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PETITIONER: ASSOCIATE BANK’S OFFICERS’ASSOCIATION

       Vs.

RESPONDENT: STATE BANK OF INDIA & ORS.

DATE OF JUDGMENT:       15/10/1997

BENCH: SUJATA V. MANOHAR, D.P. WADHWA

ACT:

HEADNOTE:

JUDGMENT: [With Writ Petitions {Civil} Nos. 763/89 and 819/90}                       J U D G M E N T Mrs. Sujata V. Manohar, J.      "Equal pay for equal work for both men and women is one of Directive Principles of State Police laid down in Article 39(d)  of   the  Constitution.  Article  37  makes  it  non- justiciable. Yet it must be borne in mind by the legislature while making  laws. In  Randhir Singh vs. Union of India and Ors. (1982  1 SCC 618), this Court construed Articles 14 and 16 in  the light of the preamble to the Constitution to read into their scheme the principle of equal pay for equal work. The principle  has since been applied in cases of irrational discrimination in  the pay-scales  of workers doing the same or similar  work in an organisation. It has not been applied when there is a basis an explanation for the difference.      Historical, equal  pay for work of equal value has been a slogan of the women’s movement. Equal pay laws, therefore, usually deal with sex-based discrimination in the pay-scales of men  and women  doing the  same or equal work in the same organisation. For  example, the  Equal Remuneration Act 1976 provides for  payment of equal remuneration to men and women workers and is meant to prevent discrimination on the ground of sex  against women in the matter of employment. The Equal Pay Act  1970 and the Equal Pay (Amendment) Regulations 1983 in Great  Britain  are  for  a  similar  purpose.  The  same doctrine has  also sought  to protect  disadvantaged  groups against similar  discrimination.  We  have  interpreted  and applied  the   doctrine  even   more   widely   to   prevent discriminatory pay-scales  within an  organisation which  is owned by  or is  an instrumentality  of the  State, provided that the different pay-scales exist in one organisation, are applied to employees doing work of equal value, and there is no rational explanation for the difference.      When the  same principle  is sought  to be  extended to compare pay-scales  in one  organisation with  pay-scales in another  organisation,   although  between  employees  doing comparable work,  the stretching  of the doctrine, if at all it is  done, must  be done  with caution  lest the  doctrine snaps.  Many   ingredients  go  into  the  shaping  of  wage structure in any organisation. Historically it may have been

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shaped by  negotiated settlements with employees’ unions, or through industrial adjudication. It may have been revised or reshaped with  the help  of expert  committees. The economic capability of  the employer also plays a crucial part in it; as also  its  capacity  to  expand  business  or  earn  more profits.  If  the  employing  organisation  functions  in  a competitive area,  it may,  if it  is  economically  strong, offer higher  wages than  its competitors doing similar work to attract  better talent.  Or it  may offer higher wages to the better qualified. A simplistic approach, granting higher remuneration to other workers in other organisations because another  organisation   has  granted   them,  may   lead  to undesirable results. Even within the same organisation, when the  differential   wage  structure   is  based  on  similar considerations, the  application of  the doctrine  would  be fraught  with   danger,  and   may  seriously   affect   the efficiency, and  at  times,  even  the  functioning  of  the organisation. The doctrine is designed to correct irrational and inexplicable  pay differentiation  which can  be  looked upon as discrimination against an employee or a given set of employees. It  is  easier  to  identify  such  discriminated groups when  the discriminated group is sex-based (women) or colour-based (Blacks  in the  USA) or caste-based (scheduled castes etc.): and more difficult to identify in other cases. But unless  there is  such identifiable  discrimination, the doctrine should  not be  applied.  Mere  difference  is  not discrimination.      In the  case before  us  the  Unions  of  employees  of various banks  which are  subsidiaries of  the State Bank of India have  claimed higher terminal benefits, better medical benefits and  extra increments  in their  pay-scale  on  the ground that  such benefits  are available  to the  employees holding equivalent  or similar  ranks in  the State  Bank of India.      The State Bank of India was constituted under the State Bank of  India Act,  1955. Under  the Act the undertaking of the Imperial Bank was transferred to the State Bank of India which was  the new  bank constituted  under the  said Act to carry on  banking business.  The Preamble  to the Act states that for  the extension  of banking  facilities on  a  large scale, more  particularly in the rural and semi-urban areas, and for  diverse other  public purposes  it is  expedient to constitute a  State Bank  of India and to transfer to it the undertaking of the Imperial Bank of India.      Four years  later, the  State Bank of India (Subsidiary Banks) Act,  1959 was  passed. The  Statement of Objects and Reasons states, inter alia, that the future of certain major State-associated banks  which are owned in part by the State Governments or with which such Governments have been closely associated, has  been under consideration for some time. The question has recently been comprehensively re-examined, with particular reference  to the  necessity for  making adequate and proper  provision for  the management  of treasuries and sub-treasuries in  the area  served by  these banks  and the need for  the expansion  of these  banks in these areas; and the view  of the banks themselves have been ascertained. The management and  the shareholders of the Bank of Bikaner, the Bank of  Indore, the  bank of Jaipur, the Bank of Mysore and the  Travancore   Bank  have   agreed  to  the  proposal  to reconstitute these  banks as subsidiaries of the State Bank. The reconstitution  on similar  lines of  the State  Bank of Saurashtra, the  Bank of  Patiala  and  the  State  Bank  of Hyderabad has also been agreed to.      The scheme for reconstitution provides for the transfer to and  vesting in  the State  Bank of  India of  the  share

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capital of  each of  the eight banks which have accepted the proposals.      Under Section  3 of the State Bank of India (Subsidiary Banks) Act,  1959, the  new banks are constituted. Section 4 provides that  every new  bank shall  be body corporate with perpetual succession  and a common seal and shall sue and be sued in  its name.  Under Section 7 all shares in the issued capital of  a new  bank shall,  on the  appointed day, stand allotted to the State Bank of India. Under Section 9, on the constitution of a new bank, all shares in the capital of the corresponding bank,  where such  corresponding  bank  has  a share capital,  shall stand  transferred to,  and shall vest in, the  State Bank,  free of  all trusts,  liabilities  and encumbrances. Section 11 deals with the transfer of services of employees  of existing banks. Under Section 24, the State Bank  may,   from  time   to  time,   give  directions   and instructions to  a subsidiary  bank in  regard to any of its affairs and business, and that bank shall be bound to comply with the directions and instructions so given. Subject o any such    directions    and    instructions,    the    general superintendence and conduct of the affairs and business of a subsidiary bank  shall, as from the appointed day, vest in a Board of  Directors who  may, with  the  assistance  of  the managing director,  exercise all powers and do all such acts and things  as may  be exercised or done by that bank. Under sub-section (3)  of Section  3, the  Board of Directors of a subsidiary bank  shall, in  discharging its  functions under this Act,  act on  business principles,  regard being had to public interest.      Section 25  deals with  the composition of the Board of Directors. The Chairman of the State Bank of India is the ex officio Chairman.  The managing  director is to be appointed under Section 25 by the State Bank of India after consulting the Board  of Directors  of the subsidiary bank and with the approval of  the Reserve  Bank. The  Board of Directors will have an  officer of the Reserve Bank nominated by that bank; not more  than five  directors to  be nominated by the State Bank, of  whom not more than three shall be officers of that bank; one Director from among the employees (Workers) of the subsidiary bank  to be  appointed as  set out  therein;  one Director from  amongst such employees of the subsidiary bank as are  not workmen,  to be appointed as set out therein and two directors  to be elected in the prescribed manner by the shareholders other  than the  State Bank.  The section  also provides for  a director  to be  nominated  by  the  Central Government in consultation with the State Bank.      Under Section  36,  a  subsidiary  bank  shall,  if  so required by  the State  Bank, act as agent of the State Bank at any  place in India for the purpose of certain businesses specified therein.  There  is  a  similar  provision  for  a subsidiary bank acting as an agent of the Reserve Bank if so required by the Reserve Bank.      Based on  these provisions,  it is  submitted before us that the  business of  each of the subsidiary banks is under the control  and management  of the State Bank of India and, therefore, the  employees of  the subsidiary banks should be considered as,  in effect,  employees of  the State  Bank of India. Sub  section (2) of Section 50, however, of the State Bank of  India (Subsidiaries  Banks) Act,  1959 provides  as follows:      "50(2): For  the removal of doubts,      it  is  hereby  declared  that  the      officers, advisers and employees of      a  subsidiary   bank,  in  whatever      capacity  engaged,   shall  not  be

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    deemed to  be officers, advisers or      employees of the State Bank for any      purpose, unless  otherwise provided      in the  contract  or  agreement  of      service  of   any   such   officer,      adviser or employee."      Despite  this   section,  it   is  contended   by   the petitioner-associations  that   since  the  subsidiary  bank shares a  common chairman of its Board of Directors with the State Bank  of India,  and since the State Bank of India has the power  to nominate  five directors  on the  Board of the subsidiary bank  and has  power to  give directions  to  the subsidiary bank,  the subsidiary  bank in fact, is a [art of the State  Bank of India. In the alternative it is under the control of  the State  Bank of India. Hence the employees of the subsidiary banks are entitled to claim the same benefits as the employees of the State Bank of India.      In its  counter affidavit  the State Bank of India has, however,  pointed   out  that  the  subsidiary  bank  is  an independent bank.  Undoubtedly it  is a  subsidiary  of  the State Bank  of India and the State Bank of India owns almost the entire  shareholding of  the subsidiary  banks. It  also exercised certain  control  over  the  subsidiary  banks  as provided in  the said  Act. But  the State Bank of India was constituted much  earlier under  a different  Act. The other banks have  not amalgamated  with the  State Bank  of India. These other  banks or  each of them remain a distinct entity with their  own Board  of Directors.  They  have  their  own capital structure,  their own  business, their own employees and their own individual identity. The associated banks were constituted as  subsidiaries instead  of  being  amalgamated because it was considered desirable to maintain the separate character  of  the  State-associated  banks  as  also  their existing  contacts   and  traditions.   It  was   considered desirable to prevent sudden changes in their working methods and policies  and at  the same  time to  offer them adequate incentives on  the development  of their respective areas of operation. It  is the  stand of the State Bank of India that they play  the rule  of an  enlightened stock-holder. In the administration of  their affairs  the subsidiary  banks  are autonomous and  the State  Bank of India in any event cannot be considered  as an employer of the staff of the subsidiary banks. Section  50 quite  clearly provides that the officers and employees  of a  subsidiary bank cannot be considered as the officers  and employees  of the  State Bank of India for any purpose.  The officers  and employees of subsidiary bank are governed  by the  terms and  conditions of employment of the subsidiary  bank by which they are employed and they are borne on  the cadre  of employees  of the  subsidiary  bank. These submissions have considerable merit.      Even with  regard  to  the  Board  of  Directors  of  a subsidiary bank,  the State Bank of India has contended that they have power to nominate five Directors. Out of them, the three non-official  Directors who are nominated by the State Bank of India represent various areas of specialisation such as agriculture,  accountancy, small scale industry etc, with a view  to  ensure  that  the  Board  of  Directors  of  the subsidiary banks  is broad-based  and is in a position to be really useful to the bank. A nominee Director does not cease to be  independent and must act in the best interests of the subsidiary bank.  The policies are laid down in consultation with the  Reserve Bank of India and the Government of India. The State Bank of India, in turn, is also subject to similar control by  the  Reserve  Bank  of  India  and  the  Central Government.

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    The narrow  question  which  we  have  to  consider  is whether looking  to the  nature of  the relationship between the State  Bank of  India and  each of the subsidiary banks, can the  employees of  the subsidiary banks be considered as employees of  the State  Bank of India? In view of the clear provisions of  Section 50,  it is  not possible to come to a conclusion that  the employees  of the subsidiary banks are, for all  practical purposes,  employees of the State Bank of India. Even  dehors Section 50, looking to the scheme of the State Bank  of India  (Subsidiary Banks)  Act, 1959,  it  is quite clear that each of the subsidiary banks is set up as a separate bank.  Each subsidiary  bank has  its  own  capital structure, its own operations. Each of the banks has its own staff  with   its  own  terms  and  conditions  of  service. Therefore, the  employees of  the subsidiary  bank cannot be treated as  the employees  of the  State Bank  of India. The employees of  the subsidiary banks are not entitled to claim the same  benefits as the employees of the State Bank on the ground that  they are, in effect, the employees of the State bank of India.      It  is   submitted  before   us  by   the   petitioner- associations in the alternative, that in any event, they are employees of  an  organisation  which  does  work  which  is similar  to   the  State  Bank  of  India.  The  duties  and responsibilities of their officers and employees are similar to the  duties and  responsibilities  of  the  officers  and employees of  the State  Bank of India. Hence they should be given the  same terminal benefits, the same medical benefits and the same increments as the officers and employees of the State  Bank  of  India.  IN  the  case  of  Union  Territory Chandigarh v. Krishan Bhandari (1996 11 SCC 348), this Court held that  the doctrine  of equal  pay  for  equal  work  is inapplicable when  the  alleged  discrimination  is  between employees of  two different  authorities  functioning  as  a State Under  Article 12. In the present case the petitioners are faced  with a further difficulty. They claim parity also regarding other  benefits. There  is no  disparity  in  pay- scales.      Looking briefly  at the  nature  of  the  grievance  in respect of  terminal or  retiral benefits,  the employees of the subsidiary  banks are  entitled  to  provident  fund  or pension, and they are also entitled to service gratuity. The employees of  the  State  Bank  of  India  are  entitled  to provident fund  and  pension.  They  are  also  entitled  to gratuity under the payment of Gratuity Act. According to the petitioners. the  employees of  the subsidiary  bank  should also be  given pension  in addition to the terminal benefits which they  already have. It is, however, pointed out by the State  Bank  of  India  that  the  terminal  benefits  in  a subsidiary bank  are comparable  to the terminal benefits in nationalised banks,  where also  there is  an option between pension or  contributory provident fund. Regarding gratuity, the employees of a nationalised bank are entitled to service gratuity or  gratuity as  per the  Payment of  Gratuity Act, whichever is higher, which is the position in the subsidiary banks also.  Looking to this comparative position, we do not see any reason to infer discrimination.      In respect  of medical  benefits,  the  hospitalisation scheme in  the State Bank of India provides for 100% payment for self  and 75% payment for the family which is similar to the hospitalisation scheme for subsidiary banks. However, in respect of  certain operations  the  ceiling  on  admissible amounts is  different. For  home treatment,  the  subsidiary banks have  prescribed ceiling  on the amount payable. It is not as  if no  medical benefits  are provided  to subsidiary

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banks’ employees.  The employees  are  provided  substantial medical benefits,   though  they are  not identical with the medical benefits given by the State Bank of India.      With regard  to pay-scales, the grievance which is made before us  as of now, is only with regard to four increments which are  given to  the officers of the State Bank of India at the  time of  joining though the pay-scales are the same. This is  not done in the subsidiary banks. The State Bank of India has  submitted  that  in  order  to  attract  suitable persons, looking  to  the  scale  of  their  operations  and responsibilities  involved,   this  has   been   done.   The subsidiary banks  are not  in a comparable position. Nor are their scales  of operation  comparable to  the State Bank of India.  The  responsibilities  of  their  officers  are  not comparable in  view of  the  extent  of  operations  of  the subsidiary banks.  In these circumstances, if the State Bank of India has offered increments to persons joining the State Bank of  India, the  same cannot  be given  to the  officers joining the subsidiary banks.      All the  grievances centre around these benefits. We do not think  that the  State Bank  of India and the subsidiary banks are  in a  comparable position  in this  regard. It is also submitted  by learned  counsel for  the State  Bank  of India that  the benefits which are extended to the employees of the  subsidiary banks are negotiated settlements with the unions of  their employees. The benefits which are conferred are in  accordance  with  the  agreements  which  have  been reached  between   the  unions  of  the  employees  and  the management of each bank. In these  circumstances, we fail to see how  the principle  of "equal pay for equal work" can be applied in the present set of facts.      The writ  petitions are,  therefore,  dismissed.  There will be no order as to costs.