IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 23/10/2003 CORAM THE HONOURABLE MR.JUSTICE P.K.MISRA AND THE HONOURABLE MR.JUSTICE F.M.IBRAHIM KALIFULLA WRIT PETITION NO.11228 OF 2003 AND W.P.NOS. 11666 to 11668, 18903, 18905 to 18907 OF 2003 AND W.P.M.P.NOS.14078, 14679 to 14681, 23661 and 23663 to 23665 OF 2003 W.P.NO.11228 OF 2003: The Madras High Court Staff Association, represented by its Secretary, Mr.W.Solomon, Chennai-104. .. Petitioner -Vs- 1.Government of Tamil Nadu, rep. by the Chief Secretary to Government, Secretariat, Chennai-600 009. 2.The Secretary to Government, Personnel & Administrative Reforms Department, Chennai-600 009. 3.The Registrar General, High Court of Madras, Chennai-600 104. .. Respondents For Petitioners :: Mr.K.Chandru, SC for Mr.S.Namasivayam Mr.S.Nandakumar For Respondents :: Mr.R.Muthukumarasamy, AAG assisted by Mr.S.T.S.Murthy, Spl.G.P. Prayer: These Writ Petitions are filed under Article 226 of the Constitution, praying for issuance of Writ of Declaration, for the reliefs as stated therein. :COMMON ORDER F.M.IBRAHIM KALIFULLA, J. The challenge in these Writ Petitions is to the Government Orders in G.O.Nos.71, 72, 73 and 74 dated 19-3-2003, G.O.No.26 dated 24-3-200 3 and G.O.No.30 dated 28-3-2003, to declare the said G.Os. as unconstitutional and ultra vires of Articles 14, 16 and 309 of the Constitution of India. 2. The petitioners are represented by Mr.K.Chandru, learned Senior Counsel and Mr.S.Nanda Kumar, while the respondents are represented by the learned Additional Advocate General. 3. In G.O.No.71, dated 19-3-2003, the respondent-State has directed that the maximum qualifying service for a Government servant in order to be eligible for full pension after retirement to be enhanced to 33 years from the existing prescription of 30 years and also directed that pension shall be determined based on the average emolument drawn during the last 10 months of service rendered by the government servant at the time of retirement. The said G.O. was made applicable to the Government servants retiring on or after 1-4-2003. It is relevant to state that prior to the issuance of the above said G.O., the pension was determined either based on 50% of the average emoluments drawn during the last 10 months of service rendered or 50% of the pay last drawn by the Government servants which ever was higher. 4. In G.O.No.72 dated 19-3-2003, the respondent-State directed that at the time of retirement, encashment of leave up to a maximum of 30 0 days alone should be allowed as against the maximum of 330 days which was prevailing earlier. Further, it was directed that the encashment of leave salary at the time of retirement should be based on Pay plus Dearness Allowance only and other allowances would not be taken into account. The said G.O. also was to take effect from 1-4-2003. 5. In G.O.No.73 dated 19-3-2003, the respondent-State revised the commutation value payable based on a multiplicity discount rate of commutation of 8% as against the discount rate of 4% which was in existence. 6. In G.O.No.74 dated 19-3-2003, the maximum limit for commutation of portion of pension by the pensioner was restricted to 33.1/3% of pension as against the prevailing quantum of 40%. This G.O. was also to take effect from 1-4-2003. 7. In G.O.No.26, dated 24-3-2003, consequential amendments to the Fundamental Rules pursuant to G.O.No.72 dated 19-3-2003 came to be incorporated, while in G.O.No.30, dated 28-3-2003, necessary amendments in the Fundamental Rules in APPENDIX-I in ANNEXURE-III came to be made pursuant to G.O.No.72 and G.O.No.26 dated 19-3-2003 and 24-3-2003 respectively. 8. While addressing arguments, Mr.K.Chandru, learned Senior counsel appearing for the petitioner in W.P.No.11228 of 2003, contended that full pension on completion of 30 years was provided in G.O.No.461 dated 31-7-1996 considering the fact that the age limit for entry into Government service came to be raised to 28 years and an employee entering the Government service at the age of 28 years would not qualify for full pension after retirement on completion of 58 years if 33 years was to be fulfilled for earning full pension and therefore, when the age of retirement continue to remain at 58 years, in spite of the recommendation of the Vth Pay Commission to raise the age of retirement to 60 years, the impugned G.O.No.71 dated 19-3-2003 enhancing the completed year of service from 30 to 33 years for earning full pension was uncalled for. According to the learned Senior counsel, when there was no change in circumstances, the increase thus made from 30 to 33 yeas would work hardship to the Government servants, apart from the said enhancement being arbitrary, unreasonable and also in violation of Article 14 of the Constitution. The learned Senior counsel further contended that the financial crunch mentioned in the G.O. cannot be a ground for increasing the qualifying period for earning full pension. According to the learned Senior counsel, the removal of proviso to FR-II under G.O.No.19 dated 5-7-2003 came to be made after the filing of the Writ Petitions and therefore, the said amendment cannot be relied upon for defeating the claims of the petitioners. 9. By referring to G.O.No.73 dated 19-3-2003, the learned Senior counsel contended that when the current market condition is the other way about, the enhancement in the discount rate from 4% to 8% would amount to charging usurious interest on the future pensioners. The learned Senior counsel by referring to the Tamil Nadu Civil Pension ( Commutation) Rules 1944 and the Table provided therein, would contend that the discount rate of 8% now made under G.O.No.73 would completely erode the benefit of commutation and will virtually make the commutation benefit an illusory one. The learned Senior counsel would also contended that the present direction of the respondent-State to determine the pension only based on 10 months average pay at the time of retirement and thereby giving a go bye to the previous system of either 10 months average pay or last drawn wage whichever was higher would also create serious monetary loss to the pensioners who retired after 1-4-2003 which again was unreasonable and arbitrary exercise of power by the respondent-State. 10. As regards the challenge to G.O.No.72, wherein the encashment of Earned Leave had been restricted to 300 days as against 330 days apart from calculation for such encashment to be made only on Pay plus Dearness Allowance as against all emoluments, the learned Senior counsel would contend that no justification was shown in the G.O. for restricting it to 300 days, as well as, to basic Pay plus Dearness Allowance alone. As regards the stipulation that only 50% alone would be allowed by way of encashment, while for the remaining 50%, the pensioners would be issued with Small Savings Certificate, the learned Senior counsel contended that such directions were not only arbitrary, were thoroughly unjustified inasmuch as, the Leave Encashment was an incentive for the employees who work without availing their Earned Leave, that if the employees had availed the Earned Leave, they would have earned all allowances apart from Pay plus Dearness Allowance which has now been deprived of by virtue of the present G.O. 11. As regards G.O.No.74, dated 19-3-2003, the learned Senior counsel contended that the restriction of commutation from 40% to 33.1/3% was again arbitrary and violative of Article 14 of the Constitution. The learned Senior counsel relied upon the Judgments reported in 198 3(1) SCC 305 (D.S.NAKARA AND OTHERS versus UNION OF INDIA); AIR 1982 SC 1265 (UNION OF INDIA versus CURNAM SINGH); 1985(1) SCC 523 (K. NAGARAJ AND OTHERS, ETC. ETC., versus STATE OF ANDHRA PRADESH AND ANOTHER, ETC.); 1985 (Suppl.) SCC 432 (B.PRABHAKAR RAO & OTHERS versus STATE OF ANDHRA PRADESH & OTHERS) in support of his submissions. In this context, the learned Senior counsel while referring to one other G.O.No.75 dated 19-3-2003, wherein, the State originally directed the settlement of Gratuity would be 50% cash and 50% Small Savings Certificate, later on came forward with G.O.No.218 dated 26-7-2003 withdrawing the said proposal made under G.O.No.75 and that while so withdrawing, it was merely stated in that G.O., that the Government now decided to pay the entire Gratuity amount in full and thereby disclosing that the reasons which were stated in G.O.No.75 as well as in the other G.Os. were not true and real. The learned Senior counsel also relied upon 1984(3) SCC 518 (KATHEEJA BAI versus SUPERINTENDING ENGINEER & OTHERS); 1993(4) SCC 288 (ALL INDIA JUDGES' ASSOCIATION AND OTHERS versus UNION OF INDIA AND OTHERS, ETC.); 2002(4) SCC 247 ( ALL INDIA JUDGES' ASSOCIATION & OTHERS versus UNION OF INDIA & OTHERS) in support of his submissions that financial aspect alone cannot be a ground for meddling with such pensionary benefits payable to Government employees. The learned Senior counsel relied upon 1989(1) SCC 765 ( HINDUSTAN PETROLEUM CORPORATION LTD. Versus H.L.TREHAN & OTHERS) to contend that when such valuable rights are to be interfered with, by issuance of such impugned G.Os. , the petitioner should have been heard. 12. Mr.Nanda Kumar, learned counsel appearing for the petitioners in W.P.Nos.18903 of 2003, etc., by referring to the Budget Estimate for 2002-2003, contended that the pension liability was only of the order of 15.90% and therefore, there was no justification for the respondent-State to meddle with the existing benefits by issuance of the impugned G.Os. on the ground of financial crunch. The learned counsel relied upon 1984(3) SCC 369 (SUDHIR CHANDRA SARKAR versus TATA IRON AND STEEL CO.LTD. & OTHERS); 1993(4) SCC 62 (STATE OF WEST BENGAL AND OTHERS versus RATAN BEHARI DEY AND OTHERS); and 1990(4) SCC 207 ( KRISHENA KUMAR versus UNION OF INDIA AND OTHERS, ETC.,) in support of his submission. 13. As against the above submissions, the learned Addl.Advocate General prefaced his submissions by submitting that the government servants hold a status and are governed by Rules which are all conditions of service and that those conditions can be altered unilaterally by the Government which position has also been approved by the Hon'ble Supreme Court in the judgments reported in 1975 SC 1646 (N.LAKSHMANA RAO AND OTHERS ETC. versus STATE OF KARNATAKA AND OTHERS) and 1993(4) SCC 62 (STATE OF WEST BENGAL AND OTHERS versus RATAN BEHARI DEY AND OTHERS). The learned Addl.Advocate General, by referring to the Judgment of the Hon'ble Supreme Court reported in AIR 1981 SC 561 (B.S. YADAV AND OTHERS; PRITPAL SINGH AND OTHERS versus STATE OF HARYANA AND OTHERS; STATE OF PUNJAB AND OTHERS), contended that the scope and content on the power under Article 309 is legislative in character, therefore, the question of violation of principles of natural justice are not attracted unlike the case of exercise of an Executive power. The learned Addl.Advocate General would contend that even the test of the impugned G.Os. Under Article 14 are limited in scope, namely, as to whether it is so very arbitrary or irrational in order to be interfered with. By drawing comparison to the ratio set out in the Judgment of the Hon'ble Supreme Court rendered in AIR 1985 SCC 551 (K.NAGARAJ & OTHERS ETC., ETC., versus ANDHRA PRADESH & ANOTHER, ETC.,), the learned Addl.Advocate General would contend that the legislative power cannot be struck down on the ground of non-application of mind. In the next place, the learned Addl.Advocate General contended that the right accrued in the case of a Government employee on the occurrence of retirement though it is a condition of service, it is highly doubtful whether it is competent for the petitioners to question the impugned G.Os. He placed reliance upon 1997(6) SCC 623 (CHAIRMAN, RAILWAY BOARD AND OTHERS versus C.R.RANGADHAMAIAH AND OTHERS) in support of his submissions. By referring to the Expenditure Statement of Salaries and Pension, the learned Addl.Advocate General contended that the pension needs substantial revenue of the State and therefore, the reasoning of the State Government that the pension payment can no longer be financially sustained at the same level of entitlement cannot be found fault with. The learned Addl.Advocate General also made a comparative statement of the maximum qualifying service that had been provided for to earn full pension right from the period October 1970 up to the issuance of the impugned notifications, and contended that the period of 30 years was prevailing even when the age of retirement was 55 years, that when the age of retirement for government servant was raised to 58 years in the year 1979, the maximum qualifying service was also raised to 33 years and that only for a short period, it was brought back to 30 years in the year 1996 which has now been restored to 33 years under the impugned G.Os. 14. As regards the basis of the calculation which has now been made as 10 months average emoluments as against the practice of either last drawn pay or 10 months average whichever was higher as per G.O.Ms.No.461, dated 31-7-1996, the learned Addl.Advocate General contended that when that was the consistent practice followed in the earlier years, the restoration of the same by the impugned notifications cannot be interfered with. The learned Addl.Advocate General also contended that there cannot be an argument based on legitimate expectation as has been held by the Hon'ble Supreme Court in the judgment reported in 1994(5) SCC 509 (MADRAS CITY WINE MERCHANTS' ASSOCIATION AND ANOTHER versus STATE OF T.N. AND ANOTHER). 15. As regards the contentions raised on behalf of the petitioners on G.O.Ms.No.72, the leaned Addl.Advocate General, would contend that in the light of the rational behind the reduction introduced as regards the maximum encashment of Earned Leave which was reduced from 330 days to 300 days which is calculated based on Pay plus Dearness Allowance, the same was perfectly justified. 16. The learned Addl.Advocate General by referring to the justification pleaded in paragraph 8 and 9 of the counter affidavit, contended that when in other States, the maximum number of Earned Leave for encashment was either 300 days or less than that, it cannot be held that the action of the State Government in bringing it on par with the other States was irrational. The learned Addl.Advocate General also contended that the Leave Encashment cannot be equated to Pay and Pension in order to claim that the employees' fundamental rights got affected. It was also submitted that when the pensioners are issued with the National Savings Certificates in the form of bonds and when they can borrow in case of emergency by utilizing those bonds, it cannot be held that the pensioners are totally deprived of the said benefit in so far as that part of the payment was concerned. 17. As regards the contention of the petitioners on G.O.Ms.No.74, the learned Addl.Advocate General would contend that even when it was sought to be enhanced under G.O.Ms.No.174, dated 21-4-1998 to 40%, the rule then prevailing provided for only 33.1/3%, that the rule was not subsequently amended enhancing the rate up to 40% and therefore, even though the higher quantum of commutation was subsequently allowed since the rule as on date continue to remain only at 33 1/3%, the present G.O. bringing it in consonance with the said rule at the rate of 33 1/3% does not call for interference. 18. As regards G.O.Ms.No.73, the learned Addl.Advocate General would contend that the enhancement of discount rate from 4% to 8% is also neither irrational nor arbitrary inasmuch as, the 4% was fixed in the year 1963 when the Pension Rules came into being and when it is compared with the present rate of interest charged for House Building Advances, as per the statement filed before this Court it can be visualized that the enhancement now sought to be made was quite reasonable. 19. On the submissions made on behalf of the petitioners that financial constraint cannot be a relevant factor, the learned Addl. Advocate General relied upon 1997(2) SCC 342 (STATE OF RAJASTHAN AND ANOTHER versus AMRIT LAL GANDHI AND OTHERS), 2000(3) SCC 733 (STATE OF PUNJAB AND OTHERS versus BOOTA SINGH AND ANOTHER) and 1997(6) SCC 623 ( CHAIRMAN, RAILWAY BOARD AND OTHERS versus C.R.RANGADHAMAIAH AND OTHERS) in support of his submissions. 20. As regards the reliance placed on behalf of the petitioners on the judgment reported in 1993(4) SCC 288 (ALL INDIA JUDGES' ASSOCIATION AND OTHERS versus UNION OF INDIA AND OTHERS, ETC.), the learned Addl.Advocate General contended that even in that very judgment, the Hon'ble Supreme Court has specifically stated that Judiciary cannot be equated to the other employees of the State Government and it was on that footing it was held therein that financial capacity cannot be a ground when the Court wanted the State Govern ment to provide minimum service conditions. The learned Addl.Advocate General also contended that in any case, such argument cannot be applied to the Leave Encashment though it may have some relevance to the pension payment. As regards the submission made on violation of principles of natural justice, the learned Addl.Advocate General contended that the same can have no application to a statutory rule. 21. Having heard the learned counsel and in order to appreciate the challenge made in these Writ Petitions, we feel it appropriate to make reference in the forefront to the principles set out in the various judgments relied upon by the learned counsel for the parties. 22. In AIR 1984(3) SCC 518 (KATHEEJA BAI versus SUPERINTENDING ENGINEER & OTHERS), when financial constraint was put forth as a submission in respect of a terminal benefit called special contribution payable to an employee of Electricity Board under the Contributory Provident Fund Regulations, while dealing with the said contention, it was held as under in para 8. "8.There was then the usual lament that a large number of employees were involved and, therefore, the cost will be heavy. We do not understand this argument at all. Does it mean that beneficent legislations and beneficent schemes must be confined to small establishments employing a few workers only? On the other hand, it is misleading to say that the cost is heavy. The cost is made to appear heavy divorced from the size of the establishment. If the establishment is huge and if a large number of workmen are employed the total wage-bill may appear to be heavy, but is it really so? Is it disproportionate to the size of the establishment, its resources, its revenues and its other expenditure? Is the individual wage-bill also very high? To talk of heavy cost without reference to other circumstances is to present an entirely unfaithful picture. We need make no further comment. ( Emphasis added) 23. In 1983(1) SCC 305 (D.S.NAKARA AND OTHERS versus UNION OF INDIA), the Hon'ble Supreme Court, while examining the goals that pension scheme seeks to subserve, held that it must provide the pensioner who would be able to live: (i) free from want, with decency, independence and self-respect and (ii) at a standard equivalent at the preretirement level. The Hon'ble Supreme Court summed up by saying that pension is not only compensation for loyal service rendered in the past, but pension also has a broader significance, in that it is a measure of socio-economic justice which inheres economic security in the fall of life when physical and mental prowess is ebbing corresponding to aging process and, therefore, one is required to fall back on savings and one such saving in kind to a person who gave his best in the hey-day of life to his employer, in days of invalidity, economic security by way of periodical payment is assured. It was held that the pension payable to a Government Servant is earned by rendering long and efficient service and therefore can be said to be deferred portion of the compensation or for service rendered. In that case, the controversy related to the issue as to the calculation of pension which was made on the basis of the average of emoluments of 36 months of service which was brought down to an average of 10 months service with a cut of date fixed as 1-4-1979 i.e. the dates subsequent to which, the liberalized pension formula was extended to the Government servants who retired after that date. Consequently, the pensioners who retired prior to the specified date had to earn pension on the average emoluments on 36 months salary just preceding the retirement. In that context, the Hon'ble Supreme Court has held as under in para 42. "42. ... 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 worst off than 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. To illustrate, take two persons, one retired just a day prior and another a day just succeeding the specified date. Both were in the same pay bracket, the average emolument was the same and both had put in equal number of years of service. How does a fortuitous circumstance of retiring a day earlier or a day later will permit totally unequal treatment in the matter of pension? One retiring a day earlier will have to be subject to ceiling of Rs 8100 p.a. and average emolument to be worked out on 36 months' salary while the other will have a ceiling of Rs 12,000 p.a. and average emolument will be computed on the basis of last 10 months' average. The artificial division stares into face and is unrelated to any principle and whatever principle, if there be any, has absolutely no nexus to the objects sought to be achieved by liberalising the pension scheme. In fact this arbitrary division has not only no nexus to the liberalised pension scheme but it is counter-productive and runs counter to the whole gamut of pension scheme. The equal treatment guaranteed in Article 14 is wholly violated inasmuch as the pension rules being statutory in character, since the specified date, the rules accord differential and discriminatory treatment to equals in the matter of commutation of pension. A 48 hours' difference in matter of retirement would have a traumatic effect. Division is thus both arbitrary and unprincipled. Therefore, the classification does not stand the test of Article 14." (Underlining is ours) 24. In AIR 1982 SC 1265 (UNION OF INDIA versus CURNAM SINGH), while dealing with the entitlement of encashment of Earned Leave of a Judge of the High Court, the Hon'ble Supreme Court has held as under in para 7. "7. ....We may observe that even as a right to receive pension, although accruing on retirement, is a condition of service, so also the right to the payment of the cash equivalent of leave salary for the period of unutilised leave accruing on the date of retirement must be considered as a condition of service. (Underlining is Ours) In the above said Judgment, the Hon'ble Supreme Court has laid the parameters as to under what circumstances, a policy decision of a State can be interdicted by the Courts in paras 7 and 8. 25. While dealing with the issue relating to reduction of age of retirement from 58 to 55, in the Judgment reported in AIR 1985 SC 551 (K.NAGARAJ & OTHERS ETC., ETC., versus ANDHRA PRADESH & ANOTHER, ETC.,) the Hon'ble Supreme Court took into account the variation in the retirement age which existed in the various States in India, and ultimately, the Hon'ble Supreme Court held based on the Reports of the various Commissions that the gradation of new avenues of employment for the youth being integral part of the policy governing the fixation of retirement age, the reduction in the age of the retirement from 58 to 55 cannot be held to be arbitrary or irrational. In para 37, the