Gujarat High Court Asks State To Form Panel To Consider Govt Employees' Entitlement To HRA Affected By Classification Of Cities

Noting that employees right to House Rent Allowance is not absolute, the Gujarat High Court has asked the state government to form a committee to consider pleas moved by various government employees working in schools in urban and rural areas, aggrieved by categorization of various cities and House Rent Allowance policy in this respect. 

The court was hearing a batch of pleas of government employees from Ahmedabad, Gandhinagar and Bhavnagar regarding grievance on grant of HRA and CLA. The State Government had said that cities are classified into the different categories and based on the classification of cities under the different categories, the payment of the HRA and CLA would be decided. 

Justice Sandeep N Bhatt referred to various judgments and said that there is no dispute that HRA is a statutory right, however, such right can be subjected to reasonable restrictions.

The court said:

"The employee may have a right to get HRA as per the existing rules and policy or decisions of the State Government which have binding force. It is not a matter of absolute right. It is compensatory allowance given by the employer to an employee towards the rental accommodation for residence of the employee when the government is unable to provide residential accommodation suitable for the residence of its employees".

While passing certain directions, the high court thus disposed of the pleas noting that the state government has adopted revision of pay rules as per the Central Government most of the time and HRA is not an absolute right which can be claimed as a matter of right at par with the Central Government employees which may exacerbate the budgetary provisions of the State, 

It said:

"The present petitions can be considered as representations of the petitioners. With a view to cut the Gordian knot, let the committee be formed by the State Government within a period of two weeks from the date of receipt of this order, consisting of Chief Secretary to Government of Gujarat, Principal Secretary of Finance Department, Principal Secretary of General Administrative Department, Secretary of Panchayat, Rural Housing and Rural Development Department and Secretary, Urban Development and Urban Housing Department, Director of Census Operations of Gujarat, to look into the details about various issues pending for appropriate consideration arising in these matters. The decision can be taken by such High Level Committee within sixteen weeks from the date of formation of the committee and the same be communicated to the petitioners within two weeks thereafter or/and by issuing appropriate circulars or by government resolution within same time limit". 

The court noted that granting or fixing the rate of HRA/CLA are the part of government's policy and it was well settled law that the "Court should refrain itself from interfering" in such policy decision which might have cascading effect, looking to the decision which is taken after full consultation with the representative of the employees of statement government and after considering the pros and cons.

The court said that the decision given by earlier committee formed by the State Government cannot be faulted in entirety, however, there were certain aspects which are still found indecipherable and needs to be redressed by the state authorities as per the demand or entitlement of the petitioners employees.

"Though this Court is of the opinion that the interference in the impugned decision will amount to interference in the policy decision, considering the wider repercussion of the decision of the committee which can be considered as a policy decision, this Court is not granting any final relief as prayed for in the petitions by taking into consideration that the present petitioners who are residing in Gandhinagar area are otherwise granted 24% HRA as `X' category which they are entitled to get and therefore the  state government may also consider this aspect that now Ahmedabad and Gandhinagar are considered twin cities," it said. 

Regarding the group of employees of Bhavnagar in the other petitions, the court observed, that the facts therein were a bit different from the facts of the case of Gandhinagar employees.

"On going through the entire material on record like the previous petitions, the order passed by this Court in that group of petitions, the report of the Committee and the present petitions, this Court is of the opinion that the point regarding the residence of the petitioners fall in which category at the relevant point of time is required to be considered by the Committee, which has been left out," it said. 

With respect to the recovery of the dues from the employees the court said that the petitioners' can be considered sympathetically in accordance with law and relevant policies, by not insisting for immediate recovery.

The court noted that petitioners have filed undertaking that they will refund the amount with 9% interest as directed in the earlier proceedings, it however said that since the it is directing the state government to consider various aspects raised in the present petitions sympathetically, there shall not be any recovery of the respective amounts from any of the petitioners for four weeks after the authority communicates the decision to the respective petitioners. 

"With the above directions, without much expressing opinion on merits and about the rival contentions raised in the present petitions, as discussed earlier, these petitions and civil applications are required to be disposed of," the court said. 

Background

The court was hearing a batch of pleas wherein one of them sought a direction to the state authorities to pay HRA (House Rent Allowance) at 20% and CLA (Compensatory Local Allowance) as per basic salary of the petitioners from the date of their appointment and HRA at 20% as per norms of the Sixth Pay Commission with effect from 01.04.2009.

By a 1975 general resolution, the state government had laid down a policy that if any employees serving in a village is not in a position to get accommodation in such village because of non-availability of suitable accommodation and if he has to reside in a city which is within 8 kms., of the place of employment, he is entitled to HRA at 15%.

By a detailed 1998 resolution the State Government had laid down the policy and the employees stationed at `A' class city are entitled to get 15% HRA and CLA as per their basic salary and the said circular is applicable to the employees serving in primary, secondary, higher secondary and non-governmental schools and therefore entitled to get HRA at 15% and CLA as per their basic salary.

The Finance Department passed a 2000 resolution and withdrew the benefits of HRA to the employees who are serving outside the periphery of 8 Kms of classified city and the said benefit of HRA was sought to be reduced from 15% to 5% of the salary, as the District Primary Education Officer misinterpreted the Government Resolution dated 25.2.2000 and decided that the petitioners are not entitled for 15% HRA and CLA but only entitled to 5% HRA and no CLA at all.

The Department in a 2008 resolution prepared a list of boundaries of various cities showing agglomeration areas on the basis of census report of 2001; the Department, in its 2009 resolution accepted the recommendations of the Sixth Pay Commission and increased the HRA from 15% to 20% with effect from 1.4.2009.

Petitions involving similar facts and identical issues for grant of 20% HRA and proportionate CLA, came to be decided by common judgment dated 5.7.2016 directing the State Government to constitute High Power Committee and to adjudicate the grievance of the petitioner in reference to granting benefits of HRA and CLA.

The High Power Committee was constituted and the committee submitted its report to the State Government by observing that the final decision in reference to grant of HRA in proportionate to CLA would be left open for the sub-committee constituted under the 7th Pay Commission.

Pursuant to the said report, the Finance Department in its 2018 resolution directed the concerned authorities to initiate recovery proceedings against respective writ petitioners with effect from 8.5.2018. Against this the plea was filed. 

The State argued that the classification of cities to which HRA is admissible and the rates at which the HRA is available at such classified cities are expert functions and more particularly, policy decisions which are best left within the domain of executive. A challenge to such economic policy of the State Government deserves to be dealt with circumspection and the scope of judicial review would also therefore be limited.

Case title: RATHOD NARESHBHAI MANSUKHBHAI & ORS. v/s STATE OF GUJARAT & ORS

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Citation : 2025 LiveLaw (Guj) 123