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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

TRANSFER CASE (CIVIL) NO. 48  OF 2010

Manojbhai N. Shah & Ors.  Petitioners

Versus

Union of India & Ors. Respondents

WITH

T.C.(C)No.7/2011, T.C.(C)No.45/2010  T.C.(C)No.47/2010,T.C.(C)No.46/2010 T.C.(C)No.6/2011,T.C.(C)No.19/2011, T.C.(C)No.23/2011,T.C.(C)No.20/2011, T.C.(C)No.21/2011 SLP(C)No.10903/2011, T.C.(C)No.82/2011,T.C.(C)No.83/2011 T.C.(C)No.49/2010, T.C.(C)No.27/2014

& T.C.(C)No.28/2014

J U D G M E N T

ANIL R. DAVE, J.

1. A common legal issue was involved in several  

writ petitions and appeals pending before different  

High Courts and therefore, transfer petitions had  

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been filed in this Court so that all pending cases  

can be transferred to and decided by this Court.   

2. 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.  

3. 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  

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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.

4. 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.

5. 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.  

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6. 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.

7. In addition to the aforestated benefits, the  

retiring employees were also to get usual benefits  

under  the  provisions  of  the  Payment  of  Gratuity  

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Act, 1972 and the amount of Provident Fund, which  

they were otherwise entitled to.

8. 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.

9. Several employees took benefit under the Scheme  

and retired in pursuance of the aforestated Scheme  

in 2004.

10. 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.

11.  The  issue  involved  in  all  these  cases  is  

whether  after  acceptance  of  voluntary  retirement  

under the Scheme, such retired employees would be  

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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”.

12. 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.

13.  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  

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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.

14. 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.  

15. 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.

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16. 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 Notification.  

(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 final.  

4. Period of operation:-  

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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,   

OR  

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.  

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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, namely:-  

(a) Provident Fund,   

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

(c) 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  

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of  leave  while  in  service  during  the  period  of  sixty  days  from  the  date  of  notification of this scheme.”  

17. 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.

(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  

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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:

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

(b) 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.”

18. In the light of the aforestated Scheme and the  

Notification,  we  have  to  consider  whether  the  

employees who had opted for voluntary retirement  

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under the Scheme are entitled to get the benefit of  

additional pension on the basis of revised salary  

in pursuance of the Notification.  

19. 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.

20. 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  

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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.

21. 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  

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Gazette, the benefit of revised pay for the purpose  

of payment of ex gratia would be allowed.

22. 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.

23. 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.

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24. 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.

25. 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.

26. 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.

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27. 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.

28. 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  

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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.

29. 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.

30. 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  

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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.

31. 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.

32. 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.

33. Upon hearing the learned counsel and upon going  

through the judgments rendered by different High  

Courts and the relevant provisions pertaining to  

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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.

34. 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  

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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.  

35. 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.

36. It is also pertinent to consider clause 5(2) of  

the Scheme, which has been reproduced hereinabove.  

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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  

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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.  

37. 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.

38. 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  

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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.

39. 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.

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40. 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.   

41. 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, 2005.

42. 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.

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.......................J.                          (ANIL R. DAVE)

.......................J.  (SHIVA KIRTI SINGH)

New Delhi January 07, 2015.  

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