Krishena Kumar Vs. Union of India & Ors.
EmailAppeal: Special Leave Petition (Civil) No. 8461 of 1986
Petitioner: Krishena Kumar
Respondent: Union of India & Ors.
Apeal: Special Leave Petition (Civil) No. 8461 of 1986
Judges: SABYASACHI MUKHARJI, CJI., B.C.RAY, M.H.KANIA, K.N. SAIKIA & S.C. AGRAWAL, JJ.
Date of Judgment: Jul 13, 1990
Appearances:
Mr.Kapil Sibal, Additional Solicitor General, Mr.Shanti Bhushan, Senior Advocate, Mr.C.V. Francis, Mrs.Swaran Mahajan and Mr.R.B.Datar, Advocates for the parties.
Head Note:
SERVICE AND LABOUR LAW
Pension
Railway employees – Liberalisation of pension – Exercise of option for pension scheme – Pension retirees and P.F. retirees – P.F. retirees formed a separate class – Classification not violative of Art. 14.
Held:
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, therefore,be reasonable to argue that what is applicable to the pension retirees must also equally be applicable to P.F. retirees. This being the legal position the rights of each individual P.F. retiree finally crystallized on his retirement whereafter no continuing obligation remained while,on the other hand, as regards Pension retirees, the obligation continued till their death. The continuing obligation of the State in respect of pension retirees is adversely affected by fall in rupee value and rising prices which, considering the corpus already received by the P.F. retirees they would not be so adversely affected ipso facto. It cannot, therefore, be said that it was the ratio decidendi in Nakara that the State’s obligation towards its P.F. retirees must be the same as that towards the pension retirees. An imaginary definition of obligation to include all the Government retirees in a class was not decided and could not form the basis for any classification for the purpose of this case. Nakara cannot, therefore, be an authority for this case. (Para 32)
(ii) The argument of the petitioners is that the option 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 relation to the reason for giving the option and only the employees who retired after the specified date and before and after the date of notification were made eligible. This submission appears to have been substantiated by what has been stated by the successive Pay Commissions. It would also appear that corresponding concomitant benefits were also granted to the Provident Fund holders. There was, therefore, no discrimination and the question of striking down or reading down clause 3.1 of the 12th Option does not arise. It would also appear that most of the petitioners before their filing these petitions had more than one opportuni-ties to switch over to the Pension Scheme which they did not exercise. Some again opted for P.F. Scheme from the Pension Scheme. (Paras 34 and 35)
Cases Reffered:
1. Union of India v. Bidhubhushan Malik, 1984 (3) SCC 95.
2. D.S.Nakara and Ors. v. Union of India, 1983 (2) SCR 165 – Distinguished.
2. D.S.Nakara and Ors. v. Union of India, 1983 (2) SCR 165 – Distinguished.
Foreign Case Referred:
Quinn v. Leathem, (1901) AC 495.
Books, Treatises and Articles Referred:
Bentham : Theory of Legislation, Chapter XII, p.60.
Halsbury Law of England, 4th Edition, Vol.26, para 573.
JUDGEMENT:
K.N. SAIKIA, J. :
1. This analogous cluster of five writ petitions and one special leave petition involves a common question of law. The petitioner in Writ Petition No. 352 of 1989 is the President of the All India Retired Railwaymen (P.F. Terms) Association and the petition has been filed 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. Petitioner No.7similarly retired on 17.2.1968 as Director, Railway Board. Petitioner No.8 retired as General Manager, Indian Railways on 15.10.1966 with the Contributory Provident Fund Scheme. The petitioners in Writ Petition No.1165 of 1989 are also similarly retired persons. The petitioner in Special Leave Petition (Civil) No. 8461 of 1986 retired as Assistant Auditor, with Provident Fund benefits. His claim to switch over to pension after retirement was rejected. The petitioners are thus retired railway employees who were covered by or had opted for the Railway Contributory Provident Fund Scheme. It is the petitioners’ case that before 1957 the only scheme for retirement benefits in the Railways was the Provident Fund Scheme wherein each employee had to contribute till retirement a portion of his annual income towards the Provident Fund and the Railways as the employer would make a matching contribution thereto. This provident Fund Scheme was replaced in the year 1957 by the Pension Scheme whereunder the Railways would give posterior to his retirement certain monthly pension to each retired employee instead of making prior contribution to his Provident Fund. It is stated that the employees who entered Railway service on or after 1.4.1957 were automatically covered by the Pension Scheme instead of the Provident Fund Scheme. In so far as the employees who were already in service on 1.4.1957, they were given an option either to retain the Provident Fund benefits or to switch over to the pensionary benefits on condition that the matching Railway contribution already made to their Provident Fund accounts would revert to the Railways on exercise of the option.
2. It is the petitioners’ case that till 1.4.1957 or even sometime thereafter, the pensionary benefits and the alternative Contributory Provident Fund benefits were considered to be more or less equally beneficial, wherefore, employees opted for either of them. That the benefits of the two were evenly balanced was evidenced by the Railway Board circular dated 17.9.1960 which gave an option to the employees covered by the Provident Fund Scheme to switch over to pension scheme and vice versa.
3. Mr. Shanti Bhushan, the learned counsel for the petitioners in Writ Petition Nos. 352 and 361 of 1989, submits that between 1957 and 1987 the pensionary benefits of Railway employees were enhanced on several occasions 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 Railways, 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 Railway employees is admittedly contained in G.O. No.F1 (3)-EV/83 dated 22.10.1983. This has, according to the learned counsel, given rise to the “strange situation” namely, that while two alternative benefits of provident fund and pension were more or less equal at the time when the petitioners were to make their choice, the pensions have thereafter been liberalised manifold to the benefit of the pension retirees, whereas no similar benefits have been extended to those who retired opting for Provident Fund, hereinafter called ‘the P.F. retirees’. It is asserted that due to successive liberalisations of pensions, the pension retirees derived manifold benefits while the P.F. retirees’ benefits remained stagnant. It is submitted that had the petitioners, all of whom are P.F. retirees, known that pensionary benefits might subsequently be so increased, they would no doubt have opted for pension instead of Provident Fund. The following twelve notifications giving such options are referred to:
Date of Notification Cut-off date chosen
1. 17.9.60 1.7.59
2. 26.10.62 1.9.62
3. 3.3.66 31.12.65
4. 13.9.68 1.5.68
5. 23.7.74 1.1.73
6. 23.8.79 31.3.79
7. 1.9.80 23.2.80
8. 4.10.82 31.8.82
9. 9.11.82 31.1.82
10. 13.5.83 31.1.82
11. 18.6.85 31.3.85
12. 8.5.87 1.1.86
4. It may be noted that in case of each option the cut-off date was anterior to the respective dates of announcement,and as a result,employees who retired after the cut-off date (specified date) and before the notification date were also made eligible for exercising the option despite the fact that they already retired in the meantime. From the above, the ‘main legal point’ that arises, submits Mr. Shanti Bhushan, is that the Railways issued the above notification giving option to certain P.F. retirees after the respective cut-off dates to opt for the Pension Scheme even after their retirement, but the same options were not given to other similarly situated P.F. retirees beyond the respective cut-off dates. This, it is submitted, is clearly discriminatory and violative of Art. 14 of the Constitution and deserves to be struck down.
5. It is contended by the petitioners that each of the above notifications including the last one, dated 8.5.1987 had given a fresh option to some of the P.F.retirees 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.
6. Mr. Kapil Sibal, the learned Additional Solicitor General refuting the argument submits that each of the options was meant to give the P.F. retirees after the specified dates option to switch over to Pension Scheme and that each specified date had nexus with the reason for granting the particular option. He relies on the following statements to substantiate his submission.
STATEMENT SHOWING PENSION OPTIONS GIVEN TO RAILWAY EMPLOYEES
———————————
Sl. Option Granted under Option validity Reasons
No. Rly. Board’s period for letter No. & granting date option
———————————
1 2 3 4 5
1. I Option F(E)50/RT1/6 1.4.57to31..3.58 Introdu-
dt.16.11.57 (For those in ction of
service on Pension
1.4.1957) system
on
Railways
2. Extensions F(P)58.PN-1/6 Extended upto
dt.7.3.58 30.6.58
F(P)58.PN-1/6 Extended upto
dt. 19.6.58 31.12.58
F(P)58.PN-1/6 Extended upto
dt.24.12.58 31.3.59
F(P)58.PN-1/6 Extended upto
dt.28.3.59 30.9.59
2. II Option PC-60/RB-2/2 1.7.59to15.12.60 Revision
dt. 17.9.60 (For those in of Pay
service on Structure
1.7.59) (2nd Pay
Commission
recommend-
ation)
Extensions PC-60/RB-2/2 Extended upto
dt.7.4.61 30.6.61
PC-60/RB-2/2 Extended upto
dt.2.11.61 31.12.61
3. III Option F(P)62.PN-1/2 1.9.62to31.3.63 Consequent
dt.26.10.62 (For those in upon decision
service on to count
1.9.1962) officiating
pay for
pensionary
benefits.
4. IV Option F(P)63.PN-1/40 1.1.64 to 16.7.64 Introduction
dt.17.1.64 of family
pension
scheme.
Extension F(P)63.PN-1/47 Extended upto
dt.4.7.64 30.9.64
5. V Option F(P)65.PN1/41 31.12.65to30.6.66 In pursuance
dt.3.3.66 (For those in of the deci-
service on sion to
31.12.65) liberalise
the Family
Pension
Scheme by extending it to employees
who die while
in service.
6. VI Option F(E)III.68.PN- 1.5.68to31.12.68 In pursuance
1/2 dt.13.9.68 (For those in of decision
service on to change the
1.5.68) definition of
“Pay” w.e.f.
1.5.68 for the purpose
of pensionary
benefits.
Extensions F(E)III.68.PN- Extended upto
1/2 dt.31.1.69 31.3.69
7. VII Option F(E)III.71.PN- 15.7.72 to As a result 1/3 dt.15.7.72 21.10.72 of demands
(For those in from organi-
service on sed labour.
15.7.72)
8. VIII Option PC-III.73.PN/3 1.1.73 to Consequent to
dt.23.7.74 22.1.75 acceptance of
(For those in III Pay
service on Commissions’
1.1.73) Recommenda-
tions.
Extensions PC-III.73.PN/3 Extended upto Extended
dt.18.1.75 & 30.6.76&31.12.75 because pay
25.6.75 schedule for
PC-III.73PN/3 Extended upto various
Pt.I 30.6.76 categories
dt. 16.12.75 were being
PC-III.73PN/3 Extended upto finalised.
Pt.I 31.12.76
dt.30.6.76
PC-III.73PN/3 Extended upto
Pt.I 30.6.77
dt.3.1.77
PC-III.73PN/3 Extended upto
Pt.I 31.12.77
dt.12.7.77
PC-III.73PN/3 Extended upto
Pt.I 30.6.78
dt.17.4.78
PC-III.73PN/3 Options exercised
Pt.I upto 31.12.78 be
dt. 20.5.78 considered as valid
PC-III.78PN/ (Staff who were in
Pt.I service as on 1.1.73
dt.27.12.78 & retired/died/quitted
service during the
period from 1.1.73 to
31.12.78)
9. IX Option F(E)III.79.PN 31.3.79to22.2.80 On account of
-1/4 (For those in liberalisa-
dt.23.8.79 service on tion of pen-
1.4.79) sion formula
and introduc-
tion of slab
system.
Extensions F(E)III.79.PN Extended upto
-1/4 dt.1.9.80 22.2.81
10. X Option F(E)III82.PN1/ 31.8.82to28.2.83 On account of
7 dt.4.10.82 (For those in part of DA
service on treated as
31.8.82) pay.
Extension F(E)III82.PN1/ Extended upto
7 dt.13.5.83 31.8.83
% Made applicable
from 31-1-82 under
letter No.F(E)III 82 PN1/
7 dt.9.11.82
11. XI Option F(E)III85.PN1 31.3.85 to Consequent
5 dt.18.6.85 17.12.85 upon DA/ADA
(For those in upto average
service on price index
31.3.85) at point 568
treated as
pay for
retirement
benefits.
12. XII Option PC-IV/87/13/ 1.1.86 to 30.9.87 All CPF bene-
881 dt.8.5.87 (For those in ficiaries who
service on were in
1.1.86) service on
1.1.86 and
who are still
in service
will be
deemed to
have come
over to Pen-
sion Scheme
unless they
specifically
opt out of
Pension Scheme
and desire to
retain the
CPF scheme.
INTRODUCTION OF PENSION SCHEME ON RAILWAYS AND SUBSEQUENT PENSION OPTION
i) Introduction of Pension Scheme Pension Scheme was introduced on the Railways on 16.11.57 and was applicable to the following:
(a) To all Railway servants who enter service on and after 16.11.57 and
(b) To all non-pensionable Railway servants who were in service on 1.4.57 or join Railway Service between 1.4.57 and 16.11.57 and opt for the Pension Scheme.
The scheme was made applicable from 1.4.57 because the financial year commences from April each year. This option was extended 4 times from time to time and was valid upto 28.3.59. The extensions were given because there were representations for its extension so that the staff could get time to weigh the merits of the Schemes before they take decision.
ii) Pension option dated 17.9.1960
Orders were issued on 2.8.1960 notifying Railway Services (Authorised Pay) Rules, 1960. Under this notification new pay scales were introduced for Railway Servants. These new pay scales were effective from 1st July, 1959.
Fresh option was granted on 17.9.60 to Railway employees who were in service on 1.7.59 to come over to the pension scheme. The last date for exercising the option was 15.12.60. This was extended upto 31.12.60 to enable the concerned employees to come to a considered decision whether to retain the P.F. or opt for the pension scheme.
iii) Pension Option dated 26.10.62
A decision was taken on 26.10.62 to count the officiating pay for the purpose of retirement benefits in case of those who were in service on 1.9.62. Accordingly, a fresh option was given to staff to come over to pension scheme on 26.10.62. This option remained open till 31.3.63.
iv) Pension Option dated 17.1.1964
As a result of introduction of Family Pension Scheme 1964, which came into force on 1.1.64 orders were issued on 17.1.64 to the effect that all Railway employees who were in service could opt for pension scheme within a period of 6 months. This option was extended upto 16.9.64.
v) Pension Option dated 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 by Ministry of Finance. The rationale behind this option was that the recommendations of the 3rd Pay Commission became effective from 1.1.73 but pay structure of all employees who were in service on 1.1.73 got altered through orders issued piecemeal from time to time. There were liberalisations in the pension scheme also in the form of increase in the amount of gratuity as also introduction of the concept of Dearness Relief made available to the pensioners. This option was made available to all employees who were in service on 1.1.73. Employees who had retired earlier did not get affected in any way by the recommendations of the 3rd Pay Commission and were accordingly not given this option to come over to Pension Scheme. This option was available upto 22.1.75, a period of 6 months.
The option given vide letter of 23.7.74 was extended from time to time till 31.12.78. The reason why this extension had to be allowed was that the revised pay scales recommended by the Pay Commission for many of the categories could not be finalised and notified. Till such time, the revised pay scale admissible to each category was made known, it was impossible for the concerned staff to assess the benefit admissible for opting for the revised scale as also for the pension option. The pension option had therefore to be extended from time to time in this manner.
The letters authorising extension of the date of option were not very clearly worded with the result that the pension option during the periods of extension was granted even to those who had retired before such extension became admissible but who were in service on 1.1.73. The clarification was accordingly issued to all the Railways stating that the subsequent orders extending the date of option were applicable to serving employees only, but the cases already decided otherwise may be treated as closed and need not be opened again.
It was subsequently represented by the organised labour that the options actually exercised upto 31.12.78 should be treated valid even though such cases may not have been decided by that date. This was agreed to and orders issued accordingly.
ix) Pension Option dated 23.8.79
A liberalised formula and slab-system for calculation of pension effective from 31.3.79 was notified by Railway Board on 1.6.79. Accordingly, orders were issued on 23.8.79 allowing pension option to those Railway employees 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 1.1.86. Accordingly another pension option was given to the Railway employees who were in service on 1.1.86 vide orders of 8.5.87. Under these orders those who did not specifically opt out of pension scheme by 17.12.87 would be automatically deemed to have opted for the pension scheme.
7. We may now examine these options. The Railway Board’s letter No. F(E) 50-RTI/6 dated November 16, 1957 introduced the pension scheme for railway servants. It said that the President had been pleased to decide that the pension rules, as liberalised vide Railway Board’s Memo No.E-48 OPC-208 dated 8.7.1950 as amended or clarified from time to time should apply “(a) to all railway servants who entered service on or after issue of that letter and (b) to all non-pensionable railway servants who were in service on 1.4.57 or have joined railway service between that date and the date of issue of the order.” The Railway servants referred to in para (b) were required to exercise an unconditional and unambiguous option on the prescribed form on or before 31.3.1958 electing for the pensionary benefits or retaining their existing retirement benefits under the State Railway Provident Fund Rules. It further said that any such employee from whom an option form prescribed for the employee’s option was not received within the above time limit or whose option was incomplete or conditional or ambiguous shall be deemed to have opted for the pensionary benefits and if any such employee had died by that date or on or after 1.4.57 without exercising option for the pensionary scheme, his dues would be paid on the provident fund system. The period of validity of this option was first extended upto 30.6.58, 31.12.58, 31.3.59 and lastly upto 30.9.59. There could, therefore, be no doubt that those who did not opt for the pension scheme had ample opportunity to choose between the two.
8. The second option was given by the Board’s letter No.PC-60/RB/2/2 dated 17.9.60 to elect the retirement benefits under the Provident Fund Rules or the Pension Rules. All Railway servants who were in non-pensionable service on 15.11.57 prior to the introduction of the pension scheme on the Railways and who were still in service including (IPR) on 1.7.59 were granted this option to have their retirement benefits regulated by the State Railway Provident Fund Rules or the Railway Pension Rules. Every eligible railway servant was given the option to change over from P.F. benefits to pensionary 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.
9. 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 from 1.7.59,the bulk or whole of the D.A. previously payable have been absorbed into pay and a number of changes are also being made in the rules regarding retirement benefits.”
1. This analogous cluster of five writ petitions and one special leave petition involves a common question of law. The petitioner in Writ Petition No. 352 of 1989 is the President of the All India Retired Railwaymen (P.F. Terms) Association and the petition has been filed 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. Petitioner No.7similarly retired on 17.2.1968 as Director, Railway Board. Petitioner No.8 retired as General Manager, Indian Railways on 15.10.1966 with the Contributory Provident Fund Scheme. The petitioners in Writ Petition No.1165 of 1989 are also similarly retired persons. The petitioner in Special Leave Petition (Civil) No. 8461 of 1986 retired as Assistant Auditor, with Provident Fund benefits. His claim to switch over to pension after retirement was rejected. The petitioners are thus retired railway employees who were covered by or had opted for the Railway Contributory Provident Fund Scheme. It is the petitioners’ case that before 1957 the only scheme for retirement benefits in the Railways was the Provident Fund Scheme wherein each employee had to contribute till retirement a portion of his annual income towards the Provident Fund and the Railways as the employer would make a matching contribution thereto. This provident Fund Scheme was replaced in the year 1957 by the Pension Scheme whereunder the Railways would give posterior to his retirement certain monthly pension to each retired employee instead of making prior contribution to his Provident Fund. It is stated that the employees who entered Railway service on or after 1.4.1957 were automatically covered by the Pension Scheme instead of the Provident Fund Scheme. In so far as the employees who were already in service on 1.4.1957, they were given an option either to retain the Provident Fund benefits or to switch over to the pensionary benefits on condition that the matching Railway contribution already made to their Provident Fund accounts would revert to the Railways on exercise of the option.
2. It is the petitioners’ case that till 1.4.1957 or even sometime thereafter, the pensionary benefits and the alternative Contributory Provident Fund benefits were considered to be more or less equally beneficial, wherefore, employees opted for either of them. That the benefits of the two were evenly balanced was evidenced by the Railway Board circular dated 17.9.1960 which gave an option to the employees covered by the Provident Fund Scheme to switch over to pension scheme and vice versa.
3. Mr. Shanti Bhushan, the learned counsel for the petitioners in Writ Petition Nos. 352 and 361 of 1989, submits that between 1957 and 1987 the pensionary benefits of Railway employees were enhanced on several occasions 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 Railways, 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 Railway employees is admittedly contained in G.O. No.F1 (3)-EV/83 dated 22.10.1983. This has, according to the learned counsel, given rise to the “strange situation” namely, that while two alternative benefits of provident fund and pension were more or less equal at the time when the petitioners were to make their choice, the pensions have thereafter been liberalised manifold to the benefit of the pension retirees, whereas no similar benefits have been extended to those who retired opting for Provident Fund, hereinafter called ‘the P.F. retirees’. It is asserted that due to successive liberalisations of pensions, the pension retirees derived manifold benefits while the P.F. retirees’ benefits remained stagnant. It is submitted that had the petitioners, all of whom are P.F. retirees, known that pensionary benefits might subsequently be so increased, they would no doubt have opted for pension instead of Provident Fund. The following twelve notifications giving such options are referred to:
Date of Notification Cut-off date chosen
1. 17.9.60 1.7.59
2. 26.10.62 1.9.62
3. 3.3.66 31.12.65
4. 13.9.68 1.5.68
5. 23.7.74 1.1.73
6. 23.8.79 31.3.79
7. 1.9.80 23.2.80
8. 4.10.82 31.8.82
9. 9.11.82 31.1.82
10. 13.5.83 31.1.82
11. 18.6.85 31.3.85
12. 8.5.87 1.1.86
4. It may be noted that in case of each option the cut-off date was anterior to the respective dates of announcement,and as a result,employees who retired after the cut-off date (specified date) and before the notification date were also made eligible for exercising the option despite the fact that they already retired in the meantime. From the above, the ‘main legal point’ that arises, submits Mr. Shanti Bhushan, is that the Railways issued the above notification giving option to certain P.F. retirees after the respective cut-off dates to opt for the Pension Scheme even after their retirement, but the same options were not given to other similarly situated P.F. retirees beyond the respective cut-off dates. This, it is submitted, is clearly discriminatory and violative of Art. 14 of the Constitution and deserves to be struck down.
5. It is contended by the petitioners that each of the above notifications including the last one, dated 8.5.1987 had given a fresh option to some of the P.F.retirees 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.
6. Mr. Kapil Sibal, the learned Additional Solicitor General refuting the argument submits that each of the options was meant to give the P.F. retirees after the specified dates option to switch over to Pension Scheme and that each specified date had nexus with the reason for granting the particular option. He relies on the following statements to substantiate his submission.
STATEMENT SHOWING PENSION OPTIONS GIVEN TO RAILWAY EMPLOYEES
———————————
Sl. Option Granted under Option validity Reasons
No. Rly. Board’s period for letter No. & granting date option
———————————
1 2 3 4 5
1. I Option F(E)50/RT1/6 1.4.57to31..3.58 Introdu-
dt.16.11.57 (For those in ction of
service on Pension
1.4.1957) system
on
Railways
2. Extensions F(P)58.PN-1/6 Extended upto
dt.7.3.58 30.6.58
F(P)58.PN-1/6 Extended upto
dt. 19.6.58 31.12.58
F(P)58.PN-1/6 Extended upto
dt.24.12.58 31.3.59
F(P)58.PN-1/6 Extended upto
dt.28.3.59 30.9.59
2. II Option PC-60/RB-2/2 1.7.59to15.12.60 Revision
dt. 17.9.60 (For those in of Pay
service on Structure
1.7.59) (2nd Pay
Commission
recommend-
ation)
Extensions PC-60/RB-2/2 Extended upto
dt.7.4.61 30.6.61
PC-60/RB-2/2 Extended upto
dt.2.11.61 31.12.61
3. III Option F(P)62.PN-1/2 1.9.62to31.3.63 Consequent
dt.26.10.62 (For those in upon decision
service on to count
1.9.1962) officiating
pay for
pensionary
benefits.
4. IV Option F(P)63.PN-1/40 1.1.64 to 16.7.64 Introduction
dt.17.1.64 of family
pension
scheme.
Extension F(P)63.PN-1/47 Extended upto
dt.4.7.64 30.9.64
5. V Option F(P)65.PN1/41 31.12.65to30.6.66 In pursuance
dt.3.3.66 (For those in of the deci-
service on sion to
31.12.65) liberalise
the Family
Pension
Scheme by extending it to employees
who die while
in service.
6. VI Option F(E)III.68.PN- 1.5.68to31.12.68 In pursuance
1/2 dt.13.9.68 (For those in of decision
service on to change the
1.5.68) definition of
“Pay” w.e.f.
1.5.68 for the purpose
of pensionary
benefits.
Extensions F(E)III.68.PN- Extended upto
1/2 dt.31.1.69 31.3.69
7. VII Option F(E)III.71.PN- 15.7.72 to As a result 1/3 dt.15.7.72 21.10.72 of demands
(For those in from organi-
service on sed labour.
15.7.72)
8. VIII Option PC-III.73.PN/3 1.1.73 to Consequent to
dt.23.7.74 22.1.75 acceptance of
(For those in III Pay
service on Commissions’
1.1.73) Recommenda-
tions.
Extensions PC-III.73.PN/3 Extended upto Extended
dt.18.1.75 & 30.6.76&31.12.75 because pay
25.6.75 schedule for
PC-III.73PN/3 Extended upto various
Pt.I 30.6.76 categories
dt. 16.12.75 were being
PC-III.73PN/3 Extended upto finalised.
Pt.I 31.12.76
dt.30.6.76
PC-III.73PN/3 Extended upto
Pt.I 30.6.77
dt.3.1.77
PC-III.73PN/3 Extended upto
Pt.I 31.12.77
dt.12.7.77
PC-III.73PN/3 Extended upto
Pt.I 30.6.78
dt.17.4.78
PC-III.73PN/3 Options exercised
Pt.I upto 31.12.78 be
dt. 20.5.78 considered as valid
PC-III.78PN/ (Staff who were in
Pt.I service as on 1.1.73
dt.27.12.78 & retired/died/quitted
service during the
period from 1.1.73 to
31.12.78)
9. IX Option F(E)III.79.PN 31.3.79to22.2.80 On account of
-1/4 (For those in liberalisa-
dt.23.8.79 service on tion of pen-
1.4.79) sion formula
and introduc-
tion of slab
system.
Extensions F(E)III.79.PN Extended upto
-1/4 dt.1.9.80 22.2.81
10. X Option F(E)III82.PN1/ 31.8.82to28.2.83 On account of
7 dt.4.10.82 (For those in part of DA
service on treated as
31.8.82) pay.
Extension F(E)III82.PN1/ Extended upto
7 dt.13.5.83 31.8.83
% Made applicable
from 31-1-82 under
letter No.F(E)III 82 PN1/
7 dt.9.11.82
11. XI Option F(E)III85.PN1 31.3.85 to Consequent
5 dt.18.6.85 17.12.85 upon DA/ADA
(For those in upto average
service on price index
31.3.85) at point 568
treated as
pay for
retirement
benefits.
12. XII Option PC-IV/87/13/ 1.1.86 to 30.9.87 All CPF bene-
881 dt.8.5.87 (For those in ficiaries who
service on were in
1.1.86) service on
1.1.86 and
who are still
in service
will be
deemed to
have come
over to Pen-
sion Scheme
unless they
specifically
opt out of
Pension Scheme
and desire to
retain the
CPF scheme.
INTRODUCTION OF PENSION SCHEME ON RAILWAYS AND SUBSEQUENT PENSION OPTION
i) Introduction of Pension Scheme Pension Scheme was introduced on the Railways on 16.11.57 and was applicable to the following:
(a) To all Railway servants who enter service on and after 16.11.57 and
(b) To all non-pensionable Railway servants who were in service on 1.4.57 or join Railway Service between 1.4.57 and 16.11.57 and opt for the Pension Scheme.
The scheme was made applicable from 1.4.57 because the financial year commences from April each year. This option was extended 4 times from time to time and was valid upto 28.3.59. The extensions were given because there were representations for its extension so that the staff could get time to weigh the merits of the Schemes before they take decision.
ii) Pension option dated 17.9.1960
Orders were issued on 2.8.1960 notifying Railway Services (Authorised Pay) Rules, 1960. Under this notification new pay scales were introduced for Railway Servants. These new pay scales were effective from 1st July, 1959.
Fresh option was granted on 17.9.60 to Railway employees who were in service on 1.7.59 to come over to the pension scheme. The last date for exercising the option was 15.12.60. This was extended upto 31.12.60 to enable the concerned employees to come to a considered decision whether to retain the P.F. or opt for the pension scheme.
iii) Pension Option dated 26.10.62
A decision was taken on 26.10.62 to count the officiating pay for the purpose of retirement benefits in case of those who were in service on 1.9.62. Accordingly, a fresh option was given to staff to come over to pension scheme on 26.10.62. This option remained open till 31.3.63.
iv) Pension Option dated 17.1.1964
As a result of introduction of Family Pension Scheme 1964, which came into force on 1.1.64 orders were issued on 17.1.64 to the effect that all Railway employees who were in service could opt for pension scheme within a period of 6 months. This option was extended upto 16.9.64.
v) Pension Option dated 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 by Ministry of Finance. The rationale behind this option was that the recommendations of the 3rd Pay Commission became effective from 1.1.73 but pay structure of all employees who were in service on 1.1.73 got altered through orders issued piecemeal from time to time. There were liberalisations in the pension scheme also in the form of increase in the amount of gratuity as also introduction of the concept of Dearness Relief made available to the pensioners. This option was made available to all employees who were in service on 1.1.73. Employees who had retired earlier did not get affected in any way by the recommendations of the 3rd Pay Commission and were accordingly not given this option to come over to Pension Scheme. This option was available upto 22.1.75, a period of 6 months.
The option given vide letter of 23.7.74 was extended from time to time till 31.12.78. The reason why this extension had to be allowed was that the revised pay scales recommended by the Pay Commission for many of the categories could not be finalised and notified. Till such time, the revised pay scale admissible to each category was made known, it was impossible for the concerned staff to assess the benefit admissible for opting for the revised scale as also for the pension option. The pension option had therefore to be extended from time to time in this manner.
The letters authorising extension of the date of option were not very clearly worded with the result that the pension option during the periods of extension was granted even to those who had retired before such extension became admissible but who were in service on 1.1.73. The clarification was accordingly issued to all the Railways stating that the subsequent orders extending the date of option were applicable to serving employees only, but the cases already decided otherwise may be treated as closed and need not be opened again.
It was subsequently represented by the organised labour that the options actually exercised upto 31.12.78 should be treated valid even though such cases may not have been decided by that date. This was agreed to and orders issued accordingly.
ix) Pension Option dated 23.8.79
A liberalised formula and slab-system for calculation of pension effective from 31.3.79 was notified by Railway Board on 1.6.79. Accordingly, orders were issued on 23.8.79 allowing pension option to those Railway employees 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 1.1.86. Accordingly another pension option was given to the Railway employees who were in service on 1.1.86 vide orders of 8.5.87. Under these orders those who did not specifically opt out of pension scheme by 17.12.87 would be automatically deemed to have opted for the pension scheme.
7. We may now examine these options. The Railway Board’s letter No. F(E) 50-RTI/6 dated November 16, 1957 introduced the pension scheme for railway servants. It said that the President had been pleased to decide that the pension rules, as liberalised vide Railway Board’s Memo No.E-48 OPC-208 dated 8.7.1950 as amended or clarified from time to time should apply “(a) to all railway servants who entered service on or after issue of that letter and (b) to all non-pensionable railway servants who were in service on 1.4.57 or have joined railway service between that date and the date of issue of the order.” The Railway servants referred to in para (b) were required to exercise an unconditional and unambiguous option on the prescribed form on or before 31.3.1958 electing for the pensionary benefits or retaining their existing retirement benefits under the State Railway Provident Fund Rules. It further said that any such employee from whom an option form prescribed for the employee’s option was not received within the above time limit or whose option was incomplete or conditional or ambiguous shall be deemed to have opted for the pensionary benefits and if any such employee had died by that date or on or after 1.4.57 without exercising option for the pensionary scheme, his dues would be paid on the provident fund system. The period of validity of this option was first extended upto 30.6.58, 31.12.58, 31.3.59 and lastly upto 30.9.59. There could, therefore, be no doubt that those who did not opt for the pension scheme had ample opportunity to choose between the two.
8. The second option was given by the Board’s letter No.PC-60/RB/2/2 dated 17.9.60 to elect the retirement benefits under the Provident Fund Rules or the Pension Rules. All Railway servants who were in non-pensionable service on 15.11.57 prior to the introduction of the pension scheme on the Railways and who were still in service including (IPR) on 1.7.59 were granted this option to have their retirement benefits regulated by the State Railway Provident Fund Rules or the Railway Pension Rules. Every eligible railway servant was given the option to change over from P.F. benefits to pensionary 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.
9. 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 from 1.7.59,the bulk or whole of the D.A. previously payable have been absorbed into pay and a number of changes are also being made in the rules regarding retirement benefits.”
