The Punjab government has initiated a legal challenge in the Supreme Court against a ruling from the Punjab and Haryana High Court. This ruling mandates the state to disburse the outstanding dearness allowance (DA) and dearness relief (DR) to its employees and pensioners within a two-week timeframe. The state contends that fulfilling this financial obligation, which amounts to approximately Rs 14,191 crores, is not feasible within the specified period.
The Special Leave Petition (SLP) was submitted by the Additional Chief Secretary of Finance, requesting a temporary suspension of the high court’s decision issued on August 3. The government is also seeking to prevent any potential contempt proceedings that may arise from non-compliance with the ruling.
Meanwhile, employees from Punjab have preemptively filed a caveat in the Supreme Court. Additionally, the high court is scheduled to hear a contempt petition filed by the employees against the Punjab government on September 27.
In its appeal to the Supreme Court, the Punjab government argues that meeting the financial demand would have significant fiscal and constitutional repercussions. It emphasizes that funds cannot be withdrawn from the Consolidated Fund without adhering to the legally mandated appropriation procedures.
The plea highlights that executing the high court’s order requires a supplementary statement of expenditure as outlined in Article 205(1)(a), and demands for grants can only be made following the Governor’s recommendation and the assent of the legislative assembly, as specified in Articles 203(2) and 203(3). Furthermore, an Appropriation Act is necessary under Article 204, without which no money can be withdrawn from the state’s Consolidated Fund.
A division bench of the high court had instructed the state to allocate all pending installments of DA and DR to every state employee and pensioner, based on the rates applicable to All India Services officers engaged in state affairs. The court also mandated that the state would incur a 6% simple interest penalty for any delays in payment, while also prohibiting the government from engaging in “unproductive” expenditures until all dues are cleared. The court dismissed a liquidation plan proposed by the state government, which it found inadequate in addressing the admitted arrears of around Rs 14,191 crores.
The state’s petition argues that the high court’s directives lead to an imbalanced outcome. It claims that its regulations do not require the payment of DA to state employees at the same rate set by the central government for its own employees. According to the Punjab Civil Services (Revised Pay) Rules, 2021, there is no specific index, formula, or rate for DA, leaving the determination of these matters to the discretion of the state government.
Furthermore, the state maintains that it provides DA to All India Services officers at the central rate because they are governed by Union law, which limits the state’s authority over their service conditions. The Sixth Punjab Pay Commission had adjusted the state’s pay structure using a multiplication factor of 2.59 to 2.72, which is higher than the factor of 2.57 adopted by the Seventh Central Pay Commission. As a result, the state argues that applying an identical percentage of DA to this higher base results in a greater financial outcome for its employees.
The state has indicated that in five out of seven categories, including clerks, drivers, and constables, Punjab employees already receive more than the current 42% DA, with monthly differences ranging from Rs 1,832 to Rs 17,852. The only categories where the state employees fall short are Superintendent and Police Inspector.
The government asserts that it has committed to remedy any discrepancies in DA payments, promising to raise DA as necessary to ensure parity with similar central positions. However, it claims that the high court’s ruling overlooked this assurance, despite it being documented before the court’s decision.
Concerning the financial strain imposed by the high court’s order, the state highlighted that committed expenditures on salaries and pensions account for approximately 51% of its revenue receipts, the highest among major Indian states, compared to the national average of around 38%. Additionally, the state’s liabilities, including interest, consume about 82% of its resources. The government argues that the order does not address any underpayment but rather compounds existing financial strain on a state already facing significant fiscal challenges.
The Punjab government has stated that paying the Rs 14,191 crores in one lump sum would equate to roughly three months’ worth of its total wage and pension expenditures, a financial burden that could disrupt essential welfare and service spending. It emphasizes that such withdrawals from the Consolidated Fund must follow constitutional appropriation procedures.
Earlier this year, the state cabinet had approved a phased liquidation plan for the Rs 14,191 crore arrears over five financial years, a plan that was subsequently annulled by the high court.
Additionally, the plea contests the high court’s order prohibiting the state from incurring unproductive expenditures, arguing that such a restriction was not substantiated with evidence during the court proceedings.
