TaxTMI 
TaxTMI 
1990 (7) TMI 366
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....iled in a representative capacity on behalf of all the members of the Association who retired with Provident Fund benefits. Writ Petition No. 361 of 1989 has been filed by three individual retired Railway employees who also retired with Provident Fund benefits. The petitioner in Writ Petition No. 1285 of 1986 retired as Block Inspector of Northern Railway on 7.1.1968, a non-pensionable post. All the petitioners except petitioner No. 5 in W.P. No. 1575 of 1986 retired from Railway service high posts. Petitioner No. 1 retired as Additional Member, Railway Board on 5.11.1960 with Provident Fund benefits. Petitioner No. 2 was Member, Railway Board and similarly retired on 1.3. 1968 opting for Provident Fund Scheme as at that time the maximum monthly pension was Rs. 675 only. Petitioner No. 3 similarly retired as General Manager on 5.12.1960. Petitioner No. 4 retired as Member (Staff) Railway Board and Ex-officio Secretary to the Government of India on 30.6.1977 opting for the Provident Fund Scheme. Petitioner No. 5 also retired on 19.6.1972 opting for the Provident Fund Scheme. Petitioner No. 6 retired on 28.8.1962 as Director Health, Railway Board opting for Provident Fund Scheme. Pet....
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....s by different ways such as altering the formula for computing the pension, by including dearness allowance in the pay for computing pension, by removal of the ceiling on pension, and by introducing or liberalising the Family Pension Scheme etc. The Railway, it is urged, had expressed no intention of extending the benefits of this liberalised pension to those employees who had already retired. At the time when the option was given to choose between pension and Provident Fund, the employees had no idea that in future improvements would be made to either of them. However, it is stated, this Court in D.S. Nakara and Ors. v. Union of India, [1983] 2 SCR 165 held that the benefit of any liberalisation in computation of pension would also have to be extended to those employees who had already retired as they were similarly situated with those who were yet to retire. It is submitted, that even though Nakara's case related to Central Government employees, the Railways also implemented the Judgment and extended the liberalised pension benefits even to those employees who had retired long before the liberalisations concerned were introduced. The decision to implement Nakara's Judgment to Rai....
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....tirees while denying that option to other P.F. retirees who were identically placed but were separated from the rest by the arbitrary cut-off date. Each of the notifications specified a date and provided that the P.F. retirees who retired on or after that date would have fresh option of switching over to the pensionary benefits even though they had already retired, and also had already drawn the entire Provident Fund benefits due to them. It is also contended that the specified dates in these notifications having formed the basis of the discrimination between similarly placed P.F. retirees those were arbitrary and un-related to the objects sought to be achieved by giving of the option and were clearly violative of Art. 14 and also of the principle laid down in Nakara's case, which according to counsel, is that pension retirees could not be divided by such arbitrary cut-off dates for the purpose of giving benefitS' to some and not to other similarly situated employees; and that by analogy the rule is equally applicable to the Provident Fund retirees as a class. Mr. Kapil Sibal, the learned Additional Solicitor General refuting the argument submits that each of the options was mea....
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....ted 3.3.66 Family Pension Scheme was further liberalised for employees who die while in service. In view of this improvement in Pension Scheme, pension option under Railway Board's orders dated 3.3.66 was given to employees who were in service on 31.12.65. Since the liberalisation in Family Pension Scheme came into effect from 1st January, 1966, the option was open for employees who were in service on 31.12.65 and was open upto 30.6.1966. (vi) Pension Option dated 13.9.68 The definition of 'Pay' for pensionary benefits was changed from 1.5.68, through Board's orders dated 13.9.68. In view of this, a further option was given on 13.9.68 to Railway employees who were in service on and after 1.5.68 to opt for the Pension Scheme. This option was open upto 31.12.68. This was further extended upto 31.3.69. (vii) Pension Option dt. 15.7. 72 On representation from the recognised labour federations that many employees had not clearly understood the liberalisation introduced in the pension scheme, a fresh option was allowed on 15.7.72 to all serving employees. This was open till 21.10.72. (viii) Pension Option dated 23.7. 74 This option was based on similar orders issued ....
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....mployees who were in service on 31.3.79. This option was initially open till 22.2.80 but was extended subsequently to enable wider participation upto 22.2.1981. (x) Pension Option dated 4. 10.82 Orders were issued by Board on 30.4.82 ordering that a portion of Dearness Allowance will be treated as pay for retirement benefits w.e.f. 31.1.82. Accordingly a fresh option was allowed on 4.10.82 which could be exercised by Railway employees who were in service on 31.1.82. This option was available upto 31.8.83. (xi) Pension Option dated 18.6.85 Orders were issued by Railway Board on 17.5.85 merging Dearness Allowance to the price index upto 568 with pay for the purpose of retirement benefits and raising the ceiling of DCRG from 36,000 to 50,000 w.e.f. 31.3.85. Accordingly, another option was granted to the Railway employees who were in service on 31.3.85. This option was available for a period of 6 months i.e. upto 17.12.1985. (xii) Pension Option dated 8.5.87 Consequent upon acceptance of the recommendations of the 4th Pay Commission the revised pay scales were notified on 19.9.86 and 14.3.87, effective from 1.1.1986. Accordingly another pension option was given to the Railway ....
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....ary benefits or vice versa. It clearly said that Railway servants who did not exercise the option would continue to be eligible for the P.F. benefits or pensionary benefits as the case might be for which he was already eligible. The option was subject to the special conditions stated therein. Where the Railway servants opted for pensionary benefits, the part of the Government contribution together with interest thereon and/or special contribution to the Railway servants' P.F. account had already been paid, the excess of the amount over the gratuity due under the Pension Rules should be refunded to the Government. It clearly said that: "the option once exercised shall, however, be final and irrevocable irrespective of the decision taken on that issue." If a Railway servant opted for P.F. benefits and if the payment of pensionary benefits had already commenced, further payment would be stopped and his P.F. account would be reconstructed as if he had never opted for pensionary benefits. The period of validity of option was extended upto 30.6.61, and then upto 31.12.61. This letter clearly indicated the reason for giving this option as "under the revised pay structure introduced fro....
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....ailway employees from the SRPF (Contributory Scheme) to Pension Scheme'Implementation of the recommendation of the IV Central Pay Commission-regarding. The Railway employees who are covered by the SRPF (Contributory Scheme) CPF Scheme have been given repeated options in the past to come over the Pension Scheme. However, some Railway employees still continue under the CPF Scheme. The Fourth Central Pay Commission has now recommended that all CPF beneficiaries in service on January 1, 1986, should be deemed to have come over to the Pension Scheme on that date, unless they specifically opt out to continue under the GPF Scheme. 2. After careful consideration the President is pleased to decide that the said recommendation shall be accepted and implemented in the manner hereinafter indicated. 3.1. All CPF beneficiaries, who were in service on 1.1.86 and who are still in service on the date of issue of these orders, will be deemed to have come over to the Pension Scheme. ? 3.2. The employees of the category mentioned above will, however, have an option to continue under the CPF Scheme, if they so desire. The option will have to be exercised and conveyed to the concerned Head o....
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....... 5 'A proposal to grant ex-gratia payment to the beneficiaries, who retired prior to 1.1.1986 and to the families of CPF beneficiaries who died prior to 1.1.1986, on the basis of the recommendations of the Fourth Central Pay Commission, is separately under consideration of the Government. The said ex-gratia payment, if and when sanctioned, will not be admissible to the employees or their families who opt to continue under the CPF Scheme from 1.1.1986 onward. 6........................... (G. Chatterjee) Executive Director, Pay Commission Railway Board." The learned Additional Solicitor General stated that each option was given for stated reasons related to the options. On each occasion time was given not only to the persons in service on the date of the Railway Board's letter but also to persons who were in service till the stated anterior date but had retired in the meantime. The period of validity of option was extended in all the options except Nos. 3rd, 4th, 5th and 7th. We find the statements to have been substantiated by facts. The cut-off dates were not arbitrarily chosen but had nexus with the purpose for which the option was given. Mr. Shanti Bhushan howev....
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....pose of giving that option: Admittedly, the entire case of the petitioners is sought to be based on the decision in Nakara's case. Mr. Kapil Sibal submits that the petitioners' basic assumption is erroneous inasmuch as Nakara's case did not hold that whenever there was a liberalisation of pension all other pension retirees and P.F. retirees must be given option and that the older system of pension or Provident Fund was always insufficient. According to counsel the only question decided in Nakara can be gathered from the following paragraph of the report at page 172: "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?" T....
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....ion then is, has the court said in Nakara that what was applicable to pensioners vis-a-vis liberalisation of pension was to be equally applicable to P.F. retirees? In Nakara's case petitioners 1 and 2 were retired pensioners of the Central Government, the first being a civil servant and the second being a member of the service personnel of the Armed Forces. The third petitioner was a society registered under the Societies Registration Act, 1860, formed to ventilate the legitimate public problems and was espousing the cause of the pensioners all over the country. The first petitioner retired in 1972 and on computation, his pension worked out at Rs. 675 per month and with dearness allowance he was drawing monthly pension of Rs. 935. The second petitioner retired at or about that time and at the relevant time was in receipt of a pension plus dearness relief of Rs .981. The Union of India had been revising and liberalising the pension rules from time to time. The Central Government servants on retirement from service were entitled to receive pension under the Central Civil Services (Pension) Rules, 1972. Successive Central Pay Commissions recommended enhancement of pension in differ....
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....72 rules and in respect of defence personnel those who became/become non-effective on or after April 1, 1979. Consequently those who retired prior to -the specified date would not be entitled to the benefits of the liberalised pension formula. On the above facts the petitioners' therein contended that this Court would consider the raison d'etre for payment of pension, namely, whether it was paid for past satisfactory service rendered, and to avoid destitution in old age as well as a social welfare or socioeconomic justice measure, the differential treatment for those who retired prior to a certain date and those retiring subsequently, the choice of the date being wholly arbitrary would amount to discrimination and violative of Art. 14; and whether the classification based on fortuitous circumstance of retirement before or subsequent to a date, fixing of which was not shown to be related to any rational principle, would be equally violative of Art. 14. It was contended that pensioners of the Central Government formed a class for the purpose of pensionary benefits and there could not be mini-classification within the class designated as pensioners. The Court considered the natu....
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.... be the underlying intendment of liberalisation of pension scheme, can any one be bold enough to assert that it was good enough only for those who would retire subsequent to the specified date but those who had already retired did not suffer the pangs of rising prices and falling purchasing power of the rupee?" The Court then proceeded to examine whether there was any rationale behind the eligibility qualification and finding no rationale concluded: "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." The Court accordingly concluded that the division was thus arbitrary and unprincipled and therefore the classification did not stand the test of Art. 14. It was also arbitrary as the Court did not find a single acceptable or persuasive reason for this division and this arbitrary action violated the guarantee of Art. 14. The Court observed that the pension scheme including the liberalised scheme to the Government employees was non-contributory in' character....
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....hat the eligibility for liberalised pension scheme of 'being in service on the specified date and retiring subsequent to that date' in impugned memoranda, Exs. P-1 and P-2, violates Article 14 and is unconstitutional and is struck down. Both the memoranda shall be enforced and implemented as read down as under: In other words, Ex. P-1, the words: 'that in respect of the government servants who were in service on March 31, 1979 and retiring from service on or after that date'; and in Ex. P-2, the words: 'the new rates of pension are effective from April 1, 1979 and will be applicable to all service officers who became/become non-effective on or after that date'; are unconstitutional and are struck down with this specification that the date mentioned therein will be relevant as being one from which the liberalised pension scheme becomes operative to all pensioners governed by 1972 Rules irrespective of the date of retirement. Omitting the unconstitutional part it is declared that all pensioners governed by the 1972 Rules and Army Pension Regulations shall be entitled to pension as computed under the liberalised pension scheme from the specified date, irrespective of the date of re....
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....as never held that both the pension retirees and the P.F. retirees formed a homogeneous class and that any further classification among them would be violative of Art. 14. On the other hand the Court clearly observed that it was not dealing with the problem of a "fund". The Railway Contributory Provident Fund is by definition a fund. Besides, the Government's obligation towards an employee under C.P.F. Scheme to give the matching contribution begins as soon as his account is opened and ends with his retirement when his rights qua the Government in respect of the Provident Fund is finally crystallized and thereafter no statutory obligation continues. Whether there still remained a moral obligation is a different matter. On the other hand under the Pension Scheme the Government's obligation does not begin until the employee retires when only it begins and it continues till the death of the employee. Thus, on the retirement of an employee Government's legal obligation under the Provident Fund account ends while under the Pension Scheme it begins. The rules governing the Provident Fund and its contribution are entirely different from the rules governing pension. It would not, theref....
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....tion given to the P.F. employees to switch over to the pension scheme with effect from a specified cut-off date is bad as violative of Art. 14 of the Constitution for the same reasons for which in Nakara the notification were read down. We have extracted the 12th option letter. This argument is fallacious in view of the fact that while in case of pension retirees who are alive the Government has a continuing obligation and if one is affected by dearness the others may also be similarly affected. In case of P.F. retirees each one's rights having finally crystallized on the date of retirement and receipt of P.F. benefits and there being no continuing obligation thereafter they could not be treated at par with the living pensioners. How the corpus after retirement of a P.F. retiree was affected or benefitted by prices and interest rise was not kept any track of by the Railways. It appears in each of the cases of option the specified date bore a definite nexus to the objects sought to be achieved by giving of the option. Option once exercised was told to have been final. Options were exercisable vice versa. It is clarified by Mr. Kapil Sibal that the specified date has been fixed in re....
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....to Pension Scheme, were directed to be allowed to do so by the Rajasthan High Court relying on Nakara which was also followed in Union of India v. Bidhubhushan Malik, [1984] 3 SCC 95, subject matter of which was High Court Judges' pension and as such both are distinguishable on facts. That the Pension Scheme and the P.F. Scheme are structurally different is also the view of the Central Pay Commissions and hence ex gratia benefits have been recommended, which may be suitably increased. In the report of the Third Central Pay Commission 1973, Vol. 4 at page 49, dealing with State Railway Provident Fund it was said: "49. Both gazetted and non-gazetted Railway employees with a service of not less than 15 years who are governed by the State Railway Provident Fund Scheme are at present allowed a special contribution at the rate of 1/4th of a month's pay for each completed 6 monthly period of service but not exceeding 15 months' pay or Rs. 35,000, whichever is less. We have been informed by the Railway Board that for such employees the Government contribution and the special contribution to the Provident Fund together constitute the retirement benefits which in other civil departm....
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....d, enlarged and liberalised from time to time, there has been no similar improvement in the CPF scheme, excepting through improvement of rates of interest which were modified from 7 per cent on 1974 to 9 per cent in 1983-84, to 10 per cent in 1984-85 and to 12 per cent in 1985-86. While those governed by the pension scheme are entitled to receive dearness relief sanctioned from time to time to compensate for increase in the cost of living, those under the CPF scheme were not entitled to such relief. The employees governed by the CPF scheme are also not entitled to the family pension available to those governed by the pension scheme. The matching government contribution in the case of CPF employees is paid for the full period of service the restriction of 33 years for those governed by pension scheme does not apply in their case. Those who have retired under the CPF scheme have a corpus yielding regular return. In the case of railway employees, special contribution to PF is paid at the time of retirement equivalent to half a month's salary for each completed year of service subject to a maximum of 16 months' salary or Rs. 60,000 whichever is less. The amount of special contribution ....
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....suggested grant of ex gratia payment to the widows and dependent children of deceased employees covered by CPF scheme at 50 per cent of the rate for ex gratia payment. We agree and recommend accordingly for those getting pay upto Rs. 500 per mensem. The eligibility of widow and minor children for the purposes of this relief may be same as laid down under the pension rules." "9.8. In so far as the CPF beneficiaries still in service on January 1, 1986 are concerned, we recommend that they should be deemed to have come over to the pension scheme on that date unless they specifically opt out to continue under the CPF scheme. The CPF beneficiaries who decide to continue to remain under that scheme should not be eligible on retirement for ex gratia payment recommended by us for the CPF retirees. Government may, however, extend the benefit of DCRG to CPF beneficiaries in other departments on the same lines as in railways." "9.9. Government may also consider the feasibility of giving an option to all other CPF retirees who are not covered under paragraph 9.6 above to come over to the pension scheme with effect from January 1, 1986 subject to their refunding to government the entire a....
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....e made to the Government in this regard, it is prayed that at least an option should no given to the respondents either to withdraw the benefit of switching over to pension from every one or to give it to the petitioners as well, so that the discrimination must go. We are not inclined to accept either of these submissions. The P.F. retirees and pension retirees having not belonged to a class, there is no discrimination. In the matter of expenditure includable in the Annual Financial Statement, this Court has to be loath to pass any order to give any direction, because of the division of functions between the three co-equal organs of the Government under the Constitution. Lastly, the question of feasibility of converting all living P.F. retirees to Pension retirees was debated from the point of view of records and adjustments. Because of the view we have taken in the matter, we do not consider it necessary to express any opinion. Mr. C.V. Francis in W.P. No. 1165 of 1989 argued the case more or less adopting the arguments of Mr. Shanti Bhushan. Mrs. Swaran Mahajan, in W.P. No. 1575 of 1986, submitted that the rule as to commuted portion of the pension reviving after 15 year....
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....change the defi- nition of "pay" w.e. f.1.5.68 for purpose the of pensionary benifits. 362 Extensions 7. VII Option F(E) III.68PN- Extended upto 1/2 dated 31.1.69 31.3.69 F(E) III.71.PN 1/3 dated 15.7.72 21.10.72 15.7.72 to As a result of demandes from (for those in service 8. VIII Option PC-III. 73.PN/3 dated 23.7.74 Extensions PC-III. 73. PN/3 dated 18.1.75 & 25.6.75 on 15.7.72 orgnised labour. 1.1.73 to 22.1.75 Consequet (for those to acceptance in service III Pay Commis- on 1.1.73) sions Recommen- dations. Extended becau- se by schedule for vsrious categories Extended upto 30.6.76 & 31.12.75 PC-III, 73. PN/3 Pt I Extended upto were being 30.6.76 Finalised. dated 16.12.75 PC-III.73 PN/3 Extended upto Pt. I 31.12.76 dated 30.6.76 PC-III 73 PN/3 Pt. I dated 3.1.77 Extended upto 30.6.76 PC-III 73 PN/3 Pt. I Extended upto 31.12.77 363 dated 12.7.77 PC-III 73 PN/3 Pt. I dated 17.4.78 PC-III 73 PN/3 Pt. I dated 20.5.78 PC-III.78 PN/3 Pt. I dated 27.12.78 Extended upto 3....