Supreme Court Directs Phased Payment of Arrears to Regional Rural Bank Employees under National Industrial Tribunal Award. Modified Scheme Approved with Instalments and No Interest, Balancing Employee Entitlements and Financial Viability of Sponsoring Banks.

Case Note & Summary

The matter arose out of applications for directions filed in two writ petitions pending before the Supreme Court, in which employees' associations representing the staff of Regional Rural Banks had originally sought parity in emoluments with nationalized commercial banks. The litigation spanned nearly a decade and involved the implementation of an industrial award concerning wage scales and arrears. The Supreme Court had earlier disposed of the writ petitions on September 1, 1987 by directing the Central Government to constitute a National Industrial Tribunal to adjudicate the pay, allowances, and benefits of Regional Rural Bank employees. The Tribunal was constituted on November 26, 1987 and delivered its award on April 30, 1990, holding that up to August 31, 1987 the employees should receive pay scales and allowances comparable to State Government employees in similar posts, and from September 1, 1987 they should be placed on par with employees of corresponding levels in their respective sponsor banks. The Tribunal left the equation of posts to the Government of India, which appointed an Equation Committee, accepted its report, and issued implementing circulars on February 22, 1991. Although salaries were paid in revised scales from January 1, 1991, arrears for the earlier period remained unpaid. The total liability was stated to be about Rs. 220 crores. The applicants approached the Supreme Court seeking directions for implementation of the award and payment of arrears. On September 12, 1994 the Court directed the Union of India and NABARD to prepare a scheme in consultation with the employees' association. A committee under K. Basu submitted a scheme on February 22, 1995 proposing payment of arrears in instalments, with funding by soft loans from the Government of India and a moratorium on repayment. The Union of India, through an affidavit dated February 20, 1996, opposed the loan route as infeasible and inappropriate, citing the varying financial condition of Regional Rural Banks, the need for equity infusion as part of a restructuring package, and the strain on budgetary resources. It proposed that 53 identified Regional Rural Banks pay arrears as per the Basu Committee scheme, that at least 50 more banks be identified for restructuring and commence payment within six months, and that the remaining banks pay in four equal annual instalments. The core legal issues before the Court were whether the Tribunal award had been implemented as to arrears, what scheme should govern discharge of the liability, and whether interest should be payable. The Court, after considering the Basu Committee report and the Union of India's affidavit, directed a phased discharge of arrears up to December 30, 1990. It ordered that 53 banks pay as per the Basu Committee scheme effective February 20, 1996; that banks in the second category pay as per the scheme effective August 20, 1996; and that the remaining banks pay in four instalments of 25% each, with the first payable by August 20, 1997 and subsequent instalments yearly. For employees who retired or deceased before the scheme, lump sum payment was directed; for those retiring after, two instalments. The Court clarified that no interest would be payable on the arrears, thereby balancing the employees' right to arrears with the financial viability of the banks and the government's fiscal constraints. The judgment thus provided a comprehensive administrative scheme for clearing the outstanding dues while acknowledging the need for restructuring weaker Regional Rural Banks.

Headnote

Issue of Consideration

Final Decision

The Supreme Court directed that the liability for payment of arrears to Regional Rural Bank employees for the period up to December 30, 1990 be discharged as follows: 53 identified banks pay as per Basu Committee scheme operative from February 20, 1996; banks under para 4(ii) pay as per scheme operative from August 20, 1996; remaining banks pay in four equal annual instalments of 25% starting August 20, 1997; employees in categories (b) and (c) of Basu Committee report paid lump sum by specified dates; employees in categories (d) and (e) paid in two instalments according to bank category; no interest payable on arrears.

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