The Supreme Court has ruled that granting a lower rate of dearness relief (DR) to pensioners compared to dearness allowance (DA) for serving employees is unconstitutional, holding such a distinction to be arbitrary and violative of Article 14 of the Constitution.
The bench of Justice Manoj Misra and Justice Prasanna B. Varale has observed that a valid classification must be based on an intelligible differentia and must have a rational nexus with the object sought to be achieved. In the present case, the Court found that no such rational nexus existed, as the objective of both DA and DR is identical—to neutralize inflationary pressures.
The appeals were filed by the State of Kerala and the Kerala State Road Transport Corporation (KSRTC) against a decision of the Kerala High Court. The dispute centered around a policy decision where DA for employees was increased by 14%, while DR for pensioners was increased by only 11%.
Pensioners had challenged this disparity, contending that both DA and DR are meant to offset inflation and, therefore, should be applied uniformly. While a Single Judge initially upheld the differentiation, the Division Bench of the Kerala High Court struck it down as discriminatory, prompting the State to approach the Supreme Court.
The Supreme Court examined whether the State could prescribe different rates of increase for DA and DR when both are linked to the same objective—mitigating the impact of inflation. The Court noted that inflation affects both serving employees and pensioners equally, and therefore, any distinction in the rate of increase must satisfy the constitutional test of reasonable classification under Article 14.
Rejecting the State’s justification based on financial constraints, the Court observed that while financial considerations may justify delaying or restructuring benefits, they cannot justify unequal rates once the benefit itself is granted. The Court emphasized that once the State decides to extend inflation-linked benefits, it must do so in a non-discriminatory manner.
The Court also distinguished earlier judgments cited by the State, noting that those cases dealt with issues of eligibility or introduction of benefits, whereas the present case concerned unequal treatment in the implementation of an already recognized benefit. Therefore, those precedents were held inapplicable.
Upholding the Kerala High Court’s decision, the Supreme Court dismissed the appeals and declared that fixing a lower rate of DR compared to DA is discriminatory and arbitrary. The ruling reinforces the principle that pensioners cannot be subjected to unequal treatment when benefits are linked to common economic factors such as inflation.
Case Details
Case Title: The State Of Kerala Versus M. Vijayakumar & Ors.
Citation: JURISHOUR-720-SC-2026
Case No.: SLP (C) Nos.11592-11593 of 2023
Date: 10/04/2026
