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TRANSFER CASE (CIVIL) NO. 48 OF 2010 Manojbhai N. Shah & Ors. Petitioners Versus Union of India & Ors. Respondents

REPORTABLE
IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

TRANSFER CASE (CIVIL) NO. 48 OF 2010
Manojbhai N. Shah & Ors. Petitioners

Versus

Union of India & Ors. Respondents

WITH

T.C.(C)No.7/2011, T.C.(C)No.45/2010
T.C.(C)No.47/2010,T.C.(C)No.46/2010
T.C.(C)No.6/2011,T.C.(C)No.19/2011,
T.C.(C)No.23/2011,T.C.(C)No.20/2011,
T.C.(C)No.21/2011 SLP(C)No.10903/2011,
T.C.(C)No.82/2011,T.C.(C)No.83/2011
T.C.(C)No.49/2010, T.C.(C)No.27/2014
& T.C.(C)No.28/2014
1 J U D G M E N T
1 ANIL R. DAVE, J.

A common legal issue was involved in several writ petitions and appeals
pending before different High Courts and therefore, transfer petitions had
been filed in this Court so that all pending cases can be transferred to
and decided by this Court.

Upon hearing the learned counsel and upon perusal of the facts of the
cases, this Court found that substantial questions of general importance
were involved in the said cases and therefore, it would be in the interest
of justice if all the cases are heard and decided together and therefore,
all these cases have been transferred to this Court.

The issue involved in all these cases is with regard to retiral benefits to
be given to a special class of retired employees of five nationalized
general insurance companies. The undisputed facts and legal issues
involved in all these cases are as under:

The insurance companies, who have been described hereinafter as “the
Employers” were in financial difficulties and so as to cut their
expenditure, the Employers framed a scheme named “General Insurance
Employees Special Voluntary Retirement Scheme, 2004” (hereinafter referred
to as “the Scheme”), so as to enable its employees to retire prematurely on
certain conditions with some special benefits.

Normally a person gets pension when he retires from service after putting
in the period of pensionable service as per his service conditions. All the
employees, in the instant case, would be eligible to get pension if they
retire from service after putting in 20 years of service.

As stated hereinabove, so as to curtail the expenditure, it was decided to
reduce the number of employees and in pursuance of the Scheme, offers were
invited from the employees who wanted to opt for voluntary retirement even
before completion of the period of normal pensionable service.

As per the provisions of the Scheme, it was open to the employees to opt
for retirement even on completion of 10 years of qualifying service,
provided they had attained the age of 40 years. The Scheme had a limited
duration of 60 days, during which the employees had to decide whether they
wanted to opt for the Scheme. The employees opting for retirement under
the Scheme were also to be given some additional benefits, namely, payment
of 60 days’ salary for each completed year of their service or salary for
the number of months of their remaining service, whichever was less. So
far as determination of the amount of pension is concerned, as per the
Scheme, five years’ service was to be notionally added to the service of
the retiring employees and on that basis pension was to be paid to them.

In addition to the aforestated benefits, the retiring employees were also
to get usual benefits under the provisions of the Payment of Gratuity Act,
1972 and the amount of Provident Fund, which they were otherwise entitled
to.

Thus, the employees opting for voluntary retirement under the Scheme were
to get benefit of ex gratia amount as well as benefit of additional pension
which would result from the addition of the notional five years’ service.

Several employees took benefit under the Scheme and retired in pursuance of
the aforestated Scheme in 2004.

After retirement of the aforestated employees, the Employers revised pay
scales of their employees under Notification dated 21st December, 2005
giving benefit of revision of pay retrospectively with effect from 1st
August, 2002, provided the employees were in service on or after 1st
August, 2002.

The issue involved in all these cases is whether after acceptance of
voluntary retirement under the Scheme, such retired employees would be
entitled to get benefit of the revision of pay, which was retrospectively
given from 1st August, 2002 under the Notification dated 21st December,
2005, which was called the “General Insurance (Rationalisation of Pay
Scales and Other Conditions of Officers) Second Amendment, 2005 and
hereinafter referred to as “the Notification”.

The Employers denied the benefit of the said Notification or retrospective
increase in the salary to the employees who had retired under the Scheme,
whereas the said retired employees claimed that they should be given
benefit of the retrospective increase in their pay and their pension should
be revised because they were in service on 1st August, 2002 and had retired
only in or after 2004.

The High Court of Gujarat took a view that the employees who had retired
under the Scheme were not entitled to any benefit of pay rise under the
Notification as they had already retired in 2004 or 2005 and at the time
when the salary had been revised, they had already severed the relationship
with the Employers and were no more in employment.

On the other hand, the High Court of Himachal Pradesh held that the
employees who had retired under the Scheme were entitled to the benefit of
pay revision which had taken place by virtue of the Notification and
therefore, their pension should be revised after considering revision in
their pay.

Before dealing with the issue, it would be apposite to find out the
conditions on which the employees were made to retire voluntarily under the
Scheme. Under the Scheme, the employees were to get certain special
benefits as they were to retire even before completion of the requisite
period of service, which would have enabled them to get pension and the
employees were also to get some special benefits like ex gratia payment of
salary and additional weightage in calculation of pension payable to them.

So far as the Scheme is concerned, the relevant portion, with which we are
concerned for the purpose of deciding these cases, is as under:

“3. Eligibility:-

(1) All permanent full time officers will be eligible to seek special
voluntary retirement under this Scheme provided they have attained the age
of 40 years and completed 10 years of qualifying service as on the date of
Notification.

(2) An employee who is under suspension or against whom disciplinary
proceedings are pending or contemplated shall not be eligible to opt for
the scheme;

Provided that the case of an officer who is under suspension or against
whom disciplinary proceedings is pending or contemplated may be considered
by the Board of the Company concerned having regard to the facts and
circumstances of each case and the decision taken by the Board shall be
final.

4. Period of operation:-

This Scheme shall remain open for a period of sixty days from the date of
notification in the Official Gazette. The company shall, however, have the
right to prematurely close the scheme at any time if it thinks fit and its
decision shall be final.

5. Amount of ex-gratia:-

(1) An employee seeking Special Voluntary Retirement under this Scheme
shall be entitled to lower of the ex-gratia amount as given below, namely:-
Sixty days salary for each completed year of service,

OR

Salary for the number of months of remaining service.

(2) The ex-gratia shall be computed on the basis of his/her salary as on
the date of relieving. In case wage revision is effected from a date prior
to the date of this notification in the Official Gazette, the benefit of
revised pay for the purpose of payment of ex-gratia will be allowed.

6. Other Benefits:-

(1) An employee opting for the scheme shall also be eligible for the
following benefits in addition to the ex-gratia amount mentioned in para 5,
namely:-

Provident Fund,

gratuity as per Payment of Gratuity Act, 1972 (39 of 1972) or gratuity
payable under the Rationalisation Scheme, as the case may be;

pension (including commuted value of pension) as per General Insurance
(Employees’) Pension Scheme, 1995, if eligible. However, the additional
notional benefit of the five years of added service as stipulated in para
30 of the said Pension Scheme shall not be admissible for the purpose of
determining the quantum of pension and commutation of pension.

(d) Leave encashment

(2) An employee who is opting for the scheme shall not be entitled to avail
Leave Travel Subsidy and also encashment of leave while in service during
the period of sixty days from the date of notification of this scheme.”

The Notification dated 21st December, 2005, by virtue of which pay scales
and other terms and conditions of service of certain employees had been
revised with retrospective effect contained the following clauses which are
necessary for our purpose:

“1.

(1) This Scheme may be called the General Insurance (Rationalisation and
Revision of Pay Scales and other conditions of service of Supervisory,
Clerical and Subordinate Staff) Second Amendment Scheme 2005.

(2) Save as otherwise provided in this Scheme, this Scheme shall be deemed
to have come into force on the 1st day of August, 2002.

(3) This Scheme shall be applicable to all employees who were in whole-
time service in Supervisory, Clerical and Sub-ordinate Staff cadres of the
Corporation or Company as on, or after, the 1st day of August, 2002:

Provided that the employees whose resignations had been accepted or
whose services had been terminated during the period from the 1st day of
August, 2002 and the date of publication of this Scheme, shall not be
eligible for the arrears on account of revision under this Scheme:

Provided further that the employees, who had sought special voluntary
Retirement under:

The General Insurance Employees’ Special Voluntary Retirement Scheme, 2004
(S.O.B.(E) dated the 1st January, 2004), in the case of company; or

The General Insurance Corporation of India Employees’ Special Voluntary
Retirement Scheme, 2004 (S.O. 454 (E) dated the 1st April, 2004) in the
case of Corporation.

And have been relieved thereunder prior to the date of this notification
shall not be eligible for any benefit arising from this Scheme other than
that provided for by sub-paragraph 2 of paragraph 5 of the General
Insurance Employees’ Special Voluntary Retirement Scheme, 2004, or, the
General Insurance Corporation of India Employees’ Special Voluntary
Retirement Scheme, 2004, as the case may be.

(4) Nothing contained in this Scheme shall entitle an employee to claim
overtime allowance higher than what he had been entitled to prior to the
publication of this Scheme.”

In the light of the aforestated Scheme and the Notification, we have to
consider whether the employees who had opted for voluntary retirement under
the Scheme are entitled to get the benefit of additional pension on the
basis of revised salary in pursuance of the Notification.

The learned counsel appearing for the employees, who had retired under the
Scheme, had vehemently submitted that pension is a right of an employee for
the services rendered in the past and as the pension depends upon the last
salary paid or payable to the employee, the employee, who had opted for the
Scheme and retired, must be given benefit of the revised pay and his
pension must also be enhanced accordingly.

It had been further submitted by the learned counsel that upon retirement,
though the relationship between the employees and the Employers had come to
an end, the employees were entitled to the amount of pension payable to
them as per the Scheme and also as per the General Insurance (Employees)
Pension Scheme, 1995. Simply because an employee retires and the
relationship of an employee and employer comes to an end would not mean
that such a retired employee would not get a particular benefit from the
employer if such a benefit is given to other employees. It had been further
submitted that in the instant case even though the employees had opted for
retirement under the Scheme, they are entitled to pension, especially when
there is a provision for payment of pension in the Scheme. In the
circumstances, there cannot be any dispute with regard to the fact that the
employees are entitled to pension on the basis of revised pay.

It had been further submitted by the learned counsel appearing for the
employees that the employees had accepted retirement under the Scheme as
there was a specific provision in Clause 5(2) of the Scheme that in case
any wage revision is effected from a date prior to the date of Notification
of the said Scheme in the Official Gazette, the benefit of revised pay for
the purpose of payment of ex gratia would be allowed.

It had been, therefore, submitted that the wage revision had taken place in
pursuance of the Notification dated 21st December, 2005, and as the pay
revision was made with retrospective effect from 1st August, 2002 and that
the employees were very much in service on 1st August, 2002, they were
entitled to the benefit of revision of the pay scales under Notification
dated 21st December, 2005.

It had been further submitted that the pension is determined on the basis
of the salary last drawn and if the salary is revised, the pension should
also be revised accordingly. According to the learned counsel, as there was
an upward revision of the salary with effect from 1st August, 2002,
determination of the amount of pension of the employees who took benefit of
the Scheme, should also be re-determined on the basis of the revised pay.

So as to substantiate the submissions made hereinabove, the learned counsel
had relied upon the judgment delivered in National Insurance Co. Ltd. &
Anr. Vs. Kirpal Singh [2014 (1) SCALE 320] which lays down the law to the
effect that even if an employee has retired, he is entitled to the benefit
of subsequent upward pay revision and if a retired employee is not given
the benefit, the action of the employer would be violative of Article 14
of the Constitution of India.

It had also been submitted that by not revising pay of the retired
employees, the Employers had also violated the principle of equal pay for
equal work because the retired employees had also done same type of work in
the past which was done by the employees who had not retired.

In support of all the abovestated submissions, several judgments were cited
by the learned counsel appearing for the employees who had retired under
the Scheme.

On the other hand, the learned counsel appearing for the Employers had
submitted that the purpose behind enactment of the Scheme was to see that
the financial burden of the Employers is reduced in future by making one-
time ex gratia payment. It had been submitted that the employees had
accepted the offer given by the Employers with regard to their retirement
as a special case under the scheme and as a result of retirement under the
Scheme, the employees were substantially benefitted because they were given
ex gratia payment to which they were otherwise not entitled to and they
were also given additional amount of pension because a notional period of
five years had been added to the number of years served by them.

In other words, if an employee had rendered service for 13 years, for the
purpose of determination of his pension, it would be treated as if he had
worked for 18 years and in that event, pension payable to the concerned
employee would be much higher because an employee getting pension upon
completion of 13 years’ service and upon completion of 18 years’ service
cannot be the same. It is an admitted fact that upon addition of five more
years of service, an employee would get sizeable more amount of pension.

It had been thereafter submitted that upon entire payment made by the
Employers to the employees who had opted for voluntary retirement under the
Scheme, the relationship of the employer and the employee had come to an
end and therefore also the employees were not entitled to any additional
amount of pension.

It had also been submitted by the learned counsel appearing for the
Employers that the employees, who retired under the Scheme, very well knew
that they were to get some additional benefits under the Scheme and their
relationship with the Employers had come to an end upon their acceptance of
retirement under the Scheme. The benefit which had been given by the
Employers under the Notification dated 21st December, 2005 was only to the
employees who were in service at the relevant time and had continued in
service or the employees who had retired in normal course on or after Ist
August, 2002.

Those who had retired under the Scheme had been given additional benefits
and as their relationship with the Employers had come to an end, there was
no question of making payment of additional pension to them.

It had been further submitted that no discriminatory treatment was given to
the employees who had retired under the Scheme as they belonged to a
separate class and there was no violation of principle of equal pay for
equal work.

Upon hearing the learned counsel and upon going through the judgments
rendered by different High Courts and the relevant provisions pertaining to
the Scheme and the Notification dated 21st December, 2005, we are of the
view that the employees who had taken benefit under the Scheme and had
already retired would not be entitled to additional pension due to
retrospective increase in pay in pursuance of Notification dated 21st
December, 2005.

There is no doubt that the Scheme had been framed by the Employers to see
that their expenditure in long term is decreased by making one-time payment
of additional amount to the employees opting for retirement under the
Scheme. Strength of the staff was going to be reduced substantially due to
voluntary retirement of several employees and the reduction in the staff
was to result in reduction in the burden of salary and establishment
expenditure. With the aforestated intention, which had been clearly
revealed in the Scheme, the Employers had floated the Scheme and several
employees of the Employers had taken due advantage of the Scheme by opting
under the Scheme and by taking not only ex gratia payment of salary but
also additional pension, which they would not have received otherwise. It
is not in dispute that the employees opting for retirement under the Scheme
were to get benefit of additional five years of service while calculating
the pension. As stated hereinabove, the said benefit was substantial and
the said benefit along with benefit of ex gratia payment, tempted number of
employees who opted under the Scheme and retired happily after getting all
retiral benefits.

Normally, retrospective rise in salary is given to those who are in service
at the relevant time or who had retired in normal circumstances. The
employees who had opted under the Scheme had not retired as per the normal
conditions of service but had retired under the Scheme upon taking some
special additional benefits.

It is also pertinent to consider clause 5(2) of the Scheme, which has been
reproduced hereinabove. According to the said clause, ex gratia amount
was to be paid to the concerned employees on the date of his/her being
relieved and it was clarified that in case of wage revision effected from a
date prior to the date on which the said Scheme had been notified in the
Official Gazette, the benefit of revised pay for the purpose of payment of
ex gratia would be allowed. Meaning thereby, the employees who had opted
under the Scheme and retired from service were entitled only to revision of
ex gratia amount upon retrospective increase in the salary. Intention of
the Employers is clearly revealed from clause 5(2) of the Scheme. The
intention was to give benefit only in relation to ex gratia amount and not
in relation to the pension. Had the intention been to give benefit of
additional pension also, the said fact would have been incorporated in the
aforesaid clause. In normal circumstances when an employee retires from
service, his relationship with the employer comes to an end. It is also a
well settled legal position that after retirement, normally no disciplinary
action can be initiated against the concerned employee. Similarly, the
retired employee would not have any right of redetermination of his pension
but only in cases where salary is revised with retrospective effect, the
retired employee gets the benefit of additional pension and that too in
certain cases.

In the instant case, it is crystal clear that the employees had already
opted under the Scheme -under a specially made Scheme, which was framed
only with an intention to reduce future expenditure of the Employers. If
all these benefits are given to the persons who had already opted under the
Scheme and had retired, the real purpose with which the Scheme had been
framed would be frustrated.

We do not agree with the submission made on behalf of the employees that
action of the Employers in not giving pay rise to the employees in
pursuance of the Notification is discriminatory in nature. The employees
who retired under the Scheme form a separate class of employees who were
given many benefits, which are not given to employees retiring in normal
course. If they all form a separate class, by no stretch of imagination
it can be said that all those who retired under the Scheme and those who
retired in normal course, are similarly situated. Thus, in our opinion,
there is no violation of Article 14 of the Constitution of India in the
instant case.

Similarly, there is no violation of the principle of equal pay for equal
work. True, that those who retired under the Scheme did the same work
which was being done by those who retired in normal course, but one cannot
forget the fact that those who retired under the Scheme got substantially
higher retirement benefits. In the circumstances, we do not accept the
said submission also.

Some submissions were made by the learned counsel for the employees
regarding power of the Employers in relation to issuance of the
Notification dated 21st December, 2005. We are of the view that an
Employer can fix salary for its employees and we do not agree with the
submission that the Notification was not issued properly or legally.

In the circumstances, we are of the view that the employees who had opted
for retirement under the Scheme would not be entitled to additional pension
upon revision of pay effected under the Notification dated 21st December,
2005.

All judgments directing the Employers to make additional payment of pension
to the employees retiring under the Scheme are set aside and, accordingly,
all the transferred cases are finally disposed of and Special Leave
Petition (C) No.10903 of 2011 is dismissed.

…………………..J.
(ANIL R. DAVE)
…………………..J.
(SHIVA KIRTI SINGH)

New Delhi
January 07, 2015.
———————–
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