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Wednesday, January 7, 2015

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


                        IN THE SUPREME COURT OF INDIA

                         CIVIL ORIGINAL JURISDICTION

                    TRANSFER CASE (CIVIL) NO. 48  OF 2010

Manojbhai N. Shah & Ors.                Petitioners


Union of India & Ors.                   Respondents


                     T.C.(C)No.7/2011, T.C.(C)No.45/2010
                   T.C.(C)No.21/2011 SLP(C)No.10903/2011,
                    T.C.(C)No.49/2010, T.C.(C)No.27/2014
                             & T.C.(C)No.28/2014

                              1 J U D G M E N T


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

"3. Eligibility:-

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

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

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

4. Period of operation:-

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

5. Amount of ex-gratia:-

(1) An employee seeking  Special  Voluntary  Retirement  under  this  Scheme
shall be entitled to lower of the ex-gratia amount as given below,  namely:-

Sixty days salary for each completed year of service,


Salary for the number of months of remaining service.

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

6. Other Benefits:-

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

Provident Fund,

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

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

(d) Leave encashment

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                                              (ANIL R. DAVE)

                                  (SHIVA KIRTI SINGH)

New Delhi
January 07, 2015.

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