The issue in the case, is not about entitlement to DR on pension. Once pension is admissible and, based on inflation, DR is admissible on it, announcing the DR at the rate lower than at what DA is provided, when both are linked to inflation and serve a common object, would be nothing but discriminatory as well as arbitrary. Therefore, the HC was justified in holding the same to be discriminatory and violative of Article 14. T HROUGH the judgment of the case-The State of Keralam v. M.Vijayakumar & others delivered on April 10, 2026, Justice Manoj Misra and Justice Prasanna B.Varale, at the Supreme Court have made it clear that when DR on pension and DA on salary, both benefits serve a common purpose, and are linked to inflation, and inflationary pressures do not discriminate between a serving employee and a pensioner, fixing different rates of enhancement of dearness allowance (DA) and dearness relief (DR) have no rational nexus to the object sought to be achieved and is clearly discriminatory as well as arbitrary. In this case, two appeals impugn a common judgment and order of Keralam High Court at Ernakulam, delivered on November 22, 2022, arising from two writ petitions.

 

The short question ,which arose before the HC through these appeals was: If dearness allowance and dearness relief are to be added on salary and pension payable to serving employees and retired employees, respectively, whether there could be a higher rate for enhancement of DA than what it is for DR? Retired employees of Kerala State Road Transport Corporation (KSRTC) filed a writ petition questioning the lower rate fixed for enhancement of DR on pension than what was fixed for enhancement on salary. Their grievance was that the serving employees got enhancement of DA by 14 pc whereas the pensioners DR was enhanced by 11 pc. Claiming that there was no rationale for different rates, and the same violated the mandate of the Article 14 of the Constitution of India. The Single Judge, at the HC dismissed the writ petition, on December 14, 2021, holding that serving employees and pensioners do not constitute one class, and therefore, different rates of enhancement are permissible. Aggrieved thereby intra Court appeals were filed before a division bench of the HC.

 

After considering the submissions formulated the following question for its consideration: “Whether, after taking a decision to extend the benefits of the order of the State Govt. declaring the enhancement of DA/DR to its employees and pensioners, the State Govt. /KSRTC could effect a classification between the employees and pensioners of KSRTC for the purposes of granting the DA/DR at differential rates” After considering several Supreme Court decisions, the HC held that, 15. The principles that can be gleaned from the aforesaid decision, when applied in the context of the Cases before us , compel us to hold that the action of the State and KSRTC in restricting the benefit of enhancement of DR to the pensioners of KSRTC to 109% with effect from March, 2021, while extending the benefit of enhanced DA to its employees at 112% with effect from March, 2021, is to be seen as discriminatory and violative of Article 14 the Constitution.”

 

The HC found it-self unable to sustain the impugned judgment of the Single Judge and set aside that and allowed the writ appeals and the writ petitions with consequential reliefs to the appellants before the HC division bench. Aggrieved by HC’s decision, the Keralam Government and KSRTC filed separate appeals before the Supreme Court. In some of its decisions the SC has observed that doctrine of classification is the judicial formula for determining whether the legislative executive action in question is arbitrary and therefore, constituting denial of equality. If the classification is not reasonable and does not satisfy the two conditions, the impugned action-legislative or executive - would be plainly arbitrary and the guarantee of equality under Article 14 would be breached. Wherever, therefore, there is arbitrariness in State action whether it is of the legislative or of the executive or of an authority under Article 12, Article 14 immediately springs into action and strikes down such action. In the decision-State of Punjab v. Davinder Singh (2025) 1SCC 1, the then CJI DR. D Y Chandrachud observed that “the Constitution permits valid classification, if two conditions are fulfilled. First, there must be an intelligible differentia which distinguishes persons grouped together from others left out of the group. Second, the differentia must have a rational relation to the object sought to be achieved by the law, that is the basis of classification must have a nexus with the object of the classification”. Applying the twin-tests principle, the SC proceeded to test the validity of the Govt. order to the extent it provides a lower rate of increase for DR than it provides for DA.

 

The object and purpose of DA/DR is to mitigate the hardship faced by salaried employeesand pensioners on account of inflation. Indisputably, inflationhits both serving and retiredemployees with equal force, therefore, the differentiating the twoqua, the rate of increase of DA andDR, has no rational nexus to theobject sought to be achieved. The issue in the case, is not about entitlement to DR on pension. Once pension is admissibleand, based on inflation, DR isadmissible on it, announcing theDR at the rate lower than at what DA is provided, when both arelinked to inflation and serve acommon object, would be nothing but discriminatory as well asarbitrary. Therefore, the HC wasjustified in holding the same tobe discriminatory and violativeof Article 14. According to the SC, the decisions cited by the Government and KSRTC counsel do not deal with a situation where there is nodispute as regards entitlement tothe benefit in question.

 

The issueis not of the entitlement to the benefit but of differential rates at which those benefits are provided, depending on whether therecipient is a serving or retiredemployee. When those benefitsserve a common purpose, and arelinked to inflation and inflationary pressures do not discriminatebetween a serving employee anda pensioner, fixing different ratesof enhancement of DA and DRhave no rational nexus to theobject sought to be achieved andis clearly discriminatory as well as arbitrary. The SC has found nomerits in these appeals and dismissed the same, accordingly.