In a significant ruling, the Supreme Court of India has held that pensioners cannot be granted a lower rate of dearness relief (DR) compared to the dearness allowance (DA) given to serving employees when both are meant to offset inflation.
Background of the Case
The dispute arose from a decision of the State of Kerala and the Kerala State Road Transport Corporation, where employees were granted a 14% increase in DA, while pensioners received only an 11% increase in DR.
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Retired employees challenged this disparity before the Kerala High Court, arguing that both DA and DR are linked to inflation and should be uniform.
Initially, a Single Judge dismissed the plea, holding that employees and pensioners form different classes. However, a Division Bench reversed that decision, calling the differential treatment discriminatory.
The State of Kerala and KSRTC then approached the Supreme Court.
The bench, led by Justice Manoj Misra, examined whether different rates of DA and DR could be justified.
The Court noted that both DA and DR serve the same purpose-to protect individuals from the impact of inflation.
“The object of both DA and DR is to mitigate the hardship caused by inflation,” the Court observed.
It further emphasized that inflation affects both serving employees and pensioners equally. Therefore, treating them differently in terms of rate of increase lacks justification.
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On Equality Under the Constitution
The Court applied the principle of equality under Article 14 of the Constitution. It reiterated that any classification must have a clear and reasonable link with the objective.
“Inflation does not discriminate between a serving employee and a pensioner,” the bench noted, questioning the rationale behind different rates.
The Court found that while employees and pensioners may be distinct groups in some contexts, such classification cannot be used arbitrarily when the purpose is identical.
State’s Argument Rejected
The State argued that financial constraints justified the lower rate for pensioners. However, the Court was not convinced.
It clarified that financial difficulties may justify delaying benefits or fixing different implementation dates, but not unequal rates when the benefit itself is linked to a common factor like inflation.
Upholding the Kerala High Court’s ruling, the Supreme Court dismissed the appeals filed by the State and KSRTC.
It held that granting a lower rate of DR compared to DA, despite both being tied to the same inflation index, is arbitrary and violative of Article 14.
The Court concluded that once the benefit is extended to both employees and pensioners, it must be implemented uniformly in terms of rate.
Case details
Case Title: The State of Kerala vs. M. Vijayakumar & Ors.
Case Number: Civil Appeal (arising out of SLP (C) Nos. 11592–11593 of 2023) with SLP (C) No. 18030 of 2023
Judge: Justice Manoj Misra and Justice Prasanna B. Varale
Decision Date: 10 April 2026
