W.P. (C) No. 17825-28/2005 Page 1 of 43 IN THE HIGH COURT OF DELHI AT NEW DELHI W.P.(C) No. 17825-28/2005 Judgment delivered on June 6th , 2008 # Central Bank Retirees‟ Association & Ors. .... Petitioners Through : Mr. Jitendra Sharma, Senior Advocate with Mr. P.N. Sharma, Advocate Versus $ Union of India & Ors. .... Respondents ^ Through : Mr. V.R. Reddy, Senior Advocate with Ms. Meera Mathur, Advocate for Respondents No. 3 to 5 Mr. J.L. Gupta, Senior Advocate with Mr. Sanjay Bhatt, Advocate for Respondents No. 6 & 7 W.P. (C) No. 17825-28/2005 Page 2 of 43 CORAM: HON'BLE MR. JUSTICE G.S.SISTANI 1. Whether reporters of local papers may be allowed to see the Judgment? Yes 2 . To be referred to the Reporter or not? Yes 3. Whether the judgment should be reported in the Digest? yes G.S. SISTANI, J. 1. The present petition, under Article 226 of the Constitution of India, seeks, inter alia, directions to the respondents to treat the petitioners at par with the employees of Nationalised Banks and Financial Institutions who have retired on or after 1.1.1986 for the purpose of grant of pension. 2. The undisputed facts, leading to the present petition, may first be noticed: In exercise of the powers conferred by Clause (f) of sub-section (2) of section 19 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, the Board of Directors of the Central Bank of W.P. (C) No. 17825-28/2005 Page 3 of 43 India, after consultation with the Reserve Bank of India and with the previous sanction of the Central Government, framed Regulations known as the Central Bank (Employees‟) Pension Regulations, 1995 (hereinafter, “the Regulations”). Analogous Regulations to the same effect were also introduced mutatis mutandis by the Bank of India, the Industrial Development Bank of India and the Industrial Finance Corporation of India. In pursuance of these Regulations, a Pension Scheme was introduced in substitution of the existing Contributory Fund Scheme (hereinafter, “the CPF Scheme”). Whereas the Pension Scheme was made applicable to all employees entering service on or after 1.11.1993, the employees who had retired from service of their respective banks between 1.1.1986 and the date of the Regulations coming into force could either continue to be governed by the erstwhile CPF Scheme or they could opt for the benefit of the Pension Scheme. The employees who had retired before 1.1.1986, however, were not eligible for the Pension Scheme. Hence, the petitioners, retired from the service of different banks on or before 1.12.1985 and thus ineligible for being entitled to the new Pension Scheme, have filed the present writ petition challenging the constitutionality of these Regulations to the extent they disqualify a retiree who had retired prior to 1.1.1986 for grant of pension. 3. It is relevant to note that the petitioners, before approaching this Court, had filed the present petition as W.P. (C) No. 471 of 2003 before the Supreme Court of India. The petitioners, whilst challenging the vires of the 1.1.1986 cut-off date before the Apex Court, complained that the action in denying pension to persons who had retired before 31.12.1985 was violative of Article 14 of the Constitution of India. The claim made by the petitioners was contested by the respondents. It was, inter alia, pleaded that the W.P. (C) No. 17825-28/2005 Page 4 of 43 constitutionality of the 1.1.1986 cut-off date had already been upheld by a Bench of three Judges in the All India Reserve Bank Retired Officers Association and others v. Union of India and others1 (hereinafter, “the RBI Case”), and subsequently affirmed by a Bench of equal strength vide its order dated 17.11.1998 in All India PNB Retired Officers Association v. Union of India & Ors. 2 (hereinafter, “the PNB Case”). The petitioners, whilst countervailing the defence of the respondents, claimed that the very basis for the fixation of the cut-off date had been obliterated by the recommendations of the Fifth Pay Commission Report, in pursuance whereof, both pre- and post- 1.1.1986 retirees have been brought at parity with each other. Upon considering the rival contentions of both parties, the Apex Court, in its wisdom, did not consider it a fit case to entertain the petition under Article 32 of the Constitution of India, and accordingly, dismissed the petition with the suggestion to the petitioners to register the same under Article 226 of the Constitution of India. The Apex Court‟s order dated 1.9.2005, directing this Court to dispose of the matter, is reproduced as under: “Heard learned counsel for the parties. We are of the considered view that this is not a fit case to entertain the petition under Article 32 of the Constitution of India. The proper course for the petitioners would be to move the High Court. To avoid unnecessary delay, we send the writ petition filed in this Court to the Delhi 1 1994 Supp (1) SCC 664 2 W.P. (C) No. 467 of 1997 W.P. (C) No. 17825-28/2005 Page 5 of 43 High Court to be registered as petition under Article 226 of the Constitution of India. Since the dispute relates to claim of pension, if the matter is taken up for early disposal. We request the High Court to dispose of the matter as early as possible, preferably within twelve months from today. The Writ petition is dismissed with the aforesaid observation.” 4. It is trite that the question of the applicability of the Pension Scheme introduced by the Regulations herein, including the constitutionality of the 1.1.1986 cut-off date, is no longer res integra in light of the decisions of the Apex Court in the RBI as well as the PNB Cases3. It is also trite that any finding qua constitutionality of a cut-off date is essentially a finding of fact, and once there is a finding of fact arrived at by the highest Court of the land, all other Courts are estopped from revisiting that conclusion. Inasmuch as the constitutionality of the cut-off date of 1.1.1986 as well as the reasonableness of the classification into pre- and post-1.1.1986 resulting therefrom has already attained finality already by the Apex Court, it is trite that any decision that this Court takes in the present petition appertaining to an identical challenge cannot be de hors the ratio in the RBI Case4, or to put it differently, without having in perspective the judicial dicta in the said case. 3 supra at n. 1 and 2 respectively 4 supra at n. 1 W.P. (C) No. 17825-28/2005 Page 6 of 43 5. In the RBI case5, the RBI had introduced Pension Regulations in 1990 with effect from 1.1.1990 in lieu of the CPF Scheme. The said Regulations became applicable to all employees on roll from 1.11.1990. However, those employees who retired between 1.1.1986 and 1.1.1990 were given an option to opt for the Pension Scheme on certain conditions. The bank employees who retired from service prior to 1.1.1986 were not eligible to opt for Pension Scheme. Aggrieved, the All India Reserve Bank Retired Officer Association challenged this action of the RBI by way of a writ petition before the Apex Court. 6. While deciding upon the vires of the Pension Regulations under challenge , the Apex Court in the RBI Case6 observed as under: “[W]henever any rule or regulation having statutory flavour is made by an authority which is a State within the meaning of Article12 of the Constitution, the choice of the cut-off date which has necessarily to be introduced to effectuate such benefits is open to scrutiny by the court and must be supported tin the touch- stone of Article 14. If the choice of the date results in classification or division of members of a homogeneous group it would be open to the Court to insist that it be shown that the classification is based on an intelligible differentia and on rational consideration which bears a nexus to the purpose and object thereof. The differential treatment accorded to those who retired prior to the specified date and those who retired subsequent thereto must be justified on the touchstone of Article 14, for otherwise it would be 5 ibid 6 supra at n. 1 W.P. (C) No. 17825-28/2005 Page 7 of 43 offensive to the philosophy of equality enshrined in the Constitution.”7 (emphasis supplied) 7. Explaining as to how the reasonableness of the classification resulting from the fixation of the cut-off date of 1.11.1986 is to be tested on the touchstone of Article 14 of the Constitution of India, the Apex Court succinctly observed as under: “[A] distinction (has to be drawn) between the continuance of an existing scheme in its liberalized form and the introduction of a wholly new scheme; in the case of the former all the pensioners had a right to pension on a uniform basis and any division which classified them into two groups by introducing a cutoff date would ordinarily violate the principle of equality in treatment unless there is strong rationale discernible for so doing and the same can be supported on the ground that it will subserve the object sought to be achieved. But in the case of a new scheme, in respect whereof the retired employees have no vested right, the employer can restrict the same to certain class of retirees, having regard to the fact-situation in which it came to be introduced, the extent of additional financial burden that it will throw, the capacity of the employer to bear the same, the feasibility of extending the scheme to all retirees regardless of the dates of their retirement, the availability of records of every retiree, etc..”8 8. In order to further vindicate the fixation of the cut-off date in pension matters, the Apex Court rationalised the prerogative of the State to 7 id at para 8 8 id at para 10 W.P. (C) No. 17825-28/2005 Page 8 of 43 limit the applicability of a new scheme to a certain class of retirees by observing as under: “The underlying principle is that when the State decides to revise and liberalise an existing pension scheme with a view to augmenting the social security cover granted to pensioners, it cannot ordinarily grant the benefit to a section of the pensioners and deny the same to others by drawing an artificial cut-off line which cannot be justified on rational grounds and is wholly unconnected with the object intended to be achieved. But when an employer introduces an entirely new scheme which has no connection with the existing scheme, different considerations enter the decision making process. One such consideration may be the financial implications of the scheme and the extent of capacity of the employer to bear the burden. Keeping in view its capacity to absorb the financial burden that the scheme would throw, the employer would have to decide upon the extent of applicability of the scheme.”9 (emphasis supplied) 9. The trite propositions culled out in the foregoing paragraphs, in my view, constitute the ratio in the RBI Case10. Applying this ratio to the Pension Regulations under challenge, the Apex Court upheld the constitutionality of the 1.1.1986 cut-off date. The various considerations, on the basis whereof the Apex Court in the RBI Case11 vindicated the reasonableness of the classification resulting 9 ibid 10 supra at n. 1 11ibid W.P. (C) No. 17825-28/2005 Page 9 of 43 from the 1.1.1986 cut-off date, would be worthwhile to take note of, and accordingly, are consolidated as under: i. There is a distinction between the liberalization of an existing scheme and the introduction of a new scheme. ii. The introduction of the Pension Regulations for the first time in an organization in lieu of the CPF is a “new scheme”. iii. The Provident Fund retirees who have retired and have already received their retrial benefits from the employer cannot claim a vested right to coverage under the Pension Regulations. iv. The relation of the Provident Fund retiree with the employer snaps upon the retirement and receipt of retrial benefits and there is no continuing relationship between the two. v. On the other hand, in the case of a pension retiree, his relation with the employer merely undergo a change upon retirement but do not snap altogether. vi. The CPF Scheme and the Pension Scheme and the rights of the members thereunder are structurally different. vii. The Provident Fund retirees and the Pension retirees do not form a homogeneous class. viii. The employer has the right to fix a cut off date and restrict the application whilst introducing the Pension Regulations in lieu of CPF for the first time. W.P. (C) No. 17825-28/2005 Page 10 of 43 ix. The cut-off date of 1.1.1986 was otherwise valid because the demand for pension as a second retrial benefit broadly on the lines of Central Government pattern was mooted sometime in the year 1986 and the date was so adopted at that time since Central Government also adopted the same based on the Fourth Pay Commission Recommendations. 10. With the aforesaid facts, ratio and the decision in the RBI Case12 in perspective, I shall now advert to the rival contentions of both parties herein in the paragraphs infra. 11. Mr. Jitendra Sharma, learned senior counsel for the petitioners, has vehemently submitted that the Pension Scheme introduced by the Regulations is not a new scheme but only a liberalised form of the already existing CPF Scheme, and that as a result of such liberalization, a homogeneous set of employees have been classified into pre- and post- 1.1.1986 retirees. It is contended that the prescription of 1.1.1986 as a cut-off date is totally unsustainable in law and is irrational in nature inasmuch as the Regulations have en bloc made the pre-1986 retirees ineligible from the grant of pension. 12. It is further argued that the classification resulting from the liberalisation of the existing CPF Scheme lies in the teeth of the ratio 12 ibid W.P. (C) No. 17825-28/2005 Page 11 of 43 in D.S. Nakara & Ors. v. Union of India13, wherein the Apex Court has unequivocally opined that classification of pensioners has to be based on some rational principle and the rational principle must have nexus to the objects sought to be achieved. The Apex Court therein has further opined that if any cut-off date classifying 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 and affront to the test of reasonableness under Article 14 of the Constitution of India 13. Learned senior counsel has strenuously argued that both the pre- 1986 and post-1986 employees are at par when compared to their respective portfolios as well as the terms and conditions governing their respective appointment, and thus, the benefits of the new Pension Scheme have been arbitrarily denied to the petitioners by treating them as a separate class. 14. It is further contended by learned senior counsel for the petitioners that the petitioners are all octogenarians who are unable to take any alternative employment and are fully dependant upon the retrial benefits which they can derive on the basis of their past service. It is contended that the petitioners in their own right constitute a class of 13 1983 (1) SCC 305 W.P. (C) No. 17825-28/2005 Page 12 of 43 persons who are in dire need of the Pension Scheme for their subsistence and to lead an independent, distinguished and decent lifestyle. 15. Learned senior counsel for the petitioners has relied upon Bharat Petroleum Management Staff Pensioners v. Bharat Petroleum Corporation Limited & Ors.14, to contend that pension is no longer considered a bounty and it has been held to be a property and it is thus onerous upon the State to take account of the rise in the pension of the retired personnel who are otherwise entitled to it. 16. In the same vein, the following observations in State of Punjab v. K.R. Erry & Sobhag Rai Mehta15, have relied upon: “In short it must be conceded that though the State Government may have had some material before it for imposing a penalty by way of a cut in the pension it had failed to give a reasonable opportunity to the officers to put forward their defence or facts in extenuation before the cut was imposed. The case of Ridge v. Baldwin [1964] A.C. 40 comes to mind in this connection. Baldwin who was the Chief Constable of the borough police force was prosecuted on grave charges. Donovan J, the trial Judge made, while acquitting him, some observations about his moral incompetence to afford leadership to the police force. Acting on this severe criticism by a Judge of the High Court the Watch Committee, entitled Under Section 191 of the 14 (1988) 3 SCC 32 15 (1973) 1 SCC 120 W.P. (C) No. 17825-28/2005 Page 13 of 43 Municipal Corporations Act, 1882 to dismiss him on a charge of unfitness, dismissed him from service. This dismissal practically at the end of his official career had the consequence of depriving him of his pension. The House of Lords held that the order had to be set aside because Baldwin was not afforded an opportunity to defend himself, though the statute itself did not require any such opportunity being given.”16 17. Relying upon Deokinandan Prasad v. State of Bihar and others17, learned senior counsel for the petitioners has contended that denial of pension was infringement of the fundamental rights guaranteed under Articles 19(1)(f) and 31(1) of the Constitution of India. The Apex Court in the said case observed as under: “[T]he right of the petitioner to receive pension is property under Article 31(1) and by a mere executive order the State had no power to withhold the same. Similarly, the said claim is also property under Article 19(1) (f) and it is not saved by Sub-article (5) of Article 19. Therefore, it follows that the order dated June 12, 1968 denying the petitioner right to receive pension affects the fundamental right of the petitioner under Articles 19(1)(f) and 31(1) of the Constitution, and as such the writ petition under Article 32 is maintainable.” 18. Learned senior counsel for the petitioners has further contended that even otherwise the prescribed cut-off date of 1.11.1986 holds no water inasmuch as on the recommendations of the Fifth Pay 16 id at para 18 17 1971 (2) SCC 330 W.P. (C) No. 17825-28/2005 Page 14 of 43 Commission, Government of India has done away with the aforesaid cut-off date applicable to retired employees in their own departments and allied offices. Pursuant thereto, all employees have been brought at par irrespective of their date of retirement. It is contended that the Fifth Pay Commission has taken a practical view of the entire situation and has come to the conclusion that all retirees are to be treated alike and no discrimination can be practiced with any one them. To make good his point, learned senior counsel for the petitioners has placed on record a copy of the Office Memorandum No. F.45/86/97-P & PW(A)/Part – III, dated 10.2.1998 appertaining the revision of pension of pre-1.1.1986 pensioners. Relevant portions of the said Office Memorandum, filed as Annexure P-3 (Colly), are reproduced thus: “REVISION OF PENSION OF PRE-1.1.1986 PENSIONERS In accordance with the provisions contained in CCs (Pension) Rules, 1972 and the Government‟s orders issued thereunder, at present pension of all pre-1986 pensioners is based on the average emoluments drawn by them during last completed 10 months immediately preceding the date of retirement and similarly family pension is based on the last pay drawn by the deceased Government servant/pensioner. Government has, inter alia accepted the recommendation of Fifth Central Pay Commission to the effect that the pension of all the pre-1986 retirees may be updated by notional fixation of their pay as on 1.1.1986 by W.P. (C) No. 17825-28/2005 Page 15 of 43 adopting the same formula as for the serving employees and thereafter for the purpose of consolidation of their pension/family pension as on 1.1.1986, they may be treated alike those who have retired on or after 1.1.1986. Accordingly, pay of all those Government servants who retired prior to 1.1.1986 and also in cases of those Central Government employees who died prior to 1.1.1986, in respect of whom family pension was being paid on 1.1.1986, will be fixed on notional basis in the revised scale of pay for the post held by the pensioner, at the time of retirement or on the date of death of Government employee, introduced subsequent to retirement/death of Government employee consequent upon promulgation of Revised Pay Rules on implementation of recommendations of successive Pay Commissions or of award of Board of Arbitration or judgment of Court or due to general revision of the scale of pay for the post, etc. The number of occasions on which pay shall be required to be fixed on notional basis in each individual case would vary and may be required to be revised on several occasions in respect of those employees who retired in the „fifties and sixties‟. In all such cases, pay fixed on notional basis on the first occasion shall be treated as „pay‟ for the purpose of emoluments for re-fixation of pay in the revised scale of pay on the second occasion and other emoluments for re-fixation of pay in the revised scale of pay on the second occasion and other elements like DA/Ad hoc DA/Additional DA, IR, etc., based on this notional pay shall be taken into account. In the same manner, pay on notional basis shall be fixed on subsequent occasions. The last occasion shall be fixation of pay in the scale introduced on the basis of Fourth Central Pay Commission and made effective from 1.1.1986. While fixation of pay on notional basis on each occasion, the pay fixation formulae approved by the Government and be strictly followed. However, the benefit of any notional increments admissible in terms of the rules and instructions applicable at the relevant time shall not be extended in any case of re-fixation of pay on notional W.P. (C) No. 17825-28/2005 Page 16 of 43 basis. The notional pay so arrived as on 1.1.1986 shall be treated as average emoluments for the purpose of calculation of pension and accordingly, the pension prescribed. [The pension so calculated shall be consolidated as on 1st January, 1996 in accordance with the provisions contained in Paragraph 4.1 of this Department‟s O.M. NO. 45/86/97-P & PW (A)-Pt. II, dated the 27th October, 1997. Such consolidated full pension shall not, however, be less effect from 1st January, 1996 for the post last held by the concerned pensioner. However, such pension will be suitably reduced pro rata, where the pensioner has less than the maximum required service for full pension as per the rule [ Rule 49 of CCS(pension) Rules 1972] applicable to the pensioner as on the date of his/her superannuation/retirement and in no case it will be less than Rs. 1, 275 p.m.” (emphasis supplied) 19. The sum and substance of the contentions put forth on behalf of the petitioners are outlined as under: i. Firstly, that as a result of 1995 Pension Regulations, when a liberalized pension formula was introduced, and no new scheme was involved, prescription of cut-off date of 1986 resulted in fragmentation of a homogenous class of employees into two groups, inasmuch as those who retired on or after 1.1.1986 were given the option to migrate from the CPF to the pension Scheme and those who retired prior to 1986 were denied this option. The classification resulting in pursuance thereunto has no nexus with the object sought to be achieved. ii. Secondly, that the cut-off date of 1.1.1986 became totally obscure under the Central Bank Employees Pension Regulation of 1995, W.P. (C) No. 17825-28/2005 Page 17 of 43 inasmuch as the said cut-off date has been obliterated retrospectively from the parent government scheme from the year 1998. iii. Thirdly, that banks