Retrospective pension rule changes cannot cut down vested retirement benefits already earned by employees.

A retrospective amendment to Rule 2544 of the Indian Railway Establishment Code that reduced the running allowance reckoned for pension was invalid to the extent it cut down benefits already accrued to retired employees. Pension was treated as a valuable right governed by the rules in force at retirement, and while a rule framed under the proviso to Article 309 may operate retrospectively, it cannot arbitrarily defeat vested pensionary rights or breach constitutional protections. The reduction from the earlier reckonable percentage to lower limits was therefore held arbitrary, unreasonable, and constitutionally unsustainable.

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Issues: Whether the retrospective amendment to Rule 2544 of the Indian Railway Establishment Code, reducing the percentage of running allowance reckoned for pension and other retiral benefits, was valid.

Analysis: The retrospective notifications altered the basis on which pension had to be computed for employees who had already retired or who retired before the notifications took effect. Pension was a valuable right earned on retirement, and under the governing railway rule the employee's claim had to be regulated by the rules in force at the time of retirement. A rule made under the proviso to Article 309 could operate retrospectively, but not so as to defeat constitutional protections or take away benefits that had already accrued. The amendment reduced the maximum running allowance reckonable from 75% to 45% for one period and 55% for the later period, thereby lowering the pension otherwise payable under the earlier rule. Such retrospective deprivation was held to be arbitrary and unreasonable and also inconsistent with the constitutional guarantees then in force when the retrospective dates were chosen.

Conclusion: The retrospective operation of the amendment to Rule 2544 was invalid and unsustainable to the extent it reduced pensionary benefits already accrued to retired employees.

Ratio Decidendi: A service rule made under the proviso to Article 309 may have retrospective effect only so long as it does not arbitrarily take away vested pensionary rights or otherwise offend the Constitution.

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