ALL INDIA RESERVE BANK RETIRED OFFICERS ASSOCIATION AND ORS. v. UNION OF INDIA AND ANR

Citation: [1991] SUPP. 3 S.C.R. 256

Court: Supreme Court of India

Bench: A.M. AHMADI, M.M. PUNCHHI

Case summary

The challenge was based principally on Article 14 of the Constitution on the ground that the specified dates fixed under the Memoranda for the two classes of employees were wholly arbitrary, unreasonable and unfair and the classification was not based·on an intelligible...

Judgment text

The Judgment of the Court was delivered by AHMADI J. In exercise of powe;s conferred by clause U) of Subsection (2) of Section 58 of the Reserve Bank of India Act, 1934 (Act U ·of 1934) (hereinafter called 'the Act'), the Central Board of the Reserve Bank of India with the prior approval of the Central Government framed Regμlations · known as the Reserve Bank o'f India Pension Regulations, 1930 (hereinafter called 'the Regulations'). By the . said Re,,gulations brought into force with effect from 1st November, 1990. a pension scheme was introducedjn s. ubsiitu~ tion of the existing Contributory Provident Fund Scheme (h~r. efoafter alluded· to as the 'CPF Scheme'). The newly introduced pension sch¢. rii. ~ wai:made applicable to all employees enter·ing Bank service on or-aft~r ist. Novell)bet, 1990; for them the CPF scheme did not exist. The in~sei'vi~e eili. plo'yees i:e.

those employees who were actually in service at the date o(intiodii9ti-0n ofihe scheme were given a11 option to opt out of the pension sch¢me arid conliol! e to be g-0verned by the CPF scheme. The third category is of those who retired from Bank's service between 1st January, 1986 and 1st November 1990. Regulation 3(3) which deals with the applicability of the scheme. to the said category of retired employees reads as under'. "3(3)- Employees who were in· service as on 1st January 1986 (excluding those on leave preparatory to retirement) and had ·retired before l~t November, 1990, provided they exercise option to be governed by these Regulations and refund within such period as may be specified, the Bank? s contribution to provident fund . including interest received by them from the Bank together with simple interest at six percent per annum 'f. rbm the date of with- . drnwal till the date·of repayn}ent Pension shall be payable tothem in accorctance wilh Regulation 31:" .

Regulation 31 reads as under : "31-Employees who have retired from the Ban. k's s~rvice 9n or after 1st January, 1986 and before 1st November, 1990 shall· be eligible for pension from 1st November, 1990 or after expiry of. (; leave preparatory to retitement subject to Regulation 22.. The payment of pension shall be subject to their refundirig Bank;s contribution to provident fund including interest received py ttiem from the bank, together with . simple interest. at the: rate . of six . percent per annum from the date of withdrawaLtiH the date. of repayment. Such employees will be permitted to commute their ( pension also with effect from 1st November, 1990, after due medical examination. " It, therefore, appears on a conjoint reading of Regulation 3(3) .

and Regulation 31 that Bank employees who retired from service between 1st January, 1986 and 1st November, 1990 could opt for the benefit of the pension scheme with effect from 1st November, 1990 provided they refunded the Bank's contribution to the provident fund together with interest received thereon and together with further interest calculated at 6 percent per annum from the date of withdrawal till the date of repayment Bank employees who retired from service before 1st January, 1986 were not eligible to opt for the newly introduced pension scheme. Petitioner No. 1 is an Association ofretired Bank employees and petitioners Nos. 2 to 7 are its members who retired from the Bank's service on or before 31st December, 1985. They are not entitled to opt for the pension-plan under the aforesaid Regulations.

They contend that the cut-off date fixed under Regulations 3(3) and 31 extracted earlier is wholly artificial and has no relation to the object sought to be achieved by the introduction of the pension-plan in substitution of the extant CPF scheme. They contend that Article 14 of the Constitution forbids class legislation and the Bank Authorities have by drawing an artificial classification between those who retired on or before 31st December, 1985 and those who retired 24 hours later i. e. on or after 1st January, 1986 have violated the letter and spirit of the said article of the Constitution. Although Article 14 permits reasonable classification, that classification must satisfy the twin test of the same being founded on an intelligible criteria which distinguishes persons or things which are grouped together from those left out and the said differentia must be shown to have a rational nexus to the object sought to be achieved by the relevant Rules or Regulations.

The petitioners, therefore, contend that while the pension scheme introduced under the Regulations is a welcome step consistent with the constitutional philosophy discernible from the Preamble and Articles 38,39, 41 and 43 of Part IV of the Constitution, the artificial division ofa homogeneous class of retired employees between those who retired prior to 1st January, 1986 and those who retired on or after that date is wholly arbitrary and unreasonable and is liable to be struck down as violative of Article 14 of the Constitution as explained by this Court in D. S. Nakara & Ors. v. Union of India, [1983] 3 SCR 165.

The petitioners contend that it is settled law that pension is neither a bounty nor a gratuitous payment dependent wholly on the sweet will or grace of the employer but is a right to which an employee is entitled on superannuation under the relevant Rules and is a welfare measure intended to render socioeconomic justice, a concept enshrined in the Preamble and Part IV of the constitution. To deny benefit of the pension scheme merely because a group of employees superannuated on or before 31st December, 1985 is clearly abhor- . ~ R. B. I. RETIRED OFFICERS ASSN. v. U. 0. 1. [AHMADI, J. ] 263 rent to the constitutional philosophy enshrined in Articles 14, 19, 21 and 300 A of the Constitution.

The petitioners, therefore contend that the obnoxious part of Regulations 3(3) and 31 which limit the benefit of the pension-plan to only those employees who retired from service on or after 1st January, 1986 should be struck down and instead the same should be liberalised and extended to all retired Bank employees regardless of the date of their retirement provided they opt for the scheme and are ready and willing to abide by the condition of refunding the Bank's contribution to the CPF scheme together with interest, if any, received by them and with further simple interest at 6 per cent per annum from the date of withdrawal of the said amount till repayment. In other words the petitioners contend that the pension scheme should be made available to all employees who retired from Bank's service before 1st November, 1990 provided they opt for the pension scheme.

They contend that if the benefit of the pension scheme is extended to those who retired before 1st November, 1990 about 2,000 such employees will benefit therefrom and not all of them will opt for the same and hence the financial implication of the extention of the scheme to such employees will be marginal. On behalf of the respondents, respondent No. 2 has entered a counter on behalf of the management and he contends that the cut-off date was chosen as 1st January, 1986 for diverse reasons, one of them being that the newly introduced pension scheme was patterned on the pension scheme applicable to Central Government Employees as revised by the Fourth Central Pay Commission with effect from 1st January, 1986. This date was decided upon after considerable thought having regard to the fact that the proposal for a pension scheme in lieu of the CPF scheme was revived sometime in 1986 after it was initially turned down.

Besides, it was considered appropriate that retired employees who had drawn their package of superannuation benefits many years earlier and had the benefit of use of those funds over prolonged periods need not now be given the option to move over to a totally different retiral plan bearing no relationship whatsoever with the then existing wage-structure. The respondents, therefore, contend that the cut-off date was chosen as 1st January, 1986 principally because that was the date from which the pension scheme as revised by the Fourth Central Pay Commission was made applicable to Government employees. It was further contended that it was felt undesirable to relate back the scheme to a date prior to 1st January, 1986 as that would cause considerable difficulties regarding calculation etc. , of the pension payable to old employees for want of availability of relevant records.

The respondents, therefore, contend that the submission that the pension scheme introduced by the Regulations is violative of Articles 14, 19 and 21 of the Constitution is wholly misplaced as this is a totally new scheme introduced for the first time and it is open to the Bank Authorities to decide the date from which it should be brought in force and the employees who should be covered thereunder. The respondents, therefore, contend that the writ petition is without merits and li deserves to be dismissed with costs.

Before we proceed to deal with the main contention based on the decision of this Court in Nakara' s case it would be advantageous to notice the fact that employees of the Reserve Bank oflndia were, prior to the introduction of the pension scheme;enjoyingsuperanrmation benefits comprising (i) CPF, and (ii) gratuity, Representatives of the employees and officers' staff had been clamouring for the introduction of a pension scheme as a third retiral benefit since quite some time. To consider the qemand the Bank had constituted a Study Group in October, 1979 under the Chairmanship of Shri W. S. Tambe, retired Executive Director of the Bank with representatives of the recognised Unions/ Associations representing different classes of Bank employees as members. The Study . Group submitted its . report in 1981. It would appear therefrom that the members held divergent view points. However, in paragraph 3.

24 of the report they recommended equalisation of superannuation benefits in the Reserve Bank of India-with those available to Central Government employees by introducing pension at 25% of la'St pay drawn. _ On the question of t_he date from which the said reco:mi:nendation should be made effective the members were divided in their opinion. One view ·expressed was that since the latest wage settlements for overwhelming majority of-employees were made operative from 1st September; ·1978 and since the appc}intinent of the Study Group was made pursuant thereto, its recommendation should be made effective from 1st September, l978.

The other view was that since the Study Group was constituted in October, 1979 and the said period fell within _the Bank's accounting year from July, 1979 to June, 1980, it wo\}ld not be reasonable to ·E -give effect to the recommendation from a date prior to 1st July,· 1979: The Study Group was, therefore, no unanimous in respect of the date from wbich its recommendation should be made effective. It appears from lhe letter of the Joint Secretary of the Staff Officer's Association dated 20ih March, 1981 that the d. raft of the report was approved by him. The subsequeiit letter of March 1, 1982 discloses that the recommendations made by the Study Group were n()t approved by the Government of India in the Ministry of Finance. In paragraplt 7ofthatletter. after objecting to the manner in whic. h the recommendations of the study Group had been brushed aside it was stated as under: "All the same we are inclined to consider the alternative in constr.

uctive manner-if we are infonned ofthe basis and the manner of the applicability ofthe . Government Pension Scheme. " It would thus appear from theabove that after the proposal for the introduction ofa third retiral benefit as recommendt:d by the Study Group was negatived, the alternative proposal for intr()ductions of pension scheme on the lines of the Government Pension Scheme was mooted. Subsequently, by :the Circular of June 15, 1982 the Association infonned its members· about the R. B. I. RETIRED OFFICERS ASSN. v. U. O. I. [AHMADI. J. ) 265 rejection by the Central Government of the recommendation made by the Study Group. This is how the demand for the introduetion of a third retiral benefitended. The~ter in the beginning of 1986a large section ofemployees of the Bank belonging to various classes represented that the Bank should at least work out a pension scheme as an alternative to and in lieu of the exisling CPF Scheme.

Taking into account the general feeling of a large section of the Bank employees a fresh rev~ew was under1aken and in 1987 informal discussions k>ok place with the officers of the Central GovemmenL The Central Government ultimately towards the end of 1989 agreed to the Bank introdueing a pension scheme patterned on Government Pension Scheme as revised by the Fourth Central Pay Commission with effect from 1st January , 1986 in lieu of the CPF scheme. Accordingly, . the Bank Authorities took a decision to introduce a pension seheine in substitution of the extant CPF scheme and ultimately framed the Regulations referred to above. Thus, lst January, 1986 was selected as a yees which was brought int. O effect from 1st Jai\uary, 1986 on the reeom. mendations of the Foilrth CentralPay Commission found in Chapter X of the report•. vide paragraph 10,19 of thnt chapter. There is, however, no doubt thatby fixing. the cut-off.

date Bank employees who superannuated on or before 31st December,, 1985·are i:}eniyd. the benefit of the pension scheme, The conten~ion-0fthe petitinqers that boili the groups; namely, those who retired on or before 31st Decembe. r, 1985 and those who retired betw~n 1st January, 198. 6 and 3. lst October, i990 belong to the same group ofCPF retirees and yet the Regulations seek to divide them by placing ari artificial cut-off date under Regulations. 3(3} and 31 of the Regulations. It is. therefore,,contended that this artificial· division of a homogeneous group not based on any logic or rational and having no ne;icus to the object to be achieved clearly offends the equality clause contained in Article"I4. There is·no·doubt that whenever any rule or regulation having statutory flavour is inade by·an authority which. is a State within the meaning of Article 12 of the Constitution, the choice 'of the cut-off date whiCh has necessarily to be introduced to effe.

ctuate such benefit$js open to scruμny by. the couri and must be sμpp. orted on the touch-Stone of Article 14. If the choice of the . date results in classificationordivision ofmembers·of a homogeneous. group it would be open to ~e Coun to insist that it be shown thar the classification is based on an {, intelligible differentia and on rational consideration which bears a nexus to the purpose and object thereof. The differential treatment accorded to those who retired prior to the specified date and those who retired subsequent thereto must bejustified on the touchstone of Article 14, for otherwise it would be offensive to the philosophy of equality enshrined in the Constitution. This is quite clear from the ratio of Nakara' s judgment as the decision of this Court in B. Prabhakar Rao & Ors. v. State ofAndhra Pradesh [1985) Supp. 2 SCR 573.

We have, therefore, to consider the limited question whether the classification· introduced by clauses 3(3) and 31 of the Regulations is inconsistent with Article 14 of the Constitution as alleged by the petitioners. The scheme introduced by the Regulations is a totally new one. It was not in existence prior to its introduction with effect from 1st November, 1990. The employees of the Reserve Bank who had retired prior. to that date were admittedly governed by the CPF scheme. They had received the benefit of employer's contribution under that scheme and on superannuation the amount to their account was disbursed to them and they had put it to use also. There can, therefore, be no doubt that the retiral benefits admissible to them under the extant Rules of the Bank had been paid to them. That was the social _security plan available to them at the date of their retirement.

The Bank employees were, however, clamouring for a pension scheme, firstly on a restricted basis as a third retiral benefit and later in lieu of the CPF scheme. The Central Government had not approved of a pension scheme, as a third retiral benefit. After that proposal was spumed it appears that the employees of the Bank demanded a pension scheme on the pattern of the scheme available to Central Government employees in lieu of the CPF Scheme. This. was approved by the Central . Government and consequently it was introduced with effect from lst November, 1990 under tl)e Regulations. There can; therefore, be no doubt that if the CPF retirees were not admitted to this new scheme they could not make any grievance in that behalf. They had no right to claim coverage under the new pension scheme since they had already retired and had collected their retiral benefits from the employer.

But the moot question is whether it was open to the employer to grant the benefit of the pension scheme to one group of CPF retirees who had retired from Bank service on or after 1st January, 1986 and deny the same to all those who had retired on or before 31st December, 1985. Is this division ofCPF retirees discriminatory and violative of Article 14 of the Constitution? Nakara' s judgment has itself drawn a distinction between an existing scheme and a new scheme. Where an existing scheme is revised or liberalised all those who are governed by the said scheme must ordinarily receive the benefit of such revision or liberalisation and if the State desires to deny it to a group thereof, it must justify its action on the touchstone ofArticle 14 and must R. B. I. RETIRED OFFICERS ASSN. v. U. 0. 1. [AHMADI, J. ] 271 show that a certain group is denied the benefit of revision/liberalisation on sound reason and not entirely on the whim and caprice of the State.

The underlying principle is that when the State decides to revise and liberalise an existing pension scheme with a view to augmenting the social security cover granted to pensioners, it cannot ordinarily grant the benefit to a section of the pensioners and deny the same to others by drawing an artificial cut-off line which cannot be justified on rational grounds and is wholly unconnected with· the object intended to be achieved. But when an employer introduces an entirely new scheme which has no connection with the existing scheme~ different considerations enter the decision making process. One such consid- ( . -. ~ eration may be the financial implications of the scheme and the extent of capacity of the employer to bear the burden. Keeping in view its capacity to absorb the financial burden that the scheme would throw, t. 'ie employer would have to decide upon the extent of applicability of the scheme.

That is why in Nakara'scase this Court drew a distinction between continuance ofan existing scheme in its liberalised form and introduction of a wholly new scheme; in the . case of the former all the pensioners had a right to pension on uniform basis and any division which classified them into two groups by introducing a cutoff date would ordinarily violate the principle of equality in treatment unless there is strong rationale discernible for so doing and the same can be supported on the ground that it will subserve the object sought to be achieved.

But in the case of a new scheme, in respect whereof the retired employees have no vested right, the employer can restrict the same to certain class of retirees, having regard to the fact-situation in which it came to be introduced, the extent of additional financial burden that it will throw, the capacity of the employer to bear the same, the feasibility of extending the scheme to all retirees regardless of the dates of their retirement, the a". ailability of records of every retiree, etc. etc. It must be realised that in the case of an employee governed by the CPF scheme his relations with the employer come to an end on his retirement and receipt of the CPF amount but in the case ofan employee governed under the · pension scheme his relations with the employer merely undergo a change but do not snap altogether. That i~ the reason why this Court inNakara'scase drew a distinction between liberalisation of an existing benefit and introduction of a totally new scheme.

In the case of pensioners it is neceSsal'y to revise the pension periodically as the continuous fall in the rupee value and the rise in prices of essential commodities necessitates an adjustment of the pension amount but that is not the case of employees governed under the CPF scheme, since they had received the lump sum payment which they were at liberty to invest in a manner that would yield optimum return which would take care of ' the inflationary tren<Js. This distinction between those belonging to the pension scheme and those belonging to the CPF scheme has been rightly emphasised by this Court in Krishena's case (supra). - ' Besides it has been pointed out by the Bank_ Authorities that under their manual, service details pertaining to an employee who . has retired are maintained for five years and thereafter they ate d~stroyed and, therefore, the cutoffdate was fixed as 1st January' 1986. This is clearly brought out in paragr:iph 3 of Deepak Bankal's affidavit.

Secondly, this Court had, during the penctency of the writ petition, asked both sides to prepare statements showing. the financial implications if the cut-off date is removed and the scheme is applied to all retirees, Both sides experience difficulty for want of service records and whatever calculations were made from scan. ty service records available with them, were disputed. This justifies the reason for not extending the benefit to· those who had retired be~ore five years or rnore. . Lastly, the justification for fixing the cut-off date as I st fam:iar)r, 1986 is that the newly introduced pension scheme is modelled on the lines of a:sirnilar scheme a:pp. licable to Central Government employees. The proposal to hzve a scheme similar to the one applicable to Central Governri1ent employees in lieu of the existing CPF scheine was mooted by the in-service Bank employees. some time in 1986 and on the Central Government aceording·sanctioi1, it was brought· int.

O effect from 1st November, 1990.. That is why it was made applicable to those who retired in the meantime on or after 1st January, 1986. The underlying reason is to operate the scheme on the pattern of the scheme governing Central . Government employees and to extend the benefit tb those Bank employees who had demanded the same. For the above reasons we do not find any substance in the allegation that the cut~off date had been arbitrarily fixed 'Qy the B~k . Auth_orities or the Central Government whi~e giving its approval or that it is devoid of rational consideration and is wholly whimsical. In fixing the cut-off dace the respondents had not acted malafide with a view to deprive those who had-retired oii or before 31st December, l. 985 of the benefit of the pension scheme but for reasons siated ab6ve it was notpracticable to extend the benefit to such retirees.

The rationale for fixing the cut-off date as 1st January~ 1986 was the same as in the case of Central government employees based on the recommendation of the Fourth Central Pay Commission. · · · We, therefore, do not see a11y merit in this peti~on and dismiss the smne with no order as to costs. · T. N. A. Petition dismissed.