2025 (7) TMI 998 - SC - Indian Laws

Compulsorily retired bank employees entitled to two-thirds pension under regulation 33, prior Board consultation mandatory

The SC allowed the appeal regarding pension reduction under regulation 33 of the Central Bank of India (Employees') Pension Regulations, 1995. The HC ... Interpretation of statute - regulation 33 of the Pension Regulations - compulsory retirement pension - Reduction of one-third of the pension payable to the appellant under the Central Bank of India (Employees’) Pension Regulations, 1995 - HELD THAT:- High Court failed to read the regulation in its proper perspective and went a step ahead to hold that a compulsorily retired employee would not be entitled to any pension unless an order is passed under regulation 33 (1). A combined reading of the clauses in regulation 33 clearly indicates that the pension payable to an employee who has been compulsorily retired as a penalty shall not be less than twothird of his full pension or Rs. 375 per mensem, whichever is higher - The word ‘may’ must be read in its proper context, that is to say, it was used in the regulation not to vest discretion in the superior authority to grant pension less than twothird of full pension payable but to clarify that the aforesaid clause will not entitle a compulsorily retired employee to pension if he is not otherwise entitled to such pension on superannuation on that day. For example, if an employee is compulsorily retired without completing ‘qualifying service’ making him eligible to pension under the regulations. Clause (1) and clause (2) of regulation 33 must be read conjointly and in all cases when the full pension admissible to a compulsorily retired employee under the regulations is reduced, a prior consultation with the Board is necessary. A plain reading of regulation 33 would show award of pension less than full pension is to be done with prior consultation of the Board of Directors. Such prior consultation with the highest authority of the Bank i.e., Board of Directors must be understood as a valuable mandatory safeguard before an employee’s constitutional right to pension is curtailed. In these circumstances, a post facto approval cannot be a substitute of prior consultation with the Board before the decision is made - Though it is claimed that the delinquent acts of the appellant had caused an approximate loss to the tune of Rs. 3.26 crores to the bank, no evidence relating to the computation of such loss was either considered by the disciplinary authority or by the appellate authority. Further, no opportunity of hearing was given by the authorities prior to reducing his pension. No exceptional case to exercise our extraordinary powers under Article 142 is made out. The order of the High Court and order of the Field General Manager dated 07.08.2015 reducing pension without prior consultation of the Board of Directors - Appeal allowed. The core legal questions considered in this judgment revolve around the interpretation and application of Regulation 33 of the Central Bank of India (Employees') Pension Regulations, 1995, particularly concerning the entitlement and quantum of pension payable to an employee compulsorily retired as a penalty. The issues include:(a) Whether a compulsorily retired employee is entitled to pension, and if so, at what minimum rate under the Pension Regulations;(b) The interpretation of clauses (1) and (2) of Regulation 33, specifically the roles of the 'authority higher than the authority competent to impose penalty' and the 'Competent Authority' in awarding or reducing pension;(c) Whether prior consultation with the Board of Directors is mandatory before reducing pension below full admissible pension;(d) The constitutional protection of pension rights under Article 300A and the procedural safeguards required before pension can be curtailed;(e) The validity of the decision to reduce the appellant's pension to two-thirds without prior consultation with the Board of Directors and without affording an opportunity of hearing;(f) The permissibility of post facto approval by the Board of Directors in lieu of prior consultation;(g) The scope of the Court's extraordinary powers under Article 142 to uphold or modify the pension reduction.Issue-wise detailed analysis:1. Entitlement to Pension and Minimum Quantum under Regulation 33The Court examined Regulation 33 of the Pension Regulations, which governs compulsory retirement pension. Clause (1) states that an employee compulsorily retired as a penalty may be granted pension at a rate not less than two-thirds and not more than full pension by an authority higher than the authority competent to impose the penalty, provided the employee was otherwise entitled to pension on superannuation. Clause (3) mandates a minimum pension of Rs. 375 per mensem.The Court emphasized that the word 'may' in clause (1) does not confer discretion to grant less than two-thirds pension but clarifies that pension is payable only if the employee is otherwise entitled on superannuation. The High Court's interpretation that grant of pension is discretionary was held to be erroneous. The Court held that a compulsorily retired employee is entitled to receive pension not less than two-thirds of the full pension or Rs. 375 per month, whichever is higher, unless disqualified by other provisions.2. Interpretation of Clauses (1) and (2) of Regulation 33 and Identification of AuthoritiesClause (1) empowers an authority higher than the disciplinary authority to grant pension at not less than two-thirds. Clause (2) requires that whenever a competent authority awards pension less than full compensation pension, the Board of Directors must be consulted before passing such order. The Court analyzed the definitions of 'Competent Authority' under both the Discipline and Appeal Regulations and Pension Regulations, noting that the competent authority must be superior to the delinquent and not below scale IV officer.The Court found that the Field General Manager, a scale VII officer, is both an authority superior to the disciplinary authority and the appellate authority competent to reduce pension under clause (2). The Bank's contention that clauses (1) and (2) operate independently, and that prior consultation with the Board is unnecessary when pension is reduced under clause (1) by a superior authority, was rejected.The Court reasoned that reading the clauses independently would lead to an anomalous situation where the same authority could reduce pension without Board consultation under clause (1), but would require it under clause (2) when exercising appellate or review powers. Such interpretation would render clause (2) nugatory, which is impermissible.3. Mandatory Nature of Prior Consultation with Board of DirectorsThe Court held that prior consultation with the Board of Directors is a mandatory procedural safeguard before pension can be reduced below full admissible pension. The Board is the highest authority of the Bank, and consultation ensures protection of the employee's constitutional right to pension under Article 300A, which safeguards property rights.The Court distinguished between prior consultation and post facto approval, holding that post facto approval cannot substitute for mandatory prior consultation. It relied on authoritative principles from precedent concerning the nature and purpose of consultation, emphasizing that consultation requires a 'meeting of minds' and must be meaningful and prior to the decision.The Court cited parameters from a landmark case which outlined that when fundamental rights are affected, prior consultation is mandatory and non-compliance renders the action invalid. The Court concluded that the Bank's failure to consult the Board prior to reducing pension was a violation of the procedural safeguards embedded in the Pension Regulations.4. Constitutional Right to Pension and Procedural SafeguardsThe Court reiterated that pension is a valuable right, not a bounty, protected under Article 300A of the Constitution. It can only be denied or curtailed by clear statutory authority and after due procedure. The reduction of pension without prior consultation and without affording the appellant an opportunity of hearing was held to be contrary to principles of natural justice and statutory requirements.5. Validity of Pension Reduction and Opportunity of HearingThe disciplinary and appellate authorities had imposed compulsory retirement and reduced the pension to two-thirds without prior consultation with the Board and without giving the appellant an opportunity to be heard on the pension reduction. The Court found that no evidence was placed on record regarding the computation of the alleged financial loss caused by the appellant, nor was any hearing conducted before pension reduction.This procedural lapse was held to vitiate the impugned pension reduction order. The Court emphasized that all procedural safeguards must be strictly followed when an employee's pension rights are curtailed.6. Post facto Approval versus Prior ConsultationThe Court rejected the Bank's argument that the pension reduction order could be placed before the Board for ex post facto approval. It held that the regulation mandates prior consultation, which is a substantive safeguard and cannot be replaced by after-the-fact approval. The Court analyzed the nature of consultation and the binding effect of the Board's opinion to conclude that prior consultation is mandatory and non-compliance renders the pension reduction invalid.7. Exercise of Extraordinary Powers under Article 142The Bank sought endorsement of the pension reduction under the Court's extraordinary powers under Article 142 to do complete justice. The Court declined to exercise such powers, noting the absence of evidence on the quantum of loss and the procedural irregularities in pension reduction. It held that no exceptional circumstances justified such intervention.ConclusionsThe Court allowed the appeal, set aside the High Court's judgment and the Field General Manager's order reducing pension without prior consultation of the Board of Directors. It directed the Bank to take an appropriate decision regarding pension reduction after giving the appellant an opportunity of hearing and with prior consultation of the Board within two months. Failing such action, the appellant shall be entitled to full pension from the date of superannuation.Significant holdings and core principles:'The word 'may' occurring in clause (1) does not give discretion to superior authority to award pension less than two-thirds of the full pension payable.''A combined reading of the clauses in regulation 33 clearly indicates that the pension payable to an employee who has been compulsorily retired as a penalty shall not be less than two-thirds of his full pension or Rs. 375 per mensem, whichever is higher.''Whenever the full pension admissible to a compulsorily retired employee under the regulations is reduced, prior consultation with the Board of Directors is necessary.''Post facto approval cannot be a substitute of prior consultation with the Board before the decision is made.''Pension is not a bounty but a valuable right to property and can be denied only through authority of law with all procedural safeguards.''Non-compliance with mandatory prior consultation and failure to afford opportunity of hearing renders the pension reduction order invalid.''Any interpretation which renders words or expressions in a statute otiose ought to be eschewed.'The judgment establishes that pension rights of compulsorily retired bank officers are protected by statutory and constitutional safeguards, requiring strict adherence to procedural requirements including prior consultation with the Board of Directors and opportunity of hearing before pension can be reduced below the prescribed minimum. The Court's ruling underscores the importance of harmoniously construing regulatory provisions to avoid anomalies and protect employee rights.