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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.   9007         OF 2012 (Arising out of SLP (C) No.25856 of 2008)

State of Punjab ... Appellant Versus

Gian Chand & Ors. ...  Respondents

WITH

CIVIL APPEAL NOS.   9008-9009       OF 2012 (Arising out of SLP (C) No.18734-18735 of 2007)

CIVIL APPEAL NO.  9010       OF 2012 (Arising out of SLP (C) No.18878 of 2010)

CIVIL APPEAL NO.  9011      OF 2012 (Arising out of SLP (C) No.22841 of 2009)

CIVIL APPEAL NO.  9012     OF 2012 (Arising out of SLP (C) No.23121 of 2010)

CIVIL APPEAL NO.  9013       OF 2012 (Arising out of SLP (C) No.23607 of 2010)

CIVIL APPEAL NO.   9014      OF 2012 (Arising out of SLP (C) No.25387 of 2012)

CIVIL APPEAL NO.  9015        OF 2012 (Arising out of SLP (C) No.27327 of 2008

CIVIL APPEAL NO.  9016       OF 2012 (Arising out of SLP (C) No.3110 of 2012)

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CIVIL APPEAL NO.  9017      OF 2012 (Arising out of SLP (C) No.4036 of 2007)

CIVIL APPEAL NO.  9018       OF 2012 (Arising out of SLP (C) No.7474 of 2007)

AND

CIVIL APPEAL NO.   9019        OF 2012 (Arising out of SLP (C) No.9569 of 2010)

J U D G M E N T

Swatanter Kumar, J.

1. Leave granted in all the Special Leave Petitions.

CAs  @  SLP  (C)  Nos.  25856/08,  18878/10,  22841/09,  23121/10,  23607/10,  25387/12,  27327/08,  3110/12  and  9569/10

2. Petitioners before the High Court and Respondent Nos.1 to  

26  before  this  Court,  were  in  service  of  the  Punjab  State  

Electricity Board (for short, the ‘PSEB’) on different posts.  All  

these respondents superannuated on different dates between  

31st July,  2003  and  30th October,  2006  after  they  had  

satisfactorily rendered the required years of service in PSEB.  

Though these respondents had retired on different dates, their  

grievance was common and hence all of them filed a common  

writ petition challenging the circular dated 29th July, 2003 issued

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by the Government.  The circular dated 29th July, 2003 reads as  

under :

“I am directed to invite a reference to the  subject  cited  above  and  to  say  that  the  Governor of Punjab is pleased to prescribe a  new  table  (copy  enclosed)  for  present  values for the calculation of commutation of  pension  to  replace  the  present  table  incorporated as Annexure to Chapter XI of  Punjab Civil Service Rules Volume II.  This  table  supersedes  the  existing  table  with  immediate effect and shall apply to all the  cases  of  retirement  arising  on  or  after  31.07.2003.

2. Annexure to Chapter XI of Punjab Civil  Services  Rules  shall  be  deemed  to  have  been  substituted  accordingly.   Correction  slip shall be issued in due course.

It may please be ensured that this is  brought to the notice of all the employees  who  are  retiring  on  or  after  31.07.2003  inviting their attention to provisions of Note  2  below  Rule  11.5(1)  of  Punjab  Civil  Services Rules, Volume-II.”

3. The grievance of the respondents was in relation to the  

table of calculation of commutation of pension, which had been  

replaced to the disadvantage of the persons who had retired  

within  the  above-referred  period.   They  pleaded  violation  of  

Article 14 of the Constitution of India.

4. The PSEB had framed regulations called the Punjab State  

Electricity Board Main Service Regulations, Vol.I, Part I, 1972 in  

exercise  of  the  powers  conferred  by  Section  79(c)  of  the

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Electricity  Supply  Act,  1948.   Regulation  1.7  of  these  

Regulations provided that  unless it  was otherwise specifically  

provided in any regulation, the PSEB employees’ claim to pay  

and allowances shall be regulated by the Regulations in force at  

the time in respect of which the pay and allowances are earned.  

It also provided that claims with regard to pension shall be by  

the regulations in force applicable to him at the time when the  

employee retires or is discharged from service.  As the PSEB had  

not  framed  any  Regulations  of  its  own  with  regard  to  the  

Pension  Rules  pertaining  to  pension  contained  in  the  Punjab  

Civil  Services  Rules,  Vol.II  were  to  be  applicable  to  the  

employees of the PSEB.  The PSEB had, vide its circular dated 4th  

September,  1999,  (Circular  No.  36  of  1998)  adopted  the  

applicability of the Punjab Government Rules.  Rule 11.5 of the  

Punjab Civil Service Rules, Vol.II dealing with the subject reads  

as under :

“11.5  (1)  The  lump  sum  payable  on  commutation  shall  be  calculated  in  accordance with a table or tables of present  values  which  shall  be  prescribed  by  the  competent authority.  

Note 1. - The lump payable on commutation  to Government employees who have served  under more than one Government when the  commutation tables applied by the different  Governments  are  not  identical,  shall  be  calculated  according  to  the  commutation  table of the Government under whose rule

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making  control  they  are,  at  the  time  of  retirement.  In  the  case  of  Government  employees who are temporarily lent by one  Government  to  another,  the  commutation  shall  be  according  to  the  table  of  the  lending  Government  and  in  the  case  of  those  who  are  permanently  transferred  from one Government to another it shall be  according to the table of the Government to  which  their  services  have  been  permanently transferred.  

Note 2. - In the event of the table of present  values  applicable  to  an  applicant  having  been  modified  between  the  date  of  administrative  sanction  to  commutation  and the date on which commutation is due  to  become  absolute,  payment  shall  be  made  in  accordance  with  the  modified  table, but it shall be open to the applicant if  the modified table is less favourable to him  than that  previously in  force,  to  withdraw  his  application,  by  notice  in  writing  despatched within 14 days of the date on  which he receives notice of modification. (2)  The  table  of  present  value  is  given  in  Annexure  to  this  Chapter  and  will  be  applicable to all Government employees.  

For the purpose of this rule, the age, in case  of impaired lives,  shall  be assumed to be  such  age,  not  being  less  than  the  actual  age as the certifying medical authority may  direct.”

5. The table of commutation of pension was prescribed by the  

State Government on the recommendation made by the 4th Pay  

Commission which was accepted by the State Government and  

was implemented with effect from 1st January, 1996.  The State  

of  Punjab,  appellant  herein,  issued a  circular  dated 29th July,

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2003  replacing  the  existing  table  with  a  new  table  for  

calculation of commutation of pension superseding the existing  

table.   As already noticed,  this  circular  contains the table  of  

commutation of pension.  As is clear from the above referred  

circular  dated  29th July,  2003,  it  had  directed  deemed  

substitution  of  Annexure  to  Chapter  XI  of  the  Punjab  Civil  

Services Rules,  Volume II  and stated that  commutation table  

was  based  on  rate  of  interest  of  8  per  cent  per  annum  

(commutation value for pension to Re1/- per annum).  However,  

vide  circular  dated  31st October,  2006,  this  circular  was  

superseded.  The circular dated 31st October, 2006 revised the  

existing table of commutation of pension and the Governor of  

Punjab reduced the discount rate from existing 8 per cent to  

4.75 per  cent  and consequently  revised the  existing table  in  

terms  of  Rule  11.5(2).   As  a  result,  employees  who  retired  

between  31st July,  2003  and  30th October,  2006  are  at  a  

disadvantageous position.  The respondents cited illustrations to  

show that they were placed at a disadvantageous position.  The  

circular dated 29th July, 2003 is arbitrary and has no reasonable  

nexus for making a classification between the employees who  

retired during the above period and the employees who retired  

prior to and /or after the cut off period.  Before the High Court,  

the appellant as well as the PSEB filed a reply in which facts

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were hardly disputed.  In that reply, it was stated that the law  

relied upon by the respondents before the High Court was not  

applicable and the claim of the said respondents was generally  

denied.  They prayed for dismissal of the writ petition.

6. The High Court,  vide its  judgment  dated 21st July,  2008  

accepted the writ filed by the respondents and while allowing  

the writ petition, the High Court noticed that no justification or  

clarification had been provided by the State,  while making a  

feeble attempt to defend its stand and there was no rational  

basis for providing the cut off dates between the period from  

31st July, 2003 to 30th October, 2006.  The following operative  

part of the judgment can usefully be reproduced at this stage :

“After hearing the counsel for the parties,  we are of the considered opinion that this  petition  deserves  to  be  allowed  and  our  opinion is further strengthened by the ratio  of law, laid down in V. Kasturi’s case (supra)  which has been followed by Hoshiar Singh’s  case  (supra).   The  State  cannot  be  permitted  to  create  two  categories  of  retirees by providing a cut off date as there  is no rationale.

In  view  of  the  above,  we  allow  the  writ  petition  and  quash  the  impugned  circular  dated 29.07.2003 and restore the pension  of  the  petitioner,  in  accordance  with  the  revised  table,  issued  as  per  the  Circular  dated 31.10.2006 (Annexure P-6).”

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7. Aggrieved from the above judgment of the High Court, the  

State of Punjab has filed the present appeal by way of special  

leave  challenging  the  legality  and  correctness  of  the  above  

judgment.

8. On behalf of the appellant, it is contended that :

(a)  the High Court has not correctly applied the principle of  

law contained in the judgment of this Court in the case of  

V. Kasturi v. Managing Director, State Bank of India [1998  

(5) SLR 629].  That case related to computation of pension  

and not commuting of pension.   

(b) The circular was neither arbitrary nor violative of Article  

14  of  the  Constitution  of  India  as  there  was  rationale  

behind the decision of the State Government which had  

been implemented by the PSEB.   

(c) The State was suffering from serious financial crunch and  

the  State  with  the  intention  to  balance  its  financial  

liability, for good and valid economic reasons had issued  

the circular dated 29th July, 2003.  Reliance in this regard  

is placed upon the judgment of this Court in the case of  

State of Bihar v.  Bihar Pensioner’s Samaj [(2006) 5 SCC  

65] and State of Punjab v. Amar Nath Goyal [(2005) 6 SCC  

754].

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(d) Date of retirement by itself is a reasonable classification  

and does not offend the doctrine of equality.  Reliance in  

this regard is placed upon Union of India v. P.N. Menon &  

Ors. [(1994)  4  SCC  69].   Vide  circular  dated  29th July,  

2003,  an  attempt  had  been  made  on  behalf  of  the  

Government  to stabilize  its  financial  position.   It  was a  

decision taken in the larger public interest and can even  

be supported by subsequent reasons.  Reliance for this  

proposition is placed upon the case of Chairman, All India  

Railway Recruitment Board & Anr. v.  M. Shyam Kumar &  

Ors. [(2010) 6 SCC 614].

(e) Under  Note  2  to  Rule  11.5(1),  the  respondents  had  a  

choice to withdraw the request for commutation, if they  

were adversely affected within 14 days from the issuance  

of the circular dated 29th July, 2003 in terms of the Punjab  

Civil Service Rules.

9. On behalf of the respondents, it is contended that none of  

these arguments were raised either in the affidavits filed before  

the High Court or even during the course of hearing.  No records  

were produced to substantiate any such plea.  On the contrary,  

it was a case of ‘no stand’ on behalf of the official respondents  

as even noticed by the High Court.  It is vehemently argued that

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the date of retirement by itself is capable of providing a rational  

basis for issuance of such orders and the same would affect the  

rights of the parties adversely.  In this regard reliance is placed  

on the cases of  V. Kasturi (supra) and D.S. Nakara v.  Union of  

India [(1983) 1 SCC 305].  According to the respondents, the  

High Court has rightly applied the law as stated by this Court.  

Further, to substantiate their plea, it has been argued with some  

vehemence that  no reasons are disclosed in the circular  and  

there  is  no  rationale  for  such  categorization.   It  is  also  the  

contention that  an  executive  circular  cannot  amend,  alter  or  

substitute an appendix or annexure which is the result  of an  

exercise of statutory power.  In this regard, reference is made to  

the judgment of this Court in the case of Dr. Rajinder Singh v.  

State of Punjab [(2001) 5 SCC 482].  The appellant cannot be  

permitted to take new grounds before this Court for the first  

time and the appeals deserve to be dismissed.

10. From the record, it is clear that none of these arguments  

were taken in the counter affidavit or even appear to have been  

addressed  before  the  High  Court  during  the  course  of  

arguments.  The substantial pleas are being sought to be raised  

before this Court for the first time.  It requires to be noticed at  

this stage that vide order dated 16th December, 2010 passed by  

a Bench of this Court after hearing, liberty was granted to the

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State to file additional affidavit.  The affidavit dated 7th January,  

2011 was filed on behalf of the State taking the ground that the  

State of Punjab had faced an acute financial crisis in the year  

2003  and,  in  fact,  was  in  a  virtual  debt  trap.   Since  the  

commutation of pension is essentially loan/advance against the  

future payments of the monthly pension, the State Government  

could ill-afford to raise further debt at higher rate of interest to  

make  such  payments  to  employees  at  concessional  effective  

rate of interest which was as low as 4.75 per cent per annum.  

The chart  showing figures  of  fiscal  indicators  of  Punjab  from  

2002-03 to 2006-07 was also annexed to this  affidavit.   Still  

another affidavit was filed with the leave of the Court dated 21st  

April,  2011 by the Deputy Secretary, Department  of Finance,  

Punjab,  Chandigarh  bringing  on  record  the  policy  of  the  

Government,  formula  adopted  for  commutation  factor  and  

giving facts and figures as to how the circular dated 29th July,  

2003 came to be issued.

11. From the orders passed by this Court, it is clear that while  

granting  liberty  to  the  State  to  file  additional  affidavit,  no  

objection was raised by the respondents herein.  Now, once the  

additional  facts  and grounds had been  brought  on record  to  

which the said respondents have already filed a rejoinder, they  

cannot be permitted to raise the objection in regard to the new

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grounds  being  examined  by  the  Court.   There  are  certainly  

lapses on the part of the State, but the questions raised before  

us are not only substantial legal questions but are also likely to  

have far reaching consequences.  It is argued that the circular  

dated 29th July, 2003 has been issued by the State of Punjab and  

the same having been quashed, there is every likelihood that all  

the  employees  of  the  State  of  Punjab,  including  various  

corporations,  would  raise  similar  claims.   The  grounds  with  

regard to Note 2 of Rule 11.5, financial crunch of the State and  

there being proper rationale for fixation of the cut off period  

(31st July, 2003 to 30th October, 2010) are matters which require  

discussion and determination by the Court in accordance with  

law.  Equally, the pleas raised by the respondents require proper  

examination.  There is no doubt that the circular dated 29th July,  

2003 does not contain any reason, whatsoever, for passing a  

directive, which enmass adversely affects the people who have  

retired in  the period between 31st July,  2003 to 31st October,  

2006.  Additional affidavit now filed before this Court, with the  

leave of the Court, does provide reasons and some justifiable  

grounds in support of the circular.  All that we propose to say is  

that the contentions raised by the respective parties are worthy  

of consideration in accordance with law.

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12. The judgment  impugned in the present  petition,  in  fact,  

does  not  even  discuss  the  plea  of  arbitrariness  and  

discrimination in its proper perspective.  The Court also has not  

deliberated upon as to whether the law stated by this Court in  

the case of V. Kasturi (supra) to the facts of the case in hand or  

not,  particularly  with  reference  to  the  contentions  raised.  

Another aspect which could be considered by this Court on the  

basis of the material produced before it, was whether the format  

to a statutory rule can be amended, altered or substituted by an  

executive order.   

13. For lack of proper reasoning in the judgment of the High  

Court, in view of the additional pleas raised before this Court  

which have significant ramifications in law and with regard to  

the liability of the State, we are left with no option but to set  

aside the judgment of the High Court under appeal and remit  

the matter to the High Court for fresh decision in accordance  

with law.  We would request the High Court to consider all the  

arguments  that  have  been  noticed  by  us  above.   All  the  

affidavits  placed on record of this Court  shall  also be placed  

before the High Court for its consideration.  Another  reason  

which can be stated in support of the view that we are taking is  

that  the  determination  of  the  contentions  raised  before  this  

Court for the first time may deprive either of the parties of a

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right to appeal to this Court.  Deprivation of right to appeal can  

be construed as prejudicial  to the rights and interests of the  

parties to the lis.

14. Accordingly, the appeals are partly allowed and the matter  

is remitted to the High Court, however, with cost of Rs.50,000/-  

to be paid to the respondent Nos.1 to 26 in equal proportion  

cost  being  conditional  to  the  hearing  of  the  writ  petition,  in  

default thereto, the appeal preferred by the State shall stand  

dismissed.  

CAs @ SLP (C) Nos.18734-18735/07, 4036/07 and 7474/07

15. As the questions arising in these cases are different and  

the High Court has dealt with these questions on merits, the  

arguments  raised  in  SLP  Nos.  Civil  Appeals  @  SLP  (C)  Nos.  

25856/08, 18878/10, 22841/09, 23121/10, 23607/10, 25387/12,  

27327/08, 3110/12 and 9569/10 are not available to the State  

of Punjab in these cases.  Thus, these cases are ordered to be  

detached  from  this  batch  and  be  listed  for  hearing  

independently.

…………………………….,J. [Swatanter Kumar]

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…………………………….,J. [Madan B. Lokur]

New Delhi; December 13, 2012