CASE NO.:
Appeal (civil) 3192 of 1999
PETITIONER:
UCO BANK AND ORS.
RESPONDENT:
SANWAR MAL
DATE OF JUDGMENT: 11/03/2004
BENCH:
V.N. KHARE CJ & S.H. KAPADIA
JUDGMENT:
JUDGMENT
2004(2) SCR 1125
The Judgment of the Court was delivered by
V.N. KHARE, CJ. Since common question of law is involved in these appeals,
one at the instance of UCO Bank; second, Oriental Bank of Commerce; and the
third, Bank of India, we propose to decide them by a common Judgment.
For the sake of convenience, we are noticing the facts asserted in Civil
Appeal No.3192 of 1999. The respondent - Sanwar Mal was appointed as a
Class-IV employee in UCO Bank on 29.12.1959 and was promoted to class-Ill
post in 1980. On 25.2.1988, he resigned after giving one month's notice. He
accepted his provident fund without protest. On 29.10.1993, a settlement
was arrived at under section 2(P) and section 18(1) of the Industrial
Disputes Act, 1947 read with Rule 58 of the Industrial Disputes (Central)
Rules, 1957 between Indian banks' Association (hereinafter referred to as
"IBA") representing the managements of banks on one hand and All India Bank
Employees' Association representing the workmen. Pursuant to the said
settlement, the IBA agreed to introduce pension scheme in banks in lieu of
employees' contribution to the provident fund. As a consequence of the said
settlement, UCO Bank (Employees') Pension Regulations, 1995 (hereinafter
referred to as "the said regulations" ) were framed by the bank under
section 19(2)(f) of the Banking Companies (Acquisition and Transfer of
Undertakings) Act, 1970 after consultation with the Reserve Bank of India.
The said regulations were published with the prior sanction of the Central
Government. The respondent herein opted for the pension scheme. However,
since he had resigned in 1988, the appellant-bank declined to accept his
option for admitting him as a member/beneficiary of the fund. Under such
circumstances, he filed a suit in civil court for a declaration that he was
entitled to pension as provided for under the regulations. He also prayed
for mandatory injunction directing the appellant to make payment of arrears
along with interest. The suit was decreed and the first appeal filed
against the trial court judgment as also the second appeal filed by the
appellant were dismissed. It is in this way that the appellant is in appeal
before us by way of special leave.
Before coming to the arguments advanced before us, we would like to examine
briefly the memorandum of settlement dated 29.10.1993 as well as the
regulations. The recital to the said settlement shows that during
negotiations of service conditions of workmen, the 1BA agreed to introduce
the pension scheme in banks for the workmen in lieu of employers'
contribution to the provident fund. This was pursuant to the demand made by
All India Bank Employees' Association representing the workmen, to
introduce pension as a second retrial benefit in lieu of employers'
contribution to contributory provident fund. As per the terms of the said
settlement, the banks agreed to introduce pension as second retrial benefit
in lieu of contributory provident fund w.e.f. 1.11.1993. Under the
settlement, the pension schema was inter alia made applicable to all
retired employees who were in service of the bank on or after 31.12.1985
and who retired in or after 1.1.1986 but before 1.11.1993. Provided that
such employees opt for the pension scheme and refund within six months from
1.11.1993 the banks contribution to the provident fund. As a consequence of
the said settlement, the appellant -Bank framed UCO Bank (Employees)
Pension Regulations, 1995 (hereinafter referred to as "the said
Regulations") in exercise of power conferred by section 19(2)(f) of the
Banking Companies (Acquisition and transfer of Undertakings) Act, 1970. The
said regulations were framed after consultation with the Reserve Bank of
India and were published with the previous sanction of the Central
Government.
Now coming to the said regulations, it may be stated that regulations 2(j)
defines "contribution" to mean any sum credited by the bank on behalf of
the employee to the Pension Fund. Under clause (k) of regulation (2), the
"date of retirement" has been defined to mean the last date of the month in
which an employee attains the age of superannuation or the date on which he
stood retired by the bank or the date on which the employee voluntarily
retires or the date on which the officer is deemed to have retired.
Regulation 2(q) defines the word "fund" to mean UCO Bank (Employees)
Pension Fund constituted under regulation 5. Regulation 2 (s) defines "pay"
to include the basic pay and all allowances counted for the purposes of
contribution to the provident fund and for payment of dearness allowance,
in relation to an employee who has either retired or died on or after
1.1.1986 but before 1.11.1993. Regulation 3 (1) inter alia states that the
said regulations shall apply to employees who were in service of the bank
on or after 1.1.1986 but who retired prior to 1.11.1993 and who exercised
option to join the pension scheme within 120 days from the notified date
i.e. 29.9.1995. Suffice it to state that the entire regulation 3 refers to
retirees only and not to those who have resigned or dismissed/removed form
the bank. Regulation 5 deals with the constitution of a pension fund. It
states that the bank shall constitute a Fund under an irrevocable trust
within the specified period to provide for payment of pension/family
pension in accordance with regulations. It further provides that the bank
shall be a contributor to the said fund to ensure that the trustees make
due payments to the beneficiaries under these regulations. A bare reading
of regulation 5 indicates that the fund will be managed by the trustees and
the beneficiaries are the employees covered by the regulations. Regulation
6 inter alia states that on constitution of the said fund, the Provident
Fund Trust shall transfer to the pension fund the accumulated balance of
the contribution of the bank to the Provident Fund along with the interest
accrued thereon up to the date of transfer. Regulation 7 deals with
composition of the pension fund. It states that pension shall consist of
the contribution by the bank at the rate of 10% per month of the pay of the
employee; the accumulated contributions of the bank to the Provident Fund
along with interest accrued up to the date of transfer; the amount
consisting of contributions of the bank along with interest refunded by the
employees who retried before the notified date but who opt for pension in
accordance with the regulations; the investment in annuities/securities
purchased out of the moneys of the Fund; annual contribution by the bank
and income from investments. Regulation 7, therefore, indicates that the
scheme is self-financing scheme to be run on the basis of contributions
from the employees and the bank. It further shows that it is a funded
scheme, which is not dependent upon budgetary support. Regulation 14 inter
alia states inter alia that an employee who has rendered a minimum of 10-
years of service in the bank on the date of his retirement shall qualify
for pension. Regulation 22 deals with forfeiture of service and it reads as
follows:-
"Forfeiture of service.- (1) Resignation or dismissal or removal or
termination of an employee from the service of the Bank shall entail
forfeiture of his entire past service and consequently shall not qualify
for pensionary benefits:
(2) An interruption in the service of a Bank employee entails forfeiture
of his past service, except in the following cases, namely:-
(a) authorized leave of absence;
(b) suspension, where it is immediately followed by reinstatement,
whether in the same or a different post, or where the bank employee dies
or is permitted to retire or is retired on attaining the age of compulsory
retirement while under suspension;
(c) transfer to non-qualifying service in an establishment under the
control of the Government or Bank if such transfer has been ordered by a
competent authority in the public interest;
(d) joining time while on transfer from one post to another.
(3) Notwithstanding anything contained in subordination (2), the
appointing authority may, by order, commute retrospectively the periods of
absence without leave as extraordinary leave.
(4) (a) In the absence of a specific indication to the contrary in the
service record, an interruption, between two spells of service rendered by
a bank employee shall be treated as automatically condoned and the pre-
interruption service treated as qualifying service;
(b) Nothing in clause (a) shall apply to interruption caused by
resignation, dismissal or removal from service or for participation in a
strike;
Provided that before making an entry in the service record of the Bank
employee regarding forfeiture of the past service because of his
participation in strike, an opportunity of representation may be given to
such bank employees."
Chapter V refers to Classes of pension and it covers superannuation
pension; pension on voluntary retirement; invalid pension compassionate
allowance, pre-mature retirement pension and compulsory retirement pension.
Regulation 34 which also falls within chapter V deals with payment of
pension/ family pension in respect of employees who retired or died between
1.1.1986 to 31.10.1993. It states that such retirees shall be eligible for
pension from 1.11.1993. Further, different formulas are laid down for
computation of pension having co-relationship with the classes of pension.
Accordingly, computation of pension on voluntary retirement is -different
from computation of pension in the case of invalid pension or pre-mature
retirement pension or compulsory retirement pension.
To sum up, the pension scheme embodied in the regulation is a self-
supporting scheme. It is a code by itself. The bank is a contributor to the
pension fund. The bank ensures availability of funds with the trustees to
make due payments to the beneficiaries under the regulations. The
beneficiaries are employees covered by the regulation 3. It is in this
light that one has to construe regulation 22 quoted above. Regulation 22
deals with forfeiture of service. Regulation 22(1) states that resignation,
dismissal, removal or termination of an employee from the service of the
bank shall entail forfeiture of his entire past service and consequently
shall not qualify for pensionary benefits. In other wards, the pension
scheme disqualifies such dismissed employees and employees who have
resigned from membership of the fund. The reason is not far to seek. In a
self financing scheme, a separate fund is earmarked as the scheme is not
based on budgetary support. It is essentially based on adequate
contributions from the members of the fund. It is for this reason that
under regulation 11, every bank is required to cause an investigation to be
made by an actuary into the financial condition of the fund from time to
time and depending on the deficits, the bank is required to make annual
contributions to the fund. Regulation 12 deals with investment of the fund
where as regulation 13 deals with payment out of the fund. In the case of
retirement, voluntary or on superannuation, there is a nexus between
retirement and retiral benefits under the provident fund rules. Retirement
is allowed only on completion of qualifying service which not there in case
of resignation. When such a retiree of opt for self-financing pension
scheme, he brings in accumulated contribution earned by him after
completing qualifying number of years of service under provident fund rules
where as a person who resigns may not have adequate credit balance to his
provident fund account (i.e. banks contribution) and, therefore, the
regulation 3 does not cover employees who have resigned. Similarly, in the
case of a dismissed employee, there may be forfeiture of his retrial
benefits and consequently the framers of the scheme have kept out the
retirees as well as dismissed employees vide regulation 22. Further, the
pension payable to the beneficiaries under the scheme would depend on
income accruing on investments and unless there is adequate corpus, the
scheme may not be workable and, therefore, clause 22 prescribes a
disqualification to dismissed employees and employees who have resigned.
Lastly, as stated above, the scheme contemplated pension as the second
retiral benefit in lieu of employers' contribution to contributory
provident fund. Therefore, the said scheme was not a continuation of the
earlier scheme of provident fund. As a new scheme, it was entitled to keep
out dismissed employees and employees who have resigned.
In the light of our above analysis of the scheme, we now proceed to deal
with the arguments advanced by both the sides. It was inter alia urged on
behalf of the appellant bank that under regulation 22, category of
employees who have resigned from the service and who have been dismissed or
removed from the service are not entitled to pension, that the pension
scheme constituted a separate fund to be regulated on self-financing
principles, that prior to the introduction of the pension scheme, there was
in existence a provident fund scheme and the present scheme conferred a
second retiral benefit to certain classes of employees who were entitled to
become the members/beneficiaries of the fund, that the membership of the
fund was not dependent on the qualifying service under the pension scheme,
that looking to the financial implications, the scheme framed mainly
covered retirees because retirement presupposed larger number of years of
service, that in the case of resignation, an employee can resign on the
next day of his appointment whereas in the case of retirement, the employee
is required to put in certain number of years of service and consequently,
the scheme was a separate code by itself, that the High Court has committed
manifest error in decreeing the suit of the respondent inasmuch as it has
not considered the relevant factors contemplated by the said scheme and
that the pension scheme was introduced in terms of the settlement dated
29.10.1993 between the IBA and All India Bank Employees' Association, which
settlement also categorically rules out employees who have resigned or who
have been dismissed/removed from the service.
Shri R.P. Bhatt, learned senior counsel appearing on behalf of the
respondent in Civil Appeal No. 1506 of 2003 inter alia urged that
regulation 22 to the extent it provides for forfeiture of service and
disqualifying those who have resigned for pensionary benefits is an
arbitrary and unreasonable classification and repugnant to Article 14 of
the Constitution, that regulation 22 was contrary to the objects of the
pension scheme embodied in the regulations, that employees who have
resigned after completing qualifying service contemplated by regulation 14
were entitled to opt for pension as they were in a position to bring in
their contribution of retiral benefits to their credit for having worked
for a minimum service of 10-years in the bank and that the respondent had
worked for more than 10-years after which he resigned and, therefore, the
fulfilled the qualifying service contemplated by regulation 14 and
consequently, he was entitled to the bent It of the pension scheme.
We find merit in these appeals. The words "resignation" and "retirement"
carry different meanings in common parlance. An employee can resign at any
point of time, even on the second day of his appointment but in the case of
retirement he retires only after attaining the age of superannuation or in
the case of voluntary retirement on completion of qualifying service. The
effect of resignation and retirement to the extent that there is severance
of employment but in service jurisprudence both the expressions are
understood differently. Under the Regulations, the expressions
"resignation" and "retirement" have been employed for different purpose and
carry different meanings. The pension scheme herein is based on actuarial
calculation; it is a self-financing scheme, which does not depend upon
budgetary support and consequently it constitutes a complete code by
itself. The scheme essentially covers retirees as the credit balance to
their provident fund account is larger as compared to employees who
resigned from service. Moreover, resignation brings about complete
cessation of master and servant relationship whereas voluntary retirement
maintains the relationship for the purposes of grant of retiral benefits,
in view of the past service. Similarly, acceptance of resignation is
dependent upon discretion of the employer whereas retirement is completion
of service in terms of regulations/rules framed by the bank. Resignation
can be tendered irrespective of the length of service whereas in the case
of voluntary retirement, the employee has to complete qualifying service
for retiral benefits. Further, there are different yardsticks and criteria
for submitting resignation vis-a-vis voluntary retirement and acceptance
thereof. Since the pension regulations disqualify an employee, who has
resigned, from claiming pension the respondent cannot claim membership of
the fund. In our view, regulation 22 provides for disqualification of
employees who have resigned from service and for those who have been
dismissed or removed from service. Hence, we do not find any merit in the
arguments advanced on behalf of the respondent that regulation 22 makes an
arbitrary and unreasonable classification repugnant to Article 14 of the
Constitution by keeping out such class of employees. The view we have taken
is supported by the judgment of this Court in the case of Reserve Bank of
India and Anr. v. Cecil Dennis Solomon and Anr., reported in (2003) 10
Scale 449. Before concluding we may state that clause 22 is not in the
nature of penalty as alleged. It only disentitles an employee who has
resigned from service from becoming a member of the Fund. Such employees
have received their retiral benefits earlier. The pension scheme, as stated
above, only provides for a second retiral benefit. Hence there is no
question of penalty being imposed on such employees as alleged. The pension
scheme only provides for an avenue for investment to retirees. They are
provided avenue to put in their savings and as a term or condition which is
more in the nature of an eligibility criteria the scheme disentitles such
category of employees out of it.
For the aforestated reasons, these appeals are allowed and the impugned
judgments and orders are set aside. There shall be no order as to costs.
So far as Civil Appeal No.607 of 2003 is concerned, learned counsel
appearing on behalf of the appellant - bank states that whatever credit
balance to the provident fund account of the employee which was transferred
to the pension fund shall be refunded to the respondent employee with
accrued interest, if any, if not already refunded.
