1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR. O R D E R Anil Bhandari v. United India Insurance Co.Ltd.& Ors. S.B.CIVIL WRIT PETITION NO.4453/1999 under Article 226 of the Constitution of India. Date of Order :: 28th April, 2009 P R E S E N T HON'BLE MR.JUSTICE GOVIND MATHUR Mr. N.M.Lodha, for the petitioner. Mr. M.S.Singhvi, for the respondents. .... BY THE COURT : The petitioner, after serving respondent United India Insurance Company (hereinafter referred to as “the company”) for a period of twenty years, three months and four days, retired voluntarily on 19.11.1997, as per the provisions of General Insurance Employees Pension Scheme, 1995 (hereinafter referred to as “the Scheme”). The Scheme was introduced by Government of India while exercising powers conferred 2 by Section 17-A of the General Insurance Business (Nationalisation) Act, 1972 (hereinafter referred to as “the Act of 1972”). According to para 30 of the Scheme, an employee at any time, after completion of twenty years of qualifying service, may by giving notice of not less than 90 days to the appointing authority, retire from service. As per clause (5) of para 30 aforesaid the qualifying service of an employee retiring voluntarily shall be increased by a period of not exceeding five years subject to the condition that total qualifying service rendered by such employee should not in any case exceed 33 years and it does not take him beyond the date of retirement. The petitioner actually served the respondents for a period of twenty years, three months and four days, therefore, determination of his pension was made by treating 25½ years as qualifying service as per clause (5) of para 30 of the Scheme. The respondent company, though has determined petitioner's pension by considering 25½ years qualifying service but this period was not taken into consideration while settling gratuity and that was quantified by the respondent company on basis of the actual term of service i.e. of 20 years, 3 months and four days. 3 While claiming redetermination of gratuity, the contention of the petitioner is that the term “pension” includes gratuity, thus, the amount of gratuity should have been determined by the respondent company by taking into consideration the qualifying service as per clause (5) of para 30 of the scheme. It is asserted that as per para 2(q) of the Scheme the “pension” includes a basic pension and the additional pension referred to in Chapter VI of the scheme. Chapter VI provides rate of pension and as per para 34 the additional pension shall be 50% of the allowances drawn by an employee. The term “allowances” includes payment of gratuity. It is further stated that para 55 of the Scheme provides that the matters relating to pension and other benefits in respect of which no express provision exists in the scheme shall be governed by the corresponding provisions contained in the Central Civil Services (Pension) Rules, 1972 (hereinafter referred to as “the Rules of 1972”) or the Central Civil Services (Commutation of Pension) Rules, 1981 (hereinafter referred to as “the Rules of 1981”) applicable for Central Government employees. The Scheme nowhere provides independent provisions for payment of gratuity and as such the gratuity is required to be determined in accordance with the provisions of the Rules of 1972. The term “pension” as per the definition given under Rule 2(o) of the Rules of 1972 includes gratuity. The term “retirement benefits” as defined under Rule 2(r) of the Rules of 4 1972 includes pension or service gratuity and retirement gratuity where admissible. Rule 48-A of the Rules of 1972 also includes pension as well as retirement gratuity required to be paid to a civil servant based on the emoluments as defined under Rules 33 and 34 of the Rules referred above. Rule 48-B of the Rules of 1972 is analogous to para 30(5) of the Scheme and as per Rule 50 of the Rules of 1972, a government servant who has completed five years qualifying service and is eligible to service gratuity or pension shall on his retirement be granted retirement gratuity equal to 1/4th of his emoluments for each completed period of qualifying service. It is stated by Shri N.M.Lodha, counsel for the petitioner that in view of the provisions above the gratuity is an integral part of retiral benefits and, therefore, the total qualifying service i.e. of 25½ years is required to be taken into consideration while determining gratuity required to be paid to the petitioner. To substantiate the contention, reliance is placed by counsel for the petitioner upon judgment of Hon'ble Supreme Court in Burhanpur Tapti Mills Ltd. v. Burhanpur Tapti Mills Mazdoor Sangh, reported in AIR 1965 SC 839, wherein it was held that “a scheme of gratuity and a scheme of pensions have much in common. Gratuity is a lump sum payment while pension is a periodic payment of a stated sum. They are both 5 “efficiency devices” and are considered necessary for an “orderly and humane elimination” from industry of superannuated or disabled employees who but for such retiring benefits would continue in employment even though they function inefficiently. The voluntary retirement of an inefficient or old or worn out employee on the assurance that he is to get a retiral benefit leads to the avoidance of industrial disputes, promotes contentment among those who look for promotions, draws better kind of employees and improves the tone and morale of the industry. It is beneficial all round. It compensates the employee who as he grows old knows that some compensation for the gradual destruction of his wage earning capacity is being built up. By inducing voluntary retirement of old an d worn out workmen it confers on the employer a benefit akin to the replacing of old and worn out machinery. An indirect saving also results when workmen at the top of the wage scales retire and their place is taken by more energetic workmen at lower scales. In this connection we cannot compare compensation for retrenchment and provident fund on the one hand with gratuity or pension on the other. Compensation for retrenchment is solatium for premature termination of employment. Contribution to the provident fund is designed to induce thrift so that the employee may lay by from his present earnings a portion for a rainy day or for his old age. As the workman cannot be expected to spare very much, regard 6 being had to the gap between what he earns and what he must spend, the employer is expected to make a contribution. Gratuity is a retiral benefit of a very different kind, because it is earned by giving service. The existence of any one of the three schemes, therefore, does not obviously overlap any of the other two. They can all exist together, provided the financial position justifies such a course.” The Apex Court's judgment in Jarnail Singh vs. The Secretary, Ministry of Home Affairs & Ors., reported in AIR 1994 SC 1484, is also relied upon, wherein it was held that “Article 366 of the Constitution of India contains the definitions for the purpose of the Constitution and therein clause (17) is defined 'pension' to include gratuity as well. This definition of 'pension' in the Constitution also indicates that conceptually the term 'pension' includes gratuity. In Rule 3(1)(o) of the Central Civil Services (Pension) Rules, 1972, the term 'pension' is defined to include gratuity except when the term 'pension' is used in contradistinction to gratuity, in consonance with the basic concept.” By placing reliance upon the law laid down by Hon'ble Supreme Court in Union of India & Anr. v. G.Ganayutham, reported in 1997 SCC (L&S) 1806, it is contended by counsel for the petitioner that withholding of retirement benefits includes stoppage 7 of pension as well as gratuity. Meaning thereby, the gratuity is nothing but a benefit connected with pension or more specifically an other benefit as prescribed under para 55 of the Scheme. With the legal foundation as above, the petitioner's stand is that the gratuity is a part of pension or at the most an other retiral benefit, thus, the same should have been determined by taking into consideration the same qualifying service on basis of which the pension was settled. On the other hand, stand of the respondents is that the Scheme is concerned to grant and determination of pension and other retiral benefits relating to which no other specific independent provision exists, and so far as gratuity of an employee of the respondent company is concerned, that is required to be settled in accordance with the General Insurance (Rationalisation and Revision of Pay Scales and other Conditions of Services of Supervisors, Clerical and Subordinate Staff) Scheme, 1974 (hereinafter referred to as “the Scheme of 1974”), para 13 of which specifically provides that gratuity shall be paid to an employee of the company in accordance with the provisions of Payment of Gratuity Act, 1972 (hereinafter referred to as “the Act of 1972”), as such the service term to settle gratuity of the petitioner is required to be taken 8 into consideration as per provisions of the Act of 1972. Heard counsel for the parties. Precisely, the issues involved in this petition for writ are that :- (1) does the term “pension” include “gratuity” making the respondent company liable to quantify amount of gratuity by adopting the qualifying service accepted for determination of pension; and (2) if the gratuity is not an integral part of pension, then whether that is an “other benefit” that requires calculation of gratuity as per provisions of Central Civil Services (Pension) Rules, 1972 in view of para 55 of the Scheme. The term “pension” in service jurisprudence means “retirement benefit paid regularly (normally monthly) with the amount of such based generally on length of employment and amount of wages or salary of pension”. (Black's Law of Dictionary 6th Edition). The gratuity is a lump sum amount that employer pays to an employee on retirement or even on resignation from the organisation. Pension is provided to retired officials to ensure regular income for a secured future and the gratuity is a retiral benefit like leave encashment or 9 employer's contribution in provident fund. These retiral benefits being received in lump sum are usually utilised by retired employees in discharging social responsibilities and obligations. The General Insurance (Employees) Pension Scheme 1995 nowhere interprets or even refer gratuity as a pensionary or retiral benefit, however, as per counsel for the petitioner it is included with the term “pension” in view of the provisions of Article 366 of the Constitution of India which defines “'pension' means a pension, whether contributory or not, of any kind whatsoever payable to or in respect of any person, and includes retired pay so payable, a gratuity so payable and any sum or sums so payable by way of the return, with or without interest thereon or any other addition thereto, of subscriptions to a provident fund”. It is also urged that as per the Rules of 1972 the pension includes gratuity and also in light of law laid down by Hon'ble Supreme Court in Jarnail Singh's case (supra) conceptually pension includes gratuity, therefore, the amount of gratuity should have been determined by the formulate applicable for settling pension, so far as it relates to length of service. I am having no doubt that the gratuity and pension as held by Hon'ble Supreme Court in Burhanpur Tapti Mills Ltd.'s case (supra) are retiral benefits and both shields and ensure social security to a retired official, but it shall be an extra stretching 10 of the term “pension” to include in it in each and every case. True it is, the gratuity as defined under Article 366(17) of the Constitution and Rule 3(1)(o) of the Rules of 1972 is included with pension but those definitions cannot be made applicable ipse dixit in every case. So far as Article 366 of the Constitution is concerned, the definitions given therein are applicable to the terms concerned referred in the Constitution itself and not otherwise. As such, definition of pension as given under Article 366(17) of the Constitution is applicable wherever interpretation is required relating to the term aforesaid used in the Constitution. Similarly, the term “pension” as defined under the Rules of 1972 is also required to be interpreted in the terms so given while adjudicating the issues arising under the Rules of 1972. In the present case the issue requires adjudication by analytical examination of the benefits extended under the Scheme. The employees of various General Insurance companies including the respondent United India Insurance Company became entitled for receiving pension first time under the Scheme though they were entitled for getting gratuity as per the Act of 1972 quite prior to that. The Scheme nowhere prescribes gratuity as a retiral benefit in it. Chapter-III of the Scheme relates to the fund required to be constituted by General Insurance Corporation and 11 the other General Insurance companies including the respondent company for the sole purpose of payment of pension or family pension to their employees or their families, as the case may be. As per para 6 of the Scheme the provident fund trust of the corporation or the subsidiary general insurance companies including the respondent company were under obligation to transfer their own pension funds to the fund created under the Scheme. The fund created under the Scheme includes an accumulated contributions of the General Insurance Corporation and other General Insurance companies including the respondent meant for grant of provident. Meaning thereby, the entire contribution relating to the provident fund of the employees of the respondent company stood transferred to the fund created under the Scheme and such employees on opting the pension under the Scheme are entitled to receive pension from the fund so created. It is also pertinent to note that the employees receiving pension under the Scheme are not entitled for receiving provident fund having contribution of the employer. As a matter of fact the pension given under the scheme is not a third benefit but is in lieu of the employer's contribution for provident fund. I have used the term “third benefit” by treating provident fund and gratuity as two retiral benefits for which employees of the respondent company were entitled even prior to introduction of the Scheme in the year 1995. In view of whatever said above, the pension given under the 12 Scheme of 1995 is a substitute to the provident fund scheme while maintaining right of the employees to receive gratuity as per the provisions applicable prior to introduction of the pension Scheme. As such the pension under the Scheme does not include gratuity in it but an independent retiral benefit beside the gratuity. The law laid down by Hon'ble Supreme Court in Jarnail Singh's case (supra) is having no application in present case as in the case aforesaid appellant Jarnail Singh after his retirement from the post of Under Secretary to the Government of India was found guilty for serious misconduct and the President of India permanently withheld his pension and the entire amount of death-cum-gratuity. The issue before Hon'ble Supreme Court was that whether the President was right while withholding the pension and gratuity though Rule 9 of the Rules of 1972 empowers the President to withhold or withdraw pension or part thereof permanently or for a specified period if a government servant is found liable for causing pecuniary loss to the government or is found guilty of grave misconduct or negligence during the period of service. Hon'ble Supreme Court while relying upon the definition of pension given under the Rules of 1972 itself held that the pension includes gratuity and, therefore, a right as per Rule 9 of the Rules of 1972 was available with the President to withhold or withdraw pension 13 including the entire amount of death-cum-retirement gratuity. In the case in hand, the term “pension” is required to be interpreted as per the Scheme wherein it is nowhere said that the pension includes gratuity. The other case i.e. of Union of India v. G.Ganayutham (supra) too is not relevant in present controversy as that too is related to the definition of pension given under the Rules of 1972. The next contention of counsel for the petitioner is that the gratuity may not be an integral part of pension but is certainly an “other benefit”, thus, the same as per provisions of para 55 of the Scheme must be calculated as per provisions of the Rules of 1972 and as per those provisions too an employer is required to add five years additional term with qualifying service for settling pension as well as gratuity relating to retiring employee. Much emphasis is given by counsel for the petitioner to the discussion made by Hon'ble Supreme court in Burhanpur Tapti Mills Ltd.'s case (supra) relating to socio economic needs for grant of retiral benefits. In the case aforesaid Hon'ble Apex Court finally noticed similarities and differences in pension and gratuity while emphasising need of grant of retiral benefits to the retired workman to ensure his future security. In the case aforesaid Hon'ble 14 Supreme Court in most unambiguous terms held that the pension as well as gratuity are effective modes to provide retiral benefits but the judgment given in that case is having no application in present controversy. It is quite relevant to notice that at the time of decision in the case of Burhanpur Tapti Mills Ltd. (supra) there was no statutory requirement and liability for an employer to make payment of gratuity to its employees. The gratuity in the case aforesaid was claimed by the workman in a demand charter and that was accepted by the Industrial Tribunal. The employer challenged the same on the count that the workmen were already getting provident fund and the retrenchment compensation in the case of retrenchment and as such the Industrial Tribunal was not right in granting gratuity to the workmen. Hon'ble Supreme Court on basis of prevailing system regarding grant of gratuity in other similar industries of the region upheld decision of the Tribunal and while doing so emphasised need of grant of retiral benefits to the employees, may that be way of pension or by way of pension or by both. In the instant matter the employees of the respondent company were entitled for gratuity under the Act of 1972 itself and, therefore, the pension scheme introduced in the year 1995 was not at all covering the gratuity. The Central Government while exercising powers under Section 16 of the General 15 Insurance Business (Nationalisation) Act 1972 framed an Scheme known as General Insurance (Rationalisation and Revision of Pay Scales and other Conditions of Service of Supervisors, Clerical and Subordinate Staff) Scheme, 1974 and as per para 13 of that the employees of the General Insurance Companies including the respondent company are entitled to receive gratuity in accordance with the provisions of Payment of Gratuity Act, 1972. The benefit of gratuity being already available even prior to application of the pension scheme of 1995, it cannot be treated as an other benefit referred in para 55 of the Scheme of 1995. In view of whatever said above, I do not find any merit in this petition for writ. Accordingly, the same is dismissed. No order to costs. ( GOVIND MATHUR ),J. kkm/ps.