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CASE NO.: Appeal (civil)  7586-87 of 2002

PETITIONER: P. S. E. B., Patiala & Anr.                      

RESPONDENT: Sudarshan Parshad & Ors.                         

DATE OF JUDGMENT: 18/05/2006

BENCH: K. G. Balakrishnan & R. V. Raveendran

JUDGMENT: J U D G M E N T WITH

CA Nos. 7588-89/2002, 7590-91/2002 and 7592-93/2002  

RAVEENDRAN,  J.

       These appeals are filed against the judgments of the  Punjab & Haryana High Court in the following cases :  

S.No.

Civil Appeal  No. Case No. before  High Court Date of  Judgment of  High Court

i) 7586-87/2002 CWP 12558/1995 14.5.1998 ii) 7588-89/2002 CWP 12557/1995 14.5.1998 iii) 7590-91/2002 CWP 12556/1995 14.5.1998 iv) 7592-93/2002 CWP 13158/1995 14.5.1998

These appeals involve a common question, as to protection of  higher House Rent Allowance drawn upto 31.8.1988 by the  employees of Punjab State Electricity Board, after the revision  of such allowance with effect from 1.9.1988.  

2.      The appellant is the Punjab State Electricity Board  (hereinafter referred to as ’the Board’). The respondents  are/were the employees of the Board. At the relevant point of  time, the Respondents, in these appeals, were posted in the

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towns of Doraha and Payal situated near Ludhiana. Upto  31.8.1988, the respondents were being paid HRA as applicable  to Ludhiana city (class ’A’ city) in view of the proximity of  those towns (Doraha and Payal) to Ludhiana, as per Board’s  policy that employees posted in places which were within a  radius of 8 km from the periphery of a Municipal Corporation  were to be paid the same HRA as applicable to those employed  in places within such Municipal Corporation limits.  

3.      The State Government revised the rates of HRA vide  circular dated 30.8.1988, implementing the recommendations  of the Third Pay Commission. The Board adopted the revised  rates of HRA introduced by the State Government. By Order  No.142/FIN.PRC-1988 (Finance Circular No. 11/89) dated  7.3.1989, it classified the cities and towns in Punjab into four  classes [Class A, Class B, Class C and Class D] and revised  the rates of house rent allowance for various pay ranges  admissible in different classes of cities/towns. We extract  below the relevant portion of the said order dated 7.3.1989 :-  

"(ii)   The rates of house rent allowances for various pay  ranges admissible in different classes of cities/towns  shall be as under :  

Pay Range Class ’A’  City Class ’B’  City Class ’C’  City Class ’D’  Town  

Rs. Rs. Rs. Rs.  750-1249 200 150 100 75 1250-1749 300 225 150 100 1750-2249 400 300 200 150 2250-2749 500 375 250 175 2750-3249 600 450 300 225 3250-3749 700

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525 350 250 3750-4249 800 600 400 300 4250-4749 900 675 450 325 4750-5249 1000 750 500 375 5250  onwards 1000 750 500 375

The amount of house rent allowance being drawn under  the existing orders by the employees at higher rates than  those specified above shall be protected till their rate of  house rent allowance gets adjusted in their revised rates.   (iii)   The house rent allowance shall no longer be admissible at  the places falling within 8 kms radius of the  municipal/outer limits of the classified cities/downs, save  in those cases where house rent allowance is admissible at  the place of posting itself.  

(iv)    The eligibility of house rent allowance of an employee  shall be determined with reference to the place of posting  of the employee.  

The other existing terms and conditions regarding the grant of  house rent allowance shall continue to be in force.  

4.      By circular dated 10.5.1989, the Board ordered that its  employees who are entitled to rent free accommodation, when  not provided or allotted with such accommodation, shall be  allowed 5% of the basic pay in addition to the normal HRA  admissible at the place of posting. By another circular dated  10.5.1989, clause (iii) in the order dated 7.3.1989 was  substituted with effect from 1.9.1988 to the effect that house  rent allowance of the employees is also admissible to the  places falling within 8 km radius of the periphery-  municipal/outer limits of the classified cities/downs.  

5.      In view of different interpretations of the HRA orders by  different offices, the State Government issued a clarificatory  Circular dated 19.9.1990 (adopted by the Board by Finance  Circular No. 25/1992 dated 29.5.1992), relevant portions of  which are extracted below :  

"a)     Government employees entitled to rent free  accommodation when not provided/allotted such  accommodation shall be allowed payment equal to the  house rent charged by the Government from the employees

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for Government accommodation i.e. 5% of the basic pay in  addition to the normal house rent allowance, if admissible  at the place of posting. This implies that the employees  posted at the place in the belt of 16 kms. from the  International Border who are entitled to rent free  accommodation as also other employees who are otherwise  entitled to rent free accommodation will get 5% of the basic  pay in addition to the house rent allowance if the place of  posting of the employees falls, in Class A, Class B, Class C,  and Class D Cities, as the case may be in accordance with  the instructions contained in the Department of Finance  letter No. 10/77/88/FPI/8014 dated 30th Aug. 1988. It is  made clear that the amount of house rent allowance of First  class cities admissible before 1.9.1988, to the employees  posted in the belt of 16 kms. from the International Border  is not covered within the protection of the House Rent  Allowance, as this amount of House Rent Allowance was  admissible in lieu of rent free accommodation only.

b)      In the rural area, house rent is not admissible to the  Government employees who, prior to 1.9.1988, were  entitled to house rent allowance of first class cities or  second class cities, as the case may be. The Govt.  employees posted in the rural areas who are entitled to rent  free accommodation when not provided such  accommodation are entitled to 5% of the basic pay, in  addition to rural area allowance and nothing more. In view  of this position, the employee posted in rural area, who,  prior to 1.9.1988, were drawing house rent allowance in  accordance with the earlier instructions in lieu of rent free  accommodation are not entitled to be given any protection  of amount of house rent allowance which they were  claiming previously."

6.      Some of employees of the Board filed a writ petition  before the Punjab and Haryana High Court alleging that they  were not being extended the benefit of protection of higher  HRA drawn upto 31.8.1988, granted under the Circular dated  7.3.1989 and seeking a direction to pay the protected (higher)  HRA as drawn by them as on 31.8.1988. The said writ petition  (W.P. No. 879/1992 \026 Beant Singh & Ors. Vs. Punjab State  Electricity Board) was disposed of by order dated 23.7.1992.  We extract below the relevant portion of the said order :  "The language of the above provision is very clear. All  these employees who are working at places falling  within 8  kms radium of the periphery of the Municipality of the  classified cities and towns are entitled to house rent  allowance.  

The grievance of the petitioners is that instead of  calculating the distance from the periphery or outer limits  of the classified cities or towns, the distance has been  calculated from Octroi Post and consequently, though the  employees were eligible for the House Rent Allowance,  they were denied of the benefit. In support of his  submission, the learned counsel relied upon annexure R-4  produced by the respondents which is a certificate issued  by the Deputy Commissioner, Ludhiana. It is seen from the  said annexure that the Deputy Commissioner has calculated  the distance from the Octroi Post and has specified the  distance from the Octroi Post concerned.  

The learned counsel for the Board submitted that the octroi  posts are generally situated on the periphery of the town

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concerned, therefore, the distance calculated from that  point is correct. The learned counsel for the petitioners,  however, contended that the octroi posts in many cities are  situated in the middle of the town or cities, as the case may  be, and therefore, in accordance with the order dated 10th  May, 1989, the distance is to be calculated only from the  periphery of the classified cities or the town.  

The question as to whether the octroi posts itself are located  in periphery or not, is a matter to be got verified physically.  However, it should be stated if the periphery of the  classified town or cities is beyond the octroi posts then the  distance has to be calculated from the periphery and not  from the octroi posts. In the result, we allow the petitions  and make the following order :-  

A direction shall issue to the respondent- board to calculate the distance of each of the  place where the employees working, from  the periphery of the classified cities or towns  and then on that basis to decide as to  whether the concerned employees are  entitled to the House Rent Allowance.  

After ascertaining the distance, if all or any of the  petitioners are entitled to the payment of the House Rent  Allowance, it shall be paid to each of the petitioners and the  arrears payable from the date of entitlement shall also be  paid. Amount already paid in pursuance of the interim  order shall be adjusted. The time for compliance is six  months."

7.      In pursuance of a query from the Board,  it would appear  that Deputy Commissioner-cum-Collector, Ludhiana, issued a  certificate dated 29.3.1993 to the Board certifying that the  distance of Doraha and Payal from the outer periphery of  Ludhiana was 10 and 18 kms respectively. As they were  beyond 8 km from Ludhiana, the Board was of the view that  the HRA applicable to Ludhiana (class ’A’ city) could not be  paid to the employees working at Doraha and Payal, and that  as the said two towns were shown as class ’D’ towns in the  order dated 7.3.1989, the employees of Board posted at Doraha  and Payal will be entitled to lesser rate of HRA applicable to  class ’D’ towns.  

8.      Some employees again approached the High Court in  W.P. No. 14529 and 14920 of 1994 seeking protection of  higher HRA. The High Court  disposed of the writ petitions,  permitting the respondents herein to file representation/s, and  to treat the writ petition itself as the representation, if no  separate representation was filed, and to dispose of the claims  by a speaking order. The High Court also directed that till such  orders were made, deduction of HRA shall remain stayed and  no recovery shall be made from the employees. It further  directed that if the representations were decided against the  affected employees, the amount drawn on the basis of the said  orders shall be recoverable in future.  

9.      The Board, accordingly, considered the representations  of the Respondents and rejected the same by order dated  23.6.1995 holding as follows :    "It has been found that the case of the petitioners for  allowing protection of the House Rent Allowance drawn by  them prior to 1.9.1988 is not covered under the above  instructions, as their station postings do not fall  within 8

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kms radius of the periphery of Municipal Corporation,  Ludhiana. So,  the claim of the petitioners for allowing  protection of the same allowance is not tenable, and the  representation is disposed of accordingly."  

10.     The respondents herein challenged the said order dated  23.6.1995 in several writ petitions with a further prayer that  the HRA that was being paid to them up to 31.8.1988, should  be protected. The said writ petitions were allowed by the  impugned orders dated 14.5.1998 with a direction that the  HRA that was admissible to respondents prior to 31.8.1988  shall be protected. The High Court followed the decision of  this Court in Mohinder Singh v. State of Punjab [SLP (c)  No.9149 of 1992 decided on 21.4.1995], in allowing the writ  petitions. The said orders are challenged by the Board in these  appeals by special leave.  11.     The appellant contends that though earlier Doraha and  Payal had been classified as category ’A’ for the purpose of  admissibility of HRA, having regard to their proximity to  Ludhiana, after the revision by circular dated 7.3.1989,  payment of HRA at the higher rates applicable to Ludhiana  could not be continued, as both Doraha and Payal fell under  category ’D’ towns, with effect from 1.9.1988. According to  appellants, the respondents are not entitled for the higher HRA  which was being paid till 31.8.1988, for the following three  reasons : (i)     Doraha and Payal were situated at a distance of 10 kms  and 18 kms from the periphery of Ludhiana and  therefore, the benefit which was earlier being given on  the assumption that they fell within a radius of 8 kms of  periphery of Ludhiana, could not be continued.  

(ii)    Even assuming that the two towns (Doraha and Payal)  were situated within a distance of 8 kms from the  periphery of Ludhiana, as Doraha and Payal were  separately classified as category ’D’ towns under the  order dated 7.3.1989, their proximity to Ludhiana  became irrelevant.  

(iii)   The protection  of HRA was granted only with reference  to the cities/towns which were already specified for  purposes of HRA prior to the circular dated 7.3.1989;  and as only the cities mentioned in classes ’A’ and ’B’  under the circular dated 7.3.1989 were earlier  recognized as cities to which HRA was applicable, the  protection was available only in regard to those cities  which fell under classes ’A’ and ’B’ under the order  dated 7.3.1989 and not to other cities/towns which were  newly included in classes ’C’ and ’D’ under the order  dated 7.3.1989.  

12.     The question whether Doraha and Payal are situated  within a distance of 8 kms within the periphery of Ludhiana  (as contended by Respondents) or beyond 8 kms from  Ludhiana (as contended by Appellants) is a disputed question  of fact. If they are situated within 8 kms of periphery of  Ludhiana, then there is no doubt that HRA applicable to  Ludhiana city would apply to Doraha and Payal in view of the  substitution of clause (iii) of the circular dated 7.3.1989 by  circular dated 10.5.1989. But it may not be necessary to  examine this disputed question of fact. For the purposes of  these appeals, we may assume that the towns of Doraha and  Payal are situated beyond 8 kms from Ludhiana city as  contended by the appellant and therefore, the HRA is  admissible only at the rates applicable to class ’D’ towns and

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not any higher HRA. But even then, in view of clause (ii) of  the order dated 7.3.1989 which protects the HRA at higher  rates already being drawn upto 31.8.1988, under the existing  orders, such higher HRA stands protected, till the rate of HRA  gets adjusted in their revised rates. Therefore, even if the rate  of HRA payable to employees at Dohara and Payal, is lowest  as the said towns fall under class ’D’ under the order dated  7.3.1989, having regard to the fact the respondents working in  those towns were being paid a higher HRA prior to 1.9.1988,  they would be entitled to the protection of such higher rate of  HRA. Protection of higher HRA under clause (ii) of the order  dated 7.3.1989 was recognized and accepted by this Court in  Mohinder Singh vs. State of Punjab [CA No. 5124/1995]   decided on 21.4.1995. We extract below the short order passed  in the said case : "Leave granted.

These appeals impugn a common judgment and order of the  High Court of Punjab and Haryana. The only question  urged in these appeals is in relation to the house rent  allowance (H.R.A.) payable by the State of Punjab to its  employees classified in the A, B, C, D categories of a  circular dated 30th August, 1998.The rates of H.R.A. were  thereby revised. A proviso stated that the HRA.being drawn  by employees at rates higher than those specified in the  circular "shall be protected, till their rate of HRA. gets  adjusted in these revised rates".  It is not in dispute that this  proviso protects the HRA. that is being drawn if it is at a  rate higher than that prescribed by the circular. The  protection enures until the rate specified in the circular is  enhanced to a rate higher than that presently drawn. In view of this undisputed position, the appeals are allowed  and the judgment and order of the High Court is set aside to  the extent aforesaid. The State Government shall give such  protection to its appellant employees."

13.     The decision in Mohinder Singh would squarely apply to  the facts of this case. Clause (ii) of the Order dated 7.3.1989  clearly protects the higher HRA drawn by the employees of the  Board upto 31.8.1988. Neither the clarificatory circular dated  19.9.1990 of the State Government (adopted  by the Board by  circular dated 29.5.1992),  nor clause (iii) of the circular dated  7.3.1989 as substituted by circular dated 10.5.1989, nor the  fact that Doraha and Payal were recognized as class ’D’ towns  under the circular dated 7.3.1989, will affect the applicability  of the protection clause.  

14.     We, therefore, find no reason to interfere with the  impugned orders. The appeals are, therefore, dismissed.