IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA. CWP No. 1362/2001 Reserved on:4.9.2008 Decided on:8.1.2009 Himachal Road Transport Corporation Retired Employees Union. …Petitioner. Versus Himachal Pradesh Road Corporation and another. …Respondents Coram The Hon’ble Mr. Justice Dev Darshan Sud, J. The Hon’ble Mr. Justice Rajiv Sharma, J. Whether approved for reporting ?1. yes For the Petitioner : Mr. Onkar Jairath, Advocate. For the Respondents : Mr. Ashok Sharma, Advocate for respondent No.1. Mr. Anshul Bansal, Addl. Advocate General for respondent No.2. Rajiv Sharma, J. The present petition is directed against the order dated 19.6.2001 of the learned Himachal Pradesh Administrative Tribunal rendered in OA No. (D) 237/1996. 1 Whether the reporters of Local Papers may be allowed to see the judgment?yes 2 Brief facts necessary for the adjudication of this petition are that the members of the petitioner’s union (hereinafter referred to as the petitioners for convenience sake) retired from the service of the respondent- corporation prior to 5.6.1995. The respondent-corporation formulated a scheme called “Himachal Road Transport Corporation Employees Pension Scheme, 1995” (hereinafter referred to as ‘the scheme’ for convenience sake). The scheme was implemented with effect from 5.6.1995. The petitioners were left out from the ambit of the scheme. The petitioners preferred an original application before the Himachal Pradesh Administrative Tribunal. It was primarily averred in the original application that the cut-off date i.e. 5.6.1995 has no reasonable nexus with the objective sought to be achieved and the respondents could not divide homogeneous class. It was further averred that though the scheme had been notified on 6.10.1995, but in fact it has been implemented with effect from 5.6.1995 respectively. The principal stand of the respondents before the learned Tribunal was that the date prescribed i.e. 5.6.1995 is constitutional and has a reasonable nexus with the objective sought to be achieved. The learned Tribunal dismissed the original application on 19.6.2001. Mr. Onkar Jairath has strenuously argued that the cut-off date i.e. 5.6.1995 is arbitrary thus violative of Articles 14 and 16 of the Constitution of India. He also contended that all the employees of the corporation constitute a homogeneous class and there cannot be classification within classification the manner in which the scheme promulgated has to be applied. He lastly contended that the respondents have given retrospective effect to the scheme though promulgated on 6.10.1995 with effect from 5.6.1995, however, the petitioners have been left out thus discriminated against. 3 Mr. Anshul Bansal, Additional Advocate General and Mr. Ashok Sharma, Advocate had supported the order of the learned Tribunal dated 19.6.2001. We have heard the learned counsel for the parties and perused the record carefully. What emerges from the pleadings of the parties is that the petitioners were initially employed by the Mandi-Kullu Road Transport Corporation. The respondent-state issued office order dated 24.9.1974 whereby the Mandi-Kullu Road Transport Corporation was re-named as Himachal Road Transport Corporation. The State Government vide notification dated 1.10.1974 has taken over the services of the petitioners with effect from 2.10.1974. The petitioners were governed by the contributory provident fund scheme after their services were taken over by the Corporation with effect from 2.10.1974. The State Government has notified the scheme on 6.10.1995, however, the same was made applicable with effect from 5.6.1995. Mr. Onkar Jairath has submitted that all the employees whether retired or serving in the corporation constitute a homogenous class. In other words, according to him, the cut-off date i.e. 5.6.1995 is arbitrary. He has strongly relied upon D.S. Nakara and others versus Union of India AIR 1983 SC 130. Their Lordships of the Hon’ble Supreme court have held that classification in revised pension formula between pensioners on the basis of the date of retirement specified in memoranda was arbitrary and violative of Article 14 of the Constitution of India. The classification made by the executive was held to be wholly arbitrary since the Court did not find a single acceptable or persuasive reason for this division. Their Lordships reiterated the established principle that classification has to be based on some rational principle and that must 4 have nexus to the objects sought to be achieved. Their Lordships have also repelled the contention raised by the Union of India that the scheme was being made retroactive. The Court held: “……. Petitioners accordingly contend that this Court may consider the raison d'etre for payment of pension. If the pension is paid for past satisfactory service rendered, and to avoid destitution in old age as well as a social welfare or socio-economic justice measure, the differential treatment for those retiring prior to a certain date and those retiring subsequently, the choice of the date being wholly arbitrary, would be according differential treatment to pensioners who form a class irrespective of the date of retirement and, therefore, would be violative of Article.14. It was also contended that classification based on fortuitous circumstance of retirement before or subsequent to a date, fixing of which is not shown to be related to any rational principle, would be equally violative of 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 succour. 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 if the State establishes not only the rational principle on which classification is founded but correlates it to the objects sought to be achieved. This approach is noticed in Ramana Dayaram Shetty v. International Airport Authority of India, (1979) 3 SCR 5 1014 at p. 1034 : (AIR 1979 SC 1628 at pp. 1637-38) when at page 1034, the Court observed that a discriminatory action of the Government is liable to be struck down, unless it can be shown by the Government that the departure was not arbitrary, but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory. ………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 answers to these and incidental questions so as to render just justice between parties to this petition. ………..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…….. ………If it appears to be undisputable, as it does to us that the pensioners for the purpose of pension benefits form a class, would its upward revision permit a homogeneous class to be divided by arbitrarily fixing an eligibility criteria unrelated to purpose of revision, and would such classification be founded on some rational principle? The classification has to be based, as is well settled, on some rational principle and the rational 6 principle must have nexus to the objects sought to be achieved. We have set out the objects underlying the payment of pension. If the State considered it necessary to liberalise the pension scheme, we find no rational principle behind it for granting these benefits only to those who retired subsequent to that 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 worse off then 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…… ……..Further the classification is wholly arbitrary because we do not find a single acceptable or persuasive reason for this division. This arbitrary action violated the guarantee of Art. 14……. ……….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 length of service is a relevant factor for computation of pension. Has the Government made it retroactive, 35 years backward compared to the case of a Government servant who retired on 30th March, 1979? Concept of qualifying service takes note of length of service, and pension quantum is correlated to qualifying service. Is it retroactive for 35 years for one and not retroactive for a person who retired two days earlier. It must be remembered that pension is relatable to qualifying service. It has correlation to the average emoluments and the length of service. Any liberalisation would pro tanto be retroactive in the narrow sense of the term. Otherwise it is always 7 prospective. A statute is not properly called a retroactive statute because a part of the requisites for its action is drawn from a time antecedent to its passing. (See Craies on Statute Law, 6th Edn., p. 387). Assuming the Government had not prescribed the specified date and thereby provided that those retiring pre and post the specified date would all be governed by the liberalised pension scheme. Undoubtedly, it would be both prospective and retroactive. Only the pension will have to be recomputed in the light of the formula enacted in the liberalized pension scheme and effective from the date the revised scheme comes into force. And beware that it is not a new scheme, it is only a revision of existing scheme. It is not a new retiral benefit. It is an upward revision of an existing benefit. If it was a wholly new concept, a new retiral benefit, one could have appreciated an argument that those who had already retired could not expect it. It could have been urged that it is an incentive to attract the fresh recruits. Pension is a reward for past service. It is undoubtedly a condition of service but not an incentive to attract new entrants because if it was to be available to new entrants only, it would be prospective at such distance of thirty-five years since its introduction. But it covers all those in service who entered thirty-five years back. Pension is thus not an incentive but a reward for past service. And a revision of an existing benefit stands on a different footing than a new retiral benefit. And even in case of new retiral benefit of gratuity under the Payment of Gratuity Act, 1972 past service was taken into consideration. Recall at this stage the method adopted when pay-scales 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 8 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, became it is implicit in theory of wages.” In Union of India and another versus SPS Vains (retd.) and others, 2008 (12) Scale 360, the Court considered the position in D.S. Nakara’s (supra) and held that pensioners cannot be divided on the basis of date of retirement. The Court ruled: “……….The question regarding creation of different classes within the same cadre on the basis of the doctrine of intelligible differentia having nexus with the object to be achieved, has fallen for consideration at various intervals for the High Courts as well as this Court, over the years. The said question was taken up by a Constitution Bench in the case of D.S. Nakara (supra) where in no uncertain terms throughout the judgment it has been repeatedly observed that the date of retirement of an employee cannot form a valid criterion for classification, for if that is the criterion those who retired by the end of the month will form a class by themselves. In the context of that case, which is similar to that of the instant case, it was held that Article 14 of the Constitution had been wholly violated, inasmuch as, the Pension Rules being statutory in character, the amended Rules, specifying a cut-off date resulted in differential and discriminatory treatment of equals in the matter of commutation of pension. It was further observed that it would have a traumatic effect on those who retired just before that date. The division which classified pensioners into two classes was held to be artificial and arbitrary and not based on any rational principle and whatever principle, if there was 9 any, had not only no nexus to the objects sought to be achieved by amending the Pension Rules, but was counter productive and ran counter to the very object of the pension scheme. It was ultimately held that the classification did not satisfy the test of Article 14 of the Constitution. However, before we give such directions we must also observe that the submissions advanced on behalf of the Union of India cannot be accepted in view of the decision in D.S. Nakara's case (supra). The object sought to be achieved was not to create a class within a class, but to ensure that the benefits of pension were made available to all persons of the same class equally. To hold otherwise would cause violence to the provisions of Article 14 of the Constitution. It could not also have been the intention of the authorities to equate the pension payable to officers of two different ranks by resorting to the step up principle envisaged in the Fundamental Rules in a manner where the other officers belonging to the same cadre would be receiving a higher pension.” What emerges from the ratio of these two judgments is that pension scheme should receive liberal construction and the courts may not so interpret the scheme as to render it otiose. The scheme in the present case was notified on 6.10.1995 and has been implemented with effect from 5.6.1995. The only reason for implementing the scheme with effect from 5.6.1995 is that the Cabinet has approved the same on 5.6.1995. The persons, who have retired between 5.6.1995 to 6.10.1995 were also covered under the scheme. It will be apt at this stage to take note of salient features of the scheme dated 6.10.1995. Paras 2,3 and 5 of the same read thus: “2. Applicability. 10 Save as otherwise provided the pension scheme shall apply to “Himachal Road Transport Corporation” employees including officers, appointed substantively on regular basis or permanently absorbed in Corporation service and posts in connection with the affairs of the Corporation which are borne on pensionable basis but shall not apply to:- i) Persons employed on contract basis. ii) Daily waged workers. iii) Casual workers and Civil Staff workers on muster-roll. iv) Part time workers. v) Persons entitled to the benefit of GPF i.e. erstwhile Himachal Government Transport Employees and Officers. vi) Persons taken on deputation from State Govt. vii) “Excluded employees” who elects to continue under the existing C.P.F. scheme. 3. Definitions: In this order, unless the context otherwise requires:- (a) “Corporation” means, Himachal Road Transport Corporation constituted under section 3 of the Road Transport Act, 1950. (b) “Financial Advisor and Chief Accounts officers” means, an officer of the Corporation who is entrusted with the functions of maintaining accounts of pension of the Corporation. (c) “Employees” means, any person who is in the regular service of the “Corporation” and drawing pay in regular pay scale including persons absorbed in the Corporation permanently but does not include persons on deputation, daily wages, civil staff workers, work charged or casual/contract and part-time employees. (d) “Existing employees” means, an employee who is in the service of the Corporation as on 5.6.1995. 11 (e) “EXCLUDED employees” means, an existing employee who is member of the EPF/GPF Scheme and elects to continue to be the member of the said scheme. (f) “Pension disbursing authority” means, head of office and Drawing and Disbursing Officer of the “Corporation” authorized to do so or any other officers who may be authorized to the purpose. (g) “Pension” includes family pension also. (h) “Family Pension” means, “Family Pension, 1964” admissible under rule 54 of the C.C. S (Pension) Rules, 1972 and shall be applicable from 5th June, 1995 itself. 5. Eligibility to elect Himachal Road Transport Corporation Pension Scheme. The existing employees who opt the pension scheme shall forfeit their claim to employee’s share including interest thereon to the Himachal Road Transport Corporation as well as other claim for EPF/PF scheme in respect of all past accumulations. The amount of their provident fund (excluding employer’s share and interest thereon shall be transferred to F.P.F. account to be allotted afresh to each subscriber i.e. “Existing employees” (who opt for pension scheme).” Only those set of employees have been excluded from the ambit of the scheme who elected to continue under the existing CPF scheme. The scheme has been promulgated to advance socio-economic justice. As laid down by their Lordships of the Hon’ble Supreme Court in the cases cited supra, the pension is neither a bounty nor a grace depending on the sweet will of the employer. The pension is not ex-gratia payment, but it is a payment for the past services rendered by an employee. It is a social- welfare measure rendering socio-economic justice to those who in the hey-day of their life ceaselessly toiled for the employer on an assurance that in their old-age, they would not be left in lurch. 12 It is not disputed by the parties that there ought to be a ‘cut-off’ date for introducing a statute or a scheme like the present one. However, what has to be seen is whether the classification based on the cut-off date has some rational principles and the rational principles have nexus to the objects sought to be achieved. The object of the present scheme is to improve the working conditions of the employees of the corporation. The other object of the scheme is as noticed above in furtherance of socio- economic justice. The respondent-corporation has not pleaded in its reply before the learned Tribunal that why the cut-off date i.e. 5.6.1995 has been picked up except that it was approved by the Cabinet on that date. The entire work force of the corporation constitutes a homogenous class. They could not be discriminated against by the employer by taking up a date i.e. 5.6.1995 without assigning any reason. It is not a case of the corporation even in the pleading that it was due to financial exigency. There is no acceptable or persuasive reason for the division of a homogenously constituted class of retirees on the basis of the cut-off date. In the present case the petitioners had been working in Mandi-Kullu Transport Corporation. Their services were taken over with effect 2.10.1974. The petitioners as well as other employees of the corporation were covered under the CPF Scheme. No doubt, they have received their GPF amount on their retirement. The petitioners who were the employees of the Himachal Road Transport Corporation could not be as a class left out from the operation of the scheme. In State Bank of India versus L. Kannaiah and others, (2003) 10 SCC 499 while interpreting rules 7 and 8 of the State Bank of India Employees’ Pension Fund Rules the Court ruled: “……The reason for prescribing the maximum age limit of 35 or 38, as the case may be, for the purpose of induction into pension fund appears to be that the 13 employee would be able to render minimum service of 20 years as contemplated by Rule 22 of the Pension Fund Rules. However, there does not appear to be any rationale or discernible basis for fixing the cutoff date as 1.1.1965, notwithstanding their earlier confirmation in Bank service. True, a new benefit has been conferred on the ex-servicemen and therefore a cutoff date could be fixed for extending this new benefit, without offending the ratio of the decision in D.S. Nakara and others v. Union of India [AIR 1983 SC 130]; but, there could be no arbitrariness or irrationality in fixing such date. Minimum qualifying service being the essential consideration, even according to the Bank, there is no reason why the ex-servicemen like the respondents, who from the date of their confirmation had put in more than twenty years of service, even taking the retirement age as 58, should be excluded. No reason is forthcoming in the counter-affidavit filed by the Bank for choosing the said date. When it is decided to extend the pensionary benefits to ex-servicemen drawing pension, the denial of the benefit to some of the serving employees should be based on rational and intelligible criterion. In substance, that is the view taken by the High Court and we see no reason to differ with that view. Their Lordships have not sustained the Observations of the High Court “that the petitioners were not entitled to pension as they were not employees of the State Bank of India originally as they have joined the service prior to 1.7.1955”. No reason has been assigned by the respondent/employer for choosing 5.6.1995 as the cut-off date nor such reason/rationale is discernible from the pleadings. Reasons to deny the benefit of the scheme to the petitioners and similarly situate persons are required to be based on rationale and cogent criterion. The petitioners and other employees of the corporation were governed under CPF scheme and they 14 have been deprived of the benefit of ‘the scheme’ only on the basis of arbitrary cut-off date i.e. 5.6.1995. The Tribunal has not correctly understood and applied the ratio of D.S. Nakara’s case (supra). It was necessary for the learned Tribunal to adjudicate on the rationality of the cut off date by calling upon the employer to substantiate why 5.6.1995 has been picked up as a cut-off date for the enforcement of the scheme. In R.L. Marwaha versus Union of India and others, (1987) 4 SCC 31 the Apex Court has held that fixing of a date for the grant of benefit must have nexus with object sought to be achieved. Their Lordships have held as under: “There is no dispute that the ICAR though it is a body registered under the Societies Registration Act, 1960, is a body which is sponsored, financed and controlled by the Central Government. There has been a continuous mobility of personnel between Central Government departments and