Case: UNITED BANK OF INDIA AN ORS Vs. UNITED BANK OF INDIA RETIREES WELFARE ASSOCIATION AND ORS

be computed on 0.24% for the entirety of basic pension and not just for the first slab upto Rs. 3550/-. But such calculation completely disregards that rate which is a flat rate applicable in case of post 01.11.2002 retirees is not 0.24% for the entire amount of basic pension but at a different level of 0.18% and the threshold requirement of quarterly average of the Index is also different. If we were to simply borrow the same rate of 0.18% in the case of retirees prior to 01.11.2002, the concerned retirees may well be at a disadvantage. For instance, the basic pension of Rs. 7880/- of said Santipriya Roy would yield a figure of Rs. 14184/- with flat rate of 0.18%. It will not therefore be correct to adopt and apply the same rate as is made applicable in case of post 01.11.2002 retirees. What is prayed for is also not the same rate but the same principle, namely, flat rate be made applicable to pre 01.11.2002 retirees as well but at a rate of 0.24%. 24. Would that be the correct approach? The tapering formula undoubtedly begins with 0.24% for the first segment of Rs. 3550/- of basic pension and then progressively steps down and finally reaches the level of 0.06% where the basic pension is in excess of Rs. 6010/-. What is devised by way of such tapering formula is higher rate at the lower levels of segments so that larger number of peoples would get maximum advantage and the rate thereafter keeps stepping down. Neither can we apply the rate of 0.18% which will then cause great harm and damage to the retirees nor can we adopt a flat rate of 0.24% for the entire amount of basic pension. The benefit which is sought to be conferred by the tapering formula lies in the averaging which comes to near about the same quantum as is given to the post 01.11.2002 retirees. At this stage it is noteworthy that no illustration has been placed on record to submit that even with 0.18% dearness allowance those who retired after November 2002 walk away with substantially greater advantage as against pre November 2002 retirees. In any case, this is not a matter where a Section of employees merely on account of date of retirement are being differentiated. If we adopt a flat rate of 0.24% as is being prayed for, the class of retirees who retired before 01.11.2002 will stand conferred better rate than those employees who retired after 01.11.2002. Nor can we apply a flat rate of 0.18% for them. Each class is governed by distinct and different parameters. These are all matters of policy making. The conferral of advantages of benefits on two different classes of retirees has a completely distinct formula and rates and it would not be possible to have a synthesis on any count or to put both the sets of retirees on any common parameters. Both classes are distinct and do not form a homogenous group. It would be extremely difficult and hazardous to adopt a flat rate as is sought to be projected. It is not a case of creating a class within a class. 25. In our view any attempt to tinker with either the formula or the rate would make the whole scheme unworkable as was cautioned by this Court in the case of P.N. Menon and Ors. (supra). As held in the case of Indian Ex-Services League and Ors. (supra) the decision of this Court in D.S. Nakara (supra) is one of limited application and there is no scope for enlarging the ambit of that decision to cover all schemes made by the retirees or a demand for an identical amount of pension irrespective of the date of retirement. The reliance on the resolutions/circulars issued by Reserve Bank of India was also misplaced. It is true that the tapering formula was done away with by Reserve Bank of India but that by itself cannot entitle the retirees prior to 01.11.2002 either to be conferred the advantage at the same rate made applicable by Reserve Bank of India or at the flat rate of 0.24% as was sought to be projected. In our considered view, the assessment made by the Division Bench of the Madras High Court was absolutely correct. The settlement has to be taken as a package deal and it would be impossible to hold certain parts good and acceptable while finding other parts to be bad. Moreover, the recitals D, E and F in the Bipartite settlement dated 02.06.2005 (quoted hereinabove) show that a package deal was entered into and Rs. 1288 crores per annum towards all the benefits was set apart for the benefit of the employees. Any stepping up of benefit for a Section of employees is bound to inflate the figure of Rs. 1288 crores per annum though that by itself is not a ground that weighs with us. In our view both the categories of retirees, namely, pre November 2002 and post November, 2002 stand on different footing, the parameters which govern the computation of dearness relief are also on a different level. The decisions rendered by the Single Judge as well as by the Division Bench of the High Court failed to appreciate these aspects and in our view, the said decisions are completely erroneous. 26. It may also be noted that the decision of the Division Bench of the Madras High Court having been confirmed by this Court, the matter stands concluded. As has been observed in paragraphs 32, 41 and 44 of Kunhayammed and Ors. v. State of Kerala and Anr. (2000) 6 SCC 359 , once leave to appeal had been granted and the appellate jurisdiction of this Court was invoked the order passed in appeal would attract the doctrine of merger. Be that as it may, we are satisfied that the Bipartite Settlement did not create any distinction which was inconsistent with the principles laid down by this Court.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]A] In D.S. Nakara and Ors. (supra) the principal question which arose was, is the date of retirement a relevant consideration for eligibility when a revised formula for computation of pension is ushered in and made effective from a specified date.1 The inquiry was limited to non-contributory superannuation or retirement pension paid by government to its erstwhile employee and for the purpose and object underlying it.2 In that case formula for computation of pension was liberalized vide office memorandum dated 25.05.1979 but the benefit was restricted to those government servants who were in service on 31.03.1979 and retired on or after that date. The challenge was to arbitrary division of a homogenous class by fixing the eligibility criteria unrelated to the purpose of revision. In that context the observations of this Court in Para 42 are relevant. Said Para 42 was as under:42. 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 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 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 Anr. 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 14.21. At the outset it must be stated that Appendix II to the Pension Regulations had categorized employees in three different segments and the dearness relief payable on basic pension in respect of employees in these three categories was on the basis of tapering formula which differed in each of the categories. In respect of those who were in the first category i.e. those who had retired earliest, the dearness relief was 0.67% on the first slab namely upto Rs. 1250/- of basic pension. The rate then tapered and finally was 0.17% of basic pension in excess of Rs. 2130/-. At the same time in respect of retirees in the second category, the rate of dearness relief was 0.35 per cent in respect of first slab namely upto Rs. 2400/-. Here also the dearness relief was on a tapering formula and finally was 0.09% of basic pension in excess of Rs. 4100/-. The third category which was in respect of employees who retired after 01.04.1998, the rate was 0.25% for the first slab upto Rs. 3380/-. Going by the tapering formula, the rate was 0.06 per cent of the basic pension in excess of Rs. 5770/-. If Clause 7(2) of the 9th Bipartite Settlement dated 27.04.2010 is compared with the last category of the Appendix II of the Pension Regulations, there is hardly any change in respect of retirees during the period 01.04.1998 to 31.10.2002. Thus, whatever benefit was conferred and was enjoyable by the employees who retired before November 2002 was not taken away.22. If both categories dealt with by 9th Bipartite Settlement dated 27.04.2010 are further compared, the retirees prior to 01.11.2002 would be entitled to dearness relief on a tapering formula where the initial slab upto Rs. 3550/- is to be governed by quotient of 0.24%. The tapering formula then ends with 0.06% of basic pension in excess of Rs. 6010/-. The starting point is at a level of 0.24% while the end point tapers to 0.06%. The maximum advantage is sought to be given to those who are getting basic pension at lower levels of slab who would get the dearness relief at 0.24%. As against this, the retirees after 01.11.2002 are to be given dearness relief at a flat rate of 0.18% of the basic pension. Theoretically, the starting level for the retirees prior to 01.11.2002 is at a higher level of 0.24% as against the retirees after 01.11.2002. It could possibly be said that for those who are with basic pension in the region of Rs. 6000/-, on the basis of a tapering formula may well, in the ultimate analysis, average to the same level of 0.18%.23. The parity that was sought in the petition was not so much regarding applicability of same rate of 0.18% but was in respect of flat rate idea. The illustrations given in para 30 of the writ petition that we have quoted hereinabove bring home the point. The calculation of dearness allowance of Rs. 14274/- on basic pension of Rs. 7880/- in the case of Santipriya Roy is in keeping with tapering formula as given in the Bipartite Settlement dated 27.04.2010. The tabular chart then proceeds to calculate full compensation on account of dearness allowance with slab rate of 0.24% on the entire basic pension of Rs. 7880/- which figure comes to Rs. 18912/-. Thus the submission was that the dearness relief be computed on 0.24% for the entirety of basic pension and not just for the first slab upto Rs. 3550/-. But such calculation completely disregards that rate which is a flat rate applicable in case of post 01.11.2002 retirees is not 0.24% for the entire amount of basic pension but at a different level of 0.18% and the threshold requirement of quarterly average of the Index is also different. If we were to simply borrow the same rate of 0.18% in the case of retirees prior to 01.11.2002, the concerned retirees may well be at a disadvantage. For instance, the basic pension of Rs. 7880/- of said Santipriya Roy would yield a figure of Rs. 14184/- with flat rate of 0.18%. It will not therefore be correct to adopt and apply the same rate as is made applicable in case of post 01.11.2002 retirees. What is prayed for is also not the same rate but the same principle, namely, flat rate be made applicable to pre 01.11.2002 retirees as well but at a rate of 0.24%.The tapering formula undoubtedly begins with 0.24% for the first segment of Rs. 3550/- of basic pension and then progressively steps down and finally reaches the level of 0.06% where the basic pension is in excess of Rs. 6010/-. What is devised by way of such tapering formula is higher rate at the lower levels of segments so that larger number of peoples would get maximum advantage and the rate thereafter keeps stepping down. Neither can we apply the rate of 0.18% which will then cause great harm and damage to the retirees nor can we adopt a flat rate of 0.24% for the entire amount of basic pension. The benefit which is sought to be conferred by the tapering formula lies in the averaging which comes to near about the same quantum as is given to the post 01.11.2002 retirees. At this stage it is noteworthy that no illustration has been placed on record to submit that even with 0.18% dearness allowance those who retired after November 2002 walk away with substantially greater advantage as against pre November 2002 retirees. In any case, this is not a matter where a Section of employees merely on account of date of retirement are being differentiated. If we adopt a flat rate of 0.24% as is being prayed for, the class of retirees who retired before 01.11.2002 will stand conferred better rate than those employees who retired after 01.11.2002. Nor can we apply a flat rate of 0.18% for them. Each class is governed by distinct and different parameters. These are all matters of policy making. The conferral of advantages of benefits on two different classes of retirees has a completely distinct formula and rates and it would not be possible to have a synthesis on any count or to put both the sets of retirees on any common parameters. Both classes are distinct and do not form a homogenous group. It would be extremely difficult and hazardous to adopt a flat rate as is sought to be projected. It is not a case of creating a class within a class.25. In our view any attempt to tinker with either the formula or the rate would make the whole scheme unworkable as was cautioned by this Court in the case of P.N. Menon and Ors. (supra). As held in the case of Indian Ex-Services League and Ors. (supra) the decision of this Court in D.S. Nakara (supra) is one of limited application and there is no scope for enlarging the ambit of that decision to cover all schemes made by the retirees or a demand for an identical amount of pension irrespective of the date of retirement. The reliance on the resolutions/circulars issued byReserve Bank of Indiawas also misplaced. It is true that the tapering formula was done away with byReserve Bank of Indiabut that by itself cannot entitle the retirees prior to 01.11.2002 either to be conferred the advantage at the same rate made applicable byReserve Bank of Indiaor at the flat rate of 0.24% as was sought to be projected.In our considered view, the assessment made by the Division Bench of the Madras High Court was absolutely correct. The settlement has to be taken as a package deal and it would be impossible to hold certain parts good and acceptable while finding other parts to be bad. Moreover, the recitals D, E and F in the Bipartite settlement dated 02.06.2005 (quoted hereinabove) show that a package deal was entered into and Rs. 1288 crores per annum towards all the benefits was set apart for the benefit of the employees. Any stepping up of benefit for a Section of employees is bound to inflate the figure of Rs. 1288 crores per annum though that by itself is not a ground that weighs with us. In our view both the categories of retirees, namely, pre November 2002 and post November, 2002 stand on different footing, the parameters which govern the computation of dearness relief are also on a different level. The decisions rendered by the Single Judge as well as by the Division Bench of the High Court failed to appreciate these aspects and in our view, the said decisions are completely erroneous.26. It may also be noted that the decision of the Division Bench of the Madras High Court having been confirmed by this Court, the matter stands concluded. As has been observed in paragraphs 32, 41 and 44 of Kunhayammed and Ors. v. State of Kerala and Anr. (2000) 6 SCC 359  , once leave to appeal had been granted and the appellate jurisdiction of this Court was invoked the order passed in appeal would attract the doctrine of merger. Be that as it may, we are satisfied that the Bipartite Settlement did not create any distinction which was inconsistent with the principles laid down by this Court.C] In Union of India v. P.N. Menon and Others the challenge to the cut off date and prayer for extension of similar relief of treating a portion of dearness allowance as pay for the purpose of retirement benefits was the subject matter. While accepting the appeal and negating the challenge raised by the concerned retirees, this Court in paragraphs 10 and 11 observed as under:10. The concept of dearness pay was evolved in respect of employees in different pay ranges with different percentages of the dearness pay. Thereafter the pension and gratuity were worked out and an option was given to persons, who retired on or after 30-9-1977 but not later than 30-4-1979, to choose either of the two alternatives(i) to have their pension and death-cum-retirement gratuity calculated on their pay excluding the element of dearness pay as indicated in paragraph 2 of the said office memorandum; or (ii) to have their pension and death-cum-retirement gratuity recalculated after taking into account the element of dearness pay. If the stand of the Respondents is to be accepted that this scheme should have been made available, without there being a cut-off date, to all including those who have retired even 20 to 25 years before the introduction of the scheme, then, according to us, the whole scheme shall be unworkable, because it is linked with the payment of dearness allowance, which is based on the level of price index. Different institutions/departments have introduced the system of payment of dearness allowance at different stages to mitigate the hardship of their employees with the rise in the prices of the essential articles as a result of the inflation11. On behalf of the Union of India, it has been stated that in the aforesaid office memorandum dated 25-5-1979, 30-9-1977 was fixed as the cut-off date, with reference to the average cost of living index at 272, which fell on 30-9-1977. It has been further stated that those who were entitled to the benefits of the said office memorandum, were given option either to opt for the revised formula or retain the existing formula. Some of the persons entitled to the new formula opted to retain their existing position, because in their case the application of the new formula would have resulted either in the reduction of the total pension or the increase which would have been only marginal. It has been said that under the office memorandum aforesaid, dearness allowance with reference to average price index level at 272 was treated as dearness pay for the purpose of pension for those who retired after 30-9-1977. It has also been pointed out that pensioners, who retired on or after 30-9-1977 with the benefits of dearness pay, became entitled to less dearness relief, as compared to those who retired before 30-9-1977 or retired after 30-9-1977, but had opted not to get the benefit of the impugned office memorandum.B] The principle laid down in D.S. Nakara (Supra) was explained in two decisions rendered by Constitution Benches of this Court in Krishena Kumar v. Union of India and Orsand in Indian Ex-Services League and Ors. v. Union of India and Ors. Paragraphs 12 and 14 of the latter decision in Indian Ex-Services League (Supra) were as under:12. The liberalised pension scheme in the context of which the decision was rendered in Nakara provided for computation of pension according to a more liberal formula under which average emoluments were determined with reference to the last ten months salary instead of 36 months salary provided earlier yielding a higher average, coupled with a slab system and raising the ceiling limit for pension. This Court held that where the mode of computation of pension is liberalised from a specified date, its benefit must be given not merely to retirees subsequent to that date but also to earlier existing retirees irrespective of their date of retirement even though the earlier retirees would not be entitled to any arrears prior to the specified date on the basis of the revised computation made according to the liberalised formula. For the purpose of such a scheme all existing retirees irrespective of the date of their retirement, were held to constitute one class, any further division within that class being impermissible. According to that decision, the pension of all earlier retirees was to be recomputed as on the specified date in accordance with the liberalised formula of computation on the basis of the average emoluments of each retiree payable on his date of retirement. For this purpose there was no revision of the emoluments of the earlier retirees under the scheme. It was clearly stated that if the pensioners form a class, their computation cannot be by different formula affording unequal treatment solely on the ground that some retired earlier and some retired later. This according to us is the decision in Nakara and no more14. Nakara decision came up for consideration before another Constitution Bench recently in Krishena Kumar v. Union of India. The Petitioners in that case were retired Railway employees who were covered by or opted for the Railway Contributory Provident Fund Scheme. It was held that PF retirees and pension retirees constitute different classes and it was never held in Nakara that pension retirees and PF retirees formed a homogeneous class, even though pension retirees alone did constitute a homogeneous class within which any further classification for the purpose of a liberalised pension scheme was impermissible. It was pointed out that in Nakara, it was never required to be decided that all the retirees for all purposes formed one class and no further classification was permissible. We have referred to this decision merely to indicate that another Constitution Bench of this Court also has read Nakara decision as one of limited application and there is no scope for enlarging the ambit of that decision to cover all claims made by the pension retirees or a demand for an identical amount of pension to every retiree from the same rank irrespective of the date of retirement, even though the reckonable emoluments for the purpose of computation of their pension be different.