Page 1

1

“  REPORTABLE”

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.9750-9819 OF 2016 (Arising from SLP(C) Nos. 10864-10933 of 2014)

State of H.P. & Ors. … Appellants

versus

Rajesh Chander Sood etc. etc. … Respondents

J U D G M E N T

Jagdish Singh Khehar, J.

1. The  State  of  Himachal  Pradesh  came  to  be  created,  with  effect  from

25.1.1971.  Consequent  upon  the  creation  of  the  State  of  Himachal  Pradesh,

employees engaged by the corporate sector, on their retirement, were being paid

provident  fund,  under  the  provisions  of  the  Employees’  Provident  Funds  and

Miscellaneous Provisions Act, 1952 (hereinafter referred to as the Provident Fund

Act).  The Central Government framed the Employees’ Provident Funds Scheme,

1995,  whereby,  it  replaced  the  earlier  statutory  schemes,  framed  under  the

Provident Fund Act.  This scheme was adopted for the corporate sector employees,

engaged in the State of Himachal Pradesh.

2. In order to extend better retiral  benefits to these employees, the Himachal

Pradesh  Government  framed  another  scheme  on  29.10.1999  –  the  Himachal

Pradesh Corporate Sector Employees Pension (Family Pension, Commutation of

Pension and Gratuity) Scheme, 1999.  In the present judgment, the instant scheme

Page 2

2

will be referred to as ‘the 1999 Scheme’.  A perusal of ‘the 1999 Scheme’ reveals

that  its  application  extended  to  employees  of  some  of  the  corporate  bodies  (-

specified  in  Annexure-I,  appended  to  ‘the  1999 Scheme’)  in  Himachal  Pradesh.

There were in  all  20 corporate  entities,  named in  Annexure-I.   These corporate

bodies  functioned as  independent  entities,  under  the  Departments  of  Industries,

Welfare,  Horticulture,  Forest,  Food  and  Supplies,  Tourism,  Town  and  Country

Planning, Housing and General Administration.

3. Paragraph 2 of ‘the 1999 Scheme’, provided for the zone of application of the

said Scheme.  It expressly provided, that the same would apply to only such of the

employees,  “who  opted  for  the  benefit  under  the  scheme”.   It  is  necessary  to

expressly notice, that paragraph 2 of ‘the 1999 Scheme’ required, that the above

option would be exercised by the employees in writing, in the format provided for the

same.  This option, was required to be submitted within 30 days of the notification of

the scheme - by 27.11.1999.  It was also provided in paragraph 2, that such of the

employees who failed to  exercise any option,  within  the period provided for, for

whatever reason, would be deemed to have exercised their option, to be regulated

by  ‘the  1999  Scheme’.  It  is  therefore  apparent,  that  it  was  imperative  for  all

concerned employees, to express their option, to be governed by the Employees

Provident Funds Scheme, 1995, in case the concerned employees, desired to avoid

‘the 1999 Scheme’.  In case of the exercise of such option, the concerned employee

would continue to be governed by the Employees Provident Funds Scheme, 1995.

Failing which, every employee, whether he opted for ‘the 1999 Scheme’, or chose

not to make any option, would be regulated by ‘the 1999 Scheme’, with effect from

the day the scheme was made operational – 1.4.1999.

Page 3

3

4. It  is  also  essential  to  indicate,  that  only  those  employees  who  had  been

appointed on regular basis, in corporate bodies, to which ‘the 1999 Scheme’ was

applicable,  could  avail  of  the  benefits  of  ‘the  1999  Scheme’.   In  other  words,

employees engaged “...on part time basis, daily wage basis, piece-meal rate basis,

casual and contract basis...” were not entitled to opt for ‘the 1999 Scheme’.  

5. Paragraph  4  of  ‘the  1999  Scheme’  further  provided,  that  those  regular

employees,  who were  entitled  to  the benefits  postulated  by  ‘the 1999 Scheme’,

would  automatically  forfeit  their  claim,  to  the  employer’s  contribution  in  their

provident fund account (including interest thereon), under the prevailing Employees

Provident Funds Scheme, 1995, to the Government.   The forfeited amount, would

include  the  amount  due  and  payable,  under  the  Employees  Provident  Funds

Scheme,  1995,  up  to  31.3.1999.   The  forfeited  amount  in  consonance  with

paragraph 5 of ‘the 1999 Scheme’, was to be transferred to a corpus fund, to be

administered  and  managed  by  the  Government  of  Himachal  Pradesh.   The

aforesaid  corpus  fund,  was  to  be  treated  as  the  pension  fund,  for  payment  of

pension under ‘the 1999 Scheme’.

6. It is of utmost relevance to mention, that paragraph 4 of ‘the 1999 Scheme’

provided as under:-

“4. Regulation of Claim to Pension:- Any claim to pension shall be regulated by the provision of this scheme

in  force  at  the  time  when  an  employee  retires  or  is  retired  or  dies  or  is discharged as the case may be subject to the following:-

(a) The  existing  employees  of  the  Corporation  as  on  1.4.99  shall have the option either to elect the pension scheme or to continue under existing Provident Fund scheme. (b) The  existing  employees  who  opt  for  Pension  Scheme  shall automatically forfeit  their  claim to employer’s share of  CPF including interest thereon to the State Government as well as other claims under CPF  Schemes  by  whatsoever  name  called  in  respect  of  all  past accumulations upto 31.3.1999.  The amount of their subscriptions to the

Page 4

4

fund  alongwith  interest  (excluding  employer’s  share  and  interest thereon)  shall  be  transferred  to  GPF  account  to  be  allotted  and maintained  by  the  concerned  Corporate  Sector  Organisation  as  per Rules adopted by them”.

It is apparent from the above extract, that even though ‘the 1999 Scheme’ was to

take effect from 1.4.1999 (- under paragraph 1(3) of ‘the 1999 Scheme’), a claim for

pension by an employee governed by the above scheme, would arise only at the

time of the employee’s retirement, on attaining the age of superannuation, or when

he was retired from service by the employer, or in case of his death in harness.  This

is how, the appellant-State views the above provision (detailed submissions,  are

being noticed separately).

7. It is not disputed, that regular employees of corporate bodies, to whom ‘the

1999 Scheme’ was applicable, had opted in writing (or were deemed to have opted)

to be governed by ‘the 1999 Scheme’, or alternatively, had been engaged on regular

basis after the induction of ‘the 1999 Scheme’ but before ‘the 1999 Scheme’ was

repealed (- on 2.12.2004).

8. While adjudicating upon the controversy, it is important to point out, that for

the implementation of ‘the 1999 Scheme’, permission was sought from the Regional

Provident Fund Commissioner, Shimla, for the transfer of the accumulated provident

fund corpus, to the proposed pension fund under ‘the 1999 Scheme’.   It  is  also

relevant  to  notice,  that  the  Regional  Provident  Fund  Commissioner,  through  a

communication dated 23.2.2000, declined to accord the above permission, because

‘the 1999 Scheme’ included only regular employees.  Part time, daily wage, piece

rate,  casual  and  contract  employees,  were  not  covered  by  ‘the  1999  Scheme’.

According to the Regional Provident Fund Commissioner, there was no provision

under the Provident Fund Act, to exclude a part of the employees, from the purview

Page 5

5

of the Provident Fund Act.  The Regional Provident Fund Commissioner was of the

view, that permission sought by the State Government could be accorded, only if all

employees  of  the  concerned  corporate  bodies,  were  to  be  regulated  by  the

substituting  scheme  (–  ‘the  1999  Scheme’).   The  Regional  Provident  Fund

Commissioner accordingly, through his communication dated 23.2.2000, advised the

concerned  corporate  bodies,  to  continue  to  comply  with  the  provisions  of  the

Provident Fund Act, in respect of all their employees.  The above communication of

the  Regional  Provident  Fund Commissioner,  was  superseded  by  another,  dated

11.9.2001,  addressed  by  the  Additional  Central  Provident  Fund  Commissioner

(Pension), to the Secretary to the Government of India (with copy to the Regional

Provident  Fund  Commissioner,  Himachal  Pradesh).   It  was  pointed  out,  that  a

perusal  of  the aforesaid  communication would reveal,  that  out  of  the concerned

corporate  bodies,  almost  all  were  fully  owned  by  the  State  or  the  Central

Government, and the share capital of the general public in the remaining, was less

than one per cent.  It was therefore, that the concerned corporate bodies were found

to  be  eligible  for  the  exemption,  and  were  accordingly  exempted  from  the

applicability of the Provident Fund Act.  It is apparent, that the communication dated

11.9.2001 clarified, that as the corporate bodies fell within the ambit of Section 16(1)

(b)  of  the  Provident  Fund  Act,  it  would  not  be  applicable  to  the  concerned

establishments in the State of Himachal Pradesh, with effect from 1.4.1999.

9. The  above  communication  dated  11.9.2001,  came to  be  endorsed  by  the

Union Minister of Labour, on 17.9.2001.  The observations recorded in the order of

the Union Minister are extracted hereunder:

“I have had the matter examined.  It has been, noted from the Notification of the State Government dated 29.10.1999 that all regular employees of these

Page 6

6

undertakings  are  entitled  to  pension,  commutation  of  pension,  gratuity  as applicable  to  the  State  Govt.  Employees  of  Himachal  Pradesh.   In  such circumstances the EPF & MP Act, 1952 shall not apply.  The Pension would be  discharged  by  the  Himachal  Pradesh  Government  in  terms  of  Section 16(1)(b). These establishments would be out of the purview of the Act from the date the Notification has come into force.”

In view of the factual position narrated herein above, the provisions of the Provident

Fund Act were not in any way an obstacle, to the operation of ‘the 1999 Scheme’.

As such, ‘the 1999 Scheme’ became operational, with effect from 1.4.1999.  At the

instant  juncture,  it  would  suffice  to  record,  that  ‘the  1999  Scheme’  remained

operational till it was repealed, by a notification date 2.12.2004.

10. After the implementation of ‘the 1999 Scheme’, a high level committee was

constituted by the Finance Department of the State Government, on 21.1.2003.  The

said  committee  was comprised of  four  managing directors  of  state  public  sector

undertakings and corporations.  The high level committee was entrusted with the

task  of  examining,  the  financial  viability  of  ‘the  1999  Scheme’.   The  committee

submitted its report on 15.11.2003.  Briefly stated, the high level committee arrived

at  the  conclusion,  that  the  pension  scheme  for  regular  employees  of  corporate

bodies, given effect to under ‘the 1999 Scheme’, would not be financially viable on a

self-sustaining basis.  One of the observations recorded in the report of the high

level committee was, with reference to the Himachal Road Transport Corporation.  It

was pointed out, that the pension fund cash flow chart (year-wise) revealed, that in

case new appointments were not made against retirees, it  would have extremely

grave financial consequences, inasmuch as, after the year 2009-10, the income by

way of income tax, as well as, the contribution to the pension fund would continue to

reduce, whereas pension payment expenditure, would continue to increase.  It was

expected, that by the year 2015-16, the balance amount left with the Himachal Road

Page 7

7

Transport Corporation Pension Fund, would be reduced to approximately Rs.10.82

crores, whereas the pension liability of the retired employees of the Himachal Road

Transport Corporation, for the said year, would be approximately Rs.14.56 crores.

Accordingly, it  was inferred, that from the year 2015-16 onwards, it would not be

possible to make payments, towards the recurring pension liability.  The report also

determined  the  viability  of  the  scheme,  with  reference  to  the  Himachal  Road

Transport Corporation, even if the staff strength is kept at the same level, as was

then prevalent (- in 2003).  The instant analysis resulted in the deduction, that the

pension contribution would be slightly more, as against the available pension fund of

Rs.10.82 crores.  In case the staff strength was maintained at the same level, the

pension fund balance would be Rs.15.76 crores.  Keeping in mind, the approximate

pension liability of Rs.14.56 crores for the year 2015-16, it  was inferred, that the

financial liability towards pension for the following year, i.e., 2016-17 would not be

met, out of the pension fund.  It was therefore infrerred, that the payment of pension

to regular  employees of  the concerned corporate bodies,  could not  be paid and

sustained,  out  of  the  pension  fund  contemplated  under  ‘the  1999  Scheme’.

Accordingly, the high powered committee recorded its conclusions as under:

“In view of the above “the committee” is of the view that the pension scheme for  Corporate  Sector  employees  based  on  contribution  by  the  State Government will  not be viable on a self sustaining basis mainly due to the following reasons:-

i). Uncertainty in the rate of interest regime. ii). Declining recruitment in the Corporate Sector would deplete the size  of  the  corpus  to  be  created  and it  would  be difficult  to  honour liabilities accruing after 10-12 years. iii). The pension  plan  envisages  payment  of  pension  to  Corporate Sector  employees  as  is  being  paid  to  the  Government  employees. Government employees at present are entitled to pension @ 50% of the basic pay last drawn with linkage to ADA.  This return does not appear to  be  possible  from  the  pension  fund  proposed  to  be  created  for corporate sector employees.”

Page 8

8

At the instant juncture, it would also be necessary to mention that, as is apparent

from the submissions advanced on behalf of the State Government, three factors

primarily weighed with it for reconsidering the continuation of ‘the 1999 Scheme’.

Firstly, uncertainty in the rate of interest regime; secondly, decline in recruitment in

the  corporate  sector;  and  thirdly,  on  account  of  the  fact  that  the

respondent-employees would be entitled to pension at the rate of 50% of the basic

pay last drawn, with linkage to an additional dearness allowance.  And as such, it

was not possible for the pension fund, to cater to the payment towards pension,

under ‘the 1999 Scheme’.  It would also be relevant to mention, that besides the

above three reasons depicted in the committee’s report, the Cabinet Memorandum

dated 12.10.2004, expressly took into consideration the poor financial health of the

concerned corporations, and the current financial health of the State Government.

Both  the  above  factors  also  indicated,  that  it  was  not  possible  for  the  State

Government to take upon itself, the financial burden of ‘the 1999 Scheme’.  And,

there  were also more  pressing  alternative  claims.   It  was submitted,  that  as  on

31.3.2014,  the  cumulative  losses  of  Government  owned  corporations,  stood  at

Rs.2,819.86  crores.   The aforesaid  Cabinet  Memorandum was appended to  the

special  leave  petition,  as  Annexure  P-4.   The  Cabinet  in  its  meeting  held  on

29.11.2004, also approved, that the Government would be supportive of efforts by

individual  Government  owned  corporations,  for  setting  up  their  own  pensionary

scheme(s).

11. After considering the report of the high level committee, the State Government

took a decision on 29.11.2004 to repeal ‘the 1999 Scheme’.  While repealing ‘the

1999  Scheme’,  it  was  decided,  that  regular  employees  who  had  retired  from

Page 9

9

corporate bodies, during the period of the subsistence of ‘the 1999 Scheme’ from

1999 to 2004, would not be affected.  For the implementation of the decision of the

State  Government  dated  29.11.2004,  a  notification  dated  2.12.2004 was issued,

repealing ‘the 1999 Scheme’.  A number of employees who had been deprived of

the benefit of ‘the 1999 Scheme’ by the notification dated 2.12.2004, challenged the

repeal  notification,  by  filing a  number  of  writ  petitions,  before  the  High Court  of

Himachal Pradesh, at Shimla (hereinafter referred to as the High Court).   By the

impugned  common  order  dated  19.12.2013,  the  High  Court  allowed  all  the  writ

petitions.  The final determination of the High Court, is apparent from the following

conclusions recorded by it:

“78. There is no merit in the contention of learned Advocate General that the scheme could not be implemented due to financial crunch.  The State was aware of the financial implication at the time of issuance of notification dated 29.10.1999.  It is the sovereign responsibility of the State to garner revenue to make welfare measures, including payment of pensionery/retiral benefits. 79. It cannot be gathered from the plain language that either expressly or by implication notification dated 2.12.2004 would apply retrospectively. 80. Accordingly, in view of the analysis and discussion made hereinabove, all the writ petitions are allowed.  The cut-off date 2.12.2004 is declared ultra vires.   Notification  dated  2.12.2004  is  read  down  to  save  it  from unconstitutionality, irrationality, arbitrariness or unreasonableness by including the  petitioners  and  similarly  situated  employees  also,  who  had  become members  of  the  scheme  notified  on  29.10.1999  and  have  retired  after 2.12.2004  and  those  employees  who  were  already  in  service  when  the pension scheme was notified on 29.10.1999 and had become members of that  scheme  and  shall  retire  hereinafter,  for  the  purpose  of  pensionery benefits after applying the principles of severability.  The Regional Provident Fund Commissioner, Shimla is directed to transfer the entire amount of the CPF to a corpus fund to be administered and maintained by the Government of Himachal Pradesh in the Finance Department including upto date interest, within a period of two weeks.  Thereafter, the Pension Sanctioning Authority is directed to sanction the pension/gratuity/commutation of pension after proper scrutiny of the cases forwarded by the concerned Public Sector Undertaking and issue pension payment order to Pension Disbursing Authority strictly as per  para  6  of  the scheme notified  on 29.10.1999 with  interest  @ 9% per annum, within a period of 12 weeks from today.”

Page 10

10

12. Dissatisfied with the judgment rendered by the High Court, dated 19.12.2013,

the State of Himachal Pradesh has approached this Court, challenging the common

impugned judgment dated 19.12.2003.

13. Leave granted.

14. The first contention advanced at the hands of Mr. P.P. Rao, learned senior

counsel  for  the  appellants,  was  premised  on  the  proposition,  that  the  State

Government which had promulgated ‘the 1999 Scheme’, was well within its rights to

repeal the same, for good and sufficient reasons.  It was submitted, that it stands

established on the record of this case, that ‘the 1999 Scheme’ was not financially

viable, inasmuch as, it could not be characterized as a self-sustaining scheme.  It

was asserted, that the determination of the State Government to scrap ‘the 1999

Scheme’, on the basis that the Scheme was not financially viable, was legal and

bonafide.  In order to canvass the instant proposition,  learned counsel,  relied on

State of Punjab v. Amar Nath Goyal,  (2005) 6 SCC 754, and invited the Court’s

attention, to the following observations recorded therein:

“25. The only question, which is relevant and needs consideration, is whether the decision of the Central and State Governments to restrict the revision of the quantum of gratuity as well as the increased ceiling of gratuity consequent upon merger of a portion of dearness allowance into dearness pay reckonable for the purpose of calculating gratuity, was irrational or arbitrary. 26. It is difficult to accede to the argument on behalf of the employees that a decision of the Central Government/State Governments to limit the benefits only to employees, who retire or die on or after 1.4.1995, after calculating the financial implications thereon, was either irrational or arbitrary. Financial and economic implications are very relevant and germane for any policy decision touching the administration of the Government, at the Centre or at the State level.”

On the same proposition, reliance was also placed on A.K. Bindal v. Union of India,

2003  (5)  SCC  163,  and  our  attention  was  drawn  to  the  following  observations

recorded therein:

Page 11

11

“13. The change in  policy  effected by these memorandums was that  the Government would not provide any budgetary support for the wage increase and the undertakings themselves will have to generate the resources to meet the additional expenditure, which will be incurred on account of increase in wages.  So  far  as  sick  enterprises  which  were  registered  with  BIFR  are concerned, it was directed that the revision in pay scale and other benefits would be allowed only if it was actually decided to revive the industrial unit. The  question  which  arises  for  consideration  is  whether  the  employees  of public  sector  enterprises  have  any  legal  right  to  claim  that  though  the industrial  undertakings or the companies in which they are working did not have the financial capacity to grant revision in pay scale, yet the Government should give financial support to meet the additional expenditure incurred in that regard.

xxx xxx xxx 17. The legal position is that identity of the government company remains distinct from the Government. The government company is not identified with the  Union  but  has  been  placed  under  a  special  system  of  control  and conferred certain privileges by virtue of the provisions contained in Sections 619     and     620     of the Companies Act. Merely because the entire shareholding is owned by the Central Government will not make the incorporated company as Central Government. It is also equally well settled that the employees of the government  company are not  civil  servants  and so are not  entitled to  the protection  afforded  by  Article     311     of  the  Constitution (Pyare  Lal  Sharma v. Managing Director, (1989) 3 SCC 448).  Since employees of  government companies are not government servants, they have absolutely no legal right to  claim  that  government  should  pay  their  salary  or  that  the  addition expenditure incurred on account of revision of their pay scale should be met by the government. Being employees of the companies it is the responsibility of the companies to pay them salary and if the company is sustaining losses continuously over a period and does not have the financial capacity to revise or enhance the pay scale, the petitioners cannot claim any legal right to ask for a direction to the Central Government to meet the additional expenditure which may be incurred on account of revision of pay scales. It appears that prior to issuance of the office memorandum dated 12-4-1993 the Government had been providing the necessary funds for the management of public sector enterprises which had been incurring losses.  After the change in economic policy introduced in early nineties, Government took a decision that the public sector undertakings will  have to generate their  own resources to meet the additional expenditure incurred on account of increase in wages and that the government will not provide any funds for the same. Such of the public sector enterprises (government companies) which had become sick and had been referred to BIFR, were obviously running on huge losses and did not have their  own  resources  to  meet  the  financial  liability  which  would  have  been incurred  by  revision  of  pay  scales.  By  the  office  memorandum  dated 19-7-1995 the Government merely reiterated its earlier stand and issued a caution that till a decision was taken to revive the undertakings, no revision in pay scale should be allowed. We, therefore, do not find any infirmity, legal or constitutional in the two office memorandums which have been challenged in

Page 12

12

the writ petitions. 18. We are unable to accept the contention of Shri Venkataramani that on account of non-revision of pay scales of the petitioners in the year 1992, there has  been  any  violation  of  their  fundamental  rights  guaranteed  under Article 21 of  the  Constitution.  Article 21 provides  that  no  person  shall  be deprived  of  his  life  or  personal  liberty  except  according  to  procedure established by law. The scope and content of this article has been expanded by judicial decisions. Right to life enshrined in this article means something more than survival or animal existence. It would include the right to live with human  dignity.  Payment  of  a  very  small  subsistence  allowance  to  an employee under suspension which would be wholly insufficient to sustain his living,  was  held  to  be violative  of  Article 21 of  the Constitution in  State  of Maharashtra  v. Chandrabhan  Tale,  (1983)  3  SCC  387.  Similarly,  unfair conditions of labour in People's Union for Democratic Rights v. Union of India, (1982) 3 SCC 235. It has been held to embrace within its field the right to livelihood by means which are not illegal, immoral or opposed to public policy in Olga Tellis v. Bombay Municipal Corpn., (1985) 3 SCC 545.  But to hold that mere  non-revision  of  pay  scale  would  also  amount  to  a  violation  of  the fundamental right guaranteed under Article 21 would be stretching it too far and cannot be countenanced.  Even under the industrial law, the view is that the workmen should get a minimum wage or a fair wage but not that their wages must be revised and enhanced periodically. It is true that on account of inflation there has been a general price rise but by that fact alone it is not possible to draw an inference that the salary currently being paid to them is wholly inadequate to lead a life with human dignity. What should be the salary structure to lead a "life with human dignity" is a difficult exercise and cannot be measured in absolute terms…..

xxx xxx xxx 22. In South Malabar Gramin Bank v. Coordination Committee of S.M.G.B Employees' Union and S.M.G.B Officers' Federation, (2001) 4 SCC 101, relied upon by the learned counsel for the petitioners, the Central Government had referred the dispute regarding the pay structure of the employees of the Bank to the Chairman of the National Industrial Tribunal headed by a former Chief Justice of a High Court. The Tribunal after consideration of the material placed before it held that the officers and employees of the Regional Rural Banks will be entitled to claim parity with the officers and other employees of the sponsor banks  in  the  matter  of  pay  scale,  allowances  and  other  benefits.  The employees of nationalised commercial banks were getting their pay scales on the basis of the 5  th     bipartite settlement and by implementation of the award of the National Industrial Tribunal, the employees of the Regional Rural Banks were also given the benefits of the same settlement. Subsequently, the pay structures  of  the  employees  of  the  nationalised  commercial  banks  were further revised by the 6  th     and 7  th     bipartite settlements but the same was not done  for  the  employees  of  the  Regional  Rural  Banks  who  then  filed  writ petitions. It was contended on behalf of the Union of India and also the Banks that financial condition of the Regional Rural Banks was not such that they may  give  their  employees  the  pay  structure  of  the  employees  of  the nationalised commercial banks. It was in these circumstances that this Court

Page 13

13

observed that the decision of the National Industrial Tribunal in the form of an award having been implemented by the Central Government, it would not be permissible for the employer bank or the Union of India to take such a plea in the proceedings before the Court. The other case namely All India Regional Rural Bank Officers Federation v. Govt. of India, (2002) 3 SCC 554, arose out of  interlocutory  applications  and  contempt  petitions  which  were  filed  for implementation  of  the  direction  issued  in  the  earlier  case,  namely,  South Malabar Gramin Bank. Any observation in these two cases to the effect that the  financial  capacity  of  the  employer  cannot  be  held  to  be  a  germane consideration for determination of the wage structure of the employees must, therefore, be confined to the facts of the aforesaid case and cannot be held to be of general application in all situations. In Associate Banks Officers' Assn. v. State  Bank  of  India,  (1998)  1  SCC  428,  it  was  observed  that  many ingredients  go  into  the  shaping  of  the  wage structure  of  any  organisation which  may  have  been  shaped  by  negotiated  settlements  with  employees' unions or through industrial adjudication or with the help of expert committees. The economic capability of the employer also plays a crucial part in it; as also its capacity to expand business or earn more profits.  It was also held that a simplistic  approach,  granting  higher  remuneration  to  workers  in  one organisation because another organisation had granted them, may lead to undesirable results and the application of the doctrine would be fraught with danger  and  may  seriously  affect  the  efficiency  and  at  times,  even  the functioning of the organisation. Therefore, it appears to be the consistent view of  this  Court  that  the  economic  viability  or  the  financial  capacity  of  the employer is an important factor which cannot be ignored while fixing the wage structure, otherwise the unit itself may not be able to function and may have to close  down  which  will  inevitably  have  disastrous  consequences  for  the employees themselves. The material on record clearly shows that both FCI and HFC had been suffering heavy losses for the last many years and the Government  had  been  giving  a  considerable  amount  for  meeting  the expenses  of  the organisations.  In  such a  situation,  the employees  cannot legitimately  claim that  their  pay  scales  should  necessarily  be  revised  and enhanced  even  though  the  organisations  in  which  they  are  working  are making continuous losses and are deeply in the red.”

Last of all, learned counsel drew our attention to Officers & Supervisors of I.D.P.L. v.

Chairman & M.D.,  I.D.P.L.,  (2003)  6  SCC 490,  and reference was  made to  the

following;

“7. In the above background, the question which arises for consideration is whether the employees of public sector enterprises have any legal right to claim  revision  of  wages  that  though  the  industrial  undertakings  or  the companies in which they are working did not have the financial capacity to grant revision in pay-scale, yet the Government should give financial support to meet the additional expenditure incurred in that regard.

Page 14

14

8. We have carefully gone through the pleadings, the Annexures filed by both sides and the orders passed by the BIFR and the judgments cited by the counsel  appearing  on  either  side.  Learned  counsel  for  the  contesting respondent  drew  our  attention  to  a  recent  judgment  of  this  Court  in A.K. Bindal  and  Anr.  v.  Union  of  India,  (2003)  5  SCC  163,  in  support  of  her contention.  We have perused the said judgment.  In our opinion,  since the employees  of  Government  companies  are  not  Government  servants,  they have absolutely no legal right to claim that the Government should pay their salary or that the additional  expenditure incurred on account  of  revision of their pay-scales should be met by the Government. Being employees of the companies, it is the responsibility of the companies to pay them salary and if the company is sustaining losses continuously over a period and does not have the financial capacity to revise or enhance the pay-scale, the petitioners, in our view, cannot claim any legal right to ask for a direction to the Central Government  to meet  the additional  expenditure which may be incurred on account  of  revision  of  pay-scales.  We  are  unable  to  countenance  the submission made by Mr. Sanghi that economic viability of the industrial unit or the financial capacity of the employer cannot be taken into consideration in the matter of revision of pay-scales of the employees.”

15. Based  on  the  conclusions  drawn  in  the  above  judgments,  it  was  the

contention of learned counsel, that the decision of the State Government to repeal

‘the 1999 Scheme’, on the basis of the report of the high powered committee, dated

28.10.2003, cannot be faulted.  It was submitted, that the determination rendered by

the High Court, was in clear disregard to the decisions in the cited cases.  It was

accordingly urged, that the option exercised by the State Government, on the basis

of legitimate material and consideration, could not be interfered with, as the same

constituted a legal and valid basis, for the discontinuation of ‘the 1999 Scheme’.

16. In order to support the State Government’s claim, it was also the contention of

learned counsel, that the State Government has an inherent right to review its policy

decisions,  and as long as the decisions of  the State  Government  are based on

bonafide consideration, the same cannot be assailed in law.  In order to support the

instant contention, learned counsel placed reliance on BALCO Employees’ Union v.

Page 15

15

Union  of  India,  (2002)  2  SCC  333,  and  invited  our  attention  to  the  following

observations, expressed therein:

“45. In Narmada Bachao Andolan v. Union of India, (2000) 10 SCC 664, there was a challenge to the validity of the establishment of a large dam. It was held by the majority at p. 762 as follows: (SCC para 229)

"229. It  is  now  well  settled  that  the  courts,  in  the  exercise  of  their jurisdiction, will not transgress into the field of policy decision. Whether to have an infrastructural project or not and what is the type of project to be undertaken  and  how  it  has  to  be  executed,  are  part  of  policy-making process and the courts are ill-equipped to adjudicate on a policy decision so  undertaken.  The  court,  no  doubt,  has  a  duty  to  see  that  in  the undertaking of  a decision,  no law is  violated and people's  fundamental rights are not transgressed upon except to the extent permissible under the Constitution."

46. It is evident from the above that it is neither within the domain of the courts nor the scope of the judicial review to embark upon an enquiry as to whether a  particular  public  policy  is  wise  or  whether  better  public  policy  can  be evolved. Nor are our courts inclined to strike down a policy at the behest of a petitioner merely because it has been urged that a different policy would have been fairer or wiser or more scientific or more logical. 47. Process of disinvestment is a policy decision involving complex economic factors. The courts have consistently refrained from interfering with economic decisions  as  it  has  been  recognised  that  economic  expediencies  lack adjudicative  disposition  and  unless  the  economic  decision,  based  on economic expediencies, is demonstrated to be so violative of constitutional or legal limits on power or so abhorrent to reason, that the Courts would decline to interfere. In matters relating to economic issues, the Government has, while taking a decision, right to "trial and error" as long as both trial and error are bona fide and within limits of authority. There is no case made out by the petitioner that the decision to disinvest in BALCO is in any way capricious, arbitrary, illegal or uninformed. Even though the workers may have interest in the manner in which the Company is conducting its business, inasmuch as its policy decision may have an impact on the workers’ rights, nevertheless it is an incidence of service for an employee to accept a decision of the employer which  has been honestly  taken and which is  not  contrary  to  law.  Even a government servant, having the protection of not only Articles 14 and 16 of the Constitution but also of Article 311, has no absolute right to remain in service. For  example,  apart  from  cases  of  disciplinary  action,  the  services  of government  servants  can  be  terminated  if  posts  are  abolished.  If  such employee cannot make a grievance based on Part III of the Constitution or Article 311 then  it  cannot  stand  to  reason  that  like  the  petitioners, non-government employees working in a company which by reason of judicial pronouncement may be regarded as a State for the purpose of Part III of the Constitution, can claim a superior or a better right than a government servant and impugn it's change of status. In taking of a policy decision in economic matters at length, the principles of natural justice have no role to play. While it

Page 16

16

is expected of a responsible employer to take all aspects into consideration including welfare of the labour before taking any policy decision that, by itself, will  not entitle the employees to demand a right of  hearing or consultation prior to the taking of the decision.”

17. Learned counsel submitted, that the respondent-employees could not claim a

vested right, with reference to the provisions of ‘the 1999 Scheme’.  In this behalf, it

was submitted, that neither the principle of estoppel, nor that of promissory estoppel,

could be invoked by the employees, so as to claim a right to be governed by ‘the

1999 Scheme’.  For canvassing that the principle of estoppel could not be invoked

by the employees, learned counsel placed reliance on M. Ramanatha Pillai v. State

of Kerala, (1973) 2 SCC 650, and invited the Court’s attention to the following:

“36. The  abolition  of  post  may  have  the  consequence  of  termination  of service of a government servant. Such termination is not dismissal or removal within  the  meaning  of  Article 311 of  the  Constitution.  The  opportunity  of showing cause against the proposed penalty of dismissal or removal does not therefore arise in the case of abolition of post.  The abolition of post is not a personal penalty against the government servant. The abolition of post is an executive policy decision. Whether after abolition of the post the Government servant who was holding the post would be offered any employment under the State  would  therefore  be  a  matter  of  policy  decision  of  the  Government because  the  abolition  of  post  does  not  confer  on  the  person  holding  the abolished post any right to hold the post.”

Reliance was also placed on Excise Commissioner, U.P., Allahabad v. Ram Kumar,

(1976) 3 SCC 540, and reference was made to the following observations recorded

therein:

“Appeals Nos. 399 to 404 of 1975 which raise another point as well viz. the validity of the appellants’ demand from the respondents in respect of sales tax at the rate of ten paise per rupee on the retail sales of country spirit made by the latter with effect from April  2, 1969 stand on a slightly different footing. Section 3-A and 4 of the U.P. Sales Tax Act, 1948 clearly authorise the State Government to impose sales tax.  The fact that sales of country liquor had been exempted from sales  tax  vide Notification No.  ST-1149/X-802(33)-51 dated  April  6,  1959  could  not  operate  as  an  estoppel  against  the  State Government and preclude it from subjecting the sales to tax if it felt impelled to do so in the interest of the Revenues of the State which are required for execution of the plans designed to meet the ever increasing pressing needs of

Page 17

17

the developing society.  It is now well settled by a catena of decisions that there can be no     question of estoppel against the Government in the exercise of its legislative, sovereign or executive powers.”

To demonstrate that the principle of promissory estoppel could not be invoked by the

respondent-employees,  reference  was  also  made  to  Union  of  India  v.  Godfrey

Philips India Ltd., (1985) 4 SCC 369, wherein it has been held as under:

“13. Of course we must make it clear, and that is also laid down in Motilal Sugar  Mills  case,   (1979)  2  SCC  409,  that  there  can  be  no  promissory estoppel against the Legislature in the exercise of its legislative functions nor can the Government or public authority be debarred by promissory estoppel from  enforcing  a  statutory  prohibition.  It  is  equally  true  that  promissory estoppel cannot be used to compel the Government or a public authority to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority  to  make.  We may also point  out  that  the  doctrine  of  promissory estoppel  being  an  equitable  doctrine,  it  must  yield  when  the  equity  so requires; if it can be shown by the Government or public authority that having regard to the facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or representation made by it, the  Court  would  not  raise an  equity  in  favour  of  the person to  whom the promise or representation is made and enforce the promise or representation against  the  Government  or  public  authority.  The  doctrine  of  promissory estoppel  would be displaced in such a case,  because on the facts,  equity would  not  require  that  the  Government  or  public  authority  should  be  held bound by the promise or representation made by it.  This aspect has been dealt  with fully in Motilal  Sugar Mills case and we find ourselves wholly in agreement with what has been said in that decision on this point.”

18. In  order  to  support  the  contention,  that  the  respondent-employees  had no

vested right under ‘the 1999 Scheme’, reliance was placed on paragraph 4 of ‘the

1999 Scheme’ (already extracted above).  It was the pointed assertion of learned

counsel, based on paragraph 4 of ‘the 1999 Scheme’, that a claim towards pension

could  be  raised  by  an  employee  under  ‘the  1999  Scheme’  only  “…when  an

employee retires or is retired or dies or is discharged as the case may be …”.  It was

submitted, that only such of the employees who could avail the benefit of pension,

were protected from the effect of the repeal  notification dated 2.12.2004.  It was

Page 19

19

hold such moneys as trustees for and on behalf of the person or persons entitled thereto under the rules of the Scheme. The object of the Scheme is to provide for pensions by means of deferred annuities for the members upon retirement  from employment  on  attaining  certain  age under  the  conditions mentioned therein, namely, every European employee of the Society shall be required as a condition of employment to apply to become a member of the Scheme from the date of his engagement by the Society and no member shall be  entitled  to  relinquish  his  membership  except  on  the  termination  of  his employment with Society; the pension payable to a member shall be provided by  means  of  a  policy  securing  a  deferred  annuity  upon  the  life  of  such member to be effected by the Trustees as agents for and on behalf of the Society  and  the  members  respectively  with  the  Co-operative  Insurance Society Limited securing the payment to the Trustees of an annuity equivalent to the pension to which such member shall be entitled under the Scheme and the  Rules;  the  insurers  shall  agree  that  the  Trustees  shall  be  entitled  to surrender such deferred annuity and that, on such deferred annuity being so surrendered,  the  insurers  will  pay  to  the Trustees  the  total  amount  of  the premiums paid in respect thereof together with compound interest thereon; all moneys received by the Trustees from the insurers shall be held by them as Trustees for and on behalf of the person or persons entitled thereto under the Rules  of  the  Scheme;  any  policy  or  policies  issued  by  the  insurers  in connection with the Scheme shall be deposited with the Trustees; the Society shall contribute one-third of the premium from time to time payable in respect of  the policy securing the deferred annuity  in  respect  of  each member as thereinbefore  provided  and  the  member  shall  contribute  the  remaining two-thirds; the age at which a member shall normally retire from the service of the Society shall  be the age of 55 years and on retirement at such age a member shall be entitled to receive a pension of the amount specified in Rule 6; a member may also, after following the prescribed procedure, commute the pension to which he is entitled for a payment in cash in accordance with the fourth column of the Table in the Appendix annexed to the Rules; if a member shall  leave or be dismissed from the service of the Society for any reason whatsoever or shall die while in the service of the Society there shall be paid to him or his legal personal representatives the total amount of the portions of the premiums paid by such member and if he shall die whilst in the service of the Society there shall be paid to him or his legal personal representatives the total amount of the portions of the premiums paid by such member and if he shall die whilst in the service of the Society or shall leave or be dismissed from the service of the Society on account of permanent breakdown in health (as to the bona fides of which the Trustees shall be satisfied) such further proportion (if any) of the total amount of the portions of the premiums paid by the Society in respect of that member shall be payable in accordance with Table C in the Appendix to the Rules; if the total amount of the portions of the premiums  in  respect  of  such  member  paid  by  the  Society  together  with interest thereon as aforesaid shall not be paid by the Trustees to him or his legal personal representatives under sub-s. (1) of r. 15 then such proportion or the whole, as the case may be, of the Society's portion of such premiums and interest  thereon as aforesaid as shall  not be paid by the Trustees to such

Page 20

20

member or his legal personal representatives as aforesaid shall be paid by the Trustees to the Society; the rules may be altered, amended or rescinded and new rules may be made in accordance with the provisions of the Trust Deed but not otherwise.

We have given the relevant part of the Scheme and the Rules. The gist of the Scheme may be  stated  thus:  The  object  of  the  Scheme is  to  provide  for pensions to its employees. It is achieved by creating a trust.  The Trustees appointed  thereunder  are  the  agents  of  the  employer  as  well  as  of  the employees and hold the moneys received from the employer, the employee and the insurer in trust for and on behalf of the person or persons entitled thereto under the rules of the Scheme. The Trustees are enjoined to take out policies  of  insurance  securing  a  deferred  annuity  upon  the     life  of  each member, and funds are provided by contributions from the employer as well as  from  the  employees.  The  Trustees  realise  the  annuities  and  pay  the pensions to the employees. Under certain contingencies mentioned above, an employee would be entitled to the pension only after superannuation. If the employee leave the service of the Society or is dismissed from service or dies in the service of  the Society, he will  be entitled only  to get  back the total amount of the portion of the premium paid by him, though the trustees in their discretion  under  certain  circumstances  may  give  him  a  proportion  of  the premiums  paid  by  the  Society.  The  entire  amount  representing  the contributions made by the Society or part thereof, as the case may be, will then have to be paid by the Trustees to the Society. Under the scheme the employee has not acquired any vested right in the contributions made by the Society.  Such  a  right  vests  in  him  only  when  he  attains  the  age  of superannuation.  Till  that  date  that  amount  vests  in  the  Trustees  to  be administered in accordance with the rules; that is to say, in case the employee ceases to be a member of  the Society by death or otherwise, the amount contributed by the employer with interest thereon, subject to the discretionary power  exercisable  by  the  trustees,  become  payable  to  the  Society.  If  he reaches the age of superannuation, the said contributions irrevocably become fixed as part of the funds yielding the pension.  To put it in other words, till a member  attains  the  age  of  superannuation  the  employer's  share  of  the contributions towards the premiums does not vest in the employee. At best he has a contingent right therein. In one contingency the said amount becomes payable to the employer and in another contingency, to the employee.”

For the same proposition, learned counsel, placed reliance on Krishena Kumar v.

Union of India, (1990) 4 SCC 207, and drew our attention to the following:

“32. In Nakara, (1983) 1 SCC 305, it was never held that both the pension retirees  and  the  P.F. retirees  formed  a  homogeneous  class  and  that  any further classification among them would be violative of Article 14. On the other hand the court clearly observed that it was not dealing with the problem of a "fund".  The  Railway  Contributory  Provident  Fund  is  by  definition  a  fund. Besides,  the  government's  obligation  towards  an  employee  under  C.P.F.

Page 21

21

Scheme to give the matching contribution begins as soon as his account is opened and ends with his retirement when his rights qua the Government in respect of the Provident Fund is finally crystallized and thereafter no statutory obligation  continues.  Whether  there  still  remained  a  moral  obligation  is  a different  matter.  On  the  other  hand  under  the  Pension  Scheme  the Government's obligation does not begin until the employee retires when only it begins and it continues till the death of the employee. Thus, on the retirement of  an  employee  government's  legal  obligation  under  the  Provident  Fund account ends while under the Pension Scheme it begins. The rules governing the Provident Fund and its contribution are entirely different from the rules governing pension. It would not, therefore, be reasonable to argue that what is applicable  to  the  pension  retirees  must  also  equally  be  applicable  to  P.F. retirees. This being the legal position the rights of each individual P.F. retiree finally  crystallized  on  his  retirement  whereafter  no  continuing  obligation remained, while on the other hand, as regards Pension retirees, the obligation continued till their death…..”

Based on the legal position declared by this Court in the above judgments, it was

urged, that in the absence of any vested right, a challenge to the notification dated

2.12.2004, was neither sustainable nor maintainable in law.

19. It would be relevant to notice, that ‘the 1999 Scheme’ became operational with

effect from 1.4.1999.  It remained operational till the issuance of notification dated

2.12.2004.  While repealing ‘the 1999 Scheme’, the notification dated 2.12.2004, did

not  deprive  such  of  the  employees  who  had  retired  during  subsistence  of  the

Scheme, of the benefits that had accrued to them, under ‘the 1999 Scheme’.  Only

such of the employees who were to retire on or after 2.12.2004, were disentitled to

the benefits under the Scheme.  It was the submission of learned counsel for the

appellants, that the choice of the cut-off date – 2.12.2004 in the present controversy,

is a permissible incident in law.  It was pointed out, that the instant proposition has

been repeatedly examined by this Court, wherein cut-off dates have been upheld;

sometimes even where the cut-off date had been made applicable retrospectively.

For the instant proposition, learned counsel placed reliance on Union of India v. P.N.

Page 23

23

measures  in  that  behalf.  The three  members  constituting  the  Commission differed with each other in certain particulars. The Government examined their recommendations and accepted them with certain modifications in the year 1981.  After  processing  the  matter  through  relevant  departments,  the Regulations  were  issued  and  published  in  the  year  1982.  In  the  above circumstances, the State Government thought that it would be appropriate to give effect to the said Regulations on and from April 1, 1977 i.e., the first day of  the  financial  year  in  which  the  Pay Commission  was  appointed  by  the Government — a fact which could not have been unknown to the Corporation employees.  We  cannot  say  that  the  Government  acted  unreasonably  in specifying the said date. It may also be said that, that was the year in which the Left Front came into power in that State, but does not detract from the validity of the aforesaid reasons assigned by the State in its counter-affidavit filed before the Division Bench of the High Court.  We are not in agreement with the opinion expressed by the High Court that the reasons assigned by the State Government are neither relevant nor acceptable. 8. In this context, it may be remembered that the power of the State to specify a date with effect from which, the Regulations framed, or amended, as the case may be, shall come into force is unquestioned. A date can be specified both prospectively as well as retrospectively. The only question is whether the prescription of  the date is unreasonable or discriminatory.  Since we have found that  the prescription of  the date in this  case is neither  arbitrary nor unreasonable, the complaint of discrimination must fail. 9.  Now coming to the argument of  Sri  P.P. Rao that the Regulations bring about an unreasonable classification between similarly placed employees, we must  say  that  we  are  not  impressed  by  it.  It  is  not  submitted  that  the Corporation had no power to give retrospective effect to the Regulations. It was within the power of  the Corporation to enforce the Regulations either prospectively or with retrospective effect from such date as they might specify. Of course, as repeatedly held by this Court, in such cases the State cannot, as the expression goes, pick a date out of its hat. It has to prescribe the date in  a  reasonable  manner,  having  regard  to  all  the  relevant  facts  and circumstances. Once this is done, question of discrimination does not arise. Reference in  this  behalf  may also be had to the decision of  this  Court  in Sushma Sharma v. State of Rajasthan, 1985 Supp. SCC 45, a decision of the Division Bench comprising E.S. Venkataramiah and Sabyasachi Mukharji, JJ.”

It was pointed out, that the determination rendered in the above two judgments has

been reiterated by this Court in State of Rajasthan v. Amrit  Lal Gandhi, (1997) 2

SCC 342.  Last of all, learned counsel invited the Court’s attention to R.R. Verma v.

Union of India, (1980) 3 SCC 402, wherefrom reliance was placed on the following:-

“5. The last point raised by Shri Garg was that the Central Government had no power to review its earlier orders as the rules do not vest the government with any such power. Shri Garg relied on certain decisions of this Court in support

Page 24

24

of his submission: Patel Narshi  Thakershi  v. Pradyumansinghji  Arjunsinghji, (1971) 3 SCC 844; D.N. Roy v. State of Bihar, (1970) 3 SCC 119, and State of Assam v. J.N. Roy Biswas, (1976) 1 SCC 234.  All  the cases cited by Shri Garg are cases where the government was exercising quasi-judicial  power vested in them by statute. We do not think that the principle that the power to review  must  be  conferred  by  statute  either  specifically  or  by  necessary implication is applicable to decisions purely of an administrative nature.  To extend the principle  to pure administrative  decisions  would indeed lead to untoward and startling results. Surely, any government must be free to alter its policy or its decision in administrative matters.  If  they are to carry on their daily administration they cannot be hidebound by the rules and restrictions of judicial  procedure  though  of  course  they  are  bound  to  obey  all  statutory requirements and also observe the principles of natural justice where rights of parties  may  be  affected.  Here  again,  we  emphasise  that  if  administrative decisions are reviewed, the decisions taken after review are subject to judicial review on all grounds on which an administrative decision may be questioned in a court. We see no force in this submission of the learned counsel. The appeal is, therefore, dismissed.”

20. Mr. R. Venkataramni, learned senior counsel, supplemented the submissions

advanced by Mr. P.P. Rao.  In his opening statement, he endorsed the submissions

advanced by Mr. P.P. Rao, and accordingly, adopted the same.

21. In addition, it was contended, that ‘the 1999 Scheme’ was introduced for the

first time on 29.10.1999, with retrospective effect - from 1.4.1999.  It was asserted,

that  through ‘the  1999 Scheme’,  it  was  proposed to  supplement  the  post-retiral

financial  benefits  of  employees,  engaged  in  corporate  bodies,  in  the  State  of

Himachal Pradesh.  It was urged, that employees of corporate bodies, were hitherto

before,  recipients  of  Contributory  Provident  Fund  (CPF),  as  the  sole  post-retiral

financial benefit.  It was submitted, that ‘the 1999 Scheme’, required employees of

corporations to switch over from the CPF scheme, by exercising their option.  And,

such of the employees who did not exercise any option (under the provisions of ‘the

1999  Scheme’),  were  also  deemed  to  have  exercised  their  option  for  the  said

scheme, on the expiry of the period specified.  It was highlighted, that the grant of

pension  under  ‘the 1999 Scheme’,  was based on the operation  of  the scheme.

Page 25

25

Stated differently, the contention was, that the right to receive pension emerged from

‘the 1999 Scheme’, and not from the option exercised by an employee, under the

said scheme.

22. Insofar as the operation of ‘the 1999 Scheme’ is concerned, it was submitted,

that  the  employer’s  contribution  to  the  CPF account  of  the  employee (including

interest which had accrued thereon) upto 31.3.1999, was transferred to the State

Government, so as to constitute the corpus fund, to be administered and maintained

by the Finance Department of the State Government, which would make ‘the 1999

Scheme’,  self-financing.   The  above  submission,  was  drawn  from  a  collective

reading of paragraphs 4(b) and 5 of ‘the 1999 Scheme’.  It was further contended,

that  an  employee’s  own  contribution  to  the  CPF,  i.e.  the  subscription  amount

contributed by the employee to his own CPF account, was to be retained in his GPF

account.  The instant employee’s contribution, was to be disbursed to him, at the

time of his retirement, as GPF.  As such, it was pointed out, that the contributions

made by the employees, from out of their own funds, were unaffected by ‘the 1999

Scheme’.

23. It was therefore highlighted by learned counsel, that the present controversy

has nothing to do with an employee’s contribution, but was limited to the right of an

employee  to  claim  pension  under  ‘the  1999  Scheme’.   It  was  urged,  that  the

exercise of an option to switch over from the CPF scheme, to ‘the 1999 Scheme’,

did not result in a vested right, to earn pension.  To support the instant contention, it

was  pointed  out,  that  one of  the  pre-conditions  for  earning  pension,  is  to  have

rendered the minimum stipulated qualifying service.   It  was submitted, that there

were various other similar conditions, on satisfaction whereof alone, an employee

Page 26

26

(despite his having exercised an option, to switch over to ‘the 1999 Scheme’), would

be entitled to pensionary benefits, after his retirement.  It was, therefore asserted,

that the crystalisation of the right for a legitimate claim for pension, would accrue on

satisfaction  of  all  the  postulated  conditions,  and  till  the  fulfillment  of  all  the

conditions, the mere exercise of option, to switch over to ‘the 1999 Scheme’, would

not result in vesting a right in the respondent-employees, to receive pension.

24. In order to effectively  project  the assertion canvassed by him,  the learned

counsel  highlighted,  that  the  exercise  of  option  by  the  employees  who  were

engaged in corporations in the State of  Himachal  Pradesh,  did not  result  in  the

employees having in any manner, altered their position to their disadvantage.  It was

averred, that the employees did not forego any pre-existing better or higher benefit,

while  exercising  their  option  to  switch  over  to  ‘the  1999  Scheme’.   Based

cumulatively on the factual position projected above, it was urged, that it was not

open to the employees of corporations in the State of Himachal Pradesh, to call into

question, the repeal of ‘the 1999 Scheme’, through the impugned notification dated

2.12.2004.

25. In order to canvass the above proposition, that rights which were contingent

upon the occurrence of an event, could not be described as vested rights, reliance

was placed on Howrah Municipal Corporation v. Ganges Rope Co. Ltd., (2004) 1

SCC 663, and the following observations recorded therein:-

“37. The argument advanced on the basis  of  so-called creation of vested right for obtaining sanction on the basis of the Building Rules (unamended) as they were on the date of submission of the application and the order of the High Court fixing a period for decision of the same, is misconceived. The word “vest” is normally used where an immediate fixed right in present or future enjoyment in respect of a property is created. With the long usage the said word “vest” has also acquired a meaning as “an absolute or indefeasible right” [see K.J.  Aiyer's  Judicial  Dictionary (A Complete Law Lexicon),  13th Edn.].

Page 27

27

The  context  in  which  the  respondent  Company  claims  a  vested  right  for sanction and which has been accepted by the Division Bench of  the High Court, is not a right in relation to “ownership or possession of any property” for which the expression “vest” is generally used. What we can understand from the claim of a “vested right” set up by the respondent Company is that on the basis of the Building Rules, as applicable to their case on the date of making an application for sanction and the fixed period allotted by the Court for its consideration,  it  had  a  “legitimate”  or  “settled  expectation”  to  obtain  the sanction. In our considered opinion, such “settled expectation”, if any, did not create  any  vested  right  to  obtain  sanction.  True  it  is,  that  the  respondent Company  which  can  have  no  control  over  the  manner  of  processing  of application for sanction by the Corporation cannot be blamed for delay but during pendency of its application for sanction, if  the State Government, in exercise of its rule-making power, amended the Building Rules and imposed restrictions on the heights of buildings on G.T. Road and other wards, such “settled  expectation”  has  been  rendered  impossible  of  fulfillment  due  to change  in  law.  The  claim  based  on  the  alleged  “vested  right”  or  “settled expectation” cannot be set up against statutory provisions which were brought into force by the State Government by amending the Building Rules and not by the Corporation against whom such “vested right” or “settled expectation” is being sought to be enforced. The “vested right” or “settled expectation” has been nullified not only by the Corporation but also by the State by amending the Building Rules. Besides this, such a “settled expectation” or the so-called “vested  right”  cannot  be  countenanced  against  public  interest  and convenience which are sought to be served by amendment of the Building Rules and the resolution of the Corporation issued thereupon.”

Based on the conclusions drawn in the cited judgment,  it  was submitted,  that  a

‘legitimate’ or a ‘settled expectation’, suggesting the possibility of drawing pension

after retirement, could not be treated as a vested right.  It was submitted, that the

respondent-employees  were  not  justified  in  raising  a  claim  based  on  the

assumption, that they had a vested right, or ‘settled expectation’, under ‘the 1999

Scheme’, particularly in the light of the fact, that ‘the 1999 Scheme’ had been partly

nullified, by the notification dated 2.12.2004.

26. It was also the assertion of learned counsel, that the repeal notification dated

2.12.2004,  had  the  consequence  of  termination/cessation  of  benefits,  as  would

emerge from the analogy of the principles expressed in Section 6 of the General

Clauses Act.  It was further submitted, that the requirement of dealing with rights and

Page 28

28

liabilities insofar as the present controversy is concerned, is clearly based on a valid

classification.   It  was  urged,  that  truly  and factually, there  was  no  classification

whatsoever, inasmuch as, the benefits under ‘the 1999 Scheme’ were extended to a

miniscule  section  of  the  employees,  and  excluded  uniformally  an  overwhelming

majority of employees.  Learned counsel questioned the veracity of the conclusion

drawn by the High Court, by reading down the repeal notification dated 2.12.2004,

for the reason, that the same would deprive pensionary rights to those employees,

who had opted for ‘the 1999 Scheme’, and had retired after 2.12.2004, as also, the

employees who were already in service when ‘the 1999 Scheme’ was notified on

29.10.1999, and had become members of that scheme, and were due to retire after

2.12.2004.  It was pointed out, that the above determination at the hands of the High

Court, would have the effect of ‘the 1999 Scheme’ remaining in place, till such time

as  employees  engaged  in  corporations  upto  2.12.2004  eventually  retired  on

attaining  the  age  of  superannuation.   In  the  above  view  of  the  matter,  it  was

asserted, that in the manner the legality of the issue has been determined by the

High Court, ‘the 1999 Scheme’ which was repealed on 2.12.2004, would actually

and factually continue to be operational,  for a further period of approximately 20

years,  by  which  time  alone,  employees  engaged  prior  to  the  notification  dated

2.12.2004, would retire from service.

27. It  was also the contention of  learned counsel,  that  the confinement  of  the

pensionary benefits under ‘the 1999 Scheme’, to such of the employees, who had

retired from the concerned corporations, between 1.4.1999 and 2.12.2004, could not

be invalidated because the right to receive pension stood crystalised and vested in

them in  terms  of  paragraph 4  of  ‘the  1999  Scheme’.   It  was  submitted,  that  a

Page 29

29

statutory classification cannot be set aside, when there is overwhelming justification,

demonstrating a valid basis, therefor.  The repeal of ‘the 1999 Scheme’ was based

on financial constraints, which had not been legitimately repudiated.  Insofar as the

instant  aspect  of  the matter  is  concerned,  learned counsel,  in  the first  instance,

placed reliance on State of Rajasthan v. Amrit Lal Gandhi (supra), and our attention

was invited to the following observations recorded therein:-

“16. Applying the ratio of the aforesaid decisions to the present case, we find no justification for the High Court having substituted the date of 1-1-1986 in lieu of 1-1-1990.  It is evident that for introducing a pension scheme, which envisaged financial implications, approval of the Rajasthan Government was required. In the letter of 16-4-1991, written to the Vice-Chancellors of different universities of Rajasthan, it was stated as follows:

“As  per  the  direction  in  regard  to  the  aforesaid  subject,  the  State Government  has  decided  to  introduce  Pension  Scheme  in  the Universities  of  the  State  w.e.f.  1-1-1990.  In  this  regard  the  State Legislature  has  passed  University  Pension  Rules  and  General Provident  Fund Rules.  Therefore,  by  enclosing  a  copy  of  University Pension Regulations and General Provident Fund Regulations with this letter, it is requested that by obtaining approval of the competent body or Syndicate of the University, these Regulations be implemented in the University  together  and  necessary  information  regarding implementation be intimated.”

17. The Syndicate and Senate of the University, when they had forwarded their recommendations in 1986, did not contain a specific date with effect from which  the  pension  scheme  was  to  be  made  applicable.  Their recommendations were subject to approval. The approval was granted by the Government, after the State Legislature had passed the University Pension Rules and General Provident Fund Rules. The Government had stated in its affidavit  before  the  High  Court  that  the  justification  of  the  cut-off  date  of 1-1-1990 was “wholly economic”. It cannot be said that the paying capacity is not  a  relevant  or  valid  consideration  while  fixing  the  cut-off  date.  The University  could,  in  1991,  validly  frame  Pension  Regulations  to  be  made applicable prospectively. It, however, chose to give them limited retrospectivity so  as  to  cover  a  larger  number  of  employees  by  taking  into  account  the financial impact of giving retrospective operation to the Pension Regulations. It was decided that employees retiring on or after 1-1-1990 would be able to exercise  the  option  of  getting  either  pension  or  provident  fund.  Financial impact of making the Regulations retrospective can be the sole consideration while fixing a cut-off date. In our opinion, it cannot be said that this cut-off date was fixed arbitrarily or without any reason. The High Court was clearly in error in  allowing  the  writ  petitions  and  substituting  the  date  of  1-1-1986  for 1-1-1990.”

Page 30

30

For  the  same  proposition,  reliance  was  also  placed  in  Union  of  India  v.  R.

Sarangapani,  (2000)  4  SCC 335,  and  our  attention  was  drawn to  the  following

observations recorded therein:-

“11. One more aspect which we want to emphasise is that the applicants who were appointed to the technical posts and the other persons who were appointed to the non-technical posts are not on the same footing. The nature of their jobs was different, the qualifications for appointment were different and the training period was to be longer for the technical staff. It was obviously necessary that those who were to occupy the technical posts should have a longer period of  training than those who were to occupy the non-technical posts. The training period for the former was one year while the training period for the latter was only three months. Naturally, the non-technical personnel could therefore be appointed earlier to the technical personnel even if both groups were selected at the same selection. Therefore, in view of the nature of  the  qualifications and nature of  the  posts  and functions and duties,  no equality  in  the  dates  of  accrual  of  the  increments  could  ever  have  been claimed  by  the  technical  personnel  comparing  themselves  to  the non-technical persons, by invoking Article 14. 12. If,  however,  the  Government  thought  it  fit  to  bring  some  sort  of equalisation  in  the  matter  of  commencement  of  their  increments,  it  was obviously by way of a sheer concession and was not as a matter of right nor was it to avoid any violation of any principles of equality under Article 14. In fact,  the  very  official  memorandum  of  the  Government  dated  22-10-1990 stated that under the Fundamental Rule 26 read with Rule 9(6)(a)(i) it was only in cases of probationers and apprentices where such appointments were followed by a confirmation that the said period of probation or apprenticeship would be counted for the purpose of scale of pay attached to the posts. This principle would “not” as per the Rules be applicable to the training period. However,  during  the  meetings  of  the  National  Council  (JCM)  it  was represented  that  where  the  training  period  was  long,  as  in  the  case  of technical  personnel,  the disparity  would become perpetual.  Therefore,  it  is obvious that the concession was not based on Article 14 nor was it on the basis of any rule but was clearly based only upon the fact that the training period of  technical  personnel  was longer and the disparity  would continue perpetually  if  these  groups  were  selected  at  the  same  time.  Therefore, Government considered initially to bring their increment on par with effect from 1-1-1990 and later on it felt that the grievance could be rectified with effect from  1-1-1986  as  mentioned  above,  the  date  of  commencement  of  the recommendations of the Fourth Pay Commission. It is, therefore, clear that the Government decided to extend the benefit in the abovesaid manner, even though parties had no right to the same either under Article 14 or under the Rules and the date was mainly based on the financial burden. It was open to the Government to decide, having regard to the budgetary provision, as to what  extent  it  could  go and whether  it  could  fix  a  cut-off  date which was co-terminus with the commencement  of  the recommendation of  the Fourth

Page 31

31

Pay Commission, namely, 1-1-1986. On the peculiar facts of this case the said date  was  perfectly  valid  because  the  only  consideration  was  the  financial burden of the State and not any principle of equality.”

28. In order to canvass the proposition noticed hereinabove, learned counsel also

placed  reliance  on,  ‘A  Treatise  on  the  Constitutional  Limitations’,  authored  by

Thomas  M.  Cooley  (Indian  Reprint  of  2005,  Hindustan  Law  Book  Company,

Calcutta), and invited our attention to following observations recorded in Chapter XI,

bearing the heading – Of The Protection To Property By ‘The Law Of The Land’:-

“The chief  restriction is that vested rights must not be disturbed; but in its application as a shield of protection, the term “vested rights” is not used in any narrow or technical sense, as importing a power of legal control merely, but rather  as  implying  a  vested  interest  which  it  is  equitable  the  government should  recognize,  and  of  which  the  individual  cannot  be  deprived  without injustice.

And before proceeding further, it may be well to consider, in the light of the reported cases, what is a vested right in the constitutional sense, that we may the better judge how far the general laws of the State may be changed, and  how  far  special  provisions  may  be  made  without  coming  under condemnation.  Every man holds all he possesses, and looks forward to all he hopes  for, through the  aid  and protection  of  the  laws;  but  as  changes  of circumstances and of public opinion, as well as other reasons of public policy, are all the time calling for changes in the laws, and these changes must more or less affect the value and stability of private possessions, and strengthen or destroy well-founded hopes; and as the power to make very many of them must be conceded, it is apparent that many rights, privileges, and exemptions which usually pertain to ownership under a particular state of the law, and many reasonable expectations, cannot be regarded as vested rights in any legal  sense.   In  many  cases  the  courts,  in  the  exercise  of  their  ordinary jurisdiction,  cause the  property  vested  in  one person  to  be  transferred  to another, either through a statutory power, or by the force of their judgments or decrees,  or  by compulsory  conveyances.   If  in  these cases the court  has jurisdiction, they proceed in accordance with the law of the land, and the right of  one  man  is  divested  by  way  of  enforcing  a  higher  and  better  right  in another.   Of  these  cases  we  do  not  propose  to  speak;  as  constitutional questions cannot well  arise in regard to them, unless they be attended by circumstances  of  irregularity  which  are  supposed to  take  them out  of  the operation of the general rule.  All vested rights are held subject to the laws for the enforcement of public duties and private contracts, and for the punishment of wrongs; and if they become divested through the operation of these laws, it is only by way of enforcing the obligations of justice and good order.  What we desire  to  arrive  at  now, is  the  meaning  of  the  term “vested  rights”,  when employed by way of indicating the interests of which one cannot be deprived

Page 32

32

by  the  mere  force  of  legislative  enactment,  or  by  any  other  than  the recognized modes of transferring title against  the consent of the owner, to which we have alluded.”

Based on the submissions recorded hereinabove, it was sought to be concluded,

that the respondent-employees had no vested right to claim pension under ‘the 1999

Scheme’, and that, it was not open to them to assail the partial repeal of ‘the 1999

Scheme’, vide notification dated 2.12.2004.

29. In the process of repudiating the submissions advanced at the hands of the

appellants,  Mr.  Guru  Krishna  Kumar,  learned  senior  counsel  representing  the

respondent-employees, drew our attention to certain factual aspects of the matter,

which according to him, needed to be kept in mind, while determining the veracity of

the challenge raised by the State  Government.   It  was pointed out,  that  all  the

respondent-employees, were already in the employment of corporate bodies, in the

State of Himachal Pradesh, on the date ‘the 1999 Scheme’ was introduced – on

1.4.1999.  Learned counsel asserted, that it was not disputed at the behest of the

State  Government,  that  all  the  respondent-employees  were  entitled  to  benefits

under ‘the 1999 Scheme’, either on account of having exercised their option to be

governed by ‘the 1999 Scheme’, or by virtue of the deeming provision expressed in

paragraph 2(2) of ‘the 1999 Scheme’.  It was asserted, that all the employees who

came  to  be  governed  by  ‘the  1999  Scheme’,  constituted  a  homogenous  class.

Inasmuch as, the employees whose right to claim pension under ‘the 1999 Scheme’

has not been disturbed, despite the repeal notification dated 2.12.2004, and those

whose right to draw pension has been taken away, cannot be distinguished in any

manner, except on the basis of the cut-off date, expressed in the repeal notification,

dated 2.12.2004.  It was contended, that merely because some of the employees

Page 33

33

had  retired  prior  to  2.12.2004,  and  the  respondent-employees  had  retired  after

2.12.2004, cannot be accepted as a legitimate basis, to treat them differentially.  It

was asserted, that the mandate of paragraph 1(2) of ‘the 1999 Scheme’ extended

pensionary  benefits  to  employees  engaged  in  corporate  bodies,  in  the  State  of

Himachal Pradesh, in accordance with the provisions laid down under the Central

Civil Services (Pension) Rules, 1972, and the Central Civil Services (Commutation

of Pension) Rules, 1981 “… as amended and adopted by the Himachal Pradesh

Government for the State Government employees, save as otherwise provided in

this scheme”.  In the above view of the matter, it  was asserted on behalf of the

respondent-employees, that the division of a homogenous class, so as to deprive

one set  of  employees  benefits,  which  still  remained extended to  another  set  of

employees,  was  clearly  unsustainable  in  law.   It  was  pointed  out  with  some

emphasis, that the High Court had taken conscious notice of the fact, that ‘the 1999

Scheme’ was introduced by  the State  Government,  after  due deliberation  by all

concerned stake holders, and upon approval by the Chief Minister and his Cabinet.

In  the  factual  background  highlighted  hereinabove,  it  was  urged,  that  denial  of

pensionary  benefits  to  one  set  of  employees,  out  of  a  homogenous  class,  was

arbitrary and discriminatory, and as such,  violative of  the principles enshrined in

Articles  14  and  16  of  the  Constitution  of  India.   Based  on  the  above  factual

background, it was urged, that the High Court was fully justified in reading down the

repeal notification dated 2.12.2004, so as to extend the benefit of ‘the 1999 Scheme’

to  all  employees  who either  opted  for, or  were  otherwise  entitled  to  pensionary

rights, under ‘the 1999 Scheme’.

30. Learned  counsel  for  the  respondent-employees,  contested  the  submission

Page 34

34

advanced  by  learned  counsel  for  the  appellants,  that  subscription  to  ‘the  1999

Scheme’ by employees engaged in corporations in the State of Himachal Pradesh,

did not create a vested right in them.  It was submitted, that a mere subscription to

‘the 1999 Scheme’, by exercising their option to be governed by the same, created a

vested right in the respondent-employees.  In this behalf it  was pointed out, that

retirement on attaining the age of the superannuation, was relevant, only for the

purpose of the accrual of a cause of action, for raising a claim for pension (under

‘the 1999 Scheme’).  Learned counsel, while acknowledging, that a right to claim

pension  would  arise  only  when  the  concerned  employee  attained  the  age  of

superannuation, yet submitted, that the moment a contribution earlier payable to the

employees as CPF on their retirement, was diverted to the corpus fund maintained

by the Finance Department of the State Government, the same created a contingent

right  in  each one of  them (under  ‘the 1999 Scheme’)  to  claim pension.   It  was

therefore submitted, that there was no justification in the contention advanced on

behalf of the appellants, that the action of the respondent-employees in opting for

‘the 1999 Scheme’,  did  not  alter  their  position adversely, with  reference to  their

erstwhile vested right (under the Employees Provident Funds Scheme, 1995).  In

order  to  support  his  submission,  that  a  vested  right  accrued  to  the

respondent-employees,  when  they  subscribed  to  ‘the  1999  Scheme’,  learned

counsel placed reliance on U.P. Raghavendra Acharya v. State of Karnataka, (2006)

9 SCC 630, and drew our attention to the following observations recorded therein:-

“3. It is not in dispute that the revised scales of pay as recommended by the Pay Revision Committee became applicable to the appellants with effect from 1-1-1986.  It  is  also not  in  dispute that  the UGC scales  of  pay were applicable  to  them.  The  Government  of  Karnataka,  by  a  letter  dated 17-12-1993, directed that the matter relating to the fixation of pension on the basis of UGC pay scales would be governed by Rule 296 of the Karnataka

Page 35

35

Civil  Services  Rules  (hereinafter  referred  to  as  “the  Rules”),  providing  for computation  of  emoluments  for  the  purpose  of  pension  and  gratuity  of  a government servant. In the said letter it was stated:

“The term ‘emoluments’ has been defined and redefined from time to time whenever  pension  has  been  revised  by  executive  orders.  The  term emoluments for purpose of pensionary benefits as defined in GO dated 17-8-1987 includes among other things the last pay drawn. It is, therefore, clarified that the pay drawn by the teachers of degree colleges in respect of whom UGC scales have been extended by GO No. ED 88 UNI 88 dated 30-3-1990 w.e.f. 1-1-1986 and who have opted to UGC scales of pay, the last pay drawn by them in UGC scales of pay among other things may be treated as emoluments for purpose of pensionary benefits under GO No. FD 20 SRS 87 (I) dated 17-8-1987.”

*** *** *** 9. However,  para  27-A  was  inserted  thereto  in  respect  of  revision  of pensionary benefits, which is to the following effect:

“27-A. Revision of pensionary benefits.—(i) UGC scales as revised from 1-1-1996 have been linked to the index level of 1510 points inasmuch as the revised pay scale structure includes the DA admissible as on 1-1-1996  to  the  extent  of  138%  of  basic  pay.  As  on  1-1-1996  the pensionary benefits under the State Government had not been revised. The revised pay scales of the State Government employees came into force from 1-4-1998 by merging the DA as on 1-1-1996. The pensionary benefits were also simultaneously revised w.e.f.  1-4-1998. Therefore, the  revised  pay  drawn  in  the  UGC  pay  scales  for  the  period  from 1-1-1996 up to 31-3-1998 shall  not  be taken as emoluments for the purpose of pensionary benefits. Accordingly,—

(a) In respect of teachers drawing UGC pay scales who have retired during the period from 1-1-1996 to 31-3-1998, they shall be eligible for the benefit of the fixation of pay and arrears under the  revised  UGC  scales  of  pay  only.  There  shall  not  be  any change in their pensionary benefits with reference to the revised UGC pay and the retirement benefits already sanctioned in the pre-revised UGC pay scales will not undergo any modifications. However, they shall be entitled to the benefit of fixation of revised pension/family pension as contemplated in GO No. FD (Spl.) 2 PET 99 dated 15-2-1999 only w.e.f. 1-4-1998. Para 6 of GO No. FD  (Spl.)  2  PET 99  dated  15-2-1999  stands  modified  to  this extent. (b) In respect of teachers drawing UGC pay scales and who have issued on or after 1-4-1998, the pay drawn in the revised UGC pay scales shall be counted for the purpose of pensionary benefits and the orders revising the pensionary benefits vide GO No.  FD  (Spl.)  2  PET  99  dated  15-2-1999  shall  be  made applicable.” *** *** ***

23. The stand of the State of Karnataka that the pensionary benefits had been conferred  on  the appellants  w.e.f.  1-4-1998 on the  premise  that  the

Page 36

36

benefit  of  the  revision  of  scales  of  pay  to  its  own  employees  had  been conferred  from  1-1-1998,  in  our  opinion,  is  wholly  misconceived.  Firstly, because the employees of the State of Karnataka and the appellants, in the matter of grant of benefit of revised scales of pay, do not stand on the same footing as revised scales of pay had been made applicable to their cases from a different date. Secondly, the appellants had been given the benefit of the revised scales of pay w.e.f. 1-1-1996. It is now well settled that a notification can  be  issued  by  the  State  accepting  the  recommendations  of  the  Pay Revision  Committee  with  retrospective  effect  as  it  was  beneficent  to  the employees. Once such a retrospective effect is given to the recommendations of  the  Pay  Revision  Committee,  the  employees  concerned  despite  their reaching the age of superannuation in between the said dates and/or the date of issuance of the notification would be deemed to be getting the said scales of pay as on 1-1-1996. By reason of such notification, as the appellants had been deprived of a vested right, they could not have been deprived therefrom and that too by reason of executive instructions.

*** *** *** 25. Pension, as is well known, is not a bounty. It is treated to be a deferred salary. It is akin to right of property. It is correlated and has a nexus with the salary payable to the employees as on the date of retirement.

*** *** *** 28. The impugned orders furthermore are opposed to the basic principles of law inasmuch as by reason of executive instructions an employee cannot be deprived of a vested or accrued right. Such a right to draw pension to the extent  of  50%  of  the  emoluments,  computed  in  terms  of  the  rules  w.e.f. 1-1-1996, vested in the appellants in terms of government notification read with Rule 296 of the Rules.”

Based on the above judgment, it  was pointed out, that the right to draw revised

pension under  the Karnataka Civil  Service Rules,  was held  to  be vested in  the

concerned employees, from the date of revision of the pay-scales.  It was pointed

out, that while calculating pensionary benefits, it was imperative for the employer to

take into consideration, the actual pay drawn by the employees, at the time of their

retirement.   Accordingly  it  was held,  that  the action of  the State  Government  in

granting revised pay-scales with retrospective effect (with effect from 1.1.1996), but

extending the benefit of revised pay for calculating pension, only with effect from

31.3.1998, was not sustainable in law.  Inasmuch as, employees who had retired

between 1.1.1996 and 31.3.1998 would  be prejudicially  affected.   On the same

Page 37

37

proposition,  learned  counsel  placed  reliance  on  D.S.  Nakara  v.  Union  of  India,

(1983) 1 SCC 305,  and invited our attention to the  following observations made

therein:-

“20. The antequated notion of pension being a bounty, a gratuitous payment depending upon the sweet will or grace of the employer not claimable as a right and, therefore, no right to pension can be enforced through Court has been  swept  under  the  carpet  by  the  decision  of  the  Constitution  Bench in     Deokinandan  Prasad     v.     State  of  Bihar,    (1971)  2  SCC 330,  wherein  this Court authoritatively ruled that pension is a right and the payment of it does not depend upon the discretion of  the Government but is governed by the rules and a government servant coming within those rules is entitled to claim pension. It was further held that the grant of pension does not depend upon anyone's discretion. It is only for the purpose of quantifying the amount having regard to service and other allied matters that it  may be necessary for the authority to pass an order to that effect but the right to receive pension flows to the officer not because of any such order but by virtue of the rules. This view was reaffirmed in State of Punjab v. Iqbal Singh, (1976) 2 SCC 1”.

Reference was also made to Chairman, Railway Board v. C.R. Rangadhamaiah,

(1997)  6  SCC  623,  wherefrom  our  attention  was  drawn  to  the  following

observations:-

“24. In many of these decisions the expressions “vested rights” or “accrued rights” have been used while striking down the impugned provisions which had been given retrospective operation so as to have an adverse effect in the matter  of  promotion,  seniority,  substantive  appointment,  etc.,  of  the employees. The said expressions have been used in the context of a right flowing under the relevant rule which was sought to be altered with effect from an anterior date and thereby taking away the benefits available under the rule in  force  at  that  time.  It  has  been  held  that  such  an  amendment  having retrospective operation which has the effect of taking away a benefit already available to the employee under the existing rule is arbitrary, discriminatory and  violative  of  the  rights  guaranteed  under  Articles  14  and  16  of  the Constitution.  We  are  unable  to  hold  that  these  decisions  are  not  in consonance  with  the  decisions  in Roshan  Lal  Tandon,  AIR  1967  SC 1889, B.S. Yadav, AIR 1969 SC 118, and Raman Lal Keshav Lal Soni, (1983) 2 SCC 33. 25.      In  these  cases  we  are  concerned  with  the  pension  payable  to  the employees after their retirement. The respondents were no longer in service on the date of issuance of the impugned notifications. The amendments in the rules are not restricted in their application in futuro. The amendments apply to employees who had already retired and were no longer in service on the date the impugned notifications were issued.

Page 38

38

26. In Deokinandan Prasad v. State of Bihar, (1971) 2 SCC 330, decided by a Constitution Bench it has been laid down: (SCC p. 343, para 31)

“31. … pension is not to be treated as a bounty payable on the sweet will  and  pleasure  of  the  Government  and  that  the  right  to superannuation pension including its amount is a valuable right vesting in a government servant.” [p. 152]

(emphasis supplied) In that case the right to receive pension was treated as property under Articles 31(1) and 19(1)(f) of the Constitution. 27. In D.S. Nakara v. Union of  India,  (1983) 1 SCC 305, this Court,  after taking note of the decision in Deokinandan Prasad (supra), has said: (SCC p. 323, paras 28 and 29)

“28.  Pension to civil  employees of  the Government and the defence personnel as administered in India appears to be a compensation for service rendered in the past.  However, as  held  in Dodge v. Board of Education,  302 US 74,  a pension is  closely  akin to wages in that  it consists of payment provided by an employer, is paid in consideration of past service and serves the purpose of helping the recipient meet the expenses of living.

*** 29. … Thus the pension payable to a government employee is earned by rendering long and efficient service and therefore can be said to be a deferred portion of the compensation or for service rendered.”

*** *** *** 30. The respondents in these cases are employees who had retired after 1-1-1973  and  before  5-12-1988.  As  per  Rule  2301  of  the  Indian  Railway Establishment  Code  they  are  entitled  to  have  their  pension  computed  in accordance with Rule 2544 as it stood at the time of their retirement. At that time the said rule prescribed that running allowance limited to a maximum of 75% of the other emoluments should be taken into account for the purpose of calculation  of  average  emoluments  for  computation  of  pension  and  other retiral  benefits.  The  said  right  of  the  respondent-employees  to  have  their pension  computed  on  the  basis  of  their  average  emoluments  being  thus calculated is being taken away by the amendments introduced in Rule 2544 by the impugned notifications dated 5-12-1988 inasmuch as the maximum limit  has been reduced from 75% to 45% for  the period from 1-1-1973 to 31-3-1979 and to 55% from 1-4-1979 onwards.  As a result  the amount  of pension payable to the respondents in accordance with the rules which were in force at the time of their retirement has been reduced. 31. In Salabuddin Mohamed Yunus v. State of A.P., (1984) Supp SCC 399, the  appellant  was  employed  in  the  service  of  the  former  Indian  State  of Hyderabad prior to coming into force of the Constitution of India. On coming into force of  the Constitution the appellant continued in the service of  that State till he retired from service on 21-1-1956. The appellant claimed that he was entitled to be paid the salary of a High Court Judge from 1-10-1947 and also claimed that he was entitled to receive pension of Rs.1000 a month in the Government of India currency, being the maximum pension admissible under the rules. The said claim of the appellant was negatived by the Government.

Page 39

39

He filed  a  writ  petition  in  the  High  Court  of  Andhra  Pradesh.  During  the pendency  of  the  said  writ  petition  the  relevant  rule  was  amended  by notification dated 3-2-1971 with retrospective effect from 1-10-1954 and the expression “Rs.1000 a month” in clause (b) of sub-rule (1) of Rule 299 was substituted  by  the  expression  “Rs.857.15  a  month”.  This  amendment  was made in exercise of the power conferred by the proviso to Article 309 read with Article 313 of the Constitution. The said amendment was struck down by this Court  as invalid and inoperative on the ground that it  was violative of Articles  31(1)  and  19(1)(f)  of  the  Constitution.  Relying  upon  the  decision in Deokinandan Prasad (supra), it was held: (SCC p. 406, para 6)

“6. … The fundamental right to receive pension according to the rules in force on the date of his retirement accrued to the appellant when he retired from service. By making a retrospective amendment to the said Rule 299(1)(  b  ) more than fifteen years after that right had accrued to him, what was done was to take away the appellant's right to receive pension according to the rules in force on the date of his retirement or in any event to curtail and abridge that right. To that extent, the said amendment was void.”

32. It is no doubt true that on 5-12-1988 when the impugned notifications were issued, the rights guaranteed under Articles 31(1) and 19(1)(f) were not available since the said provisions in the Constitution stood omitted with effect from 20-6-1979 by virtue of the Constitution (Forty-fourth Amendment) Act, 1978.  But Notifications Nos.  GSR 1143 (E) and GSR 1144 (E) have been made operative with effect from 1-1-1973 and 1-4-1979 respectively on which dates the rights guaranteed under Articles 31(1) and 19(1)(  f  ) were available. Both the notifications insofar as they have been given retrospective operation are, therefore, violative of the rights then guaranteed under Articles 19(1) and 31(1) of the Constitution. 33. Apart  from being  violative of  the rights  then available  under  Articles 31(1)  and 19(1)(  f  ),  the impugned amendments,  insofar  as they have been given retrospective operation, are also violative of the rights guaranteed under Articles  14  and  16  of  the  Constitution  on  the  ground  that  they  are unreasonable and arbitrary since the said amendments in Rule 2544 have the effect  of  reducing  the  amount  of  pension  that  had  become  payable  to employees who had already retired from service on the date of issuance of the impugned notifications, as per the provisions contained in Rule 2544 that were in force at the time of their retirement.”

Based  on  the  above  cited  judgments,  it  was  submitted,  that  the  determination

rendered  by  the  High  Court  in  the  impugned  judgment,  that  the

respondent-employees acquired a vested right, the moment they had subscribed to

‘the 1999 Scheme’, was unexceptionable.

31. Learned counsel for the respondent-employees also contested the submission

Page 40

40

advanced on behalf of the appellants, that the right to receive pension accrues to an

employee,  on the date on which he attains  the age of  superannuation,  and not

earlier.  On the instant  aspect  of  the matter  it  was submitted,  that  even though

pension can formally be claimed by an employee only on his retirement, the seeds

for a claim to pension are sown, and the foundation for receipt of pension is laid, the

very moment from which an employee commences to render qualifying service.  It

was  submitted,  that  based  on  having  acquired  a  minimum  qualifying  service

postulated  under  the  rules,  an  employee’s  claim  eventually  crystalises  for

entitlement to pension, on attaining the age of superannuation.  It was contended,

that since past service rendered by an employee, constitutes the basis for grant of

pension,  every  day  of  service  rendered  by  an  employee,  has  to  be  taken  into

consideration, for computing pension.  It was accordingly urged, that every day of

service rendered by an employee, furthers the right in the employee to earn and

receive pension.  For the aforesaid reasons, according to learned counsel, pension

has  always  been  considered  as  deferred-wages  for  services  rendered.   It  was

asserted, that with effect from the date of commencement of qualifying service, the

concerned employee is  treated  to  have an  inherent  vested  right,  for  a  claim to

pension.   In order to substantiate the instant contention, learned counsel  placed

reliance on the D.S. Nakara case (supra), and invited our attention to the following

observations recorded therein:-

“46. By our approach, are we making the scheme retroactive? The answer is emphatically in the negative. Take a government servant who retired on April 1, 1979. He would be governed by the liberalised pension scheme. By that time he had put in qualifying service of 35 years. His length of service is a, relevant  factor  for  computation  of  pension.  Has  the  Government  made  it retroactive,  35  years  backward  compared  to  the  case  of  a  Government servant who retired on 30th March, 1979? Concept of qualifying service takes note of  length of  service,  and pension quantum is  correlated to  qualifying

Page 41

41

service. Is it retroactive for 35 years for one and not retroactive for a person who retired two days earlier? It must be remembered that pension is relatable to qualifying service. It has correlation to the average emoluments and the length  of  service.  Any  liberalisation  would  pro  tanto  be  retroactive  in  the narrow sense of the term. Otherwise it is always prospective. A statute is not properly called a retroactive statute because a part of the requisites for its action is drawn from a time antecedent to its passing, (see Craies on Statute Law, sixth edition, p. 387). Assuming the Government had not prescribed the specified  date  and  thereby  provided  that  those  retiring  pre  and  post  the specified  date  would  all  be  governed  by  the  liberalised  pension  scheme, undoubtedly, it would be both prospective and retroactive. Only the pension will have to be recomputed in the light of the formula enacted in the liberalised pension scheme and effective from the date the revised scheme comes into force. And beware that it is not a new scheme, it is only a revision of existing scheme. It is not a new retiral benefit. It is an upward revision of an existing benefit.  If it was a wholly new concept, a new retiral benefit, one could have appreciated an argument that those who had already retired could not expect it. It could have been urged that it is an incentive to attract the fresh recruits. Pension is a reward for past service. It is undoubtedly a condition of service but not an incentive to attract new entrants because if it was to be available to new entrants only, it would be prospective at such distance of thirty-five years since its introduction. But it covers all those in service who entered thirty-five years back. Pension is thus not an incentive but a reward for past service. And a revision of an existing benefit stands on a different footing than a new retiral  benefit. And even in case of new retiral benefit  of gratuity under the Payment  of  Gratuity  Act,  1972  past  service  was  taken  into  consideration. Recall  at  this  stage  the  method  adopted  when  pay-scales  are  revised. Revised pay-scales are introduced from a certain date. All existing employees are brought on to the revised scales by adopting a theory of fitments and increments for past service.  In other words, benefit  of  revised scale is not limited to those who enter service subsequent to the date fixed for introducing revised scales but the benefit is extended to all those in service prior to that date.  This  is  just  and fair.  Now if  pension as we view it,  is  some kind of retirement  wages  for  past  service,  can  it  be  denied  to  those  who  retired earlier,  revised  retirement  benefits  being  available  to  future  retirees  only. Therefore,  there  is  no  substance  in  the  contention  that  the  court  by  its approach would be making the scheme retroactive, because it is implicit in theory of wages.”

Based on the observations extracted above, it was submitted, that it was not open to

the State to contend, that a vested right would be created under ‘the 1999 Scheme’,

only  on  the  date  of  retirement.   Since  pension  has  been  recognized  as

deferred-wages  for  past  services,  payable  on  retirement,  according  to  learned

counsel, the moment an employee is enrolled on the pension scheme, his right to

Page 42

42

claim pension, must be deemed to have materialized.

32. Relying on certain paragraphs of ‘the 1999 Scheme’ (referred to above), it was

submitted, that the appellants have erroneously treated the date of retirement, as

the date on which the right to pension accrued to the employees.  In this behalf it

was pointed out, that the cause of action to receive pension would accrue to an

employee on  the  date  of  his  retirement.   However, the right  to  receive pension

crystalises, at the end of every successive day, and at the end of every successive

month,  and  at  the  end  of  every  successive  year.   It  was  pointed  out,  that  it

crystalises and further crystalises, giving rise to an eventual claim for pension.  It

was accordingly pointed out, that the date of retirement had been legally perceived,

as the date on which the cause of action arose to an employee to claim pension.

Accordingly it was submitted, that the date of retirement was relevant only for the

limited purpose of determining the cause of action, to receive pension.  For this,

learned counsel place reliance on Asger Ibrahim Amin v. Life Insurance Corporation

of  India,  (2015)  10  SCALE  639,  and  invited  our  attention  to  the  following

observations:-

“3. On 8.8.1995, that is post the promulgation by the Respondent of the Pension Rules, the Appellant enquired from the Respondent whether he was entitled to pension under the Pension Rules, which has been understood by the Respondent as a representation for pension; the Respondent replied that the request of the Appellant cannot be acceded to. The Appellant took the matter no further but has averred that in 2000, prompted by news in a Daily and Judgments of a High Court and a Tribunal, he requested the Respondent to reconsider his case for pension. This request has remained unanswered. It was in 2011 that he sent a legal notice to the Respondent, in response to which the Respondent reiterated its stand that the Appellant, having resigned from service,  was  not  eligible  to  claim pension  under  the  Pension  Rules. Eventually, the Appellant filed a Special Civil Application on 29.3.2012 before the High Court,  which was dismissed by the Single  Judge vide Judgment dated 5.10.2012. The LPA of the Appellant also got dismissed on the grounds of  the  delay  of  almost  14  years,  as  also  on  merits  vide  Judgment  dated 1.3.2013, against which the Appellant has approached this Court.

Page 43

43

4. As regards the issue of delay in matters pertaining to claims of pension, it has already been opined by this Court in Union of India v. Tarsem Singh, (2008) 8 SCC 648, that in cases of continuing or successive wrongs, delay and  laches  or  limitation  will  not  thwart  the  claim so  long  as  the  claim,  if allowed, does not have any adverse repercussions on the settled third-party rights. This Court held:

“7. To summarise, normally, a belated service related claim will  be rejected on the ground of delay and laches (where remedy is sought by filing  a  writ  petition)  or  limitation  (where  remedy  is  sought  by  an application to the Administrative Tribunal). One of the exceptions to the said  rule  is  cases  relating  to  a  continuing  wrong.  Where  a  service related claim is  based on a continuing wrong,  relief  can be granted even if there is a long delay in seeking remedy, with reference to the date  on  which  the  continuing  wrong commenced,  if  such  continuing wrong creates a continuing source of injury. But there is an exception to the  exception.  If  the  grievance  is  in  respect  of  any  order  or administrative decision which related to or affected several others also, and if the reopening of the issue would affect the settled rights of third parties, then the claim will not be entertained.     For example, if the issue relates to payment or refixation of pay or pension, relief may be granted in spite of delay as it does not affect the rights of third parties  . But if the claim involved issues relating to seniority or promotion, etc., affecting others,  delay  would  render  the  claim  stale  and  doctrine  of laches/limitation will  be applied. Insofar as the consequential  relief of recovery of arrears for a past period is concerned, the principles relating to recurring/successive wrongs will apply. As a consequence, the High Courts will restrict the consequential relief relating to arrears normally to a period of three years prior to the date of filing of the writ petition.” We respectfully concur with these observations which if extrapolated or

applied to the factual  matrix  of  the present  case would have the effect  of restricting the claim for pension, if otherwise sustainable in law, to three years previous to when it was raised in a judicial forum. Such claims recur month to month and would not  stand extinguished on the application of  the laws of prescription, merely because the legal remedy pertaining to the time barred part  of  it  has  become  unavailable.  This  is  too  well  entrenched  in  our jurisprudence, foreclosing any fresh consideration.

Reliance was also placed on the decision of this Court in State of Madhya Pradesh

v.  Yogendra  Shrivastava,  (2010)  12  SCC  538,  wherefrom  learned  counsel

emphasized on the following observations:-

“17. The  appellants  contended  that  the  claims  were  therefore  barred  by limitation. It was pointed out that the respondents were paid NPA at a fixed rate  as  stipulated in the appointment  orders  and NPA was increased only when it  was revised by the government orders from time to time; that  the respondents  accepted  such  NPA without  protest;  and  that  therefore,  they

Page 44

44

cannot, after periods varying from 5 to 15 years, challenge the fixation of NPA or contend that they are entitled to NPA at a higher rate, that is 25% of their pay. 18. We cannot  agree.  Where the issue relates to payment  or  fixation of salary  or  any  allowance,  the  challenge  is  not  barred  by  limitation  or  the doctrine  of  laches,  as  the  denial  of  benefit  occurs  every  month  when the salary  is  paid,  thereby  giving  rise  to  a  fresh  cause  of  action,  based  on continuing wrong. Though the lesser payment may be a consequence of the error that was committed at the time of appointment, the claim for a higher allowance  in  accordance  with  the  Rules  (prospectively  from  the  date  of application) cannot be rejected merely because it arises from a wrong fixation made several years prior to the claim for correct payment. But in respect of grant of  consequential  relief of recovery of  arrears for the past period, the principle relating to recurring and successive wrongs would apply. Therefore the consequential relief of payment of arrears will have to be restricted to a period of three years prior to the date of the original application. [See: M.R. Gupta v. Union of  India,  1995 (5) SCC 628, and Union of  India v. Tarsem Singh, 2008 (8) SCC 648]”.

It  was, therefore, the contention of learned counsel for the respondents, that the

foundation to claim pension, accrued in the employees of all corporate bodies in the

State of Himachal Pradesh (including all the respondent-employees herein), the very

moment they came to be enrolled in ‘the 1999 Scheme’.  It was submitted, that all

existing employees who had opted for pension or were deemed to have opted for

pension, had vested in themselves the right to pension when they would retire from

service.  All employees who came to be engaged by corporations in the State, from

1.4.1999 up to 1.12.2004, were likewise vested with the right to receive pension,

because of the fact, that at the very inception of their employment, they became

members of ‘the 1999 Scheme’, and the period of service rendered by them would

likewise constitute qualifying service, for pension.  It was therefore submitted, that

there was a clear distinction between two contingencies, firstly, the date on which a

claim for pension can be stated to have vested in the employee, and the date on

which  the  employee earns a right  to  receive pension.   Insofar  as  the former  is

concerned, it was submitted, that the moment qualifying service commences to add

Page 45

45

up, a vested right to receive pension is created.  For the latter, having rendered the

postulated qualifying service (on the date of superannuation), gives rise to a cause

of action to receive pension.  It is this fine distinction which according to learned

counsel, needs to be examined and has been overlooked during the course of the

submissions advanced on behalf of the appellant-State.

33. Insofar as the issue of financial unviability of ‘the 1999 Scheme’ is concerned,

it was submitted on behalf of the respondent-employees, that the State Government

was estopped in law, from raising such a plea.  In this behalf it was pointed out, that

the Law Department and the Finance Department of  the State Government, had

advised, against the retrospective withdrawal of ‘the 1999 Scheme’.  If the advice

had been accepted, according to learned counsel, persons similarly situated, as the

private respondents,  would have remained entitled to receive pension under ‘the

1999 Scheme’.  Additionally it was contended, that in identical circumstances, the

State  Government  had  repealed  the  provisions  of  the  Central  Civil  Services

(Pension) Rules, 1972, as were applicable to State Government employees, through

a similar notification, dated 15.5.2003.  It was highlighted, that the aforesaid repeal

notification,  was  given  a  prospective  effect,  inasmuch  as,  employees  similarly

situated as the respondent-employees herein, who had not retired on the date of the

repeal  notification,  were  allowed  to  be  governed  by  the  Central  Civil  Services

(Pension) Rules, 1972.  At the cost of clarification, it was pointed out, that the repeal

notification dated 15.5.2003, had the effect of not depriving pensionary rights to any

of the existing employees.  Based on the above contentions, it was submitted, that

the action of the State Government, in depriving the respondent-employees of their

pensionary rights, must be treated as based on an arbitrary exercise of power, and

Page 46

46

as such, was liable to be considered as violative of Article 14 of the Constitution of

India.

34. It was also the contention of learned counsel for the respondent-employees,

that pension was akin to the right of property, postulated under article 300A of the

Constitution.  For the instant proposition,  learned counsel placed reliance on the

decision rendered in State of Jharkhand v. Jitendra Kumar Srivastava, (2013) 12

SCC 210, and invited our attention to the following observations recorded therein:-

“8. It is an accepted position that gratuity and pension are not bounties. An employee earns these benefits by dint  of his long, continuous, faithful  and un-blemished service. Conceptually it is so lucidly described in D.S. Nakara and Ors. v. Union of India, (1983) 1 SCC 305, by D.A. Desai, J., who spoke for the Bench, in his inimitable style, in the following words: (SCC pp. 319-20, paras 18-20)

“18. The approach of  the Respondents raises a vital  and none too easy of answer, question as to why pension is paid. And why was it required  to  be  liberalised?  Is  the  employer,  which  expression  will include even the State, bound to pay pension? Is there any obligation on the employer to provide for the erstwhile employee even after the contract  of  employment  has come to an end and the employee has ceased to render service? 19. What is a pension? What are the goals of pension? What public interest or purpose, if any, it seeks to serve? If it does seek to serve some  public  purpose,  is  it  thwarted  by  such  artificial  division  of retirement pre and post a certain date? We need seek answer to these and incidental questions so as to render just justice between parties to this petition. 20. The  antiquated  notion  of  pension  being  a  bounty  a  gratuitous payment depending upon the sweet will or grace of the employer not claimable as a right and, therefore, no right to pension can be enforced through Court has been swept under the carpet by the decision of the Constitution Bench in Deoki Nandan Prasad v. State of Bihar and Ors., (1971) 2 SCC 330, wherein this Court authoritatively ruled that pension is a right and the payment of it does not depend upon the discretion of the Government but is governed by the rules and a Government servant coming within those rules is entitled to claim pension. It was further held that the grant of pension does not depend upon anyone's discretion. It is  only  for  the  purpose  of  quantifying  the  amount  having  regard  to service  and  other  allied  maters  that  it  may  be  necessary  for  the authority to pass an order to that effect but the right to receive pension flows to the officer not because of any such order but by virtue of the rules.  This  view was reaffirmed in State of  Punjab and Anr. v. Iqbal

Page 49

49

holders of similar posts in government colleges is neither denied nor disputed. The appellants indisputably are governed by the UGC scales of pay. They are entitled to the pensionary benefits also. They had been given the benefits of the  revision  of  scales  of  pay  by  the  10th Pay  Revision  Committee  w.e.f. 1-1-1986. The pensionary benefits payable to them on attaining the age of superannuation or death were also stated to be on a par with the employees of the State Government. The State of Karnataka, as noticed hereinbefore, for all  intent  and  purport,  has  treated  the  teachers  of  the  government  aided colleges  and  the  regional  engineering  colleges  on  the  one  hand  and  the teachers of the colleges run by the State itself on the other hand on a par. Even  the  financial  rules  were  made  applicable  to  them  in  terms  of  the notifications, applying the rule of incorporation by reference.  Although Rule 296 of the Rules per se may not be applicable so far as the appellants are concerned,  it  now  stands  admitted  that  the  provisions  thereof  have  been applied to the case of the appellants also for the purpose of computation of pensionary benefits. Therefore there cannot be any doubt whatsoever that the term "Emoluments" as contained in Rule 296 of the Rules would also apply to the case of the appellants. Rule 296 of the Rules reads as under:

“296. In respect of retirement or death while in service of government servants on or after first day of July, 1993, the term ‘emoluments’ for the purpose of this Chapter means, the basic pay drawn by the government servant  in  the  scale  of  pay  applicable  to  the  post  on  the  date  of retirement or death and includes the following, but does not include pay and allowance drawn from a source other than the Consolidated Fund of the State,-

xxx xxx xxx Note:-  (a)  Basic  pay means the pay drawn in the time-scale of  pay applicable to the post immediately before retirement or death.”

xxx xxx xxx 22. The State while implementing the new scheme for payment of grant of pensionary benefits to its employees, may deny the same to a class of retired employees who were governed by a different set of rules. The extension of the  benefits  can  also  be  denied  to  a  class  of  employees  if  the  same  is permissible in law. The case of the appellants, however, stands absolutely on a different footing. They had been enjoying the benefit of the revised scales of pay. Recommendations have been made by the Central Government as also the University Grants Commission to the State of  Karnataka to extend the benefits of the Pay Revision Committee in their favour. The pay in their case had been revised in 1986 whereas the pay of the employees of the State of Karnataka was revised in 1993. The benefits of the recommendations of the Pay Revision Committee w.e.f. 1-1-1996, thus, could not have been denied to the appellants. 23. The stand of the State of Karnataka that the pensionary benefits had been conferred  on  the appellants  w.e.f.  1-4-1998 on the  premise  that  the benefit  of  the  revision  of  scales  of  pay  to  its  own  employees  had  been conferred  from  1-1-1998,  in  our  opinion,  is  wholly  misconceived.  Firstly, because the employees of the State of Karnataka and the appellants, in the matter of grant of benefit of revised scales of pay, do not stand on the same

Page 50

50

footing as revised scales of pay had been made applicable to their cases from a different date. Secondly, the appellants had been given the benefit of the revised scales of pay w.e.f. 1-1-1996. It is now well settled that a notification can  be  issued  by  the  State  accepting  the  recommendations  of  the  Pay Revision  Committee  with  retrospective  effect  as  it  was  beneficent  to  the employees. Once such a retrospective effect is given to the recommendations of  the  Pay  Revision  Committee,  the  employees  concerned  despite  their reaching the age of superannuation in between the said dates and/or the date of issuance of the notification would be deemed to be getting the said scales of pay as on 1-1-1996. By reason of such notification, as the appellants had been derived of a vested right, they could not have been deprived therefrom and that too by reason of executive instructions. 24. The  contention  of  the  State  that  the  matter  relating  to  the  grant  of pensionary  benefits  vis-à-vis  the  revision  in  the  scales  of  pay  stands  on different footing, thus, must be rejected.  25. Pension, as is well known, is not a bounty. It is treated to be a deferred salary. It is akin to right of property. It is co-related and has a nexus with the salary payable to the employees as on the date of retirement. 26. These appeals involve the question of revision of pay and consequent revision in pension and not the grant of pension for the first time. Only the modality of computing the quantum of pension was required to be determined in terms of  the notification issued by the State of  Karnataka. For the said purpose, Rule 296 of the Rules was made applicable. Once this rule became applicable, indisputably the computation of pensionary benefits was required to be carried out in terms thereof. The Pension Rules envisage that pension should be calculated only  on the basis  of  the emoluments last  drawn.  No order, therefore, could be issued which would be contrary to or inconsistent therewith.  Such  emoluments  were  to  be  reckoned  only  in  terms  of  the statutory  rules.  If  the State  had taken a conscious decision to  extend the benefit  of  the UGC pay scales w.e.f.  1-1-1996,  to the appellants,  allowing them to draw their pay and allowances in terms thereof, we fail to see any reason as to why the pensionary benefits would not be extended to them from the said date.  

xxx xxx xxx 28. The impugned order furthermore is opposed to the basic principles of law inasmuch as by reason of executive instructions an employee cannot be deprived of a vested or accrued right. Such a right to draw pension to the extent  of  50% of  the  emoluments,  computed  in  terms  of  the  rules,  w.e.f. 1-1-1996, vested in the appellants in terms of government notification read with Rule 296 of the Rules.”

36. It was also the contention of learned counsel for the respondent-employees,

that the present controversy needs to be examined from the perspective, that the

respondent-employees did not make any endeavour to claim pension as a matter of

parity  with  Government  employees,  in  the  State  of  Himachal  Pradesh.   It  was

Page 51

51

submitted, that legally such a claim would not be sustainable, because civil servants

in  the  State  of  Himachal  Pradesh,  and  employees  of  Government  owned

corporations in the State, can not be considered as entitled to the same monetary

benefits.   It  was however pointed out,  that  insofar as the present controversy is

concerned,  the  State  of  Himachal  Pradesh  at  its  own,  had  granted  parity  to

employees  of  Government  owned  corporations  on  the  subject  of  pension,  with

Government employees in the State.  Examined in the above context, according to

learned counsel, it is apparent that the right of employees of Government owned

corporations,  in  the  State  of  Himachal  Pradesh,  on  the  issue of  pension,  stood

conceded in their favour, on the basis of ‘the 1999 Scheme’.  It was in the above

view of the matter, that learned counsel for the respondent-employees asserted, that

the revocation of a benefit which the State Government conceded to employees of

Government owned corporations, was per se arbitrary, and as such, not sustainable

in law.

37. Learned counsel for the respondent-employees raised a plea of discrimination

as well.  It was submitted, that through the repeal notification dated 2.12.2004, ‘the

1999 Scheme’ was sought  to  be withdrawn for  one set  of  employees,  and was

sought to be retained for another set of employees.  In this behalf it was submitted,

that the action of the State Government in fixing the date of retirement, as a cut-off

date for withdrawing or sustaining pensionary benefits, is clearly unacceptable in

law.  In this behalf it was pointed out, that this Court on a number of occasions held,

that  the date of  retirement,  cannot  be a valid  criterion for  classification.   It  was

submitted, that the fortuitous circumstance (date) of retirement, by a day earlier or a

day later (than the cut-off date), would result  in discriminatory consequences, for

Page 55

55

Mangal Singh, (2011) 11 SCC 702, wherein it has been held as under:-

“48. The concept  of  “pension”  has also been considered in  Corpus Juris Secundum, Vol. 70, at p. 423 as thus:

“A  pension  is  a  periodical  allowance  of  money  granted  by  the government in consideration or recognition of meritorious past services, or of loss or injury sustained in the public service. A pension is mainly designed to assist the pensioner in providing for his daily wants, and it presupposes the continued life of the recipient.”

Based  on  the  above,  it  was  the  contention  of  learned  counsel,  that  the  State

Governments’ inference, based on the report of the Committee, dated 15.11.2003,

that ‘the 1999 Scheme’ was not viable, was clearly unacceptable.  In this behalf,

learned counsel invited the Court’s attention to the following observations, recorded

in the said report:-

“14. After  determining  the  magnitude  of  inflows  and  outflows,  the sustainability  of  the  corpus  has  been analysed assuming average interest income from corpus investment at various levels of interest over a period of 10 years.  The highest rate of interest has been assumed to be 6.5% and the lowest 5.5%.  In each scenario, the net surplus available for ploughing back into  the  pension  fund starts  declining  from the  6 th year  onwards.   This  is essentially due to the fact that with dwindling fresh recruitments, the pension liabilities will continue to increase over the years, but the inflows would decline due to reduced contributions.  Details of the calculations are as under:-

5.5% Annexure-F 5.75% Annexure-F-I 6.00% Annexure-F-II 6.25% Annexure-F-III 6.50% Annexure-F-IV”

It was submitted, that there was no legitimate basis for recording such a conclusion.

40. It was also the contention of learned counsel, that the judgment rendered by

the High Court, rightly negated the financial impact of ‘the 1999 Scheme’, because

in terms of the conclusions drawn in the judgment, the same would not be applicable

to future employees.  And the deficiency in the financial resources was accordingly

fastened on the State Government.  On the issue in hand, it was submitted, that a

number of  employees,  who became members of  ‘the 1999 Scheme’,  and would

Page 56

56

retire after 2.12.2004 (i.e. the cut-off date, determined under the repeal notification,

dated 2.12.2004) is a definite number.  In this behalf it was pointed out, that if the

employees,  who  became members  of  ‘the  1999  Scheme’,  are  to  be  taken  into

consideration, there would be 6,730 employees, who would draw pension on their

retirement.  It was accordingly submitted, that there would be no further increase in

the liability under ‘the 1999 Scheme’.  In order to demonstrate that the available

funds  accumulated  on  account  of  the  employee’s  contribution  to  the  EPF/CPF

concerned, were sufficient to meet the liability, to administer the pension scheme, it

was submitted, that the same has increased from 56 crores in 2003 to 253 crores in

2015.  It was pointed out, that the aforesaid figures emerged, despite the withdrawal

of provident fund amounts, by a number of employees.  It was, therefore submitted,

that  payment  of  pensionary  benefits  to  6,730  employees,  was  well  within  the

financial  reach  of  the  State  Government,  and  that,  the  decision  of  the  State

Government to issue the repeal notification, on the ground that ‘the 1999 Scheme’

was not financially viable, was not acceptable.   

41. It was also the contention of learned counsel for the respondent-employees,

that all the State owned corporations were fully controlled by the Government.  All

shares in the corporations were held by the State Government.  The management of

all  the  corporations,  was  also  under  the  direct  control  and  supervision  of  the

Government.  Accordingly it was submitted, that the ultimate authority in determining

the  conditions  of  service  of  the  concerned  corporations,  was  vested  with  the

Government.  In this behalf, reliance was placed on Articles 51 and 52 of Articles of

Association  of  the  Himachal  Pradesh  State  Forest  Development  Corporation

Limited.  It was highlighted that similar Articles of Association governed the other

Page 57

57

corporations, as well.  It was therefore submitted, that the State Government, had no

business, to withdraw itself, from its responsibility and commitment.   

42. It  was,  therefore  submitted,  that  the  Government  has  consistently  been

extending the benefit of similar conditions of service, to employees of Government

owned corporations, as are available to Government employees in the State.  The

Government having taken a conscious decision to extend pensionary benefits to all

employees of Government owned corporations, under ‘the 1999 Scheme’, is clearly

precluded from withdrawing the same,  specially  on account  of  the fact,  that  the

corporations  under  consideration,  are  instrumentalities  of  the  State  in  terms  of

Article  12 of  the Constitution of  India.   According to  learned counsel,  ‘the 1999

Scheme’ was liable  to  be treated as a welfare measure,  extended by the State

Government to all employees, and therefore, it should not shirk its responsibility, to

fulfill any financial deficiency therein, out of the Government treasury.  In the above

view of the matter it was submitted, that the impugned judgment rendered by the

High Court, deserved no interference.

43. It  was  also  asserted,  that  even  if  it  was  assumed,  that  the  report  of  the

committee, dated 15.11.2003, with reference to the status of  the corpus fund, is

correct, still  the same is liable to be rejected because the committee had sought

views of 17 corporations/boards covered by ‘the 1999 Scheme’, however, it received

views  of  7  corporations  only,  namely,  Himachal  Pradesh  Agro  Industries

Corporation,  Himachal  Pradesh  Tourism  Development  Corporation,  Himachal

Pradesh State Industrial Development Corporation, Himachal Pradesh Horticultural

Produce Marketing and Processing Corporation Ltd.,  Himachal  Pradesh Housing

Board,  Himachal  Pradesh  State  Forest  Development  Corporation  Ltd.,  and

Page 61

61

placed reliance on State of Assam v. Barak Upatyaka D.U. Karmachari  Sanstha,

(2009) 5 SCC 694, and drew our attention to the following:-

“2. By that order the Division Bench upheld the order dated 23.12.1999 of the  learned  Single  Judge  in  Civil  Rule  No.  2996/1995  allowing  the respondent's  writ  petition  and  directing  the  state  government  to  sanction financial assistance by way of grant-in-aid to Cachar and Karimganj District Milk  Producers'  Cooperative  Union  Limited  (“CAMUL”,  for  short)  so  as  to enable CAMUL to make regular payment of monthly salaries, allowances as also the arrears to its employees.

xxx xxx xxx 4. It is contended that the State Government had all-pervasive control over the affairs and management of CAMUL and therefore it should be treated as a department of the Government of Assam, though registered as a co-operative society  by  lifting  the  corporate  veil.  It  was  further  contended  that  State Government was responsible and liable to pay the salaries and emoluments of the employees of CAMUL and it was not justified in withholding the grant amount.  5. The  respondent  Union  therefore  sought  a  direction  to  the  State Government to release the arrears of pay and allowances of employees of CAMUL with effect from December 1994 and for a direction to continue to pay the salary and allowances to the employees of CAMUL, every month in future. In  addition  to  the  state  government  (Respondent  1)  and  its  officers (Respondents 2 to 4), the Union of India (Respondent 5) and CAMUL and its Managing Director (Respondents 6 and 7) were impleaded as parties to the writ petition. 6. The State Government opposed the petition. It inter-alia contended that the grant-in-aid was extended for helping CAMUL in its different development activities; that under a Centrally sponsored scheme, between 1981 to 1986, the earmarked amount was released on 50:50 basis by the Central and State Government with 70% loan component and 30% as grant component; that though the loan component was not repaid by CAMUL, the State Government continued  the  grant-in-aid  for  purposes  of  development  activities;  that  the State  Government  had  also  provided  Rs.43.60  lakhs  for  developing  the milk-processing  infrastructure  of  CAMUL;  that  despite  such  assistance, CAMUL became  defunct  and  stopped  all  its  activities  and  thereafter  the Silchar  Town  Milk  Supply  Project  was  being  run  by  the  State's  Dairy Development Department itself; that at no time, the State Government made any commitment or agreed to bear the salaries of employees of CAMUL or any other similar societies; that CAMUL had to generate its own funds and resources to pay the salaries of its staff; and that as there was no relationship of  employer  and  employee  between  the  State  Government  and  the employees of  CAMUL,  it  was  not  responsible  to  bear  or  pay any  amount towards the salaries of the employees of CAMUL. 7. The learned Single Judge allowed the writ  petition.  He held that  the State Government through its Veterinary Department undertook the Integrated Cattle Development Projects (ICDP) in various districts of Assam; and as a

Page 65

65

survival.” 20. It  is  thus  clear  that  directions  were  not  based  on  legal  right  of  the employees,  but  were  made  to  meet  a  human  right  problem  involving starvation deaths and suicides. But in the case on hand, relief is claimed and granted by proceeding on the basis that the employees of corporations/bodies answering the definition of “State” have a legal right to get their salaries from the  State  Government.  In  fact     Kapila  Hingorani  (I)     and    Kapila  Hingorani (II)     specifically negative such a right.”

46. We shall  now endeavour  to  consider  the various legal  parameters  on the

basis whereof, learned counsel for the rival parties have premised their respective

submissions.

47. First and foremost, it is essential for us to determine whether or not a vested

right came to be created in the employees of the corporate bodies, when they came

to be governed by ‘the 1999 Scheme’.  The submission at the hands of learned

counsel for the appellant-State was, that no such vested right was created, by the

time the repeal notification was issued on 2.12.2004.  The contention of  learned

counsel representing the State was, that under paragraph 4 of ‘the 1999 Scheme’, a

right to draw pension would emerge, only when a concerned employee attained the

age of superannuation, subject to the condition that he had rendered the postulated

qualifying service.   It  was submitted,  that  prior  to the fulfillment  of  the aforesaid

condition,  no employee under ‘the 1999 Scheme’,  could be considered as being

possessed of a vested right, to receive pension.

48. Having given our thoughtful consideration to the aforesaid submission, we are

of  the  view,  that  such  of  the  employees  who  had  exercised  their  option  to  be

governed  by  ‘the  1999  Scheme’,  came  to  be  regulated  by  the  said  scheme,

immediately on their having submitted their option.  In addition to the above, all such

employees  who  did  not  exercise  any  option  (whether  to  be  governed,  by  the

Employees’  Provident  Funds  Scheme,  1995,  or  by  ‘the  1999  Scheme’),  would

Page 66

66

automatically be deemed to have opted for ‘the 1999 Scheme’.  All new entrants

would naturally be governed by ‘the 1999 Scheme’.  All those who had moved from

the  provident  fund  scheme  to  the  pension  scheme,  would  be  deemed  to  have

consciously,  foregone  all  their  rights  under  the  Employees’  Provident  Funds

Scheme, 1995.  It is of significance, that all the concerned employees by moving to

‘the 1999 Scheme’, accepted, that the employer’s contribution to their provident fund

account (and the accrued interest thereon, upto 31.3.1999), should be transferred to

the corpus, out of which their pensionary claims, under ‘the 1999 Scheme’ would be

met.  It  is therefore not possible for us to accept, that the concerned employees

would be governed by ‘the 1999 Scheme’ only from the date on which they attained

the age of superannuation, and that too - subject to the condition that they fulfilled

the  prescribed  qualifying  service,  entitling  them  to  claim  pension.   Every  fresh

entrant has the statutory protection under the Provident Fund Act.  All fresh entrants

after the introduction of ‘the 1999 Scheme’, were extended the benefits of ‘the 1999

Scheme’,  because  of  the  exemption  granted  by  competent  authority  under  the

Provident Fund Act.  They too, therefore possessed similar rights as the optees.

49. With  effect  from  1.4.1999,  the  employees  who  had  opted  for  ‘the  1999

Scheme’  (or,  who  were  deemed  to  have  opted  for  the  same)  were  no  longer

governed  by  the  provisions  of  the  Provident  Fund  Act  (under  which  they  had

statutory  protection,  for  the  payment  of  provident  fund).   Consequent  upon  an

exemption  having  been  granted  to  the  concerned  corporate  bodies  by  the

competent authority under the Provident Fund Act, the Employees Provident Funds

Scheme,  1995,  was  replaced,  by  ‘the  1999  Scheme’.   All  direct  entrants  after

1.4.1999, were also entitled to the rights and privileges of ‘the 1999 Scheme’.  We

Page 67

67

are therefore of the considered view, that the submissions advanced on behalf of the

State of Himachal Pradesh premised on the assertion, that no vested right accrued

to the employees of the concerned corporate bodies, on the date when ‘the 1999

Scheme’ became operational (with effect from 1.4.1999), or to the direct entrants

who entered service thereafter, cannot be accepted.  In this behalf it would also be

relevant  to  emphasize,  that  as  soon  as  the  concerned  employees  came  to  be

governed by ‘the 1999 Scheme’, a contingent right came to be vested in them.  The

said contingent right created a right in the employees to claim pension, at the time of

their retirement.  Undoubtedly, the aforesaid contingent right would crystalise only

upon  the  fulfillment  of  the  postulated  conditions,  expressed  on  behalf  of  the

appellants (on having rendered, the postulated qualifying service).  However, once

such a contingent right was created, every employee in whom the said right was

created,  could  not  be  prevented  or  forestalled,  from  fulfilling  the  postulated

conditions, to claim pension.  Any action pre-empting the right to pension, emerging

out of the conscious option exercised by the employees, to be governed by ‘the

1999 Scheme’ (or to the direct entrants after the introduction of ‘the 1999 Scheme’),

most definitely did vest a right in the respondent-employees.

50. We are also of the view, that there is merit  in the contention advanced on

behalf of the respondent-employees, inasmuch as, the seeds of the right to receive

pension,  emerge from the very  day, an employee enters a pensionable service.

From that very date, the employee commences to accumulate qualifying service.

His claim for pension would obviously crystalise, when he acquires the minimum

prescribed qualifying service, and also, does not suffer a disqualification, disentitling

him to a claim for pension.

Page 68

68

51. In the above view of the matter, it is not possible for us to accept, that the

rights of the concerned employees under ‘the 1999 Scheme’, can be stated to get

vested,  only  on  the  date  when  a  concerned  employee  would  attain  the  age  of

superannuation, and satisfy all the pre-requisites for a claim towards pension.  We

are  also  persuaded  to  accept  the  contention  advanced  on  behalf  of  the

respondent-employees, that the cause of action to raise a claim for pension, would

arise on the date when a concerned employee actually retires from service.  Any

employee  governed  by  a  pension  scheme,  enrolls  to  earn  qualifying  service,

immediately on his enrolment into the pensionable service.  Every such employee

must be deemed to have commenced to invest in his eventual claim for pension,

from the very day he enters service.  More so, in the present controversy, by having

expressly  chosen  to  forego  his  rights,  under  the  Employees’  Provident  Funds

Scheme, 1995.

52. We shall deal with the issue, whether or not such a contingent right, as was

vested in the respondent-employees on their having opted for ‘the 1999 Scheme’ (or

in the fresh entrants, on their very appointment), was binding and irrevocable, at a

later stage of our consideration.

53. The second most important issue which deserves to be addressed by us, in

the  facts  and  circumstances  of  the  present  case  is,  whether  or  not  the  State

Government  was  justified  in  postulating  a  cut-off  date,  by  which  some  of  the

employees  governed  by  ‘the  1999  Scheme’  (those  who  had  retired  prior  to

2.12.2004) were entitled to draw pension under ‘the 1999 Scheme’, whereas others,

who had not retired by the time the repeal notification was issued on 2.12.2004,

were deprived of such benefits.  In this behalf, the contention of the learned counsel

Page 69

69

for the respondent-employees was, that all those who had opted (or deemed to have

opted) for ‘the 1999 Scheme’, and all the new entrants after the introduction of ‘the

1999 Scheme’, constituted a homogenous class, and it was impermissible for the

State  Government,  to  have  treated  them differently.  It  was  submitted,  that  the

aforesaid classification was invidious, inasmuch as, there was no reasonable basis

for  such classification,  nor  was  there  any  discernable  object,  for  bifurcating  the

homogenous  class  of  pensioners.   It  was  submitted,  that  whilst  those who had

retired  on  the  date  of  the  repeal  notification,  would  be  entitled  to  pensionary

benefits, those who retired on the following day, would be deprived of the same.

Learned counsel for the rival parties have, relied on a series of judgments in support

of the respective propositions canvassed by them.  We have extracted the same,

while recording their submissions.

54. Having given our thoughtful consideration to the issue canvassed, and having

gone through the judgments cited, we are of the considered view, that this Court has

repeatedly  upheld  a  cut-off  date,  for  extending  better  and  higher  pensionary

benefits, based on the financial health of the employer.  A cut-off date can therefore

legitimately be prescribed for extending pensionary benefits, if the funds available

cannot assuage the liability, to all the existing pensioners.  We are therefore satisfied

to conclude, that it is well within the authority of the State Government, in exercise of

its  administrative  powers  (which  it  exercised,  by  issuing  the  impugned  repeal

notification dated 2.12.2004) to fix a cut-off date, for continuing the right to receive

pension  in  some,  and  depriving  some  others  of  the  same.   This  right  was

unquestionably exercised by the State Government, as determined by this Court, in

the  R.R. Verma case (supra), wherein this Court held, that the Government was

Page 70

70

vested with the inherent power to review.  And that the Government was free to alter

its  earlier  administrative  decisions  and  policy.   Surely,  this  is  what  the  State

Government  has  done in  the  present  controversy.  But  this  Court  in  the  above

mentioned  judgment,  placed  a  rider  on  the  exercise  of  such  power  by  the

Government.  In that, the exercise of such power, should be in consonance with all

legal and statutory obligations.

55. It  is  equally  true,  that  the  power  of  administrative  review  can  only  be

exercised,  for  a  good  and  valid  justification.   Such  justification  besides  being

founded on reasonable consideration, should also not be violative of any legal right -

statutory  or  constitutional,  vested  in  the  affected  employees.   Insofar  as  the

permissibility  of  the  administrative  action  taken,  in  issuing  the  impugned  repeal

notification dated 2.12.2004 is concerned, whether the said power was exercised by

the State Government for good and valid reasons, and/or whether the same violated

any statutory or constitutional right vested in the respondent-employees, shall be

examined by us in the succeeding paragraphs.

56. In  order  to  demonstrate,  that  the  repeal  notification  dated  2.12.2004,  was

impermissible in law, reliance was placed on the  U.P. Raghavendra Acharya case

(supra).  We are of the view, that the above judgment does not have any bearing on

the  facts  and  circumstances  of  this  case.   In  the  above  judgment,  the  primary

contention which weighed with this Court, in rejecting the contention advanced by

the State Government was,  that  through an executive determination (by a letter,

dated 17.12.1993), the State Government had breached a statutory rule, regulating

the fixation of pension (Rule 296, of the Karnataka Civil Services Rules).  The above

position is not available in the present case, inasmuch as, no contention has been

Page 71

71

advanced at the behest of the respondent-employees, that the action taken by the

State Government (in issuing the repeal notification, dated 2.12.2004), violated any

legal obligation or statutory right.  So also, the judgment relied upon on behalf of the

respondent-employees in the  D.S. Nakara case (supra),  wherein the employees’

claim for pension, was based on existing rules.   And even so, in the Chairman,

Railway Board case (supra), wherein it was held, that vested rights under the rules,

could not  be taken away.  It  would also be relevant  to mention,  that  in  the last

judgment referred to above, it was observed, that the employees who had retired

from service, had been deprived of their pensionary rights, as the amended rule was

not prospective, but was retrospective.  In the instant case, the repeal notification

does  not  adversely  affect  those  employees  who  had  retired  prior  to  2.12.2004,

before  the  said  notification  was  issued.   The  above  referred  judgment  is  also,

therefore  inapplicable  to  the  present  controversy.   The  conclusion  recorded

hereinabove, also emerges on a perusal  of  paragraphs 31 and 33 of  the above

judgment.   It  is  therefore apparent,  that  the validity  of  the impugned notification

cannot be assailed on the basis of the judgments cited above.  We shall now deal

with  the legal  submissions advanced on behalf  of  the respondent-employees,  in

their attempt to invalidate the repeal notification, dated 2.12.2004.

57. The first legal contention advanced on behalf of the respondent-employees

was based on the principle of estoppel/promissory estoppel.  It was the assertion of

learned counsel, that the respondent-employees had altered their position to their

detriment, on their having opted (or deemd to have opted) to be governed by ‘the

1999 Scheme’.  In order to highlight the above assertion it was submitted, that the

entire employer’s contribution towards provident fund (alongwith, the accumulated

Page 72

72

interest thereon), was foregone by the respondent-employees.  The said amount

unquestionably  belonged  to  the  respondent-employees,  and  their  right  over  the

same was  protected  under  the  Provident  Fund Act.   It  was  submitted,  that  the

aforesaid option was exercised by the respondent-employees, only when the offer to

extend pensionary benefits,  was voluntarily made to the employees by the State

Government.  It was contended, that the promise to pay pensionary benefits, which

was  contained  in  the  offer  of  the  State  Government,  could  not  be  unilaterally

revoked, under the principle of estoppel/promissory estoppel.  It was submitted, that

the instant  action of  the State  Government  (taken by way of  issuing the repeal

notification,  dated 2.12.2004),  would seriously  impair  the financial  benefits  which

had  accrued  to  the  respondent-employees,  under  ‘the  1999  Scheme’.   It  was

pointed out, that all  that the respondent-employees had gained, by foregoing the

employer’s  contribution  (and  the  accrued  interest,  thereon),  has  been  lost,

consequent upon the issuance of the impugned notification, dated 2.12.2004.

58. We  are  of  the  considered  view,  that  the  principle  of  estoppel/promissory

estoppel cannot be invoked at the hands of the respondent-employees, in the facts

and circumstances of this case.  It is not as if the rights which had accrued to the

respondent-employees  under  the  Employees’  Provident  Funds  Scheme,  1995

(under  which  the  respondent-employees  were  governed,  prior  to  their  being

governed  by  ‘the  1999  Scheme’)  have  in  any  manner  been  altered  to  their

disadvantage.  All that was taken away, and given up by the respondent-employees

by  way  of  foregoing  the  employer’s  contribution  upto  31.3.1999  (including,  the

accrued interest thereon), by way of transfer to the corpus fund, was restored to the

respondent-employees.  All the respondent-employees, who have been deprived of

Page 73

73

their pensionary claims by the repeal notification dated 2.12.2004, would be entitled

to all the rights which had accrued to them, under the Employees’ Provident Funds

Scheme,  1995.   It  is  therefore,  not  possible  for  us  to  accept,  that  the

respondent-employees can be stated to have been made to irretrievably alter their

position, to their detriment.  Furthermore, all the corporate bodies (with which the

respondent-employees, are engaged) are independent juristic entities,  as held in

State of Assam v. Barak Upatyaka D.U. Karmachari  Sanstha (supra).  The mere

fact,  that  the corporate bodies under reference,  are fully  controlled by the State

Government, and the State Government is the ultimate authority to determine their

conditions  of  service,  under  their  Articles  of  Association,  is  inconsequential.

Undoubtedly, the respondent-employees are not Government employees.  The State

Government,  as  a  welfare  measure,  had  ventured  to  honestly  extend  some

post-retiral  benefits  to  employees  of  such  independent  legal  entities,  on  the

mistaken belief, arising out of a miscalculation, that the same can be catered to, out

of available resources.  This measure was adopted by the State Government, not in

its  capacity  as  the  employer  of  the  respondent-employees,  but  as  a  welfare

measure.  When it  became apparent, that the welfare measure extended by the

State Government, could not be sustained as originally understood, the same was

sought to be withdrawn.  We are of the view that the principle invoked on behalf of

the  respondent-employees,  cannot  be  applied  in  the  facts  of  the  present  case,

specially, in  view  of  the  decision  in  M/s.  Bhagwati  Vanaspati  Traders  v. Senior

Superintendent of Post Offices, Meerut, AIR 2015 SC 901, wherein this Court held

as under:-

“The first contention advanced at the hands of the learned counsel for the appellant was based on the decision rendered by this Court in Tata Iron &

Page 74

74

Steel Co. Ltd. v. Union of India & Ors., (2001) 2 SCC 41, wherefrom learned counsel invited our attention to the following observations:-

“20. Estoppel by conduct in modern times stands elucidated with the decisions of the English Courts in Pickard v. Sears, 1837 6 Ad. & El. 469, and its gradual elaboration until placement of its true principles by the Privy Council in the case of Sarat Chunder Dey v. Gopal Chunder Laha, (1891-92) 19 IA 203, whereas earlier Lord Esher in the case of Seton  Laing  Co.  v. Lafone, 1887  19  Q.B.D.  68, evolved  three  basic elements of the doctrine of Estoppel to wit:

“Firstly, where a man makes a fraudulent misrepresentation and another man acts upon it to its true detriment: Secondly, another may be where a man makes a false statement negligently though without fraud and another person acts upon it: And thirdly, there may be circumstances under which, where a misrepresentation is made  without  fraud  and  without  negligence,  there  may  be  an Estoppel.”

Lord Shand, however, was pleased to add one further element to the effect that there may be statements made, which have induced other party to do that  from which otherwise he would have abstained and which cannot  properly  be characterized as misrepresentation. In this context, reference may be made to the decisions of the High Court of Australia in the case of Craine v. Colonial Mutual Fire Insurance Co. Ltd., 1920 28 C.L.R. 305. Dixon, J. in his judgment in Grundt v. The Great  Boulder Pty. Gold Mines Pty. Ltd., 1938 59 C.L.R.  641, stated that:  

"In measuring the detriment, or demonstrating its existence, one does not  compare the position of  the representee,  before and after acting upon the representation, upon the assumption that the  representation  is  to  be  regarded  as  true,  the  question  of estoppel does not arise. It is only when the representor wished to disavow the assumption contained in his representation that an estoppel  arises,  and  the  question  of  detriment  is  considered, accordingly,  in  the  light  of  the  position  which  the  representee would be in if the representor were allowed to disavow the truth of the representation."

(In  this  context  see  Spencer  Bower  and  Turner:  Estoppel  by Representation,  3rd  Ed.).  Lord  Denning  also  in  the  case  of  Central Newbury  Car  Auctions  Ltd.  v.  Unity  Finance  Ltd., 1956  (3)  All  ER 905, appears to have subscribed to the view of Lord Dixon, J. pertaining to the test of 'detriment' to the effect as to whether it appears unjust or unequitable that the representator should now be allowed to resile from his representation, having regard to what the representee has done or refrained from doing in reliance on the representation, in short, the party asserting the estoppel must have been induced to act to his detriment. So long as the assumption is adhered to,  the party who altered the situation upon the faith of it cannot complain. His complaint is that when afterwards the other party makes a different state of affairs, the basis of an assertion of right against him then, if it is allowed, his own original

Page 75

75

change  of  position  will  operate  as  a  detriment,  (vide  Grundts:  High Court of Australia (supra)). 21. Phipson on Evidence (Fourteenth Edn.) has the following to state as regards estoppels by conduct.

“Estoppels  by  conduct,  or,  as  they  are  still  sometimes  called, estoppels by matter in pais, were anciently acts of notoriety not less solemn and formal than the execution of a deed, such as livery of seisin, entry, acceptance of an estate and the like, and whether a party had or had not concurred in an act of this sort was  deemed  a  matter  which  there  could  be  no  difficulty  in ascertaining, and then the legal consequences followed (Lyon v. Reed, (1844)  13  M  &  W  285  (at  p.  309).   The  doctrine  has, however,  in  modern  times,  been  extended  so  as  to  embrace practically  any  act  or  statement  by  a  party  which  it  would  be unconscionable  to  permit  him  to  deny.  The  rule  has  been authoritatively  stated  as  follows:  ‘Where  one  by  his  words  or conduct  willfully  causes  another  to  believe  the  existence  of  a certain state of things and induces him to act on that belief so as to alter this own previous position, the former is concluded from averring against the latter a different state of things as existing at the same time.’ (Pickard v. Sears (supra)).  And whatever a man's real  intention  may  be,  he  is  deemed  to  act  willfully  ‘if  he  so conducts  himself  that  a  reasonable  man  would  take  the representation to be true and believe that it was meant that he should act upon it.’  (Freeman v. Cooke, 1848 (2) Exch. 654: at p. 663).

Where  the  conduct  is  negligent  or  consists  wholly  of omission, there must be a duty to the person misled (Mercantile Bank  v.  Central  Bank, 1938  AC  287  at  p.  304, and  National Westminster  Bank  v.  Barclays  Bank  International, 1975  Q.B. 654).  This principle sits oddly with the rest of the law of estoppel, but it appears to have been reaffirmed, at least by implication, by the House of Lords comparatively recently (Moorgate Mercantile Co.  Ltd.  v. Twitchings, (1977) AC 890).   The explanation is  no doubt that this aspect of estoppel is properly to be considered a part of the law relating to negligent representations, rather than estoppel properly so-called.  If two people with the same source of information assert the same truth or agree to assert the same falsehood at the same time, neither can be estopped as against the  other  from asserting  differently  at  another  time (Square  v. Square, 1935 P. 120).”

22. A bare perusal of the same would go to show that the issue of an estoppel by conduct can only be said to be available in the event of there  being  a  precise  and  unambiguous  representation  and  on  that score  a  further  question  arises  as  to  whether  there  was  any unequivocal assurance prompting the assured to alter his position or status. The contextual facts however, depict otherwise. Annexure 2 to the  application  form  for  benefit  of  price  protection  contains  an

Page 76

76

undertaking to the following effect:- “We hereby undertake to refund to EEPC Rs… the amount paid to  us  in  full  or  part  thereof  against  our  application  for  price protection.   In  terms  of  our  application  dated  against  exports made  during...  In  case  any  particular  declaration/certificate furnished by us against our above referred to claims are found to be incorrect or any excess payment is determine to have been made due to  oversight/wrong calculation  etc.  at  any  time.  We also undertake to refund the amount within 10 days of receipt of the  notice  asking  for  the  refund,  failing  which  the  amount erroneously paid or  paid in excess shall  be recovered from or adjusted against any other claim for export benefits by EEPC or by the licensing authorities of CCI & C.”

and it is on this score it may be noted that in the event of there being a specific undertaking to refund for any amount erroneously paid or paid in excess (emphasis supplied), question of there being any estoppel in our view would not arise.  In this context  correspondence exchanged between  the  parties  are  rather  significant.  In  particular  letter  dated 30.11.1990 from the Assistant Development Commissioner for Iron & Steel and the reply thereto dated 8.3.1991 which unmistakably record the factum of non-payment of JPC price.”

It is apparent from the factual position narrated above, that the original action of the

State Government was bonafide, and for the welfare of the respondent-employees.

The  State  Government  cannot  be  accused  of  having  misrepresented  to  the

respondent-employees in any manner.  The provisions of ‘the 1999 Scheme’, clearly

bring  out,  that  the  pension  scheme  would  be  self-financing,  and  would  be

administered from the corpus fund created out of the employer’s contribution to their

CPF  account  (alongwith  the  accrued  interest  thereon).   When  the  above

foundational basis for introducing the pension scheme, was found to be an incorrect

determination/calculation, the same was withdrawn.  In the above view of the matter,

it  would  not  be  possible  to  infer,  that  the  State  Government,  induced  the

respondent-employees, to move to ‘the 1999 Scheme’.  Accordingly, it would not be

possible to apply the principle of estoppel/promissory estoppel, to the facts of the

present case.

Page 77

77

59. We are also of the view, that the principle of estoppel/promissory estoppel, is

not applicable in a situation, where the original position, which the individual enjoyed

before altering his position (by opting, or deemingly opting - for being governed by

‘the 1999 Scheme’) can be restored.  For the instant proposition, reference may be

made to the judgment in Pratima Chowdhury v. Kalpana Mukherjee, (2014) 4 SCC

196, wherein it was held as under:-

“We shall, however, endeavour to deal with the principle of estoppel, so as to figure whether, the rule contained in Section 115 of the Indian Evidence Act could have been invoked, in the facts and circumstances of the present case. Section 115 of the Indian Evidence Act is being extracted hereinabove:-

“115. Estoppel.-  When  one  person  has,  by  his  declaration,  act  or omission,  intentionally  caused  or  permitted  another  person  to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representative, to deny the truth of that thing.  

Illustration A intentionally and falsely leads B to believe that certain land belongs to A, and thereby induces B to buy and pay for it.  The land afterwards becomes the property of A, and A seeks to set aside the sale on the ground that, at the time of the sale, he had no title. He must not be allowed to prove his want of title.”

It needs to be understood, that the rule of estoppel is a doctrine based on fairness.  It postulates, the exclusion of, the truth of the matter.  All, for the sake of fairness.  A perusal of the above provision reveals four salient pre conditions before invoking the rule of estoppel.  Firstly, one party should make a factual representation to the other party.  Secondly, the other party should accept  and rely  upon the aforesaid factual  representation.   Thirdly, having relied on the aforesaid factual representation, the second party should alter his position.  Fourthly, the instant altering of position, should be such, that it would  be  iniquitous  to  require  him to  revert  back  to  the  original  position. Therefore,  the  doctrine  of  estoppel  would  apply  only  when,  based  on  a representation by the first party, the second party alters his position, in such manner, that it would be unfair to restore the initial position.”

Since  there  is  no  dispute,  that  the  original  position  (the  rights  enjoyed  by  the

respondent-employees,  under  the  Employees  Provident  Fund  Scheme,  1995)

available before ‘the 1999 Scheme’ was given effect to, has actually been restored,

we are of the considered view, that the principle sought to be invoked on behalf of

Page 78

78

the respondent-employees, cannot augur in a favourable determination for them,

because it is not possible to conclude, that it would be unfair to restore them to their

original position.  In fact, in view of the financial incapacity to continue ‘the 1999

Scheme’, the only fair action would be to restore the employees, to the Employees

Provident  Funds  Scheme,  1995.   This  has  actually  been  done  by  the  State

Government.   It  is  therefore  not  possible  in  law,  to  apply  the  principle  of

estoppel/promissory estoppel, to the facts of the present controversy.

60. Moving to the next contention.  A serious dispute has been raised before us, in

respect of the financial viability of ‘the 1999 Scheme’.  Insofar as the appellant-State

is  concerned,  it  was  asserted  on  its  behalf,  that  a  high  level  committee,  was

constituted by the Finance Department of the State Government, on 21.1.2003.  The

said committee comprised of  managing directors,  of  the concerned public sector

undertakings  and  corporations.   The  task  of  the  high  level  committee  was,  to

examine the financial viability of ‘the 1999 Scheme’.  The said committee submitted

a report  dated  28.10.2003,  returning a finding,  that  ‘the  1999 Scheme’ was not

financially viable, and would not be self-sustaining.  It is therefore, that a tentative

decision was taken by the State Government, to withdraw ‘the 1999 Scheme’.

61. To determine the modalities for withdrawing ‘the 1999 Scheme’, on the basis

of the above report, the matter was jointly examined by the Finance Department and

the Law Department  of  the State  Government,  wherein,  in  consonance with  the

advice tendered by the Law Department it  was decided, that ‘the 1999 Scheme’

should  not  be  withdrawn  retrospectively.   Based  on  the  advice  of  the  Law

Department,  it  was  finally  decided,  that  those  who  had  commenced  to  draw

pensionary benefits under ‘the 1999 Scheme’, would not be deprived of the same.

Page 79

79

And that, ‘the 1999 Scheme’ should be withdrawn prospectively, for those whose

right to receive pensionary benefits had not arisen, as they had not yet retired from

service.  In the above view of the matter, it was contended on behalf of the State

Government,  that  the  action  of  the  State  Government,  in  issuing  the  repeal

notification dated 2.12.2004, was certainly not an arbitrary exercise of the power of

administrative review.  It was submitted, that the same was based on two factors.

Firstly, the financial unviability of the scheme.  And secondly, those who had already

commenced to draw pensionary benefits under ‘the 1999 Scheme’, were not to be

affected.   It  was therefore pointed out,  that  the classification made by the State

Government was reasonable and justifiable in law, and it also had a nexus to the

object sought to be achieved.

62. It  is  in  the  above  scenario,  that  the  legality  and  justiciability  of  ‘the  1999

Scheme’, will have to be examined.  The submission advanced at the behest of the

respondent-employees was, that it was not permissible for the State Government to

advance any such plea, because the State Government must be deemed to have

examined the financial viability of the scheme, before ‘the 1999 Scheme’ was given

effect to.  And that, it does not lie in the mouth of the State Government, after giving

effect to ‘the 1999 Scheme’, to assert that ‘the 1999 Scheme’ was not financially

viable.  It was insisted, that even if data pertaining to the financial viability of the

scheme, as was sought to be relied upon was correct, financial deficiencies if any,

could be catered to by the State Government,  from the vast  financial  resources

available to it.  And further, that ‘the 1999 Scheme’ in terms of the determination

rendered by the High Court, even if permitted to be repealed, should not impact the

rights of the respondent-employees, towards pensionary benefits.

Page 80

80

63. We have given our thoughtful consideration to the above contention.  It is not

possible  for  us  to  accept  the  instant  contention,  advanced  on  behalf  of  the

respondent-employees.   The  calculations  projected  at  the  behest  of  the  State

Government, to demonstrate the financial unviability of the scheme, have not been

disputed.  The same have been detailed in paragraph 10 above.  The basis thereof,

projected by the high level committee, admittedly constitutes the rationale for issuing

the repeal notification dated 4.12.2004.  We are of the view, that the consideration at

the hands of the State Government was conscious and pointed.  And was supported

by facts and figures.  It is apparent, that out of 17 corporations/boards who were

invited to express their views on the issue, only 7 had actually done so.  It is not the

case of the respondent-employees, that any one of those who had expressed their

views, contested the fact, that the pension scheme was not self-financing.  Those

who expressed their views, affirmed that the pension scheme could be salvaged

only with Government support.  Those who did not express their views, obviously

had  no  comments  to  offer.   The  position  projected  by  the  State  Government,

therefore, cannot be considered to have been effectively rebutted.  Certain facts and

figures,  have  indeed  been  projected,  on  behalf  of  the  respondent-employees.

These have been recorded by us in paragraphs 39 and 40.  Financial calculations

can  not  be  made  casually,  on  a  generalized  basis.   In  the  absence  of  any

authenticity, and that too with reference to all the 20 corporate entities specified in

Schedule  I  of  ‘the  1999  Scheme’,  the  projections  made  on  behalf  of  the

respondent-employees, cannot be accepted, as constituting a legitimate basis, for a

favourable legal  determination.   Since the respondent-employees have not  been

able to demonstrate, that the foundational basis for withdrawing ‘the 1999 Scheme’,

Page 81

81

was not premised on any arbitrary consideration, or alternatively, was not founded

on any irrelevant consideration, it is not possible for us to accept the contention, that

the withdrawal of ‘the 1999 Scheme’, was not based on due consideration, or that, it

was irrational or arbitrary or unreasonable.  We are also satisfied, that the action of

the  State  Government,  in  allowing  those  who  had  already  started  earning

pensionary  benefits  under  ‘the  1999  Scheme’,  was  based  on  a  legitimate

classification, acceptable in law.  In the above view of the matter, the action of the

State Government cannot be described as arbitrary, and as such, violative of Article

14  of  the  Constitution  of  India.   We  are  also  satisfied  in  concluding,  that  the

understanding of the State Government (which had resulted in introducing ‘the 1999

Scheme’) on being found to be based on an incorrect calculation, with reference to

the  viability  of  the  corpus  fund  (to  operate  ‘the  1999  Scheme’),  had  to  be

administratively  reviewed.   And  that,  the  State  Government’s  determination  in

exercising its power of review, was well founded.

64. It is also not possible for us to accept, that any Court has the jurisdiction to

fasten a monetary liability on the State Government, as is the natural consequence,

of the impugned order passed by the High Court, unless it emerges from the rights

and liabilities canvassed in the lis itself.  Budgetary allocations, are a matter of policy

decisions.  The State Government while promoting ‘the 1999 Scheme’, felt that the

same would be self-financing.  The State Government, never intended to allocate

financial  resources  out  of  State  funds,  to  run  the  pension  scheme.   The  State

Government, in the instant view of the matter, could not have been burdened with

the liability, which it never contemplated, in the first place.  Moreover, it is the case of

the respondent-employees themselves, that a similar pension scheme, floated for

Page 82

82

civil servants in the State of Himachal Pradesh, has also been withdrawn.  The State

Government  has  demonstrated  its  incapacity,  to  provide  the  required  financial

resources.  We are therefore of the view, that the High Court should not (- as it could

not) have transferred the financial liability to run ‘the 1999 Scheme’, to the State

Government.  Similar suggestions made by the concerned corporate bodies, cannot

constitute a basis for fastening the residuary liability on the Government.  

65. The  action  of  the  State  Government,  in  revoking  ‘the  1999  Scheme’  vide

notification dated 2.12.2004,  was also assailed as being discriminatory.  And as

such,  violative  of  Article  16  of  the  Constitution  of  India.   In  this  behalf,  the

submission advanced on behalf of the respondent-employees was, that the State

Government extended similar benefits to Government employees under the Central

Civil  Services (Pension) Rules,  1972.  The said pensionary benefits extended to

Government servants, were also sought to be withdrawn.  It was however pointed

out,  that  while  withdrawing  the  pensionary  benefits  from  the  Government

employees,  the  State  Government  had  taken  a  decision  to  protect  all  existing

employees,  who had entered  into  Government  service,  till  the revocation  of  the

pension scheme.  It was submitted, that the High Court had, by the impugned order,

similarly protected only the existing employees, who were in service, as on the date

of issuance of the repeal notification, dated 2.12.2004.  It was contended, that the

State  Government’s  action,  in  not  treating  the  employees  of  corporate  bodies,

governed  by  ‘the  1999  Scheme’,  similarly  as  it  had  treated  employees  in

Government service, was clearly discriminatory.  It was submitted, that two sets of

employees similarly situated, were treated differently.  It was pointed out, that whilst

protection was extended to one set of employees, similar benefits were denied to

Page 83

83

the other set of employees.   

66. We have  given  our  thoughtful  consideration  of  the  plea  of  discrimination,

advanced at the behest of the respondent-employees.  It is not possible for us to

accept,  that  the employees  of  corporate  bodies,  can  demand as of  right,  to  be

similarly  treated  as  Government  employees.   Whilst  it  can  be  stated  that

Government employees of  the State of  Himachal  Pradesh are civil  servants,  the

same  is  not  true  for  employees  of  corporate  bodies.   Corporate  bodies  are

independent entities, and their employees cannot claim parity with employees of the

State Government.  The State Government has a master-servant relationship with

the civil servants of the State, whilst it has no such direct or indirect nexus with the

employees of corporate bodies.  The State Government may legitimately choose to

extend different rights in terms of pay-scales and retiral benefits to civil servants.  It

may disagree, to extend the same benefits to employees of corporate bodies.  The

State  Government  would  be  well  within  its  right,  to  deny  similar  benefits  to

employees of corporate bodies, which are financially unviable, or if their activities

have resulted in financial losses.  It is common knowledge, that when pay-scales are

periodically reviewed for civil servants, they do not automatically become applicable

to employees of corporate bodies, which are wholly financed by the Government.

And similarly, not even to employees of Government companies.  Likewise, there

cannot be parity with Government employees, in respect of allowances.  So also, of

retiral benefits.  The claim for parity with Government employees is therefore wholly

misconceived.  It is, therefore, not possible for us to accept the contention advanced

on behalf of  the respondent-employees, that the action of the State Government

was discriminatory.

Page 84

84

67. Another reason for us to conclude, that the action of the State Government

was not discriminatory is, that despite having revoked ‘the 1999 Scheme’ through

the notification dated 2.12.2004, the State Government had permitted such of the

Government owned corporations in the State of Himachal Pradesh, which were not

suffering  any  losses,  to  promote  their  own  pension  schemes,  and  to  extend

pensionary benefits to their employees, on an individual basis, in the same/similar

fashion  as  had  been  attempted  by  the  State  Government,  through  ‘the  1999

Scheme’.  In the instant view of the matter also, we are of the opinion, that the

action of the State Government cannot be assailed, on the ground of discrimination.

68. We shall now consider, whether the State Government which had introduced

‘the 1999 Scheme’, had the right to repeal the same.  In answering the above issue,

it needs to be consciously kept in mind, that the employees of corporate bodies, who

were extended the benefits of ‘the 1999 Scheme’, as already noticed above, were

not employees of the State Government.  ‘The 1999 Scheme’ was, therefore, just a

welfare scheme introduced by the State Government, with the object of ameliorating

the financial condition of employees, who had rendered valuable service in State

owned  corporations.   In  order  to  logically  appreciate  the  query  posed,  we may

illustratively take into consideration a situation, wherein an organization similar to

the one in which the respondent-employees were engaged, suffered such financial

losses, as would make the sustenance of the organization itself, unviable.  Can the

employees of such an organization, raise a claim in law, that the corporate body be

not wound up, despite its financial unworkability?  Just because, the resultant effect

would be, that they would lose their jobs.  The answer to the above query, has to be

in  the  negative.   The  sustenance  of  the  organization  itself,  is  of  paramount

Page 85

85

importance.  The claim of employees, who have been engaged by the organization,

to  run  the  activities  of  the  organization,  is  of  secondary  importance.   If  an

organization does not  remain financially  viable,  the same cannot  be required to

remain  functional,  only  for  the  reason  that  its  employees,  are  not  adversely

impacted.  When and how a decision to wind up an organization is to be taken, is a

policy decision.  The decision to wind up a corporation may be based on several

factors, including the nature of activities rendered by it.   In a given organization,

sometimes small losses may be sufficient to order its closure, as its activities may

have no vital bearing on the residents of the State.  Where, an organization is raised

to support activities on which a large number of people in the State are dependent,

the same may have to  be sustained,  despite  the fact  that  there are substantial

losses.   The  situations  are  unlimited.   Each  situation  has  to  be  regulated

administratively,  in  terms  of  the  policy  of  the  State  Government.   Whether  a

corporate body can no longer be sustained,  because its  activities are no longer

workable,  practicable,  useable,  or  effective,  either  for  the State  itself,  or  for  the

welfare  of  the  residents  of  the  State,  is  for  the  State  Government  to  decide.

Similarly, when and how much, is to be paid as wages (or allowances) to employees

of an organization, is also a policy decision.  So also, post-retiral benefits.  All these

issues fall in the realm of executive determination.  No Court has any role therein.

For the reasons recorded hereinabove, in our considered view, the conditions of

service  including  wages,  allowances  and  post-retiral  benefits  of  employees  of

corporate bodies,  will  necessarily have to be determined administratively, on the

basis  of  relevant  factors.   Financial  viability,  is  an  important  factor,  in  such

consideration.  In the facts and circumstances of the present case, it is not possible

Page 86

86

for us to accept, the contention advanced on behalf of the respondent-employees,

that the State Government should provide financial support for sustaining ‘the 1999

Scheme’, at least for such of the employees, who were engaged on or before the

date of issuance of the repeal notification (- 4.12.2004).  We would like to conclude

the instant submission by recording, that the respondent-employees have not been

able to make out a case, that the notification dated 2.12.2004, repealing ‘the 1999

Scheme’,  was in any manner, capricious,  arbitrary, illegal  or uninformed,  and as

such,  we  would  further  conclude,  that  the  respondent-employees  cannot  be

considered as being entitled, to any relief, through judicial process.

69. Having  recorded  our  aforesaid  conclusion,  it  is  not  necessary  for  us  to

examine the submissions advanced at the hands of the respondent-employees, that

the  action  of  the  State  Government,  in  issuing  the  repeal  notification  dated

2.12.2004, would violate Article 21 of the Constitution of India.  All the same, since

the contention was raised, we consider it just and appropriate, to examine and deal

with the same. The contention advanced on behalf of the respondent-employees

was,  that  the fundamental  rights enshrined in the Constitution,  do not  extend to

merely, providing for survival or animal existence.  Article 21, it was pointed out, has

been interpreted by this Court, as extending the right to life and liberty - as the right

to live, with human dignity.  It was submitted, that ‘the 1999 Scheme’, which allowed

better post-retiral benefits to the respondent-employees, was an extension of such a

benefit.  ‘The 1999 Scheme’, it was submitted, would have resulted in ameliorating

the conditions of the respondent-employees, after their retirement.  The submission

advanced on behalf of the respondent-employees is seemingly attractive, but is not

acceptable as  a proposition of  law.  A welfare scheme,  may or  may not  aim at

Page 87

87

providing,  the very  basic  rights  to  sustain human dignity.  In  situations where a

scheme targets to alleviate basic human rights, the same may possibly constitute an

irreversible  position,  as  withdrawal  of  the  same,  would  violate  Article  21  of  the

Constitution.  Not so, otherwise.  Herein, the Employees’ Provident Funds Scheme,

1995, sponsored under the Provident Fund Act, is in place.  The same was sought

to be replaced, by ‘the 1999 Scheme’.  ‘The 1999 Scheme’ was an effort at the

behest of the State Government, to provide still better retiral benefits.  ‘The 1999

Scheme’ was not a measure, aimed at providing basic human rights.  Therefore, ‘the

1999 Scheme’ can not be treated as irreversible.  The same would not violate Article

21 of the Constitution, on its being withdrawn.  It is not in dispute, that after the

repeal  notification  dated  2.12.2004,  the  erstwhile  Employees’  Provident  Funds

Scheme, 1995, has been restored to such of the employees, who were impacted by

the said repeal  notification.  We are of  the view, that the repealing of  ‘the 1999

Scheme’, in the facts and circumstances of this case, cannot be deemed to have in

any manner, violated the right of the respondent-employees, under Article 21 of the

Constitution of India.

70. It  is also not possible to accept, the contention advanced on behalf  of the

respondent-employees, based on Article 300A of the Constitution of India.  We have

deliberated hereinabove, the nature of the right created by ‘the 1999 Scheme’.  We

have  examined  all  the  legal  submissions  advanced  on  behalf  of  the

respondent-employees.  We have arrived at the conclusion, that action of the State

Government, was well within its authority.  We have also held the same to be based

on due consideration.  We have therefore, rejected the assertion made on behalf of

the  respondent-employees,  that  the  impugned  notification  dated  2.12.2004,  was

Page 88

88

unconstitutional, irrational, arbitrary or unreasonable.  It is accordingly not possible

for us to accept, the challenge raised by the respondent-employees, that they had

been deprived of their right to pensionary benefits, without the authority in law.  We

are  therefore  of  the  view,  that  the  claim  raised  on  behalf  of  the

respondent-employees, by placing reliance on Article 300A of the Constitution of

India, is misconceived.

71. Our determination, with reference to all the issues canvassed above, would

also answer the question left open in paragraph 52 above.  Namely, whether or not

the contingent right, as was vested in the respondent-employees, was binding or

irrevocable.  We may now sum up the position determined by us, in the foregoing

paragraphs.  It is no doubt true that we have concluded, that ‘the 1999 Scheme’,

created  a  contingent  right  in  the  respondent-employees.   The

respondent-employees comprise of all those employees of corporate bodies, who

had opted for ‘the 1999 Scheme’, immediately on its having been introduced; all

those,  who  were  deemed  to  have  opted  for  ‘the  1999  Scheme’  by  not  having

exercised any option; and all those who were appointed after the introduction of ‘the

1999 Scheme’.  The first issue that arises is, whether any express right or obligation

existed, between the respondent-employees and the State Government.  One can

understand, such a claim arising out of an obligation between an employer and his

employees, where there is a quid pro quo – a trade off based on a relationship (as

between, an employer and employee).  We have however concluded, that there was

no  such  relationship  between  the  State  Government,  and  the

respondent-employees.   All  the  corporate  bodies  in  which  the

respondent-employees  were/are  engaged,  are  independent  juristic  entities.   It  is

Page 89

89

therefore apparent, that the claim raised by the respondent-employees, is not based

on  any  right  or  obligation  between  the  parties.   We  have  also  examined  the

submissions  advanced  by  learned  counsel  premised  on  various  constitutional

provisions (-  Articles 14, 16, 21 and 300A of the Constitution of  India), but have

found, that no right can be stated to have been violated, thereunder.  We have also

examined  the  other  legal  submissions,  advanced  on  behalf  of  the

respondent-employees,  and  have  found  the  same,  as  unjustified.   The  issue

whether  administrative  review  was  permissible,  after  ‘the  1999  Scheme’  had

become operational,  has been answered in the affirmative.  And finally, we have

concluded, that the exercise of such power, while issuing the repeal notification, was

based  on  due  consideration.   We  therefore  hereby  uphold,  the  legality  and

constitutionality of the notification dated 2.12.2004.

72. For the reasons recorded hereinabove, the present appeals stand allowed.

The impugned order dated 19.12.2013 passed by the High Court is accordingly, set

aside.

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

….…..…………………………….J.       (C. Nagappan)

New Delhi; September 28, 2016.

Note: The emphases supplied in all the quotations in the instant judgment, are ours.

Page 90

90