Dearness Allowance Is An Enforceable Right: Supreme Court Constitutes Justice Indu Malhotra Committee To Oversee Arrears Payment For Employees In West Bengal

The Supreme Court has affirmed that the right to receive Dearness Allowance (DA) is a legally enforceable right for the employees of the West Bengal Government.

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.

To balance the employees' statutory rights with the State’s financial autonomy, the Court mandated the payment of arrears from 2008 to 2019 and constituted a high-level committee, chaired by former Supreme Court Judge Justice Indu Malhotra, to finalize a binding payment schedule by March 6, 2026.

The Court heard the matter pertaining to the Dearness Allowance and other allowances for the employees under the West Bengal Government. The Court heard the arguments at length and reserved the judgment on September 8, 2025.

The Bench comprising Justice Sanjay Karol and Justice Prashant Kumar Mishra observed, "Now the directions part we have read is this. A purpose to the above, we pass the following order. The appeals are partly allowed on two issues...To receive a Dearness Allowance is a legally enforceable fact that has accrued in favour of the resplendent employees of the State of West Bengal. Given its incorporation in ROPA rules, the AICPI is the standard to be followed by the Appellant state of West Bengal for determining of existing emoluments. The employees of the appellant state shall be entitled to receive the arrears in accordance with this judgment for them from the 2008 till 2019...On 16th of May we had passed following interim order. We have extracted that interim order where we had said that amount be immediate some amount be immediately disbursed. The interim directions issued are herein shall be complied with immediately...On account of subsequent change in law if any, any amount that would be disbursed in compliance of the judgment shall not be liable to be recovered. Considering the financial implications involved and also recognizing the need for structured release of the funds so as to not prejudicially impact states, while at the same time balancing the rights of the employees to receive the emoluments due to them. We find it fit to constitute a committee to monitor the implementation of the directions..."

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.

In order to implement the judgment, the Supreme Court constituted a committee consisting of several distinguished members. The Court appointed Justice Indu Malhotra, a former Judge of the Supreme Court, Justice Tarlok Singh Chauhan, former Chief Justice of the Jharkhand High Court, and Justice Gautam Bhaduri. Additionally, the Court included the Comptroller and Auditor General of India, or a senior-most officer nominated from that establishment, to provide financial and auditing expertise.

The Court defined the committee’s primary mandate as working in close consultation with state authorities to determine the exact total amount of arrears the State of West Bengal must pay. Furthermore, the committee received the responsibility to establish a binding payment schedule and to periodically verify that the disbursements match the determined amounts. The Court ordered that the formal exercise of calculating the arrears and finalizing the payment timeline must be completed no later than March 6, 2026.

The Court discussed thirteen questions, which are as follows:

1. What is the scope and extent of the power under Article 309 of the Constitution of India?

2. What is the scope and extent of the rules framed by the apparent state that is the ROPA rules and the first memorandum dated February 23, 2009?

3. Whether the notifications official memoranda issued subsequent to the clarificatory memoranda dated 23rd of February 2009, that is 9th of December 2009, 6th of April 2010, 23rd of October 2010, 12th of December 2011, 31st of December 2012, 16th of December 2013, 9th of January 2015, and 14th of December 2015 issued by the Appellant-State revising the rates of D.A.R. in consonance with the ROPA rules?

4. Given that the definition of existing emoluments in ROPA is identical to the central government rules, that is legislation by incorporation, could the state have then deviated from the index being adhered to by the central government? In other words, was the incorporation of AICPI number a one-time measure?

5. Whether D.A. as a concept is static or dynamic, and whether,r by the act of the legislation, recognition of a particular index does the character thereof change?

6. Whether the actions of the Appellant-State are initiated by manifest arbitrariness, as also negatively affecting the legitimate expectation accruing in favor of the employees?

7. Whether the adoption of the AICPI would render the distinct legislative domain number List I Entry 70 and List II Entry 41?

8. What is the impact of the direction of the tribunal for the state to follow the AICPI, insofar as the financial autonomy of the state is concerned, in the federal structure of the country?

9. What is the effect of the findings returned by the High Court in its first round of litigation?

10. Do the Respondent-employees have any right to receive D.A. twice a year in line with the pattern of the Central Government?

11. Is the financial capacity of the state grounds available to deny the payment of D.A. if, under the existing rules, the same is held to be a legal right? Since the question involved in this list is the payment of D.A., which is an aspect of the fiscal policy of the State, what is the extent of judicial review which is permissible?

12. Can D.A.be said to be a fundamental right under Article 21 of the Constitution of India as held by the High Court? 

13. Was the claim of the respondent affected by delay and matches as such? 

The Court observed, "We have said that Article 309 we have extensively discussed and the principles enunciated are non-exhaustive...Questions number two and three, we have come to the conclusion that in some it is there by concluding that D.A. by its very nature is non-static, fluid and subject to change. How that change is to be carried out is through the AICPI. The first memorandum is also the subsequent memorandum to the fatal flaw that they do not make reference to the AICPI, which is absolutely essential to the determination of the D.A., which in turn is indispensable to the computation of the total amount of existing monuments...As a necessary follow-up, it would be observed that the incorporation of AICPI cannot be termed as a one-time measure, and once D.A. was defined using it to take a different path would be impermissible in law. So questions two, three,and  four are answered accordingly."

"Now in so far as question five is concerned, it has got two facets as we read. One is with regard to the arbitrariness on the part of the State, and the second is withregard to the legitimate expectation of the employees. And on both these issues, we have said that keeping with the judgments referred to above , the principle of manifest arbitrariness under Article 14 refers to legislation that is capricious and rationally lacking reason principle or excessive and disproportionate, such arbitrariness which shapes both subordinate and plenary legislation, as in the present fact,s since the legislative exercise did incorporate AICPI into the framework. Deviation, therefore, from without any basis or discussed, never falls in the lack of reason principle prone to manifest arbitrariness passed from legislative competence. For the apparent state to have deviated from the recognized position to something else without laying the groundwork, therefore, compromises the exercise of rendering it capricious."

Regarding the alleged conflict between the Union and State legislative powers, the Supreme Court dismissed the State’s argument as a "figment of the imagination." The Court observed that the argument appeared to have been "conjured up in thin air," as there was no evidence of the Union imposing conditions on the State. Instead, the Court clarified that the power being exercised was solely by the State through the Governor, as permitted under the constitutional scheme of Article 309.

"Now into the effect of the signing of the first round of litigation we have said that yes it has conferred a right on the employees whether the respondents were entitled to DA twice a year. Here we are in agreement with the submissions made by the by the Appellants that DA cannot be given twice a year. So to this it is allowed", the Court held.

Addressing the findings from the first round of litigation, the Court confirmed that the previous proceedings had indeed conferred a legal right upon the employees to receive Dearness Allowance. However, the Court sided with the State on the specific frequency of payments, ruling that the employees were not entitled to receive DA installments twice a year. To this limited extent, the Court allowed the State’s appeal.

On the subject of fiscal policy and judicial review, the Court asserted that once a specific right is conferred upon an individual, the State’s fiscal policy cannot be used as an excuse to obstruct the disbursement of that right. Regarding the High Court’s classification of DA as a fundamental right under Article 21, the Supreme Court noted that both parties had agreed not to press the issue. Consequently, the Court declined to give a definitive finding on the matter, leaving the legal question open for determination in a future appropriate case.

Finally, the Court outlined the immediate steps for financial redress, mandating that the first installment of arrears be paid by March 31, 2026, following the committee's determination. The Court directed the State to provide the committee with all necessary facilities and logistical arrangements to carry out its work. Furthermore, the Court ordered that all expenses related to the committee's operations must be borne entirely by the State of West Bengal.

"Now, fiscal policy in judicial review we have elaborately discussed that once there is a right which is conferred upon a person then fiscal policy cannot be come in the way of the disbursement of such rights. Now, whether DA allowance is the fundamental right. We have said that in terms of the impugned because it was not given up really. In terms of the impugned judgment the high court held the payment of DA was a facet of Article 21 of the constitution of India. Before this court however the opposing parties have jointly agreed that none will press this question either way. That being the accepted position we do not give any finding thereupon and leave the question open to be decided in an appropriate case", the Court observed.

Background

The State Government of West Bengal constituted the 5th Pay Commission in 2008 to examine employee emoluments and recommend principles for granting DA based on the cost-of-living index. The Commission recommended that the State fall in line with the Central Government's pattern by sanctioning two DA installments each year to protect employees from inflation. The State accepted these recommendations and promulgated the ROPA Rules, 2009, making DA a part of the "existing emoluments".

The Confederation of State Government Employees filed an application before the West Bengal Administrative Tribunal (Tribunal), alleging that the State delayed DA payments and acted in a discriminatory manner.

The Tribunal initially dismissed the application in 2017, ruling that DA was an absolute prerogative of the State. On appeal, a Division Bench of the High Court set aside that dismissal in 2018, holding that the claim for DA was a legally enforceable right. The matter returned to the Tribunal, which subsequently directed the State to evolve norms for releasing DA based on the All India Consumer Price Index (AICPI) and to pay all arrears. The State then challenged this new Tribunal order through the writ petition before the High Court.

The High Court affirmed that the right to receive DA accrued as a statutory right under the ROPA Rules and rose to the level of a fundamental right under Article 21 (Right to Livelihood). The High Court held that providing different DA rates for employees posted in different locations (Delhi/Chennai vs. West Bengal) constituted arbitrary discrimination. The High Court dismissed the State's plea of financial inability, noting that the government could not deny legitimate claims that affected the dignity and livelihood of its workforce. The High Court dismissed the State's petition and ordered the government to release all due DA and arrears within three months. Hence, the said judgment was assailed before the Supreme Court. 

The Bench had also directed the State of West Bengal to release at least 25% of the amount due and payable to all the employees in terms of the impugned judgment.

The Court had previously ordered, "We find the Tribunal and the High Court to have adjudicated the right of the employees to receive Dearness Allowance pursuant to the 5th Pay Commission. The paucity of funds is a ground which stands negated both by the Tribunal and the High Court. Whether or not the right to receive Dearness Allowance is a fundamental right is an issue, amongst others, this Court is called upon to consider. We shall do so. However pending such consideration, we are of the considered view that the employees need not be kept waiting endlessly to receive the money in question."

Cause Title: State of West Bengal & Anr. v. Confederation of State Government Employees & Ors. [Special Leave to Appeal (C) No(s).22628-22630/2022]

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