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The Supreme Court noted that there is no obligation for the State Government to always adopt the Dearness Allowance as revised by the Central Government. The bench led by Justice R. Banumathi and Justice Indira Banerjee was considering an appeal against the order of the Madras High Court directing the Tamil Nadu Electricity Board to pay Dearness Allowance at the rate of 49% w.e.f. 01.01.2002 to its employees on par with the employees of the Central Government. The apex court declared that the revision of the salary or Dearness Allowance would depend on the capacity and the financial position of the employer. "Having regard to the difficult financial situation which the State and the Board were facing and having regard to the terms of the settlement, respondent(s) union cannot seek for sanction of enhanced rate of Dearness Allowance on par with the Central Government employees.", the bench added.
The board had approached the apex court against this order alleging that it was facing an extremely difficult financial situation and that the payment of the amended Dearness Allowance for the period in question to more than eighty thousand of its employees would have a large implication on the Board financially. The bench agreed with this board’s contention and stated that the revision of wage or Dearness Allowance would depend on the ability and financial capacity of the employer. The court also noted that each State Government, based on their own Dearness Allowance rate payable to their employees, can adopt the new and revised Dearness Allowance proposed by the Central Government.
There is no rule or obligation for the State Government to always adopt the modified Dearness Allowance as adopted by the Central Government. It is not absolutely necessary for the State Government to adopt the revised Dearness Allowance rates fixed by the central government. The State Government should adopt its own rates/revised rates of Dearness Allowance based on their financial and economic condition. The bench clarified that the Tamil Nadu Electricity Board, being the State Government undertaking, the money or the financial aid has to be incurred by the State Government. While setting aside the High Court order, the bench said that the High Court made a mistake in not taking into account the extremely difficult financial position of the State Government and the Board and also the additional financial burden which would be imposed upon the appellant-Board if the demands of the respondent(s)-union are complied with.
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