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SH. O.K. UDAYASANKARAN AND ORS. ETC ..

UNION OF INDIA AND ORS. ETC. ·

MARCH 27, 1996

A.M. AHMADI, CJ, SUJATA V. MANOHAR

. AND K. VENKATASWAMI, JJ.) . . . . . - .

S en•ice Law :

Life J11szrrance Corporation-Pay faation of exsen•iceme11 re-employed C prior to 1.1.1988-Drawing salary after deduction of pe11sion from defe11ce services-Compensatory scheme framed for notional fitmelll on exercise of option w.e.f. U.1988-Whether available for Appellants who joi11ed after 1.1.1988-Drawing'salary in addition to pensio11from defence services-Held, No.-Tl1{ Option ha~ to be exercised 011/y by existillg ex-serviceme11.

The Life lnsuratice Crporation of India framed a scheme in 1989 for liiation of pay of .ex-servicemen who were re-employed in .the. Corporation.

As per para 3.7 of the cheme if an ex-servicemen was re-employed within three years after discharge from Defence Services then his last dralln E salary in th~ Defence Servicesuill be compared to his starting saiary on (he

date of his re-implormerit so as t~ priect his last drawn salary. As per

Pra_ 3.s. of .the .inSirutins if the ex-seniceman is re-employe_d after a

peiod of thee ya..S aftr dischrge, his lat dr.iwn salary in defence

sl"'liC~ ;.;,, jj<I be c;; paed with hi~ salary that h~ ,;.ould have drawn if he had bee.; imiatiy mployed and ti1e salary wl; ich the ex-servicemn F i.m get' o,; the actat date of his ;:.mplo).,;.ent by the Corporatin is

.; tionally worked out. The hstrnction also provided that \he ex-ser,

Vi~~~3D '!iii' get the behefii-r n.Y eision r pay scals in lhe int~, rrgnll~.

Howeve~, the nie.; t.wouid be notionally effected and acitial benefit was '" ''.'•'' ·-.. . f - ' - '• -. ' . ; -.- . • . - - -; '' be given onlyfro1111.l.1988. The fitment under Para 3.8 was applicable only . i~ thus~ who wi-e employed plor to' 1.1.19ss and arter exercising an optio'n. G

Th,• ppellant, ":ho were ex; servlcemen who were 're-employed 'fter 1.1.1988 challenged the applicability of the instructions. The appellants coniended that there was no basis forthe cutoff date and tht the o.ptio'ncu~-c.; nsent letters for such a fite.; t was also obtained from ex~er •

vime~ employd arier 1.1.1988. The respndent's stated that .~lier the H . ·- . ,. . - - .. '.,. 955

A salary of .ex-servicemen wherever re-employed in Government or Public Service, the component of pension was deducted and adjusted in the salary on re-employment; that the corporation decided to allow the ex-servicemen who , joined after 1.1.1988 to retain their pension and they were getting salary in addition to the pension; that since this benefit was not available to those were re-employed prior to 1.1.1988, it was decided to compensate B them by notional fitinent as per para 3.8 of the instructions; that they did not obtain any consent letters from appellants and that by mistake they had allowed three appellants the benefit of para 3.8 and that they had to correct this mistake by recalculating their salary. Dismissing the Appeals and Writ Petition, this Court c

HELD : 1. Para 6 of the instuctions clearly provides that the option-cum-consent letters has to be obtained from each existing ex-serviceman employee opting fitment of salary as per the instruction. It is to be exercised only by existing ex-servicemen employees of Life Insurance Corporation. (963-B)

2. The High Court was right in rejecting the contentions of the appellants. There Is no reason to interfere with the findings given by the High Co.urt. [963-EF)

3. The respondents ore entitled to reduce the pay of the appellants granted to them erroneously, In the light of the instructions. (963-D]

CIVIL APPELLATE/ORIGINAL JURISDICTION: Civil Appeal No. 5255 of 1996 Etc.'

F From the Judgment and Order dated 3.6.91 of the Kerala High Court in W.A No. 451 of 1991.

Dr. RajeeC Dhavan, H.N. Salve, G.L. Sanghi, V.C.Mahajan, Rakesh Luthra, Gopal Singh, .KV. Mohan, Ajay Singh, H.K. Chaturvedi, H.P.

G Sharma, S. Markandeya, Pravir Choudhary, Ms. Indira Sawahney and S.'N.

Terdol for the appearig parties.

The Judgment of the Court was delivered by

MRS. SUJATA V. MANOHAR, J. Leave granted in .S.L.P. (C) No.

H 2158 of 1992.

O.K. UDAYASANKARANv. U.0.1. 957

The appellants, are the employees .of the L!fe lrisurane Corporation A of India al Kozhikotle. They are ex-servicemen who were re-employed by

( . . - - . the Life Insurance Corp.oration of fadia after their discharge from military service. Thre is a gap of more than three years between their discharge from military service and their appointment in .the Life Insurance Corporation of India. The dispute raised in this appeal relates to the fixation of B salary of these ex-servicemen on their re-employment in the Life Insurance Corporation of India. Along with this appeal, Writ Petition No. 437 of 19_93 has a!So been heard. This petition is filed by the Ex-servicemen Life Insurance Corporation Employees Association and the issue raised in this petition is identical with the issue raisd in the appeal: Th~ dispute reltes to ex-servicemen who have been appointed after a gap of three years or C

~ . ' . . - . . more from. their discharge from military service to. the .Life Insurarice Corporation of India and pertains to those who have been so appointed after 1.l.1988.

 The dispute pertains to the interpretation of. instructions dated 2nd of .lune: 1989 i.ssued by the Central Office of the Life Insurance Corpora- D tion of India relating to re-employment of ex-servicemen in the Life Insurance Corporation and their pay fixation. The relevant Paragraphs of these Instructions are set out below :

113. Pay Fixation o, n Re-cntploynient :

.I .

3.1 : Basic Salary of a re-employed Ex-serviceman shiill be fitted at the minimum of the scale in whicn he is appointed. H:owever, if the gross salary as per 'Y' below at the minimum of the scales does not produce an amount equal to r more than .the last drwn gross salary as per 'X' below. in the Defence Services, additional incrc- F .:itent/s as ·;,, ay be necessary, over. inini;,, um of the scale shall be . "•i - L . . - ' .. allowed to make up the difference and : thus : provi4e protection to the last drawn gross slary. ' . ' . ' -

3.2 : If in exceptional cases, fitent, even at the ceiiing f the entry G grade does notprovide full protection, personal allowance shall be granted which may .be absorbed agaiitst future increase in emolu- . ', - . " ' . . '\ rnents. t~ •

I . , ' ' r ' ' " 3.3 : 'X' i.e.' last drawn gross salary in the Defence Service .at the • ..j_; f•:·; ' ·~ , -,•

- '_; ' ... ' \ ....... ._,- ___ .. -· ·:. time of release shall be the aggregate of the following components: . H,. ' . •'' '. ' - . . ' .

(i) Pay as defined in sub-para 3(ix) of the Dept. of Personnel & Training O.M. No. 3/l/85-East (P ll) dated 31.7.1986.

Relevant extracts of the O.M. are given in the Appendix 'A': ).

(ii) Dearness Allowances;

(iii) Additional Dearness Alkiwancc;

(iv) Interim Relief;

(v) . City Compensatory Allowance;

(vi) Compensation in lieu of Quarters (C.I.L.O.) House Rent

Allowance;

(vii) Ration Allowance.

3.4 : 'Y' i.e. gross salary in L.l .C. shall be the aggregate of the D following:

(i) Basis salary in which the Ex-servicemen is re-employed;

(ii) Dearness Allowance;

(iii) House Rent Allowance;

(iv) City Compensatory Allowance;.

3.5 : Components of last drawn s:ilary in the Defence Services ('X') including such llowances as are indicated at (3.3) above arc to be taken into account on the basis of discharge certificate/Last Pay certificate of the individual employees ...... : ........ .

3.6 : The component of pension will not be considered for pay fixatioil.

3.7 : If the Ex-serviceman was re-employed within a period not

eceeding 3 )'ears from the date of discharge from the Defence Services 'X' (Last Drawn Salary in Defence Services) to be compared shall be as drawn on the date of release of the Exservicemen whereas ihe 'Y' (starting salary in L.I.C.) to be compared shall be as on the date of re-employment in L.I.C.

O.K. UDAYASANKARANv. U.0.1. [MRS. SUJATA V. MANOllAR, J.J 959

3.8 : If, however, he was re-employed more than three years after A the date of -discharge from Defence Services 'Y' salary to be ,._

compared shall also be as obtaining on the date of discharge.

Corresponding fitment may then be given in the revised scale; where necessary applicable at the time of re-employment of the

Ex-serviceman.

B Example: .....................

\ The filment is to be done notionally and actual benefit may be given from 1.1.1988 as shown in para 4 below.

If the basic salary determined on such comparison results in c the same_ or lower than the basic salary at which the employee was fitted on the date of re-employment, the existing salary fitment will continue without any change.

4. If the basic salary determined on such comparison is higher than D the basic salary at which the employee was fitted on the date of re-employment, incremental difference that would emerge out of - such fitmentwould be added to individual7S basic pay as on 1.1.1988 and arrears released accordingly from 1.1.1988 only •

. Example: ...............................

5. FITMENT OF EX-SERVICEMEN APPOINTED ON OR•

AFTER 1.1.1988:

• Fitment in thes~ case~ will be as per formula given in 3.1 above from 1.1.1988 or the date of appointment in the industry hichever F is later.

_ 6. OPTION-CUM-CONSENT LETTER :

An option-cum-consent letter hithe enclosed formai-(Appendix 'B') •hould be obtained from each existing Ex-servicemen' G employee opting fitment of salary as per these instructions.

7. FITMENT OF SALARY OF NEW ENTRANTS:

• Fitment of salary of all Ex-servicemen appointed in the industry henceforth shall be governed by thse instructions." If'

The dispute relates to the application of Paragraphs 3.7 and 3.8 to 6-servicemen who have been employed by the Life Insurance Corporation , , . after 1.1.1988. According to the Life Insurance Corporation the benefit of pay fixation under f'aragraphs 3.7 and 3.8 was given only to ex-servicemen who were already employed by the Life Insurance Corporation prior to 1.1.1988. This benefit is not available to those ex-servicemen who have been employed in Life Insurance Corporation after l.1.1988.

To resolve the dispute it is necessary to examine the scheme framed by the Life Insurance Corporation on 2nd of June, 1989, for pay fixation which is in supercession of earlier existing scheme. Paragraph 3 deals with fixation of pay on re-employment of ex-servicemen in Life Insurance Corporation. Since ex-servicemen including released emergency commissioned officers, shor! service commissioned officers and retrenched commissioned officers are relieved from military service at a comparatively young age, certain facilities have been given to them for re-employment in D various Government and Public Sector Undertakings including the Life lnsur_ance CorporatiOn.

Under Paragraph 3.5 when the ex-serviceman is re-employed by the Life Insurance Corporation he is normally fitted at the minimum of the scale for the post to which he is appointed. However, if his last drawn gross salary in Defence Service as specified in Paragraph 3.3 was more than the gross salary which he will get in Life Insurance Corporation as specified in Paragraph 3.4, his salary to be paid in Life Insurance Corporation is adjusted so that he does not get less than his last drawn pay in the Defence Services. This adjustment is done as per Paragraph 3.1 adding to his F minimum of the scale. additional increments as may be necessary to make up the difference so that his last drawn gross salary is protected. This adjustment is made so as to protect the last drawn salary of ex-servicemen in the case of all reemployed ex-servicemen whether they were appointed prior to 1.1.1988 or subsequent to 1.1.1988.

G Paragraph 3.7, However,· provides that if an ex-serviceman was reemployed within three years from the date of his discharge from Defence Services then his last. drawn salary in the Defence Services wi\l be compared to his starting'. salary on the date of his re-employment in Life Insurance Corporatioi; i so as to adjust the salary first drawn. by him on the H date of re-employmen~ to equal the last drawn salary.

O.K. UDAYASA1'KARAN1. U.0.1. (MRS. SUJATA V. MANO HAR J.l 961

In other words, he is governed by paragraph 3.1 to 3.6. Paragraph A

't

3.8 provides that if an ex-serviceman was re-employed more than three years after the date of his discharge from Defence Services, his last dra\vn salary in Defence Services shall be compared \\1th his salary that he would have been entitled to in the Life Insurance Corporotion had he been immediately re-employed. The basic salary that he would have drawn in B Life Insurance Corporation on the date of his discharge is thus.determined and on the basis of such a salary, the salary which the ex-serviceman will get on the actual date of .his re-employment by Life Insurance Corporation

a. is notionally worked out. The figure so arrived at is the basic salary which

I ' will be paid to the ex-serviceman on his re-employment. Paragraph 3.8 also ' provides that if in the interregnum any re\ision of pay scales takes place c in Life Insurance Corporation the ex-serviceman will get the benefit of such revision in respect of the pay scale o notionally worked out. However, Paragraph 3.8 clearly provides that such a fitment has to be made only notionally ; md any actual benefit so arising will be given to the existing ex-servicemen only from 1.1.1988 as shown in Paragraph 4. Paragraph 4 D sets out that any incremental difference that would emerge out of such fitment would be added to the ex-serviceman's basic pay as on 1.1.1988 and arrears would be released .accordingly from 1.1.1988 only.

A perusal of Paragraph 3.8 and Paragraph 4 clearly brings out the E fact that the fitment under Paragraph 3.8 has to be done only in the case of ex-servicemen who were employed prior to 1.1.1988. Paragraph 3.8 itself clearly provides that the benefit will be given to an existing ex-serviceman.

The existing ex-serviceman, thpugh employed prior to 1988 will get actual • benefit only from 1.1.1988 and not for any date prior thereto. Such a prmision would not have been required had this concept of notional F fitment under Paragraph 3.8 not been made applicable only to "xisting exservicemen. Paragraph 4 also says tha~ the incremental diffeence will be added to the individual's basic pay as on 1.1.1988 and arrears will be released accordingly. The entire scheme of Paragraph 3.8 and Paragraph ' 4, therefore, deals with existing ex-servicemen or ex-servicemen who had G been employed prior to 1.1.1988. The examples which have been annexed i.- to Paragraph 3.8 are also all examples of ex-servicemen who joined Life . Insurance Corporation prior to Ll.1988, thus clearly bringing out the intention to cover under Paragraph 3.8 existing ex-servicemen who had • been in the employment of Life Insurance Corporation prior to 1.1.1988.

The example which is appended to Paragraph 4 also deals with a case of H

A an ex-serviceman employed along prior to 1. l.1988.

Paragraph 5 makes this position amply clear by setting out that ex-servicemen who arc appointed after J.1.1988 shall be fitted as per formula given in Paragraph 3.1. above either from 1.1.1988 or the date of appointment whichever is later. Paragraph 7 again clarifies this position by saying that the filment of salary of all ex-servicemen appointed in the industry henceforth shall be governed by these instructions. The use of the past t rnse in referring to the employment of ex-servicemen by Life Insurance Corporation in Paragraphs 3.7 and 3.8 is also indicative of the fact that it refers to ex-servicemen who were employed in the Life Insurance C Corporation prior to the coming into force of the new scheme.

The reason for giving the benefit of Paragraph 3.8 to ex-se"icemen who were employed by the Life Insurance Corporation prior to l.1.1988 is referred t~ in the counter-affidavit filed on behalf of respondents 1 and 2 D in the writ petition as also in the affidavit filed on behalf of the respondents in the appe.al. Normally, whenever. a person is re-employed in Government service or public service, when the process of fixation of his pay is undertaken, the component of pension which is received by the employee from his earlier employer is always deducted and adjusted in the salary which

he gets on re-employment. This was being done in the case of ex-servicemen re-employed by Life insurance Corporation prior to the coming into operation of the new scheme. The Life Insurance Corporation decided to treat its 'x-servicemen employees more liberally by providing under the new scheme in Paragraph 3.6 that the component of pension will not be

• considered for pay fixation. The appellants herein as also all ex-servicemen who have been employed after 1.1.1988 have thus been allowed to retain their pension from Defence Services. The pay which they are getting in Life Insurance Corporation on the basis of the formula fixed under Paragraph 3.1 is addition to the pension which they are getting. This benefit, however, was apparently not available to existing re-elljployed ex-servicemen prior to 1.l .1988. As a result of negotiations which took place between the Life G Insurance Corporation and the employees, it was decided to compensate the existing re-employed ex-servicemen who had Jost the benefit of service in Life Insurance Corporation for a period exceeding three years after their discharge, 1 by giving them a notional fitment in the Life Insurance

Corporatio~'s pay scales in the manner set out in Paragraph 3.8. There was- H no question of giving such a benefit to ex-servicemen employed after

• (

O.K. t:DAYASANKARAN ... U.0.l.l\IRS.SUJATAV. MA~OIIAR.J I 963

l.1.1988.

Dr. Dha\van, learned counsel appearing for the ex-servicemen has emphasised the fact ihat an option-cum-rnnsrnt letter Paragraph 6 was also taken from ex-servicemen employed after 1.1.1988. This is disputed by the respondents. J-{o\vcver, Paragraph 6 itself quit~ cle<.irly provides that

the option-cum-consent letter has to be obtain~<l from each c.yistint; ex-ser- B l'iccntan cnzployee opting fitmcnl of salary as per those instructions. Jt is, therefore, quite clear that the option is to be exercised only by existing ex-servicemen employees of Life Insurance Corporation, thus re-inf arcing , the contention' of the respondents that fitmcnt as per Paragraph 3.8 is not available to ex-serivcr:mcn rc-employl!<l in Life Insurance Corporation after C. 1.1.1988. The respondents have admitted their mistake in asking for such consent letter i[ they have done so. They have also admitted that they made . a mi.stake in granting to the three ;.1ppellants before us the benefit of Paragraph 3.8 although they were engaged after 1. 1.1988. They have sought to correct thlS mistake by their letter of 16.1.1991 by recalculating their salary from 1991. They arc entitled to reduce the pay of the appellant on D the basis of the correct fitment to be given to the appellants in the light of the instructions of 2nd of June, 1989. The High Court was, therefore, right in rejecting the contentions of the appellants. The High Court has also directed that for recovery of excess amount so paid reasonable instalments should be given to the appellants so that undue hardship is not caused to E them.

In these circumstances, we see no reason to interfere with the findings given by the Kerala High Court. The appeal and the "petition are, therefore, dismissed. Hov; cvcr, there \\ill he .no order a.s to costs.'

V.M. '"\ppcal_ an<l_ Petition tjismissc<l. F