P S E B PATIALA Vs. SUDARSHAN PRASAD
LAWS(SC)-2006-5-62
SUPREME COURT OF INDIA (FROM: PUNJAB & HARYANA)
Decided on May 18,2006

P.S.E.B., PATIALA Appellant
VERSUS
SUDARSHAN PRASAD Respondents

JUDGEMENT

R.V.RAVEENDRAN, J. - (1.)THESE appeals are filed against the judgments of the Punjab & Haryana High Court in the following cases: JUDGEMENT_320_TLPRE0_2006Html1.htm 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 1.9.1998.
(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, of Respondents, in these appeals, were posted in the 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.
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: JUDGEMENT_320_TLPRE0_2006Html2.htm 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."

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.

(3.)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 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."

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 - 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 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 results, 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."



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