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“  REPORTABLE”   

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.8848-8849 OF 2012

Kallakkurichi Taluk Retired Official Association, Tamilnadu, etc. …. Appellants

Versus

State of Tamilnadu …. Respondent

WITH

CIVIL APPEAL NO.8850-8852 OF 2012

Tiruneveli Corporation city Pensioners Federation …. Appellant

Versus

State of Tamilnadu & Ors. …. Respondents

WITH

CIVIL APPEAL NO.8853-8855 OF 2012

Madurai Corp. Retired Teachers Welfare Association …. Appellant

Versus

State of Tamilnadu & Ors. …. Respondents

WITH

CIVIL APPEAL NO.8856 OF 2012

Tamilnadu Retired Officers Assn. & Its Affiliate, etc. …. Appellant

Versus

State of Tamil Nadu …. Respondent

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WITH

CIVIL APPEAL NO.8857 OF 2012

N. Subramaniam & Ors. …. Appellants

Versus

State of Tamilnadu & Ors. …. Respondents

WITH

CIVIL APPEAL NO.8858 OF 2012

Chennai District Retired Officials Assn. …. Appellant

Versus

State of Tamilnadu & Anr. …. Respondents

WITH

CIVIL APPEAL NO.8859 OF 2012

Tamilnadu Retired Govt. Employees Assn. …. Appellant

Versus

State of Tamilnadu & Anr. …. Respondents

WITH

CIVIL APPEAL NO.8860 OF 2012

Navaneethakrishnan & Ors. …. Appellants

Versus

State of Tamilnadu & Ors. …. Respondents

WITH

2

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CIVIL APPEAL NO.8861-8863 OF 2012

M.M.C. Pensioners Welfare Association & Ors. …. Appellants

Versus

State of Tamilnadu & Ors. …. Respondents

WITH

CIVIL APPEAL NO.8864 OF 2012

G. Lakshmikanthan & Ors. …. Appellants

Versus

State of Tamilnadu & Anr. …. Respondents

WITH

CIVIL APPEAL NO.8865 OF 2012

L.N. Ranganathan & Ors. …. Appellants

Versus

State of Tamilnadu & Ors. …. Respondents

WITH

CIVIL APPEAL NO.8866 OF 2012

P.V. Thirumal & Ors. …. Appellants

Versus

State of Tamilnadu & Anr. …. Respondents

WITH

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CIVIL APPEAL NO.8868 OF 2012

K.N. Alavandar & Ors. …. Appellants

Versus

State of Tamilnadu & Anr. …. Respondents

WITH

CIVIL APPEAL NO.8869 OF 2012

Retired Officials Association …. Appellants

Versus

State of Tamilnadu …. Respondent

WITH

CIVIL APPEAL NO.8871 OF 2012

S. Jeevi Kanagammal & Ors. …. Appellants

Versus

State of Tamilnadu & Anr. …. Respondents

WITH

CIVIL APPEAL NO.8872 OF 2012

V. Thirunavukkarasu & Ors. …. Appellants

Versus

State of Tamilnadu & Anr. …. Respondents

WITH

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CIVIL APPEAL NO.8873-8874 OF 2012

Tamilnadu Retired School-College Tech. Assn. …. Appellants

Versus

State of Tamilnadu & Ors. …. Respondents

WITH

CIVIL APPEAL NO.8875 OF 2012

Ramanathanpuram District All Pensioners & Senior Citizens Welfare Assn. …. Appellant

Versus

Government of Tamilnadu …. Respondent

WITH

CIVIL APPEAL NO.8876 OF 2012

S. Shan Mugam & Ors. …. Appellants

Versus

State of Tamilnadu & Anr. …. Respondents

WITH

CIVIL APPEAL NO.8877-8878 OF 2012

S. Shanmugum & Ors. …. Appellants

Versus

State of Tamilnadu & Ors. …. Respondents

WITH

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CIVIL APPEAL NO.8879 OF 2012

R. Thanumoorthy & Ors. …. Appellants

Versus

State of Tamilnadu & Anr. …. Respondents

WITH

CIVIL APPEAL NO.8880 OF 2012

K. Parthasarathy & Ors. …. Appellants

Versus

State of Tamilnadu & Ors. …. Respondents

WITH

CIVIL APPEAL NO.8881 OF 2012

A. Sethu & Ors. …. Appellants

Versus

State of Tamilnadu …. Respondent

WITH

CIVIL APPEAL NO.8882 OF 2012

A. Shanmugathai & Ors. …. Appellants

Versus

State of Tamilnadu & Ors. …. Respondents

WITH

CIVIL APPEAL NO.8883 OF 2012

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R. Kandasamy & Ors. …. Appellants

Versus

State of Tamilnadu & Anr. …. Respondents

WITH

CIVIL APPEAL NO.8870 OF 2012

P. Chellappan & Ors. …. Appellants

Versus

State of Tamilnadu & Anr. …. Respondents

J U D G M E N T

JAGDISH SINGH KHEHAR, J.

1. The  Government  of  Tamil  Nadu  has  been  issuing  executive  

order from time to time to determine the composition of allowances  

to be added to pay for quantifying wages for calculating pension.  

It is the case of the appellants, that the State Government followed  

a consistent practice of treating ‘dearness allowance’ as ‘dearness  

pay’  for  the  computation  of  pension  and  other  retiral  benefits.  

Illustratively, we are informed, that by a Government Order dated  

11.3.1970 the State Government included ‘dearness allowance’ at the  

rate then prevalent, as a component of wages for calculating average  

emoluments  for  determining  pension,  for  those  who  retired  on  or  

after 26.2.1970.  The instant Government Order dated 11.3.1970 was  

applicable to employees who retired between 26.2.1970 and 1.10.1970.

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2. One R. Narasimachar who had retired on 21.11.1969 was not  

extended the benefit of ‘dearness allowance’ drawn by him at the  

time of his retirement, while computing his pension.  This denial  

was  because  the  Government  order  dated  11.3.1970,  extended  the  

benefit  referred  to  above  only  to  such  employees  who  had/would  

retire  on  or  after  26.2.1970.   Dissatisfied  with  the  aforesaid  

denial, he filed Writ Petition no.1815 of 1986 contending, that his  

pension should have been calculated by taking into consideration  

‘dearness allowance’ which was being drawn by him at the time of his  

retirement, as ‘dearness pay’.  A learned Single Judge of the High  

Court of Judicature at Madras (hereinafter referred to as, the High  

Court) allowed the aforesaid writ petition on 15.3.1990 by holding,  

that  the  State  Government  was  not  right  in  restricting  the  

applicability  of  the  Government  Order  dated  11.3.1970  only  to  

employees who retired between 26.2.1970 and 1.10.1970.  The learned  

Single Judge directed, that ‘dearness allowance’ which the appellant  

was drawing, at the time of his retirement, be treated as ‘dearness  

pay’ for calculating his pension.  On 26.2.1991, the writ appeal  

filed  by  the  State  Government  against  the  order  dated  15.3.1990  

(passed by the learned Single Judge allowing Writ Petition no.1815  

of 1986), was dismissed.   

3. Based on the aforesaid judgment dated 15.3.1990, which the  

State Government accepted, a clarificatory Government Order dated  

4.12.1991, was issued.  Under the Government Order dated 4.12.1991,  

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even for employees who had retired prior to 1.12.1966, ‘dearness  

allowance’  actually  drawn  by  them,  at  the  time  of  their  

retirement,would  be  taken  as  ‘dearness  pay’  for  purposes  of  

calculating pension.  For employees retiring between 1.12.1966 and  

25.2.1970,  ‘dearness  allowance’  upto  the  level  obtaining  in  

December, 1966 would be taken into consideration as ‘dearness pay’  

for determining pension (and gratuity).  It is therefore submitted,  

that ‘dearness allowance’ became a component of pension, for all  

employees who had retired upto 25.2.1970.

4. In  order  to  place  the  sequence  of  facts  in  the  correct  

perspective,  it  was  further  brought  to  our  notice  that  the  

Government  order  dated  11.3.1970  was  clarified  by  a  subsequent  

letter dated 4.12.1991.  As per the aforesaid order and letter,  

Government servants retiring from service on or after 26.2.1970, and  

upto 1.10.1970, ‘dearness allowance’ up to the level obtaining in  

December, 1966, was to be reckoned as ‘dearness pay’ for purposes of  

pension (and gratuity).  Thereupon, through a subsequent Government  

order  dated  4.12.1991,  directions  were  issued  for  extending  the  

benefit contemplated by the Government order dated 11.3.1970 and the  

Government’s letter dated 4.2.1991, even to those who had retired  

prior to 26.2.1970.   

5. A Government order dated 4.12.1991 was then brought to our  

notice.  It provided, that notional revised pension payable from  

1.6.1988 would be encashable only with effect from 1.12.1991.  It  

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also provided, that those Government servants who had retired prior  

to 26.2.1970 but had died before 1.12.1991, would be ineligible for  

the benefits contemplated for retirees prior to 26.2.1970.  However,  

if the concerned Government employee had died after 1.12.1991, the  

benefits  contemplated  for  retirees  prior  to  26.2.1970  would  be  

released to the legal heirs of such retirees.  It is, therefore  

apparent, that for the benefits of the aforesaid Government order,  

the  retirees  under  reference  would  be  deprived  of  the  actual  

monetary  benefit  payable  to  him,  from  the  date  of  his  or  her  

retirement,  till  30.11.1991  (as  arrears  of  pension  under  the  

aforesaid  Government  orders  were  payable  only  with  effect  from  

1.12.1991).   

6. The aforesaid R. Narasimachar again assailed the Government  

order dated 4.12.1991, by contesting the determination of the State  

Government, in denying to him, the benefit of arrears from the date  

of his retirement (on 21.11.1969) till 30.11.1991, by filing Writ  

Petition no. 4038 of 1992 before the High Court.  The aforesaid Writ  

Petition was allowed by the High Court.  The High Court held, that  

monetary  benefits  could  not  be  denied  for  the  period  preceding  

1.12.1991.   In  other  words,  retirees  before  1.12.1991  were  held  

entitled  to  arrears  from  the  date  of  their  retirement  till  

30.11.1991.  The cut off date (1.12.1991) for extending the benefit  

of arrears was accordingly set aside.

7. The judgment rendered by the High Court in Writ Petition no.  

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4038  of  1992  on  15.6.1993,  quashing  the  action  of  the  State  

Government in limiting payment of arrears, only with effect from  

1.12.1991, was accepted by the State Government.  The judgment of  

the High Court was given effect to, by a Government order dated  

26.7.1993, whereby, the earlier Government order dated 4.12.1991 was  

modified.  Under the Government order dated 26.7.1993, pensioners  

were held eligible for arrears of pension from the date of their  

actual  retirement.   The  aforesaid  benefit  of  arrears  was  also  

extended to legal heirs of such pensioners, who had died in the  

meantime.

8. Based  on  the  factual  position  narrated  in  the  foregoing  

paragraphs, it clearly emerges, that ‘dearness allowance’ was taken  

as ‘dearness pay’ for employees retiring from government service, at  

all times, without any interruption, for the computation of retiral  

benefits including pension.  The aforesaid narration also reveals,  

that  the  component  of  ‘dearness  allowance’  to  be  treated  as  

‘dearness pay’ for being taken into consideration for calculating  

pension, was determined by the State Government, through Government  

orders issued from time to time.  The narration recorded hereinabove  

pertains to employees whose date of retirement preceded 1.10.1970.

9. The factual position being recorded hereinafter relates to  

the period after 1.10.1970.   

10. On 6.2.1974, a Dearness Allowance Committee was constituted,  

to inter alia  make recommendations, of allowances which should be  

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treated  as  a   component  of  wages,  for  calculating  pension  of  

retired/retiring  employees.   On  7.7.1974,  the  Dearness  Allowance  

Committee  inter  alia  recommended,  that  ‘dearness  allowance’  be  

treated as ‘dearness pay’ in full, for computing retiral benefits  

including pension.  Accepting the recommendations of the Dearness  

Allowance  Committee,  the  Finance  Department,  issued  a  Government  

Order dated 6.2.1975 directing, that ‘dearness allowance’ actually  

being drawn by employees retiring on or after 1.2.1975 be treated as  

‘dearness  pay’  for  calculating  average  pay  (  by  taking  not  

consideration 10 months  wages, prior to the date of retirement),  

for calculating pension, (gratuity and travelling allowance).  It  

would  be  relevant  to  mention,  that  at  the  aforesaid  juncture,  

employees drawing pay upto Rs.299/-, were entitled to Rs.55/- as  

‘dearness allowance’; and those drawing pay at Rs.300/- and above,  

were entitled to Rs.70/- as ‘dearness allowance’.  Accordingly, by  

the  Government  Order  dated  6.2.1975,  the  State  Government,  

determined  the  component  of  ‘dearness  allowance’  (Rs.55/-  or  

Rs.70/-, as the case may be) to be taken into consideration, for  

calculating pension.  The intention of the instant Government Order  

was, that employees retiring on or after 1.2.1975, should derive  

full  benefit  of,  the  merger  of  the  then  existing  ‘dearness  

allowance’ into wages, as ‘dearness pay’ for computing pension.  The  

Government order dated 6.2.1975 permitted employees retiring on or  

after 1.2.1975, an addition of ‘dearness allowance’ actually being  

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drawn by them, (during the period of ten months, prior to the date  

of their retirement), by treating the same as ‘dearness pay’, for  

calculating average wages.  The said average wage, would lead to the  

computation of pension actually payable.   

11. K. Venkataraman filed Writ Petition no. 8237 of 1995 before  

the High Court with a prayer that ‘dearness allowance’ drawn by him  

for a period of ten months prior to the date of his retirement (on  

30.6.1974) be treated as ‘dearness pay’ for calculating his pension.  

The  benefit  sought,  had  been  denied  because  he  had  retired  on  

30.6.1974,  whereas,  the  benefit  of  the  Government  order  dated  

6.2.1975 was extended only to such employees who had retired after  

1.2.1975.  The aforesaid Writ Petition came to be transferred to the  

Tamil Nadu Administrative Tribunal (hereinafter referred to as, the  

Administrative  Tribunal).  Before  the  Administrative  Tribunal,  the  

Writ  Petition  was  renumbered  as  T.A.  845  of  1991.   The  

Administrative Tribunal, by its order dated 1.4.1993, held that K.  

Venkataraman  was  entitled  to  the  benefits  extended  to  other  

pensioners,  irrespective  of  the  fact  that  he  had  retired  (on  

30.6.1974 i.e., prior to the cut off date (1.2.1975).

12. The  State  Government,  accepted  the  decision  of  the  

Administrative Tribunal in K. Venkataraman’s case (in T.A. no. 845  

of 1991 decided on 1.4.1993), and implemented the same.  For the  

aforesaid  purpose,  the  Finance  (Pension)  Department  issued  a  

Government order dated 23.9.1993.  Accordingly, K. Venkataraman’s  

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pension was recalculated by treating ‘dearness allowance’ actually  

drawn  by  him,  during  the  ten  months  preceding  the  date  of  his  

retirement, as ‘dearness pay’. It therefore emerges, that the manner  

of  computing  pension  for  retired  and  retiring  employees  were  

equated,  in  so  far  as  the  component  of  ‘dearness  allowance’  is  

concerned.   

13.       We were told, that when one or the other Government order  

introduced  a  distinction  in  pensionary  benefits,  for  computing  

pension, the same was equated through judicial intervention.  Such  

judicial interventions were then  adopted by the State Government,  

from time to time.  This aspect of the matter, factual as well as  

legal,  was  not  disputed  by  the  learned  counsel  representing  the  

respondents.  This  position  continued  till  the  adoption  of  the  

recommendations  of  the  Fourth  Tamil  Nadu  Pay  Commission  Report,  

details whereof, shall be narrated soon hereafter.

14. On 1.1.1979, the Tamil Nadu Pension Rules, 1978 (hereinafter  

referred to as “the Pension Rules”) came to be enforced.  After the  

promulgation of the Pension Rules, pension of retiring government  

employees had to be determined in consonance with the said Rules.  

It is not in dispute, that pension to Government employees is now  

regulated under the Pension Rules.  Under the Pension Rules, pension  

is  calculated  on  the  basis  of  an  employee’s  emoluments/wages,  

immediately before his retirement.  For this, reference may be made  

to  Rule  30  of  the  Pension  Rules,  which  is  being  extracted  

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hereunder:-

“30. Emoluments—In the rules, unless the context otherwise    requires,--

(1)  Emoluments means and include:-

(i)  Pay, other than special pay granted in view  of his personal qualifications, which has been  sanctioned for a post held by him substantively  or  in  an  officiating  capacity  (including  temporary  capacity  under  emergency  provisions)  or  to  which  he  is  entitled  by  reason  of  his  position in a cadre:

(ii) special  pay,  dearness  pay and  personal pay; and

(iii) any other remuneration which may be specially  claused as emoluments by the Government.”

(emphasis is ours)

The emoluments/wages to be taken into consideration for computing  

pension is dependent on the allowances which are added to pay.  The  

composition and component of the said allowances is determined by  

the State Government from time to time through Government orders.  A  

perusal of Rule 30 of the Pension Rules reveals, that ‘dearness pay’  

is  a component  of the  wages to  be taken  into consideration  for  

computing pension.  And ‘dearness pay’ is a component of ‘dearness  

allowance; which on a declaration by the State Government approves  

(through a Government order) for being taken into consideration for  

calculating pension.

15. In  1986,  the  Fourth  Tamil  Nadu  Pay  Commission  gave  its  

report.  The Pay Commission recommended, that ‘dearness allowance’,  

prevalent at the end of three years (after the Pay Commission’s  

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recommendations), should be treated as ‘dearness pay’, in order to  

ensure a reasonable pension level.  The Finance (Pension) Department  

having considered the recommendations made by the Pay Commission,  

issued a Government Order dated 30.4.1986, providing that ‘dearness  

allowance’  and  ‘additional  dearness  allowance’  sanctioned  upto  

30.9.1987  would  be  treated  as  ‘dearness  pay’  for  calculating  

pension,  in respect  of those  who retired  (or died)  on or  after  

1.10.1987.  The concession of adding ‘dearness pay’ was extended to  

the  period  of  10  months  for  calculating  average  emoluments,  for  

those who retired before or after 31.7.1987.  But employees retiring  

on  or  after  1.10.1987  were  entitled  to  add  ‘dearness  allowance’  

sanctioned upto 1.10.1987 to their wages, for quantifying pension  

(family pension and death-cum-retirement gratuity).  It is therefore  

apparent, that even after the acceptance of the recommendations of  

the Fourth Pay Commission report, ‘dearness allowance’ remained a  

component of wages.  As such, ‘dearness allowance’ continued to be  

taken  into  consideration  for  computing  pension  of  retiring  

government employees.

16. The Fifth Tamil Nadu Pay Commission submitted its report in  

1989.  The instant Pay Commission recommended, the following formula  

for calculating pension:

Basic Pay Per Month Rate of Pension Per Month i) Not exceeding Rs.1,500 30  percent  of  basic  pay  

subject  to  a  minimum  of  Rs.375 p.m.

ii) Exceeding Rs.1,500 but not 20  per  cent  of  basic  pay  

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exceeding Rs.3,000/- subject  to  a  minimum  of  Rs.450 p.m.

iii )

Exceeding Rs.3,000/- 15  per  cent  of  basic  pay  subject  to  a  minimum  of  Rs.600  and  a  maximum  of  Rs.1,250 p.m.

The Fifth Pay Commission also recommended different percentages of  

increase in pension for existing pensioners, who had retired prior  

to  1.6.1988.   By  a  Government  Order  dated  9.8.1989  the  Finance  

Department while accepting the recommendations of the Fifth Tamil  

Nadu  Pay  Commission  fixed  a  slab  system,  for  adding  ‘dearness  

allowance’ as ‘dearness pay’ for calculating pension.  This decision  

of the State Government was to be implemented for employees retiring  

on or after 1.6.1988.

17. Original  Application  no.  1919  of  1991  was  filed  by  

Ambasamudaram,  Taluk  Pensioner  Associations  before  the  

Administrative Tribunal.  Likewise, a large number of other Original  

Applications (including OA no. 4952 of 1992, O.A. no. 2227 of 1992,  

O.A. no. 4265 of 1992, O.A. no. 4953 of 1992, OA no.2645 of 1994 and  

OA no.2646 of 1994) were filed before the Administrative Tribunal.  

Through  the  aforesaid  original  applications,  the  

petitioners/applicants assailed the Government Order dated 30.4.1986  

(issued in furtherance of the recommendations made by the Fourth  

Tamil Nadu Pay Commission), as well as, the Government Order dated  

9.8.1989 (issued in furtherance of the recommendations made by the  

Fifty  Tamil  Nadu  Pay  Commission).   All  the  aforesaid  original  

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applications were disposed of by the Administrative Tribunal vide a  

common order dated 6.5.1996.  The operative part of the order passed  

by the Administrative Tribunal while disposing of the aforementioned  

original applications is being extracted hereunder:

“OA 1919/91 We set aside the G.O.Ms. No.810 (Finance and Pay Commission)  

Department dated 9.8.89 in so far as it affects the applicant’s  association and direct the respondent to extend the benefits of  60%  increase  in  the  pre-revised  pension  plus  the  Dearness  Allowance at 608 points available to those who retired prior to  1.6.60 to those pensioners and family pensioners of cases of  retirements or death occurring after 1.6.60.

OA 2227/92 We  quash  the  G.O.Ms.  No.371,  Finance  dated  30.4.1986  and  

G.O.Ms.No.911, finance dated 4.12.1991 in so far as they have  restricted their applicability to the pensioners and family who  retired prior to 1.10.1987 listed in Appendix 1 and 2 and those  who retired during the period from 1.10.1987 to 31.5.1988 as  listed  in  Appendix  from  the  services  of  Government,  local  bodies  and  aided  educational  institutions  and  direct  the  respondent to count the DA and ADA as dearness pay for all ten  months preceding retirement for computing average emoluments to  fix their pensionary benefits including pension and value of  commutation and also direct the respondent to pay the arrears  of pension, gratuity and value of commutation of pension on  such refixation computed from the date of retirement or death  as the case may be to the pensioners and family pensioners.

OA 4265/92 We  quash  the  G.O.Ms.No.115,  Finance  dated  6.2.1975  and  

G.O.Ms.No.911  Finance  dated  4.12.1991  in  respect  of  the  applicant as far as it relates to classification of pensioners  and  direct  the  respondent  to  extend  the  benefits  of  the  impugned G.Os. to the affected pensioners and family pensioners  and pay the arrears of pension and gratuity and the family  pension computed on refixation of their original pension or  family pension from the date of their retirement or the date of  death of the Government servant as the case may be.

OA 4953/92 We  quash  G.O.Ms.No.371,  Finance  dated  30.4.1986  and  

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G.O.Ms.No.911  Finance  dated  4.112.91  in  respect  of  the  applicant as far as they have restricted their applicability to  the pensioners and family pensioners’ who retired or died as  the case may be prior to 1.10.87 and after 1.4.78 and direct  the respondent to allow the pensioners who retired during the  period from 1.10.87 to 31.5.1988 to count the DA and ADA as  dearness pay for all the 10 months preceding retirement for  computing average emoluments and extend the benefits of the  impugned GOS to them, and pay them the arrears of pension,  gratuity and value of commutation on such refixation computed  on and from the date of retirement or death as the case may be  to the affected pensioners and family pensioners.

OA No.2645/94 We  direct  the  respondents  to  extend  the  benefit  of  

G.O.Ms.No.679, Finance (Pension) Department, dated 23.9.93 to  the  applicant  also  and  revise  his  pension  with  effect  from  1.11.1974 taking into account the Dearness Allowance drawn by  him from 9.1.1974 to 31.10.1974 and pay him the arrears due to  him consequent on the revision from 1.11.1974.

OA No.2646/94 We  quash  the  letter  No.88079/Pension/93-I,  Finance  

Department, dated 1.10.1993 and direct the respondent to extend  the benefit granted in G.O.Ms.No.115, Finance dated 6.2.75 to  those who retired during the period from 1.10.70 to 1.2.75 and  pay them ar4rears of pension and DCRG from the dates of their  retirement.

The applications are allowed.  Taking into consideration the  fact that most of the applicants would have died or most of  them would have reached the age of more than 70, we direct the  respondent to refix their pension and pay the arrears within  two months from the date of receipt of this order or a copy  thereof.”

18. The  factual  narration  recorded  hereinabove  refers  to  the  

Government orders issued from to time, directing the component of  

‘dearness allowance’, which was to be taken into consideration as  

‘dearness  pay’  for  computation  of  pension;  the  outcome  of  the  

challenges  raised  to  the  aforesaid  Government  orders;  and  the  

eventual implementation thereof in the context of the implementation  

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of the component of ‘dearness pay’ to be taken into consideration  

for calculating pension.  Even though the exhaustive details of the  

same have been narrated above, it is necessary to record a summary  

thereof, so as to have a bird’s eye view of the manner in which  

‘dearness pay’ has been extended to retired Government employees  

from time to time.  Accordingly, the aforesaid summary is being  

paraphrased below:-

(i) Government order dated 11.3.1970 included ‘dearness  

allowance’ as a component of wages for calculating pension  

for only such employees who retired between 26.2.1970 and  

1.10.1970.   By  judicial  intervention,  the  aforesaid  

Government  order  extending  the  benefit  of  treating  

‘dearness allowance’ as ‘dearness pay’, was held to be  

applicable  even  to  employees  who  had  retired  prior  to  

26.2.1970.  The State Government accepted the aforesaid  

legal position and extended the same benefit of ‘dearness  

allowance’ by treating the same as ‘dearness pay’ to all  

pensioners equally.

(ii) Government order dated 6.2.1975 was issued to give  

effect  to  the  recommendations  made  by  the  Dearness  

Allowance  Committee  to  the  effect,  that  ‘dearness  

allowance’ sanctioned with effect from 1.4.1974 (Rs.55/-  

for employees drawing pay upto Rs.599/-, and Rs.70/- for  

employees drawing pay upto Rs.600/- and above) would be  

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treated as ‘dearness pay’ for employees retiring on or  

after 1.2.1975 ( by ‘adding dearness allowance actually  

drawn  by  them  during  the  ten  months  preceding  their  

retirement.  By judicial intervention, it was held that  

the aforesaid benefit would also extend to such employees  

who had retired during the period between 2.10.1970 and  

31.1.1975, and that, ‘dearness allowance’ sanctioned from  

time to time and actually drawn by the retiring employee  

would be treated as ‘dearness pay’ in case of those who  

retired during the period between 2.10.1970 and 31.1.1975  

(for calculation of pension).

(iii) Government order dated 30.4.1986, while accepting the  

recommendation  made  by  the  Fourth  Tamil  Nadu  Pay  

Commission,  provided  for  certain  pensionary  benefits  to  

employees who had retired between 1.10.1987 and 31.5.1988,  

by  allowing  them  to  count  ‘dearness  allowance’  and  

‘additional dearness allowance’ as ‘dearness pay’.  The  

concession of ‘dearness pay’ was extended for the entire  

ten months for calculating average emoluments in case of  

those  who  retired  after  31.7.1987.   By  judicial  

intervention, it was held that the concession of adding  

‘dearness allowance’ as ‘dearness pay’ would extend even  

to employees who had retired (or died) prior to 1.10.1987.  

It was also held, that pensioners who had retired during  

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the  period  between  1.10.1987  and  31.5.1988  would  be  

entitled  to  count  ‘dearness  allowance’  and  ‘additional  

dearness allowance’ as ‘dearness pay’ (for all the ten  

months preceding their retirement) for computing average  

wages  for  calculating  pension.   The  State  Government  

accepted  the  aforesaid  legal  position  and  extended  the  

aforesaid benefits equally to all pensioners.   

(iv)  Government order dated 9.8.1989, while accepting the  

recommendations  made  by  the  Fifty  Tamil  Nadu  Pay  

Commission, introduced a slab system, for adding ‘dearness  

allowance’ as ‘dearness pay’ into the component of wages  

for calculating pension.  A distinction was made between  

employees retiring before and after 1.6.1988.  By judicial  

intervention, the benefit of treating ‘dearness allowance’  

as ‘dearness pay’ was extended to employees irrespective  

of the date of their retirement.

(v) Government  order  dated  4.12.1991  provided,  that  

arrears of pension based on recalculation of pension, by  

taking  into  consideration  the  component  of  ‘dearness  

allowance’  as  ‘dearness  pay’,   would  be  released  to  

pensioners with effect from 1.12.1991, even in cases where  

the concerned pensioner had retired with effect from a  

date  preceding  1.12.1991.   By  judicial  intervention,  

arrears  of  pension,  based  on  recalculation  of  pension,  

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were   ordered  to  be  released  to  retired  employees,  by  

taking  into  consideration  the  component  of  ‘dearness  

allowance’ as ‘dearness pay’ equally for all employees.  

The State Government accepted the aforesaid legal position  

and  extended  the  said  benefit  to  pensioners  who  had  

retired prior to 1.12.1991.

19. The  aforesaid  factual/legal  position  is  a  historical  

narration of the inclusion of ‘dearness allowance’ as ‘dearness pay’  

from time to time for computation of pension.  What emerges from  

this narration is, that all pensioners (past, present and future)  

were  equally  granted  the  benefit  of  ‘dearness  allowance’  as  

‘dearness  pay’  for  calculating  pension.   Whenever  a  class  of  

pensioners was discriminated against,  for computation of pension,  

on  the  basis   of  dearness  allowance/  pay  judicial  intervention  

restored the equation.  The equation was then given effect to by the  

State Government from time to time.  Clearly, judicial intervention  

repeatedly erased the classifications created between pensioners, on  

the basis of ‘dearness pay’.

20. The present controversy yet again presents a dispute, inter  

se, between the State Government and retired employees in respect of  

the  component  of  ‘dearness  allowance’  liable  to  be  treated  as  

‘dearness pay’, for computing pension payable to retired Government  

employees.  Even though the instant controversy also arises out of  

Government order dated 9.8.1989, the same remained unsettled in the  

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earlier rounds of litigation (emerging out of the same Government  

order  dated  9.8.1989),  presumably  because  none  of  the  retired  

employees fell within the classes of  pensioners included in the  

present litigation.  The employees herein are those who retired on  

or after 1.6.1988.  By the impugned Government order dated 9.8.1989,  

pensionary  benefits  of  an  employee  retired/retiring  on  or  after  

1.6.1988 were required to be computed by adding ‘dearness allowance’  

to ‘dearness pay’ at a fixed percentage.  By virtue of the aforesaid  

determination, employees retiring on or after 1.6.1988 would be at a  

disadvantage,  as  against  the  employees  who  had  retired  prior  

thereto.

21. The afore-stated challenge to the impugned Government order  

dated 9.8.1989 was raised before the Administrative Tribunal through  

an Original Application (O.A. no. 5771 of 2001) by an Association of  

retired Government employees.  The aforesaid Original Application  

came to be transferred to the High Court, wherein it was renumbered  

as Writ Petition (T) no. 32045 of 2005.  A learned Single Judge of  

the High Court allowed the aforesaid Writ Petition on 20.4.2006.  

The learned Single Judge held, that the State Government, in not  

extending  benefits  to  members  of  the  appellant  Association,  had  

discriminated against them.  The impugned Government order dated  

9.8.1989, to the extent that it did not confer the same benefits  

(based on the component of ‘dearness allowance’ treated as ‘dearness  

pay’), for employees who retired on or after 1.6.1988, was held as  

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unsustainable.  Writ Petition (T) no. 32045 of 2005 was accordingly  

allowed.

22. Dissatisfied with the order dated 20.4.2006 passed by the  

learned Single Judge, allowing Writ Petition (T) no. 32045 of 2005,  

the State Government preferred a Writ Appeal before a Division Bench  

of  the  High  Court.   The  aforesaid  Writ  Appeal,  alongwith  writ  

petitions filed before the High Court on the same subject, were  

taken up for collective adjudication.  By an order dated 17.12.2007,  

Writ  Appeal  no.  1002  of  2006  was  allowed.   The  order  dated  

20.4.2006, passed by the learned Single Judge (allowing the claim of  

the employees who had retired on or after 1.6.1988), was set aside.  

All writ petitions filed by retired employees on the same subject  

matter which were taken up for disposal alongwith the Writ Appeal  

referred  to  above,  were  simultaneously  dismissed.   Through  the  

instant Civil Appeals, different employees’ associations, as also  

employees  (singularly  and  collectively),  have  assailed  the  order  

passed  on  17.12.2007  by  the  Division  Bench  of  the  High  Court,  

allowing Writ Appeal no. 1002 of 2006 (and connected appeals); and  

dismissing the writ petitions preferred by employees (and employees’  

associations)  taken  up  for  collective  disposal,  alongwith  the  

aforesaid Writ Appeal (no. 1002 of 2006).

23. During the course of hearing, learned counsel representing  

the appellants, first and foremost, vehemently contended, on the  

basis of the legal and the factual position noticed above, that the  

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benefit of ‘dearness allowance’ as ‘dearness pay’ has always equally  

been extended to all the pensioners, irrespective of the date of  

their retirement.  It was further contended, that as and when there  

was  discrimination  on  the  above  subject,  the  same  was  suitably  

remedied by the State Government, by amending/modifying the earlier  

Government orders.  It was submitted, that a similar discrimination  

emanating  out  of  the  same  Government  order  dated  9.8.1989,  

pertaining  to  a  set  of  employees  differently  classified,  was  

corrected  through  judicial  intervention  (details  already  noticed  

above).  During the aforesaid course of repeated adjudication, on  

the subject under consideration, the matter once came up to this  

Court, when Special Leave Petition (Civil) no. 23643 of 1996, filed  

before this Court by the State Government, was dismissed.  Even a  

review petition filed before this Court, by the State Government  

thereafter,  admittedly  met  the  same  fate.   It  was  accordingly  

submitted,  that  the  same  principle  which  was  made  applicable  to  

different sections of pensioners, under the same Government order  

dated 9.8.1989, should be extended to the instant class of retired  

Government employees i.e., those who retired on or after 1.6.1988.

24. Besides  the  aforesaid  legal  premise,  for  assailing  the  

impugned  Government  order  dated  9.8.1989,  learned  counsel  

representing  the  appellants,  invited  our  pointed  attention  to  a  

compilation enclosed by the Retired Officers’ Association (in Civil  

Appeal no. 8856 of 2012).  The said compilation was relied upon to  

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demonstrate  to  us,  the  extent  of  discrimination  caused  to  the  

appellants  (who  retired  on  or  after  1.6.1988).  For  this  reason  

various  hypothetical  situations  were  illustratively  placed  before  

us, for our consideration.  In each such hypothetical illustration,  

the appellants took into consideration the same number of years of  

service rendered, against the same post, wherein the pensioner had  

also retired at the same component of last pay drawn.  Therefrom, it  

was sought to be established, that employees who had retired on or  

after  1.6.1988  would  be  at  a  substantial  disadvantage.  

Illustratively, for the adjudication of the present controversy, a  

hypothetical situation relating to an employee holding the post of  

Deputy Collector is being placed below:  

‘  A’   

Cadre taken : Deputy  Collector

Date of retirement : 30.04.1988 Net qualifying service : 33 years

Scale of Pay : 1340-75—1715—90—2435 Pay last drawn : Rs. 2435/- Average Emoluments : Rs. 2435/- Original Pension fixed : Rs. 1218/- Pension revised as per G.O. 449 :  Rs. 1448/- Revision as per G.O. 810 As on 01.06.1988 : Rs. 1622/-

Pension as per G.O. 271 :    1622/- Add: 50% increase :         811/-

------------- Total Pension     2433/- (With effect  

from 1.6.1988)

(Pension as on 1.1.1966) :  2433/- Add:  111% :  2701/-

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Interim Relief-I     50/- Interim Relief –II :       244/- 40% Hike :      974/-

        ------------------------

Total Pension : 6402/- (With effect from  1.1.1996)

xxx xxx xxx xxx

‘  B’   

Cadre taken : Deputy  Collector

Date of retirement : 30.06.1988 Net qualifying service : 33 years

Scale of Pay : 2200-75—2800—100—4000 Average Emoluments : Rs. 2515/- + Add: 13% as per G.O. 810 : Rs.   327/-

: Rs.2842/-

Pension 50% : Rs.1421/-

As on 1.1.96: Pension : Rs.1421/-  

Add 148% :       2104/- Interim relief-I :          50/- Interim relief-II :         143/- 40% Hike :          569/-

------------- Total Pension   Rs.4287/- (With effect  

from 1.1.1996)

xxx xxx xxx xxx

‘  C’   

Cadre taken : Deputy  Collector

Date of retirement : 30.06.1993 Net qualifying service : 33 years

10 months average  emoluments : Rs.2725/-

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Add: 13% increase : Rs.   355/- : Rs.3080/-

Pension fixed at 50% : Rs.1540/-

Revised pension as on  1.1.1996 : Rs.1540/-  

Add Dearness Allowance 148% :       2280/-

Interim relief-I :          50/- Interim relief-II :         154/- 40% Hike :          616/-

------------- Total Pension   Rs.4640/- (With effect  

from 1.1.1996)

After narrating the computations made in the illustrations referred  

to above, it was submitted that it clearly emerged, that a person  

who had retired as a Deputy Collector on 30.4.1988 (before 1.6.1988)  

would get pension of Rs.6,402/-;  while a Deputy Collector, who  

retired on 30.6.1988, would get Rs.4,287/-; and a Deputy Collector  

who retired on 30.6.1993, would get Rs.4,640/- as pension, all of  

them having the same 33 years of qualifying service, as well as, a  

similar last pay prior to their retirement.  What is important is,  

that the figures referred to above were accepted in the response  

sought by the High Court from the Accountant General, Tamil Nadu.  

In the response from the Accountant General, Tamil Nadu, the only  

mistake found was the amount of pension depicted as Rs.6,402/- for a  

Deputy Collector (who retired prior to 1.6.1988).  According to the  

Accountant  General,  Tamil  Nadu,  on  a  correct  analysis,  the  said  

figure  would  be  Rs.6,808/-.   It  is  therefore  apparent,  that  in  

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identical  circumstances,  a  Deputy  Collector  retiring  prior  to  

1.6.1988  would  draw  pension  at  the  monthly  rate  of  Rs.6,808/-,  

whereas, a Deputy Collector retiring thereafter on 30.6.1988, would  

get a monthly pension of Rs.4,287/-.  This would show that a person  

who  retired  from  the  same  cadre  before  the  crucial  date  i.e.,  

1.6.1988, would get about Rs.2,500/- per month more than the one who  

had retired from the same cadre after the said date.  The aforesaid  

illustration has been highlighted by us, in order to determine the  

correctness of the following inferences drawn by the Division Bench  

of  the  High  Court,  while  passing  the  impugned  order  dated  

17.12.2007:-

“Learned counsel for the parties circulated their respective  calculations showing working sheet of pension as admissible to  a class of employees, who retired prior to 1st June, 1988 in the  unrevised  scales  of  pay  and  those  similarly  situated  and  retired  after  1st June,  1988  in  the  revised  scales  of  pay.  Charts are varying.  While in the chart submitted by the State  Government it has been shown that those who retired after 1  st    

June, 1988 will be getting a little bit higher than those who  retired prior to 1  st   June, 1988, the calculation submitted by    individual parties shows that those who retired just prior to  1  st   June, 1988 may get a little higher emoluments than those who    retired after 1  st   June, 1988  .  It is for the said reason, we  also  sought  for  opinion  from  the  Accountant  General,  Tamil  Nadu, who has submitted its calculation chart, as circulated  between the parties and quoted hereunder:-

“As per instructions of the Hon’ble High Court of Madras  in W.P. 11634 of 2002, the working sheets submitted by  both the Government and the petitioners in WA 1002 of 2006  have been scrutinized and the following observations are  made:-

A. Government Working Sheet:

Details of the case As it As it  

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is should  be

Designation: Tahsildar Date of Retirement: 31.5.1988 Scale of Pay: Rs.1160-50-1460-70- 1950 Pay Rs.1880

Rs.1387 Rs.1573

Designation: Tahsildar Date of Retirement: after 1.6.1988 Scale of Pay: Rs.2000-60-2300-75- 3200 Pay Rs.2300

Rs.1534 Rs.1534

1/579 revision is applied in this case, then the revised  pension from 1.6.88 works out to Rs.2000 + 18% D.A.

B. Petitioner Working Sheet:  Out of nine illustrations,  five cases are found to be correct and in four cases,  the correct calculations are given below:-

 Details of the  

case As it is As it  

should be Designation:  Deputy  Collector  (‘A’)  Date  of  Retirement:  30.4.1988 Scale  of  Pay:  Rs.1340-75-1715- 90-2435 Pay Rs.2435

Rs.2433  (from  1.6.88)  Rs.6402  (from  1.1.96)

Rs.2589  (from 1.6.88)  Rs.6808  (from 1.1.96)

Designation:  Block  Development  Officer (‘A’)  Date  of  Retirement:  31.1.1988 Scale  of  Pay:  Rs.1045-45-1450- 65-1675 Pay Rs.1515

Rs.849 (from  1.2.88)  Rs.1427 (from  1.6.88) Rs.4303 (from  1.1.96)

Rs.947 (from 1.2.88)  Rs.1592 (from 1.6.88) Rs.4796 (from 1.1.96)

Designation:  Secondary  Grade  Teacher  (‘A’)  (Sel. Grade)

Rs.472 (from  1.1.88)  Rs.815

Rs.513 (from 1.1.88)  Rs.890 (from 1.6.88)

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Date  of  Retirement:  31.12.1987 Scale of Pay: Rs. Pay Rs.820

(from  1.6.88) Rs.2480 (from  1.1.96)

Rs.2790 (from 1.1.96)

Designation:  Tahsildar Date  of  Retirement:  31.3.1990 Scale  of  Pay:  Rs.1160-50-1460- 70-1950 Pay  Rs.2180  from  1.1.90

Rs.1232 (from  1.4.90)  Rs.3723 (from  1.1.96)

Rs.1209 (from 1.4.90)  Rs.3654 (from 1.1.96)

It  is  certified  that  subject  to  the  observations  made  supra the illustrative calculations are in order.

Branch Officer/Pension 30”

From the aforesaid chart it appears that those who retired  prior to 1  st   June, 1988 or after 30  th   June, 1988 from similar    post, they will get almost similar quantum of pension.

(emphasis is ours)

25. Learned  counsel  for  the  appellants  pointed  out,  that  the  

determination by the High Court to the effect, that employees who  

had retired prior to 1.6.1988 from a similar post, would “…get a  

little  higher…”  pensionary  emoluments,  than  those  who  retired  

afterwards,  was  clearly   preposterous.  Learned  counsel  for  the  

appellants, while referring to the illustration narrated above, also  

invited our attention to the affidavit dated 15.12.2011 (filed by  

the first respondent in Civil Appeal no.8856 of 2012), wherein the  

position canvassed at the behest of the appellants was considered.  

According to the acknowledged position, the first respondent (in the  

affidavit dated 15.12.2011), on proper calculations asserted, that  

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in identical circumstances, a Deputy Collector retiring prior to  

1.6.1988  would  draw  pension  at  a  monthly  rate  of  Rs.6,808/-,  

whereas, a Deputy Collector retiring after 30.6.1988 would get a  

monthly pension of Rs.4,287/-.  This would show, that merely on  

account of the accident of retiring before or after 1.6.1988, one of  

the pensioners would draw pension at the rate of about Rs.2,500/-  

per  month  more  than  the  other.   We  are  satisfied,  that  the  

illustration referred to hereinabove, clearly negates the conclusion  

drawn by the Division Bench of the High Court in the impugned order  

dated 17.12.2007, to the effect, that retirees prior to 1.6.1988  

from  a  similar  post  would  “…get  a  little  higher”  pensionary  

emoluments.

26. We  have  given  our  thoughtful  consideration  to  the  

controversy in hand.  First and foremost, it needs to be understood  

that the quantum of discrimination, is irrelevant to a challenge  

based  on  a  plea  of  arbitrariness,  under  Article  14  of  the  

Constitution of India.  Article 14 of the Constitution of India  

ensures to all, equality before the law and equal protection of the  

laws.  The question is of arbitrariness and discrimination.  These  

rights  flow  to  an  individual  under  Articles  14  and  16  of  the  

Constitution of India.  The extent of benefit or loss in such a  

determination is irrelevant and inconsequential. The extent to which  

a benefit or loss actually affects the person concerned, cannot ever  

be a valid justification for a court in either granting or denying  

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the claim raised on these counts.  The rejection of the claim of the  

appellants by the High Court, merely on account of the belief that  

the  carry  home  pension  for  employees  who  would  retire  after  

1.6.1988,  would  be  trivially  lower  than  those  retiring  prior  

thereto, amounts to bagging the issue pressed before the High Court.  

The solitary instance referred to above, which is not a matter of  

dispute  even  at  the  hands  of  the  first  respondent,  clearly  

demonstrates, that in a given situation, an employee retiring on or  

after 1.6.1988 could suffer a substantial loss, in comparison to an  

employee retiring before 1.6.1988.  We are, therefore satisfied,  

that  the  High  Court  clearly  erred  while  determining  the  issue  

projected before it.

27. At this juncture it is also necessary to examine the concept  

of valid classification.  A valid classification is truly a valid  

discrimination.  Article 16 of the Constitution of India permits a  

valid classification (see, State of Kerala vs. N.M. Thomas (1976) 2  

SCC 310).  A valid classification is based on a just objective.  The  

result to be achieved by the just objective presupposes, the choice  

of  some  for  differential  consideration/treatment,  over  others.  A  

classification  to  be  valid  must  necessarily  satisfy  two  tests.  

Firstly, the distinguishing rationale has to be based on a just  

objective.  And secondly, the choice of differentiating one set of  

persons from another, must have a reasonable nexus to the objective  

sought  to  be  achieved.   Legalistically,  the  test  for  a  valid  

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classification  may  be  summarized  as,  a  distinction  based  on  a  

classification founded on an intelligible differentia, which has a  

rational  relationship  with  the  object  sought  to  be  achieved.  

Whenever a cut off date (as in the present controversy) is fixed to  

categorise one set of pensioners for favourable consideration over  

others,  the  twin  test  for  valid  classification  (or  valid  

discrimination) must necessarily be satisfied.  In the context of  

the  instant  appeals,  it  is  necessary  to  understand  the  overall  

objective of treating “dearness allowance” (or a part of it) as  

“dearness pay”.  There can be no doubt, that ‘dearness allowance’ is  

extended to employees to balance the effects of ongoing inflation,  

so as to ensure that inflation does not interfere with the enjoyment  

of  life,  to  which  an  employee  is  accustomed.   Likewise,  the  

objective of ‘dearness pay’ is to balance the effects of ongoing  

inflation, so that a pensioner can adequately sustain the means of  

livelihood to which he is accustomed .  Having understood the reason  

why the Government extends the benefit of ‘dearness allowance’ and  

‘dearness pay’, to its employees and pensioners respectively, we  

would venture to search for answers to the twin tests which must be  

satisfied,  for  making  a  valid  classification  (or  a  valid  

discrimination), in the present fact situation.   

28. In the present context, it needs to be kept in mind, that  

‘dearness allowance’ is paid to Government employees keeping in mind  

the All India Consumer Price Index.  Inflation in the market place  

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is  sought  to  be  balanced  by  paying  ‘dearness  allowance’  to  

Government  employees.   When  a  State  Government  chooses  to  treat  

‘dearness allowance’ as ‘dearness pay’, the objective remains the  

same i.e., inflation in the market place is sought to be balanced  

for retired employees by giving them the benefit of ‘dearness pay’.  

Since the component of inflation similarly affects all employees,  

and all pensioners (irrespective of the date of their entry into  

service  or  retirement),  it  is  not  per  se possible  to  accept  

different  levels  of  ‘dearness  pay’  to  remedy  the  malady  of  

inflation.  Just like the date of entry into service (for serving  

employees) would be wholly irrelevant to determine the ‘dearness  

allowance’ to be extended to serving employees, because the same has  

no relevance to the object sought to be achieved.  Likewise, the  

date of retirement (for pensioners) would be wholly irrelevant to  

determine the ‘dearness pay’ to be extended to retired employees.  

Truthfully,  it  may  be  difficult  to  imagine  a  valid  basis  of  

classification  for  remedying  the  malaise  of  inflation.   In  the  

absence of any objective, projected in this case, the question of  

examining the reasonableness to the object sought to be achieved,  

simply does not arise.  Our straying into this expressed realm of  

imagination, was occasioned by the fact, that the pleadings filed on  

behalf of the State Government, do not reveal any reason for the  

classification, which is subject matter of challenge in the instant  

appeal.   The only position adopted in the  pleadings filed before  

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this  Court   for  introducing  a  cut  off  date  for  differential  

treatment, is expressed in paragraph 4 of the counter affidavit,  

filed  by  the  State  of  Tamil  Nadu,  which  is  being  extracted  

herewith:.-

“With reference to the averments made in the Grounds of the  Special Leave Petition, I submit that the fifth Pay Commission  has revised pay and pension with effect from 1.6.1988.  As per  the recommendation of the above Pay Commission, the Government  had  issued  orders  for  the  revision  of  pension  and  Family  Pension with effect from 1.6.1988 in G.O.Ms. No. 810. Finance  (PC)  Department,  dated  9.8.1989.  It  is  submitted  that  the  fourth Tamil Nadu Pay Commission has recommended that at the  end  of  the  period  of  three  years,  the  Dearness  Allowance  sanctioned upto that period could be treated as Dearness Pay.  The Fourth Pay Commission revision was given with effect from  1.10.1984.  Based on the above recommendation, the Government  has issued orders in G.O.Ms. No.371, Finance, dated 30.4.1986,  read  with  Government  letter  No.124414/Pension/86-1,  dt.  11.2.1987,  that  the  Dearness  Allowance  sanctioned  upto  30.9.1987 shall be treated as Dearness Pay for the purpose of  pensionary benefit in the case of the Govt. Servant retiring  on or after 1.10.1987.  The orders  issued in G.O.Ms. 371,  Finance  dated  30.4.1985  as  amended  in  Government  letter  No.70707-A/Pension /86-1, dated 8.7. 1986 read as follows:-

    “The Fourth Tamil Nadu Pay Commission have among other  things recommended that at the end of a period of three  years the Dearness Allowance sanctioned upto  the period  could be treated as Dearness Pay in order to ensure a  reasonable  pension  level.  The  Government  accept  the  recommendation of the Commission and direct that in the  case of Government servant, who will be retiring on or  after 1.10.1987, the Dearness Allowance sanctioned upto  1.10.1987 shall be reckoned as Dearness Pay for purpose  of pension in the case of death of a Government servant  occurring  on  or  after  1.10.1987  while  in  service  the  Dearness  Allowance  sanctioned  upto  1.10.1987  shall  be  treated  as  Dearness  Pay  for  the  purpose  of  computing  Family Pension.”  

It  is  therefore,  evident,  that  the  State  Government  has  not  

disclosed any object which is desired to achieve by the cut off  

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date.   Most  importantly,  the  financial  constraints  of  the  State  

Government,  were  not  described  as  the  basis/reason  for  the  

classification  made  in  the  imputgned  Government  order  dated  

9.8.1989.

29. The issue in hand needs to examine from another perspective  

as well.  It must be clearly understood, that no employee has a  

right to draw ‘dearness allowance’ as ‘dearness pay’ till such time  

as the State Government decides to treat ‘dearness allowance’ as  

‘dearness pay’.  And therefore, the State Government has the right  

to choose whether or not ‘dearness allowance’ should be treated as  

‘dearness pay’.  As such, it is open to the State Government not to  

treat any part of ‘dearness allowance’ as ‘dearness pay’. In case of  

financial constraints, this would be the most appropriate course to  

be adopted. Likewise, the State Government has the right to choose  

how  much  of  ‘dearness  allowance’  should  be  treated  as  ‘dearness  

pay’.  As such, it is open to the State Government to treat a  

fraction, or even the whole of ‘dearness allowance’ as ‘dearness  

pay’.  Based on Rule 30 of the Pension Rules, it is clear that the  

component  of  ‘dearness  pay’  would  be  added  to  emoluments  of  an  

employee for calculating pension.  In a situation where the State  

Government  has  chosen,  that  a  particular  component  of  ‘dearness  

allowance’  would  be  treated  as  ‘dearness  pay’,  it  cannot  

discriminate  between  one  set  of  pensioners  and  another,  while  

calculating the pension payable to them (for the reasons expressed  

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in the preceding paragraph).  Of course, a valid classification may  

justify such an action.  In this case, the State Government has not  

come out with any justification/basis for the classification whereby  

one  set  of  pensioners  has  been  distinguished  from  others  for  

differential treatment.

30. The  instant  controversy  should  not  be  misunderstood  as  a  

determination of the total carry home pension of an employee.  All  

the Government orders referred to above, deal with the quantum of  

‘dearness  allowance’  to  be  treated  as  ‘dearness  pay’  for  the  

calculation  of  pension.   ‘Dearness  pay’  is  one  of  the  many  

components, which go into the eventual determination of pension.  

Therefore, the focus in the adjudication of the present controversy  

must be on ‘dearness pay’, rather than on the eventual carry home  

pension.  The relevance and purpose of treating ‘dearness allowance’  

as ‘dearness pay’, has been brought out in the foregoing paragraphs.  

Therefore,  clearly,  the  object  sought  to  be  achieved  by  adding  

‘dearness pay’ to the wage of a retiree, while determining pension  

payable to him, is to remedy the adverse effects of inflation.  The  

aforesaid object has to be necessarily kept in mind, while examining  

the present controversy.  Any classification without reference to  

the object sought to be achieved, would be arbitrary and violative  

of the protection afforded under Article 14 of the Constitution of  

India,  it  would  also  be  discriminatory  and  violative  of  the  

protection afforded under Article 16 of the Constitution of India.

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31. Having given our thoughtful consideration to the controversy  

in hand, it is not possible for us to find a valid justification for  

the  State  Government  to  have  classified  pensioners  similarly  

situated as the appellants herein (who had retired after 1.6.1988),  

from those who had retired prior thereto.  Inflation, in case of all  

such pensioners, whether retired prior to 1.6.1988 or thereafter,  

would have had the same effect on all of them.  The purpose of  

adding  the  component  of  ‘dearness  pay’  to  wages  for  calculating  

pension is to offset the effect of inflation.  In our considered  

view,  therefore,  the  instant  classification  made  by  the  State  

Government in the impugned Government order dated 9.8.1989 placing  

employees who had retired after 1.6.1988 at a disadvantage, vis-à-

vis the employees who retired prior thereto, by allowing them a  

lower  component  of  ‘dearness  pay’,  is  clearly  arbitrary  and  

discriminatory, and as such, is liable to be set aside, as violative  

of Articles 14 and 16 of the Constitution of India.   

32. It is also imperative for us to take into consideration, a  

few judgments rendered by this Court, which were brought to our  

notice by the learned counsel representing the State Government.  

Reliance  was  placed  on  three  judgments  to  substantiate  the  

submissions advanced on behalf of the respondents.  

(i) First of all, reliance was placed on the decision rendered by  

this Court in Union of India Vs. P.N. Menon,. (1994) 4 SCC 68. Facts  

in the first cited judgment reveal, that a recommendation was made  

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by  the  Third  Pay  Commission  to  the  State  Government,  suggesting  

review  of  the  existing  wage  position,  based  on  unprecedented  

inflation.  The  State  Government  was  asked  (by  the  Third  Pay  

Commission) to take a decision on whether the dearness allowance  

scheme should be extended further; or in the alternative pay-scales  

themselves  should  be  revised.  This  suggestion  of  the  Third  Pay  

Commission was based on the fact, that the price level index had  

arisen above the 12 monthly average to 272.  Having considered the  

matter,  the  State  Government  decided  to  extend  the  dearness  

allowance scheme.  It simultaneously issued an  Office Memorandum,  

(hereinafter referred to as ‘O.M.’)  whereby, a portion of ‘dearness  

allowance’  was to be treated as pay for computation of retiral  

benefits.  The benefit of the aforesaid O.M.  was extended only to  

those employees who had/would  retire on or after 30.9.1977.  The  

aforesaid O.M, also  contemplated,  that  persons who had/would  

retire on or after 30.9.1977 but not later than 30.04.1979 would be  

allowed  to  exercise  an  option,  to  choose  one  out  of  the  two  

alternatives.  They  could  either   seek  the  benefit  of  death-cum-

retirement  gratuity  by  excluding  the  element  of  ‘dearness  

allowance’, alternatively, they could seek the same, by including  

the element of ‘dearness allowance’.  The issue which came up for  

adjudication before this Court was, whether the aforesaid O.M. was  

sustainable  in law,  as it  did not  extend equal  benefits to  all  

retirees, irrespective of the dates of their retirement. All the  

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respondents  had  retired  before  30.9.1997.  While  determining  the  

aforesaid issue, this Court took into consideration  inter alia  the  

fact that the decision to merge a part of ‘dearness allowance’ with  

pay,  was  taken  with  reference  to  the  price  index  level.   This  

decision  was  taken  on  the   recommendations  of  the   Third  Pay  

Commission.  In the aforesaid view of the matter, and  specially  

because,  an option was given to employees who had retired between  

30.09.1977 and  30.04.1979, to get their pension and (death-cum-

retirement  gratuity)  calculated,  by  including  or  excluding  the  

element on dearness pay, this Court ruled, that the State Government  

had adopted measures ensuring similar benefits to all. And that,  

there was no intention to create a class within a class.  This Court  

felt that the classification, had a reasonable nexus with the price  

level index at  272, on 30.09.1977.  This according to this Court  

was  just  and  valid.  The  factual  position,  that  needs  to  be  

highlighted, in so far as the first cited judgment  i.e. in P.N.  

Menon’s case (supra)  is that, the respondent employees had never  

been in receipt of dearness pay, when  they retired from service,  

and therefore, the O.M. in question could not have been applied to  

them.  This is how this Court examined the matter in the cited case.  

This Court also noticed, that prior to the O.M. in question, the  

pension  scheme  was  contributory,  and  only  with  effect  from  

22.9.1977, the pension scheme was made non contributory.  Since the  

respondent employees in the first cited case, were not in service at  

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the time of introducing the same, they were held not eligible  for  

the said benefit.

(ii) Next, learned counsel relied upon the judgment in  State of  

Rajasthan Vs. Amrit Lal  Gandhi, (1997) 2 SCC 342.  The facts, in  

the  second  cited  judgment  were,  that  originally  teachers  of  the  

Jodhpur  University  were  governed  by  contributory  provident  fund  

rules.  There was no pension scheme applicable to them.  In 1983, a  

committee  constituted  by  the  University  Grants  Commission,  

recommended the introduction of pension-cum- gratuity for university  

and college teachers. Thereupon, the Senate and Syndicate of the  

Jodhpur  University  resolved  to  introduce  a  pension  scheme  for  

university teachers. The resolution of the Syndicate and Senate also  

provided, that options would be sought from existing teachers, so as  

to enable them, to choose whether they should be governed by the  

contributory  provident  fund  rules,  or  would  like  to  accept  the  

benefits under the pension scheme.  As the recommendation of the  

Syndicate and the Senate, of the Jodhpur University had financial  

implications, approval of the State Government was imperative.  On  

examining  the  recommendations,  the  State  Government  decided  to  

introduce  the  pension  scheme  with  effect  from  1.1.1990.  Based  

thereon, the Syndicate and the Senate passed a concurring resolution  

expressing, that the pension scheme would become operational with  

effect from 1.1.1990. Based thereon, those teachers who were in the  

service  of  the  Jodhpur  University  on  or  after  1.1.1990,  were  

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required to submit their options.  The question which arose for  

consideration in the second cited judgment was, whether employees  

who  had  retired  before  1.1.1990,  had  a  similar  right  to  claim  

pension, as was being extended to employees, who had/would retire on  

or after 1.1.1990.  The High Court partly accepted the plea of the  

retirees by holding, that the pension scheme should be extended to  

employees who had retired on or after 1.1.1986.  This Court did not  

approve the decision rendered by the High Court. This Court noticed,  

that the approval of the resolutions of the Syndicate and Senate of  

the Jodhpur University had been accorded by the State Government  

after the State Legislature had passed the University Pension Rules,  

and the General Provident Fund Rules.  This Court also noticed, that  

the State Government in its affidavit had taken an express stand,  

that the introduction of the pension scheme was economically viable  

only  with  effect  from   1.1.1990.   In  other  words,  the  State  

Government could bear the financial burden of the pension scheme,  

only if it was  introduced with effect from 1.1.1990.  Based on the  

aforesaid  position  adopted  by  the  State  Government,  this  Court  

concluded,  that  the  determination  of  the  State  Government  in  

introducing the pension scheme  for employees, who had retired with  

effect from 1.1.1990 had not been fixed arbitrarily or without any  

valid reason/basis. This Court accordingly, set aside the judgment  

rendered by the High Court.

(iii) Finally,  learned  counsel  placed  reliance  on  the  judgment  

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rendered  by  this  Court  in  State  of  Punjab  Vs.  Amar  Nath  Goel,  

(2005)6 SCC 754.  In the third cited case, employees both of the  

Central Government, as also, of the State Governments of Punjab and  

Himachal Pradesh, who had retired prior to 1.4.1995 sought death  

cum-retirement gratuity, up to the increased limit of Rs. 2.5 lakhs.  

The  claim  raised  by  the  employees  was  rejected  in  some  cases,  

whereas in some other cases the Central Administrative Tribunal and  

the High Court took the view,  that the  benefit of  increased  

quantum of death-cum-retirement gratuity, should be  extended to  

employees, who had retired between 1.7.1993 and 31.3.1995 as well.  

Having examined the aforesaid controversy, this Court arrived at the  

conclusion, that the decision of the  Central Government and State  

Governments to limit the benefit only to employees, who had retired  

(  or  died)   on  or  after  1.4.1995,  was  based  on  a  concrete  

determination of financial implications, as such, it was held that  

the cut off date (1.4.1995) was neither  arbitrary nor irrational,  

as alleged.   Consequently, the plea advanced  at the hands  of the  

employees  assailing the cut off date as arbitrary, and by alleging  

that it was not based on any rational criteria, was rejected.

33. We have considered the submissions urged at the hands of the  

learned counsel for the respondent, based on the judgments cited at  

the bar.  In our view, none of the judgments relied upon is relevant  

to the present controversy.  

(i) In so far as  P.N. Menon’s case (supra) is concerned, having  

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examined the controversy. this Court arrived at the conclusion, that  

the State Government adopted measures which would ensure, similar  

benefits to all.  This court also expressed the view, that there was  

no intention of the State Government, to create any class within a  

class. The price level index at 272 on 30.9.1977 was the determining  

factor  for  the  State  Government’s  decision.   It  was  accordingly  

concluded, that there was a valid and reasonable nexus to the object  

sought to be achieved.  But most importantly this Court felt, that  

the decision of the State Government in not extending benefits to  

the respondents was based on the fact, that they were not in receipt  

of the any ‘dearness pay’ at the time of their retirement. Moreover,  

since  the  family  pension  scheme  was  contributory  when  the  

respondents had retired, the respondents could not justifiably seek  

the benefits, which were available  only to the  retirees after the  

pension scheme was made non contributory.  There is, therefore no  

co-relation  of  the  first  cited  judgment  with  the  controversy  in  

hand.  

(ii) In Amrit Lal Gandhi’s case (supra) pension was introduced  

for  the  first  time  for  university  teachers  based  on  resolutions  

passed by the Syndicate and the Senate of the Jodhpur University.  

The same were approved by the State Government with effect from  

1.1.1990. The instant controversy is, therefore, not between one set  

of pensioners alleging discriminatory treatment, as against another  

set  of  pensioners.  There  were  no  pensioners,  to  begin  with.  

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Retirees  were  entitled  to  provident  fund  under  the  existing  

Provident Fund Scheme.  The question of discrimination of one set of  

pensioners from another set of pensioners, therefore, did not arise  

in the second cited judgment.  Financial viability was, as such, a  

relevant issue.  The State Government adopted the stance, that the  

introduction of the pension scheme was financially viable only if  

the scheme was introduced with effect from 1.1.1990.  The cut off  

date clearly disclosed a classification founded on an intelligible  

differentia,  which  had  a  rational  relationship  with  the  object  

sought  to  be  achieved.   There  is  therefore,  in  our  view,  no  

correlation of the second cited judgment with the controversy in  

hand.

(iii) In so far as the third cited judgment is concerned, this  

Court in Amrit Lal Gandhi’s case (supra) examined an issue where,  

the increased death-cum-retirement gratuity could only be claimed by  

employees,  who  had  retired  after  the  cut  off  date  (1.4.1995).  

Death-cum-retirement  gratuity  is  a  one  time  benefit,  whereas,  

pension enures to retired employees for the entire length of their  

lives.   Pension  is  therefore  a  continuing  benefit.   Death-cum-

retirement gratuity, is a one time benefit, disbursed in accordance  

with to the rules prevalent at the time (of retirement).  Herein  

also, the issue under consideration was not different measures for  

computing, a continuing retiral benefit, based on any cut off date.  

We are therefore of the view, that the instant judgment is also not  

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relevant for the adjudication of the controversy in hand.   

In  view of  the above,  we are  satisfied, that  none of  judgments  

relied upon by the learned counsel for the respondents, have any  

bearing to controversy in hand.

34. The instant appeals are accordingly allowed.  The impugned  

order dated 17.12.2007 passed by the High Court is hereby set aside.  

The impugned Government Order dated 9.8.1989, to the extent that it  

extends  to  employees  who  retire  on  or  after  1.6.1988,  a  lower  

component of ‘dearness pay’, as against those who had retired prior  

to 1.6.1988, is set aside, being violative of Articles 14 and 16 of  

the Constitution of India.

....................J. (D.K. Jain)

...................J. (Jagdish Singh Khehar)

New Delhi;  January 17, 2013.

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