The Supreme Court of India, in a significant ruling on public employment, has declared that financial stringency cannot be used as a “talisman that overrides fairness, reason and the duty to organise work on lawful lines”. A bench of Justice Vikram Nath and Justice Sandeep Mehta held that a state’s refusal to sanction posts on a generic plea of “financial constraints” is arbitrary, especially when an institution has relied on daily wagers for perennial duties for decades. The Court quashed orders from the State of Uttar Pradesh that had denied the creation of posts for the U.P. Higher Education Services Commission and directed the regularization of six long-serving employees with retrospective effect from 2002.
Background of the Case
The case involved six appellants engaged by the U.P. Higher Education Services Commission (“the Commission”) between 1989 and 1992. Five individuals served in Class-IV roles, while one worked as a Class-III Driver, performing essential ministerial and support functions. They were initially paid as daily wagers before being moved to a consolidated monthly salary.
On October 24, 1991, the Commission resolved to create fourteen permanent posts and sought sanction from the State Government. The Commission reiterated this request over the years, even furnishing a list of its fourteen daily wagers, including the appellants, to the State in 1998.
However, the State rejected the proposal via a letter dated November 11, 1999, citing “financial constraints”. This prompted the appellants to file a writ petition in the High Court of Judicature at Allahabad in 2000. In 2002, the High Court directed a fresh consideration of the matter and ordered that the appellants be paid the minimum of the applicable pay scale. Despite this, the State again refused sanction on November 25, 2003, citing a financial crisis and a ban on creating new posts.
A Single Judge of the High Court dismissed the writ petition in 2009, citing a lack of regularization rules, no vacancies, and the precedent set in
Secretary, State of Karnataka & Others. vs. Umadevi & Others. The dismissal was upheld by a Division Bench in 2017, leading to the appeal before the Supreme Court.
Supreme Court’s Analysis
The Supreme Court’s judgment, authored by Justice Vikram Nath, found that the High Court had erred by treating the case merely as a plea for regularization, failing to address the core challenge to the State’s arbitrary refusal to sanction posts. The Court described this as a “misdirection and, in effect, a failure to exercise jurisdiction”.
On the State’s Plea of Financial Constraints: The Court deemed the State’s refusals unsustainable and arbitrary. It observed that “a non-speaking rejection on a generic plea of ‘financial constraints’, ignoring functional necessity and the employer’s own long-standing reliance on daily wagers to discharge regular duties, does not meet the standard of reasonableness expected of a model public institution”. It concluded, “Financial stringency certainly has a place in public policy, but it is not a talisman that overrides fairness, reason and the duty to organise work on lawful lines”.
On the Existence of Vacancies: The Supreme Court noted that the High Court’s finding of “no vacancy” was contradicted by evidence, including an RTI response and an unrebutted application pointing to at least five vacant Class-IV posts and one vacant Driver post. The Court also highlighted the “unequal treatment” and “clear violation of equity” in the selective regularization of other similarly placed daily wagers in the same Commission.
On the Misapplication of Umadevi: The judgment clarified that the High Court’s reliance on
Umadevi (Supra) was misplaced in this case. The Court stated, “the challenge before us is not an invitation to bypass the constitutional scheme of public employment. It is a challenge to the State’s arbitrary refusals to sanction posts despite the employer’s own acknowledgement of need and decades of continuous reliance on the very workforce”. The Court referred to its recent judgments in
Jaggo v. Union of India and Shripal & Another v. Nagar Nigam, Ghaziabad to emphasize that Umadevi (Supra) cannot be used as a “shield to justify exploitation through long-term ‘ad hocism'”.
On Outsourcing and Supervening Changes: The Court also addressed the State’s argument regarding a recent reorganization and a new policy to outsource Class-IV functions. It held that a “supervening structural change cannot extinguish accrued claims” and a later outsourcing policy “cannot retrospectively validate earlier arbitrary refusals”.
On the State as a Constitutional Employer: The Court concluded with strong observations on the State’s role, stating it “cannot balance budgets on the backs of those who perform the most basic and recurring public functions”. It added, “Sensitivity to the human consequences of prolonged insecurity is not sentimentality. It is a constitutional discipline that should inform every decision affecting those who keep public offices running”.
Decision and Directions
The Supreme Court allowed the appeal, quashed the State’s refusal orders, and issued comprehensive directions to ensure justice:
- Regularization: All appellants are to be regularized with effect from April 24, 2002.
- Creation of Supernumerary Posts: The State and the successor commission must create supernumerary posts to effectuate the regularization.
- Pay and Seniority: Appellants shall be placed at the minimum of the regular pay scale, with seniority counted from the date of regularization.
- Arrears: Full arrears, calculated as the difference between the regular pay scale and the amount actually paid, shall be released within three months from April 24, 2002.
- Retired/Deceased Appellants: The benefits shall be extended to retired and deceased appellants for recalculating pensionary and terminal dues, to be paid to them or their legal representatives.
- Compliance: A compliance affidavit must be filed with the Court within four months.
The Court stated these detailed directions were designed “to convert rights into outcomes and to reaffirm that fairness in engagement and transparency in administration are not matters of grace, but obligations under Articles 14, 16 and 21 of the Constitution of India”.
