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Inability due to financial Crunch – A sufficient ground to revise pay scale: SC

Court: Supreme Court of India

Judgement Name: Punjab State Co-operative Milk Producers Federation Ltd. & Anr. V Balbir Kumar Walia & ors.

Judgement Date: 9th July, 2021

Bench: JJ Sanjay Kishan Kaul, JJ Hemath Gupta

The Supreme Court bench consisting of Justice Sanjay Kishan Kaul and Justice Hemath Gupta overruled the decision of Punjab and Haryana High court. The High Court had ruled that the employees of Punjab Co-operative Milk Producers Federation Ltd. were entitled to a equal pay scale as other employees of the State of Punjab with effect from 01.01.1986, though the revised pay scale was allowed to begin with effect 01.01.1994. The court recognized that the inability of the federation due to the financial crunch was sufficient grounds to revise pay scale from 01.01.1994. The goal of the federation was to achieve the white revolution Introduction and any demand that is not sensitive to that objective is not ideal and the object of the federation was not to provide employment but produce more milk.

Brief Facts of the case:

  1. The federation was a state under sec 12, it faced an acute economic crisis, due to which the state granted a loan of Rs 8 crores which the federation could not repay.
  • Looking at the situation of the federation the National Dairy Development Board gave a loan of 4 crores that led to change in management and restructuring of the federation.
  • The federation issued a notice under Section 9-A of the Industrial Disputes Act,1947, signalling its intention to effect the pay scale change from 01.01.1994 instead of the Punjab government Anomaly committee recommended date of 01.01.1986. Such an intention was based on the fact that the federation was facing financial difficulties.
  • To address the unhappy reaction of the employees to the notice, a committee was constituted. The committee was of the view that the federation will not be able to pay the revised arrears hence recommended that the pay scale change be applied from 01.01.1994.
  • The High court allowed the writ petition filed by the employees stating that the financial stringency can no longer be considered an excuse to revise pay scale and held that the 01.01.1994 revision was unfair.
  • The current appeal is against the High court’s judgement. 

Issues in the Case:

  1. Does the federation have the right to revise the date of enforcement of the enforcement of the pay scale changes?
  2. Does the federation’s activities amount to discrimination?
  3. Does the court have jurisdiction over administrative policies of an state (under art12)  ?

Respondent’s submissions:

  1. Mr. Govind Goel appearing on behalf of one head draftsman , two drafts man , two Junior Draftsman and two Surveyors contended that the federations’ decision based on the findings of the Anomaly committee was wholly arbitrary .It was pointed out that out of 1573 employees of the federation only 7 employees alone had been discriminated against.
  • Relying on the Purushottam Lal v.Union of India judgement, where the SC held that revision of pay scale recommended by the Pay commission after  acceptance by the Government could not be denied to only a category of employees as it would constitute discrimination.

Analysis by the Court:

  1. Hindustan Times Ltd. v. Workmen, it was held that there were numerous factors arising from economic and social philosophies that lead to ever changing considerations. The financial position of the employer, state of national economy and requirements of the employees also have to be considered.
  • Similarly, in A.K. Bindal v. Union of India, it was held that non revision of the pay scale would not result in the violation of fundamental rights guaranteed under Article 21.
  • Distinguishing the Purushottam Lal case the court observed that, in the current case despite the writ petitions having no work, the federation still granted a revised pay scale higher than that recommended by the Pay commission but less than the recommendations of the Anomaly committee.
  • The court observed that the federation was justified in its acts as the writ petitioners did not have work from the day of appointment and were assigned alternative assignments. It was not discriminatory or arbitrary exercise of power by the Supreme Court in considering the administrative actions under judicial review.
  • Relying on Tata Cellular v. Union of India, the court observed that it was not fair for the court to critique a particular policy decision but only look into the manner in which these decisions were made. In, Harshit Agarwal v. Union of India, it was further held that judicial review of administrative actions is acceptable on the grounds of irrationality, illegality and procedural impropriety.


The High court’s verdict was overruled and further observed that invalidating financial burdens would be viable. The High court’s order mandated payment of arrears for a period of 3 years and 2 months which was considered unsuited given the financial condition of the consideration and the huge losses it was bearing. Exercising judicial review the Supreme court set aside the High court’s decision in Punjab State Cooperative Milk Producers Federation Ltd. v. Balbir Kumar Walia, 2021


The decision of the court established the right to exercise judicial review in the administrative policies of the federation. The court noticed the inability of the federation to pay the arrears within the restricted time frame and the impossibility of the High Court judgment. They acknowledged that the remuneration paid was higher than the Pay commissions recommendations and given circumstances it was not discriminatory in nature. A thorough analysis if the respondent’s state is taken into consideration to ensure a sense of equity.


  2. Punjab State Co-Operative Milk Producers Federation Ltd. v. Balbir Kumar Walia, 2021 SCC Online SC 462
  3. Purshottam Lal v. Union of India, (1973) 1 SCC 651,
  4. Hindustan Times Ltd. v. Workmen, (1963) 1 LLJ 120
  5. A.K. Bindal v. Union of India(2003) 5 SCC 163
  6.  Tata Cellular v. Union of India, (1994) 6 SCC 651
  7. Harshit Agarwal v. Union of India(2021) 2 SCC 710,

Written By: Shreya Shetty, Christ University, Bangalore.

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