ASSOCIATE BANKS OFFICERS ASSOCIATIONversusSTATE BANK OF INDIA AND ORS.

                    ASSOCIATE BANKS OFFICERS                                     A
                          ASSOCIATION
                               v.
                  STATE BANK OF INDIA AND ORS.

                            OCTOBER 15, 1997
                                                                                 B
          [SUJATA V. MANOHAR AND D.P. WADHWA, JJ.]


       Service Law-Parity in Employment-Equal pay for equal work-
State Bank of India and its Subsidiary Banks-Claim for parity in terminal        C
 benefits, medical benefits and extra increments-Subsidiary Banks, held on
facts, are not in comparable position.with the SB/ nor the employees of the
Subsidiary Banks deemed to be employees of SB/-Cautious approach to be
adopted while applying the principle-Employees of the Subsidiary Banks
of SB/ receiving certain benefits by way of negotiated settlement with the
management-Hence, suf!sequent claim for parity with their counterparts in        D
SB/, held not sustainab/e-Co_nstitution of India, Articles 14, 16 and.
39(d)-State Bank of India (Subsidiary Banks) 1ct, 1959, Sec. 50(2).

      The Petitioner-Association was of the officers of the Subsidiary Banks
of the State Bank of India (SBI). Though there was parity in pay scales, the ·
Petitioner claimed terminal benefits, medical benefits and extra increments E
on par with the employees holding equivalent or similar ranks in the SBI.

       SBI in its counter affidavit pointed out that Subsidiary Bank is an
independent Bank and Section 50(2) of the State Bank of India (Subsidiary
Banks) Act, 1959, also clearly provides that the officers and the employees      F
of the Subsidiary Banks cannot be considered as the officers and the employees
of the State Bank of India for any purposes.

      It was contended by the petitioner-Association that since Subsidiary
Banks share a common Chairman of its Board of Directors with the SBI, and
since SBI has the power to nominate five Directors to the Subsidiary Banks,      G
the Subsidiary Banks in fact, are part of the SBI. In the alternative, it was
contended that the Subsidiary Banks are under the control of SBI. Hence,
the employees of the Subsidiary Banks are entitled to claim the same benefits
as the employees of the SBI.

     Dismissing the writ petition, the Court
                                    475
                                                                                 H
    476                     SUPREME COURT REPORTS [1997] SUPP. 4 S.C.R.

A         HELD : 1. In view of clear provisions of section 50 of the Act, it is not
    possible-to come to a conclusion that the employees of the subsidiary banks
    are, for all practical purposes, employees of SBI. Even dehors section 50,
    looking to the scheme of the Act, it is clear that each of the Subsidiary Bank
    is set up as separate bank. Each Subsidiary Bank has its own capital
B   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 Banks cannot be treated as employees of the SBI. The employees
    of the Subsidiary Banks are not entitled to claim the same benefits as the
    employees ofSBI on the ground that they are, in effect, the employees ofSBI.
                                                                         [481-F-G]
c         2. SBI and the Subsidiary Banks are not in a comparable position in
    regard to the benefits claimed by the petitioners. The benefits 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
D   employees and the Management of each Bank. In the circumstances, the
    principle of"Equal pay for equal work" is not applicable. [483-C-D]

         Union Territory, Chandfgarh v. Krishan Bhandari, [1996] ll SCC (L&S)
    391 and Randhir Singh v. Union of India, [1982[ 1 SCC 618, referred to.

          CIVIL ORIGINAL JURISDICTION: Writ Petition (C) No. 754of1989.
E
          (Under Article 32 of the Constitution of India).

                                           WITH
          Writ Petitions Civil Appeal Nos. 763/89 and 819/90.
F        R.K. Jain, Raju Ramachandran, Suresh C. Gupta, (S.C. Paul) for Bharat
    Sangal, Tripurari Ray and Mukul Mudgal for the Petitioner.

         Harish N. Salve, Anil Kumar Singal, Ms. Naina, A.V. Rangam, A.
    Ranganadhan and B.A. Ranganadhan for the Respondents.

G         The Judgment of the Court was delivered by

          MRS. SUJATA V. MANOHAR, J. "Equal pay for equal work" for both
    men and women is one of Directive Principles of State Policy 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
H   v. Union of India and Ors., [1982] I SCC 618, this Court construed Articles
       ASSOCIATE BANKS OFFICERS ASSN. v. S.B.I. [SUJA TA V. MANOHAR, J.l    477
 14 and 16 in the light of the preamble to the Constitution to read into their     A
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 or an explanation for the difference.

      Historically, equal pay for work of equal value has been a slogan of         B
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        C
women in the matter of employment. The Equal Pay Act 1970 and the Equal
Pay (Amendment) Regulations 1983 in Great Britairt 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         D
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 E
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 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 F
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 inay offer higher wages to the
better qualified. A simplistic approach, granting higher remuneration to other G
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 H
    478                       SUPREME COURT REPORTS (1997) SUPP. 4 S.C.R.                -
A 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
B   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
C   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
D   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.

E         Four years later, the State Bank of India (Subsidiary Banks) Act, I 959
    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
F   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
G   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 o(the State Bank of Saurashtra, the Bank o(Patiala and the State Bank
    of Hyderabad has also been agreed to.

           The scheme for re;constitution provides for the transfer to and vesting
H   in the State Bank of India of the share capital of each of the eight banks which
-          AS SOCIA TE BANKS OFFICERS ASSN. v. S.B.l. [SUJATA V. MANOHAR, J.]    479

    have accepted the proposals.                                                        A
           Under Section 3 of the State Bank oflndia (Subsidiary Banks) Act, 1959,
    the new banks are constituted. Section 4 provides that every new bank shall
    be a 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         B
    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 I I deals with the transfer
    of services of employees of existing banks. Under Section 24, the State Bank        C
    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 to 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           D
    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 24, 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         E
    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            F
    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             G
    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         H
    480                       SUPREME COURT REPORTS [1997] SUPP. 4 S.C.R.                 --
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
B   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
c           capacity engaged, shall not be deemed to be officers, advisers or
            employees cif the State Bank for any purpose, unless otherwise
            provided in the contract or agreement of service of any such officer,
            adviser or employee."

D         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 part
    of the State Bank of India. In the alternative it is under the control of the State
E   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 oflndia 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
F   shareholding of the subsidiary banks. It also exercises 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 bank or each of them
    remain a distinct entity with their own Board of Directors. They have their
G   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
H   adequate incentives on the development of their respective areas of operation.
      ASSOCIATE BANKS OFFICERS ASSN. v. S.B.I. [SUJATA V. MANOHAR, J.]       48)

It is the stand of the State Bank of India that they play the role of an             A
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        B
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           C
State of 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          D
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 oflndia 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.

      The narrow question which we have to consider is whether looking to            E
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         F
Bank of India. Even dehors Section 50, looking to the scheme of the State
Bank of IPldia (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              G
India. The employees of the subsidiary banks are not entitled to claim the
same benefits as the employees of the State Bank of India 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             H
    482                       SUPREME COURT REPORTS [1997] SUPP. 4 S.C.R.

A which is similar to the State Bank of India. The duties and responsibilities of
    their ofi}cers and employees are similar to the duties and responsibilities of
    the officers and employees of the State of 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 of Bank of India. In the
    case of Union Territory Chandigarh V. Krishan Bhandari, [ 1996] 11 sec 348,
B   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.
c
           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
D   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 0ank are comparable to the terminal benefits in nationalised
    banks where also there is an option between pension or contributory provident
E   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
F   Bank oflndia 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
G   subsidiary banks' employees. The employees are provided substantial medical
    benefits, though they are not identical with the medical benefits given by
    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
H   of the State Bank of India at the time of joining though the pay-scales are
         ASSOCIATE BANKS OFFICERS ASSN. v. S.B.I. [SUJATA V. MANOHAR, J.]   483
the same. This is not done in the subsidiary banks. The State Bank of India        A
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 ofoperations of the subsidiary   B
banks. In these circumstances, if the State Bank of India has offered increments
to persons joining the State Bank of India, the same cann;it 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      C
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 for the subsidiary
banks are negotiated settlements with the union 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          D
"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.

B.K.S.                                                     Petitions dismissed.    E