Page 1 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 9007 OF 2012

(Arising out of SLP (C) No.25856 of 2008)

State of Punjab ... Appellant

Versus

Gian Chand & Ors. ...

Respondents

WITH

CIVIL APPEAL NOS. 9008-9009 OF 2012

(Arising out of SLP (C) No.18734-18735 of 2007)

CIVIL APPEAL NO. 9010 OF 2012

(Arising out of SLP (C) No.18878 of 2010)

CIVIL APPEAL NO. 9011 OF 2012

(Arising out of SLP (C) No.22841 of 2009)

CIVIL APPEAL NO. 9012 OF 2012

(Arising out of SLP (C) No.23121 of 2010)

CIVIL APPEAL NO. 9013 OF 2012

(Arising out of SLP (C) No.23607 of 2010)

CIVIL APPEAL NO. 9014 OF 2012

(Arising out of SLP (C) No.25387 of 2012)

CIVIL APPEAL NO. 9015 OF 2012

(Arising out of SLP (C) No.27327 of 2008

CIVIL APPEAL NO. 9016 OF 2012

(Arising out of SLP (C) No.3110 of 2012)

Page 2 CIVIL APPEAL NO. 9017 OF 2012

(Arising out of SLP (C) No.4036 of 2007)

CIVIL APPEAL NO. 9018 OF 2012

(Arising out of SLP (C) No.7474 of 2007)

AND

CIVIL APPEAL NO. 9019 OF 2012

(Arising out of SLP (C) No.9569 of 2010)

J U D G M E N T

Swatanter Kumar, J.

1.Leave granted in all the Special Leave Petitions.

CAs @ SLP (C) Nos. 25856/08, 18878/10, 22841/09,

23121/10, 23607/10, 25387/12, 27327/08, 3110/12 and

9569/10

2.Petitioners before the High Court and Respondent Nos.1 to

26 before this Court, were in service of the Punjab State

Electricity Board (for short, the ‘PSEB’) on different posts. All

these respondents superannuated on different dates between

31

st

July, 2003 and 30

th

October, 2006 after they had

satisfactorily rendered the required years of service in PSEB.

Though these respondents had retired on different dates, their

grievance was common and hence all of them filed a common

writ petition challenging the circular dated 29

th

July, 2003 issued

Page 3 by the Government. The circular dated 29

th

July, 2003 reads as

under :

“I am directed to invite a reference to the

subject cited above and to say that the

Governor of Punjab is pleased to prescribe a

new table (copy enclosed) for present

values for the calculation of commutation of

pension to replace the present table

incorporated as Annexure to Chapter XI of

Punjab Civil Service Rules Volume II. This

table supersedes the existing table with

immediate effect and shall apply to all the

cases of retirement arising on or after

31.07.2003.

2.Annexure to Chapter XI of Punjab Civil

Services Rules shall be deemed to have

been substituted accordingly. Correction

slip shall be issued in due course.

It may please be ensured that this is

brought to the notice of all the employees

who are retiring on or after 31.07.2003

inviting their attention to provisions of Note

2 below Rule 11.5(1) of Punjab Civil

Services Rules, Volume-II.”

3.The grievance of the respondents was in relation to the

table of calculation of commutation of pension, which had been

replaced to the disadvantage of the persons who had retired

within the above-referred period. They pleaded violation of

Article 14 of the Constitution of India.

4.The PSEB had framed regulations called the Punjab State

Electricity Board Main Service Regulations, Vol.I, Part I, 1972 in

exercise of the powers conferred by Section 79(c) of the

Page 4 Electricity Supply Act, 1948. Regulation 1.7 of these

Regulations provided that unless it was otherwise specifically

provided in any regulation, the PSEB employees’ claim to pay

and allowances shall be regulated by the Regulations in force at

the time in respect of which the pay and allowances are earned.

It also provided that claims with regard to pension shall be by

the regulations in force applicable to him at the time when the

employee retires or is discharged from service. As the PSEB had

not framed any Regulations of its own with regard to the

Pension Rules pertaining to pension contained in the Punjab

Civil Services Rules, Vol.II were to be applicable to the

employees of the PSEB. The PSEB had, vide its circular dated 4

th

September, 1999, (Circular No. 36 of 1998) adopted the

applicability of the Punjab Government Rules. Rule 11.5 of the

Punjab Civil Service Rules, Vol.II dealing with the subject reads

as under :

“11.5 (1) The lump sum payable on

commutation shall be calculated in

accordance with a table or tables of present

values which shall be prescribed by the

competent authority.

Note 1. - The lump payable on commutation

to Government employees who have served

under more than one Government when the

commutation tables applied by the different

Governments are not identical, shall be

calculated according to the commutation

table of the Government under whose rule

Page 5 making control they are, at the time of

retirement. In the case of Government

employees who are temporarily lent by one

Government to another, the commutation

shall be according to the table of the

lending Government and in the case of

those who are permanently transferred

from one Government to another it shall be

according to the table of the Government to

which their services have been

permanently transferred.

Note 2. - In the event of the table of present

values applicable to an applicant having

been modified between the date of

administrative sanction to commutation

and the date on which commutation is due

to become absolute, payment shall be

made in accordance with the modified

table, but it shall be open to the applicant if

the modified table is less favourable to him

than that previously in force, to withdraw

his application, by notice in writing

despatched within 14 days of the date on

which he receives notice of modification. (2)

The table of present value is given in

Annexure to this Chapter and will be

applicable to all Government employees.

For the purpose of this rule, the age, in case

of impaired lives, shall be assumed to be

such age, not being less than the actual

age as the certifying medical authority may

direct.”

5.The table of commutation of pension was prescribed by the

State Government on the recommendation made by the 4

th

Pay

Commission which was accepted by the State Government and

was implemented with effect from 1

st

January, 1996. The State

of Punjab, appellant herein, issued a circular dated 29

th

July,

Page 6 2003 replacing the existing table with a new table for

calculation of commutation of pension superseding the existing

table. As already noticed, this circular contains the table of

commutation of pension. As is clear from the above referred

circular dated 29

th

July, 2003, it had directed deemed

substitution of Annexure to Chapter XI of the Punjab Civil

Services Rules, Volume II and stated that commutation table

was based on rate of interest of 8 per cent per annum

(commutation value for pension to Re1/- per annum). However,

vide circular dated 31

st

October, 2006, this circular was

superseded. The circular dated 31

st

October, 2006 revised the

existing table of commutation of pension and the Governor of

Punjab reduced the discount rate from existing 8 per cent to

4.75 per cent and consequently revised the existing table in

terms of Rule 11.5(2). As a result, employees who retired

between 31

st

July, 2003 and 30

th

October, 2006 are at a

disadvantageous position. The respondents cited illustrations to

show that they were placed at a disadvantageous position. The

circular dated 29

th

July, 2003 is arbitrary and has no reasonable

nexus for making a classification between the employees who

retired during the above period and the employees who retired

prior to and /or after the cut off period. Before the High Court,

the appellant as well as the PSEB filed a reply in which facts

Page 7 were hardly disputed. In that reply, it was stated that the law

relied upon by the respondents before the High Court was not

applicable and the claim of the said respondents was generally

denied. They prayed for dismissal of the writ petition.

6.The High Court, vide its judgment dated 21

st

July, 2008

accepted the writ filed by the respondents and while allowing

the writ petition, the High Court noticed that no justification or

clarification had been provided by the State, while making a

feeble attempt to defend its stand and there was no rational

basis for providing the cut off dates between the period from

31

st

July, 2003 to 30

th

October, 2006. The following operative

part of the judgment can usefully be reproduced at this stage :

“After hearing the counsel for the parties,

we are of the considered opinion that this

petition deserves to be allowed and our

opinion is further strengthened by the ratio

of law, laid down in V. Kasturi’s case (supra)

which has been followed by Hoshiar Singh’s

case (supra). The State cannot be

permitted to create two categories of

retirees by providing a cut off date as there

is no rationale.

In view of the above, we allow the writ

petition and quash the impugned circular

dated 29.07.2003 and restore the pension

of the petitioner, in accordance with the

revised table, issued as per the Circular

dated 31.10.2006 (Annexure P-6).”

Page 8 7.Aggrieved from the above judgment of the High Court, the

State of Punjab has filed the present appeal by way of special

leave challenging the legality and correctness of the above

judgment.

8.On behalf of the appellant, it is contended that :

(a) the High Court has not correctly applied the principle of

law contained in the judgment of this Court in the case of

V. Kasturi v. Managing Director, State Bank of India [1998

(5) SLR 629]. That case related to computation of pension

and not commuting of pension.

(b)The circular was neither arbitrary nor violative of Article

14 of the Constitution of India as there was rationale

behind the decision of the State Government which had

been implemented by the PSEB.

(c)The State was suffering from serious financial crunch and

the State with the intention to balance its financial

liability, for good and valid economic reasons had issued

the circular dated 29

th

July, 2003. Reliance in this regard

is placed upon the judgment of this Court in the case of

State of Bihar v. Bihar Pensioner’s Samaj [(2006) 5 SCC

65] and State of Punjab v. Amar Nath Goyal [(2005) 6 SCC

754].

Page 9 (d)Date of retirement by itself is a reasonable classification

and does not offend the doctrine of equality. Reliance in

this regard is placed upon Union of India v. P.N. Menon &

Ors. [(1994) 4 SCC 69]. Vide circular dated 29

th

July,

2003, an attempt had been made on behalf of the

Government to stabilize its financial position. It was a

decision taken in the larger public interest and can even

be supported by subsequent reasons. Reliance for this

proposition is placed upon the case of Chairman, All India

Railway Recruitment Board & Anr. v. M. Shyam Kumar &

Ors. [(2010) 6 SCC 614].

(e)Under Note 2 to Rule 11.5(1), the respondents had a

choice to withdraw the request for commutation, if they

were adversely affected within 14 days from the issuance

of the circular dated 29

th

July, 2003 in terms of the Punjab

Civil Service Rules.

9.On behalf of the respondents, it is contended that none of

these arguments were raised either in the affidavits filed before

the High Court or even during the course of hearing. No records

were produced to substantiate any such plea. On the contrary,

it was a case of ‘no stand’ on behalf of the official respondents

as even noticed by the High Court. It is vehemently argued that

Page 10 the date of retirement by itself is capable of providing a rational

basis for issuance of such orders and the same would affect the

rights of the parties adversely. In this regard reliance is placed

on the cases of V. Kasturi (supra) and D.S. Nakara v. Union of

India [(1983) 1 SCC 305]. According to the respondents, the

High Court has rightly applied the law as stated by this Court.

Further, to substantiate their plea, it has been argued with some

vehemence that no reasons are disclosed in the circular and

there is no rationale for such categorization. It is also the

contention that an executive circular cannot amend, alter or

substitute an appendix or annexure which is the result of an

exercise of statutory power. In this regard, reference is made to

the judgment of this Court in the case of Dr. Rajinder Singh v.

State of Punjab [(2001) 5 SCC 482]. The appellant cannot be

permitted to take new grounds before this Court for the first

time and the appeals deserve to be dismissed.

10.From the record, it is clear that none of these arguments

were taken in the counter affidavit or even appear to have been

addressed before the High Court during the course of

arguments. The substantial pleas are being sought to be raised

before this Court for the first time. It requires to be noticed at

this stage that vide order dated 16

th

December, 2010 passed by

a Bench of this Court after hearing, liberty was granted to the

Page 11 State to file additional affidavit. The affidavit dated 7

th

January,

2011 was filed on behalf of the State taking the ground that the

State of Punjab had faced an acute financial crisis in the year

2003 and, in fact, was in a virtual debt trap. Since the

commutation of pension is essentially loan/advance against the

future payments of the monthly pension, the State Government

could ill-afford to raise further debt at higher rate of interest to

make such payments to employees at concessional effective

rate of interest which was as low as 4.75 per cent per annum.

The chart showing figures of fiscal indicators of Punjab from

2002-03 to 2006-07 was also annexed to this affidavit. Still

another affidavit was filed with the leave of the Court dated 21

st

April, 2011 by the Deputy Secretary, Department of Finance,

Punjab, Chandigarh bringing on record the policy of the

Government, formula adopted for commutation factor and

giving facts and figures as to how the circular dated 29

th

July,

2003 came to be issued.

11.From the orders passed by this Court, it is clear that while

granting liberty to the State to file additional affidavit, no

objection was raised by the respondents herein. Now, once the

additional facts and grounds had been brought on record to

which the said respondents have already filed a rejoinder, they

cannot be permitted to raise the objection in regard to the new

Page 12 grounds being examined by the Court. There are certainly

lapses on the part of the State, but the questions raised before

us are not only substantial legal questions but are also likely to

have far reaching consequences. It is argued that the circular

dated 29

th

July, 2003 has been issued by the State of Punjab and

the same having been quashed, there is every likelihood that all

the employees of the State of Punjab, including various

corporations, would raise similar claims. The grounds with

regard to Note 2 of Rule 11.5, financial crunch of the State and

there being proper rationale for fixation of the cut off period

(31

st

July, 2003 to 30

th

October, 2010) are matters which require

discussion and determination by the Court in accordance with

law. Equally, the pleas raised by the respondents require proper

examination. There is no doubt that the circular dated 29

th

July,

2003 does not contain any reason, whatsoever, for passing a

directive, which enmass adversely affects the people who have

retired in the period between 31

st

July, 2003 to 31

st

October,

2006. Additional affidavit now filed before this Court, with the

leave of the Court, does provide reasons and some justifiable

grounds in support of the circular. All that we propose to say is

that the contentions raised by the respective parties are worthy

of consideration in accordance with law.

Page 13 12.The judgment impugned in the present petition, in fact,

does not even discuss the plea of arbitrariness and

discrimination in its proper perspective. The Court also has not

deliberated upon as to whether the law stated by this Court in

the case of V. Kasturi (supra) to the facts of the case in hand or

not, particularly with reference to the contentions raised.

Another aspect which could be considered by this Court on the

basis of the material produced before it, was whether the format

to a statutory rule can be amended, altered or substituted by an

executive order.

13.For lack of proper reasoning in the judgment of the High

Court, in view of the additional pleas raised before this Court

which have significant ramifications in law and with regard to

the liability of the State, we are left with no option but to set

aside the judgment of the High Court under appeal and remit

the matter to the High Court for fresh decision in accordance

with law. We would request the High Court to consider all the

arguments that have been noticed by us above. All the

affidavits placed on record of this Court shall also be placed

before the High Court for its consideration. Another reason

which can be stated in support of the view that we are taking is

that the determination of the contentions raised before this

Court for the first time may deprive either of the parties of a

Page 14 right to appeal to this Court. Deprivation of right to appeal can

be construed as prejudicial to the rights and interests of the

parties to the lis.

14.Accordingly, the appeals are partly allowed and the matter

is remitted to the High Court, however, with cost of Rs.50,000/-

to be paid to the respondent Nos.1 to 26 in equal proportion

cost being conditional to the hearing of the writ petition, in

default thereto, the appeal preferred by the State shall stand

dismissed.

CAs @ SLP (C) Nos.18734-18735/07, 4036/07 and 7474/07

15.As the questions arising in these cases are different and

the High Court has dealt with these questions on merits, the

arguments raised in SLP Nos. Civil Appeals @ SLP (C) Nos.

25856/08, 18878/10, 22841/09, 23121/10, 23607/10, 25387/12,

27327/08, 3110/12 and 9569/10 are not available to the State

of Punjab in these cases. Thus, these cases are ordered to be

detached from this batch and be listed for hearing

independently.

…………………………… .,J.

[Swatanter Kumar]

Page 15 …………………………… .,J.

[Madan B. Lokur]

New Delhi;

December 13, 2012