The Punjab and Haryana High Court affirmed that the State of Punjab and Punjab State Power Corporation Limited (PSPCL) are bound to implement the 6th Punjab Pay Commission’s recommendation to grant Dearness Allowance/Dearness Relief (DA/DR) on the Central Government pattern, and quashed the age-tiered liquidation plan as violative of Article 14.
Background & Facts
The Dispute
The petitioners, a group of serving and retired employees of the Government of Punjab and PSPCL, claimed that the State had accepted the 6th Punjab Pay Commission’s recommendation to continue DA/DR on the All India Consumer Price Index (AICPI) basis, yet failed to release accrued instalments and proposed a staggered payment schedule (the “Liquidation Plan”) that differentiated pensioners by age.
Key Facts
- 30.04.2021: 6th Punjab Pay Commission submitted its report recommending continuation of DA/DR on the Central pattern.
- 17.06.2021: Finance Department memo (Para 1.9.2(a)) recorded the Department’s comment that the Government may accept the recommendation.
- 18.06.2021: Council of Ministers approved the recommendation (sub-paras 2.1-2.6 of the memo).
- 21.06.2021: Communication to the Principal Secretary, Finance, conveying the Council’s decision.
- 05.07.2021: Notification of the Punjab Civil Services (Revised Pay) Rules, 2021 (the “2021 Rules”) under Article 309 of the Constitution.
- 07.09.2021: Governor’s instruction announcing DA rates (2%-17%) on the Central pattern, effective from 01.07.2016-01.07.2019.
- 02.11.2021: Memo confirming release of DA from 17% to 28%.
- 18.11.2025: Speaking order by the Additional Chief Secretary, Finance, holding the matter for consideration and stating that no decision had been taken on the four instalments from 42% to 55%.
- 13.02.2025: Council of Ministers approved a structured Liquidation Plan, spreading arrears of revised pay/DA/DR (covering 01.01.2016-30.06.2021 and 01.07.2021-31.03.2024) over five financial years, with tiered instalments based on age.
- 21.02.2025: Division Bench order in CACP No. 47 2024 directing compliance with the Liquidation Plan.
- 08.04.2026: Single Judge allowed the writ petitions, quashing the Liquidation Plan and directing payment of all pending DA/DR instalments.
- 03.08.2026: Present judgment delivered by Acting Chief Justice Ashwani Kumar Mishra and Justice Rohit Kapoor.
Procedural History
- 21.08.2025: CWP No. 24698-2025 filed by retired PSPCL employees.
- 25.08.2025: Single Judge directed the Principal Secretary, Finance, to consider the representation.
- 15.10.2025: Hearing before the Additional Chief Secretary.
- 18.11.2025: Speaking order issued (see above).
- 08.04.2026: Single Judge’s common judgment (CWP 7291, 10301, 9514) granting relief.
- 03.08.2026: Appeals (LPA-1437, 1249, 1290, 1767) heard and decided.
The Parties' Positions
- State of Punjab / PSPCL (Appellants): argued that the Pay Commission recommendations were not binding, that the State retained discretion to fix DA rates, that the Cabinet decision lacked the Governor’s formal assent, and that the liquidation plan was a valid fiscal measure.
- Petitioners / Employees & Pensioners (Respondents): contended that acceptance of the recommendation created an enforceable right, that DA/DR is a constitutional entitlement under Article 21, 38, 39 and 43, and that the age-based payment schedule violated Article 14.
Relief Sought
- Declaration that the State must grant DA/DR on the Central Government pattern.
- Quashing of the Liquidation Plan dated 18.02.2025.
- Direction to release all accrued DA/DR instalments without further delay.
- Interest at 6% per annum on any delayed payment.
- Compliance report by 31 August 2026.
The Legal Issue
The central question was whether the State of Punjab and PSPCL, having accepted the 6th Punjab Pay Commission’s recommendation to continue DA/DR on the Central Government pattern, are legally bound to implement it in full, and whether the age-tiered Liquidation Plan that staggered payment of accrued DA/DR amounts constitutes an arbitrary classification violative of Article 14.
Arguments Presented
For the State/Appellant
The State argued that (i) the Pay Commission’s recommendations are advisory and do not create a statutory duty; (ii) the 2021 Rules, framed under Article 309, leave the rate of DA to the discretion of the State; (iii) the Cabinet decision of 18.06.2021 was not expressed in the Governor’s name and therefore could not give rise to enforceable rights; (iv) financial constraints justify staggered payment; and (v) PSPCL, as a separate legal entity, is not bound by the State’s policy.
For the Petitioners/Respondent
The petitioners relied on Purshottam Lal v. Union of India to argue that acceptance of a Pay Commission recommendation creates a binding obligation; they invoked Article 14 to challenge the age-based classification; they cited State of West Bengal v. Confederation of State Government Employees to hold that once a standard is adopted, the State cannot arbitrarily deny its benefits; and they emphasized that DA/DR is a component of “existing emoluments” under Rule 3(c) and 3(j) of the 2021 Rules, making it a property right under Article 300A.
The Court's Analysis
The Court first examined whether the 6th Punjab Pay Commission’s recommendation was binding. It noted that the recommendation to continue DA/DR on the AICPI basis was accepted by the Council of Ministers on 18.06.2021, and that the acceptance was communicated, notified, and operationalised through the 2021 Rules and subsequent Governor’s instructions. The Court held that acceptance of a Pay Commission recommendation creates an enforceable right, citing Purshottam Lal and the principle that “upon acceptance, the State incurs a binding obligation to implement the recommendations in their entirety and to disburse all consequential benefits to its employees and pensioners without exception.”
"The adoption of the recommendations of the 6th Pay Commission cannot be treated as a mere formality or symbolic exercise. Upon acceptance, the State incurs a binding obligation to implement the recommendations in their entirety and to disburse all consequential benefits to its employees and pensioners without exception."
Next, the Court considered the statutory framework. Rule 9 of the 2021 Rules provides that arrears of revised pay (including DA/DR) from 01.01.2016 to 30.06.2021 shall be paid “in such manner and at such time as may be approved by the Government.” The Court interpreted the non-obstante clause as permitting discretion only in the manner and timing of payment, not in denying the entitlement or creating a discriminatory schedule. The Liquidation Plan’s tiered instalments (2 for >85 years, 12 for 75-85 years, 42 for <75 years) was found to lack a rational nexus to the object of DA/DR, which is to neutralise inflation for all retirees equally. Relying on D.S. Nakara and All Manipur Pensioners Association, the Court declared the plan “patently violative of Article 14” and “expropriatory” because it deferred payment of admitted dues without interest for a substantial period.
The Court rejected the State’s reliance on fiscal constraints, observing that the State had already allocated funds for DA/DR in successive budgets and had paid rates in line with the Central series (2 %-42 %). Financial hardship cannot justify denial of a statutory entitlement, as affirmed in State of Kerala v. M. Vijayakumar.
Regarding jurisdiction, the Court held that the writ petitions were correctly listed before the Single Judge (roster for statutory corporations) and that the presence of PSPCL as a respondent satisfied the principles of natural justice. The arguments of non-joinder, coram non judice, and enlargement of scope were dismissed.
Finally, the Court affirmed the in-rem effect of the Single Judge’s directions, extending relief to all similarly situated employees and pensioners, not merely the litigants.
The Verdict
All four Letters Patent Appeals (LPA-1437, 1249, 1290, 1767) are dismissed. The Single Judge’s judgment dated 08 April 2026 and 28 April 2026 is affirmed. The Liquidation Plan dated 18 February 2025 and PSPCL’s Finance Circular 03/2025 are quashed. The State of Punjab and PSPCL are directed to grant and release all up-to-date pending DA/DR instalments to every employee and pensioner within a fortnight, at the rates applicable to IAS/IPS/IFS officers. In default, the unpaid amounts shall attract simple interest at 6 % per annum from the expiry of the stipulated period. The Chief Secretary must file a compliance affidavit by 31 August 2026.
What This Means For Similar Cases
Acceptance of Pay Commission Recommendations Is Enforceable
- Once a Pay Commission recommendation is formally accepted by the Council of Ministers and operationalised through Rules or notifications, it becomes a legally enforceable right for the concerned class of employees.
- Lawyers must treat such acceptance as a statutory duty, not merely a policy choice.
Article 14 Bars Age-Based Tiered Payments
- Any scheme that creates separate classes within a homogeneous group of pensioners must demonstrate a reasonable classification with a rational nexus to the statutory objective.
- Courts will strike down payment schedules that defer dues for younger pensioners while paying older ones promptly.
Fiscal Constraints Do Not Override Statutory Entitlements
- The State’s budgetary considerations cannot be invoked to deny benefits already mandated by law; the burden of fiscal prudence lies with the State, not with the beneficiaries.
- Interest accrues on delayed payments, reinforcing the principle that arrears are property under Article 300A.
In-Rem Relief Extends to All Affected Persons
- When a court declares a policy instrument unconstitutional, the relief operates in rem, benefiting all similarly situated persons, even those who did not litigate.
- Practitioners should anticipate that successful challenges will have a class-wide effect.
Actionable Takeaways for Practitioners
- Verify whether the government has formally accepted Pay Commission recommendations; if so, draft writs seeking enforcement.
- Scrutinise any payment plan for age-based differentiation and be prepared to invoke Article 14.
- Include a prayer for interest on delayed amounts to protect the client’s property right.
- Anticipate that courts may issue compliance reports and set strict timelines; advise clients to be ready for rapid implementation.
