievance of the Employees

The counsel for the employees, Mr. Govind Goel contended that the writ petition had been filed on behalf of one Head Draftsman, two Draftsman, two Junior Draftsman and two Surveyors. Assailing the decision of the Federation, the counsel argued that the decision to not grant the revised pay scale on the basis of the report of the Anomaly Committee was wholly arbitrary and discriminatory, since out of the 1573 employees of the Federation, those seven employees alone had been discriminated. Reliance was placed by the employees on Purshottam Lal v. Union of India, (1973) 1 SCC 651, wherein the Supreme Court had held that, “revision of pay scale recommended by the Pay Commission after acceptance by the Government could not be denied to a category of employees as it would be an act of discrimination.”

Analysis by the Court

In Hindustan Times Ltd. v. Workmen, (1963) 1 LLJ 120, it had been held that, “numerous complex factors, some of which are economic and some spring from social philosophy give rise to conflicting considerations that have to be borne in mind and that such factors are not static in nature. The financial position of the employer, state of national economy, and the requirements of a workman living in a civilized and progressive society also are to be recognized.” Similarly, in A.K. Bindal v. Union of India, (2003) 5 SCC 163, it was held that the non-revision of pay scale would not amount to violation of fundamental rights guaranteed under Article 21 as it would be stretching too far and cannot be countenanced. It was held that even under industrial law, workmen should get a minimum wage or a fair wage but not that the wages must be revised and enhanced periodically.

Distinguishing the judgment in Purshottam Lal, the Bench stated that it was altogether on different facts as in the instant case,

“The Committee has considered that there was no work for the writ petitioners. Still, instead of abolishing the post, the Federation granted revised pay scale which was better than the pay scale recommended by the Pay Commission but less than the pay scale granted by the State Government in pursuance of the recommendations of the Anomaly Committee.

Thus, the Bench held that it could not be said to be a discriminatory or arbitrary decision more so in exercise of power of judicial review. There existed good reasons not to grant higher pay scale as there was no work of the post to which the (workmen-respondents) were appointed but were given alternate assignments. Further, the Bench opined,

“The employer and the employees have to work together to achieve the objective of the organisation i.e. white revolution rather frittering away the gains made by the joint efforts of the management and employees by giving increased wages to the employees irrespective of its capacity to bear such expenses. The income generated by the Federation is not to be expanded only on payment of salary but is also required for up gradation of technology, renovation and expansion of plants etc.”

Judicial Review of Administrative Actions

In Tata Cellular v. Union of India, (1994) 6 SCC 651, it had been held that, it is not for the court to determine whether a particular policy or particular decision taken in the fulfilment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. Similarly, in Harshit Agarwal v. Union of India, (2021) 2 SCC 710, it was established that judicial review of administrative action is permissible on grounds of illegality, irrationality and procedural impropriety.

Thus, holding that the fact that the Federation was in financial difficulties was based upon relevant material, the Bench held that the process to arrive at such decision could be said to be flawed only on the permissible grounds of illegality, irrationality and procedural impropriety, and neither the decision-making process, nor the decision itself suffered from any such vice.


Hence, rejecting the submission that there would not be financial burden on the federation in view of the fact that the High Court had ordered payment of arrears for a period of 3 years and 2 months before the date of filing of writ petitions, the Bench opined that restricting it for a period of 3 years and 2 months would not be helpful in respect of the financial condition of the Federation as during the relevant time the federation was suffering from huge losses.

In view of the above, the order of the High Court was held to be unjustified, in excess of the power of judicial review and, consequently, was set aside.[Punjab State Co-Operative Milk Producers Federation Ltd. v. Balbir Kumar Walia, 2021 SCC OnLine SC 461, decided on 09-07-2021]

Kamini Sharma, Editorial Assistant has reported this brief.

Appearance before the Court:

Counsel for the Federation: Adv. Patwalia

Counsel for the Respondents: Adv. Govind Goel

*Judgement by: Justice Hemant Gupta

Know Thy Judge| Justice Hemant Gupta

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