Deviation From AICPI For Allowance Rules Is Manifestly Arbitrary: Supreme Court While Affirming Right To Receive Dearness Allowance For West Bengal Govt. Employees

The Court has affirmed that the right to receive Dearness Allowance (DA) is a legally enforceable right for the employees of the West Bengal Government. The Court also mandated the payment of arrears from 2008 to 2019 and constituted a committee, chaired by former Supreme Court Judge Justice Indu Malhotra, to finalize a binding payment schedule by March 6, 2026.

While the Court partly allowed the State’s appeals by ruling that employees are not entitled to DA twice a year and leaving the question of its status as a fundamental right open, it firmly held that the All India Consumer Price Index (AICPI) must be the standard for determining emoluments under the ROPA Rules.

​The Bench of Justice Sanjay Karol and Justice Prashant Kumar Mishra observed, “Keeping in view the judgments referred to above, the principle of manifest arbitrariness under Article 14 refers to legislation that is capricious, irrational, lacking in reasoned principle, or excessive and disproportionate; such arbitrariness vitiates both subordinate and plenary legislation alike. In the present facts, since a legislative exercise did incorporate AICPI into the framework, deviation therefrom without any basis as discussed above falls in the ‘lacking in reasoned principle’ prong of manifest arbitrariness, apart from legislative competence. For the appellant-State to have deviated from the recognised position to something else without laying the groundwork therefor, compromises the exercise by rendering it capricious.”

Senior Advocates Kapil Sibal, Abhishek Manu Singhvi, Shyam Divan, Huzefa Ahmadi, Kalyan Banerjee, and Mahima Cholera appeared for the Petitioners, while Senior Advocates P.S. Patwalia, Bansuri Swaraj, Karuna Nundy, Bikash Ranjan Bhattacharyya, Rauf Rahim, Gopal Subramanium, Nachiketa Joshi and Bikram Banerjee appeared for the Respondents.

The State of West Bengal in these appeals by special leave, questioned the legality and correctness of the final judgments and orders passed by the Calcutta High Court. At heart, the grievance of the State is that the High Court declared Dearness Allowance as a facet of Article 21 of the Constitution of India and directed the State Government to pay to the Respondents said allowance at the rate prevalent in the Central Government in accordance with the AICPI.

The Court was concerned with the disbursement of arrears of DA as claimed by the employees of the appellant-State for the period 2008-2019.

The Appellant-State set up the Fifth Pay Commission11 in 2008 to examine the structure of emoluments to be paid to the State Government employees. In the report submitted, the Commission made several recommendations, including the revision of the DA to be paid. In furtherance of such recommendations, the Appellant-State, in accordance with the powers conferred under Article 309 of the Constitution, brought into force the West Bengal (Revision of Pay and Allowance) Rules, 2009, by Notification dated February 23, 2009. The said Rules provide for revision of pay and allowances, viz., Dearness Allowance, House-Rent allowance, Medical Allowance, and Non-Practicing Allowance, and were to have retrospective effect, i.e., from January 1, 2006.

The Court analyzed the question of law as to whether the actions of the Appellant-State were vitiated by the manifest arbitrariness, also negatively affecting the legitimate expectation accruing in favour of the employees.

“Article 14 is one of the constituents of the golden thread that wraps around the Constitution. It is necessary to understand its importance in its true majesty. It is not a declaration of formal uniformity, simpliciter; it is instead a profound assertion of the rule of law itself. It only stands to reason that amongst other things, exercise of State power must also answer to fairness, justice and reason. This evolution from formal equality to an embodiment of the rule of law shows the development and maturing of Indian constitutional thought. In the early articulation, the aim and object of the Courts was to preserve legislative flexibility while preventing arbitrary discrimination and to do that there came to be evolved the twin test of reasonable nexus and intelligible differentia”, the Court said.

In other words, the Court noted that Article 14 in this avatar was a restraint on legislative excess rather than a principle of substantive justice. It was observed that he State’s legitimate objects must be pursued through suitable means ensuring that individual rights are not curtailed beyond necessity. This flows from the idea of constitutional morality which insists on the dignity of an individual, making that, the scales upon which any and all exercise of authority is to be judged, it added.

With regard to the Doctrine of Manifest Arbitrariness, the Court observed, “This doctrine thus extends the reach of Article 14 to all forms of State action. The Constitution, being supreme, demands that every exercise of power, whether clothed in the form of a statute or an executive order, must remain subject to the discipline of rationality. Manifest arbitrariness, in this sense, is not a departure from legislative supremacy but its constitutional completion, for the very legitimacy of law in a democratic order lies in its reasoned foundation.”

The Court said that the doctrine of ‘manifest arbitrariness’ within the discussion of Article 14 would equally apply to the First Memorandum dated February 23, 2009. It held that the an exercise undertaken by means of Article 309 of the Constitution has statutory force; accordingly, the vires thereof can be adjudicated on the same grounds as well.

“Having said that, we notice that while the substantive RoPA Rules provide explicitly for a method to calculate the ‘existing emoluments’ more particularly DA by way of the AICPI, the First Memorandum and the subsequent memoranda, issued, allegedly to clarify the same, without any reference thereto, quite apparently departs from the stipulation of the substantive law which was to follow the AICPI. To say the least, it is quite strange that the First Memorandum issued on the same day as the substantive law, deviates therefrom at the very inception. Such an action, in our view, cannot stand judicial scrutiny, and will be hit by ‘manifest arbitrariness’ for it fails to establish a link between the two i.e., the RoPA Rules and the First Memorandum. It does not show adequate determining principle in so far as it completely ignores the stipulation of AICPI within the RoPA Rules. As observed herein, doing so would have been permissible had the State carried out its own determinative exercise. The Memorandum dated 23rd February 2009 would also accordingly have to be held to be contrary to law”, the Bench observed.

Regarding to the issue of legitimate expectation, the Court held that legitimate expectation on the part of the respondents did arise in view of the change of law i.e., the enactment of RoPA Rules and its recognition of AICPI as the determinative factor for the computation of DA.

Accordingly, the Court allowed the appeals partly.

Cause Title: State of West Bengal & Anr. v. Confederation of State Government Employees & Ors. [Neutral Citation: 2026 INSC 123]

Appearances:

Appellants: Senior Advocate Karuna Nundy, Senior Advocate Kapil Sibal, Senior Advocate Abhishek Manu Singhvi, Senior Advocate Huzefa Ahmadi, Senior Advocate Kalyan Banerjee, Advocate on Record Mrigank Prabhakar, Advocate on Record Uddyam Mukherjee, Advocate on Record Kunal Mimani, Advocate on Record Shekhar Kumar, Advocate Prabir Chatterjee, Advocate Siddharth Sahu, Advocate Shiv Mehrotra, Advocate Rishika Rishabh, Advocate Shivangshi Mitra, Advocate Kallol Basu, Advocate Suman Banerjee, Advocate Ambu Bindu Chatterjee, Advocate Rajit Lal Moitra, Advocate Sudip Banerjee, Advocate Gobinda Chandra Halder, Advocate Adrija Chatterjee, Advocate Sudip Biswas, Advocate Shyam Divan, Advocate Mahima Cholera, Advocate Debanjan Mandal, Advocate Kunal Vajani, Advocate Avishkar Singhvi, Advocate Kartikey Bhatt, Advocate Tanish Arora, Advocate Aviroop Mitra, Advocate Deepan Sarkar, Advocate Aparajita Jamwal.

Respondents: Senior Advocate Bikash Ranjan Bhattacharyya, Senior Advocate Rauf Rahim, Senior Advocate Gopal Subramanium, Senior Advocate Nachiketa Joshi, Senior Advocate P.S. Patwalia, Senior Advocate Bansuri Swaraj, Advocate on Record Uddyam Mukherjee, Advocate on Record Mrigank Prabhakar, Advocate on Record Shekhar Kumar, Advocate on Record Dharmaprabhas Law Associates, Advocate Karuna Nundy, Advocate Prabir Chatterjee, Advocate Siddharth Sahu, Advocate Shiv Mehrotra, Advocate Rishika Rishabh, Advocate Shivangshi Mitra, Advocate Kallol Basu, Advocate Suman Banerjee, Advocate Ambu Bindu Chatterjee, Advocate Rajit Lal Moitra, Advocate Sudip Banerjee, Advocate Gobinda Chandra Halder, Advocate Adrija Chatterjee, Advocate Sudip Biswas, Advocate Firdous Samim, Advocate Ali Asghar Rahim, Advocate Gopa Biswas, Advocate Mohsin Rahim, Advocate Tania Tamanna, Advocate Siddhartha Banerjee, Advocate Bikram Banerjee, Advocate Chandrashekhar A. Chakalabbi, Advocate Abhijeet Upadhyay, Advocate Raghav Kohli, Advocate Siddhant Juyal, Advocate Joel George, Advocate Sudipta Dasgupta, Advocate Debapriya Mitra, Advocate Sinjhoni Chakraborty, Advocate Rajan Parmar, Advocate Rahul Singh Latwal, Advocate Siddesh Kotwal, Advocate Guddu Singh, Advocate Swapnil Pattanayak, Advocate Ana Upadhyay, Advocate Manya Hasija, Advocate Agnibha Chatterjee, Advocate T Illayarasu, Advocate Vadehi Kolhe, Advocate Deveshi Chand, Advocate Saurabh Guha, Advocate Madhav Sareen, Advocate Davesh Vashistha.

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