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“ 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

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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.

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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

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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

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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

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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

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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.”

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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

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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.”

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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:

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“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

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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 5

th

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 6

th

and 7

th

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

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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.

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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.

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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

Page 16 16

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

Page 17 17

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

Page 18 18

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

Page 19 19

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

Page 20 20

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.

Page 21 21

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.

Page 22 22

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

Page 23 23

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

Page 24 24

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.

Page 25 25

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

Page 26 26

(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.].

Page 27 27

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

Page 28 28

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

Page 29 29

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.”

Page 30 30

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

Page 31 31

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

Page 32 32

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

Page 33 33

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

Page 34 34

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

Page 35 35

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

Page 36 36

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

Page 37 37

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.

Page 38 38

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.

Page 39 39

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

Page 40 40

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

Page 41 41

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

Page 42 42

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.

Page 43 43

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

Page 44 44

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

Page 45 45

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

Page 46 46

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

Page 47 47

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

Page 48 48

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

Page 49 49

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 10

th

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

Page 50 50

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

Page 51 51

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

Page 52 52

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

Page 53 53

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

Page 54 54

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.

Page 55 55

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 6

th

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

Page 56 56

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

Page 57 57

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

Page 58 58

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.

Page 59 59

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

Page 60 60

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,

Page 61 61

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

Page 62 62

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):

Page 63 63

“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)

Page 64 64

“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

Page 65 65

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

Page 66 66

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

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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.

Page 68 68

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

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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

Page 70 70

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

Page 71 71

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

Page 72 72

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

Page 73 73

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 &

Page 74 74

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

Page 75 75

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

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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.

Page 77 77

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

Page 78 78

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.

Page 79 79

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.

Page 80 80

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’,

Page 81 81

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

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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

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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.

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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

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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

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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

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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

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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

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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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