STATE OF H.P. & ORS. versus RAJESH CHANDER SOOD ETC. ETC.
[2016] 6 S.C.R. 851, Supreme Court of India, 2016
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
[2016] 6 S.C.R. 851 
STATE OF H.P. & ORS. 
v. 
RAJESH CHANDER SOOD ETC. ETC. 
(Civil Appeal Nos. 9750-9819of2016) 
SEPTEMBER 28, 2016 
[JAGDISH SINGH KHEHAR AND C. NAGAPPAN, JJ.) 
Service law: 
Himachal Pradesh Government Corpora/e Sec/or E111ployees 
Pension (Fa111ily Pension, Co111mu1a1io11 of Pension and Gratuity) 
Scheme' 1999 - Pension scheme - Wilhdrawal of - Scheme of 1999 
not financially viable - Repeal of 1999 Scheme vide Notification 
dated 02.12.2004 - Legalily of - Held: Notification dated 2.12.2004 
is legal and constitulional - It cannot be said /hat the notification 
was unconstitutional, irrational, arbitrary or unreasonable - Scheme 
of 1999 created a contingent right in the employees of corporate 
bodies, who had opted for 'the 1999 Schenle ', i111111ediately on its 
having been introduced; all those, who were deemed to have opted; 
and all those appointed after the illlroduction of 'the 1999 Scheme' 
- There was no employer and employees relationship betlveen the 
State Government and employees -All the corporate bodies in which 
employees were/are engaged, are independent juristic entities - Thus, 
the claim raised by employees fm· pension, is not based on any 
right or obligation be/ween the parties - No right can· be stated to 
have been violated u/Arts. 14, 16, 21 and 300A - Further, the action 
of the State Government, was well within its authority and was based 
on due consideration - Repealing of the Scheme was a policy 
decision jailing in lhe
realm of executive determinalion and 110 court 
has any role therein - Administrative law - Policy decision. 
Scheme of 1999 -
Cut-off date postulated by Slate 
Government, whereby some of the employees governed by 1999 
Scheme (/hose who had re/ired prior lo 2.12.2004) 11•ere entitled lo 
draw pension under the 1999 Scheme, whereas others, who had 
not retired by the time the repeal notification was issued on 
2.12.2004, were deprived of such benefits - Justification of - Held: 
Cut-off date has been upheld for extending better and higher 
851 
A 
8 
c 
D 
E 
F 
G 
H
852 
SUPREME COURT REPORTS 
[20f6] 6 S.C.R. 
A 
pensionary benefits, based on the financial health of the employer 
- Cut-off date can therefore, legitimately be prfi1·cribed for extending 
pensionary benefits, if the funds available cannot assuage the 
liability, to all the existing pensioners - Thus, it is well within the 
authority of the State Government, in exercise of its administrative 
B . powers, to fix a cut-off date, for continuing the right to receive 
pens.ion in some, and depriving some others. 
c 
D 
E 
F 
G 
H 
Scheme of 1999 - Right to pension under, whether a vested 
right - Held: As soon as the concerned employees came to be 
governed by 'the 1999 Scheme', a contingent right came to be vested 
in them, on the date when 'the 1999 Scheme' became operational, 
or to the direct entrants who entered service thereafter - Said 
contingent right created a right in the employees to claim pension, 
at the time of their retirement - Said right :would crystalise only 
upon the fulfillment of the postulated conditions, on having rendered, 
the postulated qualijj;ing service - However, once such a contingent 
right was created, every such employee, could not be prevented 
from fulfilling the postulated conditions, to claim pension. 
Principle of estoppel/promissory estoppel - Applicability of 
- When original position (the rights enjoyed by the employees, under 
the Employees Provident Fund Scheme, 1995) available before 'the 
1999 Scheme' was given effect to, has
actually been restored - Held: 
Principle of estoppel/promissory estoppel is not applicable. 
Constitution of India - Art. 21 - 1999 Scheme, whether 
violative of Art. 21 - Held: Employees' Provident Funds Scheme, 
1995, was sought to be replaced, by 'the 1999 Scheme'- 1999 
Scheme' was an effort at the behest of the State Government, to 
provide still better retiral benefits - 1999 Scheme' was not a measure, 
aimed at providing basic human rights - Thus, 'the 1999 Scheme' 
cannot be treated as irreversible - Repealing of 'the 1999 
Scheme 'cannot be deemed to have in any manner, violated the. right 
of the employees, u/Art. 21 - After the repeal notification dated 
2.12.2004, the erstwhile Scheme of 1995, has been restored to such 
of the employees, who were impacted by the said repeal notification. 
Allowing the appeals, the Court 
HELD: 1. 'The 'Himachal Pradesh Government Corporate 
Sector Employees Pension (J<'amily Pension, Commutation of
STATE OF H. P. v. RAJESH CHANDER SOOD ETC: ETC. 
Pension and Gratuity) Scheme' 1999', created a contingent right 
in the respondent-employees. The respondent-employees 
comprise of all those employees of corporate bodies, who had 
opted for 'the 1999 Scheme', immediately on its having been 
introduced; all those, who were deemed to have opted for 'the 
\. 1999 ~heme' by not having exercised any option; and all those 
who were appointed after the introduction of 'the 1999 Scheme'. 
The claim whether any express right or obligation existed, 
between the respondent-employees and the State Government,, 
arises out of an obligation between an employer and his 
employees, where there is a quid pro quo - a trade off based on a 
relationship (as between, a';' employer and employee). However, 
it is concluded, that there was no such relationship between the 
State Government, and the respondent-employees. All the 
corporate bodies in which the respondent-employees were/are 
engaged, are independent juristic entities. It is therefore apparent, 
that the claim raised by the respondent-employees, is not based 
on any right or obligation between the parties. No right can be 
stated to have been violated, thereunder. The issue whether 
administrative review was permissible, after 'the 1999 Scheme' 
had become operational, has been answered in the affirmative. 
Thus, the exercise of such power, while issuing the repeal 
notification, was based on due considerati011. Therefore, the
legality and constitutionality of the notification dated 2.12.2004 
is upheld. (Para 71)(954-F-H; 955-A-C] 
2.1 With effect from 1.4.1999, the employees who had opted 
for the Scheme' 1999' (or, who were deemed to have opted for 
~the same) were no longer governed by the provisions of the 
Provident Fund Act (under which they had statutory protection, 
for th_e payment of provident fund). Consequent upon an 
exemption having been granted to the concerned corporate 
bodies by the competen! authority under the Provident Fund Act, 
the Employees Provident Funds Scheme, 1995, was replaced, by 
'the 1999 Scheme'. All direct entrants after 1.4.1999, were also 
entitled to the rights and privileges of 'the 1999 Scheme'. 
Therefore, the submissions that no vested right accrued to the 
employees of the concerned corporate bodies, on the date when 
'the 1999 Scheme' became operational (with effect from 1.4.1999), 
853 
A 
B 
c 
D 
E 
F 
G 
H
854 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
or to the direct entrants who entered service thereafter, cannot 
be accepted. As soon as the concerned employees came to be 
governed by 'the 1999 Scheme', a contingent right came to be 
vested in them. The said contingent right created a right in the 
employees to claim pension, at the time of their retirement. 
Undoubtedly, the said contingent right would crystalise only upon 
the fulfillment of the postulated conditions, expressed on behalf 
of the appellants (on having rendered, the postulated qualifying 
service). However, once such a contingent right was created, 
every employee in whom the said right was created, could not be 
prevented or forestalled, from fulfilling the postulated conditions, 
to claim pension. Any action pre-empting the right to pension, 
emerging out of the conscious option exercised by the employees, 
to be governed by 'the 1999 Scheme' (or to the direct entrants 
after the introduction of 'the 1999 Scheme'), most definitely did 
vest a right in the respondent-employees. [Para 49][936-H; 937-
A-E] 
2.2 The right to receive pension, emerge from the very 
day, an employee enters a pensionable service. From that very 
date, the employee commences to accumulate qualifying service. 
His claim for pension would obviously crystalise, when he acquires 
the minimum prescribed qualifying service, and also, does not 
suffer a disqualification, disentitling him to a claim for pension. 
In
view thereof, it is not possible to accept, that the rights of the 
concerned employees under 'the 1999 Scheme', can be stated to 
get vested, ortly on the date when a concerned employee would 
attain the age of superannuation, and satisfy all the pre-requisites 
for a claim towards pension. The submission that the cause of 
action to raise a claim for pension, would arise on the date when 
a concerned employee actually retires from service, is accepted. 
Any employee governed by a pension scheme, enrolls to earn 
qualifying service, immediately on his enrolment into the 
pensionable service. Every such employee must be deemed to 
have commenced to invest in his eventual claim for pension, from 
the very day he enters service. More so, in the instant case, by 
having expressly ,chosen to forego his rights, under the 
Employees' Provident Funds Scheme, 1995. [Paras 50, 51][937-
F-H; 938-A-C)
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
2.3 This Court has repeatedly upheld a cut-off date, for 
extending better and higher pensionary benefits, based on the 
financial health of the employer. A cut-off date can. therefore 
legitimately be prescribed for extending pensionary benefits, if 
the funds available cannot assuage the liability, to all the existing 
pensioners. Therefore, it is well within the authority of the State 
Government, in exercise of its administrative powers (which it 
exercised, by issuing the impugned repeal notification dated 
2.12.2004) to fix a cut-off date, for continuing the right to receive 
pension in some, and depriving some others of the same. This 
right was unquestionably exercised by the State Government, in 
the *R.R. Verma case wherein this Court held that the Government 
was vested with the inherent power to review, and that the 
Government was free to alter its earlier administrative decisions 
and policy. This is what the State Government did in the instant 
case. [Para 54)(939-A-C] 
*R.R. Verma v. Union of India (1980) 3 SCC 402:1980 
(3) SCR 478 - referred to. 
2.4 It is equally true, that the power of administrative review 
can only be exercised, for a good and valid justification. Such 
justification besides being founded on reasonable consideration, 
should also not be violative of any legal right - statutory or 
constitutional, vested in the affected employees. [Para 55)(939-
D-E) 
2.5 It is not as if the rights which
had accrued to the 
respondent-employees onder the Employees' Provident Funds 
Scheme, 1995 (under which the respondent-employees were 
governed, prior to their being. gover~ed by 'the 1999 Scheme') 
have in ally manner been altered to their disadvantage. All that 
was taken away, and given up by the respondent-employees by 
way of foregoing the employer's contribution upto 31.3.1999 
(including, the accrued interest thereon), by way of transfer to 
the corpus fund, was restored to the respondent-employees. AH 
the respondent-employees, who have been deprived of their 
pensionary claims by the repeal notification dated 2.12.2004, 
would be entitled to all the rights which_had accrued to·them, 
under the Employees' Provident Funds Scheme, 1995. It is 
therefore, not possible-to accept, that the respondent-employees 
855 
A 
B 
c 
D 
E 
F 
G
856 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
can be stated to have been made to irretrievably alter their 
position, to their detriment. Furthermore, all the corporate bodies 
(with which the respondent-employees, are engaged) are 
independent juristic entities. The mere fact, that the corporate 
bodies under reference, are fully controlled by the State 
Government, and the State Government is the ultimate authority 
to determine their conditions of service, under their Articles of 
Association, is inconsequential. Undoubtedly, the respondent-
employees are not Government employees. The State 
Government, as a welfare measure, had ventured to honestly 
extend some post-retiral benefits to employees of such 
independent legal entities, on the mistaken belief, arising out of 
a miscalculation, that the same can be catered·to, out of available 
resources. This measure was adopted by the State Government, 
not in its capacity as the employer of the respondent-employees, 
but as a welfare measure. When it became apparent, that the 
I 
welfare measure extended by the State Government, could not 
be sustained as originally understood, ,the same was sought to be 
withdrawn. [Para 58)(941-C-H; 942-A) 
Mis. 
Bhagwati Vanaspati 
Traders 
v. 
Senior 
Superintendent of Post Offices, Meerut AIR 2015 SC 
901:2014 (10 ) SCR 762 - referred to. 
2.6 It is apparent from the factual position that the original 
action of the State Government was bonafide, and for the
welfare 
of the respondent-employees. The State Government cannot be 
accused of having misrepresented to the respondent-employees 
in any manner. The provisions of 'the 1999 Scheme', clearly bring 
out, that the pension scheme would be self-financing, and would 
be administered from the corpus fund created out of the 
employer's contribution to their CPF account (alongwith the 
accrued interest thereon). When the said foundational basis for 
introducing the pension scheme, was found to be an incorrect 
determination/calculation, the same was withdrawn. In view 
thereof, it would not be possible to infer, that the State 
Government, induced the respondent-employees, to move to 'the 
1999 Scheme'. Accordingly, it would not be possible to apply the 
principle of estoppel/promissory estoppel, to the facts of the 
instant case. [Para 5811945-E-G) .
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
2.7 The principle of estoppel/promissory estoppel, is not 
applicable in a situation, where the original position, which the 
individual enjoyed before altering his position (by opting; or 
deemingly opting - for being governed by 'the 1999 Scheme') 
can be restored. Since there is no dispute, that the original position 
(the rights enjoyed by the respondent-employees, under the 
Employees Provident Fund Scheme, 1995) available before 'the 
1999 Scheme' was given effeet to, has actually been restored, 
the principle sought to be invoked on behalf of the respondent-
employees, cannot augur in a favourable determination for them,. 
because it is not possible to conclude, that it would be unfair to 
restore them to their original position. In fact, in view of the 
financial incapacity to continue '.the 1999 Scheme', the only fair 
action would be to restore the gmployees, to the Employees 
Provident Funds Scheme, 1995. This has actually been done by 
the State Government. Thus, it is not possible in law, to apply the 
principle of estoppellpromissory estoppel, to the facts of the case. 
[Para 59][945-G-H; 947-A-C] 
Pratima Chowdhury v. Kalpana Mukherjee (2014) 4 
SCC 196: 2014 (2) SCR.656 - referred to. 
2.8. With the advice tendered by the Law Department it 
was decided, that 'the 1999 Scheme' should not be withdrawn 
retrospectively; that those who had commenced to draw 
pensionary benefits under 'the 1999 Scheme', would not be
•. 
deprlved of the same; and that, 'the 1999 Scheme' should be 
withdrawn prospectively, for those whose right tc;> receive 
pensionary benefits had not atisen, as they had not yet retired 
from service. [Para 61)(947-F-H] 
2.9. The calculations were projected at the behest of the 
r· State Government, to demonstrate the financial unviability of the 
scheme. The basis thereof, projected by the high level committee, 
admittedly constitutes tlie ration.ale for issuing the repeal 
notification dated 4.12.2004. The consideration at the hands of 
the State Government was conscious and pointed out and was 
supported by facts and figures. It is apparent, that O'ut of 17 
corporations/boards who were invited to express their views on 
the issue, only 7 had actually done so. It is not the case of the 
respondent-employees, that any one of those who had expressed 
857 ' 
A 
B 
c 
D 
E 
F 
H
858 
A 
B 
c 
D. 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
their views, contested the fact, that the pension scheme was not 
self-financing. Those who expressed their views, affirmed that 
the pension scheme could be salvaged only with Government 
support. The position projected by the State Government, 
therefore, cannot be considered to have been effectively rebutted. 
Financial calculations can not be made casually, on a generalized 
basis. In the absence of any authenticity, and that too with 
reference to all the 20 corporate entities specified in Schedule I 
of 'the 1999 Scheme', the projections made on behalf of the 
respondent-employees, cannot be accepted, as constituting a 
legitimate basis, for a favourable legal determination. Since the 
respondent-employees have not been able to demonstrate, that 
the foundational basis for withdrawing 'the 1999 Scheme', was 
not premised on any arbitrary consideration, or alternatively, was 
not founded on any irrelevant consideration, it cannot be accepted 
that the withdrawal of 'the 1999 Scheme', was not based on due 
consideration, or that, it was irrational or arbitrary or 
unreasonable. The action of the State Government, in allowing 
those who had alrl)ady started earning pensionary benefits under 
'the 1999 Scheme', was based on a legitimate classification, 
acceptable in law. In view thereof, the action of the State 
Government cannot be described as arbitrary, and as such, 
violative of Article 14 of the
Constitution of India. The 
understanding of the State Government (which had resulted in 
introducing 'the 1999 Scheme') on being found to be based on an 
incorrect calculation, with reference to the viability of the corpus 
fund (to operate 'the 1999 Scheme'), had to be administratively 
reviewed. And that, the State Government's determination in 
exercising its power of review, was well_ founded. [Para 63][948-
F-H; 949-A-F] 
2.10. It is also not possible to accept, that imy Court has 
the jurisdiction to fasten a monetary liability on the State 
Government, as is the natural consequence, of the impugned 
order passed by the High Court, unless it emerges from the rights 
and liabilities canvassed in the lis itself. Budgetary allocations, 
are a matter of policy decisions. The State Government while 
promoting 'the 1999 Scheme', felt that the same would be self-
financing. The State Government, never intended to allocate
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
financial resources out of State funds, to run the pension scheme. 
The State Government could not have been burdened with the 
liability, which it never contemplated, in the first place. Moreover, 
it is the case of the respondent-employees themselves, that a 
similar pension scheme, floated for civil servants in the State, 
has also been withdrawn. The State Government demonstrated 
its incapacity, to provide the required financial resources. Thus, 
the High Court should not (as it could not) have transferred the 
financial liability to run 'the 1999 Scheme', to the State 
Government. Similar suggestions made by the concerned 
corporate bodies, cannot constitute a basis for fastening the 
residuary liability on the Government. [Para 64][949-F-H; 950-
A-C) 
2.11 It is not possible to accept that the employees of 
corporate bodies, can demand as of right, to be similarly treated 
as Government employees. Whilst it can be stated that 
Government employees of the State ofHimachal Pradesh are civil 
servants, the same is not true for employees of corporate bodies. 
Corporate bodies arc independent entities, and their employees 
cannot claim parity with employees of the State Government. The 
State Government has a master-servant relationship with the civil 
servants of the State, whilst it has no such direct or indirect nexus 
with the employees of corporate bodies. The State Government 
may legitimately choose to extend
different rights in terms of 
pay-scales an~ retiral benefits to civil servants. It may disagree, 
· to extend the i;ame benefits to employees of corporate bodies. 
The State Government would be, well within its right, to deny 
similar benefits to employees of corporate bodies, which are 
financially unviable, or if their activities have resulted in financial 
losses. It is common knowledge, that when pay-scales are 
periodically reviewed for civil servants, they do not automatically 
become applicable to employees of corporate bodies, which are 
wholly financed by the Government. And similarly, not even to 
employees of Government companies. Likewise, there cannot 
be parity with Government employees, in respect of allowances. 
So also, of retiral benefits. The claim for parity with Government 
employees is therefore wholly misconceived. Thus, it cannot be 
said that the action of the State Government was discriminatory. 
859 
A 
B 
c 
D 
E 
F 
G 
H
860 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
A 
[Para 66][950-G-H; 951-A-D) 
2.12 The action of the State Government was not 
discriminatory since despite having revoked 'the 1999 Scheme' 
through the notification, the State Government had permitted such 
of the Government owned corporations in the State of Himachal 
B 
Pradesh, which were not suffering any losses, to promote their 
own pension schemes, and to extend pensionary benefits to their 
employees, on an individual basis, in the same/similar fashion as 
had been attempted by th~· State Government, through 'the 1999 
Scheme'. [Para 67][951-D-E) 
c 
D 
E 
F 
G 
H 
2.13. The employees of corporate bodies, who were 
extended the benefits of 'the 1999 Scheme' were not employees 
of the State Government. 'The 1999 Scheme' was, therefore, just 
a welfare scheme introduced by the State Government, with the 
object of ameliorating the financial condition of employees, who 
had rendered valuable service in State owned corporations. The 
sustenance of the organization itself, is of paramount importance. 
The claim of employees, who have been engaged by the 
organization, to run the activities of the organization, is of 
secondary importance. If an organization does not remain 
financially viable, the same cannot be required to remain 
functional, only for the reason that its employees, are not 
adversely impacted. When and how a decision to wind up an 
organization is to be taken, is a policy decision. The decision to 
wind up
a corporation may be based on several factors, including 
the nature of activities rendered by it. In a given organization, 
sometimes small losses may be sufficient to order its closure, as 
its activities may have no vital bearing on the residents of the 
State. Where, an organization is raised to support activities on 
which a large number of people in the State are dependent, the 
same may have to be sustained, despite the fact that there are 
substantial losses. The situations are unlimited. Each situation 
bas to be regulated administratively, in terms of the policy of the· 
State Government. Whether a corporate body can no longer be 
sustained, ~ecause its activities are no longer workable, 
practicable, useable, or effective, either for the State itself, or for 
the welfare of the residents of the State, is for the State 
Government to decide. Similarly, when and how much, is to be
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
paid as wages (or allowances) to employees of an organization, is 
also a policy decision. So also, post-retiral benefits. All these 
issues fall in the realm of executive determination. No Court has 
any role therein. Thus, the conditions of service includ_ing wages, 
allowances and post-retiral benefits of employees of corporate 
bodies, will necessarily have to be determined administratively, 
on the basis of relevant factors. Financial viability, is an important 
factor, in such consideration. In the facts and circumstances of 
the instant case, it is not possible to accept, the submission on 
behalf of the res11ondent-employees, that the State Government 
should provide financial support for sustaining 'the 1999 
Scheme', at least for such of the employees, who were engaged 
on or before the date of issuance of the repeal notification 
(4.12.2004). The respondent-employees have not been able to 
make out a case, that the notification dated 2.12.2004, repealing 
'the 1999 Scheme', was in any manner, capricious, arbitrary, illegal 
or uninformed, and as such, the respondent-employees cannot 
be considered as being entitled, to any relief, through judicial 
process. [Para 68)[951-G-H; 952-A-H; 953-A-B) 
2.14. A welfare scheme, may or may not aim at providing, 
the very basic rights to sustain human dignity. In situations where 
a scheme targets to alleviate basic human rights, the same may 
possibly constitute an
irreversible position, as withdrawal of the 
same, would violate Article 21,of the Constitution. Not so, 
otherwise. The Employees' Provident Funds Scheme, 1995, 
sponsore<L!ulder the Provident Fund Act, is in place. The same 
was sought tooe replaced, by 'the 1999 Scheme'. 'The 1999 
Scheme' was an effort at the behest' of the State Government, to 
provide still better retiral benefits. 'The 1999 Scheme' was not a 
measure, aimed at providing basic human rights. Therefore, 'the 
1999 Scheme' cannot be treated as irreversible. The repealing 
of 'the 1999 Scheme', cannot be deemed to have in any manner, 
violated the right of the respondent-employees, under Article 21 
of the Constitution of India. After the repeal notification dated 
2.12.2004, the erstwhile Employees' Provident Funds Scheme, 
1995, has been restored to such of the employees, who were 
impacted by the said repeal notification. [Para 69)[953-E-H; 954-
A) 
861 
A 
c 
D 
E 
F 
G 
H
862 
A 
8 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
2.15. The action of the State Government, was well within 
its authority. The same was based on due consideration. Therefore, 
it cannot be said that the impugned notification dated 2.12.2004, 
was unconstitutional, irrational, arbitrary or unreasonable. 
Accordingly, the challenge raised by the respondent-employees, 
that they had been deprived of their right to pensionary benefits, 
without the authority in law cannot be accepted. Therefore the 
claim raised on behalf of the respondent-employees, by placing 
reliance on Article 300A of the Constitution of India, is 
misconceived. [Para 70][954-C-D] 
U.P. Raghavendra Acharya v. State of Karnataka (2006) 
9 sec 630: 2006 (2) Suppl. SCR 582 -
held 
inapplicable. 
State of Punjab v. Amar Nath Goyal (2005) 6 SCC 754: 
2005 (2) Suppl. SCR 549; A.K. Bindal v. [;i1io11 of India 
2003 (5) sec 163: 2003 (3) SCR 928; D.P.L. v. 
Chairman & MD., I.D.P.L. (2003) 6 SCC 490: 2003 
(1) Suppl. SCR 720; BALCO Employees' Union 1' Union 
of India (2002) 2 SCC 333: 2001 (5) Suppl. SCR 511; 
M Ramanatha Pillai v. State of Kera/a (1973) 2 SCC 
650: 1974 (1) SCR 515; Excise Commissioner, U.P .. 
Allahabad v. Ram Kumar (1976) 3 SCC 540:1976 (0) 
Suppl. SCR 535; Union of India\\ Godji·ey Philips India 
Ltd. (1985) 4 sec 369: 1985 (3) Suppl. SCR 123; 
Commissioner of Income-tax, Kera/a and Coimbatore 
v. L. W. Russel (1964) 7 SCR 569; Krishena Kumar v. 
Union of India (1990) 4 SCC
207: 1990 (3) SCR 352; 
Union ~f India v. P.N. Menon (1994) 4 SCC 68; State 
of West Bengal v. Ratan Behari Dey (1993) 4 SCC 
62: 1993 (1) Suppl. SCR 514; State of Rajasthan v. 
Amrit Lal Gandhi (1997) 2 SCC 342: 1997 (1) SCR 
121; Howrah Municipal Corporation v. Ganges Rope 
Co. Ltd. (2004) 1 sec 663: 2003 (6) Suppl. SCR 1212; 
Union of India v. R. Sarangapani (2000) 4 SCC 
335: 2000 (2) SCR 495; D.S. Nakara \\ Union -0f India 
(1983) 1 SCC 305: 1983 (2) SCR 165; Chairman, 
Railway Board v. C.R. Rangadhamaiah (1997) 6 SCC 
623:1997 (3) Suppl. SCR 63; Asger Ibrahim Amin v.
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 
863 
Life Insurance Corporation of India (2015) 10 SCALE 
A 
639; State of Madhya Pradesh v. Yogendra Shrivastava 
(2010) 12 SCC 538: 2009 (14) SCR 1137; Stute of 
Jharkhand v. Jitendra Kumar Srivastava (2013) 12 
SCC 210: 2013 (8) SCR 177; Union of India v. SPS 
Vains (Retd.) (2008) 9 SCC 125: 2008 (13) SCR 257; 
B 
Pepsu Road Transport Corporation, Patiala v. Mangat 
Singh (2011) 11 SCC 702: 2011 (6) SCR 564; State of 
Assam v. Barak Upatyaka D. U. Karmachari Sanstha 
(2009) 5 sec 694 - referred to. 
Case Law Reference 
c 
2005 (2) Suppl. SCR 549 
referred to 
Para 14 
2003 (3) SCR 928 
referred to 
Para 14 
2003 (1) Suppl. SCR 720 
referred to 
Para 14 
2001 (5) Suppl. SCR 511 
referred to 
Para 15 
1974 (1) SCR 515 
referred to 
Para 17 
D 
1976 (0) Suppl. SCR 535 
referred to 
Para 17 
1985 (3) Suppl. SCR 123 
referred to 
Para 18 
(1964) 7 SCR 569 
referred to 
Para 18 
1990 (3) SCR 352 
referred to 
Para 18 
E 
(1994) 4 sec 68 
referred to 
Para 19 
1993 (1) Suppl. SCR 514 
referred to 
Para 19 
1997 (1) SCR 121 
referred to 
Para 19 
2003 (6) Suppl. SCR 1212 
referred to 
Para25 
2000 (2) SCR 495 
referred to 
Para 27 
F 
1983 (2) SCR 165 
referred to 
Para 30 
1997 (3) Suppl. SCR 63 
referred to 
Para30 
(2015) 10 SCALE 639 
referred to 
Para 32 
2009 (14) SCR 1137 
referred to 
Para32 
2013 (8) SCR 177 
referred to 
Para 34 
G 
2008 (13) SCR 257 
referred to 
Para 37 
2011 (6) SCR ~64 
referred to 
Para 39 
(2009) 5
sec 694 
referred to 
Para 45 
1980 (3) SCR 478 
referred to 
Para 54 
H
864 
A 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
2006 (2) Suppl. SCR 582 
2014 (10) SCR 762 
held inapplicable Para 56 
2014 (2) SCR 656 
referred to 
referred to 
Para 58 
Para 59 
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 9750-
B 
9819of2016. 
c 
D 
E 
F 
G 
H 
From the Judgment and Order dated 19.12.2013 of the High Court 
ofHimachal Pradesh at Shimla in Civil Writ Petition No. 1577 of2009. 
P. P. Rao, R. Venkataramani, Surya Narayana Singh, (A.G), Sr. 
Advs., Ms. Pragati Neekhra, Yashraj Singh Bundela, Neelam Singh, 
Swarnendh Chatterjee, M. P. Sri Vignesh, Ms. Ahaaya Sarkar, Advs. 
for the Appellants. 
Guru Krishna Kumar, Sr. Adv., Anand Verma, Ms. Sneha Ravi 
Iyer, Raj iv Dubey, Kamlendra Mishra, Advs. for the Respondents. 
The Judgment of the Court was delivered by 
JAGDISH SINGH KHEHAR, J, I. The State of Himachal 
Pradesh came to be created, with effect from 25 .1.1971. Consequent 
upon the creation of the State ofHimachal Pradesh, employees engaged 
by the corporate sector, on their retirement, were being paid provident 
fund, under the provisions of the Employees' Provident Funds and 
Miscellaneous Provisions Act, 1952 (hereinafter referred to as the 
Provident Fund Act). The Central Government framed the Employees' 
Provident Funds Scheme, 1995, whereby, it replaced the earlier statutory 
schemes, framed under the Provident Fund Act. This scheme was 
adopted for the corporate sector employees, engaged in the State of 
Himachal Pradesh. 
2. In order to extend
better retiral benefits to these employees, 
the Himachal Pradesh Government framed another scheme on 29.10.1999 
- the Himachal Pradesh Corporate Sector Employees Pension (Family 
Pension, Commutation of Pension and Gratuity) Scheme, 1999. In the 
present judgment, the instant scheme will be referred to as 'the 1999 
Scheme'. A perusal of 'the 1999 Schenie' reveals that its application 
extended to employees of some of the corporate bodies (- specified in 
Annexure-1, appended to 'the 1999 Scheme') in Himachal Pradesh. There 
were in all 20 corporate entities, named in Annexure-1. These corporate 
bodies functioned as independent entities; under the Departments of
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGD1SH SINGH KHEHAR, J.] 
Industries, Welfare, Horticulture, Forest, Food and Supplies, Tourism, 
Town and Country Planning, Housing and General Administration. 
3. Paragraph 2 of 'the 1999 Scheme', provided for the zone of 
application of the said Scheme. It expressly provided, that the same 
would apply to only such of the employees, "who opted for the benefit 
under the scheme". It is necessary to expressly notice, that paragraph 
2 of 'the 1999 Scheme' required, that the above option would be exercised 
by the employees in writing, in the format provided forthe same. This 
option, was required to be submitted within 30 days of the notification of 
the scheme - by 27.11.1999. It was also provided in paragraph 2, that 
such of the employees who failed to exercise any option, within the 
period provided for, for whatever reason, would be deemed to have 
exercised their option, to be regulated by 'the 1999 Scheme'. It is 
therefore apparent, that it was imperative for all concerned employees, 
to express their option, to be governed by the Employees Provident Funds 
Scheme, 1995, in case the concerned employees, desired to avoid 'the 
1999 Scheme'. In case of the exercise of such option, the concerned 
employee would continue to be governed by the Employees Provident 
Funds Scheme, 1995. Failing which, every employee, whether he opted 
for 'the 1999 Scheme', or chose not to make any option, would be 
regulated by 'the 1999
Scheme', with effect from the day the scheme 
was made operational - 1.4. 1999. 
· 
4. It is also essential to indicate, that only those employees who 
had been appointed on regular basis, in corporate bodies, to which 'the 
1999 Scheme' was applicable, could avail of the benefits of 'the 1999 
Scheme'. In other words, employees engaged " ... on part time basis, 
daily wage basis, piece-meal rate basis, casual and contract basis ... " 
were not entitled to opt for 'the 1999 Scheme'. 
5. Paragraph 4 of'the 1999 Scheme' further provided, that those 
regular employees, who were entitled to the benefits postulated by 'the 
1999 Scheme', would automatically forfeittheir claim, to the employer's 
contribution in their provident fund account (including interest thereon), 
under the prevailing Employees Provident Funds Scheme, 1995, to the 
Government. The forfeited amount, would include the amount due and 
payable, under the Employees Provident Funds Scheme, 199·5, up to 
31.3.1999. The forfeited amount in consonance with paragraph 5 of 
'the 1999 Scheme', was to be transferred to a corpus fund, to be 
administered and managed by the Government of Himachal Pradesh. 
865 
B 
c 
D 
E 
F 
G 
H
866 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
A 
The aforesaid corpus fund, was to be treated as the pension fund, for 
payment of pension under 'the 1999 Scheme'. 
8 
c 
D 
__ ..,,,. 
·---' 
E 
F 
G 
H 
6. It is of utmost relevance to mention, that paragraph 4 of 'the 
1999 Scheme' provided as under:-
"4. 
Regulation of Claim to Pension:-
Any claim to pension shall be regulated by the provision of 
this scheme in force at the time when an employee retires or is 
retired or dies or is discharged as the case may be subject to the 
following:-
( a) The existing employees of the Corporation as on 1.4.99 shall 
have the option either to elect the pension scheme or to continue 
under existing Provident Fund scheme. 
(b) The existing employees who opt for Pension Scheme shall 
automatically forfeit their claim to employer's share of CPF 
including interest thereon to the State Government as well as other 
claims under CPF Schemes by whatsoever name called in respect 
of all past accumulations upto 31.3.1999. The amount of their 
subscriptions to the fund alongwith interest (excluding employer's 
share and interest thereon) shall be transferred to GPF account 
to be allotted and maintained by the concerned Corporate Sector 
Organisation as per Rules adopted by them". 
It is apparent from the above extract, that even though 'the 1999 
Scheme' was to take effect from 1.4.1999 (- under paragraph 1 (3) of 
'the 1999 Scheme'), a claim for pension by an employee governed by 
the above
scheme, would arise only at the time of the employee's 
retirement, on attaining the age of superannuation, or when he was retired 
from service by the employer, or in case of his death in harness. This is 
how, the appellant-State views the above provision (detailed submissions, 
are being noticed separately). 
7. It is not disputed, that regular employees of corporate bodies, 
to whom 'the 1999 Scheme' was applicable, had opted in writing (or 
were deemed to have opted) to be governed by 'the 1999 Scheme', or 
alternatively, had been engaged on regular basis after the induction of 
'the 1999 Scheme' but before 'the 1999 Scheme' was repealed (- on 
2.12.2004 ).
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
8. While adjudicating upon the controversy, it is important to point 
out, that for the implementation of 'the 1999 Scheme', permission was 
sought from the Regional Provident Fund Commissioner, Shimla, for the 
transfer of the accumulated provident fund corpus, to the proposed 
pension fund under 'the 1999 Scheme'. It is also relevant to notice, that 
the Regional Provident Fund Commissioner, through a communication 
dated 23.2.2000, declined to accord the above permission, because 'the 
1999 Scheme' included only regular employees. Part time, daily wage, 
piece rate, casual and contract employees, were not covered by 'the 
1999 Scheme'. According to the Regioi:ial Provident Fund Commissioner, 
there was no provision under the Provident Fund Act, to exclude a part 
of the employees, from the purview of the Provident Fund Act. The 
Regional Provident Fund Commissioner was of the view, that permission 
sought by the State Government could be accorded, only if all employees 
of the concerned corporate bodies, were to be regulated by the 
substituting scheme (-'the 1999 Scheme'). The Regional Provident 
Fund Commissioner accordingly, through his communication dated 
23.2.2000, advised the concerned corporate bodies, to continue to comply 
with the provisions of the Provident Fund Act, in respect of all their 
employees. The above communication of the Regional Provident Fund 
Commissioner, was
superseded by another, dated 11.9.2001, addressed 
by the Additional Central Provident Fund Commissioner (Pension), to 
the Secretary to the Government of India (with copy to the Regional 
Provident Fund Commissioner, Himachal Pradesh). It was pointed out, 
that a perusal of the aforesaid communication would reveal, that out of 
the concerned corporate bodies, almost all were fully owned by the State 
or the Central Government, and the share capital of the general public in 
the remaining, was less than one per cent. It was therefore, that the 
concerned corporate bodies were found to be eligible for the exemption, 
and were accordingly exempted from the applicability of the Provident 
Fund Act. It is apparent, thatthe communication dated 11.9.2001 clarified, 
that as the corporate bodies fell within the ambit of Section 16(1)(b) of 
the Provident Fund Act, it would not be applicable to the concerned 
establishments in the State of Himachal Pradesh, with effect from 
1.4.1999. 
9. The above communication dated 11.9.2001, came to be endorsed 
by the Union Minister of Labour, on 17.9.2001. The observations 
recorded in the order of the Union Minister are extracted hereunder: 
867 
A 
B 
c 
D 
E 
F 
G 
H
868 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
(2016] 6 S.C.R. 
"I have had the matter examined. It has been, noted from the 
Notification of the State Government dated 29. I 0.1999 that all 
regular employees of these undertakings are entitled to pension, 
commutation ofoension, gratuity as applicable to the State Govt. 
Employees ofHimachal Pradesh. In such circumstances the EPF 
& MP Act, 1952 shall not apply. The Pension would be'31scharged 
by the Himachal Pradesh Government in terms of Section 16( I )(b ). 
These establishments would be out of the purview of the Act 
from the date the Notification has come into force." 
In view of the factual position narrated herein above, the provisions 
of the Provident Fund Act were not in any way an obstacle, to the 
operation of 'the 1999 Scheme'. As such, 'the 1999 Scheme' became 
operational, with effect from 1.4.1999. Atthe instant juncture, it would 
suffice to record, that 'the 1999 Scheme' remained operational till it was 
repealed, by a notification date 2.12.2004. 
10. After the implementation of 'the 1999 Scheme', a high level 
committee was constituted by the Finance Department of the State 
Government, on 21.1.2003. The said committee was comprised of four 
managing directors of state public-sector undertakings and corporations. 
The high level committee was entrusted with the task of examining, the 
financial viability of'the 1999 Scheme'. The committee submitted its 
report on 15.11.2003. Briefly stated, the
high level committee arrived at 
the conclusion, that the pension scheme for regular employees of 
corporate bodies, given.effect to under 'the 1999 Scheme', would not be 
financially viable on a self-sustaining basis. One of the observations 
recorded in the report of the high level committee was, with reference 
to the Himachal Road Transport Corporation. It was _pointed out, that 
the pension fund cash flow chart (year-wise) revealed, that in case new 
appointments were not made against retirees, it would have extremely 
-grave financial consequences, inasmuch as, after the year 2009-10, the 
income by way of income tax, as well as, the contribution to the pension 
fund would continue to reduce, whereas pension payment expenditure, 
would continue to increase. It was expected, that by the year 2015-16, 
the balance amount left with the Himachal Road Transport Corporation 
Pension Fund, would be reduced to approximately Rs. I 0.82 crores, 
whereas the pension liability of the retired employees of the Himachal 
Road Transport Corporation, for the sai<lyear, would be approximately 
Rs.14.56 crores. Accordingly, it was inferred, that from the year 2015-
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
16 onwards, it would not be possible to make payments, towards the 
recurring pension liability. The report also determined the viability of the 
scheme, with reference to the Himachal Road Transport Corporation, 
even ifthe staff strength is kept at the same level, as was then prevalent 
(-in 2003). The instant analysis resulted in the deduction, that the pension 
contribution would be slightly more, as against the available pension fund 
of Rs. I 0.82 crores. In case the staff strength was maintained at the 
same level, the pension fund balance would be Rs.15.76 crores. Keeping 
in mind, the approximate pension liability ofRs.14.56 crores for the year 
2015-16, it was inferred, that the financial liability towards pension for 
the following year, i.e., 2016-17 would not be met, out of the pension 
fund. It was therefore infrerred, that the payment of pension to regular 
employees of the concerned corporate bodies, could not be paid and 
sustained, out of the pension fund contemplated under 'the 1999 Scheme'. 
Accordingly, the high powered committee recorded its conclusions as 
under: 
"In view of the above "the committee" is of the view that the 
pension scheme for Corporate Sector employees based on 
contribution by the State Government will not be viable on a self 
sustaining basis. mainly due to the following reasons:-
i). Uncertainty in the rate of interest regime. 
ii). Declining recruitment
in the Corporate Sector would 
deplete the size of the corpus to be created and it would be 
difficult to honour liabilities accruing after I 0-12 years. 
iii). The pension plan envisages payment of pension to 
Corporate Sector employees as is being paid to the 
Government employees. Government employees at present 
are entitled to pension@ 50% of the basic pay last drawn 
with linkage to ADA. This return does not appear to be 
possible from the pension fund proposed to be created for 
corporate sector employees." 
At the instant juncture, it would also be necessary to mention that, 
as is apparent from the submissions advanced on behalf of the State 
Government, three factors primarily weighed with it for reconsidering 
the continuation of 'the 1999 Scheme'. Firstly, uncertainty in the rate of 
interest regime; secondly, decline in recruitment in the corporate sector; 
and thirdly, on account of the fact that the respondent-employees would 
869 
A 
B 
c 
D 
E 
F 
G 
H
870 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016) 6 S.C.R. 
be entitled to pension at the rate of 50% of the basic pay last drawn, 
with linkage to an additional dearness allowance. And as such, it was 
not possible for the pension fund, to cater to the payment towards pension, 
under 'the 1999 Scheme'. It would also be relevant to mention, that 
besides the above three reasons depicted in the committee's report, the 
Cabinet Memorandum dated 12. l 0.2004, expressly took into consideration 
the poor financial health of the concerned corporations, and the current 
financial health of the State Government. Both the above factors also 
indicated, that it was not possible for the State Government to take upon 
itself, the financial burden of 'the 1999 Scheme'. And, there were also 
more pressing alternative claims. It was submitted, that as oii 31.3.2014, 
the cumulative losses of Government owned corporations, stood at 
Rs.2,819 .86 crores. The aforesaid Cabinet Memorandum was appended 
to the special leave petition, as Annexure P-4. The Cabinet in its meeting 
held on 29.11.2004, also approved, that the Government would be 
supportive of efforts by individual Government owned corporations, for 
setting up their own pensionary scheme(s). 
11. After considering the report of the high level committee, the 
State Government took a decision on 29 .11.2004 to repeal 'the 1999 
Scheme'. While repealing 'the 1999 Scheme', it was decided, that regular 
employees who had
retired from corporate bodies, during the period of 
the subsistence of 'the 1999 Scheme' from 1999 to 2004, would not be 
affected. For the implementation of the decision of the State Government 
dated 29.11.2004, a notification dated 2.12.2004 was issued, repealing 
'the 1999 Scheme'. A number of employees who had been deprived of 
the benefit of 'the 1999 Scheme' by the notification dated 2.12.2004, 
challenged the repeal notification, by filing a number of writ petitions, 
before the High Court of Himachal Pradesh, at Shimla (hereinafter 
referred to as the High Court). By the impugned common order dated 
19.12.2013, the High Court allowed all the writ petitions. The final 
determination of the High Court, is apparent from the following conclusions 
recorded by it: 
"78. There is no merit in the contention of learned Advocate 
General that the scheme could not be implemented due to financial 
crunch. The State was aware of the financial implication at the 
time of issuance of notification dated 29.10.1999. It is the 
sovereign responsibilitv of the State to garner revenue to make 
welfare measures, including payment of pensionery/retiral
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
871 
[JAGDISH SINGH KHEHAR, J.] 
benefits. 
A 
79. It cannot be gathered from the plain language that either 
expressly or by implication notification dated 2.12.2004 would 
apply retrospectively. 
80. Accordingly, in view of the analysis and discussion made 
hereinabove, all the writ petitions are allowed. The cut-off date 
2.12.2004 is declared ultra vires. Notification dated 2.12.2004 is 
read down to save it from unconstitutionality, irrationality, 
arbitrariness or unreasonableness by including the petitioners and 
similarly situated employees also, who had become members of 
the scheme notified on 29 .10.1999 and have retired after 2.12.2004 
and those employees who were already in service when the pension 
scheme was notified on 29.10.1999 and had become members of 
that scheme and shall retire hereinafter. for the purpose of 
pensionery benefits after applying the principles of severability. 
The Regional Provident Fund Commissioner, Shimla is directed to 
transfer the entire amount of the CPF to a corpus fund to be 
administered and maintained by the Government of Himachal 
Pradesh in the Finance Department including upto date interest, 
within a period of two weeks. Thereafter, the Pension Sanctioning 
Authority is directed to sanction the pension/gratuity/commutation 
of pension after proper scrutiny of the cases forwarded by the 
concerned Public Sector Undertaking and issue pension payment 
order to Pension
Disbursing Authority strictly as per para 6 of the 
scheme notified on 29. I 0.1999 with interest@ 9% per annum, 
within a period of 12 weeks from today." 
12. Dissatisfied with the judgment rendered by the High Court, 
dated 19.12.2013, the State of Himachal Pradesh has approached this 
Court, challenging the common impugned judgment dated 19.12.2003. 
13. Leave granted. 
14. The first contention advanced at the hands of Mr. P.P. Rao, 
learned senior counsel for the appellants, was premised on the proposition, 
that the State Government which had promulgated 'the 1999 Scheme', 
was well within its rights to repeal the same, for good and sufficient 
reasons. It was submitted, that it stands established on the record of this 
case, that 'the 1999 Scheme' was not financially viable, inasmuch as, it 
B 
c 
D 
E 
F 
G 
H
872 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
could not be characterized as a self-sustaining scheme. It was asserted, 
that the determination of the State Government to scrap 'the 1999 
Scheme', on the basis that the Scheme was not financially viable, was 
legal and bonafide. In order to canvass the instant proposition, learned 
counsel, relied on State of Punjab v. Amar Nath Goyal, (2005) 6 SCC 
754, and invited the Court's attention, to the following observations 
recorded therein: 
"25. The only question, which is relevant and needs consideration, 
is whether the decision of the Central and State Governments to 
restrict the revision of the quantum of gratuity as well as the 
increased ceiling of gratuity consequent upon merger of a portion 
of dearness allowance into dea~ness pay reckonable for the 
purpose of calculating gratuity, was irrational or arbitrary. 
26. It is difficult to accede to the argument on behalf of the 
employees that a decision of the Central Government/State 
Governments to limit the benefits only to employees, who retire 
or die on or after 1.4.1995, after calculating the financial 
implications thereon, was either irrational or arbitrary. Financial 
and economic implications are ve1y relevant and germane for any 
policy decision touching the administration of the Government, at 
the Centre or at the State level." 
On the same proposition, reliance was also placed on A.K. Bindal 
v. Union oflndia, 2003 (5) SCC 163, and our
attention was drawn to the 
following observations recorded therein: 
"13~ The change in policy effected by these memorandums was 
that the Government would not provide any budgetary support for 
the wage increase and the undertakings themselves will have to 
generate the resources to meet the additional expenditure, which 
will be incurred on account of increase in wages. So far as sick 
enterprises which were registered with BIFR are concerned, it 
was directed that the revision in pay scale and other benefits would 
be allowed only if it was actually decided to revive the industrial 
unit. The question which arises for consideration is whether the 
employees of public sector enterprises have any legal right to 
claim that though the industrial undertakings or the companies in 
which thev are working did not have the financial capacity to 
grant revision in pay scale, yet the Government should give
- -,_. 
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
873 
[JAGDISH SINGH KHEHAR, J.] 
financial support to meet the additional expenditure incurred in 
A · 
that regard. 
xxx 
xxx 
xxx 
17. 
The legal position is that identity of the government 
company remains distinct from the Government. The government 
company is not identified with the Union but has been placed 
under a special system of control and conferred certain privileges 
· by virtue of the provisions contained in Sections 619 and 620 of 
the Companies Act. Merely because the entire shareholding is 
owned by the Central Government will not make the incomorated 
company as Central Government. It is also equally well settled 
that the employees of the government company are not civil 
servants and so are not entitled to the protection afforded by 
Article 311 of the Constitution (Pyare Lal Sharma v. Managing 
Director, (1989) 3 SCC 448). Since employees of government 
companies are not governmenfservants, they have absolutely no 
legal right to claim that government should pay their salary or that 
the addition expenditure incurred on account ofrevision of their 
pay scale should be met by the government. Being employees of 
B 
c 
D 
E 
the companies it is the responsibility of the companies to pay them 
salary and if the compa.ny is.sustaining losses continuouslvover a 
period and does not have the financial capacity to revise or enhance 
the pay scale, the petitioners cannot claim any legal right to ask 
for
a direction to the Central Government to meet the additional 
expenditure which mayb,e incurred on account ofrevision of oay 
scales. It appears that prior to issuance of the office memorandum 
dated 12-4-1993 the Government had been providing the necessary . 
funds for the management of public ·sector enterprises which had 
F 
been incurring losses. After the change in economic policy 
introduced in early nineties, Government took a decision that the 
public sector undertakings will have to generate their own resources 
to meet the additional expenditure incurred on account of increase 
in wages and that the government will not provide any funds for 
G 
the same. Such of the public sector enterprises (government 
companies) which had become sick and had been referred to 
BIFR, were obviously running on huge losses and did not have 
their own resources to meet the financial liability which would 
have been incurred by revision of pay scales. By the office 
H
874 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
memorandum dated 19-7-1995 the Government merely reiterated 
its earlier stand and issued a caution that till a decision was taken 
to revive the undertakings, no revision in pay scale should be 
allowed. We, therefore, do not find any infirmity, legal or 
constitutional in the two office memorandums which have been 
challenged in the writ petitions. 
18. We are unable to accept the contention of Shri Venkataramani 
that on account of non-revision of pay scales of the petitioners in 
the year 1992, there has been any violation of their fundamental 
rights guaranteed under Article 21 of the Constitution. 
Article 21 provides that no person shall be deprived of his life or 
personal liberty except according to procedure established by law. 
The scope and content of this article has been expanded by judicial 
decisions. Right to life enshrined in this article means something 
more than survival or animal existence. It would include the right 
to live with human dignity. Payment of a very small subsistence 
allowance to an employee under suspension which would be wholly 
insufficient to sustain his living, was held to be violative of 
Article 21 of the Constitution in State of Maharashtra 
v. Chandmbhan Tale, (1983) 3 SCC 387. Similarly, unfair conditions 
of labour in People's Union for Democratic Rights v. Union of 
India, (1982) 3 SCC 235. It has been held to embrace within its 
field the right to livelihood
by means which are not illegal, immoral 
or opposed to public policy in Olga Tellis v. Bombay Municipal 
Corpn., ( 1985) 3 SCC 545. But to hold that mere non-revision of 
pay scale would also amount to a violation of the fundamental 
right guaranteed under Article ;u would be stretching it too far 
and cannot be countenanced. Even under the industrial law, the 
view is that the workmen should get a minimum wage or a fair 
wage but not that their wages must be revised and enhanced 
periodically. It is true that on account ofinflation there has been a 
general price rise but by that fact alone it is not possible to draw 
an inference that the salary currently being paid to them is wholly 
inadequate to lead a life with human dignity. What should be the 
salary structure to lead a "life with human dignity" is a difficult 
exercise and cannot be measured in absolute terms ..... 
xxx 
xxx 
xxx 
22. In South Malabar Gram in Bank v. Coordination Committee of
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
,<, 
S.M.G.B Employees' Union and S.M.G.B Officers' Federation, 
(2001) 4 SCC I 01, relied upon by the learned counsel for the 
petitioners, the Central Government had referred the dispute 
regarding the pay structure of the employees of the Bank to the 
Chairman of the National Industrial Tribunal headed by a fonner 
Chief Justice of a High Court. The Tribunal after consideration of 
the material placed before it held that the officers and employees 
of the Regional Rural Banks will be entitled to claim parity with 
the officers and other employees of the sponsor banks in the matter 
of pay scale, allowances and other benefits. The employees of 
nationalised commercial banks were getting their pay scales on 
the basis of the 5!!! bipartite settlement and by implementation of 
the award of the National Industrial Tribunal, the employees of 
the Regional Rural Banks were also given the benefits of the 
same settlement. Subsequently, the pay structures of the employees 
of the nationalised commercial banks were further revised by the 
§!!!and 7!!! bipartite settlements but the same was not done for the 
employees of the Regional Rural Banks who then filed writ 
petitions. It was contended on behalf of the Union of India and 
also the Banks that financial condition of the Regional Rural Banks 
was not such that they may give their employees the pay structure 
of the employees of the nationalised
commercial banks. It was in 
these circumstances that this Court observed that the decision of 
the National Industrial Tribunal in the form of an award having 
been implemented by the Central Government, it would not be 
permissible for the employer bank or the Union of India to take 
such a plea in the proceedings before the Court. The other case 
namely All India Regional Rural Bank Officers Federation v. Govt. 
oflndia, (2002) 3 sec 554, arose out of interlocutory applications 
and contempt petitions which were filed for implementation of 
the direction issued in the earlier case, namely, South Malabar 
Gramin Bank. Any observation in these two cases to the effect 
that the financial capacity of the employer cannot be held to be a 
germane consideration for determination of the wage structure of 
the employees must, therefore, be confined to the facts of the 
aforesaid case and cannot be held to be of general application in 
all situations. In Associate Banks Officers' Assn. v. State Bank 
oflndia, ( 1998) 1 SCC 428, it was observed that many ingredients 
go into the shaping of the wage structure of any organisation which 
875 
A 
B 
c 
D 
E 
F 
G 
H
.876 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
may have been shaped by negotiated settlements with employees' 
unions or through industrial adjudication or with the help of expert 
committees. The economic capability of the employer also plays 
a crucial part in it; as also its capacity to expand business or earn 
more profits. It was also held that a simplistic approach; granting 
higher remuneration to workers in one organisation because 
another organisation had granted them, may lead to undesirable 
results and the application of the doctrine would be fraught with 
danger and may seriously affect the efficiency and at times. even 
the functioning of the organisation. Therefore. it appears to be the 
consistent view of this Court that the economic viability or the 
financial capacity of the employer is an important factor which 
cannot be ignored while fixing the wage structure. otherwise the 
unit itself may not be able to function and may have to close down 
>Vhich will inevitably have disasfrous consequences for the 
employees themselves. The materiafon record clearly shows that 
both FCl and HFC had been suffering heavy losses for the last 
many years and the Government had been giving a considerable 
amount for meeting the expenses of the organisations. In such a 
situation, the employees cannot legitimately claim that their pay 
scales should necessarily be revised and enhanced even though 
the organisations in which they are working a~e
making continuous 
losses and are deeply in the red." 
Last of all, learned counsel drew our attention to Officers & 
Supervisors of 1.0.P.L. v. Chairman & M.0., 1.0.P.L., (2003) 6 SCC 
490, and reference was made to the following; 
."7. In the above background, the question which arises for 
consideration is whether the employees of public sector enterprises 
have any legal right to claim revision of wages that though the 
industrial undertakings or the companies in which they are working 
did not have the financial capacity to grant revision in pay-scale, 
yet the Government should give financial support to meet the 
additional expenditure incurred in that regard. 
8. We have carefully gone through the pleadings, the Annexures 
filed by both sides and the orders passed by the BIFR and the 
judgments cited by the counsel appearing on either side. Learned 
counsel for the contesting respondent drew our attention to a 
recent judgment of this Court in A.K. Bindal andAnr. v. Union of
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.) 
India, (2003) 5 SCC 163, in support of her contention. We have 
perused the said judgment. In our opinion, since the employees of 
Government companies are not Government servants, they have 
absolutely no legal right to claim that the Government should pay 
their salary or that the additional expenditure incurred on account 
ofrevision of their pay-scales should be met by the Government. 
Being employees of the companies, it is the responsibility of the 
companies to pay them salary and ifthe company is sustaining 
losses continuously over a period and does not have the financial 
capacity to revise or enhance the pay-scale, the petitioners, in our 
view, cannot claim any legal right to ask for a direction to the 
Central Government to meet the additional expenditure which may 
be incurred on account of revision of pay-scales. We are unable 
to countenance the submission made by Mr. Sanghi that economic 
viability of the industrial unit or the financial capacity of the 
employer cannot be taken into consideration in the matter of revision 
of pay-scales of the employees." 
15. Based on the conclusions drawn in the above judgments, it 
was the contention of learned counsel, that the decision of the State 
Government to repeal 'the 1999 Scheme', on the basis of the report of 
the high powered committee, dated 28.10.2003, cannot be faulted. It 
was submitted, that the determination rendi;ired by the
High Court, was 
in clear disregard to the decisions in the cited cases. It was acc9rdingly 
urged, that the option exercised by the State Government, on the basis 
of legitimate material and consideration, could not be interfered with, as 
the same constituted a legal and valid basis, for the discontinuation of 
'the 1999 Scheme'. 
16. In order to support the State Government's claim, it was also 
the contention of learned counsel, that the State Government has an 
inherent right to review its policy decisions, and as long as the decisions 
of the State Government are based on bonafide consideration, the same 
, cannot be assailed in law. In order to support the instant contention, 
learned counsel placed reliance on BALCO Employees' Union v. Union 
of India, (2002) 2 SCC 333, and invited our attention to the following 
observations, expressed therein: 
"45. In Narmada Bachao Andolan v. Union of India, (2000) 10 
sec 664, there was a challenge to the validity of the establishment 
of a large dam. It was held by the majority at p. 762 as follows: 
877 
A 
B 
c 
D 
E 
F 
G 
H
878 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
(SCC para 229) 
"229. It is now well settled that the courts, in the exercise of their 
jurisdiction, will not transgress into the field of policy decision. 
Whether to have an infrastructural project or not and what is the 
type of project to be undertaken and how it has to be executed, 
are part of policy-making process and the courts are ill-equipped 
to adjudicate on a policy decision so undertaken. The court, no 
doubt, has a duty to see that in the undertaking of a decision, no 
law is violated and people's fundamental rights are not transgressed 
upon except to the extent permissible under the Constitution." 
46. It is evident from the above that it is neither within the domain 
of the courts nor the scope of the judicial review to embark upon 
an enquiry as to whether a particular public policy is wise or 
whether better public policy can be evolved. Nor are our courts 
inclined to strike down a pol icy at the behest of a petitioner merely 
because it has been urged that a different policy would have been 
fairer or wiser or more scientific or more logical. 
47. Process of disinvestment is a policy decision involving complex 
economic factors. The courts have consistently rtl1:~l11ed from 
interfering with economic decisions as it has b~ 
economic expediencies lack adjudicative <lisp( 
....... " . , .. 
the economic decision, based on economic expediencies, is 
demonstrated to be so violative of
constitutional or legal limits on 
power or so abhorrent to reason, that the Courts would decline to 
interfere. In matters relating to economic issues, the Government 
has, while taking a decision, right to "trial and error" as long as 
both trial and error are bona tide and within limits of authority. 
There is no case made out by the petitioner that the decision to 
disinvest in BALCO is in any way capricious, arbitrary, illegal or 
uninformed. Even though the workers may have interest in the 
manner in which the Company is conducting its business, inasmuch 
as its policy decision may have an impact on the workers' rights, 
nevertheless it is an incidence of service for an employee to accept 
a decision of the employer which has been honestly taken and 
which is not contrary to law. Even a government servant, having 
the protection of not only Articles 14 and 16 of the Constitution 
but also of Article 311, has no absolute right to remain in service. 
For example, apart from cases of disciplinary action, the services
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
of government servants can be terminated if posts are abolished. 
If such employee cannot make a grievance based on Part llI of 
the Constitution or Article 311 then it cannot stand to reason that 
like the petitioners, non-government employees working in a 
company which by reason of judicial pronouncement may be 
regarded as a State for the purpose of Part III of the Constitution, 
can claim a superior or a better right than a government servant 
and impugn it's change of status. In taking of a policy decision in 
economic matters at length, the principles of natural justice have 
no role to play. While it is expected of a responsible employer to 
take all aspects into consideration including welfare of the labour 
before taking any policy decision that, by itself, will not entitle the 
employees to demand a right of hearing or consultation prior to 
the taking of the decision." 
17. Learned counsel submitted, that the respondent-employees 
could not claim a vested right, with reference to the provisions of 'the 
1999 Scheme'. In this behalf, it was submitted, that neither the principle 
of estoppel, nor that of promissory estoppel, could be invoked by the 
employees, so as to claim a right to be governed by 'the 1999 Scheme'. 
For canvassing that the principle of estoppel could not be invoked by the 
employees, learned counsel placed reliance on M. Ramanatha Pillai v. 
State ofKerala, (1973) 2 SCC
650, and invited the Court's attention to 
the following: 
"36. The abolition of post may have the consequence of 
termination of service of a government servant. Such termination 
is not dismissal or removal within the meaning of Article 3 I 1 of 
the Constitution. The opportunity of showing cause against the 
proposed penalty of dismissal or removal does not therefore arise 
in the case ofabolition of post. The abolition of post is not a personal 
penalty against the government servant. The abolition of post is 
an executive policy decision. Whether after abolition of the post 
the Government servant who was holding the post would be offered 
any employment under the State would therefore be a matter of 
policy decision of the Government because the abolition of post 
does not confer on the person holding the abolished post any right 
to hold the post." 
Reliance was also placed on Excise Commissioner, U .P., Allahabad 
v. Ram Kumar, (1976) 3 SCC 540, and reference was made to the 
879 
A 
B 
c 
D 
E 
F 
G 
H
880 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
following observations recorded therein: 
"Appeals Nos. 399 to 404of1975 which raise another point as 
well viz. the validity of the appellants' demand from the respondents 
in respect of sales tax at the rate of ten paise per rupee on the 
retail sales of country spirit made by the latter with effect from 
April 2, 1969 stand on a slightly different footing. Section 3-A 
and 4 of the U.P. Sales Tax Act, 1948 clearly authorise the State 
Government to impose sales tax. The fact that sales of country 
liquor had been exempted from sales tax vide Notification No. 
ST-1149/X-802(33)-51 dated April 6, 1959 could not operate as 
an estoppel against the State Government and preclude it from 
subjecting the sales to tax if it felt impelled to do so in the interest 
of the Revenues of the State which are required for execution of 
the plans designed to meet the ever increasing pressing needs of 
the developing society. It is now well settled by a catena of 
decisions that there can be no question of estoppel against the 
Government in the exercise of its legislative, sovereign or executive 
powers." 
To demonstrate that the principle of promissory estoppel could 
not be invoked by the respondent-employees, reference was also made 
to Union oflndia v. Godfrey Philips India Ltd., (1985) 4 SCC 369, wherein 
it has been held as under: 
"13. Of course we must make it clear, and that is also laid down 
in Motilal Sugar
Mills case, ( 1979) 2 SCC 409, that there can be 
no promissory estoppel against the Legislature in the exercise of 
its legislative functions nor can the Government or public authority 
be debarred by promissory estoppel from enforcing a statutory 
prohibition. It is equally true that promissory estoppel cannot be 
used to compel the Government or a public authority to carry out 
a representation or promise which is contrary to law or which 
was outside the authority or power of the officer of the Government 
or of the public authority to make. We may also point out that the 
doctrine of promissory estoppel being an equitable doctrine, it must 
yield when the equity so requires: if it can be shown by the • 
Government or public authority that having regard to the facts as 
they have transpired, it would be inequitable to hold the Government 
or public authority to the promise or representation made by it, the 
Court would not raise an equity in favour of the person to whom
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
the promise or representation is made and enforce the promise or 
representation against the Government or public authoritv. The 
doctrine oforomissoi:y estoppel would be displaced in such a case.· 
because on the facts, equity would not require that the Government 
or public authority should be held bound by the promise or 
representation made by it. This aspect has been dealt with fully in 
Motilal Sugar Mills case and we find ourselves wholly in agreement 
with what has been said in that decision on this point." 
18. In order to support the contention, that the respondent-
employees had no vested right under 'the 1999 Scheme', reliance was 
placed on paragraph 4 of 'the 1999 Scheme' (already extracted above}. 
It was the pointed assertion oflearned counsel, based on paragraph 4 of 
. 'the 1999 Scheme', that a claim towards pension could be raised by an· 
employee under 'the 1999 Scheme' only " ... when an employee retires 
or is retired or dies or is discharged as the case may be ... ". It was 
submitted, that only such of the employees who could avail the benefit 
of pension, were protected from the effect of the repeal notification 
dated 2.12.2004. It was submitted, that such of the employees who had 
opted for 'the 1999 Scheme', but were not occasioned with the effect of 
the contingencies contemplated under paragraph 4 of 'the 1999 Scheme', 
were not entitled to claim a vested right. It was
urged, that a vested 
right can only be established, when all the incidents which would entitle 
an employee to draw pensionary rights, under 'the 1999 Scheme', stood 
satisfied. It was pointed out, that only on the happening of one of the 
events depicted in paragraph 4, a vested right would emerge. It was the 
unequivocal submission oflearned counsel for the appellants, that none 
of the respondent-employees in the present controversy, can claim a 
vested right under 'the 1999 Scheme', as neither of them had retired on 
attaining the age of superannuation (after putting in the postulated 
qualifying service), or had been retired by the employer, or had died in 
harness, or had been discharged from service. It was therefore asserted, 
that the challenge raised at the hands of the respondents, to the notification 
dated 2.12.2004, was legally unacceptable. In this behalf, learned counsel 
invited our attention to Commissioner of Income-tax, Kerala and 
Coimbatore v. L.W. Russel, (1964) 7 SCR 569, wherefrom our attention 
was drawn to the following: 
"Before we attempt to construe the scope of s. 7( I) of the Act it 
will be convenient at the outset to notice the provisions of the 
881 
A 
B 
c 
D 
E 
F 
G 
H
882 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
scheme, for the scope of the respondent's right in the amounts 
representing the employer's contributions thereunder depends 
upon it. The trust deed and the rules dated July 27, 1934, embody 
the superannuation scheme. The scheme is described as the English 
and Scottish Joint Co-operative Wholesale Society Limited 
Overseas European Employees' Superannuation Scheme, 
hereinafter called the Scheme. It is established for the benefit of 
the male European members of the Society's staff employed in 
India, Ceylon and Africa by means of deferred annuities. The 
Society itself is appointed thereunder as the first trustee. The 
trustees shall act as agents for and on behalf of the Society and 
the members respectively; they shall effect or cause to be effected 
such policy or policies as may be necessary to carry out the scheme 
and shall collect and arrange for the payment of the moneys 
payable under such policy or policies and shall hold such moneys 
as trustees for and on behalf of the person or persons entitled 
thereto under the rules of the Scheme. The object of the Scheme 
is to provide for pensions by means of deferred annuities for the 
members upon retirement from employment on attaining certain 
age under the conditions mentioned therein, namely, every 
European employee of the Society shall be required as a condition 
of employment to apply to become a member of the Scheme frorrf 
the date of his
engagement by the Society and no member shall 
be entitled to relinquish his membership except on the termination 
of his employment with Society; the pension payable to a member 
shall be provided by means of a policy securing a deferred annuity 
upon the life of such member to be effected by the Trustees as 
agents for and on behalf of the Society and the members 
respectively with the Co-operative Insurance Society Limited 
securing the payment to the Trustees of an annuity equivalent to 
the pension to which such member shall be entitled under the 
Scheme and the Rules; the insurers shall agree that the Trustees 
shall be entitled to surrender such deferred annuity and that, on 
such deferred annuity being so surrendered, the insurers will pay 
to the Trustees the total amount of the premiums paid in respect 
thereof together with compound interest thereon; all moneys 
received by the Trustees from the insurers shall be held by them 
as Trustees for and on behalf of the person or persons entitled. 
thereto under the Rules of the Scheme; any policy or policies
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
issued by the insurers in connection with the Scheme shall be 
deposited with the Trustees; the Society shall contribute one-third 
of the premium from time to time payable in respect of the policy 
securing the deferred annuity in respect of each member as 
thereinbefore provided and the member shall contribute the 
remaining two-thirds; the age at which a member shall normally 
retire from the service of the Society shall be the age of 55 years 
and on retirement at such age a member shall be entitled to receive 
a pension of the amount specified in Rule 6; a member may also, 
after following the prescribed procedure, commute the pension to 
which he is entitled for a payment in cash in accordance with the 
fourth column of the Table in the Appendix annexed to the Rules; 
if a member shall leave or be dismissed from the service of the 
Society for any reason whatsoever or shall die while in the service 
of the Society there shall be paid to him or his legal personal 
representatives the total amount of the portions of the premiums 
paid by such member and if he shall die whilst in the service of 
the Society there shall be paid to him or his legal personal 
representatives the total amount of the portions of the premiums 
paid by such member and ifhe shall die whilst in the service of 
the Society or shall leave or be dismissed from the service of the 
Society on account of permanent breakdown in
health (as to the 
bona tides of which the Trustees shall be satisfied) such further 
proportion (if any) of the total amount of the portions of the 
premiums paid by the Society in respect of that member shall be 
payable in accordance with Table C in the Appendix to the Rules; 
if the total amount of the portions of the premiums in respect of 
such member paid by the Society together with interest thereon 
as aforesaid shall not be paid by the Trustees to him or his legal 
personal representatives under sub-s. (I) of r. 15 then such 
proportion or the whole, as the case may be, of the Society's 
portion of such premiums and interest thereon as aforesaid as 
shall not be paid by the Trustees to such member or his legal 
personal representatives as aforesaid shall be paid by the Trustees 
to the Society; the rules may be altered, amended or rescinded 
and new rules may be made in accordance with the provisions of 
the Trust Deed but not otherwise. 
We have given the relevant part of the Scheme and the Rules. 
883 
A 
B 
c 
D 
E 
F 
G 
H
884 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
The gist of the Scheme may be stated thus: The object of the 
Scheme is to provide for pensions to its emP.loyees. It is achieved 
by creating a trust. The Trustees appointed thereunder are the 
agents of the employer as well as of the employees and hold the 
. moneys received from the employer, the employee and the insurer 
in trust for and on behalf of the person or persons entitled thereto 
under the rules of the Scheme. The Trustees are enjoined to take 
out policies of insurance securing a deferred annuity upon the life 
of each member, and funds are provided by contributions from 
the employer as well as from the employees. The Trustees realise 
the annuities and pay the pensions to the employees. Under certain 
contingencies mentioned above, an employee would be entitled te 
the pension only after superannuation. If the employee leave the 
service of the Society or is dismissed from service or dies in the 
service of the Society, he will be entitled only to get back the total 
amount of the portion of the premium paid by him, though the 
trustees in their discretion under certain circumstances may give 
him a proportion of the premiums paid by the Society. The entire 
amount representing the contributions made by the Society or part 
thereof, as the case may be, will then have to be paid by the 
Trustees to the Society. Under the scheme the employee has not 
acquired any vested right in the
contributions made by the Society. 
Such a right vests in him only when he attains the age of 
superannuation. Till that date that amount vests in the Trustees to 
be administered in accordance with the rules; that is to say, in 
case the employee ceases to be a member of the Society by death 
or otherwise, the amount contributed by the employer with interest 
thereon, subject to the discretionary power exercisable by the 
trustees, become payable to the Society. If he reaches the age of 
superannuation, the said_ contributions irrevocably become fixed 
as part of the funds yielding the pension. To put it in other words, 
till a member attains the age of superannuation the employer's 
share of the contributions towards the premiums does not vest in 
the employee. At best he has a contingent right therein. In one 
contingency the said amount becomes payable to the employer 
and in another contingency, to the employee." 
For the same proposition, learned counsel, placed reliance on 
Krishena Kumar v. Union of India, (1990) 4 SCC 207, and drew our
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
attention to the following: . 
"32. In Nakara, ( 1983) 1 SCC 305, it was never held that both the 
pension retirees and the P.F. retirees formed a homogeneous class 
and that any further classification among them would be violative 
·of Article 14. On the other hand the court clearly observed that it 
was not dealing with the problem of a "fund". The Railway 
Contributory Provident Fund is by definition a fund. Besides, the 
goven1ment's obligation towards an employee under C.P.F. Scheme 
to give the matching contribution begins as soon as his account is 
opened and ends with his retirement when his rights qua the 
Government in respect of the Provident Fund is finally crystallized 
and thereafter no statutory obligation continues. Whether there 
still remained a moral obligation is a different matter. On the other 
hand under the Pension Scheme the Government's obligation does 
A 
B 
c 
not begin until the employee retires when only it begins and it 
continues till the death of the employee. Thus, on the retirement _,, ... 
ofan employee government's legal obligation under the Provident 
Fund account ends while under the Pension Scheme it begins. 
D 
The rules governing the Provident Fund and its contribution are 
entirely different from the rules governing pension. It would not, 
therefore, be reasonable to argue that what is applicable to the 
pension retirees must also equally be applicable to
P.F. retirees. 
This being the legal position the rights of each individual P.F. retiree 
finally crystallized on his retirement whereafter no continuing 
obligation remained, while on the other hand, as regards Pension 
retirees, the obligation continued till their death ..... " 
Based on the legal position declared by this Court in the above 
judgments, it was urged, that in the absence of any vested right, a 
challenge to the notification dated 2.12.2004, was neither sustainable 
nor maintainable in law. 
19. It would be relevant to notice, that 'the 1999 Scheme' became 
operational with effect from 1.4.1999. It remained operational till the 
issuance of notification dated 2.12.2004. While repealing 'the 1999 
Scheme', the notification dated 2.12.2004, did not deprive such of the 
employees who had retired during subsistence of the Scheme, of the 
benefits that had ac'crued to them, under 'the 1999 Scheme'. Only such 
of the employees who were to retire on or after 2.12.2004, were disentitled 
to the benefits under the Scheme. It was the submission of learned 
E 
F 
G 
H
886 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
counsel for the appellants, that the choice of the cut-off date - 2.12.2004 
in the present controversy, is a pennissible incident in law. It was pointed 
out, that the instant proposition has been repeatedly examined by this 
Court, wherein cut-off dates have been upheld; sometimes even where 
the cut-off date had been made applicable retrospectively. For the instant 
proposition, learned counsel placed reliance on Union of India v. P.N. 
Menon, (1994) 4 SCC 68, and invited the Court's attention to the following 
observations: 
"8. Whenever the Government or an authority, which can be held 
to be a State within the meaning of Article 12 of the Constitution, 
frames a scheme for persons who have superannuated from 
service, due to many constraints, it is not always possible to extend 
the same benefits to one and all, irrespective of the dates of 
superannuation. As such any revised scheme in respect of post-
retirement benefits, if implemented with a cut-off date, which can 
be held to be reasonable and rational in the light of Article 14 of 
the Constitution, need not be held to be invalid. It shall not amount 
to "picking out a date from the hat'', as was said by this Court in 
the case of D.R. Nim v. Union of India, AIR 1967 SC 130 I, in 
connection with fixation of seniority. Whenever a revision takes 
place, a cut-off date becomes imperative, because the. benefit 
has to be allowed within the
financial resources available with the 
Government." 
Reliance was also placed on State of West Bengal v. Ratan Behari 
Dey, ( 1993) 4 SCC 62, and our attention was drawn to the following 
conclusions: 
"7. In our opinion, the principle ofNakara, ( 1983) I SCC 305, has 
no application to the facts of this case. The precise principle 
enunciated in Nakara (supra) has been duly explained in Krishena 
Kumar, (1990) 4 SCC 207, by a coordinate Bench. For reasons to 
be assigned hereinafter, it cannot be said that prescribing April I, 
1977 as the date from which the new Regulations were to come 
into force is either arbitrary or discriminatory. Now, it is open to 
the State or to the Corporation, as the case may be. to change the 
conditions of service unilaterally. Terminal benefits as well as 
pensionary benefits constitute conditions of service. The employer 
has the undoubted Rower to revise the salaries and/or thtU1fil'.: 
scales as also terminal benefits/pensionary benefits. The power
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
to specify a date from which the revision of pay scales or terminal 
benefits/pertsionaiy benefits, as the case may be, shall take effect 
is a concomitant of the said power. So long as such date is specified 
in a reasonable manner, i.e., without bringing about a discrimination 
between similarly situated persons, no interference is called for 
by the court in that behalf. It appears that in the Calcutta 
Corporation, a pension scheme was in force prior to 1914. Later, 
that scheme appears to have been given up and the Provident 
Fund Scheme introduced under the Provident Fund Scheme, a 
certain amount was deducted from the salary of the employees 
every month and credited to the Fund. An equal amount was 
contributed by the employer which too was credited to the Fund. 
The total amount to the credit of the employee in the Fund was 
paid to him on the date of his retirement. The employees, however, 
were demanding the introduction of a pension scheme. The demand 
fell on receptive years in the year 1977 ... maybe because in that-
year the Left Front Government came to power in that State, as 
suggested by the writ petitioners. The State Government appointed 
a Commission to examine the said demand and to recommend the 
necessary measures in that behalf. The three members constituting 
the Commission differed with each other in certain particulars. 
887 
A 
B 
c 
D 
The Government examined their
recommendations and accepted 
them with certain modifications in the year 1981 . After processing 
E 
the matter through relevant departments, the Regulations were 
issued and published in the year 1982. In the above circumstances, 
the State Government thought that it would be appropriate to give 
effect to the said Regulations on and from April l, 1977 i.e., the · 
first day of the financial year in which the Pay Commission was 
appointed by .the Government -
a fact which could not have · F 
been unknown to the Corporation employees. We cannot say that 
the Government acted unreasonably in specifying the said date: It 
may also be said that, that was the year' in which the Left Front 
came into power in that State, but does not detract from the validity 
of the aforesaid reasons assigned by the State in its counter-
G 
affidavit filed before the Division Bench of the High Court. We 
are not in agreement with the opinion expressed by the High Court 
that the reasons assigned by the State Government are neither 
relevant nor acceptable. 
H
888 
A 
/ 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
. [2016] 6 S.C.R. 
8. In this context, it may be remembered that the power of the 
State to specify a date with effect from which, the Regulations 
framed, or amended, as the case may be, shall come into force is 
unquestioned. A date can be specified both prospectively as well 
as retrospectively. The only question is whether the prescription 
of the date is unreasonable or discriminatory. Since we have 
found that the prescription of the date in this case is neither 
arbitrary nor unreasonable, the complaint of discrimination must 
fail. 
9. Now coming to the argument of Sri P.P. Rao that the Regulations 
bring about an unreasonable classification between similarly placed 
employees, we must say that we are not impressed by it. It is not 
submitted that the Corporation had no power to give retrospective 
effect to the Regulations. It was within the power of the 
Corporation to enforce the Regulations either prospectively or 
with retrospective effect from such date as they might specify. 
Of course, as repeatedly held by this Court, in such cases the 
State cannot, as the expression goes, pick a date out of its hat. It 
has to prescribe the date in a reasonable manner, having regard to 
all the relevant facts and circumstances. Once this is done, question 
of discrimination does not arise. Reference in this behalf may also 
be had to the decision of this Court in Sushma Sharma v. State of 
Rajasthan, 1985 Supp. SCC 45,
a decision of the Division Bench 
comprising E.S. Venkataramiah and Sabyasachi Mukharji, JJ." 
It was pointed out, that the determination rendered in the above 
two judgments has been reiterated by this Court in State of Rajasthan v. 
Amrit Lal Gandhi, ( 1997) 2 SCC 342. Last of all, learned counsel invited 
the Comt's attention to R.R. Verma v. Union of India, (1980) 3 SCC 
402, wherefrom reliance was placed on the following:-
"5. The last point raised by Shri Garg was that the Central 
Government had no power to review its earlier orders as the rules 
do not vest the government with any such power. Shri Garg relied 
on certain decisions of this Court in support of his submission: 
Patel Narshi Thakershi v. Pradyumansinghji Arjunsinghji, ( 1971) 
3 SCC 844; D.N. Roy v. State of Bihar, (f970) 3 SCC 119, and 
State of Assam v. J.N. Roy Biswas, (1976) I SCC 234. All the 
cases cited by Shri Garg are cases where the government was 
exercising quasi-judicial power vested in them by statute. We do
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
not think that the principle that the power to review must be 
conferred by statute either specifically or by necessary implication 
is applicable to decisions purely of an administrative nature. To 
extend the principle to pure administrative decisions would indeed 
lead to untoward and start I ing results. Surely, any government 
must be free to alter its policy or its decision in administrative 
matters. If they are to carry on their daily administration they 
cannot be hidebound by the rules and restrictions of judicial 
procedure though of course they are bound to obey all statutory 
requirements and also observe the principles of natural justice 
where rights of parties may be affected. Here again, we emphasise 
that if administrative decisions are reviewed, the decisions taken 
after review are subject to judicial review on all grounds on which 
an administrative decision may be questioned in a court. We see 
~ 110 force in this submission of the learned counsel. The appeal is, 
therefore, dismissed." 
20. Mr. R. Venkataramni, learned senior counsel, supplemented 
the submissions advanced by Mr. P.P. Rao. In his opening statement, he 
endorsed the submissions advanced by Mr. P.P. Rao, and accordingly, 
adopted the same. 
21. In addition, it was contended, that 'the 1999 Scheme' was 
introduced for the first time on 29.10.1999, with retrospective effect -
from 1.4.1999. It was asserted, that
through 'the 1999 Scheme', it was 
proposed to supplement the post-retiral financial benefits of employees, 
engaged in corporate bodies, in the State ofHimachal Pradesh. It was 
urged, that employees of corporate bodies, were hitherto before, 
recipients of Contributory Provident Fund (CPF), as the sole post-retiral 
financial benefit. It was submitted, that 'the 1999 Scheme', required 
employees of corporations to switch over from the CPF scheme, by 
exercising their option. And, such of the employees who did not exercise 
any option (under the provisions of'the 1999 Scheme'), were also deemed 
to have exercised their option for the said scheme, on the expiry of the 
period specified. It was highlighted, that the grant of pension under 'the 
1999 Scheme', was based on the operation of the scheme. Stated 
differently, the contention was, that the right to receive pension emerged 
from 'the 1999 Scheme', and not from the option exercised by an 
employee, under the said scheme. 
22. Insofar as the operation of'the I 999 Scheme' is concerned, it 
889 
A 
8 
c 
D 
E 
F 
G 
H
890 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
was submitted, that the employer's contribution to the CPF account of 
the employee (including interest which had accrued thereon) upto 
31.3.1999, was transferred to the State Government, so as to constitute 
the corpus fund, to be administered and maintained by the Finance 
Department of the State G<wernment, which would make 'the 1999 
Scheme', self-financing. The above submission, .was drawn from a 
collective reading of paragraphs 4(b) and 5 of 'the 1999 Scheme'. It 
was further contended, that an employee's own contribution to the CPF, 
i.e. the subscription amount contributed by the employee to his own 
CPF account, was to be retained in his GPF account. The instant 
employee's contribution, was to be disbursed to him, at the time of his 
retirement, as GPF. As such, it was pointed out, that the contributions 
made by the employees, from out of their own funds, were unaffected 
by 'the 1999 Scheme'. 
23. It was therefore high I ighted by learned counsel, that the present 
controversy has nothing to do with an employee's contribution, but was 
limited to the right of an employee to claim pension under 'the 1999 
Scheme'. It was urged, that the exercise of an option to switch over 
from the CPF scheme, to 'the 1999 Scheme', did not result in a vested 
right, to earn pension. To support the instant contention, it was pointed 
out, that one of the pre-conditions for earning pension, is to have rendered
the minimum stipulated qualifying service. It was submitted, that there 
were various other similar conditions, on satisfaction whereof alone, an 
employee (despite his having exercised an option, to switch over to 'the 
1999 Scheme'), would be entitled to pensionary benefits, after his 
retirement. It was, therefore asserted, that the crystalisation of the right 
for a legitimate claim for pension, would accrue on satisfaction of all the 
postulated conditions, and till the fulfillment of all the conditions, the mere 
exercise ofoption, to switch over to 'the 1999 Scheme', would not result 
in vesting a right in the respondent-employees, to receive pension. 
24. In order to effectively project the assertion canvassed by him, 
the learned counsel highlighted, that the exercise of option by the 
employees who were engaged in corporations in the State of Himachal 
Pradesh, did not result in the employees having in any manner, altered 
their position to their disadvantage. It was averred, that' the employees 
did not forego any pre-existing better or higher benefit, while exercising 
their option to switch over to 'the 1999 Scheme'. Bas.:d cumulatively 
on the factual position projected above, it was urged, that it was not
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.) 
open to the employees of corporations in the State ofHimachal Pradesh, 
to call into question, the repeal of 'the 1999 Scheme', through the 
impugned notification dated 2.12.2004. 
25. In order to canvass· the above proposition, that rights which 
were contingent upon the occurrence of an event, could not be described 
as vested rights, reliance was placed on Howrah Municipal Corporation 
v. Ganges Rope Co. Ltd., (2004) 1 sec 663, and the following 
observations recorded therein:-
"37. The argument advanced on the basis of so-called creation 
of vested right forobtainingsanction on the basis of the Building 
Rules (unamended) as they were on the date of submission of the 
application and the order of the High Court fixing a period for 
, decision of the same, is misconceived. The word "vest" is normally 
used where an immediate fixed right in presentor future enjoyment 
in respect of a property is created. With the long usage the said 
word "vest" has also acquired a meaning as "an absolute or 
indefeasible right" [see K.J. Aiyer's Judicial Dictionary (A 
Complete Law Lexicon), 13th Edn.]. The context in which the 
respondent Company claims a vested right for sanction and which 
has been accepted by the Division Bench of the High Court, is 
not a right in relation to "ownership or possession of any property" 
for which the expression "vest" is generally used. What we can 
' understand from the claim
of a "vested right" set up by the 
respondent Company is that on the basis of the Building Rules, as 
applicable to their case on the date of making an application for 
sanction and the fixed period allotted by the Court for its 
consideration, it had a "legitimate" or"settled expectation" to obtain 
the sanction. In our considered opinion, such "settled expectation'', 
if any, did not create any vested rightfo obtain sanction. True it is, 
that the respondent Company which can have no control over the 
manner of processing of application for sanction by the Corporation 
cannot be blamed for delay but during pendency of its application 
for sanction, if the State Government, in exercise of its rule-making 
power, amended the Building Rules and imposed restrictions on 
the heights ofbuildings on GT. Road and other wards, such "settled 
expectation" has been rendered impossible of fulfillment due to 
change in law. The claim based on the alleged "vested right" or 
"settled expectation" cannot be set up against statutory provisions 
891 
A 
B 
c 
D 
E 
F 
G 
H
892 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
which were brought into force by the State Government by 
amending the Building Rules and not by the Corporation against 
whom such "vested right" or"settled expectation" is being sought 
to be enforced. The "vested right" or "settled expectation" has 
been nullified not only by the Corporation but also by the State by 
amending the Building Rules. Besides this, such a "settled 
expectation" or the so-called "vested right" cannot be 
countenanced against public interest and convenience which are 
sought to be served by amendment of the Building Rules and the 
resolution of the Corporation issued thereupon." 
Based on the conclusions drawn in the cited judgment, it was 
submitted, that a 'legitimate' or a ->settled expectation', suggesting the 
possibility of drawing pension after retirement, could not be treated as a 
vested right. It was submitted, that the respondent-employees were not 
justified in raising a claim based on the assumption, thatthey had a vested 
right, or 'settled expectation', under 'the 1999 Scheme', particularly in 
the light of the fact, that 'the 1999 Scheme' had been partly nullified, by 
the notification dated 2.12.2004. 
26. It was also the assertion of learned counsel, that the repeal 
notification dated 2.12.2004, had the consequence of termination/ 
cessation of benefits, as would emerge from the analogy of the principles 
expressed in Section 6 of the General Clauses Act. It
was further 
submitted, that the requirement of dealing with rights and liabilities insofar 
as the present controversy is concerned, is clearly based on a valid 
classification. It was urged, that truly and factually, there was no 
classification whatsoever, inasmuch as, the benefits under 'the 1999 
Scheme' were extended to a miniscule section of the employees, and 
excluded uni formally an overwhelming majority of employees. Learned 
counsel questioned the veracity of the conclusion drawn by the High 
Court, by reading down the repeal notification dated 2.12.2004, for the 
reason, that the same would deprive pensionary rights to those employees, 
who had opted for 'the 1999 Scheme', and had retired after 2.12.2004, 
as also, the employees who were already in service when 'the 1999 
Scheme' was notified on 29. I 0.1999, and had become members of that 
scheme, and were due to retire after 2.12.2004. It was pointed out, that 
the above determination at the hands of the High Com1, would have the 
effect of 'the 1999 Scheme' remaining in place, till such time as 
employees engaged in corporations upto 2.12.2004 eventually retired on
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
attaining the age of superannuation. In the above view of the matter, it 
was asserted, that in the manner the legality of the issue has been 
determined by the High Court, 'the 1999 Scheme' which was repealed 
on 2.12.2004, would actually and factually continue to be·operational, 
for a further period of approximately 20 years, by which time alone, 
employees engaged prior to the notification dated 2.12.2004, would retire 
from service. 
27. It was also the contention of learned counsel, that the 
confinement of the pensionary benefits under 'the 1999 Scheme', to 
such of the employees, who had retired from the concerned corporations, 
between 1.4.1999 and 2.12.2004, could not be invalidated because the 
right to receive pension stood crystalised and vested in them in terms of 
paragraph 4 of 'the 1999 Scheme'. It was submitted, that a statutory 
classification cannot be set aside, when there is overwhelmingjustification, 
demonstrating a valid basis, therefor. The repeal of'the 1999 Scheme' 
was based on financial constraints, which .had not been legitimately 
repudiated. Insofar as the instant aspect of the matter is concerned, 
learned counsel, in the first instance, placed reliance on State ofRajasthan 
v. Amrit Lal Gandhi (supra), and our attention was invited to the following 
observations recorded therein:-
" 16. Applying the ratio of the aforesaid decisions to the present 
case, we find no
justification for the High Court having substituted 
the date of 1-1-1986 in lieu of 1-1-1990. It is evident that for 
introducing a pension scheme, which eny_isaged financial 
implications, approval of the Rajasthan Government was required. 
In the letter of 16-4-1991, written to the Vice-Chancellors of 
different universities ofRajasthan, it was stated as follows: 
"As per the direction in regard to the aforesaid subject, the 
State Government has decided to introduce Pension Scheme 
in the Universities of the State w.e.f. 1-1-1990. In this regard 
the State Legislature has passed University Pension Rules 
and General Provident Fund Rules. Therefore, by enclosing 
a copy of University Pension Regulations and General 
Provident Fund Regulations with this letter, it is requested 
that by obtaining approval of the competent body or Syndicate 
of the University, these Regulations be implemented in the 
University together and necessary information regarding 
implementation be intimated." 
893 
A 
B 
c 
D 
E 
F 
G 
H
894 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
17. The Syndicate and Senate of the University, when they had 
forwarded their recommendations in 1986, did not contain a specific 
date with effect from which the pension scheme was to be made 
applicable. Their recommendations were subject to approval. The 
approval was granted by the Government, after the State 
Legislature had passed the University Pension Rules and General 
Provident Fund Rules. The Government had stated in its affidavit 
before the High Court that the justification of the cut-off date of 
1-1-1990 was "wholly economic". It cannot be said that the paying 
capacity is not a relevant or valid consideration while fixing the 
cut-off date. The University could, in 1991, validly frame Pension 
Regulations to be made applicable prospectively. It, however, chose 
to give them limited retrospectivity so as to cover a larger number 
of employees by taking into account the financial impact of giving 
retrospective operation to the Pension Regulations. It was decided 
that employees retiring on or after I-1~1990 would be able to 
exercise the option of getting either pension or provident fund. 
Financial impact of making the Regulations retrospective can be 
the sole consideration while fixing a cut-off date. In our opinion, it 
cannot be said that this cut-off date was fixed arbitrarily or without 
any reason. The High Court was clearly in error in allowing the 
writ petitions and substituting
the date of 1-1-1986 for 1-1-1990." 
For the same proposition, reliance was also placed in Union of 
India v. R. Sarangapani, (2000) 4 SCC 335, and our attention was drawn 
to the following observations recorded therein:-
" I I. One more aspect which we want to emphasise is that the 
applicants who were appointed to the technical posts and the other 
persons who were appointed to the non-technical posts are not on 
the same footing. The nature of their jobs was different, the 
qualifications for appointment were different and the training period 
was to be longer for the technical staff. It was obviously necessary 
that those who were to occupy the technical posts should have a 
longer period of training than those who were to occupy the non-
technical posts. The training period for the former was one year 
while the training period for the latter was only three months. 
Naturally, the non-technical personnel could therefore be appointed 
earlier to the technical personnel even if both groups were selected 
at the same selection. Therefore, in view of the nature of the
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
895 
[JAGDISH SINGH KHEHAR, J.] 
qualifications and nature of the posts and functions and duties, no 
A 
equality in the dates of accrual of the increments could ever have 
been claimed by the technical personnel comparing themselves to 
the non-technical persons, by invoking Article 14. 
12. If, however, the Government thought it fit to bring some sort 
of equalisation in the matter of commencement of their increments, · B 
it was obviously by way of a sheer concession and was not as a 
matter of right nor was it to avoid any violation of any principles 
of equality under Article 14. In fact, the very official memorandum 
of the Government dated 22-1 0-1990 stated that under the 
Fundamental Rule 26 read with Rule 9(6)(a)(i) it was only in 
c,!!_ses of probationers and apprentices where such appointments 
were followed by a confirmation that the said period of probation 
or apprenticeship would be counted for the purpose of scale of 
pay attached to'the posts. This principle would "not" as per the 
Rules be applicable to the training period. However, during the 
meetings of the National Council (JCM) it was represented that 
where the training period was long, as in the case of technical 
personnel, the disparity would become perpetual. Therefore, it is 
obvious that the concession was not based on Article 14 nor was 
it on the basis ofany rule but was clearly based only upon the fact 
that the training period of technical
personnel was longer and the 
disparity would continue per:petually if these groups were selected 
at the same time. Therefore, Government considered initially to 
bring their increment on par with effect from 1-1-1990 and later 
on it felt that the grievance could be rectified with effect from 1-
1-1986 as mentioned above, the date of commencement of the 
c 
D 
E 
recommendations of the Fourth Pay Commission. It is, therefore, 
F 
clear that the Government decided to extend the benefit in the 
abovesaid manner, even though parties had no right to the same 
either under Article 14 or under the Rules and the date was mainly 
based on the financial burden. It was open to the Government to 
decide, having regard to the budgetary provision, as to what extent 
it could go and whether it could fix a cut-off date which was co-
terminus with the commencement of the recommendation of the 
Fourth Pay Commission, namely, 1-1-1986. On the peculiar facts 
of this case the said date was perfectly valid because the only 
consideration was the financial burden of the State and not any 
G 
H
896 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
principle of equality." 
28. In order to canvass the. proposition noticed hereinabove, learned 
counsel also placed reliance on, 'A Treatise on the Constitutional 
Limitations', authored by Thomas M. Cooley (Indian Reprint of 2005, 
Hindustan Law Book Company, Calcutta), and invited our attention to 
following observations recorded in Chapter XI, bearing the heading -
Of The Protection To Property By 'The Law Of The Land':-
"The chief restriction is that vested rights must not be disturbed; 
but in its application as a shield of protection, the term "vested 
rights" is not used in any narrow or technical sense. as importing 
a power of legal control merely, but rather as implying a vested 
interest which it is equitable the government should recognize, 
and of which the ind_ividual cannot be deprived without injustice. 
And before proceeding further, it may be well to consider. in the 
light of the reported cases, what is a vested right in the constitutional 
sense, that we may the better judge how far the general laws of 
the State may be changed. and how far special provisions may be 
made without coming under condemnation. Every man holds all 
he possesses, and looks forward to all he hopes for, through the 
aid and protection of the laws; but as changes of circumstances 
and of public opinion, as well as other reasons of public policy, are 
all the time calling for changes in the laws, and these changes
must more or less affect the value and stability of private 
possessions, and strengthen or destroy well-founded hopes; and 
as the power to make very many of them must be conceded, it is 
apparent that many rights, privileges~ and exemptions which usually 
pertain to ownership under a particular state of the law, and many 
reasonable expectations, cannot be regarded as vested rights in 
any legal sense. In many cases the courts. in the exercise of their 
ordinary jurisdiction, cause the property vested in one person to 
be transferred to another, either through a statutory power. or by 
the force of their judgments or decrees, or by compulsory 
conveyances. If in these cases the court has jurisdiction, they 
proceed in accordance with the law of the land, and the right of 
one man is divested by way of enforcing a higher and better right 
in another. Of these cases we do not propose to speak: as 
constitutional questions cannot well arise in regard to them, unless 
they be attended by circumstances of irregularity which are
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
897 
[JAGDISH SINGH KHEHAK, J.] 
supposed to take them out of the operation of the general rule. 
A 
All vested rights are held subject to the laws for the enforcement 
of public duties and private contracts, and for the punishment of 
wrongs; and if they become divested through the operation of 
these laws, it is only by way of enforcing the ob I igations of justice 
and good order. What we desire to arrive at now, is the meaning 
8 
of the term "vested rights''. when employed by way of indicating , 
the interests of which one cannot be deprived by the mere force 
oflegislative enactment, or by any other than the recognized modes 
of transferring title against the consent of the owner, to which we 
have alluded." 
Based on the submissions recorded hereinabove, it was sought to 
be concluded, that the respondent-employees had no vested right to claim 
pension under 'the 1999 Scheme', and that, it was not open to them to 
assail the partial repeal of 'the 1999 Scheme', vide notification dated 
2.12.2004. 
29. In the process ofrepudiating the submissions advanced at the 
hands of the appellants, Mr. Guru Krishna Kumar, learned senior counsel 
representing the respondent-employees, drew our attention to certain 
factual aspects of the matter, which according to him, needed to be kept 
in mind, while determining the veracity of the challenge raised by the 
State Government. It was pointed out, that all the respondent-employees,
were already in the employment of corporate bodies, in the State of 
Himachal Pradesh, on the date 'the 1999 Scheme' was introduced- on 
1.4.1999. Learned counsel asserted, that it was not disputed at the 
behest of the State Government, that all the respondent-employees were 
entitled to benefits under 'the 1999 Scheme', either on account of having 
exercised their option to be governed by 'the 1999 Scheme', or by virtue 
of the deeming provision expressed in paragraph 2(2) of 'the 1999 
Scheme'. It was asserted, that all the employees who came to be 
governed by 'the 1999 Scheme', constituted a homogenous class. 
Inasmuch as, the employees whose right to claim pension under 'the 
1999 Scheme' has not been disturbed, despite the repeal notification 
dated 2.12.2004, and those whose right to draw pension has been taken 
away, cannot be distinguished in any manner, except on the basis of the 
cut-off date, expressed in the repeal notification, dated 2.12.2004. It 
was contended, that merely because some of the employees had retired 
prior to 2.12.2004, and the respondent-employees had retired after 
c 
D 
E 
F 
G 
H
898 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
2.12.2004, cannot be accepted as a legitimate basis, to treat them 
differentially. It was asserted, that the mandate of paragraph 1(2) of 
'the 1999 Scheme' extended pensionary benefits to employees engaged 
in corporate bodies, in the State of Himachal Pradesh, in accordance 
with the provisions laid down urider the Central Civil Services (Pension) 
Rules, 1972, and the Central Civil Services (Commutation of Pension) 
Rules, 1981 " ... as amended and adopted by the Himachal Pradesh 
Government for the State Government employees, save as otherwise 
provided in this scheme". In the above view of the matter, it was asserted 
on behalf of the respondent-employees, that the division of a homogenous 
class, so as to deprive one set of employees benefits, which still remained 
extended to another set of employees, was clearly unsustainable in law. 
It was pointed out with some emphasis, that the High Court had taken 
conscious notice of the fact, that 'the 1999 Scheme' was introduced by 
the State Government, after due deliberation by all concerned stake 
holders, and upon approval by the Chief Minister and his Cabinet. In the 
factual background highlighted hereinabove, it was urged, that denial of 
pensionary benefits to one set of employees, out of a homogenous class, 
was arbitrary and discriminatory, and as such, violative of the principles 
enshrined in Articles 14 and 16 of the Constitution of India.
Based on 
the above factual background, it was urged, that the High Court was 
fully justified in reading down the repeal notification dated 2.12.2004, so 
as to extend the benefit of 'the 1999 Scheme' to all employees who 
either opted for, or were otherwise entitled to pensionary rights, under 
'the 1999 Scheme'. 
30. Learned counsel forthe respondent-employees, contested the 
submission advanced by learned counsel for the appellants, that 
subscription to 'the 1999 Scheme' by employees engaged in corporations 
in the State of Himachal Pradesh, did not create a vested right in them. 
It was submitted, that a mere subscription to 'the 1999 Scheme', by 
exercising their option to be governed by the same, created a vested 
right in the respondent-employees. In this behalf it was pointed out, that 
retirement on attaining the age of the superannuation, was relevant, only 
for the purpose of the accrual ofa cause ofaction, for raising a claim for 
pension (under 'the 1999 Scheme'). Learned counsel, while 
acknowledging, that a right to claim pension would arise only when the 
concerned employee attained the age of superannuation, yet submitted, 
that the moment a contribution earlier payable to the employees as CPF
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
899 
[JAGDISH SINGH KHEHAR, J.] 
on their retirement, was diverted to the corpus fund maintained by the · A 
Finance Department of the State Government, the same created a 
contingent right in each one of them (under 'the 1999 Scheme') to claim 
pension. It was therefore submitted, that there was no.justification in 
the contention advanced on behalf of the appellants, that the action of 
the respondent-employees in opting for 'the 1999 Scheme', did not alter 
their position adversely, with reference to their erstwhile vested right 
(under the Employees Provident Funds Scheme, I 995). In order to 
support his submission, that a vested right accrued to the respondent-
employees, when they subscribed to 'the I 999 Scheme', learned counsel 
placed reliance on U.P. Raghavendra Acharya v. Sta~e of Karnataka, 
(2006) 9 sec 630, and drew our attention to the following observations 
recorded therein:-
"3. It is not in dispute that the revised scales of pay as 
recommended by the Pay Revision Committee became applicable 
to the appellants with effect from 1-1-I 986. It is also not in dispute 
that the UGC scales of pay were applicable to them. The 
Government ofKarnataka, by a letter dated 17-I 2-1993, directed 
that the matter relating to the fixation of pension on the basis of 
UGC pay scales would be governed by Rule 296 of the Karnataka 
Civil Services Rules (hereinafter referred to as "the Rules"),· 
providing for computation of
emoluments for the purpose of pension 
and gratuity of a government servant. In the said letter it was 
stated: 
"The term 'emoluments' has been defined and redefined from 
time to time whenever pension has been revised by executive 
orders. The term emoluments for purpose of pensionary 
benefits as defined in GO dated I 7-8-1987 includes among 
other things the last pay drawn. It is, therefore, clarified that 
the pay drawn by' the teachers of degree colleges in respect 
of whom UGC scales have been extended by GO No. ED 
88 UNI 88 dated 30-3-1990 w.e.f. 1-1-1986 and who have 
opted to UGC scales of pay, the last pay drawn by them in 
UGC scales of pay among other things may be treated as 
emoluments for purpose of pensionary benefits under GO 
No. FD 20 SRS 87 (I) dated 17-8-1987." 
*** 
*** 
*** 
B 
c 
D 
E 
F 
G 
H
900 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
A 
9. However, para 27-A was inserted thereto in respect ofrevision 
B 
c 
D 
E 
F 
G 
H 
of pensionary benefits, which is to the fo II owing effect: 
"27-A. Revision ofpensionary benefits.-{i) UGC scales as 
revised from 1-1-1996 have been linked to the index level of 
1510 points inasmuch as the revised pay scale structure 
includes the DA admissible as on 1-1-1996 to the extent of 
138% of basic pay. As on 1-1-1996 the pensionary benefits 
under the State Government had not been revised. The 
revised pay scales of the State Government employees came 
into force from 1-4-1998 by merging the DA as on 1-1-1996. 
The pensionary benefits were also simultaneously revised 
w.e.f. 1-4-1998. Therefore, the revised pay drawn in the 
UGC pay scales for the period from 1-1-1996 up to 3 1-3-
1998 shall not be taken as emoluments for the purpose of 
pensionary benefits. Accordingly,-
( a) In respect of teachers drawing UGC pay scales who 
have retired during the period from 1-1-1996 to 31-3-1998, 
they shall be eligible for the benefit of the fixation of pay and 
arrears under the revised UGC scales of pay only. There 
shall not be any change in their pensionary benefits with 
reference to the revised UGC pay and the retirement benefits 
already sanctioned in the pre-revised UGC pay scales will 
not undergo any modifications. However, they shall be entitled 
to the benefit of fixation of revised pension/family pension 
as contemplated in GO
No. FD (Spl.) 2 PET 99 dated 15-2-
1999 only w.e.f. 1-4-1998. Para 6 of GO No. FD (Spl.) 2 
PET 99 dated 15-2-1999 stands modified to this extent. 
(b) In respect of teachers drawing UGC pay scales and 
who have issued on or after 1-4-1998, the pay drawn in the 
revised UGC pay scales shall be counted for the purpose of 
pensionary benefits and the orders revising the pensionary 
benefits vide GO No. FD (Spl.) 2 PET 99 dated 15-2-1999 
shall be made applicable." 
*** 
*** 
*** 
23. The stand of the State of Kamataka that the pensionary benefits 
had been conferred on the appellants w.e.f. 1-4-1998 on the premise 
that the benefit of the revision of scales ofoay to its own employees
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
had been conferred from 1-1-1998. in our opinion, is wholly 
misconceived. Firstly, because the employees of the State of 
Karnataka and the appellants. in the matter of grant of benefit of 
revised scales of pay, do not stand on the same footing as revised 
scales of pay had been made applicable to their cases from a 
different date. Secondly, the appellants had been given the benefit 
of the revised scales ofoay w.e.f; 1-1-1996. It is now well settled 
that a notification can be issued by the State accepting the 
recommendations of the Pay Revision Committee with 
retrospective effect as it was beneficent to the employees. Once 
such a retrospective effect is given to the recommendations of 
the Pay Revision Committee. the employees concerned despite 
their reaching the age of superannuation in between the said dates 
and/or the date of issuance of the notification would be deemed 
to be getting the said scales of pay as on 1-1-I 996. By reason of 
such notification. as the appellants had been deprived of a vested 
right. they could not have been deprived therefrom and that too 
by reason of executive instructions. 
*** 
*** 
*** 
25. Pension, as is well known, is not a bounty. It is treated to be 
a deferred salary. It is akin to right of property. It is correlated 
901 
A 
B 
c 
D 
and has a nexus with the salary payable to the employees as on 
E 
the date of retirement. 
*** 
*** 
*** 
28. The
impugned orders furthermore are opposed to the basic 
principles oflaw inasmuch as by reason of executive instructions 
an employee cannot be deprived of a vested or accrued right. 
Such a right to draw pension to the extent of 50% of the 
emoluments. computed in terms of the rules w.e.f. I-1-1996, vested 
in the appellants in terms of government notification read with 
Rule 296 of the Rules." 
Based on the above judgment, it was pointed out, that the right to 
draw revised pension under the Karnataka Civil Service Rules, was 
held to be vested in the concerned employees, from the date of revision 
of the pay-scales. It was pointed out, that while calculating pensionary 
benefits, it was imperative for the employer to take into consideration, 
the actual pay drawn by the employees, at the time of their retirement. 
F 
G 
H
902 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016) 6 S.C.R. 
Accordingly it was held, that the action of the State Government in granting 
revised pay-scales with retrospective effect (with effect from l. l .1996), 
but extending the benefit of revised pay for calculating pension, only 
with effect from 31.3 .1998, was not sustainable in law. Inasmuch as, 
employees who had retired between 1.1.1996 and 3 1.3 .1998 would be 
prejudicially affected. On the same proposition, learned counsel placed 
reliance on D.S. Nakara v. Union oflndia, (1983) 1SCC305, and invited 
'our attention to the followi~g observations made therein:-
"20. The antequated notion of pension being a bounty, a gratuitous 
payment depending upon the sweet will or grace of the employer 
not claimable as a right and, therefore, no right to pension can be 
enforced through Court has been swept under the carpet by the 
decision of the Constitution Bench in Deokinandan Prasad v. State 
ofBihar, (1971) 2 SCC 330. wherein this Court authoritatively 
ruled that pension is a right and the payment of it does not depend 
upon the discretion of the Government but is governed by the 
rules and a government servant coming within those rules is entitled 
to claim pension. It was further held that the grant of pension 
does not depend upon anyone's discretion. It is only for the pur:pose 
of guantifying the amount having regard to service and other allied 
matters that it may be necessary for the authority to pass
an order 
to that effect but the right to receive pension flows to the officer 
not because of any such order but by virtue of the rules. This 
view was reaffinµed in State of Punjab v. Iqbal Singh, (1976) 2 
sec l". 
Reference was also made to Chairman, Railway Board v. C.R. 
Rangadhamaiah, ( 1997) 6 sec 623' where from our attention was drawn 
to the following observations:-
"24. In many of these decisions the expressions "vested rights" 
or "a.ccrued rights" have been used while striking down the 
impugned provisions which had been given retrospective operation 
so as to have an adverse effect in the matter of promotion, seniority. 
substantive appointment, etc., of the employees. The said 
expressions have been used in the context of a right flowing under 
the relevant rule which was sought to be altered with effect from 
an anterior date and thereby taking away the benefits available 
under the rule in force at that time. It has been held that such an 
amendment having retrospective operation which has the effect
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
of taking away a benefit already available to the employee under 
the existing rule is arbitrary. discriminatory and violative of the 
rights guaranteed under Articles 14 and 16 of the Constitution. 
We are unable to hold that these decisions are not in consonance 
with the decisions in Roshan Lal Tandon, AIR 1967 SC 1889, B.S. 
Yadav, AIR 1969 SC 118, and Raman Lal Keshav Lal Soni, (1983) 
2 sec 33. 
25. In these cases we are concerned with the pension payable to 
the employees after their retirement. The respondents were no 
longer in service on the date of issuance of the impugned 
notifications. The amendments in the rules are not restricted in 
their application in futuro. The amendments apply to employees 
who had already retired and were no longer in service on the date 
the impugned notifications were issued. 
26.In Deokinandan Prasad v. State ofBihar, (1971) 2 SCC 330, 
decided by a_Constitution Bench it has been laid down: (SCC p. 
343, para31) 
"31. ... pension is not to be treated as a bounty payable on 
the sweet will and pleasure of the Government and that the 
right to superannuation pension including its amount is 
a valuable right vesting in a government servant." [p. 
152] 
(emphasis supplied) 
In that case the right to receive pension was treated as property 
under Articles 31 (I) and 19( 1 )( t) of the Constitution. 
903 
A 
B 
c 
D 
E 
27. In D.S. Nakara v. Union ofindia, (1983)
1 SCC 305, this 
F 
Court, after taking note of the decision in Deokinandan Prasad 
(supra), has said: (SCC p. 323, paras 28 and 29) 
"28. Pension to civil employees of the Government and the 
defence personnel as administered in India appears to be a 
compensation for service rendered in the past. However, as 
G 
held in Dodge v. Board of Education, 302 US 74, a pension 
is closely akin to wages in that it consists of payment provided 
by an employer, is paid in consideration of past service and 
serves the purpose of helping the recipient meet the expenses 
ofliving. 
H
904 
A 
B 
c 
D 
E 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
*** 
29 .... Thus the pension payable to a government employee 
is earned by rendering long and efficient service and 
therefore can be said to be a deferred portion of the 
compensation or for service rendered." 
*** 
*** 
*** 
30. The respondents in these cases are employees who had retired 
after 1-1-1973 and before 5-12-1988. As per Rule 2301 of the 
Indian Railway Establishment Code they are entitled to have their 
pension computed in accordance with Rule 2544 as it stood at the 
time of their retirement. At that time the said rule prescribed that 
running allowance limited to a maximum of 75% of the other 
emoluments should be taken into account for the purpose of 
calculation of average emoluments for computation of pension 
and other retiral benefits. The said right of the respondent-
employees to have their pension computed on the basis of their 
average emoluments being thus calculated is being taken away 
by the amendments introduced in Rule 2544 by the impugned 
notifications dated 5-12-1988 inasmuch as the maximum limit has 
been reduced from 75% to 45% for the period from 1-1-1973 to 
31-3-1979 and to 55% from 1-4-1979 onwards. As a result the 
amount of pension payable to the respondents in accordance with 
the rules which were in force at the time of their retirement has 
been reduced. 
31. In Salabuddin Mohamed Yun us v. State of A.P., ( 1984) Supp 
sec 399, the appellant was employed in the service
of the former 
F 
Indian State of Hyderabad prior to coming into force of the 
Constitution oflndia. On coming into force of the Constitution the 
appellant continued in the service of that State till he retired from 
service on 21-1-1956. The appellant claimed that he was entitled 
to be paid the salary of a High Court Judge from 1-10-194 7 and 
G 
also claimed that he was entitled to receive pension ofRs.1000 a 
month in the Government oflndia currency, being the maximum 
pension admissible under the rules. The said claim of the appellant 
was negatived by the Government. He filed a writ petition in the 
High Court of Andhra Pradesh. During the pendency of the said 
writ petition the relevant rule was amended by notification dated 
H
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
3-2-1971 with retrospective effect from 1-10-1954 and the 
expression "Rs.1000 a month" in clause (b) of sub-rule (I) of 
Rule 299 was substituted by the expression "Rs.857.15 a month". 
This amendment was made in exercise of the power conferred 
by the proviso to Article 309 read with Article 313 of the 
Constitution. The said amendment was struck down by this Court 
as invalid and inoperative on the ground that it was violative of 
Articles 31 (1) and I 9(1 )(t) of the Constitution: Relying upon the 
decision in Deokinandan Prasad (supra), it was held: (SCC p. 406, 
para 6) 
"6 .... The fundamental right to receive pension according 
to the rules in force on the date of his retirement accrued to 
the appellant when he retired from service. By making a 
retrospective amendment to the said Rule 299(J)(b) more 
than fifteen years after that right had accrued to him. what 
was done was to take away.theappellant's right to receive 
pension according to the rules in force on the date of his 
retirement or in any event to curtail and abridge that right. 
To that extent. the said amendment was void." 
32. It is no doubt true that on 5-I 2-I 988 when the impugned 
notifications were issued, the rights guaranteed under Articles 31 (I) 
and 19(J)(t) were not available since the said provisions in the 
Constitution stood omitted with effect from 20-6-I 979 by virtue 
of the Constitution (Forty-fourth
Amendment) Act, 1978. But 
Notifications Nos. GSR I 143 (E) and GSR I 144 (E) have been 
made operative with effect from I- 1-1973 and 1-4-1979 
respectively on which dates the rights guaranteed under Articles 
3 J(J) and I 9(1 )(0 were available. Both the notifications insofar 
as they have been given retrospective operation are. therefore. 
violative of the rights then guaranteed under Articles I 9( I) and 
3 I (I) of the Constitution. 
33. Apart from being violative of the rights then available under 
Articles 3 !(!) and I 9(1)(0, the impugned amendments. insofar 
as they have been given retrospective operation. are also violative 
of the rights guaranteed under Articles 14 and 16 of the Constitution 
on the ground that they are unreasonable and arbitrary since the 
said amendments in Rule 2544 have the effect of reducing the 
amount of pension that had become payable to employees who 
905 
A 
B 
c 
D 
E 
F 
G 
H
906 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
A 
had already retired from service on the date of issuance of the 
impugned notifications, as per the provisions contained in Rule 
2544 that were in force at the time of their retirement." 
Based on the above cited judgments, it was submitted, that the 
determination rendered by the High Court in the impugned judgment, 
B · that the respondent-employees acquired a vested right, the moment they 
had subscribed to 'the 1999 Scheme', was unexceptionable. 
c 
D 
E 
F 
G 
H 
31. Learned counsel for the respondent-employees also contested 
the submission advanced on behalf of the appellants, that the right to 
receive pension accrues to an employee, on the date on which he attains 
the age of superannuation, and not earlier. On the instant aspect of the 
matter it was submitted, that even though pension can formally be claimed 
by an employee only on his retirement, the seeds for a claim to pension 
are sown, and the foundation for receipt of pension is laid, the very 
moment from which an employee commences to render qualifying 
service. It was submitted, that based on having acquired a minimum 
qualifying service postulated under the rules, an employee's claim 
eventually crystalises for entitlement to pension, on attaining the age of 
superannuation. It was contended, that since past service rendered by 
• an employee, constitutes the basis for grant of pension, every day of 
service rendered by an employee, has to be taken into
consideration, for 
computing pension. It was accordingly urged, that every day of service 
rendered by an employee, furthers the right in the employee to earn and 
receive pension. For the aforesaid reasons, according to learned counsel, 
pension has always been considered as deferred-wages for services 
rendered. It was asserted, that with effect from the date of 
commencement of qualifying service, the concerned employee is treated 
to have an inherent vested right, for a claim to pension. In order to 
substantiate the instant contention, learned counsel placed reliance on 
the D.S. Nakara case (supra), and invited our attention to the following 
observations recorded therein:-
"46. By our approach, are we making the scheme retroactive? 
The answer is emphatically in the negative. Take a government 
servant who retired on April 1, 1979. He would be governed by 
the liberalised pension scheme. By that time he had put iil gualifring 
service of35 years. His length of service is a, relevant factor for 
computation of pension. Has the Government made it retroactive, 
3 5 years backward compared to the case of a Government servant
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 
907 
[JAGDISH SINGH KHEHAR, J.] 
who retired on 30th March, 1979? Concept of qualifying service 
takes note oflength of service. and pension quantum is correlated 
to qualifying service. Is it retroactive for 35 years for one and not 
retroactive for a person who retired two days earlier? It must be 
remembered that pension is relatable to qualifying service. It has 
correlation to the average emoluments and the length of service. 
Any liberalisation would pro tanto be retroactive in the narrow 
sense of the term. Otherwise it is always prospective. A statute is 
not properly called a retroactive statute because a part of the 
requisites for its action is drawn from a time antecedent to its 
passing; (see Craies on Statute Law, sixth edition, p. 387). Assuming 
the Government had not prescribed the specified date and thereby 
provided that those retiring pre and post the specified date would 
all be governed by the liberalised pension scheme, undoubtedly, it 
would be both prospective and retroactive. Only the pension will 
have to be recomputed in the light of the formula enacted in the 
liberalised pension scheme and effective from the date the revised 
scheme comes into force. And beware that it is not a new scheme, 
it is only a revision of existing scheme. It is not a new retiral 
benefit. It is an upward revision of an existing benefit. If it was a 
wholly new concept, a new retiral benefit. one could have 
appreciated an
argument that those who had already retired could 
not expect it. It could have been urged that it is an incentive to 
attract the fresh recruits. Pension is a reward for past service. It 
is undoubtedly a condition of service but not an incentive to attract 
· new entrants because if it was to be available to new entrants 
only, it would be prospective at such distance of thirty-five years 
since its introduction. But it covers all those in service who entered 
thirty-five years back. Pension is thus not an incentive but a reward 
for past service. And a revision of an existing benefit stands on a 
different footingthan a new retiral benefit. And even in case of 
new retiral benefit of gratuity under the Payment of Gratuity Act, 
1972 past service was taken into consideration. Recall at this stage 
the method adopted when pay-scales are revised. Revised pay-
scales are introduced from a certain date. All existing employees 
are brought on to the revised scales by adopting a theory of fitments 
and increments for past service. In other words, benefit of revised 
scale is not limited to those who enter service subsequent to the 
date fixed for introducing revised scales but the benefit is extended 
A 
B 
c 
D 
E 
F 
G 
H
908 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016) 6 S.C.R. 
to all those in service prior to that date. This is just and fair. Now 
if pension as we view it. is some kind of retirement wages for 
past service, can it be denied to those who retired earlier, revised 
retirement benefits being available to future retirees only. 
Therefore, there is no substance in the contention that the court 
by its approach wou Id be making the scheme retroactive, because 
it is implicit in theory of wages." 
Based on the observations extracted above, it was submitted, that 
it was not open to the State to contend, that a vested right would be 
created under 'the 1999 Scheme', only on the date of retirement. Since 
pension has been recognized as deferred-wages for past services, 
payable on retirement, according to learned counsel, the moment an 
employee is enrolled on the pension scheme, his right to claim pension, 
must be deemed to have materialized. 
32. Relying on certain paragraphs of'the 1999 Scheme' (referred 
to above), it was submitted, that the appellants have erroneously treated 
the date of retirement, as the date on which the right to pension accrued 
to the employees. In this behalf it was pointed out, that the cause of 
action to receive pension would accrue to an employee on the date of 
his retirement. However, the right to receive pension crysta1ises, at the 
end of every successive day, and at the end of every successive month, 
and at the end of every
successive year. It was pointed out, that it 
crystalises and further crystalises, giving rise to an eventual claim for 
pension. It was accordingly pointed out, that the date of retirement had 
been legally perceived, as the date on which the cause of action arose to 
an employee to claim pension. Accordingly it was submitted, that the 
date ofretirement was relevant only for the limited purpose of determining 
the cause of action, to receive pension. For this, learned counsel place 
reliance on Asger Ibrahim Amin v. Life Insurance Corporation oflndia, 
(2015) 10 SCALE 639, and invited our attention to the following 
observations:-
"3. On 8.8.1995, that is post the promulgation by the Respondent 
of the Pension Rules, the Appellant enquired from the Respondent 
whether he was entitled to pension under the Pension Rules, which 
has been understood by the Respondent as a representation for 
pension; the Respondent replied that the request of the Appellant 
cannot be acceded to. The Appellant took the matter no further 
but has averred that in 2000, prompted by news in a Daily and
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
Judgments of a High Court and a Tribunal, he requested the 
Respondent to reconsider his case for pension. This request has 
remained unanswered. It was in 2011 that he sent a legal notice 
to the Respondent, in response to which the Respondent reiterated 
its stand that the Appellant, having resigned from service, was not 
eligible to claim pension under the Pension Rules. Eventually, the 
Appellant filed a Special Civil Application on 29.3.2012 before 
the High Court, which was dismissed by the Single Judge vide 
Judgment dated 5.10.2012. The LPA of the Appellant also got 
dismissed on the grounds of the delay of almost 14 years, as also 
on merits vide Judgment dated 1.3.2013, against which the 
Appellant has approached this Court. 
4. As regards the issue of delay in matters pertaining to claims of 
pension, it has already been opined by this Court in Union oflndia 
v. Tarsem Singh, (2008) 8 SCC 648, that in cases of continuing or 
successive wrongs, delay and !aches or limitation will not thwart 
the claim so long as the claim, if allowed, does not have any adverse 
repercussions on the settled third-party rights. This Court held: 
"7. To summarise, normally, a belated service related claim 
will be rejected on the ground of delay and !aches (where 
remedy is sought by filing a writ petition) or limitation (where 
remedy is sought by an application to the Administrative 
Tribunal). One of the
exceptions to the said rule is cases 
relating to a continuing wrong. Where a service related claim 
is based on a continuing wrong. relief can be granted even if 
there is a long delay in seeking remedy. with reference to 
the date on which the continuing wrong commenced, if such 
continuing wrong creates a continuing source of injury. But 
there is an exception to the exception. If the grievance is in 
respect of any order or administrative decision which related 
to or affected several others also, and ifthe reopening of the 
issue would affect the settled rights of third parties, then the 
claim will not be entertained. For example, if the issue relates 
to payment or refixation of pay or pension, relief may be 
granted in spite of delay as it does not affect the rights of 
third parties. But if the claim involved issues relating to 
seniority or promotion. etc .. affecting others. delay would 
render the claim stale and doctrine oflaches/limitation will 
909 
A 
8 
c 
D 
E 
F 
G 
H
910 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016) 6 S.C.R. 
be applied. Insofar as the consequential relief ofrecovery of 
arrears for a past period is concerned, the principles relating 
to recurring/successive wrongs will apply.As a consequence, 
the High Courts will restrict the consequential relief relating 
to arrears normally to a period of three years prior to the 
date of filing of the writ petition." 
We respectfully concur with these observations which 
if extrapolated or applied to the factual matrix of the present case 
would have the effect of restricting the claim for pension, if 
otherwise sustainable in law, to three years previous to when it 
was raised in a judicial forum. Such claims recur month to month 
and would not stand extinguished on the application of the laws of 
prescription. merely because the legal remedy pertaining to the 
time barred part of it has become unavailable. This is too well 
entrenched in our jurisprudence, foreclosing ai:iy fresh 
consideration. 
Reliance was also placed on the decision of this Court in State of 
Madhya Pradesh v. Yogendra Shrivastava, (2010) 12 SCC 538, 
wherefrom learned counsel emphasized on the following observations:-
"17. The appellants contended that the claims were therefore 
barred by limitation. It was pointed out that the respondents were 
paid NPA at a fixed rate as stipulated in the appointment orders 
and NPA was increased only when it was revised by the 
government orders from time to time;
that the respondents 
accepted such NPA without protest; and that therefore, they cannot, 
after periods varying from 5 to I 5 years, challenge the fixation of 
NPA or contend that they are entitled to NPA at a higher rate, 
that is 25% of their pay. 
18. We cannot agree. Where the issue relates to payment or 
fixation of salary or any allowance. the challenge is not barred by 
limitation or the doctrine oflaches, as the denial of benefit occurs 
every month when the salary is paid. thereby giving rise to a fresh 
cause of action, based on continuing wrong. Though the lesser 
payment may be a consequence of the error that was committed 
at the time of appointment, the claim for a higher allowance in 
accordance with the Rules (prospectively from the date of 
application) cannot be rejected merely because it arises from a
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
wrong fixation made several years prior to the claim for correct 
payment. But in respect of grant of consequential relief of recovery 
of arrears for the past period, the principle relating to recurring 
and successive wrongs would apply. Therefore the consequential 
relief of payment of arrears will have to be restricted to a period 
. of three years prior to the date of the original application. 
[See: M.R. Gupta v. Union oflndia, 1995 (5) SCC 628, and Union 
of India v. Tarsem Singh, 2008 (8) SCC 648]". 
It was, therefore, the contention of learned counsel for the 
respondents, that the foundation to claim pension, accrued in the 
employees of all corporate bodies in the State of Himachal Pradesh 
(including all the respondent-employees herein), the very moment they 
came to be enrolled in 'the 1999 Scheme'. It was submitted, that all 
existing employees who had opted for pension or were deemed to have 
opted for pension, had vested in themselves the rjght to pension when 
they would retire from service. All employees who came to be engaged 
by corporations in the State, from 1.4.1999 up to 1.12.2004, were likewise 
vested with the right to receive pension, because of the fact, that at the 
very inception of their employment, they became members of 'the 1999 
Scheme', and the period of service rendered by them would likewise 
constitute qualifying service, for pension. It was therefore
submitted, 
that there was a clear distinction between two contingencies, firstly, the 
date on which a claim for pension can be stated to have vested in the 
employee, and the date on which the employee earns a right to receive 
pension. Insofar as the former is concerned, it was submitted, that the 
moment qualifying service commences to add up, a vested right to receive 
pension is created. For the latter, having rendered the postulated qualifying 
service (on the date of superannuation), gives rise to a cause of action to 
receive pension. It is this fine distinction which according to learned 
counsel, needs to be examined and has been overlooked during the course 
of the submissions advanced on behalf of the appellant-State. 
33. Insofar as the issue of financial unviability of 'the 1999 
Scheme' is concerned, it was submitted on behalf of the respondent-
employees, that the State Government was estopped in law, from raising 
such a plea. In this behalf it was pointed out, that the Law Department 
and the Finance Department of the State Government, had advised, 
against the retrospective withdrawal of'the 1999 Scheme'. If the advice 
had been accepted, according to learned counsel, persons similarly situated, 
911 
A 
B 
c 
D 
E 
F 
-=--~-
G 
H
912 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
as the private respondents, would have remained entitled to receive 
pension under 'the 1999 Scheme'. Additionally it was contended, that in 
identical circumstances, the State Government had repealed the provisions 
of the Central Civil Services (Pension) Rules, I 972, as were applicable 
to State Government employees, through a similar notification, dated 
I 5.5.2003. It was highlighted, that the aforesaid repeal notification, was 
given a prospective effect, inasmuch as, employees similarly situated as 
the respondent-employees herein, who had not retired on the date of the 
repeal notification, were allowed to be governed by the Central Civil 
Services (Pension) Rules, I 972. At the cost of clarification, it was pointed 
out, that the repeal notification dated 15.5.2003, had the effect of not 
depriving pensionary rights to any of the existing employees. Based on 
the above contentions, it was submitted, that the action of the State 
Government, in depriving the respondent-employees of their pensionary 
rights, must be treated as based on an arbitrary exercise of power, and 
as such, was liable to be considered as violative of Article 14 of the 
Constitution of India. 
34. It was also the contention oflearned counsel for the respondent-
employees, that pension was akin to the right of property, postulated 
under article 300A of the Constitution. For the instant proposition, learned 
counsel placed
reliance on the decision rendered in State of Jharkhand 
v. J itendra Kumar Srivastava, (20 I 3) 12 SCC 2 I 0, and invited our attention 
to the following observations recorded therein:-
".8. It is an accepted position that gratuity and pension are not 
bounties. An employee earns these benefits by dint of his long, 
continuous, faithful and un-blemished service. Conceptually it is 
so lucidly described in D.S. Nakara and Ors. v. Union of India, 
(1983) 1 SCC 305, by D.A. Desai, J., who spoke for the Bench, 
in his inimitable style, in the following words: (SCC pp. 319-20, 
paras I 8-20) 
"I 8. The approach of the Respondents raises a vital and 
none too easy of answer, question as to why pension is paid. 
And why was it required to be liberalised? Is the employer, 
which expression will include even the State, bound to pay 
pension? Is there any obligation on the employer to provide 
for the erstwhile employee even after the contract of 
employment has come to an end and the employee has 
ceased to render service?
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
19. What is a pension? What are the goals of pension? What 
public interest or purpose, if any, it seeks to serve? If it does 
seek to serve some public purpose, is it thwarted by such 
artificial division of retirement pre and post a certain date? 
We need seek answer to these and incidental questions so 
as to render just justice between parties to this petition. 
20. The antiquated notion of pension being a bounty a 
gratuitous payment depending upon the sweet will or grace 
of the employer not claimable as a right and, therefore, no 
right to pension can be enforced through Court has been 
swept under the carpet by the decision of the Constitution 
Bench in Deoki Nandan Prasad v. State of Bihar and Ors., 
( 1971) 2 SCC 330, wherein this Court authoritatively ruled 
that pension is a right and the payment ofit does not depend 
upon the discretion of the Government but is governed by 
the rules and a Government servant comin_g within those rules 
is entitled to claim pension. It was further held that the grant 
of pension does not depend upon anyone's discretion. It is 
only for the purpose of quantifying the amount having regard 
to service and other allied maters that it may be necessary 
for the authority to pass an order to that effect but the right 
to receive pension flows to the officer not because of any 
such order but by virtue of the rules. This view was reaffirmed 
in State of Punjab
andAnr. v. Iqbal Singh, (1976) 2 SCC l ". 
It is thus hard earned benefit which accrues to an employee and 
is in the nature of "property". This right to property cannot be 
taken away without the due process of law as per the provisions 
of Article 300A of the Constitution oflndia. 
xxx 
xxx 
xxx 
13. A reading of Rule 43(b) makes it abundantly clear that even 
after the conclusion of the departmental inquiry, it is permissible 
913 
A 
B 
c 
D 
E 
F 
for the Government to withhold pension etc. only when a finding 
G 
is recorded either in departmental inquiry or judicial proceedings 
that the employee had committed grave misconduct in the 
discharge of his duty while in his office. There is no provision in 
the rules for withholding of the pension/gratuity when such 
departmental proceedings or judicial proceedings are still pending. 
H
914 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
14. The right to receive pension was recognized as a right to 
property by the Constitution Bench jl.,ldgment of this Court in 
Deokinandan Prasad v. State of Bihar, (1971) 2 SCC 330, as is 
apparent from the following discussion: (SCC pp. 342-43, paras 
27-33) 
"27. The last question to be considered, is, whether the right 
to receive pension by a Government servant is property, so 
as to attract Articles 19(1 )(f) and 31 (1) of the Constitution. 
This question falls to be decided in order to consider whether 
the writ petition is maintainable under Article 32. To this 
aspect, we have already adverted to earlier and we now 
proceed to consider the same. 
28. According to the Petitioner the right to receive pension 
is property and the Respondents by an executive order dated 
12-6-1968 have wrongfully withheld his pension. That order 
affects his fundamental rights under Articles 19(1 )(t) and 
31 (I) of the Constitution. The Respondents, as we have 
already indicated, do not dispute the right of the Petitioner to 
get pension, but for the order passed on 5-8-1996. There is 
only a bald avennent in the counter-affidavit that no question 
of any fundamental right arises for consideration. Mr. Jha, 
learned Counsel for the Respondents, was not prepared to 
take up the position that the right to receive pension cannot 
be considered to be property under any circumstances. 
According to him, in this case, no
order has been passed by 
the State granting pension. We understood the learned 
Counsel t<;> urge that ifthe State had passed an order granting 
pension and later on resiles from that order, the latter order 
may be considered to affect the Petitioner's right regarding 
property so as to attract Articles 19(1)(f) and 31(1) of the 
Constitution. 
29. We are not inclined to acceptthe contention of the learned 
Counse 1 for the Respondents. By a reference to the material 
provisions in the Pension Rules, we have already indicated 
that the grant of pension does not depend upon an order 
being passed by the authorities to that effect. It may be that 
for the purposes of quantifying the amount having regard to 
the period of service and other allied matters, it may be
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
necessary for the authorities to pass an order to that effect, 
but the right to receive pension flows to an officer not because 
of the said order but by virtue of the rules. The rules, we 
have already pointed out, clearly recognise the right of persons 
like the petitioners to receive pension under the circumstances 
mentioned therein. 
xxx 
xxx 
xxx 
33. Having due regard to the above decisions, we are of the 
opinion that the 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 I 9( I l(f) and it is not 
saved by clause (5) of Article 19. Therefore, it follows that 
the order dated 12-6-1968, denying the petitioner right to 
receive pension affects the fundamental right of the petitioner 
under Articles 19( I )(t) and 31 (I) of the Constitution, and as 
such the writ petition under Article 32 is maintainable. It may 
be that under the Pension Act (23 of I 871) there is a bar 
against a civil court entertaining any suit relating to the matters 
mentioned therein. That does not stand in the way of writ of 
mandamus being issued to the State to properly consider the 
claim of the petitioner for payment of pension according to 
law." 
I 6. The fact remains that there is an imprimatur to the legal principle 
that the right to receive pension is
recognized as a right in 
"property". Article 300-A of the Constitution of India reads as 
under: 
"300-A. Persons not to be deprived of property save by 
authority oflaw.- No person shall be deprived of his property 
save by authority of law." 
Once we proceed on that premise, the answer to the question 
posed by us in the beginning of this judgment becomes too obvious. 
A person cannot be deprived of th is pension without the authority 
oflaw, which is the Constitutional mandate enshrined in Article 300-
A of the Constitution. It follows that attempt of the Appellant to 
take away a part of pension or gratuity or even leave encashment 
915 
A 
B 
c 
D 
E 
F 
G 
H
916 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
without any statutory provision and under the umbrage of 
administrative instruction cannot be countenanced." 
For the same proposition, reliance was placed on the decision of 
this Court in the U.P. Raghavendra Acharya case (supra). 
Learned counsel while seeking to adopt the conclusions drawn by 
this Court in the above case asserted, that the subscription to the 
pensionary scheme by itself, would create a vested right in the 
respondent-employees, to draw pension under 'the 1999 Scheme'. 
35. At this juncture, learned counsel for the respondent-employees 
also placed reliance on the U.P. Raghavendra Acharya case (supra), 
and invited the Court's attention to the following:-
"19. The fact that the appellants herein were treated to be on a 
par with the holders of similar posts in government colleges is 
neither denied nor disputed. The appellants indisputably are 
governed by the UGC scales of pay. They are entitled to the 
pensionary benefits also. They had been given the benefits of the 
revision of scales of pay by the I Q•h Pay Revision Committee 
w.e.f. 1-1-1986. The pensionary benefits payable to them on 
attaining the age of superannuation or death were also stated to 
be on a par with the employees of the State Government. The 
State of Karnataka, as noticed hereinbefore, for all intent and 
purport, has treated the teachers of the government aided colleges 
and the regional engineering colleges
on the one hand and the 
teachers of the colleges run by the State itself on the other hand 
on a par. Even the financial rules were made applicable to them in 
terms of the notifications, applying the rule of incorporation by 
reference. Although Rule 296 of the Rules per se may not be 
applicable so far as the appellants are concerned, it now stands 
admitted that the provisions thereof have been applied to the case 
of the appellants also forthe purpose of computation of pensionary 
benefits. Therefore there cannot be any doubt whatsoever that 
the term "Emoluments" as contained in Rule 296 of the Rules 
would also apply to the case of the appellants. Rule 296 of the 
Rules reads as under: 
"296. In respect of retirement or death while in service of 
government servants on or after first day of July, 1993, the 
term 'emoluments' for the purpose of this Chapter means,
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
the basic pay drawn by the government servant in the scale 
of pay applicable to the post on the date of retirement or 
death and includes the following, but does not include pay 
and allowance drawn from a source other than the 
Consolidated Fund of the State,-
xxx 
xxx 
xxx 
Note:- (a) Basic pay means the pay drawn in ·the time-scale 
of pay applicable to the post immediately before retirement 
or death." 
xxx 
xxx 
xxx 
22. The State while implementing the new scheme for payment 
of grant of pensionary benefits to its employees, may deny the 
same to a class of retired employees who were governed by a 
different set of rules. The extension of the benefits can also be 
denied to a class of employees ifthe same is permissible in law. 
The case of the appellants, however, stands absolutely on a 
different footing. They had been enjoying the benefit of the revised 
scales of pay. Recommendations have been made by the Central 
Government as also the University Grants Commission to the State 
of Karnataka to extend the benefits of the Pay Revision 
Committee in their favour. The pay in their case had been revised 
in 1986 whereas the pay of the employees of the State of 
Karnataka was revised in 1993. The benefits of the 
recommendations of the Pay Revision Committee w.e.f. 1-1-1996, 
thus, could not have been denied to the appellants. 
23. The stand of the State of Kamataka that the pensionary
benefits had been conferred on the appellants w.e.f. 1-4-1998 on 
the premise that the benefit of the revision of scales of pay to its 
own employees had been conferred from 1-1-1998, in our opinion, 
is wholly misconceived. Firstly, because the employees of the State 
of Karnataka and the appellants, in the matter of grant of benefit 
of revised scales of pay, do not stand on the same footing as 
revised scales of pay had been made applicable to their cases 
from a different date. Secondly, the appellant~ had been given the 
benefit of the revised scales of pay w.e.f. 1-1-1996. It is now well 
settled that a notification can be issued by the State accepting the 
recommendations of the Pay Revision Committee with 
retrospective effect as it was beneficent to the employees. Once 
917 
A 
B 
c 
D 
E 
F 
G 
H
918 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
such a retrospective effect is given to the recommendations of 
the Pay Revision Committee, the employees concerned despite 
their reaching the age of superannuation in between the said dates 
and/or the date of issuance of the notification would be deemed 
to be getting the said scales of pay as on 1-1-1996. By reason of 
such notification, as the appellants had been derived of a vested 
right, they could not have been deprived therefrom and that too 
by reason of executive instructions. 
24. The contention of the State that the matter relating to the 
grant of pensionary benefits vis-a-vis the revision in the scales of 
pay stands on different footing, thus, must be rejected. 
25. Pension, as is well known, is not a bounty. It is treated to be a 
deferred salary. It is akin to right of property. It is co-related and 
has a nexus with the salary payable to the employees as on the 
date of retirement. 
26. These appeals involve the question of revision of pay and 
consequent revision in pension and not the grant of pension for 
the first time. Only the modality of computing the quantum of 
pension was required to be determined in tenns of the notification 
issued by the State of Karnataka. For the said purpose, Rule 296 
of the Rules was made applicable. Once this rule became 
applicable, indisputably the computation of pensionary benefits 
was required to be carried out in terms thereof. The Pension Rules
envisage that pension should be calculated only on the basis of 
the emoluments last drawn. No order. therefore, could be issued 
which would be contrary to or inconsistent therewith. Such 
emoluments were to be reckoned only in tenns of the statutory 
rules. If the State had taken a conscious decision to extend the 
, benefit of the UGC pay scales w.e.f. 1-1-1996, to the appellants, 
al lowing them to draw their pay and allowances in terms thereof, 
~~fail to see any reas911 as to why the pensionary benefits would 
not be extended to them from the said date. 
xxx 
xxx 
xxx 
28. The impugned order furthermore is opposed to the basic 
principles of law inasmuch as by reason of executive instructions 
an employee cannot be deprived of a vested or accrued right. 
Such a riglat to draw pension to the extent of 50% of the
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 
919 
[JAGDJSH SINGH KHEHAR, J.] 
emoluments, computed in terms of the rules, w.e.f. 1-1-1996, vested 
A 
in the appellants in terms of government notification read with 
Rule 296 of the Rules." 
36. It was also the contention ofleamed counsel for the respondent-
empbyees, that the present controversy needs to be examined from the 
perspective, that the respondent-employees did not make any endeavour 
to claim pension as a matter of parity with Government employees, in 
the State of Himachal Pradesh. It was submitted, that legally such a 
claim would not be sustainable, because civil servants in the State of 
Himachal Pradesh, and employees of Government owned corporations 
in the State, can not be considered as entitled to the same monetary 
benefits. It was however pointed out, that insofar as the present 
controversy is concerned, the State ofHimachal Pradesh at its own, had 
granted parity to employees of Government owned corporations on the 
subject of pension, with Government employees in the State. Examined 
in the above context, according to learned counsel, it is apparent that the 
right of employees of Government owned corporations, in the State of 
Himachal Pradesh, on the issue of pension, stood conceded in their favour, 
on tl>e basis of 'the 1999 Scheme'. It was in the above view of the 
matter, that learned counsel for the respondent-employees asserted, that 
the revocation of a benefit which the State Government
conceded to 
employees of Government owned corporations, was per se arbitrary, 
and as such, not sustainable in law. 
37. Learned counsel for the respondent-employees raised a plea 
of discrimination as well. It was submitted, that through the repeal 
notification dated 2.12.2004, 'the 1999 Scheme' was sought to be 
withdrawn for one set of employees, and was sought to be retained for 
another set of employees. In this behalf it was submitted, that the action 
of the State Government in fixing the date of retirement, as a cut-off 
date for withdrawing or sustaining pensionary benefits, is clearly 
unacceptable in law. In this behalf it was pointed out, that this Court on 
a number of occasions held, that the date of retirement, cannot be a 
valicf'criterion for classification. It was submitted, that the fortuitous 
circumstance (date) of retirement, by a day earlier or a day later (than 
the cut-off date), would result in discriminatory consequences, for persons 
who constitute a homogenous class. It was contended, that whilst 'the 
1999 Scheme' was in operation, all employees of State owned 
corporations who had opted for the same, constituted a homogenous 
B 
c 
D 
E 
F 
G 
H
920 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
(2016] 6 S.C.R. 
class, and there could be no division to segregate such a homogenous 
class, so as to extend pensionary benefits to one set of employees, and 
to revoke the same, for another. In order to support the above contention, 
learned counsel for the respondents placed reliance on the D.S. Nakara 
case (supra) and drew our attention to the following observations 
recorded therein:-
"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 
worst off than those who retire later. Therefore, this
division which 
classified pensioners into two classes is not based on any rational 
principle and ifthe 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 wi II 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 wi II be computed on 
the basis of last ten months' average. The artificial division stares 
into face and is unrelated to any principle and whatever principle, 
ifthere be any, has absolutely no nexus to the objects sought to be
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
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 ofretirement would 
have a traumatic effect. Division is thus both arbitrary and 
unprincipled. Therefore the classification does not stand the test 
of Article 14." 
On the same proposition, reliance was placed on Union oflndia v. 
SPS Vains (Retd.), (2008) 9 SCC 125, and the Court's attention was 
invited to the following observations:-
"28. The question regarding creation of different classes within 
the same cadre on the basis of the doctrine of intelligible differentia 
having nexus with the object to be achieved, has fallen for 
consideration at various intervals for the High Courts as well as 
this Court, over the years. The said question was taken up by a 
Constitution Bench in the case of D.S. Nakara v. Union oflndia, 
(1983) 1 SCC 305, where in no uncertain terms throughout the 
judgment it has been repeatedly observed that the date of 
retirement of an employee cannot form a valid
criterion for 
classification, for ifthat is the criterion those who retired by the 
end of the month will form a class by themselves. In the context 
of that case, which is similar to that of the instant case, it was held 
that Article 14 of the Constitution had been wholly violated, 
inasmuch as, the Pension Rules being statutory in character, the 
amended Rules, specifying a cut-off date resulted in differential 
and discriminatory treatment of equals in the matter of commutation 
of pension. It was further observed that it would have a traumatic 
effect on those who retired just before that date. The division 
which classified pensioners into two classes was held to be artificial 
and arbitrary and not based on any rational principle and whatever 
principle, if there was any, had not only no nexus to the objects 
sought to be achieved by amending the Pension Rules, but was 
counterproductive and ran counter to the very object of the pension 
schen;ie. It was ultimately held that the classification did not satisfy 
921 
A 
B 
c 
D 
E 
F 
G 
H
922 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
the test of Article 14 of the Constitution. 
29. The Constitution Bench (in D.S. Nakara (supra)), has 
discussed in detail the objects of granting pension and we need 
not, therefore, dilate any further on the said subject, but the decision 
in the aforesaid case has been consistently referred to in various 
subsequent judgments of this Court, to which we need not refer. 
In fact, all the relevant judgments delivered on the subject prior to 
the decision of the Constitution Bench have been considered and 
dealt with in detail in the aforesaid case. The directions ultimately 
given by the Constitution Bench in the said case in order to resolve 
the dispute which had arisen, is ofrelevance to resolve the dispute 
in this case also. 
30. However, before we give such directions we must also observe 
that the submissions advanced on behalf of the Union of India 
cannot be accepted in view of the decision in D.S. Nakara's case 
(supra). The object sought to be achieved was not to create a 
class within a class, but to ensure that the benefits of pension 
were made available to all persons of the same class equally. To 
hold otherwise would cause violence to the provisions of Article 
14 of the Constitution. It could not also have been the intention of 
the authorities to equate the pension payable to officers of two 
different ranks by resorting to the step up principle envisaged in 
the fundamental rules in a
manner where the other officers 
belonging to the same cadre would be receiving a higher pension." 
38. It was therefore asserted on behalf of the respondent-
employees, that the concept of a cut-off date cannot be adopted, in case 
of a repeal of a pension scheme prospectively. In this behalf it was 
submitted, that it could not be forgotten, that consequent upon the 
respondent-employees having been enrolled in 'the 1999 Scheme', they 
had been deprived of the employer's share of provident fund (and the 
interest which had accrued, thereon). The same ought to be treated as 
consideration, which passed from the respondent-employees to the State 
Government, consequent upon their enrollment into 'the 1999 Scheme'. 
On account of having foregone the employer's contribution which was 
a pre-requisite for enrollment in 'the 1999 Scheme', it was submitted, 
that the respondent-employees must be deemed to have contributed by 
way of consideration, to earn the benefit which would accrue to them, 
under 'the 1999 Scheme'. Keeping the above legal proposition in mind,
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SJNGH KHEHAR, J.] 
it was pointed out, that the action of the State Government in depriving 
the respondent-employees of pensionary benefits, while allowing the same 
to such of the employees, who had retired on or before 2.12.2004, was 
discriminatory and unsustainable in law. It was also the contention of 
learned counsel for the respondent-employees, that the only situation 
where a claim for pension under 'the 1999 Scheme' could have been 
legaliy denied, is when a succeeding pension scheme introduced by the 
employer, postulated better retiral benefits. 
39. Reliance was also placed on Pepsu Road Transport 
Corporation, Patiala v. Mangal Singh, (2011) 11 SCC 702, wherein it has 
been held as under:-
"48. The concept of"pension" has also been considered in Corpus 
Juris Secundum, Vol. 70, at p. 423 as thus: 
"A pension is a periodical allowance of money granted by 
the government in consideration or recognition of meritorious 
past services, or of loss or injury sustained in the public 
service. A pension is mainly designed to assist the pensioner 
in providing for his daily wants, and it presupposes the 
continued life of the recipient." 
Based on the above, it was the contention oflearned counsel, that 
the State Governments' inference, based on the report of the Committee, 
dated 15.11.2003, that 'the 1999 Scheme' was not viable, was clearly 
unacceptable. In this behalf, learned counsel invited the Court's
attention 
to the following observations, recorded in the said report:-
"14. After determining the magnitude of inflows and outflows, the 
sustainability of the corpus has been analysed assuming average 
interest income from corpus investment at various levels ofinterest 
over a period of I 0 years. The highest rate of interest has been 
assumed to be 6.5% and the lowest 5.5%. In each scenario, the 
net surplus available for ploughing back into the pension fund starts 
declining from the 6th year onwards. This is essentially due to the 
fact that with dwindling fresh recruitments, the pension liabilities 
will continue to increase over the years, but the inflows would 
decline due to reduced contributions. Details of the calculations 
are as under:-
5.5% 
Annexure-F 
923 
A 
B 
c 
D 
E 
F 
G 
H
924 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
5.75% 
6.00% 
6.25% 
6.50% 
Annexure-F-1 
Annexure-F-Il 
Annexure-F-111 
Annexure-F-IV" 
[2016] 6 S.C.R. 
It was submitted, that there was no legitimate basis for recording 
such a conclusion. 
40. It was also the contention oflearned counsel, that the judgment 
rendered by the High Court, rightly negated the financial impact of 'the 
1999 Scheme', because in terms of the conclusions drawn in the judgment, 
the same would not be applicable to future employees. And the deficiency 
in the financial resources was accordingly fastened on the State 
Government. On the issue in hand, it was submitted, that a number of 
employees, who became members of 'the 1999 Scheme', and would 
retire after 2.12.2004 (i.e. the cut-off date, determined under the repeal 
notification, dated 2.12.2004) is a definite number. In this behalf it was 
pointed out, that if the employees, who became members of 'the 1999 
Scheme', are to be taken into consideration, there would be 6,730 
employees, who would draw pension on their retirement. It was 
accordingly submitted, that there would be no further increase in the 
liability under 'the 1999 Scheme'. In order to demonstrate that the 
available funds accumulated on account of the employee's contribution 
to the EPF/CPF concerned, were sufficient to meet the liability, to 
administer the pension scheme, it was submitted, that the same has 
increased from 56 crores in 2003 to 253 crores in 2015. It was
pointed 
out, that the aforesaid figures emerged, despite the withdrawal of provident 
fund amounts, by a number of employees. It was, therefore submitted, 
that payment of pensionary benefits to 6, 730 employees, was well within 
the financial reach of the State Government, and that, the decision of the 
State Government to issue the repeal notification, on the ground that 
'the 1999 Scheme' was not financially viable, was not acceptable. 
41. It was also the contention oflearned counsel for the respondent-
employees, that all the State owned corporations were fully controlled 
by the Government. All shares in the corporations were held by the 
State Government. The management of all the corporations, was also 
under the direct control and supervision of the Government. Accordingly 
it was submitted, that the ultimate authority in determining the conditions
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
of service of the concerned corporations, was vested with the 
Government. In this behalf, reliance was placed on Articles 51 and 52 
of Articles of Association of the Himachal Pradesh State Forest 
Development Corporation Limited. It was highlighted that similar Articles 
of Association governed the other corporations, as well. It was therefore 
submitted, that the State Government, had no business, to withdraw itself, 
from its responsibility and commitment. 
42. It was, therefore submitted, that the Government has 
consistently been extending the benefit of similar conditions of service, 
to employees of Government owned corporations, as are available to 
Government employees in the State. The Government having taken a 
conscious decision to extend pensionary benefits to all employees of 
Government owned corporations, under 'the 1999 Scheme', is clearly 
precluded from withdrawing the same, specially on account of the fact, 
that the corporations under consideration, are instrumentalities of the 
State in terms of Article 12 of the Constitution oflndia. According to 
learned counsel, 'the 1999 Scheme' was liable to be treated as a welfare 
measure, extended by the State Government to all employees, and 
therefore, it should not shirk its responsibility, to fulfill any financial 
deficiency therein, out of the Government treasury. In the above view 
of the matter it was submitted, that the
impugned judgment rendered by 
the High Court, deserved no interference. 
· 
43. It was also asserted, that even if it was assumed, that the 
report of the committee, dated 15.11.2003, with reference to the status 
of the corpus fund, is correct, still the same is liable to be rejected because 
the committee had sought views of 17 corporations/boards covered by 
'the 1999 Scheme', however, it received views of 7 corporations only, 
namely, Himachal Pradesh Agro Industries Corporation, Himachal 
Pradesh Tourism Development Corporation, Himachal Pradesh State 
Industrial Development Corporation. Himachal Pradesh Horticultural 
Produce Marketing and Processing Corporation Ltd., Himachal Pradesh 
Housing Board, 1-limachal Pradesh State Forest Development 
Corporation Ltd., and Himachal Pradesh SC & ST Development 
Corporation. The above corporations had expressed the opinion, that a 
unified trust for pension with financial support of the State Government, 
could salvage the financial position, to enable the corpus fund to cater to 
payment of pension to employees under 'the 1999 Scheme'. It was 
therefore the contention of learned counsel for the respondents, that 
925 
A 
B 
c 
D 
E 
F 
G 
H
926 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
A 
credence should not be given to the proposition propounded at the hands 
of the State Government, that 'the 1999 Scheme' was not financially 
viable. 
B 
c 
D 
E 
44. In order to controvert the submissions advanced at the hands 
ofleamed counsel for the respondent-employees, Mr. P.P. Rao, learned 
senior counsel emphatically pointed out, that all the judgments relied 
upon by the respondents were inapplicable to the present controversy. 
It was submitted, that the judgments relied upon, did not deal with the 
rights of serving employees. It was pointed out, that a clear enunciation 
in this behalf was recorded by this Court, that the prayers raised at the 
hands of the respondent-employees, could only relate to superannuated 
personnel. For the above, learned counsel invited our attention to the 
Chairman, Railway Board case (supra), wherefrom the following 
observations were relied upon:-
"20. It can, therefore, be said that a rule which operates in futuro 
so as to govern future rights of those already in service cannot be 
assailed on the ground of retroactivity as being violative of 
Articles 14 and 16 of the Constitution, but a rule which seeks to 
reverse from an anterior date a benefit which has been granted 
or availed of, e.g., promotion or pay scale, can be assailed as 
being violative of Articles 14 and 16 of the Constitution to the 
extent it operates retrospectively. 
xxx 
xxx 
xxx 
25. In these cases we are
concerned with the pension payable to 
the employees after their retirement. The respondents were no 
longer in service on the date of issuance of the impugned 
F 
notifications. The amendments in the rules are not restricted in 
their application in futuro. The amendments applv to employees 
who had already retired and were no longer in service on the date 
the impugned notifications were issued. 
G 
H 
xxx 
xxx 
xxx 
30. The respondents in these cases are employees who had retired 
after 1-1-1973 and before 5-12-1988. As per Rule 2301 of the 
Indian Railway Establishment Code they are entitled to have their 
pension computed in accordance with Rule 2544 as it stood at the 
time of their retirement. At that time the said rule prescribed that
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
Running Allowance limited to a maximum of 75% of the other 
emoluments should be taken into account for the purpose of 
calculation of average emoluments for computation of pension 
and other retiral benefits. The said right of the respondent-
employees to have their pension computed on the basis of their 
average emoluments being thus calculated is being taken away 
by the amendments introduced in Rule 2544 by the impugned 
notifications dated 5-12-1988 inasmuch as the maximum limit has 
been reduced from 75% to 45% for the period from 1-1-1973 to 
31-3-1979 and to 55% from 1-4-1979 onwards. As a result the 
amount of pension payable to the respondents in accordance with 
the rules which were in force at the time of their retirement has 
been reduced. 
xxx 
xxx 
xxx 
33. Apart from being violative of the rights then available under 
Articles 31 (I) and 19( I )(f), the impugned amendments, insofar as 
they have been given retrospective operation, are also violative of 
the rights guaranteed under Articles 14 and 16 of the Constitution 
on the ground that they are unreasonable and arbitrary since the 
said amendments in Rule 2544 have the effect of reducing the 
amount of pension that had become payable to employees who 
had already retired from service on the date of issuance of the 
impugned notifications, as per the provisions contained in Rule 
2544 that were in force at the time of their
retirement. 
34. The learned Additional Solicitor General has, however, 
submitted that the impugned amendments cannot be regarded as 
arbitrary for the reason that by the reduction of the maximum 
limit in respect of Running Allowance from 75% to 45% for the 
period 1-1-1973 to 31-3-1974 and to 55% from 1-4-1979 onwards, 
the total amount of pension payable to the employees has not 
been reduced. The submission of the learned Additional Solicitor 
General is that since the pay scales had been revised under the 
1973 Rules with effect from 1-1-1973, the maximum limit of 45% 
or 55% of the Running Allowance will have to be calculated on 
the basis of the revised pay scales while earlier the maximum 
limit of 75% of Running Allowance was being calculated on the 
basis of unrevised pay scales and, therefore, it cannot be said that 
there has been any reduction in the amount of pension payable to 
927 
A 
B 
c 
D 
E 
F 
G 
H
928 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
the respondents as a result of the impugned amendments in Rule 
2544 and it cannot be said that their rights have been prejudicially 
affected in any manner. We are unable to agree. As indicated 
earlier, Rule 2301 of the Indian Railway Establishment Code 
prescribes in express terms that a pensionable railway servant's 
claim to pension is regulated by the rules in force at the time 
when he resigns or is discharged from the service of Government. 
The respondents who retired after 1-1-1973 but before 5-12-1988 
were, therefore, entitled to have their pension computed on the 
basis of Rule 2544 as it stood on the date of their retirement. 
Under Rule 2544, as it stood prior to amendment by the impugned 
notifications, pension was required to be computed by taking into 
account the revised pay scales as per the 1973 Rules and the 
average emoluments were required to be calculated on the basis 
of the maximum limit of Run11ing Allowance at 75% of the other 
emoluments. including the pay as per the revised pay scales under 
the 1973 Rules. Merely because the respondents were not paid 
their pension on that basis in view of the orders of the Railway 
Board dated 21-1-1974, 22-3-1976 and 23-6-1976, would not mean 
that the pension payable to them was not required to be computed 
ir. accordance with Rule 2544 as it stood on the date of their 
retirement. Once it is held that pension payable to such employees
had to be computed in accordance with Rule 2544 as it stood on 
the date of their retirement, it is obvious that as a result of the 
amendments which have been introduced in Rule 2544 by the 
impugned notifications dated 5-12-1988 the pension that would be 
payable would be less than the amount that would have been 
p:;yable as per Rule 2544 as it stood on the date of retirement. 
The Full Bench of the Tribunal has, in our opinion, rightly taken 
the view that the amendments that were made in Rule 2544 by 
the impugned notifications dated 5-12-1988, to the extent the said 
amendments have been given retrospective effect so as to reduce 
the maximum limit from 75% to 45% in respect of the period 
from 1-1-1973 to 31-3-1979 and reduce it to 55% in respect of 
the period from 1-4-1979, are unreasonable and arbitrary and are 
violative of the rights guaranteed under Articles 14 and 16 of the 
Constitution." 
For the same proposition, reliance was placed on the U .P.
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
Raghavendra Acharya case (supra), wherefrom our attention was 
drawn to the following observations:-
"2. The appellants in these appeals are retired teachers of the 
University and Private Aided Colleges (to whom UGC scales of 
pay were applicable). They have retired during the period 1.1.1996 
to 31.3.1998. So far as the teachers of the University or Privates 
. Aided Colleges are concerned, indisputably, they were being paid 
the same salary as was being paid to the teachers of the 
Government colleges. The appellants in Civil Appeal No. 1391/ 
2006, have retired from the Karnataka Regional Engineering 
College, Surathkal, Karnataka, which was established by the 
Government of India at the request of the Government of 
Karnataka. It is a Centrally aided institution as envisaged under 
Entry 64 of List 1 of the Seventh Schedule to the Constitution of 
India. So far as the said institution is concerned, its expenditure 
used to be borne by the Government of India and the State of 
Karnataka. It, however, has been notified by the Government of 
India as a Deemed University with effect from 26.6.2002. 
xxx 
xxx 
xxx 
31. The appellants had retired from service. The State therefore 
could not have amended the statutory rules adversely affecting 
their pension with retrospective effect." 
45. A different projection was sought to be made by Mr. R. 
Venkataramani, learned senior counsel, who also
represented the 
appellants. Learned counsel, placed reliance on State of Assam v. Barak 
Upatyaka D.U. Karmachari Sanstha, (2009) 5 SCC 694, and drew our 
attention to the following:-
"2. By that order the Division Bench upheld the order dated 
23.12.1999 of the learned Single Judge in Civil Rule No. 2996/ 
1995 allowing the respondent's writ petition and directing the state 
government to sanction financial assistance by way of grant-in-
aid to Cachar and Karimganj District Milk Producers' Cooperative 
Union Limited ("CAMUL", for short) so as to enable CAMUL to 
make regular payment of monthly salaries, allowances as also the 
arrears to its employees. 
· 
xxx 
xx.x 
xxx 
929 
A 
B 
c 
D 
E 
F 
G 
H
930 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
4. It is contended that the State Government had all-pervasive 
control over the affairs and management of CAM UL and 
therefore it should be treated as a department of the Government 
of Assam, though registered as a co-operative society by lifting 
the corporate veil. It was further contended that State Government 
was responsible and I iable to pay the salaries and emoluments of 
the employees ofCAMUL and it was not justified in withholding 
the grant amount. 
5. The respondent Union therefore sought a direction to the State 
Government to release the arrears of pay and allowances of 
employees ofCAMUL with effect from December 1994 and for 
a direction to continue to pay the salary and allowances to the 
employees ofCAMUL, every month in future. In addition to the 
state government (Respondent 1) and its officers (Respondents 2 
to 4), the Union of India (Respondent 5) and CAMUL and its 
Managing Director (Respondents 6 and 7) were impleaded as 
parties to the writ petition. 
6. The State Government opposed the petition. It inter-
alia contended that the grant-in-aid was extended for helping 
CAMUL in its different development activities; that under a 
Centrally sponsored scheme, between 1981 to I 986, the eannarked 
amount was released on 50:50 basis by the Central and State 
Government with 70% loan component and 30% as grant 
component; that though the loan component was not repaid by 
CAMUL, the
State Government continued the grant-in-aid for 
p11rposes of development activities; that the State Government 
had also provided Rs.43.60 lakhs for developing the milk-
p1 ocessing infrastructure of CAMUL; that despite such assistance, 
CAMUL became defunct and stopped all its activities and 
thereafter the Silchar Town Milk Supply Project was being run by 
the State's Dairy Development Department itself; that at no time, 
the State Government made any commitment or agreed to bear 
the salaries of employees ofCAMUL or any other similar societies; 
that CAMUL had to generate its own funds and resources to pay 
the salaries of its staff; and that as there was no relationship of 
employer and employee between the State Government and the 
employees ofCAMUL, it was not responsible to bear or pay any 
amount towards the salaries of the employees ofCAMUL.
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
7. The learned Single Judge allowed the writ petition. He held 
that the State Government through its Veterinary Department 
undertook the Integrated Cattle Development Projects (ICDP) in 
various districts of Assam; and as a part of the said project, an 
ICDP block was created at Ghungoor, Silchar in Cachar district; 
that 32 cooperative societies of Milk Producers were established 
and CAMUL was formed as an Apex Body of those co-operative 
societies; that the Dairy Development Department of the State 
Government had been providing grant-in-aid earmarked in the 
State budget every year to CAMUL; that the State Government 
failed to offer any explanation or reason for stopping the grant-in-
aid from 1994: that the Dairy Development Project at Silchar 
was purely a State Government scheme and as that Project has 
not been discontinued and as there was no decision to bar CAM UL 
from receiving grant-in-aid which was being granted from 1982-
. 83 till 1994, the State Government could not deny the grant-in-aid 
amount. Consequently. the learned Single Judge directed release 
of the grand-in-aid for paying monthly salaries and allowances 
along with arrears to the employees. 
xxx 
xxx 
xxx 
10. CAMUL indisputably is a co-operative society registered under 
the provisions of the Assam Cooperative Societies Act, 1949. 
Section 85 of the said Act provides that every registered society 
shall be deemed to
be a body corporate by the name under which 
it is registered, with perpetual succession and a common seal, and 
with power to hold property, to enter into contracts, institute and 
defend suits and other legal proceedings and to do all things 
necessary for the purposes for which it was con.;tituted. 
11. Therefore, CAMUL. even if it was "State" for purposes of 
Article 12, was an independent juristic entity and could not have 
been identified with or treated as the State Government. In the 
view we have taken, it is not necessary in this case to examine 
whether CAMUL was "State" for purposes of Article 12. 
xxx 
xxx 
xxx 
14. The respondent has not been able to show any right in the 
employees of CAMUL against the State Government. or any 
obligation on the part of the State Government with reference to 
931 
A 
B 
c 
D 
E 
F 
G