The Supreme Court of India has held that the right to receive Dearness Allowance (DA) is a “legally enforceable right” and not a matter of grace or bounty. In a significant judgment delivered on February 5, 2026, the Division Bench comprising Justice Sanjay Karol and Justice Prashant Kumar Mishra partly allowed the appeals filed by the State of West Bengal, directing the State to release arrears of DA to its employees for the period 2008-2019 based on the All-India Consumer Price Index (AICPI).
The Court rejected the State’s defense of “paucity of funds,” observing that financial inability cannot be a ground to deny statutory rights to employees. To oversee the payment schedule, the Apex Court has constituted a high-level committee headed by retired Supreme Court Judge, Justice Indu Malhotra.
Background of the Dispute
The controversy originated from the recommendations of the Fifth Pay Commission constituted by the State of West Bengal in 2008. Following the report, the State enacted the West Bengal (Revision of Pay and Allowance) Rules, 2009 (ROPA Rules), which were deemed to have come into force on January 1, 2006.
Rule 3(1)(c) of the ROPA Rules defined “existing emoluments” to include DA appropriate to basic pay at “index average 536 (1982=100).” However, through a subsequent Clarificatory Memorandum dated February 23, 2009, and further notifications, the State Government revised DA rates that allegedly differed from the AICPI standard used by the Central Government.
The respondent employees and their unions approached the State Administrative Tribunal, alleging that while the State initially followed the Central Government pattern, it discontinued the practice after 2010. The Tribunal, after a remand from the High Court, held that while employees were not entitled to DA at Central Government rates per se, they were entitled to DA calculated on the basis of AICPI numbers.
In the second round of litigation, the Calcutta High Court, by its judgment dated May 20, 2022, declared that the right to receive DA is a “facet of Article 21” (Right to Life) and directed the State to pay DA at rates prevalent in the Central Government. The State of West Bengal challenged this decision before the Supreme Court.
Arguments of the Parties
The Appellant-State’s Contentions: Represented by Senior Advocates Kapil Sibal, Shyam Divan, and Huzefa Ahmadi, the State argued:
- There is no legal obligation to pay DA at Central Government rates, citing federal autonomy under List II of the Seventh Schedule.
- The claim for arrears would impose a financial burden of approximately Rs. 41,770 crores. Reliance was placed on Tamil Nadu Electricity Board v. TNEB Thozhilalar Aykkiya Sangam (2019) to argue that financial capacity is a relevant factor.
- The ROPA Rules do not mandate paying DA twice a year.
- The High Court erred in declaring DA a fundamental right under Article 21.
The Respondents’ Contentions: Represented by Senior Advocates Gopal Subramaniam, P.S. Patwalia, Bikash Ranjan Bhattacharya, and Karuna Nundy, the employees argued:
- DA is necessary to combat inflation and protect the “living wage.”
- Since the State accepted the Pay Commission recommendations and enacted the ROPA Rules incorporating the AICPI, a legal right had accrued.
- Paucity of funds cannot defeat a legal right, citing Haryana State Minor Irrigation Tube Wells Corporation v. GS Uppal (2008).
- The State’s action was discriminatory as employees posted in New Delhi (Banga Bhawan) and Chennai received higher DA.
Court’s Analysis and Observations
1. Nature of Dearness Allowance
Justice Karol, writing for the Bench, observed that DA is a “practical instrument of protection” against inflation, which acts as a “bad penny” eroding purchasing power.
“Dearness Allowance is not an additional benefit but a means to maintain a minimum standard of living,” the Court noted, adding that it is tied to the constitutional idea of dignity.
2. Statutory Force of ROPA Rules
The Court analyzed Article 309 of the Constitution and held that the ROPA Rules, having been framed under this Article, possess statutory force. Since Rule 3(1)(c) explicitly incorporated the “index average 536 (1982=100),” the State could not deviate from this standard through executive memoranda.
“To say that the number that has been explicitly put there is nothing more than a starting point… cannot be countenanced,” the Court stated. The subsequent memoranda deviating from the AICPI were termed “manifestly arbitrary” for lacking a reasoned principle.
3. Financial Inability Rejected
The Bench firmly rejected the State’s plea regarding financial difficulty.
“The least that is expected of a State in a democracy is that it honours its obligations… Paucity of funds is not a ground to deny the employees of the appellant-State, the payment of DA.”
4. Federal Autonomy
Addressing the State’s argument on federal structure, the Court held that while the State has financial autonomy and was not bound to follow the Central Government initially, it chose to incorporate the Central pattern (AICPI) into its own Rules.
“The alleged conflict… is a figment of imagination of the appellant-State. The argument seems to have been conjured up in thin air,” the Court remarked, noting the State was bound by its own legislative exercise.
5. Article 21 and Fundamental Rights
The Supreme Court did not uphold the High Court’s finding that DA is a fundamental right under Article 21, as the parties agreed not to press this question. The issue was left open.
6. Payment “Twice a Year”
The Court set aside the direction to pay DA twice a year, holding that the ROPA Rules do not mandate such a frequency. “Anything that is not provided for in the Rules… cannot be said to be a right accruing on any party,” the judgment read.
Decision and Directions
The Supreme Court partly allowed the appeals with the following key directions:
- Legal Right: “To receive dearness allowance is a legally enforceable right that has accrued in favour of the respondents-employees.”
- Standard: The AICPI is the standard to be followed by the State for determining “existing emoluments.”
- Arrears: Employees are entitled to arrears for the period 2008-2019.
- Committee Constitution: To manage the release of funds and balance the State’s exchequer with employees’ rights, the Court constituted a Committee comprising:
- Justice Indu Malhotra (Retired Supreme Court Judge) – Chairperson
- Justices Tarlok Singh Chauhan and Goutam Bhaduri (Former High Court Judges)
- Comptroller and Auditor General of India (or nominee).
The Committee is tasked to determine the total amount and schedule of payments before March 6, 2026. The first installment must be paid by March 31, 2026.
The Court also directed that any amount disbursed under the interim order dated May 16, 2025 (which directed 25% payment), shall be complied with immediately. Retired employees are also entitled to these benefits.
The matter is listed for compliance on April 15, 2026.
Case Details:
- Case Title: State of West Bengal & Anr. v. Confederation of State Government Employees, West Bengal & Ors.
- Case Number: Civil Appeal arising out of SLP(C) Nos. 22628-22630 of 2022 (2026 INSC 123)
- Bench: Justice Sanjay Karol and Justice Prashant Kumar Mishra
- Counsel for Appellant: Mr. Kapil Sibal, Mr. Shyam Divan, Mr. Huzefa Ahmadi (Senior Advocates)
- Counsel for Respondents: Mr. Gopal Subramaniam, Mr. P.S. Patwalia, Mr. Bikash Ranjan Bhattacharya, Ms. Karuna Nundy (Senior Advocates)
