STATE OF H.P & ORS Vs. RAJESH CHANDER SOOD ETC ETC
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 9750-9819 of 2016, Judgment Date: Sep 28, 2016
In our opinion, since the
employees of Government companies are not Government servants, they have
absolutely no legal right to claim that the Government should pay their
salary or that the additional expenditure incurred on account of revision
of their pay-scales should be met by the Government. Being employees of the
companies, it is the responsibility of the companies to pay them salary and
if the company is sustaining losses continuously over a period and does not
have the financial capacity to revise or enhance the pay-scale, the
petitioners, in our view, cannot claim any legal right to ask for a
direction to the Central Government to meet the additional expenditure
which may be incurred on account of revision of pay-scales
A reading of Rule 43(b) makes it abundantly clear that even after the
conclusion of the departmental inquiry, it is permissible for the
Government to withhold pension etc. only when a finding is recorded either
in departmental inquiry or judicial proceedings that the employee had
committed grave misconduct in the discharge of his duty while in his
office. There is no provision in the rules for withholding of the
pension/gratuity when such departmental proceedings or judicial proceedings
are still pending.
We shall now consider, whether the State Government which had
introduced ‘the 1999 Scheme’, had the right to repeal the same. In
answering the above issue, it needs to be consciously kept in mind, that
the employees of corporate bodies, who were extended the benefits of ‘the
1999 Scheme’, as already noticed above, were not employees of the State
Government. ‘The 1999 Scheme’ was, therefore, just a welfare scheme
introduced by the State Government, with the object of ameliorating the
financial condition of employees, who had rendered valuable service in
State owned corporations. In order to logically appreciate the query
posed, we may illustratively take into consideration a situation, wherein
an organization similar to the one in which the respondent-employees were
engaged, suffered such financial losses, as would make the sustenance of
the organization itself, unviable. Can the employees of such an
organization, raise a claim in law, that the corporate body be not wound
up, despite its financial unworkability? Just because, the resultant
effect would be, that they would lose their jobs. The answer to the above
query, has to be in the negative. The sustenance of the organization
itself, is of paramount importance. The claim of employees, who have been
engaged by the organization, to run the activities of the organization, is
of secondary importance. If an organization does not remain financially
viable, the same cannot be required to remain functional, only for the
reason that its employees, are not adversely impacted. When and how a
decision to wind up an organization is to be taken, is a policy decision.
The decision to wind up a corporation may be based on several factors,
including the nature of activities rendered by it. In a given
organization, sometimes small losses may be sufficient to order its
closure, as its activities may have no vital bearing on the residents of
the State. Where, an organization is raised to support activities on which
a large number of people in the State are dependent, the same may have to
be sustained, despite the fact that there are substantial losses. The
situations are unlimited. Each situation has to be regulated
administratively, in terms of the policy of the State Government. Whether
a corporate body can no longer be sustained, because its activities are no
longer workable, practicable, useable, or effective, either for the State
itself, or for the welfare of the residents of the State, is for the State
Government to decide. Similarly, when and how much, is to be paid as wages
(or allowances) to employees of an organization, is also a policy decision.
So also, post-retiral benefits. All these issues fall in the realm of
executive determination. No Court has any role therein. For the reasons
recorded hereinabove, in our considered view, the conditions of service
including wages, allowances and post-retiral benefits of employees of
corporate bodies, will necessarily have to be determined administratively,
on the basis of relevant factors. Financial viability, is an important
factor, in such consideration. In the facts and circumstances of the
present case, it is not possible for us to accept, the contention advanced
on behalf of the respondent-employees, that the State Government should
provide financial support for sustaining ‘the 1999 Scheme’, at least for
such of the employees, who were engaged on or before the date of issuance
of the repeal notification (- 4.12.2004). We would like to conclude the
instant submission by recording, that the respondent-employees have not
been able to make out a case, that the notification dated 2.12.2004,
repealing ‘the 1999 Scheme’, was in any manner, capricious, arbitrary,
illegal or uninformed, and as such, we would further conclude, that the
respondent-employees cannot be considered as being entitled, to any relief,
through judicial process.
“REPORTABLE”
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS.9750-9819 OF 2016
(Arising from SLP(C) Nos. 10864-10933 of 2014)
State of H.P. & Ors. … Appellants
versus
Rajesh Chander Sood etc. etc. … Respondents
J U D G M E N T
Jagdish Singh Khehar, J.
1. The State of Himachal Pradesh came to be created, with effect from
25.1.1971. Consequent upon the creation of the State of Himachal Pradesh,
employees engaged by the corporate sector, on their retirement, were being
paid provident fund, under the provisions of the Employees’ Provident Funds
and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the
Provident Fund Act). The Central Government framed the Employees’
Provident Funds Scheme, 1995, whereby, it replaced the earlier statutory
schemes, framed under the Provident Fund Act. This scheme was adopted for
the corporate sector employees, engaged in the State of Himachal Pradesh.
2. In order to extend better retiral benefits to these employees, the
Himachal Pradesh Government framed another scheme on 29.10.1999 – the
Himachal Pradesh Corporate Sector Employees Pension (Family Pension,
Commutation of Pension and Gratuity) Scheme, 1999. In the present
judgment, the instant scheme will be referred to as ‘the 1999 Scheme’. A
perusal of ‘the 1999 Scheme’ reveals that its application extended to
employees of some of the corporate bodies (- specified in Annexure-I,
appended to ‘the 1999 Scheme’) in Himachal Pradesh. There were in all 20
corporate entities, named in Annexure-I. These corporate bodies functioned
as independent entities, under the Departments of Industries, Welfare,
Horticulture, Forest, Food and Supplies, Tourism, Town and Country
Planning, Housing and General Administration.
3. Paragraph 2 of ‘the 1999 Scheme’, provided for the zone of
application of the said Scheme. It expressly provided, that the same would
apply to only such of the employees, “who opted for the benefit under the
scheme”. It is necessary to expressly notice, that paragraph 2 of ‘the
1999 Scheme’ required, that the above option would be exercised by the
employees in writing, in the format provided for the same. This option,
was required to be submitted within 30 days of the notification of the
scheme - by 27.11.1999. It was also provided in paragraph 2, that such of
the employees who failed to exercise any option, within the period provided
for, for whatever reason, would be deemed to have exercised their option,
to be regulated by ‘the 1999 Scheme’. It is therefore apparent, that it was
imperative for all concerned employees, to express their option, to be
governed by the Employees Provident Funds Scheme, 1995, in case the
concerned employees, desired to avoid ‘the 1999 Scheme’. In case of the
exercise of such option, the concerned employee would continue to be
governed by the Employees Provident Funds Scheme, 1995. Failing which,
every employee, whether he opted for ‘the 1999 Scheme’, or chose not to
make any option, would be regulated by ‘the 1999 Scheme’, with effect from
the day the scheme was made operational – 1.4.1999.
4. It is also essential to indicate, that only those employees who had
been appointed on regular basis, in corporate bodies, to which ‘the 1999
Scheme’ was applicable, could avail of the benefits of ‘the 1999 Scheme’.
In other words, employees engaged “...on part time basis, daily wage basis,
piece-meal rate basis, casual and contract basis...” were not entitled to
opt for ‘the 1999 Scheme’.
5. Paragraph 4 of ‘the 1999 Scheme’ further provided, that those regular
employees, who were entitled to the benefits postulated by ‘the 1999
Scheme’, would automatically forfeit their claim, to the employer’s
contribution in their provident fund account (including interest thereon),
under the prevailing Employees Provident Funds Scheme, 1995, to the
Government. The forfeited amount, would include the amount due and
payable, under the Employees Provident Funds Scheme, 1995, up to 31.3.1999.
The forfeited amount in consonance with paragraph 5 of ‘the 1999 Scheme’,
was to be transferred to a corpus fund, to be administered and managed by
the Government of Himachal Pradesh. The aforesaid corpus fund, was to be
treated as the pension fund, for payment of pension under ‘the 1999
Scheme’.
6. It is of utmost relevance to mention, that paragraph 4 of ‘the 1999
Scheme’ provided as under:-
“4. Regulation of Claim to Pension:-
Any claim to pension shall be regulated by the provision of this scheme in
force at the time when an employee retires or is retired or dies or is
discharged as the case may be subject to the following:-
(a) The existing employees of the Corporation as on 1.4.99 shall have the
option either to elect the pension scheme or to continue under existing
Provident Fund scheme.
(b) The existing employees who opt for Pension Scheme shall automatically
forfeit their claim to employer’s share of CPF including interest thereon
to the State Government as well as other claims under CPF Schemes by
whatsoever name called in respect of all past accumulations upto 31.3.1999.
The amount of their subscriptions to the fund alongwith interest
(excluding employer’s share and interest thereon) shall be transferred to
GPF account to be allotted and maintained by the concerned Corporate Sector
Organisation as per Rules adopted by them”.
It is apparent from the above extract, that even though ‘the 1999 Scheme’
was to take effect from 1.4.1999 (- under paragraph 1(3) of ‘the 1999
Scheme’), a claim for pension by an employee governed by the above scheme,
would arise only at the time of the employee’s retirement, on attaining the
age of superannuation, or when he was retired from service by the employer,
or in case of his death in harness. This is how, the appellant-State views
the above provision (detailed submissions, are being noticed separately).
7. It is not disputed, that regular employees of corporate bodies, to
whom ‘the 1999 Scheme’ was applicable, had opted in writing (or were deemed
to have opted) to be governed by ‘the 1999 Scheme’, or alternatively, had
been engaged on regular basis after the induction of ‘the 1999 Scheme’ but
before ‘the 1999 Scheme’ was repealed (- on 2.12.2004).
8. While adjudicating upon the controversy, it is important to point
out, that for the implementation of ‘the 1999 Scheme’, permission was
sought from the Regional Provident Fund Commissioner, Shimla, for the
transfer of the accumulated provident fund corpus, to the proposed pension
fund under ‘the 1999 Scheme’. It is also relevant to notice, that the
Regional Provident Fund Commissioner, through a communication dated
23.2.2000, declined to accord the above permission, because ‘the 1999
Scheme’ included only regular employees. Part time, daily wage, piece
rate, casual and contract employees, were not covered by ‘the 1999 Scheme’.
According to the Regional Provident Fund Commissioner, there was no
provision under the Provident Fund Act, to exclude a part of the employees,
from the purview of the Provident Fund Act. The Regional Provident Fund
Commissioner was of the view, that permission sought by the State
Government could be accorded, only if all employees of the concerned
corporate bodies, were to be regulated by the substituting scheme (– ‘the
1999 Scheme’). The Regional Provident Fund Commissioner accordingly,
through his communication dated 23.2.2000, advised the concerned corporate
bodies, to continue to comply with the provisions of the Provident Fund
Act, in respect of all their employees. The above communication of the
Regional Provident Fund Commissioner, was superseded by another, dated
11.9.2001, addressed by the Additional Central Provident Fund Commissioner
(Pension), to the Secretary to the Government of India (with copy to the
Regional Provident Fund Commissioner, Himachal Pradesh). It was pointed
out, that a perusal of the aforesaid communication would reveal, that out
of the concerned corporate bodies, almost all were fully owned by the State
or the Central Government, and the share capital of the general public in
the remaining, was less than one per cent. It was therefore, that the
concerned corporate bodies were found to be eligible for the exemption, and
were accordingly exempted from the applicability of the Provident Fund Act.
It is apparent, that the communication dated 11.9.2001 clarified, that as
the corporate bodies fell within the ambit of Section 16(1)(b) of the
Provident Fund Act, it would not be applicable to the concerned
establishments in the State of Himachal Pradesh, with effect from 1.4.1999.
9. The above communication dated 11.9.2001, came to be endorsed by the
Union Minister of Labour, on 17.9.2001. The observations recorded in the
order of the Union Minister are extracted hereunder:
“I have had the matter examined. It has been, noted from the Notification
of the State Government dated 29.10.1999 that all regular employees of
these undertakings are entitled to pension, commutation of pension,
gratuity as applicable to the State Govt. Employees of Himachal Pradesh.
In such circumstances the EPF & MP Act, 1952 shall not apply. The Pension
would be discharged by the Himachal Pradesh Government in terms of Section
16(1)(b). These establishments would be out of the purview of the Act from
the date the Notification has come into force.”
In view of the factual position narrated herein above, the provisions of
the Provident Fund Act were not in any way an obstacle, to the operation of
‘the 1999 Scheme’. As such, ‘the 1999 Scheme’ became operational, with
effect from 1.4.1999. At the instant juncture, it would suffice to record,
that ‘the 1999 Scheme’ remained operational till it was repealed, by a
notification date 2.12.2004.
10. After the implementation of ‘the 1999 Scheme’, a high level committee
was constituted by the Finance Department of the State Government, on
21.1.2003. The said committee was comprised of four managing directors of
state public sector undertakings and corporations. The high level
committee was entrusted with the task of examining, the financial viability
of ‘the 1999 Scheme’. The committee submitted its report on 15.11.2003.
Briefly stated, the high level committee arrived at the conclusion, that
the pension scheme for regular employees of corporate bodies, given effect
to under ‘the 1999 Scheme’, would not be financially viable on a self-
sustaining basis. One of the observations recorded in the report of the
high level committee was, with reference to the Himachal Road Transport
Corporation. It was pointed out, that the pension fund cash flow chart
(year-wise) revealed, that in case new appointments were not made against
retirees, it would have extremely grave financial consequences, inasmuch
as, after the year 2009-10, the income by way of income tax, as well as,
the contribution to the pension fund would continue to reduce, whereas
pension payment expenditure, would continue to increase. It was expected,
that by the year 2015-16, the balance amount left with the Himachal Road
Transport Corporation Pension Fund, would be reduced to approximately
Rs.10.82 crores, whereas the pension liability of the retired employees of
the Himachal Road Transport Corporation, for the said year, would be
approximately Rs.14.56 crores. Accordingly, it was inferred, that from the
year 2015-16 onwards, it would not be possible to make payments, towards
the recurring pension liability. The report also determined the viability
of the scheme, with reference to the Himachal Road Transport Corporation,
even if the staff strength is kept at the same level, as was then prevalent
(- in 2003). The instant analysis resulted in the deduction, that the
pension contribution would be slightly more, as against the available
pension fund of Rs.10.82 crores. In case the staff strength was maintained
at the same level, the pension fund balance would be Rs.15.76 crores.
Keeping in mind, the approximate pension liability of Rs.14.56 crores for
the year 2015-16, it was inferred, that the financial liability towards
pension for the following year, i.e., 2016-17 would not be met, out of the
pension fund. It was therefore infrerred, that the payment of pension to
regular employees of the concerned corporate bodies, could not be paid and
sustained, out of the pension fund contemplated under ‘the 1999 Scheme’.
Accordingly, the high powered committee recorded its conclusions as under:
“In view of the above “the committee” is of the view that the pension
scheme for Corporate Sector employees based on contribution by the State
Government will not be viable on a self sustaining basis mainly due to the
following reasons:-
i). Uncertainty in the rate of interest regime.
ii). Declining recruitment in the Corporate Sector would deplete the size
of the corpus to be created and it would be difficult to honour liabilities
accruing after 10-12 years.
iii). The pension plan envisages payment of pension to Corporate
Sector employees as is being paid to the Government employees. Government
employees at present are entitled to pension @ 50% of the basic pay last
drawn with linkage to ADA. This return does not appear to be possible from
the pension fund proposed to be created for corporate sector employees.”
At the instant juncture, it would also be necessary to mention that, as is
apparent from the submissions advanced on behalf of the State Government,
three factors primarily weighed with it for reconsidering the continuation
of ‘the 1999 Scheme’. Firstly, uncertainty in the rate of interest regime;
secondly, decline in recruitment in the corporate sector; and thirdly, on
account of the fact that the respondent-employees would be entitled to
pension at the rate of 50% of the basic pay last drawn, with linkage to an
additional dearness allowance. And as such, it was not possible for the
pension fund, to cater to the payment towards pension, under ‘the 1999
Scheme’. It would also be relevant to mention, that besides the above
three reasons depicted in the committee’s report, the Cabinet Memorandum
dated 12.10.2004, expressly took into consideration the poor financial
health of the concerned corporations, and the current financial health of
the State Government. Both the above factors also indicated, that it was
not possible for the State Government to take upon itself, the financial
burden of ‘the 1999 Scheme’. And, there were also more pressing
alternative claims. It was submitted, that as on 31.3.2014, the cumulative
losses of Government owned corporations, stood at Rs.2,819.86 crores. The
aforesaid Cabinet Memorandum was appended to the special leave petition, as
Annexure P-4. The Cabinet in its meeting held on 29.11.2004, also
approved, that the Government would be supportive of efforts by individual
Government owned corporations, for setting up their own pensionary
scheme(s).
11. After considering the report of the high level committee, the State
Government took a decision on 29.11.2004 to repeal ‘the 1999 Scheme’.
While repealing ‘the 1999 Scheme’, it was decided, that regular employees
who had retired from corporate bodies, during the period of the subsistence
of ‘the 1999 Scheme’ from 1999 to 2004, would not be affected. For the
implementation of the decision of the State Government dated 29.11.2004, a
notification dated 2.12.2004 was issued, repealing ‘the 1999 Scheme’. A
number of employees who had been deprived of the benefit of ‘the 1999
Scheme’ by the notification dated 2.12.2004, challenged the repeal
notification, by filing a number of writ petitions, before the High Court
of Himachal Pradesh, at Shimla (hereinafter referred to as the High Court).
By the impugned common order dated 19.12.2013, the High Court allowed all
the writ petitions. The final determination of the High Court, is apparent
from the following conclusions recorded by it:
“78. There is no merit in the contention of learned Advocate General that
the scheme could not be implemented due to financial crunch. The State was
aware of the financial implication at the time of issuance of notification
dated 29.10.1999. It is the sovereign responsibility of the State to
garner revenue to make welfare measures, including payment of
pensionery/retiral benefits.
79. It cannot be gathered from the plain language that either expressly
or by implication notification dated 2.12.2004 would apply retrospectively.
80. Accordingly, in view of the analysis and discussion made hereinabove,
all the writ petitions are allowed. The cut-off date 2.12.2004 is declared
ultra vires. Notification dated 2.12.2004 is read down to save it from
unconstitutionality, irrationality, arbitrariness or unreasonableness by
including the petitioners and similarly situated employees also, who had
become members of the scheme notified on 29.10.1999 and have retired after
2.12.2004 and those employees who were already in service when the pension
scheme was notified on 29.10.1999 and had become members of that scheme and
shall retire hereinafter, for the purpose of pensionery benefits after
applying the principles of severability. The Regional Provident Fund
Commissioner, Shimla is directed to transfer the entire amount of the CPF
to a corpus fund to be administered and maintained by the Government of
Himachal Pradesh in the Finance Department including upto date interest,
within a period of two weeks. Thereafter, the Pension Sanctioning
Authority is directed to sanction the pension/gratuity/commutation of
pension after proper scrutiny of the cases forwarded by the concerned
Public Sector Undertaking and issue pension payment order to Pension
Disbursing Authority strictly as per para 6 of the scheme notified on
29.10.1999 with interest @ 9% per annum, within a period of 12 weeks from
today.”
12. Dissatisfied with the judgment rendered by the High Court, dated
19.12.2013, the State of Himachal Pradesh has approached this Court,
challenging the common impugned judgment dated 19.12.2003.
13. Leave granted.
14. The first contention advanced at the hands of Mr. P.P. Rao, learned
senior counsel for the appellants, was premised on the proposition, that
the State Government which had promulgated ‘the 1999 Scheme’, was well
within its rights to repeal the same, for good and sufficient reasons. It
was submitted, that it stands established on the record of this case, that
‘the 1999 Scheme’ was not financially viable, inasmuch as, it could not be
characterized as a self-sustaining scheme. It was asserted, that the
determination of the State Government to scrap ‘the 1999 Scheme’, on the
basis that the Scheme was not financially viable, was legal and bonafide.
In order to canvass the instant proposition, learned counsel, relied on
State of Punjab v. Amar Nath Goyal, (2005) 6 SCC 754, and invited the
Court’s attention, to the following observations recorded therein:
“25. The only question, which is relevant and needs consideration, is
whether the decision of the Central and State Governments to restrict the
revision of the quantum of gratuity as well as the increased ceiling of
gratuity consequent upon merger of a portion of dearness allowance into
dearness pay reckonable for the purpose of calculating gratuity, was
irrational or arbitrary.
26. It is difficult to accede to the argument on behalf of the employees
that a decision of the Central Government/State Governments to limit the
benefits only to employees, who retire or die on or after 1.4.1995, after
calculating the financial implications thereon, was either irrational or
arbitrary. Financial and economic implications are very relevant and
germane for any policy decision touching the administration of the
Government, at the Centre or at the State level.”
On the same proposition, reliance was also placed on A.K. Bindal v. Union
of India, 2003 (5) SCC 163, and our attention was drawn to the following
observations recorded therein:
“13. The change in policy effected by these memorandums was that the
Government would not provide any budgetary support for the wage increase
and the undertakings themselves will have to generate the resources to meet
the additional expenditure, which will be incurred on account of increase
in wages. So far as sick enterprises which were registered with BIFR are
concerned, it was directed that the revision in pay scale and other
benefits would be allowed only if it was actually decided to revive the
industrial unit. The question which arises for consideration is whether the
employees of public sector enterprises have any legal right to claim that
though the industrial undertakings or the companies in which they are
working did not have the financial capacity to grant revision in pay scale,
yet the Government should give financial support to meet the additional
expenditure incurred in that regard.
xxx xxx xxx
17. The legal position is that identity of the government company remains
distinct from the Government. The government company is not identified with
the Union but has been placed under a special system of control and
conferred certain privileges by virtue of the provisions contained in
Sections 619 and 620 of the Companies Act. Merely because the entire
shareholding is owned by the Central Government will not make the
incorporated company as Central Government. It is also equally well settled
that the employees of the government company are not civil servants and so
are not entitled to the protection afforded by Article 311 of the
Constitution (Pyare Lal Sharma v. Managing Director, (1989) 3 SCC 448).
Since employees of government companies are not government servants, they
have absolutely no legal right to claim that government should pay their
salary or that the addition expenditure incurred on account of revision of
their pay scale should be met by the government. Being employees of the
companies it is the responsibility of the companies to pay them salary and
if the company is sustaining losses continuously over a period and does not
have the financial capacity to revise or enhance the pay scale, the
petitioners cannot claim any legal right to ask for a direction to the
Central Government to meet the additional expenditure which may be incurred
on account of revision of pay scales. It appears that prior to issuance of
the office memorandum dated 12-4-1993 the Government had been providing the
necessary funds for the management of public sector enterprises which had
been incurring losses. After the change in economic policy introduced in
early nineties, Government took a decision that the public sector
undertakings will have to generate their own resources to meet the
additional expenditure incurred on account of increase in wages and that
the government will not provide any funds for the same. Such of the public
sector enterprises (government companies) which had become sick and had
been referred to BIFR, were obviously running on huge losses and did not
have their own resources to meet the financial liability which would have
been incurred by revision of pay scales. By the office memorandum dated 19-
7-1995 the Government merely reiterated its earlier stand and issued a
caution that till a decision was taken to revive the undertakings, no
revision in pay scale should be allowed. We, therefore, do not find any
infirmity, legal or constitutional in the two office memorandums which have
been challenged in the writ petitions.
18. We are unable to accept the contention of Shri Venkataramani that on
account of non-revision of pay scales of the petitioners in the year 1992,
there has been any violation of their fundamental rights guaranteed under
Article 21 of the Constitution. Article 21 provides that no person shall be
deprived of his life or personal liberty except according to procedure
established by law. The scope and content of this article has been expanded
by judicial decisions. Right to life enshrined in this article means
something more than survival or animal existence. It would include the
right to live with human dignity. Payment of a very small subsistence
allowance to an employee under suspension which would be wholly
insufficient to sustain his living, was held to be violative of
Article 21 of the Constitution in State of Maharashtra v. Chandrabhan Tale,
(1983) 3 SCC 387. Similarly, unfair conditions of labour in People's Union
for Democratic Rights v. Union of India, (1982) 3 SCC 235. It has been held
to embrace within its field the right to livelihood by means which are not
illegal, immoral or opposed to public policy in Olga Tellis v. Bombay
Municipal Corpn., (1985) 3 SCC 545. But to hold that mere non-revision of
pay scale would also amount to a violation of the fundamental right
guaranteed under Article 21 would be stretching it too far and cannot be
countenanced. Even under the industrial law, the view is that the workmen
should get a minimum wage or a fair wage but not that their wages must be
revised and enhanced periodically. It is true that on account of inflation
there has been a general price rise but by that fact alone it is not
possible to draw an inference that the salary currently being paid to them
is wholly inadequate to lead a life with human dignity. What should be the
salary structure to lead a "life with human dignity" is a difficult
exercise and cannot be measured in absolute terms…..
xxx xxx xxx
22. In South Malabar Gramin Bank v. Coordination Committee of S.M.G.B
Employees' Union and S.M.G.B Officers' Federation, (2001) 4 SCC 101, relied
upon by the learned counsel for the petitioners, the Central Government had
referred the dispute regarding the pay structure of the employees of the
Bank to the Chairman of the National Industrial Tribunal headed by a former
Chief Justice of a High Court. The Tribunal after consideration of the
material placed before it held that the officers and employees of the
Regional Rural Banks will be entitled to claim parity with the officers and
other employees of the sponsor banks in the matter of pay scale, allowances
and other benefits. The employees of nationalised commercial banks were
getting their pay scales on the basis of the 5th bipartite settlement and
by implementation of the award of the National Industrial Tribunal, the
employees of the Regional Rural Banks were also given the benefits of the
same settlement. Subsequently, the pay structures of the employees of the
nationalised commercial banks were further revised by the 6th and
7th bipartite settlements but the same was not done for the employees of
the Regional Rural Banks who then filed writ petitions. It was contended on
behalf of the Union of India and also the Banks that financial condition of
the Regional Rural Banks was not such that they may give their employees
the pay structure of the employees of the nationalised commercial banks. It
was in these circumstances that this Court observed that the decision of
the National Industrial Tribunal in the form of an award having been
implemented by the Central Government, it would not be permissible for the
employer bank or the Union of India to take such a plea in the proceedings
before the Court. The other case namely All India Regional Rural Bank
Officers Federation v. Govt. of India, (2002) 3 SCC 554, arose out of
interlocutory applications and contempt petitions which were filed for
implementation of the direction issued in the earlier case, namely, South
Malabar Gramin Bank. Any observation in these two cases to the effect that
the financial capacity of the employer cannot be held to be a germane
consideration for determination of the wage structure of the employees
must, therefore, be confined to the facts of the aforesaid case and cannot
be held to be of general application in all situations. In Associate Banks
Officers' Assn. v. State Bank of India, (1998) 1 SCC 428, it was observed
that many ingredients go into the shaping of the wage structure of any
organisation which may have been shaped by negotiated settlements with
employees' unions or through industrial adjudication or with the help of
expert committees. The economic capability of the employer also plays a
crucial part in it; as also its capacity to expand business or earn more
profits. It was also held that a simplistic approach, granting higher
remuneration to workers in one organisation because another organisation
had granted them, may lead to undesirable results and 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.
Therefore, it appears to be the consistent view of this Court that the
economic viability or the financial capacity of the employer is an
important factor which cannot be ignored while fixing the wage structure,
otherwise the unit itself may not be able to function and may have to close
down which will inevitably have disastrous consequences for the employees
themselves. The material on record clearly shows that both FCI and HFC had
been suffering heavy losses for the last many years and the Government had
been giving a considerable amount for meeting the expenses of the
organisations. In such a situation, the employees cannot legitimately claim
that their pay scales should necessarily be revised and enhanced even
though the organisations in which they are working are making continuous
losses and are deeply in the red.”
Last of all, learned counsel drew our attention to Officers & Supervisors
of I.D.P.L. v. Chairman & M.D., I.D.P.L., (2003) 6 SCC 490, and reference
was made to the following;
“7. In the above background, the question which arises for consideration
is whether the employees of public sector enterprises have any legal right
to claim revision of wages that though the industrial undertakings or the
companies in which they are working did not have the financial capacity to
grant revision in pay-scale, yet the Government should give financial
support to meet the additional expenditure incurred in that regard.
8. We have carefully gone through the pleadings, the Annexures filed by
both sides and the orders passed by the BIFR and the judgments cited by the
counsel appearing on either side. Learned counsel for the contesting
respondent drew our attention to a recent judgment of this Court in A.K.
Bindal and Anr. v. Union of India, (2003) 5 SCC 163, in support of her
contention. We have perused the said judgment. In our opinion, since the
employees of Government companies are not Government servants, they have
absolutely no legal right to claim that the Government should pay their
salary or that the additional expenditure incurred on account of revision
of their pay-scales should be met by the Government. Being employees of the
companies, it is the responsibility of the companies to pay them salary and
if the company is sustaining losses continuously over a period and does not
have the financial capacity to revise or enhance the pay-scale, the
petitioners, in our view, cannot claim any legal right to ask for a
direction to the Central Government to meet the additional expenditure
which may be incurred on account of revision of pay-scales. We are unable
to countenance the submission made by Mr. Sanghi that economic viability of
the industrial unit or the financial capacity of the employer cannot be
taken into consideration in the matter of revision of pay-scales of the
employees.”
15. Based on the conclusions drawn in the above judgments, it was the
contention of learned counsel, that the decision of the State Government to
repeal ‘the 1999 Scheme’, on the basis of the report of the high powered
committee, dated 28.10.2003, cannot be faulted. It was submitted, that the
determination rendered by the High Court, was in clear disregard to the
decisions in the cited cases. It was accordingly urged, that the option
exercised by the State Government, on the basis of legitimate material and
consideration, could not be interfered with, as the same constituted a
legal and valid basis, for the discontinuation of ‘the 1999 Scheme’.
16. In order to support the State Government’s claim, it was also the
contention of learned counsel, that the State Government has an inherent
right to review its policy decisions, and as long as the decisions of the
State Government are based on bonafide consideration, the same cannot be
assailed in law. In order to support the instant contention, learned
counsel placed reliance on BALCO Employees’ Union v. Union of India, (2002)
2 SCC 333, and invited our attention to the following observations,
expressed therein:
“45. In Narmada Bachao Andolan v. Union of India, (2000) 10 SCC 664, there
was a challenge to the validity of the establishment of a large dam. It was
held by the majority at p. 762 as follows: (SCC para 229)
"229. It is now well settled that the courts, in the exercise of their
jurisdiction, will not transgress into the field of policy decision.
Whether to have an infrastructural project or not and what is the type of
project to be undertaken and how it has to be executed, are part of policy-
making process and the courts are ill-equipped to adjudicate on a policy
decision so undertaken. The court, no doubt, has a duty to see that in the
undertaking of a decision, no law is violated and people's fundamental
rights are not transgressed upon except to the extent permissible under the
Constitution."
46. It is evident from the above that it is neither within the domain of
the courts nor the scope of the judicial review to embark upon an enquiry
as to whether a particular public policy is wise or whether better public
policy can be evolved. Nor are our courts inclined to strike down a policy
at the behest of a petitioner merely because it has been urged that a
different policy would have been fairer or wiser or more scientific or more
logical.
47. Process of disinvestment is a policy decision involving complex
economic factors. The courts have consistently refrained from interfering
with economic decisions as it has been recognised that economic
expediencies lack adjudicative disposition and unless the economic
decision, based on economic expediencies, is demonstrated to be so
violative of constitutional or legal limits on power or so abhorrent to
reason, that the Courts would decline to interfere. In matters relating to
economic issues, the Government has, while taking a decision, right to
"trial and error" as long as both trial and error are bona fide and within
limits of authority. There is no case made out by the petitioner that the
decision to disinvest in BALCO is in any way capricious, arbitrary, illegal
or uninformed. Even though the workers may have interest in the manner in
which the Company is conducting its business, inasmuch as its policy
decision may have an impact on the workers’ rights, nevertheless it is an
incidence of service for an employee to accept a decision of the employer
which has been honestly taken and which is not contrary to law. Even a
government servant, having the protection of not only Articles 14 and 16 of
the Constitution but also of Article 311, has no absolute right to remain
in service. For example, apart from cases of disciplinary action, the
services of government servants can be terminated if posts are abolished.
If such employee cannot make a grievance based on Part III of the
Constitution or Article 311 then it cannot stand to reason that like the
petitioners, non-government employees working in a company which by reason
of judicial pronouncement may be regarded as a State for the purpose of
Part III of the Constitution, can claim a superior or a better right than a
government servant and impugn it's change of status. In taking of a policy
decision in economic matters at length, the principles of natural justice
have no role to play. While it is expected of a responsible employer to
take all aspects into consideration including welfare of the labour before
taking any policy decision that, by itself, will not entitle the employees
to demand a right of hearing or consultation prior to the taking of the
decision.”
17. Learned counsel submitted, that the respondent-employees could not
claim a vested right, with reference to the provisions of ‘the 1999
Scheme’. In this behalf, it was submitted, that neither the principle of
estoppel, nor that of promissory estoppel, could be invoked by the
employees, so as to claim a right to be governed by ‘the 1999 Scheme’. For
canvassing that the principle of estoppel could not be invoked by the
employees, learned counsel placed reliance on M. Ramanatha Pillai v. State
of Kerala, (1973) 2 SCC 650, and invited the Court’s attention to the
following:
“36. The abolition of post may have the consequence of termination of
service of a government servant. Such termination is not dismissal or
removal within the meaning of Article 311 of the Constitution. The
opportunity of showing cause against the proposed penalty of dismissal or
removal does not therefore arise in the case of abolition of post. The
abolition of post is not a personal penalty against the government servant.
The abolition of post is an executive policy decision. Whether after
abolition of the post the Government servant who was holding the post would
be offered any employment under the State would therefore be a matter of
policy decision of the Government because the abolition of post does not
confer on the person holding the abolished post any right to hold the
post.”
Reliance was also placed on Excise Commissioner, U.P., Allahabad v. Ram
Kumar, (1976) 3 SCC 540, and reference was made to the following
observations recorded therein:
“Appeals Nos. 399 to 404 of 1975 which raise another point as well viz. the
validity of the appellants’ demand from the respondents in respect of sales
tax at the rate of ten paise per rupee on the retail sales of country
spirit made by the latter with effect from April 2, 1969 stand on a
slightly different footing. Section 3-A and 4 of the U.P. Sales Tax Act,
1948 clearly authorise the State Government to impose sales tax. The fact
that sales of country liquor had been exempted from sales tax vide
Notification No. ST-1149/X-802(33)-51 dated April 6, 1959 could not operate
as an estoppel against the State Government and preclude it from subjecting
the sales to tax if it felt impelled to do so in the interest of the
Revenues of the State which are required for execution of the plans
designed to meet the ever increasing pressing needs of the developing
society. It is now well settled by a catena of decisions that there can be
no question of estoppel against the Government in the exercise of its
legislative, sovereign or executive powers.”
To demonstrate that the principle of promissory estoppel could not be
invoked by the respondent-employees, reference was also made to Union of
India v. Godfrey Philips India Ltd., (1985) 4 SCC 369, wherein it has been
held as under:
“13. Of course we must make it clear, and that is also laid down in
Motilal Sugar Mills case, (1979) 2 SCC 409, that there can be no
promissory estoppel against the Legislature in the exercise of its
legislative functions nor can the Government or public authority be
debarred by promissory estoppel from enforcing a statutory prohibition. It
is equally true that promissory estoppel cannot be used to compel the
Government or a public authority to carry out a representation or promise
which is contrary to law or which was outside the authority or power of the
officer of the Government or of the public authority to make. We may also
point out that the doctrine of promissory estoppel being an equitable
doctrine, it must yield when the equity so requires; if it can be shown by
the Government or public authority that having regard to the facts as they
have transpired, it would be inequitable to hold the Government or public
authority to the promise or representation made by it, the Court would not
raise an equity in favour of the person to whom the promise or
representation is made and enforce the promise or representation against
the Government or public authority. The doctrine of promissory estoppel
would be displaced in such a case, because on the facts, equity would not
require that the Government or public authority should be held bound by the
promise or representation made by it. This aspect has been dealt with fully
in Motilal Sugar Mills case and we find ourselves wholly in agreement with
what has been said in that decision on this point.”
18. In order to support the contention, that the respondent-employees had
no vested right under ‘the 1999 Scheme’, reliance was placed on paragraph 4
of ‘the 1999 Scheme’ (already extracted above). It was the pointed
assertion of learned counsel, based on paragraph 4 of ‘the 1999 Scheme’,
that a claim towards pension could be raised by an employee under ‘the 1999
Scheme’ only “…when an employee retires or is retired or dies or is
discharged as the case may be …”. It was submitted, that only such of the
employees who could avail the benefit of pension, were protected from the
effect of the repeal notification dated 2.12.2004. It was submitted, that
such of the employees who had opted for ‘the 1999 Scheme’, but were not
occasioned with the effect of the contingencies contemplated under
paragraph 4 of ‘the 1999 Scheme’, were not entitled to claim a vested
right. It was urged, that a vested right can only be established, when all
the incidents which would entitle an employee to draw pensionary rights,
under ‘the 1999 Scheme’, stood satisfied. It was pointed out, that only on
the happening of one of the events depicted in paragraph 4, a vested right
would emerge. It was the unequivocal submission of learned counsel for the
appellants, that none of the respondent-employees in the present
controversy, can claim a vested right under ‘the 1999 Scheme’, as neither
of them had retired on attaining the age of superannuation (after putting
in the postulated qualifying service), or had been retired by the employer,
or had died in harness, or had been discharged from service. It was
therefore asserted, that the challenge raised at the hands of the
respondents, to the notification dated 2.12.2004, was legally unacceptable.
In this behalf, learned counsel invited our attention to Commissioner of
Income-tax, Kerala and Coimbatore v. L.W. Russel, (1964) 7 SCR 569,
wherefrom our attention was drawn to the following:
“Before we attempt to construe the scope of s. 7(1) of the Act it will be
convenient at the outset to notice the provisions of the scheme, for the
scope of the respondent's right in the amounts representing the employer's
contributions thereunder depends upon it. The trust deed and the rules
dated July 27, 1934, embody the superannuation scheme. The scheme is
described as the English and Scottish Joint Co-operative Wholesale Society
Limited Overseas European Employees' Superannuation Scheme, hereinafter
called the Scheme. It is established for the benefit of the male European
members of the Society's staff employed in India, Ceylon and Africa by
means of deferred annuities. The Society itself is appointed thereunder as
the first trustee. The trustees shall act as agents for and on behalf of
the Society and the members respectively; they shall effect or cause to be
effected such policy or policies as may be necessary to carry out the
scheme and shall collect and arrange for the payment of the moneys payable
under such policy or policies and shall hold such moneys as trustees for
and on behalf of the person or persons entitled thereto under the rules of
the Scheme. The object of the Scheme is to provide for pensions by means of
deferred annuities for the members upon retirement from employment on
attaining certain age under the conditions mentioned therein, namely, every
European employee of the Society shall be required as a condition of
employment to apply to become a member of the Scheme from the date of his
engagement by the Society and no member shall be entitled to relinquish his
membership except on the termination of his employment with Society; the
pension payable to a member shall be provided by means of a policy securing
a deferred annuity upon the life of such member to be effected by the
Trustees as agents for and on behalf of the Society and the members
respectively with the Co-operative Insurance Society Limited securing the
payment to the Trustees of an annuity equivalent to the pension to which
such member shall be entitled under the Scheme and the Rules; the insurers
shall agree that the Trustees shall be entitled to surrender such deferred
annuity and that, on such deferred annuity being so surrendered, the
insurers will pay to the Trustees the total amount of the premiums paid in
respect thereof together with compound interest thereon; all moneys
received by the Trustees from the insurers shall be held by them as
Trustees for and on behalf of the person or persons entitled thereto under
the Rules of the Scheme; any policy or policies issued by the insurers in
connection with the Scheme shall be deposited with the Trustees; the
Society shall contribute one-third of the premium from time to time payable
in respect of the policy securing the deferred annuity in respect of each
member as thereinbefore provided and the member shall contribute the
remaining two-thirds; the age at which a member shall normally retire from
the service of the Society shall be the age of 55 years and on retirement
at such age a member shall be entitled to receive a pension of the amount
specified in Rule 6; a member may also, after following the prescribed
procedure, commute the pension to which he is entitled for a payment in
cash in accordance with the fourth column of the Table in the Appendix
annexed to the Rules; if a member shall leave or be dismissed from the
service of the Society for any reason whatsoever or shall die while in the
service of the Society there shall be paid to him or his legal personal
representatives the total amount of the portions of the premiums paid by
such member and if he shall die whilst in the service of the Society there
shall be paid to him or his legal personal representatives the total amount
of the portions of the premiums paid by such member and if he shall die
whilst in the service of the Society or shall leave or be dismissed from
the service of the Society on account of permanent breakdown in health (as
to the bona fides of which the Trustees shall be satisfied) such further
proportion (if any) of the total amount of the portions of the premiums
paid by the Society in respect of that member shall be payable in
accordance with Table C in the Appendix to the Rules; if the total amount
of the portions of the premiums in respect of such member paid by the
Society together with interest thereon as aforesaid shall not be paid by
the Trustees to him or his legal personal representatives under sub-s. (1)
of r. 15 then such proportion or the whole, as the case may be, of the
Society's portion of such premiums and interest thereon as aforesaid as
shall not be paid by the Trustees to such member or his legal personal
representatives as aforesaid shall be paid by the Trustees to the Society;
the rules may be altered, amended or rescinded and new rules may be made in
accordance with the provisions of the Trust Deed but not otherwise.
We have given the relevant part of the Scheme and the Rules. The gist of
the Scheme may be stated thus: The object of the Scheme is to provide for
pensions to its employees. It is achieved by creating a trust. The Trustees
appointed thereunder are the agents of the employer as well as of the
employees and hold the moneys received from the employer, the employee and
the insurer in trust for and on behalf of the person or persons entitled
thereto under the rules of the Scheme. The Trustees are enjoined to take
out policies of insurance securing a deferred annuity upon the life of each
member, and funds are provided by contributions from the employer as well
as from the employees. The Trustees realise the annuities and pay the
pensions to the employees. Under certain contingencies mentioned above, an
employee would be entitled to the pension only after superannuation. If the
employee leave the service of the Society or is dismissed from service or
dies in the service of the Society, he will be entitled only to get back
the total amount of the portion of the premium paid by him, though the
trustees in their discretion under certain circumstances may give him a
proportion of the premiums paid by the Society. The entire amount
representing the contributions made by the Society or part thereof, as the
case may be, will then have to be paid by the Trustees to the Society.
Under the scheme the employee has not acquired any vested right in the
contributions made by the Society. Such a right vests in him only when he
attains the age of superannuation. Till that date that amount vests in the
Trustees to be administered in accordance with the rules; that is to say,
in case the employee ceases to be a member of the Society by death or
otherwise, the amount contributed by the employer with interest thereon,
subject to the discretionary power exercisable by the trustees, become
payable to the Society. If he reaches the age of superannuation, the said
contributions irrevocably become fixed as part of the funds yielding the
pension. To put it in other words, till a member attains the age of
superannuation the employer's share of the contributions towards the
premiums does not vest in the employee. At best he has a contingent right
therein. In one contingency the said amount becomes payable to the employer
and in another contingency, to the employee.”
For the same proposition, learned counsel, placed reliance on Krishena
Kumar v. Union of India, (1990) 4 SCC 207, and drew our attention to the
following:
“32. In Nakara, (1983) 1 SCC 305, it was never held that both the pension
retirees and the P.F. retirees formed a homogeneous class and that any
further classification among them would be violative of Article 14. On the
other hand the court clearly observed that it was not dealing with the
problem of a "fund". The Railway Contributory Provident Fund is by
definition a fund. Besides, the government's obligation towards an employee
under C.P.F. Scheme to give the matching contribution begins as soon as his
account is opened and ends with his retirement when his rights qua the
Government in respect of the Provident Fund is finally crystallized and
thereafter no statutory obligation continues. Whether there still remained
a moral obligation is a different matter. On the other hand under the
Pension Scheme the Government's obligation does not begin until the
employee retires when only it begins and it continues till the death of the
employee. Thus, on the retirement of an employee government's legal
obligation under the Provident Fund account ends while under the Pension
Scheme it begins. The rules governing the Provident Fund and its
contribution are entirely different from the rules governing pension. It
would not, therefore, be reasonable to argue that what is applicable to the
pension retirees must also equally be applicable to P.F. retirees. This
being the legal position the rights of each individual P.F. retiree finally
crystallized on his retirement whereafter no continuing obligation
remained, while on the other hand, as regards Pension retirees, the
obligation continued till their death…..”
Based on the legal position declared by this Court in the above judgments,
it was urged, that in the absence of any vested right, a challenge to the
notification dated 2.12.2004, was neither sustainable nor maintainable in
law.
19. It would be relevant to notice, that ‘the 1999 Scheme’ became
operational with effect from 1.4.1999. It remained operational till the
issuance of notification dated 2.12.2004. While repealing ‘the 1999
Scheme’, the notification dated 2.12.2004, did not deprive such of the
employees who had retired during subsistence of the Scheme, of the benefits
that had accrued to them, under ‘the 1999 Scheme’. Only such of the
employees who were to retire on or after 2.12.2004, were disentitled to the
benefits under the Scheme. It was the submission of learned counsel for
the appellants, that the choice of the cut-off date – 2.12.2004 in the
present controversy, is a permissible incident in law. It was pointed out,
that the instant proposition has been repeatedly examined by this Court,
wherein cut-off dates have been upheld; sometimes even where the cut-off
date had been made applicable retrospectively. For the instant
proposition, learned counsel placed reliance on Union of India v. P.N.
Menon, (1994) 4 SCC 68, and invited the Court’s attention to the following
observations:
“8. Whenever the Government or an authority, which can be held to be a
State within the meaning of Article 12 of the Constitution, frames a scheme
for persons who have superannuated from service, due to many constraints,
it is not always possible to extend the same benefits to one and all,
irrespective of the dates of superannuation. As such any revised scheme in
respect of post-retirement benefits, if implemented with a cut-off date,
which can be held to be reasonable and rational in the light of
Article 14 of the Constitution, need not be held to be invalid. It shall
not amount to “picking out a date from the hat”, as was said by this Court
in the case of D.R. Nim v. Union of India, AIR 1967 SC 1301, in connection
with fixation of seniority. Whenever a revision takes place, a cut-off date
becomes imperative, because the benefit has to be allowed within the
financial resources available with the Government.”
Reliance was also placed on State of West Bengal v. Ratan Behari Dey,
(1993) 4 SCC 62, and our attention was drawn to the following conclusions:
“7. In our opinion, the principle of Nakara, (1983) 1 SCC 305, has no
application to the facts of this case. The precise principle enunciated in
Nakara (supra) has been duly explained in Krishena Kumar, (1990) 4 SCC 207,
by a coordinate Bench. For reasons to be assigned hereinafter, it cannot be
said that prescribing April 1, 1977 as the date from which the new
Regulations were to come into force is either arbitrary or discriminatory.
Now, it is open to the State or to the Corporation, as the case may be, to
change the conditions of service unilaterally. Terminal benefits as well as
pensionary benefits constitute conditions of service. The employer has the
undoubted power to revise the salaries and/or the pay-scales as also
terminal benefits/pensionary benefits. The power to specify a date from
which the revision of pay scales or terminal benefits/pensionary benefits,
as the case may be, shall take effect is a concomitant of the said power.
So long as such date is specified in a reasonable manner, i.e., without
bringing about a discrimination between similarly situated persons, no
interference is called for by the court in that behalf. It appears that in
the Calcutta Corporation, a pension scheme was in force prior to 1914.
Later, that scheme appears to have been given up and the Provident Fund
Scheme introduced under the Provident Fund Scheme, a certain amount was
deducted from the salary of the employees every month and credited to the
Fund. An equal amount was contributed by the employer which too was
credited to the Fund. The total amount to the credit of the employee in the
Fund was paid to him on the date of his retirement. The employees, however,
were demanding the introduction of a pension scheme. The demand fell on
receptive years in the year 1977… maybe because in that-year the Left Front
Government came to power in that State, as suggested by the writ
petitioners. The State Government appointed a Commission to examine the
said demand and to recommend the necessary measures in that behalf. The
three members constituting the Commission differed with each other in
certain particulars. The Government examined their recommendations and
accepted them with certain modifications in the year 1981. After processing
the matter through relevant departments, the Regulations were issued and
published in the year 1982. In the above circumstances, the State
Government thought that it would be appropriate to give effect to the said
Regulations on and from April 1, 1977 i.e., the first day of the financial
year in which the Pay Commission was appointed by the Government — a fact
which could not have been unknown to the Corporation employees. We cannot
say that the Government acted unreasonably in specifying the said date. It
may also be said that, that was the year in which the Left Front came into
power in that State, but does not detract from the validity of the
aforesaid reasons assigned by the State in its counter-affidavit filed
before the Division Bench of the High Court. We are not in agreement with
the opinion expressed by the High Court that the reasons assigned by the
State Government are neither relevant nor acceptable.
8. In this context, it may be remembered that the power of the State to
specify a date with effect from which, the Regulations framed, or amended,
as the case may be, shall come into force is unquestioned. A date can be
specified both prospectively as well as retrospectively. The only question
is whether the prescription of the date is unreasonable or discriminatory.
Since we have found that the prescription of the date in this case is
neither arbitrary nor unreasonable, the complaint of discrimination must
fail.
9. Now coming to the argument of Sri P.P. Rao that the Regulations bring
about an unreasonable classification between similarly placed employees, we
must say that we are not impressed by it. It is not submitted that the
Corporation had no power to give retrospective effect to the Regulations.
It was within the power of the Corporation to enforce the Regulations
either prospectively or with retrospective effect from such date as they
might specify. Of course, as repeatedly held by this Court, in such cases
the State cannot, as the expression goes, pick a date out of its hat. It
has to prescribe the date in a reasonable manner, having regard to all the
relevant facts and circumstances. Once this is done, question of
discrimination does not arise. Reference in this behalf may also be had to
the decision of this Court in Sushma Sharma v. State of Rajasthan, 1985
Supp. SCC 45, a decision of the Division Bench comprising E.S.
Venkataramiah and Sabyasachi Mukharji, JJ.”
It was pointed out, that the determination rendered in the above two
judgments has been reiterated by this Court in State of Rajasthan v. Amrit
Lal Gandhi, (1997) 2 SCC 342. Last of all, learned counsel invited the
Court’s attention to R.R. Verma v. Union of India, (1980) 3 SCC 402,
wherefrom reliance was placed on the following:-
“5. The last point raised by Shri Garg was that the Central Government had
no power to review its earlier orders as the rules do not vest the
government with any such power. Shri Garg relied on certain decisions of
this Court in support of his submission: Patel Narshi Thakershi v.
Pradyumansinghji Arjunsinghji, (1971) 3 SCC 844; D.N. Roy v. State of
Bihar, (1970) 3 SCC 119, and State of Assam v. J.N. Roy Biswas, (1976) 1
SCC 234. All the cases cited by Shri Garg are cases where the government
was exercising quasi-judicial power vested in them by statute. We do not
think that the principle that the power to review must be conferred by
statute either specifically or by necessary implication is applicable to
decisions purely of an administrative nature. To extend the principle to
pure administrative decisions would indeed lead to untoward and startling
results. Surely, any government must be free to alter its policy or its
decision in administrative matters. If they are to carry on their daily
administration they cannot be hidebound by the rules and restrictions of
judicial procedure though of course they are bound to obey all statutory
requirements and also observe the principles of natural justice where
rights of parties may be affected. Here again, we emphasise that if
administrative decisions are reviewed, the decisions taken after review are
subject to judicial review on all grounds on which an administrative
decision may be questioned in a court. We see no force in this submission
of the learned counsel. The appeal is, therefore, dismissed.”
20. Mr. R. Venkataramni, learned senior counsel, supplemented the
submissions advanced by Mr. P.P. Rao. In his opening statement, he
endorsed the submissions advanced by Mr. P.P. Rao, and accordingly, adopted
the same.
21. In addition, it was contended, that ‘the 1999 Scheme’ was introduced
for the first time on 29.10.1999, with retrospective effect - from
1.4.1999. It was asserted, that through ‘the 1999 Scheme’, it was proposed
to supplement the post-retiral financial benefits of employees, engaged in
corporate bodies, in the State of Himachal Pradesh. It was urged, that
employees of corporate bodies, were hitherto before, recipients of
Contributory Provident Fund (CPF), as the sole post-retiral financial
benefit. It was submitted, that ‘the 1999 Scheme’, required employees of
corporations to switch over from the CPF scheme, by exercising their
option. And, such of the employees who did not exercise any option (under
the provisions of ‘the 1999 Scheme’), were also deemed to have exercised
their option for the said scheme, on the expiry of the period specified.
It was highlighted, that the grant of pension under ‘the 1999 Scheme’, was
based on the operation of the scheme. Stated differently, the contention
was, that the right to receive pension emerged from ‘the 1999 Scheme’, and
not from the option exercised by an employee, under the said scheme.
22. Insofar as the operation of ‘the 1999 Scheme’ is concerned, it was
submitted, that the employer’s contribution to the CPF account of the
employee (including interest which had accrued thereon) upto 31.3.1999, was
transferred to the State Government, so as to constitute the corpus fund,
to be administered and maintained by the Finance Department of the State
Government, which would make ‘the 1999 Scheme’, self-financing. The above
submission, was drawn from a collective reading of paragraphs 4(b) and 5 of
‘the 1999 Scheme’. It was further contended, that an employee’s own
contribution to the CPF, i.e. the subscription amount contributed by the
employee to his own CPF account, was to be retained in his GPF account.
The instant employee’s contribution, was to be disbursed to him, at the
time of his retirement, as GPF. As such, it was pointed out, that the
contributions made by the employees, from out of their own funds, were
unaffected by ‘the 1999 Scheme’.
23. It was therefore highlighted by learned counsel, that the present
controversy has nothing to do with an employee’s contribution, but was
limited to the right of an employee to claim pension under ‘the 1999
Scheme’. It was urged, that the exercise of an option to switch over from
the CPF scheme, to ‘the 1999 Scheme’, did not result in a vested right, to
earn pension. To support the instant contention, it was pointed out, that
one of the pre-conditions for earning pension, is to have rendered the
minimum stipulated qualifying service. It was submitted, that there were
various other similar conditions, on satisfaction whereof alone, an
employee (despite his having exercised an option, to switch over to ‘the
1999 Scheme’), would be entitled to pensionary benefits, after his
retirement. It was, therefore asserted, that the crystalisation of the
right for a legitimate claim for pension, would accrue on satisfaction of
all the postulated conditions, and till the fulfillment of all the
conditions, the mere exercise of option, to switch over to ‘the 1999
Scheme’, would not result in vesting a right in the respondent-employees,
to receive pension.
24. In order to effectively project the assertion canvassed by him, the
learned counsel highlighted, that the exercise of option by the employees
who were engaged in corporations in the State of Himachal Pradesh, did not
result in the employees having in any manner, altered their position to
their disadvantage. It was averred, that the employees did not forego any
pre-existing better or higher benefit, while exercising their option to
switch over to ‘the 1999 Scheme’. Based cumulatively on the factual
position projected above, it was urged, that it was not open to the
employees of corporations in the State of Himachal Pradesh, to call into
question, the repeal of ‘the 1999 Scheme’, through the impugned
notification dated 2.12.2004.
25. In order to canvass the above proposition, that rights which were
contingent upon the occurrence of an event, could not be described as
vested rights, reliance was placed on Howrah Municipal Corporation v.
Ganges Rope Co. Ltd., (2004) 1 SCC 663, and the following observations
recorded therein:-
“37. The argument advanced on the basis of so-called creation of vested
right for obtaining sanction on the basis of the Building Rules (unamended)
as they were on the date of submission of the application and the order of
the High Court fixing a period for decision of the same, is misconceived.
The word “vest” is normally used where an immediate fixed right in present
or future enjoyment in respect of a property is created. With the long
usage the said word “vest” has also acquired a meaning as “an absolute or
indefeasible right” [see K.J. Aiyer's Judicial Dictionary (A Complete Law
Lexicon), 13th Edn.]. The context in which the respondent Company claims a
vested right for sanction and which has been accepted by the Division Bench
of the High Court, is not a right in relation to “ownership or possession
of any property” for which the expression “vest” is generally used. What we
can understand from the claim of a “vested right” set up by the respondent
Company is that on the basis of the Building Rules, as applicable to their
case on the date of making an application for sanction and the fixed period
allotted by the Court for its consideration, it had a “legitimate” or
“settled expectation” to obtain the sanction. In our considered opinion,
such “settled expectation”, if any, did not create any vested right to
obtain sanction. True it is, that the respondent Company which can have no
control over the manner of processing of application for sanction by the
Corporation cannot be blamed for delay but during pendency of its
application for sanction, if the State Government, in exercise of its rule-
making power, amended the Building Rules and imposed restrictions on the
heights of buildings on G.T. Road and other wards, such “settled
expectation” has been rendered impossible of fulfillment due to change in
law. The claim based on the alleged “vested right” or “settled expectation”
cannot be set up against statutory provisions which were brought into force
by the State Government by amending the Building Rules and not by the
Corporation against whom such “vested right” or “settled expectation” is
being sought to be enforced. The “vested right” or “settled expectation”
has been nullified not only by the Corporation but also by the State by
amending the Building Rules. Besides this, such a “settled expectation” or
the so-called “vested right” cannot be countenanced against public interest
and convenience which are sought to be served by amendment of the Building
Rules and the resolution of the Corporation issued thereupon.”
Based on the conclusions drawn in the cited judgment, it was submitted,
that a ‘legitimate’ or a ‘settled expectation’, suggesting the possibility
of drawing pension after retirement, could not be treated as a vested
right. It was submitted, that the respondent-employees were not justified
in raising a claim based on the assumption, that they had a vested right,
or ‘settled expectation’, under ‘the 1999 Scheme’, particularly in the
light of the fact, that ‘the 1999 Scheme’ had been partly nullified, by the
notification dated 2.12.2004.
26. It was also the assertion of learned counsel, that the repeal
notification dated 2.12.2004, had the consequence of termination/cessation
of benefits, as would emerge from the analogy of the principles expressed
in Section 6 of the General Clauses Act. It was further submitted, that
the requirement of dealing with rights and liabilities insofar as the
present controversy is concerned, is clearly based on a valid
classification. It was urged, that truly and factually, there was no
classification whatsoever, inasmuch as, the benefits under ‘the 1999
Scheme’ were extended to a miniscule section of the employees, and excluded
uniformally an overwhelming majority of employees. Learned counsel
questioned the veracity of the conclusion drawn by the High Court, by
reading down the repeal notification dated 2.12.2004, for the reason, that
the same would deprive pensionary rights to those employees, who had opted
for ‘the 1999 Scheme’, and had retired after 2.12.2004, as also, the
employees who were already in service when ‘the 1999 Scheme’ was notified
on 29.10.1999, and had become members of that scheme, and were due to
retire after 2.12.2004. It was pointed out, that the above determination
at the hands of the High Court, would have the effect of ‘the 1999 Scheme’
remaining in place, till such time as employees engaged in corporations
upto 2.12.2004 eventually retired on attaining the age of superannuation.
In the above view of the matter, it was asserted, that in the manner the
legality of the issue has been determined by the High Court, ‘the 1999
Scheme’ which was repealed on 2.12.2004, would actually and factually
continue to be operational, for a further period of approximately 20 years,
by which time alone, employees engaged prior to the notification dated
2.12.2004, would retire from service.
27. It was also the contention of learned counsel, that the confinement
of the pensionary benefits under ‘the 1999 Scheme’, to such of the
employees, who had retired from the concerned corporations, between
1.4.1999 and 2.12.2004, could not be invalidated because the right to
receive pension stood crystalised and vested in them in terms of paragraph
4 of ‘the 1999 Scheme’. It was submitted, that a statutory classification
cannot be set aside, when there is overwhelming justification,
demonstrating a valid basis, therefor. The repeal of ‘the 1999 Scheme’ was
based on financial constraints, which had not been legitimately repudiated.
Insofar as the instant aspect of the matter is concerned, learned counsel,
in the first instance, placed reliance on State of Rajasthan v. Amrit Lal
Gandhi (supra), and our attention was invited to the following observations
recorded therein:-
“16. Applying the ratio of the aforesaid decisions to the present case, we
find no justification for the High Court having substituted the date of 1-1-
1986 in lieu of 1-1-1990. It is evident that for introducing a pension
scheme, which envisaged financial implications, approval of the Rajasthan
Government was required. In the letter of 16-4-1991, written to the Vice-
Chancellors of different universities of Rajasthan, it was stated as
follows:
“As per the direction in regard to the aforesaid subject, the State
Government has decided to introduce Pension Scheme in the Universities of
the State w.e.f. 1-1-1990. In this regard the State Legislature has passed
University Pension Rules and General Provident Fund Rules. Therefore, by
enclosing a copy of University Pension Regulations and General Provident
Fund Regulations with this letter, it is requested that by obtaining
approval of the competent body or Syndicate of the University, these
Regulations be implemented in the University together and necessary
information regarding implementation be intimated.”
17. The Syndicate and Senate of the University, when they had forwarded
their recommendations in 1986, did not contain a specific date with effect
from which the pension scheme was to be made applicable. Their
recommendations were subject to approval. The approval was granted by the
Government, after the State Legislature had passed the University Pension
Rules and General Provident Fund Rules. The Government had stated in its
affidavit before the High Court that the justification of the cut-off date
of 1-1-1990 was “wholly economic”. It cannot be said that the paying
capacity is not a relevant or valid consideration while fixing the cut-off
date. The University could, in 1991, validly frame Pension Regulations to
be made applicable prospectively. It, however, chose to give them limited
retrospectivity so as to cover a larger number of employees by taking into
account the financial impact of giving retrospective operation to the
Pension Regulations. It was decided that employees retiring on or after 1-1-
1990 would be able to exercise the option of getting either pension or
provident fund. Financial impact of making the Regulations retrospective
can be the sole consideration while fixing a cut-off date. In our opinion,
it cannot be said that this cut-off date was fixed arbitrarily or without
any reason. The High Court was clearly in error in allowing the writ
petitions and substituting the date of 1-1-1986 for 1-1-1990.”
For the same proposition, reliance was also placed in Union of India v. R.
Sarangapani, (2000) 4 SCC 335, and our attention was drawn to the following
observations recorded therein:-
“11. One more aspect which we want to emphasise is that the applicants who
were appointed to the technical posts and the other persons who were
appointed to the non-technical posts are not on the same footing. The
nature of their jobs was different, the qualifications for appointment were
different and the training period was to be longer for the technical staff.
It was obviously necessary that those who were to occupy the technical
posts should have a longer period of training than those who were to occupy
the non-technical posts. The training period for the former was one year
while the training period for the latter was only three months. Naturally,
the non-technical personnel could therefore be appointed earlier to the
technical personnel even if both groups were selected at the same
selection. Therefore, in view of the nature of the qualifications and
nature of the posts and functions and duties, no equality in the dates of
accrual of the increments could ever have been claimed by the technical
personnel comparing themselves to the non-technical persons, by invoking
Article 14.
12. If, however, the Government thought it fit to bring some sort of
equalisation in the matter of commencement of their increments, it was
obviously by way of a sheer concession and was not as a matter of right nor
was it to avoid any violation of any principles of equality under Article
14. In fact, the very official memorandum of the Government dated 22-10-
1990 stated that under the Fundamental Rule 26 read with Rule 9(6)(a)(i) it
was only in cases of probationers and apprentices where such appointments
were followed by a confirmation that the said period of probation or
apprenticeship would be counted for the purpose of scale of pay attached to
the posts. This principle would “not” as per the Rules be applicable to the
training period. However, during the meetings of the National Council (JCM)
it was represented that where the training period was long, as in the case
of technical personnel, the disparity would become perpetual. Therefore, it
is obvious that the concession was not based on Article 14 nor was it on
the basis of any rule but was clearly based only upon the fact that the
training period of technical personnel was longer and the disparity would
continue perpetually if these groups were selected at the same time.
Therefore, Government considered initially to bring their increment on par
with effect from 1-1-1990 and later on it felt that the grievance could be
rectified with effect from 1-1-1986 as mentioned above, the date of
commencement of the recommendations of the Fourth Pay Commission. It is,
therefore, clear that the Government decided to extend the benefit in the
abovesaid manner, even though parties had no right to the same either under
Article 14 or under the Rules and the date was mainly based on the
financial burden. It was open to the Government to decide, having regard to
the budgetary provision, as to what extent it could go and whether it could
fix a cut-off date which was co-terminus with the commencement of the
recommendation of the Fourth Pay Commission, namely, 1-1-1986. On the
peculiar facts of this case the said date was perfectly valid because the
only consideration was the financial burden of the State and not any
principle of equality.”
28. In order to canvass the proposition noticed hereinabove, learned
counsel also placed reliance on, ‘A Treatise on the Constitutional
Limitations’, authored by Thomas M. Cooley (Indian Reprint of 2005,
Hindustan Law Book Company, Calcutta), and invited our attention to
following observations recorded in Chapter XI, bearing the heading – Of The
Protection To Property By ‘The Law Of The Land’:-
“The chief restriction is that vested rights must not be disturbed; but in
its application as a shield of protection, the term “vested rights” is not
used in any narrow or technical sense, as importing a power of legal
control merely, but rather as implying a vested interest which it is
equitable the government should recognize, and of which the individual
cannot be deprived without injustice.
And before proceeding further, it may be well to consider, in the light of
the reported cases, what is a vested right in the constitutional sense,
that we may the better judge how far the general laws of the State may be
changed, and how far special provisions may be made without coming under
condemnation. Every man holds all he possesses, and looks forward to all
he hopes for, through the aid and protection of the laws; but as changes of
circumstances and of public opinion, as well as other reasons of public
policy, are all the time calling for changes in the laws, and these changes
must more or less affect the value and stability of private possessions,
and strengthen or destroy well-founded hopes; and as the power to make very
many of them must be conceded, it is apparent that many rights, privileges,
and exemptions which usually pertain to ownership under a particular state
of the law, and many reasonable expectations, cannot be regarded as vested
rights in any legal sense. In many cases the courts, in the exercise of
their ordinary jurisdiction, cause the property vested in one person to be
transferred to another, either through a statutory power, or by the force
of their judgments or decrees, or by compulsory conveyances. If in these
cases the court has jurisdiction, they proceed in accordance with the law
of the land, and the right of one man is divested by way of enforcing a
higher and better right in another. Of these cases we do not propose to
speak; as constitutional questions cannot well arise in regard to them,
unless they be attended by circumstances of irregularity which are supposed
to take them out of the operation of the general rule. All vested rights
are held subject to the laws for the enforcement of public duties and
private contracts, and for the punishment of wrongs; and if they become
divested through the operation of these laws, it is only by way of
enforcing the obligations of justice and good order. What we desire to
arrive at now, is the meaning of the term “vested rights”, when employed by
way of indicating the interests of which one cannot be deprived by the mere
force of legislative enactment, or by any other than the recognized modes
of transferring title against the consent of the owner, to which we have
alluded.”
Based on the submissions recorded hereinabove, it was sought to be
concluded, that the respondent-employees had no vested right to claim
pension under ‘the 1999 Scheme’, and that, it was not open to them to
assail the partial repeal of ‘the 1999 Scheme’, vide notification dated
2.12.2004.
29. In the process of repudiating the submissions advanced at the hands
of the appellants, Mr. Guru Krishna Kumar, learned senior counsel
representing the respondent-employees, drew our attention to certain
factual aspects of the matter, which according to him, needed to be kept in
mind, while determining the veracity of the challenge raised by the State
Government. It was pointed out, that all the respondent-employees, were
already in the employment of corporate bodies, in the State of Himachal
Pradesh, on the date ‘the 1999 Scheme’ was introduced – on 1.4.1999.
Learned counsel asserted, that it was not disputed at the behest of the
State Government, that all the respondent-employees were entitled to
benefits under ‘the 1999 Scheme’, either on account of having exercised
their option to be governed by ‘the 1999 Scheme’, or by virtue of the
deeming provision expressed in paragraph 2(2) of ‘the 1999 Scheme’. It was
asserted, that all the employees who came to be governed by ‘the 1999
Scheme’, constituted a homogenous class. Inasmuch as, the employees whose
right to claim pension under ‘the 1999 Scheme’ has not been disturbed,
despite the repeal notification dated 2.12.2004, and those whose right to
draw pension has been taken away, cannot be distinguished in any manner,
except on the basis of the cut-off date, expressed in the repeal
notification, dated 2.12.2004. It was contended, that merely because some
of the employees had retired prior to 2.12.2004, and the respondent-
employees had retired after 2.12.2004, cannot be accepted as a legitimate
basis, to treat them differentially. It was asserted, that the mandate of
paragraph 1(2) of ‘the 1999 Scheme’ extended pensionary benefits to
employees engaged in corporate bodies, in the State of Himachal Pradesh, in
accordance with the provisions laid down under the Central Civil Services
(Pension) Rules, 1972, and the Central Civil Services (Commutation of
Pension) Rules, 1981 “… as amended and adopted by the Himachal Pradesh
Government for the State Government employees, save as otherwise provided
in this scheme”. In the above view of the matter, it was asserted on
behalf of the respondent-employees, that the division of a homogenous
class, so as to deprive one set of employees benefits, which still remained
extended to another set of employees, was clearly unsustainable in law. It
was pointed out with some emphasis, that the High Court had taken conscious
notice of the fact, that ‘the 1999 Scheme’ was introduced by the State
Government, after due deliberation by all concerned stake holders, and upon
approval by the Chief Minister and his Cabinet. In the factual background
highlighted hereinabove, it was urged, that denial of pensionary benefits
to one set of employees, out of a homogenous class, was arbitrary and
discriminatory, and as such, violative of the principles enshrined in
Articles 14 and 16 of the Constitution of India. Based on the above
factual background, it was urged, that the High Court was fully justified
in reading down the repeal notification dated 2.12.2004, so as to extend
the benefit of ‘the 1999 Scheme’ to all employees who either opted for, or
were otherwise entitled to pensionary rights, under ‘the 1999 Scheme’.
30. Learned counsel for the respondent-employees, contested the
submission advanced by learned counsel for the appellants, that
subscription to ‘the 1999 Scheme’ by employees engaged in corporations in
the State of Himachal Pradesh, did not create a vested right in them. It
was submitted, that a mere subscription to ‘the 1999 Scheme’, by exercising
their option to be governed by the same, created a vested right in the
respondent-employees. In this behalf it was pointed out, that retirement
on attaining the age of the superannuation, was relevant, only for the
purpose of the accrual of a cause of action, for raising a claim for
pension (under ‘the 1999 Scheme’). Learned counsel, while acknowledging,
that a right to claim pension would arise only when the concerned employee
attained the age of superannuation, yet submitted, that the moment a
contribution earlier payable to the employees as CPF on their retirement,
was diverted to the corpus fund maintained by the Finance Department of the
State Government, the same created a contingent right in each one of them
(under ‘the 1999 Scheme’) to claim pension. It was therefore submitted,
that there was no justification in the contention advanced on behalf of the
appellants, that the action of the respondent-employees in opting for ‘the
1999 Scheme’, did not alter their position adversely, with reference to
their erstwhile vested right (under the Employees Provident Funds Scheme,
1995). In order to support his submission, that a vested right accrued to
the respondent-employees, when they subscribed to ‘the 1999 Scheme’,
learned counsel placed reliance on U.P. Raghavendra Acharya v. State of
Karnataka, (2006) 9 SCC 630, and drew our attention to the following
observations recorded therein:-
“3. It is not in dispute that the revised scales of pay as recommended by
the Pay Revision Committee became applicable to the appellants with effect
from 1-1-1986. It is also not in dispute that the UGC scales of pay were
applicable to them. The Government of Karnataka, by a letter dated 17-12-
1993, directed that the matter relating to the fixation of pension on the
basis of UGC pay scales would be governed by Rule 296 of the Karnataka
Civil Services Rules (hereinafter referred to as “the Rules”), providing
for computation of emoluments for the purpose of pension and gratuity of a
government servant. In the said letter it was stated:
“The term ‘emoluments’ has been defined and redefined from time to time
whenever pension has been revised by executive orders. The term emoluments
for purpose of pensionary benefits as defined in GO dated 17-8-1987
includes among other things the last pay drawn. It is, therefore, clarified
that the pay drawn by the teachers of degree colleges in respect of whom
UGC scales have been extended by GO No. ED 88 UNI 88 dated 30-3-1990 w.e.f.
1-1-1986 and who have opted to UGC scales of pay, the last pay drawn by
them in UGC scales of pay among other things may be treated as emoluments
for purpose of pensionary benefits under GO No. FD 20 SRS 87 (I) dated 17-8-
1987.”
*** *** ***
9. However, para 27-A was inserted thereto in respect of revision of
pensionary benefits, which is to the following effect:
“27-A. Revision of pensionary benefits.—(i) UGC scales as revised from 1-1-
1996 have been linked to the index level of 1510 points inasmuch as the
revised pay scale structure includes the DA admissible as on 1-1-1996 to
the extent of 138% of basic pay. As on 1-1-1996 the pensionary benefits
under the State Government had not been revised. The revised pay scales of
the State Government employees came into force from 1-4-1998 by merging the
DA as on 1-1-1996. The pensionary benefits were also simultaneously revised
w.e.f. 1-4-1998. Therefore, the revised pay drawn in the UGC pay scales for
the period from 1-1-1996 up to 31-3-1998 shall not be taken as emoluments
for the purpose of pensionary benefits. Accordingly,—
(a) In respect of teachers drawing UGC pay scales who have retired during
the period from 1-1-1996 to 31-3-1998, they shall be eligible for the
benefit of the fixation of pay and arrears under the revised UGC scales of
pay only. There shall not be any change in their pensionary benefits with
reference to the revised UGC pay and the retirement benefits already
sanctioned in the pre-revised UGC pay scales will not undergo any
modifications. However, they shall be entitled to the benefit of fixation
of revised pension/family pension as contemplated in GO No. FD (Spl.) 2 PET
99 dated 15-2-1999 only w.e.f. 1-4-1998. Para 6 of GO No. FD (Spl.) 2 PET
99 dated 15-2-1999 stands modified to this extent.
(b) In respect of teachers drawing UGC pay scales and who have issued on
or after 1-4-1998, the pay drawn in the revised UGC pay scales shall be
counted for the purpose of pensionary benefits and the orders revising the
pensionary benefits vide GO No. FD (Spl.) 2 PET 99 dated 15-2-1999 shall be
made applicable.”
*** *** ***
23. The stand of the State of Karnataka that the pensionary benefits had
been conferred on the appellants w.e.f. 1-4-1998 on the premise that the
benefit of the revision of scales of pay to its own employees had been
conferred from 1-1-1998, in our opinion, is wholly misconceived. Firstly,
because the employees of the State of Karnataka and the appellants, in the
matter of grant of benefit of revised scales of pay, do not stand on the
same footing as revised scales of pay had been made applicable to their
cases from a different date. Secondly, the appellants had been given the
benefit of the revised scales of pay w.e.f. 1-1-1996. It is now well
settled that a notification can be issued by the State accepting the
recommendations of the Pay Revision Committee with retrospective effect as
it was beneficent to the employees. Once such a retrospective effect is
given to the recommendations of the Pay Revision Committee, the employees
concerned despite their reaching the age of superannuation in between the
said dates and/or the date of issuance of the notification would be deemed
to be getting the said scales of pay as on 1-1-1996. By reason of such
notification, as the appellants had been deprived of a vested right, they
could not have been deprived therefrom and that too by reason of executive
instructions.
*** *** ***
25. Pension, as is well known, is not a bounty. It is treated to be a
deferred salary. It is akin to right of property. It is correlated and has
a nexus with the salary payable to the employees as on the date of
retirement.
*** *** ***
28. The impugned orders furthermore are opposed to the basic principles
of law inasmuch as by reason of executive instructions an employee cannot
be deprived of a vested or accrued right. Such a right to draw pension to
the extent of 50% of the emoluments, computed in terms of the rules w.e.f.
1-1-1996, vested in the appellants in terms of government notification read
with Rule 296 of the Rules.”
Based on the above judgment, it was pointed out, that the right to draw
revised pension under the Karnataka Civil Service Rules, was held to be
vested in the concerned employees, from the date of revision of the pay-
scales. It was pointed out, that while calculating pensionary benefits, it
was imperative for the employer to take into consideration, the actual pay
drawn by the employees, at the time of their retirement. Accordingly it
was held, that the action of the State Government in granting revised pay-
scales with retrospective effect (with effect from 1.1.1996), but extending
the benefit of revised pay for calculating pension, only with effect from
31.3.1998, was not sustainable in law. Inasmuch as, employees who had
retired between 1.1.1996 and 31.3.1998 would be prejudicially affected. On
the same proposition, learned counsel placed reliance on D.S. Nakara v.
Union of India, (1983) 1 SCC 305, and invited our attention to the
following observations made therein:-
“20. The antequated notion of pension being a bounty, a gratuitous payment
depending upon the sweet will or grace of the employer not claimable as a
right and, therefore, no right to pension can be enforced through Court has
been swept under the carpet by the decision of the Constitution Bench
in Deokinandan Prasad v. State of Bihar, (1971) 2 SCC 330, wherein this
Court authoritatively ruled that pension is a right and the payment of it
does not depend upon the discretion of the Government but is governed by
the rules and a government servant coming within those rules is entitled to
claim pension. It was further held that the grant of pension does not
depend upon anyone's discretion. It is only for the purpose of quantifying
the amount having regard to service and other allied matters that it may be
necessary for the authority to pass an order to that effect but the right
to receive pension flows to the officer not because of any such order but
by virtue of the rules. This view was reaffirmed in State of
Punjab v. Iqbal Singh, (1976) 2 SCC 1”.
Reference was also made to Chairman, Railway Board v. C.R. Rangadhamaiah,
(1997) 6 SCC 623, wherefrom our attention was drawn to the following
observations:-
“24. In many of these decisions the expressions “vested rights” or
“accrued rights” have been used while striking down the impugned provisions
which had been given retrospective operation so as to have an adverse
effect in the matter of promotion, seniority, substantive appointment,
etc., of the employees. The said expressions have been used in the context
of a right flowing under the relevant rule which was sought to be altered
with effect from an anterior date and thereby taking away the benefits
available under the rule in force at that time. It has been held that such
an amendment having retrospective operation which has the effect of taking
away a benefit already available to the employee under the existing rule is
arbitrary, discriminatory and violative of the rights guaranteed under
Articles 14 and 16 of the Constitution. We are unable to hold that these
decisions are not in consonance with the decisions in Roshan Lal Tandon,
AIR 1967 SC 1889, B.S. Yadav, AIR 1969 SC 118, and Raman Lal Keshav Lal
Soni, (1983) 2 SCC 33.
25. In these cases we are concerned with the pension payable to the
employees after their retirement. The respondents were no longer in service
on the date of issuance of the impugned notifications. The amendments in
the rules are not restricted in their application in futuro. The amendments
apply to employees who had already retired and were no longer in service on
the date the impugned notifications were issued.
26. In Deokinandan Prasad v. State of Bihar, (1971) 2 SCC 330, decided by
a Constitution Bench it has been laid down: (SCC p. 343, para 31)
“31. … pension is not to be treated as a bounty payable on the sweet will
and pleasure of the Government and that the right to superannuation pension
including its amount is a valuable right vesting in a government servant.”
[p. 152]
(emphasis supplied)
In that case the right to receive pension was treated as property under
Articles 31(1) and 19(1)(f) of the Constitution.
27. In D.S. Nakara v. Union of India, (1983) 1 SCC 305, this Court, after
taking note of the decision in Deokinandan Prasad (supra), has said: (SCC
p. 323, paras 28 and 29)
“28. Pension to civil employees of the Government and the defence personnel
as administered in India appears to be a compensation for service rendered
in the past. However, as held in Dodge v. Board of Education, 302 US 74, a
pension is closely akin to wages in that it consists of payment provided by
an employer, is paid in consideration of past service and serves the
purpose of helping the recipient meet the expenses of living.
***
29. … Thus the pension payable to a government employee is earned by
rendering long and efficient service and therefore can be said to be a
deferred portion of the compensation or for service rendered.”
*** *** ***
30. The respondents in these cases are employees who had retired after 1-
1-1973 and before 5-12-1988. As per Rule 2301 of the Indian Railway
Establishment Code they are entitled to have their pension computed in
accordance with Rule 2544 as it stood at the time of their retirement. At
that time the said rule prescribed that running allowance limited to a
maximum of 75% of the other emoluments should be taken into account for the
purpose of calculation of average emoluments for computation of pension and
other retiral benefits. The said right of the respondent-employees to have
their pension computed on the basis of their average emoluments being thus
calculated is being taken away by the amendments introduced in Rule 2544 by
the impugned notifications dated 5-12-1988 inasmuch as the maximum limit
has been reduced from 75% to 45% for the period from 1-1-1973 to 31-3-1979
and to 55% from 1-4-1979 onwards. As a result the amount of pension payable
to the respondents in accordance with the rules which were in force at the
time of their retirement has been reduced.
31. In Salabuddin Mohamed Yunus v. State of A.P., (1984) Supp SCC 399,
the appellant was employed in the service of the former Indian State of
Hyderabad prior to coming into force of the Constitution of India. On
coming into force of the Constitution the appellant continued in the
service of that State till he retired from service on 21-1-1956. The
appellant claimed that he was entitled to be paid the salary of a High
Court Judge from 1-10-1947 and also claimed that he was entitled to receive
pension of Rs.1000 a month in the Government of India currency, being the
maximum pension admissible under the rules. The said claim of the appellant
was negatived by the Government. He filed a writ petition in the High Court
of Andhra Pradesh. During the pendency of the said writ petition the
relevant rule was amended by notification dated 3-2-1971 with retrospective
effect from 1-10-1954 and the expression “Rs.1000 a month” in clause (b) of
sub-rule (1) of Rule 299 was substituted by the expression “Rs.857.15 a
month”. This amendment was made in exercise of the power conferred by the
proviso to Article 309 read with Article 313 of the Constitution. The said
amendment was struck down by this Court as invalid and inoperative on the
ground that it was violative of Articles 31(1) and 19(1)(f) of the
Constitution. Relying upon the decision in Deokinandan Prasad (supra), it
was held: (SCC p. 406, para 6)
“6. … The fundamental right to receive pension according to the rules in
force on the date of his retirement accrued to the appellant when he
retired from service. By making a retrospective amendment to the said Rule
299(1)(b) more than fifteen years after that right had accrued to him, what
was done was to take away the appellant's right to receive pension
according to the rules in force on the date of his retirement or in any
event to curtail and abridge that right. To that extent, the said amendment
was void.”
32. It is no doubt true that on 5-12-1988 when the impugned notifications
were issued, the rights guaranteed under Articles 31(1) and 19(1)(f) were
not available since the said provisions in the Constitution stood omitted
with effect from 20-6-1979 by virtue of the Constitution (Forty-fourth
Amendment) Act, 1978. But Notifications Nos. GSR 1143 (E) and GSR 1144 (E)
have been made operative with effect from 1-1-1973 and 1-4-1979
respectively on which dates the rights guaranteed under Articles 31(1) and
19(1)(f) were available. Both the notifications insofar as they have been
given retrospective operation are, therefore, violative of the rights then
guaranteed under Articles 19(1) and 31(1) of the Constitution.
33. Apart from being violative of the rights then available under
Articles 31(1) and 19(1)(f), the impugned amendments, insofar as they have
been given retrospective operation, are also violative of the rights
guaranteed under Articles 14 and 16 of the Constitution on the ground that
they are unreasonable and arbitrary since the said amendments in Rule 2544
have the effect of reducing the amount of pension that had become payable
to employees who had already retired from service on the date of issuance
of the impugned notifications, as per the provisions contained in Rule 2544
that were in force at the time of their retirement.”
Based on the above cited judgments, it was submitted, that the
determination rendered by the High Court in the impugned judgment, that the
respondent-employees acquired a vested right, the moment they had
subscribed to ‘the 1999 Scheme’, was unexceptionable.
31. Learned counsel for the respondent-employees also contested the
submission advanced on behalf of the appellants, that the right to receive
pension accrues to an employee, on the date on which he attains the age of
superannuation, and not earlier. On the instant aspect of the matter it
was submitted, that even though pension can formally be claimed by an
employee only on his retirement, the seeds for a claim to pension are sown,
and the foundation for receipt of pension is laid, the very moment from
which an employee commences to render qualifying service. It was
submitted, that based on having acquired a minimum qualifying service
postulated under the rules, an employee’s claim eventually crystalises for
entitlement to pension, on attaining the age of superannuation. It was
contended, that since past service rendered by an employee, constitutes the
basis for grant of pension, every day of service rendered by an employee,
has to be taken into consideration, for computing pension. It was
accordingly urged, that every day of service rendered by an employee,
furthers the right in the employee to earn and receive pension. For the
aforesaid reasons, according to learned counsel, pension has always been
considered as deferred-wages for services rendered. It was asserted, that
with effect from the date of commencement of qualifying service, the
concerned employee is treated to have an inherent vested right, for a claim
to pension. In order to substantiate the instant contention, learned
counsel placed reliance on the D.S. Nakara case (supra), and invited our
attention to the following observations recorded therein:-
“46. By our approach, are we making the scheme retroactive? The answer is
emphatically in the negative. Take a government servant who retired on
April 1, 1979. He would be governed by the liberalised pension scheme. By
that time he had put in qualifying service of 35 years. His length of
service is a, relevant factor for computation of pension. Has the
Government made it retroactive, 35 years backward compared to the case of a
Government servant who retired on 30th March, 1979? Concept of qualifying
service takes note of length of service, and pension quantum is correlated
to qualifying service. Is it retroactive for 35 years for one and not
retroactive for a person who retired two days earlier? It must be
remembered that pension is relatable to qualifying service. It has
correlation to the average emoluments and the length of service. Any
liberalisation would pro tanto be retroactive in the narrow sense of the
term. Otherwise it is always prospective. A statute is not properly called
a retroactive statute because a part of the requisites for its action is
drawn from a time antecedent to its passing, (see Craies on Statute Law,
sixth edition, p. 387). Assuming the Government had not prescribed the
specified date and thereby provided that those retiring pre and post the
specified date would all be governed by the liberalised pension scheme,
undoubtedly, it would be both prospective and retroactive. Only the pension
will have to be recomputed in the light of the formula enacted in the
liberalised pension scheme and effective from the date the revised scheme
comes into force. And beware that it is not a new scheme, it is only a
revision of existing scheme. It is not a new retiral benefit. It is an
upward revision of an existing benefit. If it was a wholly new concept, a
new retiral benefit, one could have appreciated an argument that those who
had already retired could not expect it. It could have been urged that it
is an incentive to attract the fresh recruits. Pension is a reward for past
service. It is undoubtedly a condition of service but not an incentive to
attract new entrants because if it was to be available to new entrants
only, it would be prospective at such distance of thirty-five years since
its introduction. But it covers all those in service who entered thirty-
five years back. Pension is thus not an incentive but a reward for past
service. And a revision of an existing benefit stands on a different
footing than a new retiral benefit. And even in case of new retiral benefit
of gratuity under the Payment of Gratuity Act, 1972 past service was taken
into consideration. Recall at this stage the method adopted when pay-scales
are revised. Revised pay-scales are introduced from a certain date. All
existing employees are brought on to the revised scales by adopting a
theory of fitments and increments for past service. In other words, benefit
of revised scale is not limited to those who enter service subsequent to
the date fixed for introducing revised scales but the benefit is extended
to all those in service prior to that date. This is just and fair. Now if
pension as we view it, is some kind of retirement wages for past service,
can it be denied to those who retired earlier, revised retirement benefits
being available to future retirees only. Therefore, there is no substance
in the contention that the court by its approach would be making the scheme
retroactive, because it is implicit in theory of wages.”
Based on the observations extracted above, it was submitted, that it was
not open to the State to contend, that a vested right would be created
under ‘the 1999 Scheme’, only on the date of retirement. Since pension has
been recognized as deferred-wages for past services, payable on retirement,
according to learned counsel, the moment an employee is enrolled on the
pension scheme, his right to claim pension, must be deemed to have
materialized.
32. Relying on certain paragraphs of ‘the 1999 Scheme’ (referred to
above), it was submitted, that the appellants have erroneously treated the
date of retirement, as the date on which the right to pension accrued to
the employees. In this behalf it was pointed out, that the cause of action
to receive pension would accrue to an employee on the date of his
retirement. However, the right to receive pension crystalises, at the end
of every successive day, and at the end of every successive month, and at
the end of every successive year. It was pointed out, that it crystalises
and further crystalises, giving rise to an eventual claim for pension. It
was accordingly pointed out, that the date of retirement had been legally
perceived, as the date on which the cause of action arose to an employee to
claim pension. Accordingly it was submitted, that the date of retirement
was relevant only for the limited purpose of determining the cause of
action, to receive pension. For this, learned counsel place reliance on
Asger Ibrahim Amin v. Life Insurance Corporation of India, (2015) 10 SCALE
639, and invited our attention to the following observations:-
“3. On 8.8.1995, that is post the promulgation by the Respondent of the
Pension Rules, the Appellant enquired from the Respondent whether he was
entitled to pension under the Pension Rules, which has been understood by
the Respondent as a representation for pension; the Respondent replied that
the request of the Appellant cannot be acceded to. The Appellant took the
matter no further but has averred that in 2000, prompted by news in a Daily
and Judgments of a High Court and a Tribunal, he requested the Respondent
to reconsider his case for pension. This request has remained unanswered.
It was in 2011 that he sent a legal notice to the Respondent, in response
to which the Respondent reiterated its stand that the Appellant, having
resigned from service, was not eligible to claim pension under the Pension
Rules. Eventually, the Appellant filed a Special Civil Application on
29.3.2012 before the High Court, which was dismissed by the Single Judge
vide Judgment dated 5.10.2012. The LPA of the Appellant also got dismissed
on the grounds of the delay of almost 14 years, as also on merits vide
Judgment dated 1.3.2013, against which the Appellant has approached this
Court.
4. As regards the issue of delay in matters pertaining to claims of
pension, it has already been opined by this Court in Union of India v.
Tarsem Singh, (2008) 8 SCC 648, that in cases of continuing or successive
wrongs, delay and laches or limitation will not thwart the claim so long as
the claim, if allowed, does not have any adverse repercussions on the
settled third-party rights. This Court held:
“7. To summarise, normally, a belated service related claim will be
rejected on the ground of delay and laches (where remedy is sought by
filing a writ petition) or limitation (where remedy is sought by an
application to the Administrative Tribunal). One of the exceptions to the
said rule is cases relating to a continuing wrong. Where a service related
claim is based on a continuing wrong, relief can be granted even if there
is a long delay in seeking remedy, with reference to the date on which the
continuing wrong commenced, if such continuing wrong creates a continuing
source of injury. But there is an exception to the exception. If the
grievance is in respect of any order or administrative decision which
related to or affected several others also, and if the reopening of the
issue would affect the settled rights of third parties, then the claim will
not be entertained. For example, if the issue relates to payment or
refixation of pay or pension, relief may be granted in spite of delay as it
does not affect the rights of third parties. But if the claim involved
issues relating to seniority or promotion, etc., affecting others, delay
would render the claim stale and doctrine of laches/limitation will be
applied. Insofar as the consequential relief of recovery of arrears for a
past period is concerned, the principles relating to recurring/successive
wrongs will apply. As a consequence, the High Courts will restrict the
consequential relief relating to arrears normally to a period of three
years prior to the date of filing of the writ petition.”
We respectfully concur with these observations which if extrapolated or
applied to the factual matrix of the present case would have the effect of
restricting the claim for pension, if otherwise sustainable in law, to
three years previous to when it was raised in a judicial forum. Such claims
recur month to month and would not stand extinguished on the application of
the laws of prescription, merely because the legal remedy pertaining to the
time barred part of it has become unavailable. This is too well entrenched
in our jurisprudence, foreclosing any fresh consideration.
Reliance was also placed on the decision of this Court in State of Madhya
Pradesh v. Yogendra Shrivastava, (2010) 12 SCC 538, wherefrom learned
counsel emphasized on the following observations:-
“17. The appellants contended that the claims were therefore barred by
limitation. It was pointed out that the respondents were paid NPA at a
fixed rate as stipulated in the appointment orders and NPA was increased
only when it was revised by the government orders from time to time; that
the respondents accepted such NPA without protest; and that therefore, they
cannot, after periods varying from 5 to 15 years, challenge the fixation of
NPA or contend that they are entitled to NPA at a higher rate, that is 25%
of their pay.
18. We cannot agree. Where the issue relates to payment or fixation of
salary or any allowance, the challenge is not barred by limitation or the
doctrine of laches, as the denial of benefit occurs every month when the
salary is paid, thereby giving rise to a fresh cause of action, based on
continuing wrong. Though the lesser payment may be a consequence of the
error that was committed at the time of appointment, the claim for a higher
allowance in accordance with the Rules (prospectively from the date of
application) cannot be rejected merely because it arises from a wrong
fixation made several years prior to the claim for correct payment. But in
respect of grant of consequential relief of recovery of arrears for the
past period, the principle relating to recurring and successive wrongs
would apply. Therefore the consequential relief of payment of arrears will
have to be restricted to a period of three years prior to the date of the
original application. [See: M.R. Gupta v. Union of India, 1995 (5) SCC 628,
and Union of India v. Tarsem Singh, 2008 (8) SCC 648]”.
It was, therefore, the contention of learned counsel for the respondents,
that the foundation to claim pension, accrued in the employees of all
corporate bodies in the State of Himachal Pradesh (including all the
respondent-employees herein), the very moment they came to be enrolled in
‘the 1999 Scheme’. It was submitted, that all existing employees who had
opted for pension or were deemed to have opted for pension, had vested in
themselves the right to pension when they would retire from service. All
employees who came to be engaged by corporations in the State, from
1.4.1999 up to 1.12.2004, were likewise vested with the right to receive
pension, because of the fact, that at the very inception of their
employment, they became members of ‘the 1999 Scheme’, and the period of
service rendered by them would likewise constitute qualifying service, for
pension. It was therefore submitted, that there was a clear distinction
between two contingencies, firstly, the date on which a claim for pension
can be stated to have vested in the employee, and the date on which the
employee earns a right to receive pension. Insofar as the former is
concerned, it was submitted, that the moment qualifying service commences
to add up, a vested right to receive pension is created. For the latter,
having rendered the postulated qualifying service (on the date of
superannuation), gives rise to a cause of action to receive pension. It is
this fine distinction which according to learned counsel, needs to be
examined and has been overlooked during the course of the submissions
advanced on behalf of the appellant-State.
33. Insofar as the issue of financial unviability of ‘the 1999 Scheme’ is
concerned, it was submitted on behalf of the respondent-employees, that the
State Government was estopped in law, from raising such a plea. In this
behalf it was pointed out, that the Law Department and the Finance
Department of the State Government, had advised, against the retrospective
withdrawal of ‘the 1999 Scheme’. If the advice had been accepted,
according to learned counsel, persons similarly situated, as the private
respondents, would have remained entitled to receive pension under ‘the
1999 Scheme’. Additionally it was contended, that in identical
circumstances, the State Government had repealed the provisions of the
Central Civil Services (Pension) Rules, 1972, as were applicable to State
Government employees, through a similar notification, dated 15.5.2003. It
was highlighted, that the aforesaid repeal notification, was given a
prospective effect, inasmuch as, employees similarly situated as the
respondent-employees herein, who had not retired on the date of the repeal
notification, were allowed to be governed by the Central Civil Services
(Pension) Rules, 1972. At the cost of clarification, it was pointed out,
that the repeal notification dated 15.5.2003, had the effect of not
depriving pensionary rights to any of the existing employees. Based on the
above contentions, it was submitted, that the action of the State
Government, in depriving the respondent-employees of their pensionary
rights, must be treated as based on an arbitrary exercise of power, and as
such, was liable to be considered as violative of Article 14 of the
Constitution of India.
34. It was also the contention of learned counsel for the respondent-
employees, that pension was akin to the right of property, postulated under
article 300A of the Constitution. For the instant proposition, learned
counsel placed reliance on the decision rendered in State of Jharkhand v.
Jitendra Kumar Srivastava, (2013) 12 SCC 210, and invited our attention to
the following observations recorded therein:-
“8. It is an accepted position that gratuity and pension are not
bounties. An employee earns these benefits by dint of his long, continuous,
faithful and un-blemished service. Conceptually it is so lucidly described
in D.S. Nakara and Ors. v. Union of India, (1983) 1 SCC 305, by D.A. Desai,
J., who spoke for the Bench, in his inimitable style, in the following
words: (SCC pp. 319-20, paras 18-20)
“18. The approach of the Respondents raises a vital and none too easy of
answer, question as to why pension is paid. And why was it required to be
liberalised? Is the employer, which expression will include even the State,
bound to pay pension? Is there any obligation on the employer to provide
for the erstwhile employee even after the contract of employment has come
to an end and the employee has ceased to render service?
19. What is a pension? What are the goals of pension? What public
interest or purpose, if any, it seeks to serve? If it does seek to serve
some public purpose, is it thwarted by such artificial division of
retirement pre and post a certain date? We need seek answer to these and
incidental questions so as to render just justice between parties to this
petition.
20. The antiquated notion of pension being a bounty a gratuitous payment
depending upon the sweet will or grace of the employer not claimable as a
right and, therefore, no right to pension can be enforced through Court has
been swept under the carpet by the decision of the Constitution Bench in
Deoki Nandan Prasad v. State of Bihar and Ors., (1971) 2 SCC 330, wherein
this Court authoritatively ruled that pension is a right and the payment of
it does not depend upon the discretion of the Government but is governed by
the rules and a Government servant coming within those rules is entitled to
claim pension. It was further held that the grant of pension does not
depend upon anyone's discretion. It is only for the purpose of quantifying
the amount having regard to service and other allied maters that it may be
necessary for the authority to pass an order to that effect but the right
to receive pension flows to the officer not because of any such order but
by virtue of the rules. This view was reaffirmed in State of Punjab and
Anr. v. Iqbal Singh, (1976) 2 SCC 1”.
It is thus hard earned benefit which accrues to an employee and is in the
nature of "property". This right to property cannot be taken away without
the due process of law as per the provisions of Article 300A of the
Constitution of India.
xxx xxx xxx
13. A reading of Rule 43(b) makes it abundantly clear that even after the
conclusion of the departmental inquiry, it is permissible for the
Government to withhold pension etc. only when a finding is recorded either
in departmental inquiry or judicial proceedings that the employee had
committed grave misconduct in the discharge of his duty while in his
office. There is no provision in the rules for withholding of the
pension/gratuity when such departmental proceedings or judicial proceedings
are still pending.
14. The right to receive pension was recognized as a right to property by
the Constitution Bench judgment of this Court in Deokinandan Prasad v.
State of Bihar, (1971) 2 SCC 330, as is apparent from the following
discussion: (SCC pp. 342-43, paras 27-33)
“27. The last question to be considered, is, whether the right to receive
pension by a Government servant is property, so as to attract
Articles 19(1)(f) and 31(1) of the Constitution. This question falls to be
decided in order to consider whether the writ petition is maintainable
under Article 32. To this aspect, we have already adverted to earlier and
we now proceed to consider the same.
28. According to the Petitioner the right to receive pension is property
and the Respondents by an executive order dated 12-6-1968 have wrongfully
withheld his pension. That order affects his fundamental rights under
Articles 19(1)(f) and 31(1) of the Constitution. The Respondents, as we
have already indicated, do not dispute the right of the Petitioner to get
pension, but for the order passed on 5-8-1996. There is only a bald
averment in the counter-affidavit that no question of any fundamental right
arises for consideration. Mr. Jha, learned Counsel for the Respondents,
was not prepared to take up the position that the right to receive pension
cannot be considered to be property under any circumstances. According to
him, in this case, no order has been passed by the State granting pension.
We understood the learned Counsel to urge that if the State had passed an
order granting pension and later on resiles from that order, the latter
order may be considered to affect the Petitioner's right regarding property
so as to attract Articles 19(1)(f) and 31(1) of the Constitution.
29. We are not inclined to accept the contention of the learned Counsel
for the Respondents. By a reference to the material provisions in the
Pension Rules, we have already indicated that the grant of pension does not
depend upon an order being passed by the authorities to that effect. It may
be that for the purposes of quantifying the amount having regard to the
period of service and other allied matters, it may be necessary for the
authorities to pass an order to that effect, but the right to receive
pension flows to an officer not because of the said order but by virtue of
the rules. The rules, we have already pointed out, clearly recognise the
right of persons like the petitioners to receive pension under the
circumstances mentioned therein.
xxx xxx xxx
33. Having due regard to the above decisions, we are of the opinion that
the right of the Petitioner to receive pension is property under
Article 31(1) and by a mere executive order the State had no power to
withhold the same. Similarly, the said claim is also property under
Article 19(1)(f) and it is not saved by clause (5) of Article 19.
Therefore, it follows that the order dated 12-6-1968, denying the
petitioner right to receive pension affects the fundamental right of the
petitioner under Articles 19(1)(f) and 31(1) of the Constitution, and as
such the writ petition under Article 32 is maintainable. It may be that
under the Pension Act (23 of 1871) there is a bar against a civil court
entertaining any suit relating to the matters mentioned therein. That does
not stand in the way of writ of mandamus being issued to the State to
properly consider the claim of the petitioner for payment of pension
according to law.”
16. The fact remains that there is an imprimatur to the legal principle
that the right to receive pension is recognized as a right in "property".
Article 300-A of the Constitution of India reads as under:
“300-A. Persons not to be deprived of property save by authority of law.-
No person shall be deprived of his property save by authority of law.”
Once we proceed on that premise, the answer to the question posed by us in
the beginning of this judgment becomes too obvious. A person cannot be
deprived of this pension without the authority of law, which is the
Constitutional mandate enshrined in Article 300-A of the Constitution. It
follows that attempt of the Appellant to take away a part of pension or
gratuity or even leave encashment without any statutory provision and under
the umbrage of administrative instruction cannot be countenanced.”
For the same proposition, reliance was placed on the decision of this Court
in the U.P. Raghavendra Acharya case (supra). Learned counsel while
seeking to adopt the conclusions drawn by this Court in the above case
asserted, that the subscription to the pensionary scheme by itself, would
create a vested right in the respondent-employees, to draw pension under
‘the 1999 Scheme’.
35. At this juncture, learned counsel for the respondent-employees also
placed reliance on the U.P. Raghavendra Acharya case (supra), and invited
the Court’s attention to the following:-
“19. The fact that the appellants herein were treated to be on a par with
the holders of similar posts in government colleges is neither denied nor
disputed. The appellants indisputably are governed by the UGC scales of
pay. They are entitled to the pensionary benefits also. They had been given
the benefits of the revision of scales of pay by the 10th Pay Revision
Committee w.e.f. 1-1-1986. The pensionary benefits payable to them on
attaining the age of superannuation or death were also stated to be on a
par with the employees of the State Government. The State of Karnataka, as
noticed hereinbefore, for all intent and purport, has treated the teachers
of the government aided colleges and the regional engineering colleges on
the one hand and the teachers of the colleges run by the State itself on
the other hand on a par. Even the financial rules were made applicable to
them in terms of the notifications, applying the rule of incorporation by
reference. Although Rule 296 of the Rules per se may not be applicable so
far as the appellants are concerned, it now stands admitted that the
provisions thereof have been applied to the case of the appellants also for
the purpose of computation of pensionary benefits. Therefore there cannot
be any doubt whatsoever that the term "Emoluments" as contained in Rule 296
of the Rules would also apply to the case of the appellants. Rule 296 of
the Rules reads as under:
“296. In respect of retirement or death while in service of
government servants on or after first day of July, 1993, the term
‘emoluments’ for the purpose of this Chapter means, the basic pay drawn by
the government servant in the scale of pay applicable to the post on the
date of retirement or death and includes the following, but does not
include pay and allowance drawn from a source other than the Consolidated
Fund of the State,-
xxx xxx xxx
Note:- (a) Basic pay means the pay drawn in the time-scale of pay
applicable to the post immediately before retirement or death.”
xxx xxx xxx
22. The State while implementing the new scheme for payment of grant of
pensionary benefits to its employees, may deny the same to a class of
retired employees who were governed by a different set of rules. The
extension of the benefits can also be denied to a class of employees if the
same is permissible in law. The case of the appellants, however, stands
absolutely on a different footing. They had been enjoying the benefit of
the revised scales of pay. Recommendations have been made by the Central
Government as also the University Grants Commission to the State of
Karnataka to extend the benefits of the Pay Revision Committee in their
favour. The pay in their case had been revised in 1986 whereas the pay of
the employees of the State of Karnataka was revised in 1993. The benefits
of the recommendations of the Pay Revision Committee w.e.f. 1-1-1996, thus,
could not have been denied to the appellants.
23. The stand of the State of Karnataka that the pensionary benefits had
been conferred on the appellants w.e.f. 1-4-1998 on the premise that the
benefit of the revision of scales of pay to its own employees had been
conferred from 1-1-1998, in our opinion, is wholly misconceived. Firstly,
because the employees of the State of Karnataka and the appellants, in the
matter of grant of benefit of revised scales of pay, do not stand on the
same footing as revised scales of pay had been made applicable to their
cases from a different date. Secondly, the appellants had been given the
benefit of the revised scales of pay w.e.f. 1-1-1996. It is now well
settled that a notification can be issued by the State accepting the
recommendations of the Pay Revision Committee with retrospective effect as
it was beneficent to the employees. Once such a retrospective effect is
given to the recommendations of the Pay Revision Committee, the employees
concerned despite their reaching the age of superannuation in between the
said dates and/or the date of issuance of the notification would be deemed
to be getting the said scales of pay as on 1-1-1996. By reason of such
notification, as the appellants had been derived of a vested right, they
could not have been deprived therefrom and that too by reason of executive
instructions.
24. The contention of the State that the matter relating to the grant of
pensionary benefits vis-à-vis the revision in the scales of pay stands on
different footing, thus, must be rejected.
25. Pension, as is well known, is not a bounty. It is treated to be a
deferred salary. It is akin to right of property. It is co-related and has
a nexus with the salary payable to the employees as on the date of
retirement.
26. These appeals involve the question of revision of pay and consequent
revision in pension and not the grant of pension for the first time. Only
the modality of computing the quantum of pension was required to be
determined in terms of the notification issued by the State of Karnataka.
For the said purpose, Rule 296 of the Rules was made applicable. Once this
rule became applicable, indisputably the computation of pensionary benefits
was required to be carried out in terms thereof. The Pension Rules envisage
that pension should be calculated only on the basis of the emoluments last
drawn. No order, therefore, could be issued which would be contrary to or
inconsistent therewith. Such emoluments were to be reckoned only in terms
of the statutory rules. If the State had taken a conscious decision to
extend the benefit of the UGC pay scales w.e.f. 1-1-1996, to the
appellants, allowing them to draw their pay and allowances in terms
thereof, we fail to see any reason as to why the pensionary benefits would
not be extended to them from the said date.
xxx xxx xxx
28. The impugned order furthermore is opposed to the basic principles of
law inasmuch as by reason of executive instructions an employee cannot be
deprived of a vested or accrued right. Such a right to draw pension to the
extent of 50% of the emoluments, computed in terms of the rules, w.e.f. 1-1-
1996, vested in the appellants in terms of government notification read
with Rule 296 of the Rules.”
36. It was also the contention of learned counsel for the respondent-
employees, that the present controversy needs to be examined from the
perspective, that the respondent-employees did not make any endeavour to
claim pension as a matter of parity with Government employees, in the State
of Himachal Pradesh. It was submitted, that legally such a claim would not
be sustainable, because civil servants in the State of Himachal Pradesh,
and employees of Government owned corporations in the State, can not be
considered as entitled to the same monetary benefits. It was however
pointed out, that insofar as the present controversy is concerned, the
State of Himachal Pradesh at its own, had granted parity to employees of
Government owned corporations on the subject of pension, with Government
employees in the State. Examined in the above context, according to
learned counsel, it is apparent that the right of employees of Government
owned corporations, in the State of Himachal Pradesh, on the issue of
pension, stood conceded in their favour, on the basis of ‘the 1999 Scheme’.
It was in the above view of the matter, that learned counsel for the
respondent-employees asserted, that the revocation of a benefit which the
State Government conceded to employees of Government owned corporations,
was per se arbitrary, and as such, not sustainable in law.
37. Learned counsel for the respondent-employees raised a plea of
discrimination as well. It was submitted, that through the repeal
notification dated 2.12.2004, ‘the 1999 Scheme’ was sought to be withdrawn
for one set of employees, and was sought to be retained for another set of
employees. In this behalf it was submitted, that the action of the State
Government in fixing the date of retirement, as a cut-off date for
withdrawing or sustaining pensionary benefits, is clearly unacceptable in
law. In this behalf it was pointed out, that this Court on a number of
occasions held, that the date of retirement, cannot be a valid criterion
for classification. It was submitted, that the fortuitous circumstance
(date) of retirement, by a day earlier or a day later (than the cut-off
date), would result in discriminatory consequences, for persons who
constitute a homogenous class. It was contended, that whilst ‘the 1999
Scheme’ was in operation, all employees of State owned corporations who had
opted for the same, constituted a homogenous class, and there could be no
division to segregate such a homogenous class, so as to extend pensionary
benefits to one set of employees, and to revoke the same, for another. In
order to support the above contention, learned counsel for the respondents
placed reliance on the D.S. Nakara case (supra) and drew our attention to
the following observations recorded therein:-
“42. If it appears to be undisputable, as it does to us that the
pensioners for the purpose of pension benefits form a class, would its
upward revision permit a homogeneous class to be divided by arbitrarily
fixing an eligibility criteria unrelated to purpose of revision, and would
such classification be founded on some rational principle? The
classification has to be based, as is well settled, on some rational
principle and the rational principle must have nexus to the objects sought
to be achieved. We have set out the objects underlying the payment of
pension. If the State considered it necessary to liberalise the pension
scheme, we find no rational principle behind it for granting these benefits
only to those who retired subsequent to that date simultaneously denying
the same to those who retired prior to that date. If the liberalisation was
considered necessary for augmenting social security in old age to
government servants then those who retired earlier cannot be worst off than
those who retire later. Therefore, this division which classified
pensioners into two classes is not based on any rational principle and if
the rational principle is the one of dividing pensioners with a view to
giving something more to persons otherwise equally placed, it would be
discriminatory. To illustrate, take two persons, one retired just a day
prior and another a day just succeeding the specified date. Both were in
the same pay bracket, the average emolument was the same and both had put
in equal number of years of service. How does a fortuitous circumstance of
retiring a day earlier or a day later will permit totally unequal treatment
in the matter of pension? One retiring a day earlier will have to be
subject to ceiling of Rs.8100 p.a. And average emolument to be worked out
on 36 months’ salary while the other will have a ceiling of Rs.12,000 p.a.
and average emolument will be computed on the basis of last ten months’
average. The artificial division stares into face and is unrelated to any
principle and whatever principle, if there be any, has absolutely no nexus
to the objects sought to be achieved by liberalising the pension scheme. In
fact this arbitrary division has not only no nexus to the liberalised
pension scheme but it is counter productive and runs counter to the whole
gamut of pension scheme. The equal treatment guaranteed in Article 14 is
wholly violated inasmuch as the pension rules being statutory in character,
since the specified date, the rules accord differential and discriminatory
treatment to equals in the matter of commutation of pension. A 48 hours’
difference in matter of retirement would have a traumatic effect. Division
is thus both arbitrary and unprincipled. Therefore the classification does
not stand the test of Article 14.”
On the same proposition, reliance was placed on Union of India v. SPS Vains
(Retd.), (2008) 9 SCC 125, and the Court’s attention was invited to the
following observations:-
“28. The question regarding creation of different classes within the same
cadre on the basis of the doctrine of intelligible differentia having nexus
with the object to be achieved, has fallen for consideration at various
intervals for the High Courts as well as this Court, over the years. The
said question was taken up by a Constitution Bench in the case of D.S.
Nakara v. Union of India, (1983) 1 SCC 305, where in no uncertain terms
throughout the judgment it has been repeatedly observed that the date of
retirement of an employee cannot form a valid criterion for classification,
for if that is the criterion those who retired by the end of the month will
form a class by themselves. In the context of that case, which is similar
to that of the instant case, it was held that Article 14 of the
Constitution had been wholly violated, inasmuch as, the Pension Rules being
statutory in character, the amended Rules, specifying a cut-off date
resulted in differential and discriminatory treatment of equals in the
matter of commutation of pension. It was further observed that it would
have a traumatic effect on those who retired just before that date. The
division which classified pensioners into two classes was held to be
artificial and arbitrary and not based on any rational principle and
whatever principle, if there was any, had not only no nexus to the objects
sought to be achieved by amending the Pension Rules, but was
counterproductive and ran counter to the very object of the pension scheme.
It was ultimately held that the classification did not satisfy the test of
Article 14 of the Constitution.
29. The Constitution Bench (in D.S. Nakara (supra)), has discussed in
detail the objects of granting pension and we need not, therefore, dilate
any further on the said subject, but the decision in the aforesaid case has
been consistently referred to in various subsequent judgments of this
Court, to which we need not refer. In fact, all the relevant judgments
delivered on the subject prior to the decision of the Constitution Bench
have been considered and dealt with in detail in the aforesaid case. The
directions ultimately given by the Constitution Bench in the said case in
order to resolve the dispute which had arisen, is of relevance to resolve
the dispute in this case also.
30. However, before we give such directions we must also observe that the
submissions advanced on behalf of the Union of India cannot be accepted in
view of the decision in D.S. Nakara's case (supra). The object sought to be
achieved was not to create a class within a class, but to ensure that the
benefits of pension were made available to all persons of the same class
equally. To hold otherwise would cause violence to the provisions of
Article 14 of the Constitution. It could not also have been the intention
of the authorities to equate the pension payable to officers of two
different ranks by resorting to the step up principle envisaged in the
fundamental rules in a manner where the other officers belonging to the
same cadre would be receiving a higher pension.”
38. It was therefore asserted on behalf of the respondent-employees, that
the concept of a cut-off date cannot be adopted, in case of a repeal of a
pension scheme prospectively. In this behalf it was submitted, that it
could not be forgotten, that consequent upon the respondent-employees
having been enrolled in ‘the 1999 Scheme’, they had been deprived of the
employer’s share of provident fund (and the interest which had accrued,
thereon). The same ought to be treated as consideration, which passed from
the respondent-employees to the State Government, consequent upon their
enrollment into ‘the 1999 Scheme’. On account of having foregone the
employer’s contribution which was a pre-requisite for enrollment in ‘the
1999 Scheme’, it was submitted, that the respondent-employees must be
deemed to have contributed by way of consideration, to earn the benefit
which would accrue to them, under ‘the 1999 Scheme’. Keeping the above
legal proposition in mind, it was pointed out, that the action of the State
Government in depriving the respondent-employees of pensionary benefits,
while allowing the same to such of the employees, who had retired on or
before 2.12.2004, was discriminatory and unsustainable in law. It was also
the contention of learned counsel for the respondent-employees, that the
only situation where a claim for pension under ‘the 1999 Scheme’ could have
been legally denied, is when a succeeding pension scheme introduced by the
employer, postulated better retiral benefits.
39. Reliance was also placed on Pepsu Road Transport Corporation, Patiala
v. Mangal Singh, (2011) 11 SCC 702, wherein it has been held as under:-
“48. The concept of “pension” has also been considered in Corpus Juris
Secundum, Vol. 70, at p. 423 as thus:
“A pension is a periodical allowance of money granted by the government in
consideration or recognition of meritorious past services, or of loss or
injury sustained in the public service. A pension is mainly designed to
assist the pensioner in providing for his daily wants, and it presupposes
the continued life of the recipient.”
Based on the above, it was the contention of learned counsel, that the
State Governments’ inference, based on the report of the Committee, dated
15.11.2003, that ‘the 1999 Scheme’ was not viable, was clearly
unacceptable. In this behalf, learned counsel invited the Court’s
attention to the following observations, recorded in the said report:-
“14. After determining the magnitude of inflows and outflows, the
sustainability of the corpus has been analysed assuming average interest
income from corpus investment at various levels of interest over a period
of 10 years. The highest rate of interest has been assumed to be 6.5% and
the lowest 5.5%. In each scenario, the net surplus available for ploughing
back into the pension fund starts declining from the 6th year onwards.
This is essentially due to the fact that with dwindling fresh recruitments,
the pension liabilities will continue to increase over the years, but the
inflows would decline due to reduced contributions. Details of the
calculations are as under:-
5.5% Annexure-F
5.75% Annexure-F-I
6.00% Annexure-F-II
6.25% Annexure-F-III
6.50% Annexure-F-IV”
It was submitted, that there was no legitimate basis for recording such a
conclusion.
40. It was also the contention of learned counsel, that the judgment
rendered by the High Court, rightly negated the financial impact of ‘the
1999 Scheme’, because in terms of the conclusions drawn in the judgment,
the same would not be applicable to future employees. And the deficiency
in the financial resources was accordingly fastened on the State
Government. On the issue in hand, it was submitted, that a number of
employees, who became members of ‘the 1999 Scheme’, and would retire after
2.12.2004 (i.e. the cut-off date, determined under the repeal notification,
dated 2.12.2004) is a definite number. In this behalf it was pointed out,
that if the employees, who became members of ‘the 1999 Scheme’, are to be
taken into consideration, there would be 6,730 employees, who would draw
pension on their retirement. It was accordingly submitted, that there
would be no further increase in the liability under ‘the 1999 Scheme’. In
order to demonstrate that the available funds accumulated on account of the
employee’s contribution to the EPF/CPF concerned, were sufficient to meet
the liability, to administer the pension scheme, it was submitted, that the
same has increased from 56 crores in 2003 to 253 crores in 2015. It was
pointed out, that the aforesaid figures emerged, despite the withdrawal of
provident fund amounts, by a number of employees. It was, therefore
submitted, that payment of pensionary benefits to 6,730 employees, was well
within the financial reach of the State Government, and that, the decision
of the State Government to issue the repeal notification, on the ground
that ‘the 1999 Scheme’ was not financially viable, was not acceptable.
41. It was also the contention of learned counsel for the respondent-
employees, that all the State owned corporations were fully controlled by
the Government. All shares in the corporations were held by the State
Government. The management of all the corporations, was also under the
direct control and supervision of the Government. Accordingly it was
submitted, that the ultimate authority in determining the conditions of
service of the concerned corporations, was vested with the Government. In
this behalf, reliance was placed on Articles 51 and 52 of Articles of
Association of the Himachal Pradesh State Forest Development Corporation
Limited. It was highlighted that similar Articles of Association governed
the other corporations, as well. It was therefore submitted, that the
State Government, had no business, to withdraw itself, from its
responsibility and commitment.
42. It was, therefore submitted, that the Government has consistently
been extending the benefit of similar conditions of service, to employees
of Government owned corporations, as are available to Government employees
in the State. The Government having taken a conscious decision to extend
pensionary benefits to all employees of Government owned corporations,
under ‘the 1999 Scheme’, is clearly precluded from withdrawing the same,
specially on account of the fact, that the corporations under
consideration, are instrumentalities of the State in terms of Article 12 of
the Constitution of India. According to learned counsel, ‘the 1999 Scheme’
was liable to be treated as a welfare measure, extended by the State
Government to all employees, and therefore, it should not shirk its
responsibility, to fulfill any financial deficiency therein, out of the
Government treasury. In the above view of the matter it was submitted,
that the impugned judgment rendered by the High Court, deserved no
interference.
43. It was also asserted, that even if it was assumed, that the report of
the committee, dated 15.11.2003, with reference to the status of the corpus
fund, is correct, still the same is liable to be rejected because the
committee had sought views of 17 corporations/boards covered by ‘the 1999
Scheme’, however, it received views of 7 corporations only, namely,
Himachal Pradesh Agro Industries Corporation, Himachal Pradesh Tourism
Development Corporation, Himachal Pradesh State Industrial Development
Corporation, Himachal Pradesh Horticultural Produce Marketing and
Processing Corporation Ltd., Himachal Pradesh Housing Board, Himachal
Pradesh State Forest Development Corporation Ltd., and Himachal Pradesh SC
& ST Development Corporation. The above corporations had expressed the
opinion, that a unified trust for pension with financial support of the
State Government, could salvage the financial position, to enable the
corpus fund to cater to payment of pension to employees under ‘the 1999
Scheme’. It was therefore the contention of learned counsel for the
respondents, that credence should not be given to the proposition
propounded at the hands of the State Government, that ‘the 1999 Scheme’ was
not financially viable.
44. In order to controvert the submissions advanced at the hands of
learned counsel for the respondent-employees, Mr. P.P. Rao, learned senior
counsel emphatically pointed out, that all the judgments relied upon by the
respondents were inapplicable to the present controversy. It was
submitted, that the judgments relied upon, did not deal with the rights of
serving employees. It was pointed out, that a clear enunciation in this
behalf was recorded by this Court, that the prayers raised at the hands of
the respondent-employees, could only relate to superannuated personnel.
For the above, learned counsel invited our attention to the Chairman,
Railway Board case (supra), wherefrom the following observations were
relied upon:-
“20. It can, therefore, be said that a rule which operates in futuro so as
to govern future rights of those already in service cannot be assailed on
the ground of retroactivity as being violative of Articles 14 and 16 of the
Constitution, but a rule which seeks to reverse from an anterior date a
benefit which has been granted or availed of, e.g., promotion or pay scale,
can be assailed as being violative of Articles 14 and 16 of the
Constitution to the extent it operates retrospectively.
xxx xxx xxx
25. In these cases we are concerned with the pension payable to the
employees after their retirement. The respondents were no longer in service
on the date of issuance of the impugned notifications. The amendments in
the rules are not restricted in their application in futuro. The amendments
apply to employees who had already retired and were no longer in service on
the date the impugned notifications were issued.
xxx xxx xxx
30. The respondents in these cases are employees who had retired after 1-
1-1973 and before 5-12-1988. As per Rule 2301 of the Indian Railway
Establishment Code they are entitled to have their pension computed in
accordance with Rule 2544 as it stood at the time of their retirement. At
that time the said rule prescribed that Running Allowance limited to a
maximum of 75% of the other emoluments should be taken into account for the
purpose of calculation of average emoluments for computation of pension and
other retiral benefits. The said right of the respondent-employees to have
their pension computed on the basis of their average emoluments being thus
calculated is being taken away by the amendments introduced in Rule 2544 by
the impugned notifications dated 5-12-1988 inasmuch as the maximum limit
has been reduced from 75% to 45% for the period from 1-1-1973 to 31-3-1979
and to 55% from1-4-1979 onwards. As a result the amount of pension payable
to the respondents in accordance with the rules which were in force at the
time of their retirement has been reduced.
xxx xxx xxx
33. Apart from being violative of the rights then available under
Articles 31(1) and 19(1)(f), the impugned amendments, insofar as they have
been given retrospective operation, are also violative of the rights
guaranteed under Articles 14 and 16 of the Constitution on the ground that
they are unreasonable and arbitrary since the said amendments in Rule 2544
have the effect of reducing the amount of pension that had become payable
to employees who had already retired from service on the date of issuance
of the impugned notifications, as per the provisions contained in Rule 2544
that were in force at the time of their retirement.
34. The learned Additional Solicitor General has, however, submitted that
the impugned amendments cannot be regarded as arbitrary for the reason that
by the reduction of the maximum limit in respect of Running Allowance from
75% to 45% for the period 1-1-1973 to 31-3-1974 and to 55% from 1-4-1979
onwards, the total amount of pension payable to the employees has not been
reduced. The submission of the learned Additional Solicitor General is that
since the pay scales had been revised under the 1973 Rules with effect from
1-1-1973, the maximum limit of 45% or 55% of the Running Allowance will
have to be calculated on the basis of the revised pay scales while earlier
the maximum limit of 75% of Running Allowance was being calculated on the
basis of unrevised pay scales and, therefore, it cannot be said that there
has been any reduction in the amount of pension payable to the respondents
as a result of the impugned amendments in Rule 2544 and it cannot be said
that their rights have been prejudicially affected in any manner. We are
unable to agree. As indicated earlier, Rule 2301 of the Indian Railway
Establishment Code prescribes in express terms that a pensionable railway
servant's claim to pension is regulated by the rules in force at the time
when he resigns or is discharged from the service of Government. The
respondents who retired after 1-1-1973 but before 5-12-1988 were,
therefore, entitled to have their pension computed on the basis of Rule
2544 as it stood on the date of their retirement. Under Rule 2544, as it
stood prior to amendment by the impugned notifications, pension was
required to be computed by taking into account the revised pay scales as
per the 1973 Rules and the average emoluments were required to be
calculated on the basis of the maximum limit of Running Allowance at 75% of
the other emoluments, including the pay as per the revised pay scales under
the 1973 Rules. Merely because the respondents were not paid their pension
on that basis in view of the orders of the Railway Board dated 21-1-1974,
22-3-1976 and 23-6-1976, would not mean that the pension payable to them
was not required to be computed in accordance with Rule 2544 as it stood on
the date of their retirement. Once it is held that pension payable to such
employees had to be computed in accordance with Rule 2544 as it stood on
the date of their retirement, it is obvious that as a result of the
amendments which have been introduced in Rule 2544 by the impugned
notifications dated 5-12-1988 the pension that would be payable would be
less than the amount that would have been payable as per Rule 2544 as it
stood on the date of retirement. The Full Bench of the Tribunal has, in
our opinion, rightly taken the view that the amendments that were made in
Rule 2544 by the impugned notifications dated 5-12-1988, to the extent the
said amendments have been given retrospective effect so as to reduce the
maximum limit from 75% to 45% in respect of the period from 1-1-1973 to 31-
3-1979 and reduce it to 55% in respect of the period from 1-4-1979, are
unreasonable and arbitrary and are violative of the rights guaranteed under
Articles 14 and 16 of the Constitution.”
For the same proposition, reliance was placed on the U.P. Raghavendra
Acharya case (supra), wherefrom our attention was drawn to the following
observations:-
“2. The appellants in these appeals are retired teachers of the
University and Private Aided Colleges (to whom UGC scales of pay were
applicable). They have retired during the period 1.1.1996 to 31.3.1998. So
far as the teachers of the University or Privates Aided Colleges are
concerned, indisputably, they were being paid the same salary as was being
paid to the teachers of the Government colleges. The appellants in Civil
Appeal No. 1391/2006, have retired from the Karnataka Regional Engineering
College, Surathkal, Karnataka, which was established by the Government of
India at the request of the Government of Karnataka. It is a Centrally
aided institution as envisaged under Entry 64 of List 1 of the Seventh
Schedule to the Constitution of India. So far as the said institution is
concerned, its expenditure used to be borne by the Government of India and
the State of Karnataka. It, however, has been notified by the Government of
India as a Deemed University with effect from 26.6.2002.
xxx xxx xxx
31. The appellants had retired from service. The State therefore could
not have amended the statutory rules adversely affecting their pension with
retrospective effect.”
45. A different projection was sought to be made by Mr. R. Venkataramani,
learned senior counsel, who also represented the appellants. Learned
counsel, placed reliance on State of Assam v. Barak Upatyaka D.U.
Karmachari Sanstha, (2009) 5 SCC 694, and drew our attention to the
following:-
“2. By that order the Division Bench upheld the order dated 23.12.1999 of
the learned Single Judge in Civil Rule No. 2996/1995 allowing the
respondent's writ petition and directing the state government to sanction
financial assistance by way of grant-in-aid to Cachar and Karimganj
District Milk Producers' Cooperative Union Limited (“CAMUL”, for short) so
as to enable CAMUL to make regular payment of monthly salaries, allowances
as also the arrears to its employees.
xxx xxx xxx
4. It is contended that the State Government had all-pervasive control
over the affairs and management of CAMUL and therefore it should be treated
as a department of the Government of Assam, though registered as a co-
operative society by lifting the corporate veil. It was further contended
that State Government was responsible and liable to pay the salaries and
emoluments of the employees of CAMUL and it was not justified in
withholding the grant amount.
5. The respondent Union therefore sought a direction to the State
Government to release the arrears of pay and allowances of employees of
CAMUL with effect from December 1994 and for a direction to continue to pay
the salary and allowances to the employees of CAMUL, every month in future.
In addition to the state government (Respondent 1) and its officers
(Respondents 2 to 4), the Union of India (Respondent 5) and CAMUL and its
Managing Director (Respondents 6 and 7) were impleaded as parties to the
writ petition.
6. The State Government opposed the petition. It inter-alia contended
that the grant-in-aid was extended for helping CAMUL in its different
development activities; that under a Centrally sponsored scheme, between
1981 to 1986, the earmarked amount was released on 50:50 basis by the
Central and State Government with 70% loan component and 30% as grant
component; that though the loan component was not repaid by CAMUL, the
State Government continued the grant-in-aid for purposes of development
activities; that the State Government had also provided Rs.43.60 lakhs for
developing the milk-processing infrastructure of CAMUL; that despite such
assistance, CAMUL became defunct and stopped all its activities and
thereafter the Silchar Town Milk Supply Project was being run by the
State's Dairy Development Department itself; that at no time, the State
Government made any commitment or agreed to bear the salaries of employees
of CAMUL or any other similar societies; that CAMUL had to generate its own
funds and resources to pay the salaries of its staff; and that as there was
no relationship of employer and employee between the State Government and
the employees of CAMUL, it was not responsible to bear or pay any amount
towards the salaries of the employees of CAMUL.
7. The learned Single Judge allowed the writ petition. He held that the
State Government through its Veterinary Department undertook the Integrated
Cattle Development Projects (ICDP) in various districts of Assam; and as a
part of the said project, an ICDP block was created at Ghungoor, Silchar in
Cachar district; that 32 cooperative societies of Milk Producers were
established and CAMUL was formed as an Apex Body of those co-operative
societies; that the Dairy Development Department of the State Government
had been providing grant-in-aid earmarked in the State budget every year to
CAMUL; that the State Government failed to offer any explanation or reason
for stopping the grant-in-aid from 1994; that the Dairy Development Project
at Silchar was purely a State Government scheme and as that Project has not
been discontinued and as there was no decision to bar CAMUL from receiving
grant-in-aid which was being granted from 1982-83 till 1994, the State
Government could not deny the grant-in-aid amount. Consequently, the
learned Single Judge directed release of the grand-in-aid for paying
monthly salaries and allowances along with arrears to the employees.
xxx xxx xxx
10. CAMUL indisputably is a co-operative society registered under the
provisions of the Assam Cooperative Societies Act, 1949. Section 85 of the
said Act provides that every registered society shall be deemed to be a
body corporate by the name under which it is registered, with perpetual
succession and a common seal, and with power to hold property, to enter
into contracts, institute and defend suits and other legal proceedings and
to do all things necessary for the purposes for which it was constituted.
11. Therefore, CAMUL, even if it was “State” for purposes of Article 12,
was an independent juristic entity and could not have been identified with
or treated as the State Government. In the view we have taken, it is not
necessary in this case to examine whether CAMUL was “State” for purposes of
Article 12.
xxx xxx xxx
14. The respondent has not been able to show any right in the employees
of CAMUL against the State Government, or any obligation on the part of the
State Government with reference to the salaries/emoluments of employees of
CAMUL either under any statute or contract or otherwise.
15. The learned Counsel for the respondent contended that the same issue
arose for consideration in Kapila Hingorani (I) v. State of Bihar, (2003) 6
SCC 1 (for short “Kapila Hingorani (I)”) and the issue has been answered in
their favour. Reference is invited to the following question, which was set
down as one of the questions arising for consideration in that case: (SCC
p.17, para 20)
“2. Whether having regard to the admitted position that the government
companies or corporations referred to hereinbefore are “State” within the
meaning of Article 12 of the Constitution of India, the State of Bihar
having deep and pervasive control over the affairs thereof, can be held to
be liable to render all assistance to the said companies so as to fulfill
its own and/or the corporations' obligations to comply with the citizens'
rights under Articles 21 and 23 of the Constitution of India?”
16. Reference is also invited to the following observations of this Court
in considering the said question (Kapila Hingorani (I), SCC, pp. 20-21,
paras 30-31 & 33-34):
“30. The government companies/public sector undertakings being ‘State’
would be constitutionally liable to respect life and liberty of all persons
in terms of Article 21 of the Constitution of India. They, therefore, must
do so in cases of their own employees. The Government of the State of Bihar
for all intent and purport is the sole shareholder. Although in law, its
liability towards the debtors of the company may be confined to the shares
held by it but having regard to the deep and pervasive control it exercises
over the government companies; in the matter of enforcement of human rights
and/or rights of the citizen to life and liberty, the State has also an
additional duty to see that the rights of employees of such corporations
are not infringed.
31. The right to exercise deep and pervasive control would in its turn
make the Government of Bihar liable to see that the life and liberty clause
in respect of the employees is fully safeguarded. The Government of the
State of Bihar, thus, had a constitutional obligation to protect the life
and liberty of the employees of the government-owned companies/corporations
who are the citizens of India. It had an additional liability having regard
to its right of extensive supervision over the affairs of the company.
xxx xxx xxx
33. The State having regard to its right of supervision and/or deep and
pervasive control, cannot be permitted to say that it did not know the
actual state of affairs of the State Government undertakings and/or it was
kept in the dark that the salaries of their employees had not been paid for
years leading to starvation death and/or commission of suicide by a large
number of employees. Concept of accountability arises out of the power
conferred on an authority.
34. The State may not be liable in relation to the day-to-day functioning
of the companies, but its liability would arise on its failure to perform
the constitutional duties and functions by the public sector undertakings,
as in relation thereto lie the State's constitutional obligations. The
State acts in a fiduciary capacity. The failure on the part of the State in
a case of this nature must also be viewed from the angle that the statutory
authorities have failed and/or neglected to enforce the social-welfare
legislations enacted in this behalf e.g. the Payment of Wages Act, the
Minimum Wages Act etc. Such welfare activities as adumbrated in part IV of
the Constitution of India indisputably would cast a duty upon the State
being a welfare State and its statutory authorities to do all things which
they are statutorily obligated to perform.
Reference is invited to the fact that this Court directed the Bihar
government to release Rs. 50 crores and deposit it with the High Court for
disbursing salaries of employees of government corporations/companies. The
contention of respondent is that the direction of the High Court, is in
consonance with the said view.
17. The learned Counsel for the respondent also relied upon the
following observations in Kapila Hingorani (II) v. State of Bihar, (2005) 2
SCC 262 (for short “Kapila Hingorani (II)): (SCC p. 268, paras 26-27)
“26. We, therefore, do not appreciate the stand taken by the State of
Bihar now that it does not have any constitutional obligation towards a
section of citizens viz. the employees of the public sector undertakings
who have not been paid salaries for years.
27. We also do not appreciate the submissions made on behalf of the State
of Bihar that the directions issued were only one-time direction. In Clause
4 of the directions, it was clearly stated that the State for the present
shall deposit a sum of Rs. 50 crores before the High Court for disbursement
of salaries to the employees of the corporations. Furthermore, the matter
had been directed to be placed again after six months.”
This Court also issued further interim directions to the State of Bihar to
deposit a further sum of Rs.50 crores and the State of Jharkhand to deposit
a sum of Rs.25 crores to meet the arrears of salaries of public sector
undertakings.
18. We have carefully examined the said two decisions. The two decisions
are interim orders made in a writ petition under Article 32 of the
Constitution. The said orders have not finally decided the issues/questions
raised, nor laid down by any principle of law. The observations extracted
above as also other observations and directions are purely tentative as
will be evident from the following observations in Kapila Hingorani (I):
(SCC pp. 34-35, paras 74 & 76)
“74. We, however hasten to add that we do not intend to lay down a law, as
at present advised, that the State id directly or vicariously liable to pay
salaries/remunerations of the employees of the public sector undertakings
or the government companies in all situations. We, as explained
hereinbefore, only say that the State cannot escape its liability when a
human rights problem of such magnitude involving the starvation deaths
and/or suicide by the employees has taken place by reason of non-payment of
salary to the employees of public sector undertakings for such a long time.
…
xxx xxx xxx
76. This order shall be subject to any order that may be passed
subsequently or finally.”
xxx xxx xxx
19. The position is further made clear in Kapila Hingorani (II) as under:
(SCC p. 270, para 37)
“37. We make it clear that we have not issued the aforementioned
directions to the States of Bihar and Jharkhand on the premise that they
are bound to pay the salaries of the employees of the public sector
undertakings but on the ground that the employees have a human right as
also a fundamental right under Article 21 which the States are bound to
protect. The directions, which have been issued by this Court on 9.5.2003
as also which are being issued herein, are in furtherance of the human and
fundamental rights of the employees concerned and not by way of an
enforcement of their legal right to arrears of salaries. The amount of
salary payable to the employees or workmen concerned would undoubtedly be
adjudicated upon in the proper proceedings. However, these directions are
issued which are necessary for their survival.”
20. It is thus clear that directions were not based on legal right of the
employees, but were made to meet a human right problem involving starvation
deaths and suicides. But in the case on hand, relief is claimed and granted
by proceeding on the basis that the employees of corporations/bodies
answering the definition of “State” have a legal right to get their
salaries from the State Government. In fact Kapila Hingorani (I) and Kapila
Hingorani (II) specifically negative such a right.”
46. We shall now endeavour to consider the various legal parameters on
the basis whereof, learned counsel for the rival parties have premised
their respective submissions.
47. First and foremost, it is essential for us to determine whether or
not a vested right came to be created in the employees of the corporate
bodies, when they came to be governed by ‘the 1999 Scheme’. The submission
at the hands of learned counsel for the appellant-State was, that no such
vested right was created, by the time the repeal notification was issued on
2.12.2004. The contention of learned counsel representing the State was,
that under paragraph 4 of ‘the 1999 Scheme’, a right to draw pension would
emerge, only when a concerned employee attained the age of superannuation,
subject to the condition that he had rendered the postulated qualifying
service. It was submitted, that prior to the fulfillment of the aforesaid
condition, no employee under ‘the 1999 Scheme’, could be considered as
being possessed of a vested right, to receive pension.
48. Having given our thoughtful consideration to the aforesaid
submission, we are of the view, that such of the employees who had
exercised their option to be governed by ‘the 1999 Scheme’, came to be
regulated by the said scheme, immediately on their having submitted their
option. In addition to the above, all such employees who did not exercise
any option (whether to be governed, by the Employees’ Provident Funds
Scheme, 1995, or by ‘the 1999 Scheme’), would automatically be deemed to
have opted for ‘the 1999 Scheme’. All new entrants would naturally be
governed by ‘the 1999 Scheme’. All those who had moved from the provident
fund scheme to the pension scheme, would be deemed to have consciously,
foregone all their rights under the Employees’ Provident Funds Scheme,
1995. It is of significance, that all the concerned employees by moving to
‘the 1999 Scheme’, accepted, that the employer’s contribution to their
provident fund account (and the accrued interest thereon, upto 31.3.1999),
should be transferred to the corpus, out of which their pensionary claims,
under ‘the 1999 Scheme’ would be met. It is therefore not possible for us
to accept, that the concerned employees would be governed by ‘the 1999
Scheme’ only from the date on which they attained the age of
superannuation, and that too - subject to the condition that they fulfilled
the prescribed qualifying service, entitling them to claim pension. Every
fresh entrant has the statutory protection under the Provident Fund Act.
All fresh entrants after the introduction of ‘the 1999 Scheme’, were
extended the benefits of ‘the 1999 Scheme’, because of the exemption
granted by competent authority under the Provident Fund Act. They too,
therefore possessed similar rights as the optees.
49. With effect from 1.4.1999, the employees who had opted for ‘the 1999
Scheme’ (or, who were deemed to have opted for the same) were no longer
governed by the provisions of the Provident Fund Act (under which they had
statutory protection, for the payment of provident fund). Consequent upon
an exemption having been granted to the concerned corporate bodies by the
competent authority under the Provident Fund Act, the Employees Provident
Funds Scheme, 1995, was replaced, by ‘the 1999 Scheme’. All direct
entrants after 1.4.1999, were also entitled to the rights and privileges of
‘the 1999 Scheme’. We are therefore of the considered view, that the
submissions advanced on behalf of the State of Himachal Pradesh premised on
the assertion, that no vested right accrued to the employees of the
concerned corporate bodies, on the date when ‘the 1999 Scheme’ became
operational (with effect from 1.4.1999), or to the direct entrants who
entered service thereafter, cannot be accepted. In this behalf it would
also be relevant to emphasize, that as soon as the concerned employees came
to be governed by ‘the 1999 Scheme’, a contingent right came to be vested
in them. The said contingent right created a right in the employees to
claim pension, at the time of their retirement. Undoubtedly, the aforesaid
contingent right would crystalise only upon the fulfillment of the
postulated conditions, expressed on behalf of the appellants (on having
rendered, the postulated qualifying service). However, once such a
contingent right was created, every employee in whom the said right was
created, could not be prevented or forestalled, from fulfilling the
postulated conditions, to claim pension. Any action pre-empting the right
to pension, emerging out of the conscious option exercised by the
employees, to be governed by ‘the 1999 Scheme’ (or to the direct entrants
after the introduction of ‘the 1999 Scheme’), most definitely did vest a
right in the respondent-employees.
50. We are also of the view, that there is merit in the contention
advanced on behalf of the respondent-employees, inasmuch as, the seeds of
the right to receive pension, emerge from the very day, an employee enters
a pensionable service. From that very date, the employee commences to
accumulate qualifying service. His claim for pension would obviously
crystalise, when he acquires the minimum prescribed qualifying service, and
also, does not suffer a disqualification, disentitling him to a claim for
pension.
51. In the above view of the matter, it is not possible for us to accept,
that the rights of the concerned employees under ‘the 1999 Scheme’, can be
stated to get vested, only on the date when a concerned employee would
attain the age of superannuation, and satisfy all the pre-requisites for a
claim towards pension. We are also persuaded to accept the contention
advanced on behalf of the respondent-employees, that the cause of action to
raise a claim for pension, would arise on the date when a concerned
employee actually retires from service. Any employee governed by a pension
scheme, enrolls to earn qualifying service, immediately on his enrolment
into the pensionable service. Every such employee must be deemed to have
commenced to invest in his eventual claim for pension, from the very day he
enters service. More so, in the present controversy, by having expressly
chosen to forego his rights, under the Employees’ Provident Funds Scheme,
1995.
52. We shall deal with the issue, whether or not such a contingent right,
as was vested in the respondent-employees on their having opted for ‘the
1999 Scheme’ (or in the fresh entrants, on their very appointment), was
binding and irrevocable, at a later stage of our consideration.
53. The second most important issue which deserves to be addressed by us,
in the facts and circumstances of the present case is, whether or not the
State Government was justified in postulating a cut-off date, by which some
of the employees governed by ‘the 1999 Scheme’ (those who had retired prior
to 2.12.2004) were entitled to draw pension under ‘the 1999 Scheme’,
whereas others, who had not retired by the time the repeal notification was
issued on 2.12.2004, were deprived of such benefits. In this behalf, the
contention of the learned counsel for the respondent-employees was, that
all those who had opted (or deemed to have opted) for ‘the 1999 Scheme’,
and all the new entrants after the introduction of ‘the 1999 Scheme’,
constituted a homogenous class, and it was impermissible for the State
Government, to have treated them differently. It was submitted, that the
aforesaid classification was invidious, inasmuch as, there was no
reasonable basis for such classification, nor was there any discernable
object, for bifurcating the homogenous class of pensioners. It was
submitted, that whilst those who had retired on the date of the repeal
notification, would be entitled to pensionary benefits, those who retired
on the following day, would be deprived of the same. Learned counsel for
the rival parties have, relied on a series of judgments in support of the
respective propositions canvassed by them. We have extracted the same,
while recording their submissions.
54. Having given our thoughtful consideration to the issue canvassed, and
having gone through the judgments cited, we are of the considered view,
that this Court has repeatedly upheld a cut-off date, for extending better
and higher pensionary benefits, based on the financial health of the
employer. A cut-off date can therefore legitimately be prescribed for
extending pensionary benefits, if the funds available cannot assuage the
liability, to all the existing pensioners. We are therefore satisfied to
conclude, that it is well within the authority of the State Government, in
exercise of its administrative powers (which it exercised, by issuing the
impugned repeal notification dated 2.12.2004) to fix a cut-off date, for
continuing the right to receive pension in some, and depriving some others
of the same. This right was unquestionably exercised by the State
Government, as determined by this Court, in the R.R. Verma case (supra),
wherein this Court held, that the Government was vested with the inherent
power to review. And that the Government was free to alter its earlier
administrative decisions and policy. Surely, this is what the State
Government has done in the present controversy. But this Court in the
above mentioned judgment, placed a rider on the exercise of such power by
the Government. In that, the exercise of such power, should be in
consonance with all legal and statutory obligations.
55. It is equally true, that the power of administrative review can only
be exercised, for a good and valid justification. Such justification
besides being founded on reasonable consideration, should also not be
violative of any legal right - statutory or constitutional, vested in the
affected employees. Insofar as the permissibility of the administrative
action taken, in issuing the impugned repeal notification dated 2.12.2004
is concerned, whether the said power was exercised by the State Government
for good and valid reasons, and/or whether the same violated any statutory
or constitutional right vested in the respondent-employees, shall be
examined by us in the succeeding paragraphs.
56. In order to demonstrate, that the repeal notification dated
2.12.2004, was impermissible in law, reliance was placed on the U.P.
Raghavendra Acharya case (supra). We are of the view, that the above
judgment does not have any bearing on the facts and circumstances of this
case. In the above judgment, the primary contention which weighed with
this Court, in rejecting the contention advanced by the State Government
was, that through an executive determination (by a letter, dated
17.12.1993), the State Government had breached a statutory rule, regulating
the fixation of pension (Rule 296, of the Karnataka Civil Services Rules).
The above position is not available in the present case, inasmuch as, no
contention has been advanced at the behest of the respondent-employees,
that the action taken by the State Government (in issuing the repeal
notification, dated 2.12.2004), violated any legal obligation or statutory
right. So also, the judgment relied upon on behalf of the respondent-
employees in the D.S. Nakara case (supra), wherein the employees’ claim for
pension, was based on existing rules. And even so, in the Chairman,
Railway Board case (supra), wherein it was held, that vested rights under
the rules, could not be taken away. It would also be relevant to mention,
that in the last judgment referred to above, it was observed, that the
employees who had retired from service, had been deprived of their
pensionary rights, as the amended rule was not prospective, but was
retrospective. In the instant case, the repeal notification does not
adversely affect those employees who had retired prior to 2.12.2004, before
the said notification was issued. The above referred judgment is also,
therefore inapplicable to the present controversy. The conclusion recorded
hereinabove, also emerges on a perusal of paragraphs 31 and 33 of the above
judgment. It is therefore apparent, that the validity of the impugned
notification cannot be assailed on the basis of the judgments cited above.
We shall now deal with the legal submissions advanced on behalf of the
respondent-employees, in their attempt to invalidate the repeal
notification, dated 2.12.2004.
57. The first legal contention advanced on behalf of the respondent-
employees was based on the principle of estoppel/promissory estoppel. It
was the assertion of learned counsel, that the respondent-employees had
altered their position to their detriment, on their having opted (or deemd
to have opted) to be governed by ‘the 1999 Scheme’. In order to highlight
the above assertion it was submitted, that the entire employer’s
contribution towards provident fund (alongwith, the accumulated interest
thereon), was foregone by the respondent-employees. The said amount
unquestionably belonged to the respondent-employees, and their right over
the same was protected under the Provident Fund Act. It was submitted,
that the aforesaid option was exercised by the respondent-employees, only
when the offer to extend pensionary benefits, was voluntarily made to the
employees by the State Government. It was contended, that the promise to
pay pensionary benefits, which was contained in the offer of the State
Government, could not be unilaterally revoked, under the principle of
estoppel/promissory estoppel. It was submitted, that the instant action of
the State Government (taken by way of issuing the repeal notification,
dated 2.12.2004), would seriously impair the financial benefits which had
accrued to the respondent-employees, under ‘the 1999 Scheme’. It was
pointed out, that all that the respondent-employees had gained, by
foregoing the employer’s contribution (and the accrued interest, thereon),
has been lost, consequent upon the issuance of the impugned notification,
dated 2.12.2004.
58. We are of the considered view, that the principle of
estoppel/promissory estoppel cannot be invoked at the hands of the
respondent-employees, in the facts and circumstances of this case. It is
not as if the rights which had accrued to the respondent-employees under
the Employees’ Provident Funds Scheme, 1995 (under which the respondent-
employees were governed, prior to their being governed by ‘the 1999
Scheme’) have in any manner been altered to their disadvantage. All that
was taken away, and given up by the respondent-employees by way of
foregoing the employer’s contribution upto 31.3.1999 (including, the
accrued interest thereon), by way of transfer to the corpus fund, was
restored to the respondent-employees. All the respondent-employees, who
have been deprived of their pensionary claims by the repeal notification
dated 2.12.2004, would be entitled to all the rights which had accrued to
them, under the Employees’ Provident Funds Scheme, 1995. It is therefore,
not possible for us to accept, that the respondent-employees can be stated
to have been made to irretrievably alter their position, to their
detriment. Furthermore, all the corporate bodies (with which the
respondent-employees, are engaged) are independent juristic entities, as
held in State of Assam v. Barak Upatyaka D.U. Karmachari Sanstha (supra).
The mere fact, that the corporate bodies under reference, are fully
controlled by the State Government, and the State Government is the
ultimate authority to determine their conditions of service, under their
Articles of Association, is inconsequential. Undoubtedly, the respondent-
employees are not Government employees. The State Government, as a welfare
measure, had ventured to honestly extend some post-retiral benefits to
employees of such independent legal entities, on the mistaken belief,
arising out of a miscalculation, that the same can be catered to, out of
available resources. This measure was adopted by the State Government, not
in its capacity as the employer of the respondent-employees, but as a
welfare measure. When it became apparent, that the welfare measure
extended by the State Government, could not be sustained as originally
understood, the same was sought to be withdrawn. We are of the view that
the principle invoked on behalf of the respondent-employees, cannot be
applied in the facts of the present case, specially, in view of the
decision in M/s. Bhagwati Vanaspati Traders v. Senior Superintendent of
Post Offices, Meerut, AIR 2015 SC 901, wherein this Court held as under:-
“The first contention advanced at the hands of the learned counsel for the
appellant was based on the decision rendered by this Court in Tata Iron &
Steel Co. Ltd. v. Union of India & Ors., (2001) 2 SCC 41, wherefrom learned
counsel invited our attention to the following observations:-
“20. Estoppel by conduct in modern times stands elucidated with the
decisions of the English Courts in Pickard v. Sears, 1837 6 Ad. & El.
469, and its gradual elaboration until placement of its true principles by
the Privy Council in the case of Sarat Chunder Dey v. Gopal Chunder
Laha, (1891-92) 19 IA 203, whereas earlier Lord Esher in the case of Seton
Laing Co. v. Lafone, 1887 19 Q.B.D. 68, evolved three basic elements of the
doctrine of Estoppel to wit:
“Firstly, where a man makes a fraudulent misrepresentation and another man
acts upon it to its true detriment: Secondly, another may be where a man
makes a false statement negligently though without fraud and another person
acts upon it: And thirdly, there may be circumstances under which, where a
misrepresentation is made without fraud and without negligence, there may
be an Estoppel.”
Lord Shand, however, was pleased to add one further element to the effect
that there may be statements made, which have induced other party to do
that from which otherwise he would have abstained and which cannot properly
be characterized as misrepresentation. In this context, reference may be
made to the decisions of the High Court of Australia in the case of Craine
v. Colonial Mutual Fire Insurance Co. Ltd., 1920 28 C.L.R. 305. Dixon, J.
in his judgment in Grundt v. The Great Boulder Pty. Gold Mines Pty.
Ltd., 1938 59 C.L.R. 641, stated that:
"In measuring the detriment, or demonstrating its existence, one does not
compare the position of the representee, before and after acting upon the
representation, upon the assumption that the representation is to be
regarded as true, the question of estoppel does not arise. It is only when
the representor wished to disavow the assumption contained in his
representation that an estoppel arises, and the question of detriment is
considered, accordingly, in the light of the position which the representee
would be in if the representor were allowed to disavow the truth of the
representation."
(In this context see Spencer Bower and Turner: Estoppel by Representation,
3rd Ed.). Lord Denning also in the case of Central Newbury Car Auctions
Ltd. v. Unity Finance Ltd., 1956 (3) All ER 905, appears to have subscribed
to the view of Lord Dixon, J. pertaining to the test of 'detriment' to the
effect as to whether it appears unjust or unequitable that the
representator should now be allowed to resile from his representation,
having regard to what the representee has done or refrained from doing in
reliance on the representation, in short, the party asserting the estoppel
must have been induced to act to his detriment. So long as the assumption
is adhered to, the party who altered the situation upon the faith of it
cannot complain. His complaint is that when afterwards the other party
makes a different state of affairs, the basis of an assertion of right
against him then, if it is allowed, his own original change of position
will operate as a detriment, (vide Grundts: High Court of Australia
(supra)).
21. Phipson on Evidence (Fourteenth Edn.) has the following to state as
regards estoppels by conduct.
“Estoppels by conduct, or, as they are still sometimes called, estoppels by
matter in pais, were anciently acts of notoriety not less solemn and formal
than the execution of a deed, such as livery of seisin, entry, acceptance
of an estate and the like, and whether a party had or had not concurred in
an act of this sort was deemed a matter which there could be no difficulty
in ascertaining, and then the legal consequences followed (Lyon v.
Reed, (1844) 13 M & W 285 (at p. 309). The doctrine has, however, in
modern times, been extended so as to embrace practically any act or
statement by a party which it would be unconscionable to permit him to
deny. The rule has been authoritatively stated as follows: ‘Where one by
his words or conduct willfully causes another to believe the existence of a
certain state of things and induces him to act on that belief so as to
alter this own previous position, the former is concluded from averring
against the latter a different state of things as existing at the same
time.’ (Pickard v. Sears (supra)). And whatever a man's real intention may
be, he is deemed to act willfully ‘if he so conducts himself that a
reasonable man would take the representation to be true and believe that it
was meant that he should act upon it.’ (Freeman v. Cooke, 1848 (2) Exch.
654: at p. 663).
Where the conduct is negligent or consists wholly of omission, there must
be a duty to the person misled (Mercantile Bank v. Central Bank, 1938 AC
287 at p. 304, and National Westminster Bank v. Barclays Bank
International, 1975 Q.B. 654). This principle sits oddly with the rest of
the law of estoppel, but it appears to have been reaffirmed, at least by
implication, by the House of Lords comparatively recently (Moorgate
Mercantile Co. Ltd. v. Twitchings, (1977) AC 890). The explanation is no
doubt that this aspect of estoppel is properly to be considered a part of
the law relating to negligent representations, rather than estoppel
properly so-called. If two people with the same source of information
assert the same truth or agree to assert the same falsehood at the same
time, neither can be estopped as against the other from asserting
differently at another time (Square v. Square, 1935 P. 120).”
22. A bare perusal of the same would go to show that the issue of an
estoppel by conduct can only be said to be available in the event of there
being a precise and unambiguous representation and on that score a further
question arises as to whether there was any unequivocal assurance prompting
the assured to alter his position or status. The contextual facts however,
depict otherwise. Annexure 2 to the application form for benefit of price
protection contains an undertaking to the following effect:-
“We hereby undertake to refund to EEPC Rs… the amount paid to us in full or
part thereof against our application for price protection. In terms of our
application dated against exports made during... In case any particular
declaration/certificate furnished by us against our above referred to
claims are found to be incorrect or any excess payment is determine to have
been made due to oversight/wrong calculation etc. at any time. We also
undertake to refund the amount within 10 days of receipt of the notice
asking for the refund, failing which the amount erroneously paid or paid in
excess shall be recovered from or adjusted against any other claim for
export benefits by EEPC or by the licensing authorities of CCI & C.”
and it is on this score it may be noted that in the event of there being a
specific undertaking to refund for any amount erroneously paid or paid in
excess (emphasis supplied), question of there being any estoppel in our
view would not arise. In this context correspondence exchanged between the
parties are rather significant. In particular letter dated 30.11.1990 from
the Assistant Development Commissioner for Iron & Steel and the reply
thereto dated 8.3.1991 which unmistakably record the factum of non-payment
of JPC price.”
It is apparent from the factual position narrated above, that the original
action of the State Government was bonafide, and for the welfare of the
respondent-employees. The State Government cannot be accused of having
misrepresented to the respondent-employees in any manner. The provisions
of ‘the 1999 Scheme’, clearly bring out, that the pension scheme would be
self-financing, and would be administered from the corpus fund created out
of the employer’s contribution to their CPF account (alongwith the accrued
interest thereon). When the above foundational basis for introducing the
pension scheme, was found to be an incorrect determination/calculation, the
same was withdrawn. In the above view of the matter, it would not be
possible to infer, that the State Government, induced the respondent-
employees, to move to ‘the 1999 Scheme’. Accordingly, it would not be
possible to apply the principle of estoppel/promissory estoppel, to the
facts of the present case.
59. We are also of the view, that the principle of estoppel/promissory
estoppel, is not applicable in a situation, where the original position,
which the individual enjoyed before altering his position (by opting, or
deemingly opting - for being governed by ‘the 1999 Scheme’) can be
restored. For the instant proposition, reference may be made to the
judgment in Pratima Chowdhury v. Kalpana Mukherjee, (2014) 4 SCC 196,
wherein it was held as under:-
“We shall, however, endeavour to deal with the principle of estoppel, so as
to figure whether, the rule contained in Section 115 of the Indian Evidence
Act could have been invoked, in the facts and circumstances of the present
case. Section 115 of the Indian Evidence Act is being extracted
hereinabove:-
“115. Estoppel.- When one person has, by his declaration, act or
omission, intentionally caused or permitted another person to believe a
thing to be true and to act upon such belief, neither he nor his
representative shall be allowed, in any suit or proceeding between himself
and such person or his representative, to deny the truth of that thing.
Illustration
A intentionally and falsely leads B to believe that certain land
belongs to A, and thereby induces B to buy and pay for it. The land
afterwards becomes the property of A, and A seeks to set aside the sale on
the ground that, at the time of the sale, he had no title. He must not be
allowed to prove his want of title.”
It needs to be understood, that the rule of estoppel is a doctrine based on
fairness. It postulates, the exclusion of, the truth of the matter. All,
for the sake of fairness. A perusal of the above provision reveals four
salient pre conditions before invoking the rule of estoppel. Firstly, one
party should make a factual representation to the other party. Secondly,
the other party should accept and rely upon the aforesaid factual
representation. Thirdly, having relied on the aforesaid factual
representation, the second party should alter his position. Fourthly, the
instant altering of position, should be such, that it would be iniquitous
to require him to revert back to the original position. Therefore, the
doctrine of estoppel would apply only when, based on a representation by
the first party, the second party alters his position, in such manner, that
it would be unfair to restore the initial position.”
Since there is no dispute, that the original position (the rights enjoyed
by the respondent-employees, under the Employees Provident Fund Scheme,
1995) available before ‘the 1999 Scheme’ was given effect to, has actually
been restored, we are of the considered view, that the principle sought to
be invoked on behalf of the respondent-employees, cannot augur in a
favourable determination for them, because it is not possible to conclude,
that it would be unfair to restore them to their original position. In
fact, in view of the financial incapacity to continue ‘the 1999 Scheme’,
the only fair action would be to restore the employees, to the Employees
Provident Funds Scheme, 1995. This has actually been done by the State
Government. It is therefore not possible in law, to apply the principle of
estoppel/promissory estoppel, to the facts of the present controversy.
60. Moving to the next contention. A serious dispute has been raised
before us, in respect of the financial viability of ‘the 1999 Scheme’.
Insofar as the appellant-State is concerned, it was asserted on its behalf,
that a high level committee, was constituted by the Finance Department of
the State Government, on 21.1.2003. The said committee comprised of
managing directors, of the concerned public sector undertakings and
corporations. The task of the high level committee was, to examine the
financial viability of ‘the 1999 Scheme’. The said committee submitted a
report dated 28.10.2003, returning a finding, that ‘the 1999 Scheme’ was
not financially viable, and would not be self-sustaining. It is therefore,
that a tentative decision was taken by the State Government, to withdraw
‘the 1999 Scheme’.
61. To determine the modalities for withdrawing ‘the 1999 Scheme’, on the
basis of the above report, the matter was jointly examined by the Finance
Department and the Law Department of the State Government, wherein, in
consonance with the advice tendered by the Law Department it was decided,
that ‘the 1999 Scheme’ should not be withdrawn retrospectively. Based on
the advice of the Law Department, it was finally decided, that those who
had commenced to draw pensionary benefits under ‘the 1999 Scheme’, would
not be deprived of the same. And that, ‘the 1999 Scheme’ should be
withdrawn prospectively, for those whose right to receive pensionary
benefits had not arisen, as they had not yet retired from service. In the
above view of the matter, it was contended on behalf of the State
Government, that the action of the State Government, in issuing the repeal
notification dated 2.12.2004, was certainly not an arbitrary exercise of
the power of administrative review. It was submitted, that the same was
based on two factors. Firstly, the financial unviability of the scheme.
And secondly, those who had already commenced to draw pensionary benefits
under ‘the 1999 Scheme’, were not to be affected. It was therefore pointed
out, that the classification made by the State Government was reasonable
and justifiable in law, and it also had a nexus to the object sought to be
achieved.
62. It is in the above scenario, that the legality and justiciability of
‘the 1999 Scheme’, will have to be examined. The submission advanced at
the behest of the respondent-employees was, that it was not permissible for
the State Government to advance any such plea, because the State Government
must be deemed to have examined the financial viability of the scheme,
before ‘the 1999 Scheme’ was given effect to. And that, it does not lie in
the mouth of the State Government, after giving effect to ‘the 1999
Scheme’, to assert that ‘the 1999 Scheme’ was not financially viable. It
was insisted, that even if data pertaining to the financial viability of
the scheme, as was sought to be relied upon was correct, financial
deficiencies if any, could be catered to by the State Government, from the
vast financial resources available to it. And further, that ‘the 1999
Scheme’ in terms of the determination rendered by the High Court, even if
permitted to be repealed, should not impact the rights of the respondent-
employees, towards pensionary benefits.
63. We have given our thoughtful consideration to the above contention.
It is not possible for us to accept the instant contention, advanced on
behalf of the respondent-employees. The calculations projected at the
behest of the State Government, to demonstrate the financial unviability of
the scheme, have not been disputed. The same have been detailed in
paragraph 10 above. The basis thereof, projected by the high level
committee, admittedly constitutes the rationale for issuing the repeal
notification dated 4.12.2004. We are of the view, that the consideration
at the hands of the State Government was conscious and pointed. And was
supported by facts and figures. It is apparent, that out of 17
corporations/boards who were invited to express their views on the issue,
only 7 had actually done so. It is not the case of the respondent-
employees, that any one of those who had expressed their views, contested
the fact, that the pension scheme was not self-financing. Those who
expressed their views, affirmed that the pension scheme could be salvaged
only with Government support. Those who did not express their views,
obviously had no comments to offer. The position projected by the State
Government, therefore, cannot be considered to have been effectively
rebutted. Certain facts and figures, have indeed been projected, on behalf
of the respondent-employees. These have been recorded by us in paragraphs
39 and 40. Financial calculations can not be made casually, on a
generalized basis. In the absence of any authenticity, and that too with
reference to all the 20 corporate entities specified in Schedule I of ‘the
1999 Scheme’, the projections made on behalf of the respondent-employees,
cannot be accepted, as constituting a legitimate basis, for a favourable
legal determination. Since the respondent-employees have not been able to
demonstrate, that the foundational basis for withdrawing ‘the 1999 Scheme’,
was not premised on any arbitrary consideration, or alternatively, was not
founded on any irrelevant consideration, it is not possible for us to
accept the contention, that the withdrawal of ‘the 1999 Scheme’, was not
based on due consideration, or that, it was irrational or arbitrary or
unreasonable. We are also satisfied, that the action of the State
Government, in allowing those who had already started earning pensionary
benefits under ‘the 1999 Scheme’, was based on a legitimate classification,
acceptable in law. In the above view of the matter, the action of the
State Government cannot be described as arbitrary, and as such, violative
of Article 14 of the Constitution of India. We are also satisfied in
concluding, that the understanding of the State Government (which had
resulted in introducing ‘the 1999 Scheme’) on being found to be based on an
incorrect calculation, with reference to the viability of the corpus fund
(to operate ‘the 1999 Scheme’), had to be administratively reviewed. And
that, the State Government’s determination in exercising its power of
review, was well founded.
64. It is also not possible for us to accept, that any Court has the
jurisdiction to fasten a monetary liability on the State Government, as is
the natural consequence, of the impugned order passed by the High Court,
unless it emerges from the rights and liabilities canvassed in the lis
itself. Budgetary allocations, are a matter of policy decisions. The
State Government while promoting ‘the 1999 Scheme’, felt that the same
would be self-financing. The State Government, never intended to allocate
financial resources out of State funds, to run the pension scheme. The
State Government, in the instant view of the matter, could not have been
burdened with the liability, which it never contemplated, in the first
place. Moreover, it is the case of the respondent-employees themselves,
that a similar pension scheme, floated for civil servants in the State of
Himachal Pradesh, has also been withdrawn. The State Government has
demonstrated its incapacity, to provide the required financial resources.
We are therefore of the view, that the High Court should not (- as it could
not) have transferred the financial liability to run ‘the 1999 Scheme’, to
the State Government. Similar suggestions made by the concerned corporate
bodies, cannot constitute a basis for fastening the residuary liability on
the Government.
65. The action of the State Government, in revoking ‘the 1999 Scheme’
vide notification dated 2.12.2004, was also assailed as being
discriminatory. And as such, violative of Article 16 of the Constitution
of India. In this behalf, the submission advanced on behalf of the
respondent-employees was, that the State Government extended similar
benefits to Government employees under the Central Civil Services (Pension)
Rules, 1972. The said pensionary benefits extended to Government servants,
were also sought to be withdrawn. It was however pointed out, that while
withdrawing the pensionary benefits from the Government employees, the
State Government had taken a decision to protect all existing employees,
who had entered into Government service, till the revocation of the pension
scheme. It was submitted, that the High Court had, by the impugned order,
similarly protected only the existing employees, who were in service, as on
the date of issuance of the repeal notification, dated 2.12.2004. It was
contended, that the State Government’s action, in not treating the
employees of corporate bodies, governed by ‘the 1999 Scheme’, similarly as
it had treated employees in Government service, was clearly discriminatory.
It was submitted, that two sets of employees similarly situated, were
treated differently. It was pointed out, that whilst protection was
extended to one set of employees, similar benefits were denied to the other
set of employees.
66. We have given our thoughtful consideration of the plea of
discrimination, advanced at the behest of the respondent-employees. It is
not possible for us to accept, that the employees of corporate bodies, can
demand as of right, to be similarly treated as Government employees.
Whilst it can be stated that Government employees of the State of Himachal
Pradesh are civil servants, the same is not true for employees of corporate
bodies. Corporate bodies are independent entities, and their employees
cannot claim parity with employees of the State Government. The State
Government has a master-servant relationship with the civil servants of the
State, whilst it has no such direct or indirect nexus with the employees of
corporate bodies. The State Government may legitimately choose to extend
different rights in terms of pay-scales and retiral benefits to civil
servants. It may disagree, to extend the same benefits to employees of
corporate bodies. The State Government would be well within its right, to
deny similar benefits to employees of corporate bodies, which are
financially unviable, or if their activities have resulted in financial
losses. It is common knowledge, that when pay-scales are periodically
reviewed for civil servants, they do not automatically become applicable to
employees of corporate bodies, which are wholly financed by the Government.
And similarly, not even to employees of Government companies. Likewise,
there cannot be parity with Government employees, in respect of allowances.
So also, of retiral benefits. The claim for parity with Government
employees is therefore wholly misconceived. It is, therefore, not possible
for us to accept the contention advanced on behalf of the respondent-
employees, that the action of the State Government was discriminatory.
67. Another reason for us to conclude, that the action of the State
Government was not discriminatory is, that despite having revoked ‘the 1999
Scheme’ through the notification dated 2.12.2004, the State Government had
permitted such of the Government owned corporations in the State of
Himachal Pradesh, which were not suffering any losses, to promote their own
pension schemes, and to extend pensionary benefits to their employees, on
an individual basis, in the same/similar fashion as had been attempted by
the State Government, through ‘the 1999 Scheme’. In the instant view of
the matter also, we are of the opinion, that the action of the State
Government cannot be assailed, on the ground of discrimination.
68. We shall now consider, whether the State Government which had
introduced ‘the 1999 Scheme’, had the right to repeal the same. In
answering the above issue, it needs to be consciously kept in mind, that
the employees of corporate bodies, who were extended the benefits of ‘the
1999 Scheme’, as already noticed above, were not employees of the State
Government. ‘The 1999 Scheme’ was, therefore, just a welfare scheme
introduced by the State Government, with the object of ameliorating the
financial condition of employees, who had rendered valuable service in
State owned corporations. In order to logically appreciate the query
posed, we may illustratively take into consideration a situation, wherein
an organization similar to the one in which the respondent-employees were
engaged, suffered such financial losses, as would make the sustenance of
the organization itself, unviable. Can the employees of such an
organization, raise a claim in law, that the corporate body be not wound
up, despite its financial unworkability? Just because, the resultant
effect would be, that they would lose their jobs. The answer to the above
query, has to be in the negative. The sustenance of the organization
itself, is of paramount importance. The claim of employees, who have been
engaged by the organization, to run the activities of the organization, is
of secondary importance. If an organization does not remain financially
viable, the same cannot be required to remain functional, only for the
reason that its employees, are not adversely impacted. When and how a
decision to wind up an organization is to be taken, is a policy decision.
The decision to wind up a corporation may be based on several factors,
including the nature of activities rendered by it. In a given
organization, sometimes small losses may be sufficient to order its
closure, as its activities may have no vital bearing on the residents of
the State. Where, an organization is raised to support activities on which
a large number of people in the State are dependent, the same may have to
be sustained, despite the fact that there are substantial losses. The
situations are unlimited. Each situation has to be regulated
administratively, in terms of the policy of the State Government. Whether
a corporate body can no longer be sustained, because its activities are no
longer workable, practicable, useable, or effective, either for the State
itself, or for the welfare of the residents of the State, is for the State
Government to decide. Similarly, when and how much, is to be paid as wages
(or allowances) to employees of an organization, is also a policy decision.
So also, post-retiral benefits. All these issues fall in the realm of
executive determination. No Court has any role therein. For the reasons
recorded hereinabove, in our considered view, the conditions of service
including wages, allowances and post-retiral benefits of employees of
corporate bodies, will necessarily have to be determined administratively,
on the basis of relevant factors. Financial viability, is an important
factor, in such consideration. In the facts and circumstances of the
present case, it is not possible for us to accept, the contention advanced
on behalf of the respondent-employees, that the State Government should
provide financial support for sustaining ‘the 1999 Scheme’, at least for
such of the employees, who were engaged on or before the date of issuance
of the repeal notification (- 4.12.2004). We would like to conclude the
instant submission by recording, that the respondent-employees have not
been able to make out a case, that the notification dated 2.12.2004,
repealing ‘the 1999 Scheme’, was in any manner, capricious, arbitrary,
illegal or uninformed, and as such, we would further conclude, that the
respondent-employees cannot be considered as being entitled, to any relief,
through judicial process.
69. Having recorded our aforesaid conclusion, it is not necessary for us
to examine the submissions advanced at the hands of the respondent-
employees, that the action of the State Government, in issuing the repeal
notification dated 2.12.2004, would violate Article 21 of the Constitution
of India. All the same, since the contention was raised, we consider it
just and appropriate, to examine and deal with the same. The contention
advanced on behalf of the respondent-employees was, that the fundamental
rights enshrined in the Constitution, do not extend to merely, providing
for survival or animal existence. Article 21, it was pointed out, has been
interpreted by this Court, as extending the right to life and liberty - as
the right to live, with human dignity. It was submitted, that ‘the 1999
Scheme’, which allowed better post-retiral benefits to the respondent-
employees, was an extension of such a benefit. ‘The 1999 Scheme’, it was
submitted, would have resulted in ameliorating the conditions of the
respondent-employees, after their retirement. The submission advanced on
behalf of the respondent-employees is seemingly attractive, but is not
acceptable as a proposition of law. A welfare scheme, may or may not aim
at providing, the very basic rights to sustain human dignity. In
situations where a scheme targets to alleviate basic human rights, the same
may possibly constitute an irreversible position, as withdrawal of the
same, would violate Article 21 of the Constitution. Not so, otherwise.
Herein, the Employees’ Provident Funds Scheme, 1995, sponsored under the
Provident Fund Act, is in place. The same was sought to be replaced, by
‘the 1999 Scheme’. ‘The 1999 Scheme’ was an effort at the behest of the
State Government, to provide still better retiral benefits. ‘The 1999
Scheme’ was not a measure, aimed at providing basic human rights.
Therefore, ‘the 1999 Scheme’ can not be treated as irreversible. The same
would not violate Article 21 of the Constitution, on its being withdrawn.
It is not in dispute, that after the repeal notification dated 2.12.2004,
the erstwhile Employees’ Provident Funds Scheme, 1995, has been restored to
such of the employees, who were impacted by the said repeal notification.
We are of the view, that the repealing of ‘the 1999 Scheme’, in the facts
and circumstances of this case, cannot be deemed to have in any manner,
violated the right of the respondent-employees, under Article 21 of the
Constitution of India.
70. It is also not possible to accept, the contention advanced on behalf
of the respondent-employees, based on Article 300A of the Constitution of
India. We have deliberated hereinabove, the nature of the right created by
‘the 1999 Scheme’. We have examined all the legal submissions advanced on
behalf of the respondent-employees. We have arrived at the conclusion,
that action of the State Government, was well within its authority. We
have also held the same to be based on due consideration. We have
therefore, rejected the assertion made on behalf of the respondent-
employees, that the impugned notification dated 2.12.2004, was
unconstitutional, irrational, arbitrary or unreasonable. It is accordingly
not possible for us to accept, the challenge raised by the respondent-
employees, that they had been deprived of their right to pensionary
benefits, without the authority in law. We are therefore of the view, that
the claim raised on behalf of the respondent-employees, by placing reliance
on Article 300A of the Constitution of India, is misconceived.
71. Our determination, with reference to all the issues canvassed above,
would also answer the question left open in paragraph 52 above. Namely,
whether or not the contingent right, as was vested in the respondent-
employees, was binding or irrevocable. We may now sum up the position
determined by us, in the foregoing paragraphs. It is no doubt true that we
have concluded, that ‘the 1999 Scheme’, created a contingent right in the
respondent-employees. The respondent-employees comprise of all those
employees of corporate bodies, who had opted for ‘the 1999 Scheme’,
immediately on its having been introduced; all those, who were deemed to
have opted for ‘the 1999 Scheme’ by not having exercised any option; and
all those who were appointed after the introduction of ‘the 1999 Scheme’.
The first issue that arises is, whether any express right or obligation
existed, between the respondent-employees and the State Government. One
can understand, such a claim arising out of an obligation between an
employer and his employees, where there is a quid pro quo – a trade off
based on a relationship (as between, an employer and employee). We have
however concluded, that there was no such relationship between the State
Government, and the respondent-employees. All the corporate bodies in
which the respondent-employees were/are engaged, are independent juristic
entities. It is therefore apparent, that the claim raised by the
respondent-employees, is not based on any right or obligation between the
parties. We have also examined the submissions advanced by learned counsel
premised on various constitutional provisions (- Articles 14, 16, 21 and
300A of the Constitution of India), but have found, that no right can be
stated to have been violated, thereunder. We have also examined the other
legal submissions, advanced on behalf of the respondent-employees, and have
found the same, as unjustified. The issue whether administrative review
was permissible, after ‘the 1999 Scheme’ had become operational, has been
answered in the affirmative. And finally, we have concluded, that the
exercise of such power, while issuing the repeal notification, was based on
due consideration. We therefore hereby uphold, the legality and
constitutionality of the notification dated 2.12.2004.
72. For the reasons recorded hereinabove, the present appeals stand
allowed. The impugned order dated 19.12.2013 passed by the High Court is
accordingly, set aside.
….….….………………………….J.
(Jagdish Singh Khehar)
….…..…………………………….J.
(C. Nagappan)
New Delhi;
September 28, 2016.
Note: The emphases supplied in all the quotations in the instant judgment,
are ours.
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