IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE V.GIRI FRIDAY, THE 22ND FEBRUARY 2008 / 3RD PHALGUNA 1929 WP(C).No. 23282 of 2005(V) ------------------------------------- PETITIONER: ------------------- CENTRAL GOVERNMENT PENSIONERS' ASSOCIATION, KERALA (REG.NO.1765/98), HEAD QUARTERS AT `PENSION KENDRA', 2ND FLOOR, CAPITAL TOWERS, PATTURAICKAL JUNCTION THRISSUR-680 001, REP. BY ITS GENERAL SECRETARY. BY ADV. SRI.ANIL K.NARENDRAN RESPONDENTS: ----------------------- 1. THE UNION OF INDIA, REP. BY THE SECRETARY TO GOVERNMENT, MINISTRY OF FINANCE, DEPARTMENT OF EXPENDITURE, NEW DELHI. 2. ADDITIONAL SECRETARY (PENSION) GOVERNMENT OF INDIA, MINISTRY OF PERSONNEL, PUBLIC GRIEVANCES & PENSIONS, DEPARTMENT OF PENSION & PENSIONERS'S WELFARE, LOK NAYAK BHAVAN, KHAN MARKET, NEW DELHI-110 003. BY ADV. SRI.T.SANJAY, CGC THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 17/01/2008, THE COURT ON 22/02/2008 DELIVERED THE FOLLOWING: W.P.(C) NO..23282/2005 APPENDIX PETITIONERS EXHIBITS EXT.P1:- COPY OF THE REPRESENTATION DT. 15.6.04 SUBMITTED BY THE PETITIONER BEFORE THE CENTRAL GOVERNMENT. EXT.P2:- COPY OF THE REPRESENTATION DT. 12.11.04 SUBMITTED BY THE PETITIONER, BEFORE THE PRESIDENT OF INDIA, ALONG WITH GIST OF IMPORTANT GRIEVANCES. EXT.P3:- COPY OF THE LETTER DT. 17.11.04 OF THE PRESIDENT'S SECRETARIAT, ADDRESSED TO THE PETITIONER. ANNEXURE -I:- COPY OF THE OM DT. 5..3.87. ANNEXURE II:- COPY OF THE JUDGMENT OF THE HONOURABLE SUPREME COURT OF INDIA IN CIVIL APPEAL NO.129/03 DT. 11.8.05. /TRUE COPY/ P.A. TO JUDGE tss V. GIRI ,J. ------------------------------- WP(C).NO. 23282 of 2005 --------------------------------- Dated this the 22nd day of February, 2008. JUDGMENT The issue which has impact on the quantum of pension drawn by the Central Government pensioners, who had exercised their option for receiving a lumpsum amount on computation of a percentage of pension admissible to them, is involved in this writ petition. Since the adjudication of the issue would also involve the service conditions of those pensioners whose service related disputes are cognizable by the Central Government Administrative Tribunal constituted under the Administrative Tribunals Act, an affidavit was filed by the petitioner in support of I.A.No.12599/2005 seeking permission of the court to confine the reliefs sought for in the writ petition to those Central Government pensioners who will not come within the purview of the Central Administrative Tribunal constituted under the Administrative Tribunals Act, 1985. Such permission was granted on 30.9.2005 and thereafter the writ petition was WPC.23282 /2005 2 proceeded with. A counter affidavit was filed on behalf of respondents. By consent of parties the writ petition was has been taken up and disposed of. 2. I heard learned counsel for the petitioner Sri. Anil K.Narendran and Sri.T.Sanjay, learned Central Government Standing Counsel on behalf of the respondents. 3. The petitioner is an Association of Central Government Pensioner's in Kerala registered under the Travancore Cochin Literary, Scientific and Charitable Societies Registration Act. One of the main objects of the association is to protect, promote and safeguard the interests and welfare of the Central Government pensioners and retirees from Central Government public sector undertakings and to work for the common betterment of all central Government pensioners, in the economic and social spheres. The petitioner seeks to approach this court essentially aggrieved by the inaction on the part of the Central Government in ordering restoration of the commuted portion of the pension of the Central Government pensioners after 12 years of commutation as recommended by the 5th Central Pay Commission instead of 15 years as is being presently done. The WPC.23282 /2005 3 right of the Central Government Pensioner (hereinafter referred to as the Pensioner for the purpose of this case) to commute a portion of the pension drawn by him is provided under the Central Civil Services (Commutation of Pension)Rules 1981 (hereinafter referred to as the Rules. Rule 5 of the rules is extracted hereunder:- “ Limit on commutation of pension (1) A government servant shall be entitled to commute for a lumpsum payment of an amount not exceeding forty per cent of his pension.” 4. Rule 8 of the Rules provided that “ the lumpsum payable to an applicant shall be calculated in accordance with the table of the values prescribed from time to time and applicable to the applicant on the date on which the commutation becomes absolute.” As per the Government of India decision under Rule 10 of the Rules, those Central Government pensioners who have commuted a portion of their pension and on 1.4.1985 or thereafter have completed or will complete 15 years from their respective dates of retirement will have their commuted portion of pension restored. It is accordingly that a pensioner who WPC.23282 /2005 4 receives a lumpsum amount after availing the facility of commutation of pension in terms of Rule 5 of the Rules is entitled to restoration of the pension after a period of 15 years. The commutation values for a pension of Rs.1 .p.a., is given in the table at the end of the Rules. The commutation value is expressed as number of years purchase, which is variable, with reference to the age of pensioner. An illustration given by the petitioner by hypothetically treating an amount of Rs.510/- as the pension offered for commutation, being 40% of the pension admissible to the pensioner and relatable to the age of retirement from 58 to 60 is given hereunder: __________________________________________________ Amount of Age of No. of Lumpsum Recovery Recovery pension retire- years payable for for offered for ment. purchase. 15 years. 12 years. commuta- tion @40%. ____________________________________________________ Rs.510/- 58 10.46 64,015.20 91,800 73,440 Rs.510/- 60 9.81 60,037.20 91,800 73,440 ------------------------------------------------------------------------- Amount of Age of No. of Lumpsum Recovery Recovery pension retire- years payable for for offered for purchase 15 years 12 years commutation @ 33% ------------------------------------------------------------------------- Rs.420.75 58 10.46 52,812.54 75,735 60,588 Rs.420.75 60 9.81 49530.69 75,735 60,588 ____________________________________________________ WPC.23282 /2005 5 5. The illustration also gives the number of years of purchase, lumpsum amount payable and recovery effected for 15 years and 12 years of 33% of the pension drawn. The number of years of purchase undergoes considerable reduction from 10.46 to 9.81 on enhancement of the retirement age from 58 to 60. Consequently there is a significant reduction in the lumpsum payable to the pensioner on commutation. But what is sought to be illustrated by the petitioner is that instead of number of years of purchase from 10.46 to 9.81 and consequent reduction in the lumpsum amount payable on commutation, the recovery effected over the period of 15 years remains the same. Further more, the recovery effected from the pensioner over a period of 12 years itself is far in excess of the amount which had been paid to the pensioner at the time of commutation. It is contended that since based on the portion actually commuted the monthly pension drawn by the pensioner is correspondingly reduced and proportionate recovery is effected by the Government, restoration of the pension should be co-terminus with the recovery effected attaining such levels as are required to make up the lumpsum WPC.23282 /2005 6 amount that had been paid at the time of commutation. The contention is that where restoration of the pension is delayed beyond the period of 12 years and reaches 15 years as being currently done, there is an excess recovery by the Government and this is exprapriatory and amounts to unjust enrichment. Since class of persons who are subjected to such excess recovery are weaker sections of the society who are entitled to the protection and benevolent attitude of the Government, the Government ought to take serious attention to the anomaly above mentioned and take appropriate action thereupon, it is contended. 6. Reference is made to the recommendations of the 5th pay Commission report of the 5th Central Pay Commission. Particular reference is made to para 136.9 and 136.10 of the report. The same are extracted hereunder for reference. “136.9 We are also unable to accept the suggestions that the commuted portion of the pension should be progressively restored in three equated instalments spread over 15 years or on a pensioner attaining the average age of survival assumed in the computations because it would be contrary to the basic WPC.23282 /2005 7 principles governing the scheme of commutation. Apart from the fact that the commuted value is not fully adjusted in five or ten years, it would be incorrect, in our view, to restore the commuted portion without taking into account the element of interest, which, in any case, is levied only at the concessional rate of 4.75 per cent per annum. The following observation of the Supreme Court in the Common Cause case would also be of relevance in this context. “........in dealing with a matter of this nature, it is not appropriate to be guided by the example of life insurance, equally unjust it would be to adopt the interest basis. On the other hand, the conclusion should be evolved by relating it to the years of purchase basis and an addition of two years necessary for the recovery of interest”. 136.10. As mentioned earlier, the commuted value of pension receivable currently by an employee retiring at the normal age of 58 years is equal to 10.46 years' purchase. We have, however, separately recommended that the age of superannuation be raised from 58 to 60 years. Consequently, the commutation value in respect of employees superannuating at the age of 60 years and commuting a portion of pension within a period of one year would be equal to 9.81 years' purchase. After adding thereto a further period of two years for recovery of interest in terms of the observations of the Supreme Court, it would be reasonable to restore the commuted portion of the pension after 12 years, instead of 15 years WPC.23282 /2005 8 as at present. We recommend accordingly. In arriving at this decision, we have also taken note of the fact that several State Governments, such as Kerala, Madhya Pradesh, Orissa and Punjab, now permit restoration after a similar period of 12 years.” 7. The petitioner contends that a high power expert body like the pay commission after taking note of the fact that the age of superannuation is enhanced from 58 to 60 and consequently the commutation value in respect of employees superannuating at the age of 60 years would be equal to 9.81 years purchase recommended that it would be reasonable to restore commutation value of pension after 12 years instead of 15 years which is currently done. The petitioners are aggrieved that though the Government had accepted the recommendations of the 5th pay commission and enhanced the age from 58 to 60 for Central Government Staff, the restoration of the pension consequent upon commutation is still being effected after 15 years and not after 12 years as recommended by the pay commission. Hence the writ petition seeking a direction to the Central Government to accept the recommendations of the Central pay commission and order restoration of the pension WPC.23282 /2005 9 drawn by the Central Government Staff, on commutation, after 12 years from the date of retirement. Exs.P1 and P2 are representations made in this behalf before the Government. 8. A counter affidavit has been filed by the respondents. It is pointed out that the 5th pay commission made two recommendations regarding commutation. Firstly to enhance the limit of commutation from 33 1/3% to 40% and secondly to restore commuted pension after 12 years. Both recommendations were considered in consultation with the Ministry of Finance, the first respondent. Recommendation to enhance the limit from 33 1/3% to 40% was accepted. The second recommendation was not accepted, though the matter was considered in consultation with the Ministry of Finance. This was on account of the administrative and financial implications involved. The recommendations made by any pay commission are not mandatory. It is up to the Government to take a decision keeping in mind the legal, administrative and financial points of view. The Supreme Court itself has in the case of State of Punjab and others vs. Amarnath Goyal and others ( 2005 (6) SCC 754) held that the recommendations of the pay WPC.23282 /2005 10 commission cannot be binding on the Government. It is up to the Government to accept and implement those recommendations consistent with their financial position. The Government had decided not to accept the second recommendation. On an over all assessment of the administrative and financial implications, the government decided not to implement the second recommendation. There is nothing arbitrary and illegal in the said decision of the Government. The respondents pray that the writ petition may be dismissed. 9. No doubt the recommendations made by any pay commission even though a high powered body are essentially recommendations and consequently cannot be treated as binding on the Government as such. As observed by the Supreme Court in Amarnath Goyal's case it is up to the Government to take a decision on such recommendations, consistent with its financial position. Both in the matter of enhancement of the retirement age from 58 to 60 and in the matter of enhancing the maximum percentage of pension that could be made available for commutation, the Government had thought it fit to accept the recommendations of the pay commission. It is up to the WPC.23282 /2005 11 Government to evaluate the implications arising from the recommendation to restore full pension after 12 years of recovery and then decide whether the recommendations made should be accepted in toto or in part or not to be accepted at all. But any decision taken by the Government will have to be a reasoned one and any such decision will have to be in conformity with the constitutional provisions. 10. The present case is one where the recommendation made by the pay commission affects large number of citizens. It affects the standard of living and therefore it affects the rights to life guaranteed under Article 21 of the Constitution of India. The right to receive pension is not a bounty given by the employer. The Supreme Court has time and again held that pension is the right of a Government servant forming part of the earnings accrued by dint of his service. There is a statutory rule governing such right and therefore the right to receive pension could be a statutory right as well. But the pension in the form of retirement benefit cannot merely be a statutory right. A decision taken by the Government to give a pension would only be treated as a discharge of an obligation of an employer in a WPC.23282 /2005 12 welfare State. It is a matter of common knowledge that one of the attractions of Government service is the prospects of receiving pension. A right to receive pension is part of the conditions of service of a Government servant. If pension is not a bounty given by the Government but a right of the Government servant, it has to be recognised as such. Consequently all actions taken by the Government which have an impact on the right of the Government servant to receive pension which is statutorily regulated, will necessarily have to adhere to article 14 of the constitution. It is in this context that I find the absence of any reason whatsoever on the part of the Government in deciding not to accept the recommendation of the pay commission, as disturbing. When the refusal on the part of the Government to accept the recommendation of the pay commission has been challenged before this court, it was necessary on the part of the respondents to disclose the reasons why it decided not to accept the recommendation of the 5th pay commission for restoration of pension after 12 years of recovery instead of 15 yeas as is currently done. 11. Going by the lumpsum amount payable on WPC.23282 /2005 13 commutation and the recovery effected by applying the years of purchase as given by the table of commutation of pension rules there seems to have been a reason for the recommendation made by the pay commission. The reasons are expressed in para 136.9 and 136.10 of the pay commission report. As to what persuaded the Government to take a decision not to accept the recommendation of the pay commission in the matter of restoration of pension after a period of 12 years, the counter affidavit is significantly silent on this aspect. The counter affidavit only mentions that the recommendation made by any pay commission are not mandatory. They are in the nature of suggestions which the Government may accept or not. In other words, the stand taken in the counter affidavit suggests either absence of application of mind on the part of the government in taking a decision not to accept the recommendation of the pay commission or more seriously a refusal to reveal such reasons as such. 12. The recommendation of the pay commission for reducing the number of years from 15 to 12, would normally suggest that recovery effected over a period of 12 years is WPC.23282 /2005 14 sufficient. If that be so, is it not reasonable to assume that further recovery effected for a period of three years, after the expiry of 12 years, would constitute an unjust enrichment on the part of the respondent. If so, is it not necessary for the Government to restrict the recovery of 12 years from the date of commutation and order restoration of full pension. Obviously no Government would countenance a situation where it unjustly enrich itself at the expense of its senior citizens. In my view, these are matters which merit serious attention by the Government. 13. For all these reasons, I am of the view that the first respondent should take a fresh decision in the matter of the recommendation made by the 5th central pay commission as regards restoration of the commuted pension drawn by the central pensioners, after 12 years. A reasoned order may be passed in this regard by the first respondent after hearing a representative of the petitioner. The Government shall take note of the observations made in this judgment. The petitioners are at liberty to supplement Exts.P1 and P2 with additional representations and also produce materials in support of their WPC.23282 /2005 15 contention. The writ petition is disposed directing the first respondent to take such a decision on Exts. P1 and P2 in the light of the observations made above and after hearing the representative of the petitioner within six months from the date of receipt of a copy of this judgment. V. GIRI, JUDGE. Pmn/ WPC.23282 /2005 16