TaxTMI 
TaxTMI 
1982 (12) TMI 151
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....cle and brain powers permeating these petitions, the petitioners in the fall of life yearn for equality of treatment which is being meted out to those who are soon going to join and swell their own ranks, Do pensioners entitled to receive superannuation or retiring pension under Central Civil Services (Pension) Rules, 1972 ('1972 Rules' for short) form a class as a whole ? Is the date of retirement a relevant consideration for eligibility when a revised formula for computation of pension is ushered in and made effective from a specified date ? Would differential treatment to pensioners related to the date of retirement qua the revised formula for computation of pension attract Article 14 of the Constitution and the element of discrimination liable to be declared unconstitutional as being violative of Art. 14 ? These and the related questions debated in this group of petitions call for an answer in the backdrop of a welfare State and bearing in mind that pension is a socio-economic justice measure providing relief when advancing age gradually but irrevocably impairs capacity to stand on one's own feet. Factual matrix has little relevance to the issues raised and canvassed at t....
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....sed from Rs. 675 p.m. to Rs. 1000 p.m. Before the Government could take its decision on the recommendations of the ARC, the Third Central Pay Commission was set up. One of the terms of reference of the Third Pay Commission was 'death-cum- retirement benefits of Central Government employees'. The Third Pay Commission did not examine the question of relief to pensioners because in its view unless the terms of reference were suitably amended it would not be within their jurisdiction to examine this question and on a reference by them, the Government of India decided not to amend the terms of reference. With regard to the future pensioners the Third Pay Commission while reiterating that the age of superannuation should continue to be 58 years further recommended that no change in the existing formula for computing pension is considered necessary. The only important recommendation worth noticing is that the Commission recommended that the existing ceiling of maximum pension should be raised from Rs. 675 to Rs. 1,000 p.m. and the maximum of the gratuity should be raised from Rs. 24,000 to Rs. 30,000. On May 25, 1979, Government of India, Ministry of Finance, issued Office Memorandum N....
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....f Art. 14. Primary contention is that the pensioners of the Central Government form a class for purpose of pensionary benefits and there could not be mini-classification within the class designated as pensioners. The expression 'pensioner' is generally understood in contra-distinction to the one in service. Government servants in service, in other words, those who have not retired, are entitled to salary and other allowances. Those who retire and are designated as 'pensioners' are entitled to receive pension under the relevant rules. Therefore, this would clearly indicate that those who render service and retire on superannuation or any other mode of retirement and are in receipt of pension are comprehended in the expression 'pensioners'. Is this class of pensioners further divisible for the purpose of 'entitlement' and 'payment' of pension into those who retired by certain date and those who retired after that date ? If date of retirement can be accepted as a valid criterion for classification, on retirement each individual government servant would form a class by himself because the date of retirement of each is correlated to his birth date and on attaining a certain age he....
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....be fulfilled, viz., (i) that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from those that are left out of the group; and (ii) that differentia must have a rational relation to the objects sought to be achieved by the statute in question. (see Shri Ram Krishna Dalmia v. Shri Justice S.R. Tendolkar & Others. The classification may be founded on differential basis according to objects sought to be achieved but what is implicit in it is that there ought to be a nexus i.e., causal connection between the basis of classification and object of the statute under consideration. It is equally well settled by the decisions of this Court that Art. 14 condemns discrimination not only by a substantive law but also by a law of procedure. After an exhaustive review of almost all decisions bearing on the question of Art. 14, this Court speaking through Chandrachud, C.J. in Re. Special Courts Bill restated the settled propositions which emerged from the judgments of this Court undoubtedly insofar as they were relevant to the decision on the points arising for consideration in that matter. Four of them are apt a....
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....o be identified with the doctrine of classification because the view taken was that Art. 14 forbids discrimination and there will be no discrimination where the classification making the differentia fulfils the aforementioned two conditions. However, in EP. Royappa v. State of Tamil Nadu(1), it was held that the basic principle which informs both Arts. 14 and 16 is equality and inhibition against discrimination. This Court further observed as under: "From a positivistic point of view, equality is antithetic to arbitrariness. In fact, equality and arbitrariness are sworn enemies; one belongs to the rule of law in a republic while the other, to the whim and caprice of an absolute monarch. Where an act is arbitrary it is implicit in it that it is unequal both according to political logic and constitutional law and is, therefore, violative of Art. 14, and if it affects any matter relating to public employment, it is also violative of Art. 16. Articles 14 and 16 strike at arbitrariness in State action and ensure fairness and equality of treatment. Justice Iyer has in his inimitable style dissected Art. 14 as under: "The article has a pervasive processual potency and versatil....
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....help the less fortunate in the society to ameliorate their condition so that the social and economic inequality in the society may be bridged. This would necessitate a legislation applicable to a group of citizens otherwise unequal and amelioration of whose lot is the object of state affirmative action. In the absence of doctrine of classification such legislation is likely to flounder on the bed rock of equality enshrined in Art. 14. The court realistically appraising the social stratification and economic inequality and keeping in view the guidelines on which the State action must move as constitutionally laid down in part IV of the Constitution, evolved the doctrine of classification. The doctrine was evolved to sustain a legislation or State action designed to help weaker sections of the society or some such segments of the society in need of succor. Legislative and executive action may accordingly be sustained if it satisfies the twin tests of reasonable classification and the rational principle correlated to the object sought to be achieved. The State, therefore, would have to affirmatively satisfy the Court that the twin tests have been satisfied. It can only be satisfied....
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.... a Rubicon and those who retire prior to that date form one class and those who retire on a subsequent date form a distinct and separate class and no one can cross the Rubicon. And the learned Attorney General contended that this differentiation is grounded on a rational principle and it has a direct correlation to the object sought to be achieved by liberalised pension formula. 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 ? 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. The antiquated ....
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....e plans of retirement benefits, everyone who qualifies for normal retirement receives the same amount. (see Retirement Systems for Public Employees by Bleakney, page 33.) As the present case is concerned with superannuation pension, a brief history of its initial introduction in early stages and continued existence till today may be illuminating. Superannuation is the most descriptive word of all but has become obsolescent because it seems ponderous. Its genesis can be traced to the first Act of Parliament (in U.K.) to be concerned with the provision of pensions generally in public offices. It was passed in 1810. The Act which substantively devoted itself exclusively to the problem of superannuation pension was superannuation Act of 1834. These are landmarks in pension history because they attempted for the first time to establish a comprehensive and uniform scheme for all whom we may now call civil servants. Even before the 19th century, the problem of providing for public servants who are unable, through old age or incapacity, to continue working, has been recognised, but methods of dealing with the problem varied from society to society and even occasionally from department t....
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....he patient replied, 'that is funny, I could not before'. It appears that determining the minimum amount required for living decently is difficult, selecting the percentage representing the proper ratio between earnings and the retirement income is harder. But it is imperative to note that as self- sufficiency declines the need for his attendance or institutional care grows. Many are literally surviving now than in the past. We owe it to them and ourselves that they live, not merely exist. The philosophy prevailing in a given society at various stages of its development profoundly influences its social objectives. These objectives are in turn a determinant of a social policy. The law is one of the chief instruments whereby the social policies are implemented and 'pension is paid according to rules which can be said to provide social security law by which it is meant those legal mechanisms primarily concerned to ensure the provision for the individual of a cash income adequate, when taken along with the benefits in kind provided by other social services (such as free medical aid) to ensure for him a culturally acceptable minimum standard of living when the normal means of doing so fa....
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....your employer, in days of invalidity, economic security by way of periodical payment is assured. The term has been judicially defined as a stated allowance or stipend made in consideration of past service or a surrender of rights or emoluments to one retired from service. 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. In one sentence one can say that the most practical raison d'etre for pension is the inability to provide for oneself due to old age. One may live and avoid unemployment but not senility and penury if there is nothing to fall back upon. The discernible purpose thus underlying pension scheme or a statute introducing the pension scheme must inform interpretative process and accordingly it should receive a liberal construction and the courts may not so interpret such statute as to render them inane (see American Jurisprudence 2d. 881). From the discussion three things emerge : (i) that pension is neither a bounty nor a matter of grace depending upon the sweet will of the employer and that it creates a vested ....
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....seeking the intervention of the Court with touching faith and confidence in the Court. The Judges of the Court have a duty to redeem their Constitutional oath and do justice no less to the pavement dweller than to the guest of the Five Star Hotel." Proceeding further, this Court observed that where all relevant considerations are the same, persons holding identical posts may not be treated differently in the matter of their pay merely because they belong to different departments. If that can't be done when they are in service, can that be done during their retirement? Expanding this principle, one can confidently say that if pensioners form a class, their computation cannot be by different formula affording unequal treatment solely on the ground that some retired earlier and some retired later. Art. 39 (e) requires the State to secure that the health and strength of workers, men and women, and children of tender age are not abused and that citizens are not forced by economic necessity to enter avocations unsuited to their age or strength. Art. 41 obligates the State within the limits of its economic capacity and development, to make effective provision for securing the right to ....
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.... wherewithal while the ill-equipped son or daughter of a well-to-do father will enter the portals of higher education and contribute to national wastage. After the education is completed, socialism aims at equality in pursuit of excellence in the chosen avocation without let or hindrance of caste, colour, sex or religion and with full opportunity to reach the top not thwarted by any considerations of status, social or otherwise. But even here the less equipped person shall be assured a decent minimum standard of life and exploitation in any form shall be eschewed. There will be equitable distribution of national cake and the worst off shall be treated in such a manner as to push them up the ladder. Then comes the old age in the life of everyone, be he a monarch or a Mahatma, a worker or a pariah. The old age overtakes each one, death being the fulfilment of life providing freedom from bondage. But there socialism aims at providing an economic security to those who have rendered unto society what they were capable of doing when they were fully equipped with their mental and physical prowess. In the fall of life the State shall ensure to the citizens a reasonably decent standard of l....
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....n these petitions. The challenge is not to the validity of the pension liberalisation scheme. The scheme is wholly acceptable to the petitioners, nay they are ardent supporters of it, nay further they seek the benefit of it. The petitioners challenge only that part of the scheme by which its benefits are admissible to those who retired from service after a certain date. In other words, they challenge that the scheme must be uniformly enforced with regard to all pensioners for the purpose of computation of pension irrespective of the date when the Government servant retired subject to the only condition that he was governed by the 1972 Rules. No doubt, the benefit of the scheme will be available from the specified date, irrespective of the fact when the concerned Government servant actually retired from service. Having set out clearly the society which we propose to set up, the direction in which the State action must move, the welfare State which we propose to build up, the constitutional goal of setting up a socialist State and the assurance in the Directive Principles of State Policy especially of security in old age at least to those who have rendered useful service during....
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....just preceding the date of retirement, naturally the average would be lower and they will be doubly hit because the slab system as now introduced was not available and the ceiling was at a lower level. Thus they suffer triple jeopardy, viz., lower average emoluments, absence of slab system and lower ceiling. What then is the purpose in prescribing the specified date vertically dividing the pensioners between those who retired prior to the specified date and those who retire subsequent to that date? That poses the further question, why was the pension scheme liberalised ? What necessitated liberalisation of the pension scheme ? Both the impugned memoranda do not spell out the raison d'etre for liberalising the pension formula. In the affidavit in opposition by Shri S.N. Mathur, it has been stated that the liberalisation of pension of retiring Government servants was decided by the Government in view of the persistent demand of the Central Government employees represented in the scheme of Joint Consultative Machinery. This would clearly imply that the preliberalised pension scheme did not provide adequate protection in old age and that a further liberalisation was necessary ....
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.... itself the function of legislation for persons, things or situations omitted by the legislature. It was said that when the legislature has expressly defined the class with clarity and precision to which the legislation applies, it would be outside the judicial function to enlarge the class and to do so is not to interpret but to legislate which is the forbidden field. Alternatively it was also contended that where a larger class comprising two smaller classes is covered by a legislation of which one part is constitutional, the Court examines whether the legislation must be invalidated as a whole or only in respect of the unconstitutional part. It was also said that severance always cuts down the scope of legislation but can never enlarge it and in the present case the scheme as it stands would not cover pensioners such as the petitioners and if by severance an attempt is made to include them in the scheme it is not cutting down the class or the scope but enlarge the ambit of the scheme which is impermissible even under the doctrine of severability. In this context it was lastly submitted that there is not a single case in India or elsewhere where the Court has included some cat....
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....t date simultaneously denying the same to those who retired prior to that date. If the liberalisation was considered necessary for augmenting social security in old age to government servants then those who retired earlier cannot be worst off than those who retire later. Therefore, this division which classified pensioners into two classes is not based on any rational principle and if the rational principle is the one of dividing pensioners with a view to giving something more to persons otherwise equally placed, it would be discriminatory. To illustrate, take two persons, one retired just a day prior and another a day just succeeding the specified date. Both were in the same pay bracket, the average emolument was the same and both had put in equal number of years of service. How does a fortuitous circumstance of retiring a day earlier or a day later will permit totally unequal treatment in the matter of pension ? One retiring a day earlier will have to be subject to ceiling of Rs. 8,100 p a. and average emolument to be worked out on 36 months' salary while the other will have a ceiling of Rs. 12,000 p.a. and average emolument will be computed on the basis of last ten months ave....
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....f pension is a statutory liability undertaken by the Government and whatever becomes due and payable is budgeted for. One could have appreciated this line of reasoning where there is a contributory scheme and a pension fund from which alone pension is disbursed. That being not the case, there is no question of pensioners dividing the pension fund which, if more persons are admitted to the scheme, would pro rata affect the share. Therefore, there is no question of dividing the pension fund. Pension is a liability incurred and has to be provided for in the budget. Therefore, the argument of divisions of a cake, larger the number of sharers, smaller the share and absence of residue and therefore by augmentation of beneficiaries, pro rata share is likely to be affected and their absence making relief impermissible, is an argument born of desperation, and is without merits and must be rejected as untenable. 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 len....
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....les 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. That takes us to the last important contention of the learned Attorney General. It was urged that the date from which the scheme becomes operative is an integral part of the scheme and the doctrine of severability cannot be invoked. In other words, it was urged that date cannot be severed from the main object of the scheme because the Government would have never offered the scheme unless the dat....
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.... the maximum the old lower ceiling will not deny him what is otherwise justly due on computation. The words "who were in service on 31st March, 1979 and retiring from service on or after the date" excluding the date for commencement of revision are words of limitation introducing the mischief and are vulnerable as denying equality and introducing an arbitrary fortuitous circumstance can be severed without impairing the formula. Therefore, there is absolutely no difficulty in removing the arbitrary and discriminatory portion of the scheme and it can be easily severed. There is nothing immutable about the choosing of an event as an eligibility criteria subsequent to a specified date. If the event is certain but its occurrence at a point of time is considered wholly irrelevant and arbitrarily selected having no rationale for selecting it and having an undesirable effect of dividing homogeneous class and of introducing the discrimination, the same can be easily severed and set aside. While examining the case under Art. 14, the approach is not: 'either take it or leave it', the approach is removal of arbitrariness and if that can be brought about by severing the mischievous portio....
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....tion of Seniority) Rules, 1954. These rules required first to ascertain the year of allotment of the person concerned for the determination of his seniority. In doing so, the Government of India directed that officers promoted to the Indian Police Service should be allowed the benefit of their continuous officiation with effect only from 19th May, 1951. The appellant challenged the order because the period of officiation from June 1947 to May 1951 was excluded for the purpose of fixation of his seniority. His grievance was that there was no rationale behind selecting this date. After taking into consideration affidavit in opposition, this Court held as under : "It would be noticed that the date, May 19, 1951, to begin with had nothing to do with the finalisation of the Gradation List of the Indian Police Service because it was a date which had reference to the finalisation of the Gradation List for the IAS. Further this date does not seem to have much relevance to the question of avoiding the anomalous position mentioned in para 9 of the affidavit reproduced above. This date was apparently chosen for the IAS because on this date the Gradation List for all the earlier persons ....
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....at date would not be deemed to be approved by the Central Government within the second proviso. In case before us, the eligibility criteria for being eligible for liberalised pension scheme have been picked out from where it is difficult to gather and no rationale is discernible nor one was attempted at the hearing. The ratio of the decision would squarely apply to the facts of this case. Similarly in Jaila Singh & Anr. v. State of Rajasthan & Ors.(1), this Court struck down as discriminatory the division of pre-1955 and post-1955 tenants for the purpose of allotment of land made by the Rules under the Rajasthan Colonisation Act, 1954 observing that the various provisions indicate that the pre-1955 and post-1955 tenants stand on the same footing and therefore do not form different classes and hence the division was held to be based on wholly irrelevant consideration. The court further observed that it is difficult to appreciate how it would make any difference from the point of view of allotment of land, whether a tenant has been in occupation for 16 years or 18 or 20 years and why differentiation should be made with reference to the date when Rajasthan Tenancy Act came into force.....
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....e decision of the legislature or its delegate must be accepted unless we can say that it is very wide of the reasonable mark." In reaching this conclusion the Court relied on Louisville Gas Co. v. Alabama Power Co. (1) This decision is not an authority for the proposition that whenever a date is chosen, or an eligibility criteria which divides a class, the purpose of choice unrelated to the objects sought to be achieved must be accepted as valid. In fact it is made clear in the decision itself that even if no particular reason is forthcoming for the choice unless it is shown to be capricious or whimsical, the choice of the legislature may be accepted. Therefore, the choice of the date cannot be wholly divorced from the objects sought to be achieved by the impugned action. In other words, if the choice is shown to be thoroughly arbitrary and introduces discrimination violative of Art. 14, the date can be struck down. What facts influenced the Court's decision in that case for upholding the choice of the date are worth- recalling. The Court held that the object of granting the concessional rate of duty was to protect the smaller units in the industry from the competition by the la....
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....e object sought to be achieved and has the pernicious tendency of dividing an otherwise homogeneous class, the question is whether the liberalised pension scheme must wholly fail or that the pernicious part can be severed, cautioning itself that this Court does not legislate but merely interprets keeping in view the underlying intention and the object, the impugned measure seeks to subserve ? Even though it is not possible to oversimplify the issue, let us read the impugned memoranda deleting the unconstitutional part. Omitting it, the memoranda will read like this : "At present, pension is calculated at the rate of 1/80th of average emoluments for each completed year of service and is subject to a maximum of 33/80 of average emoluments and is further restricted to a monetary limit of Rs. 1,000/- per month. The President is, now, pleased to decide that with effect from 31st March, 1979 the amount of pension shall be determined in accordance with the following slabs." If from the impugned memoranda the event of being in service and retiring subsequent to specified date is severed, all pensioners would be governed by the liberalised pension scheme. The pension will have to be r....
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....stitutional measure has been well recognised. It would be just and proper that the provision in the memoranda while retaining the date for its implementation, but providing 'that in respect of Government servants who were in service on the 31st March, 1979 but retiring from service in or after that date' can be legally and validly severed and must be struck down. The date is retained without qualification as the effective date for implementation of scheme, it being made abundantly clear that in respect of all pensioners governed by 1972 Rules, the pension of each may be recomputed as on April 1, 1979 and future payments be made in accordance with fresh computation under the liberalised pension scheme as enacted in the impugned memoranda. No arrears for the period prior to 31st March, 1979 in accordance with revised computation need be paid. In this context the last submission of the learned Attorney General was that as the pension is always correlated to the date of retirement, the Court cannot change the date of retirement, and impose fresh commutation benefit. We are doing nothing of this kind. The apprehension is wholly unfounded. The date of retirement of each employee remai....
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..... The exclusion is of a whole class of people who retire before a certain date. Parliament would not have hesitated to extend the benefit otherwise considered eminently just, and this becomes clearly discernible from page 35 of 9th Report of Committee on Petitions (Sixth Lok Sabha) April, 1976. While examining their representation for better pensionary benefit, the Committee concluded as under: "The Committee are of the view that Government owe a moral responsibility to provide adequate relief to its retired employees including pre 1.1.1973 pensioners, whose actual value of pensions has been eroded by the phenomenal rise in the prices of essential commodities. In view of the present economic conditions in India and constant rise in the cost of living due to inflation, it is all the more important even from purely humanitarian considerations if not from the stand point of fairness and justice, to protect the actual value of their meagre pensions to enable the pensioners to live in their declining years with dignity and in reasonable comfort." Therefore, we are not inclined to share the apprehension voiced by the learned Attorney that if we strike down the unconstitutional part....
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....ubmission is that if the benefit of commutation is already availed of, it cannot and need not be reopened. And availability of other benefits is hardly a relevant factor because pension is admissible to all retirees. The figures submitted are thus neither frightening nor the liability is supposed to be staggering which would deflect us from going to the logical end of constitutional mandate. Even according to the most liberal estimate, the average yearly increase is worked out to be Rs. 51 crores but that assumes that every pensioner has survived till date and will continue to survive. Therefore, we are satisfied that the increased liability consequent upon this judgment is not too high to be unbearable or such as would have detracted the Government from covering the old pensioners under the scheme. Locus standi of third petitioner was questioned. Petitioner No. 3 is a Society registered under the Societies Registration Act of 1860. It is a non-political non-profit and voluntary organisation. Its members consist of public spirited citizens who have taken up the cause of ventilating legitimate public problems. This Society received a large number of representations from old pensi....