SUBRATA SEN AND ORS.

UNION OF INDIA AND ORS.

SEPTEMBER 18, 2001

[M.B. SHAH AND R.P. SETHI, JJ.]

Service Law:

Pension-Assam Oil Sta.ff Pension Fund Rules-Bumzah Oil Company (Acquisition of Shares of Oil India Limited and of the Undertakings in India of Assam Oil Conpany Limited and the Burmah Oil Company (India Trading Limited) Act, 1981-Section /I-Revised Pension Scheme providing applicability of the scheme to employees who retired after a particular date-Employees who retired before the cut off date-Held, entitled to revised pension-Constitution of India, 1950-Article 32

Respondent-State issued notification providing for revision of pension formula in respect of officers of Indian Oil Corporation (Assam Oil Division). A specific cut off date for applicability of. the revision was provided in the notification.

E Petitioners, employees of the Corporation who had retired prior to

cut off date, filed Writ Petition under Article 32 of the Constitution on the ground that the cut off date was discriminatory and contended that they were entitled to get the pension on the basis of revised formula.

Respondents admitted that petitioners were part of the group which came from erstwhile Assam Oil Company and were getting pension on the basis on non-contributory pension scheme. However, they contended that petitioners were not covered under revised pension scheme since separate fund was allocated and trust was created and approved under Income Tax Act, 1961, for paying pension to the retired employees and any improvement in the pension scheme in an approved pension fund would benefit only the existing members in service.

Disposing of the appeal, the Court

HELD: 1.1 •. The employees who retired before the cut off date viz.

H 1.12.1994 are also entitled to revised pension. [143-D]

SUBRATA SEN v. U.0.1. 141

1.2. The payment of pension was the liability of the employer as per A the rules and that liability is required to be discharged by the Union of India in lieu of its taking over of the Company. The rights of the employees (including retired). are protected under .Section 11 of the Burmah Oil , Company (Acquisition of Shares of Oil India Limited and of the Undertakings in India ()r Assam Oil Company Limited and the Burmah B Oil Company (India Trading) Limited Act, 1981. [149-C; DJ

D.S. Nakara v. Union of India, [1983) 1 SCC 305 explained and distinguished.

1.3. Pension is neither a bounty, nor a matter of grace depending upon the sweet will of the employer, nor an ex gratia payment. It is a payment for the past services rendered. It is a social welfare measure rendering socio-economic justice to those who in the hey-day of their life ceaselessly toiled for the employer on an assurance that in their old age they would not be left in lurch. In view of the admission by Respondent, it is clear that petitioners were not required to contribute any amount for getting pension. May be that in the present case, the Trust for pension fund is created for Income Tax purposes or for smooth payment of pension, but that would not affect the liability of employer to pay monthly pension calculated as per the Rules on retirement from service and this retirement benefit is not based on availability of pension fund. There is no question of pensioners dividing the Pension Fund or affecting the pro rata share on addition of new members to the Scheme. [148~H; 149-A; Bl ·

2. Right to get pension is different from getting annuity on the basis of accumulated contribution. [151-B]

Sasadhar Chakravarty and Anr. v. Union of India and Ors., [1996] 11 sec 1, distinguished.

3. The rules for grant of pension in the present case provide that an employee mentioned in specified category shall automatically be member of pension fund and is entitled to get pension on the date of his retirement.

G Amount of pension is to be determined as per the Rules. That Rule is modified and the petitioners seek relief on the basis of t:1e amended rule on the ground that there cannot be any discrimination between the employees who retired prior to or after a particular date. There is no question of pensioners (retired employees) dividing the pension fund and/or payment H

of pension to be made only from the pension fund. The liability to pay pension arises because of provision made in the rules. [151-B; C; DJ

D.S. Nakara v. Union of India, [1983] 1 SCC 305 and V. Kasturi v.

0 Managing Director, State Bank of India, Bombay and Am:, [1998) 8 SCC 30,

referred to.

4. In case of an employee governed under the Pension Scheme, relations with the employer merely undergo a change, but are not snapped altogether. There is no new scheme of payment of pension, but it is only a revision of the existing pension scheme. Under the new Pension Scheme, pension is required to be paid on the basis of 40 per cent the average of the last 10 months salary including average dearness allowance drawn by the officer over the last 10 months of his service instead of earlier 40 per cent of the average annual basic salary for the las.t five years of service immediately preceding the date of retirement. [152-C; D; EJ

All India Reserve Bank Retired Officers Association v. Union of India, [1992] Supp. 1 SCC 664, referred to.

CIVIL ORIGINAL JURISDICTION: Writ Petition (C) No. 372of1999.

Under Article 32 of the Constitution of India.

V.R. Reddy and Dinesh Mathur for J.B.D. & Co. for the Petitioners.

Raj Birbal, V.K. Rao and Ms. Madhu Sikri for the Respondents.

B.A. Mohanty, K.C. Kaushik, Ms. Sunita Sharma and B.V. Balaram Das for Union of India.

The Judgment of the Court was delivered by

SHAH, J. This petition under Article 32 of the Constitution of India is filed by the petitioners who were employees of the Indian Oil Corporation Limited (Assam Oil Division) and retired prior to 1st December 1994. It is pointed out that Assam Oil Division was formed by transfer of the Undertaking of the Assam Oil Co. Ltd., a 100% subsidiary of the Burmah Oil Company which has been nationalized w.e.f. 14.10. 1981. Petitioners were transferred from Assam Oil Co. Limited to the Indian Oil Corporation - Assam Oil Division (In short "AOD"), As per the Assam Oil Company Staff Pension Fund H Scheme, they were getting pension on the following basis :

I /

"A sum equal to 40 percent of the average annual basic salary for A the last five years of service immediately preceding the date of retirement"

. It is pointed out that the Government of India has issued Notification dated 10.3.1995 providing for revision of pension formula in respect of Indian Oil Corporation (AOD) Offiers covered by AOD Staff Pension Scheme which B reads thus :

"Pension for the officers retiring from December, 1994, onwards

my be computed on the basis of 40% of the average of the last 10 months salary including averages dearness allowance drawn by the officer over the last 10 months of his service. (f and when pay revision C take place retrospectively, the amount o.f pension .may be adjusted accordingly. No dearness allowance will be paid on pension."

Petitioners submit that the cut-off date is discriminatory and that there cannot be any classification of retiree who have retired prior to December, 1994 .and who are to retire from December, 1994 onwards and, therefore, they are entitled to have pension on the basis of revised formula. For this, they have relied on the decision rendered by this Court in D.S. Nakara v. Union of India, (1983] 1 sec 305. In this petition, they have prayed as under :

(a) Issue a writ, direction or order in the nature of certiorari of any other appropriate writ, direction of order quashing the cut off date mentioned in the impugned communication No. F. No.

F.29011/1/95-IOC dated 10.3.1995 (Annexure 'E'), as December, 1994 as having been arbitrarily fixed; and

(b) . Issue a writ, direction of order in the nature of mandamus or any other appropriate writ, direction or order to the respondents directing them to extend benefits of the impugned communication No. F. No. 29011/1/95-IOC dated 10.3.1995 to all the pensioners of IOC (AOD) irrespective of date of retirement.

(c) Issue a writ, direction or order in the nature of mandamus or any other appropriate writ, direction or order directing the respondents to liberalize the AOC Pension Scheme so as to include the Ad hoc Pension Relief to all retirees and who are still in service and to superannuate under the AOC Pension Scheme as is being granted to the ex-employees of AOC who stood transferred to

~; H

( d) Issue a writ, direction or order in the nature of mandamus or any other appropriate writ direction or order directing the respondents to liberalize the AOC Pension Sche.me so as to include the benefits of the CLI linked Pension Relief to all retirees and who are still in service and to superannuate under the AOC Pension Scheme, as in. being granted to the el.igible pensioners of OIL, BPCL and HPCL;

( e) ' Issue a writ, direction or order in the nature of mandamus or my

other appropriate writ, direction or order directing the respondents to liberalize the pension scheme pf the respondent no. 2 so as to include the benefit of restoration of the commuted pottioil of pension after 15 years as i.s being granted to the sister companies of the respondent no. 2 i.e. )3PCL and HPCL.

At the outset, we may state that Mr. V.R. Reddy, learned senior counsel for the petitioners has not pressed for prayer (c) and With regard to prayers (d) D and (e)"as they involve disputed questions of fact, the issues are not required to be decided and are left open. In affidavit-in-reply filed on behalf of respondent No. 2 also it has been submitted that it would have been appropriate for the petitioners to approach the High Court for sorting out the disputed facts. For the said reliefs, it would be open to the petitioners to approach the competent

forum.

Mr. Raj Birbal, learned senior counsel for respondent No. 2 Indian Oil Corporation submitted that in the present case there is o question of applying the principles laid down in Nakara '.s case. It is his submission that petitioners were governed by the non-contributory Pension Scheme, namely, IOC (DOD) Staff Pension Fund approved under the Income Tax Act, 1961. Under the Rules of the Pension Fund, annuity is purchased by the trustees in respect of such members on their retirement/death from LIC and pension is paid by the LIC.

The right of and to receive the annuity and the quaf!tum gets crystallized at the time of purchase of the annuity. It/is also pointed out that an improvement in the pension scheme in an approvd Pension Fund is effected on the basis of the fund's financial position as determined by actuarial valuation based on current resources of the fund and future contribution to be received by the fund only in respect of the existing members in service.

, On, the question as to when retired employees are entitled to the benefit H . of revised pension scheme, this Court after considering earlier aecisions in

) r

V. Kasturi v. Managing Director, State Bank of India, Bombay and Another, A

(1998) 8 sec o specified two categories as under:

"Category-I

Para 22. If the person retiring is eligible for pension at the time of his retirement and if he survives till the time of subsequent amendment of B the relevant pension scheme, he would become eligible to get enhanced pension or wquld become eligible to get more pension as per the new formula of computation of pension subsequently brought into force, he would be entitled to get the benefit of the amended pension provision froµ1 the date of such order as he would be a member of the very same C class of pensioners when the additional benefit is being conferred on all ofthem. In such a situation, the additional benefit available to the same class of pensioners cannot be denied to him on the ground that he had retired prior to the date on which the aforesaid additional benefit was conferred on all the members of the same class of pensioners who had survived by the time the scheme granting additional benefit to these pensioners 'came into force. The line of decisions tracing their roots to the ratio of Nakara case would cover this category of cases

Category-II

Para 23. However, if an employee at the time of his retirement is not eligible for earning pensin and stands outside the class of pensioners, if subsequently by amendment of the relevant pension rules any beneficial umbrella.of pension scheme is extended to cover a new class of pensioners and when such a subsequent scheme comes into force, the erstwhile non-pensioner might have survived, then only if such extension of pension scheme to erstwhile non-pensioners is expressly made retrospective by the authorities promulgating such scheme; the erstwhile non-pensioner who has retired prior to the advent of such extended pension scheme can claim benefit "of such a new extended pension scheme."·

Learned counsel for the petitioners submitted that petitioners would be covered by the Category (I) and would be entitled to get pension under the revised pension scheme.· ·

As against this, learned -counsel for the respondents submitted that there H

A is a t.hird category wherein the pension is paid from pension fund scheme and on the date of retirement, right to receive the pension amount is crystallized.

Hence, petitioners are: not entitled to get benefit of subsequent modificatiOn . with respect to determinative factor for grant of pension such as qualifying service.

B For appreciating this contention, we would refer to the averments made in the affidavit-in-reply and the relevant rules which provided for grant of pension to the petitioners. In the affidavit-in-reply, it has been stated that petitioners were part of the group which came from erstwhile Assam Oil Company and are getting pension on the basis of non-contributory pension C scheme, i.e. "they do not contribute at all and are getting the pension on month to month basis and on the other hand, the other employees of respondent no. 2 only get the benefit of contributory scheme."

From the aforesaid admission, it is clear that petitioners were not required to contribute any amount for getting pension. May be that the Company D allocated separate fund and created a trust for paying pension to the retiring employees but their right to get pension is crystallized as per the.rules and was not dependent upon availability of the fund and was to be determined on the basis of a rule which provided that they would get a sum equal to 40 percent of the average basic salary for the last five years of service immediately E preceding the date of retirement.

For this purpose, we would refer to relevant part of the rules of Assam Oil Staff Pension Fund, which read thus :

"l. The following employees shall be Members of the Fund :

(b) Persons who enter into a specified category of service with the

Company as detailed hereinafter the lst day of January, 1973 and who are members of the Burmah Oil (India) Provident Fund or Provident & Insurance Fund (India) Recognised.

A Pension will be granted to a Member on retirement from the Service at or after Normal Pension Age provided that at the date of such retirement:

(i) he has completed at least fifteen years of Pensionable Service;

( \

(ii) he shall have been a member of the Provident Fund A continuously of not less than ten years.

The pension payable to such a Member:

(a) who has completed at least twenty years' Pensionable Service will be the Basic Figure as reduced by the Authorised B Deduction; or

(b) who has completed at least fifteen years' Pensionable Service but less than twenty years' Pensionable Service will be a proportion of the Basic Figure equal to the ratio which the C number of years of Pensionable Service (calculated to the nearer month) bears to twenty years and the amount so calculated will be reduced by the Authorised Deduction.

The Trustees may at the request of the Employer withhold or discontinue a pension or annuity or any part thereof D payable to a Member or his Dependents or exclude him or them from all or any benefits hereunder if such Member is dismissed for fraud or dishonesty or Misconduct or leaves his employment without the consent of the Employer or having left such employment acts to the detriment of such employer's interest of assigns or charges his rights hereunder or attempts to do so. Any sum so withheld discontinued or excluded shall be forfeited to the Fund.

No person shall be entitled to transfer o~ assign whether by way of security or otherwise however his interest or any part thereof in the Fund and no such transfer or assignment shall be valid and neither the Employers nor the Trustees shall recognise or be bound by notice to them respectively of any such transfer or assignment.

10.

Notwithstanding anything to the contrary m the Rules contained:

(a)

(b)

(c) All pensions and allowances shall be non-assignable and (subject to the provisions of Rule 4) non-commutable and .shall be paid monthly in advance without a pr<_>portion to the date of cessation or at the discretion of the Trustees at longer intervals and at such times at such places and in suh manner and subject to such evidence of health, age survival, marital status, educational status and identity as t.he Trustees . may prescribe."

Under Rule 16 "Basic Figure" means a suin equal to forty per centam of the Member's average annual Basic Salary for the last five years of Service C immediately preceding the date of retirement. Likewise, "Normal Pension Age" means the fifty-fifth birthday for men and the forty-fifth birthday for women.

Keeping in mind the aforesaid rules, we would first refer to the contention of Mr. B.A. Mohanty and Mr. Raj Birbal, learned senior counsel for Union of D .India and respondent No. 2 respectively who, in support of their submissions,

relied upon paragraJ?h 45 of the judgment in Nakara '.s case, which reads thus:

"45. Let us clear one misconception. The pension scheme including. the liberalised scheme available to the government employees is noncontributory in character. It was not pointed out that there is something . like a pension fund .... The payment of pension is a statutory liability undertaken by the Government and whatever becop.1es due and payable is budgeted for. One could have appreciated this line of .reasoning where there is a contributor:y scheme and a pension fund from which alone pension is disbursed. That being not the case, there is noquestion . of pensioners dividing the pension fund which, if more persons are admitted to the scheme, would pro-rata affect the share."

In .our view the aforesaid para does not in any way support the contention of the respondents. n the contrary, on parity of reasoning, .we would also . reiterate that let us be clear about this misconception. Firstly, the Pension Scheme including the liberalised scheme available to the employees is noncontributory in character. Payment of pension does not depend tipoh Pension Fund. It is the liability undertaken by the Company under the Rules and whenever becomes due and payable is to be paid. As observed in Nakara '.s case (supra), pension is neither a bounty, nor a matter of grace depe11ding upon the sweet will of the employer, nor an exgratia payment. It is a payment for ihe

past services rendered. It is a social welfare measure rendering socio-economic justice .to those who in the hey-day of their life ceaselessly toiled for the employer on an assurance that in their old age they would not be left in lurch.

May be that in the present case, the Trust for pension fund is created for Income Tax purposes of for smooth payment of pension, but that would not affect the liability of employer to pay monthly pension calculated as per the Rules on retirement from service and this retirement benefit is not based on availability of pension fund. There is no question of pensioners dividing the Pension Fund or affecting the pro-rata share on addition of new members to the Scheme. As per Rule (1) quoted above, an employee would become member of the Fund as soon as enters into a specified category of service of the Company. Under Rule (8) Trustees may withhold or discontinue a pension or annuity or any part thereof.payable to a member.or his dependants, and that pension amount is nonassignable. Further, the payment of pension was the liability of the employer as p

0er the ruls: and that liability is equired to be discharged by the UOI in lieu of its tak:jng over of the Company. The rights of the employees '(including

rtired) are protected under Section 11 of the Burmah Oil Company (Acquisition of Shares of Oil India (Act 41) Limited and of the U11dertakings in India of Assam Oil Company Limited and the Burmah Oil Company (India Trading) Limited Act, 1981.

In support of his contention that petitioners are not entitled to get benefit

of revised scherrie, learned senior counsel for respondent No. 2, further, relied E upon the decision of this Court in Sasadhar Chakravarty "and Am: v. Union of bidia and Or11., (1996) 1l SCC 1, wherein the Court considered the Indian Oxygen Ltd. Staff Pension Fund and the Pension Scheme thereunder. It was the contention of the petitioners that improvements made in the existing pension scheme after retirement of employees should also be made available to such retired employees who are the existing pensioners of the Fund. Negativing.the said contention; the Court held thus : . .

" ..... This contention is based on a misunderstanding of the nature of the annuity which is purchased in respect of each employee as under \Yhen he retires. The right of an employee to receive the annuity and the qu_antum of this annuity gets determined at the time when the an, nuity is purchased. Any subsequent improvements in a givt<n Pension Fund Scheme would not be available to those persons whose rights are already crystallized under the annuity scheme by which they are governed because the amounts contributed by the employer in respect

of such persons are already withdrawn from the Pension Fund .t~ purchase an annuity. Any subsequent improvement in the Pension Fund will benefit only those whose moneys form a part of the Pension Fund."

In paragraph 11, the Court further observed :

"In these circumstances the ratio of D.S. Nakara v. Union of India, [1983) i sec 305 cannot be applied to extend the benefit of improvement in the pension schemes of such funds to the existing pensioners. By the very nature of this scheme, such benefits are available only to members in service. In the present case, the Pension Fund. is created out of contributions made by the employer in respect of is employees who aie in serice in the manner provided under the Income Tax Act and the Rules. The contribution is in the form of a fixed percentage of salary of each of the employees. There is, therefore, no provision for an employer inaking any additional payment in respect of its past employees who are the existing pensioners. In Nakara case the increase in pension could be met from the general revenue of the Central Government. No such reserve of funds is available to the trustees of an approved superannuation fund."

In our view, the ratio of the aforesaid judgment is not applicable in the present case. In the said case, Indian Oxygen Ltd. had set up a 'non-contributory Superannuation fund' known as the Indian Oxygen Ltd. Executive Staff Pension Fund. As per the Rules, an employee was entitled to receive an annuity under a policy purchased by the trustee of tf1e Fund from the Life Insurance Corporation of India. Petitioners in that case contended that the scheme of such noncontributory pproved superannuation fund should be modified so as to provide for disbursement of pension by the fund themselves or in the alternative by a statutory body to be newly constituted under a new scheme. Further, the Fund was coristituted for the purpose of providing an annuity to the beneficiaries and the trustees were required to accumulate the contribution in respect of each beneficiary and purchase an annuity from the Lif~ Insunmce Corporation of India at the time of retirement or death of each employee or on his becoming incapacitated prior to retirement as per Rule 89(2) of the Income Tax Rules,

1962. Therefore, when an employee retired; all accumulated contribution in respect of employee concerned made by the employer to the pension fund of the trust was crystallized (or the benefit of employee. In that set of circumstances, • the Court observed that the right of the employee to receive the annuity and

quantum of his annuity gets crystallized at the time of purchase of annuity under the then existing scheme of Life Insurance Corporation of India. The Court also observed. that the contention was. based on misunderstanding of the nature of the annuity which is' purchased in the interest of each employee as and when he retires. The position in the present case is altogether different.

Right to get pension is obviously different from getting annuity on the basis of accumulated "Contribution. The rules for grant of pension provide that an employee mentioned in specified category shall automatically be member of pension fund and is entitled to get pension on the date of his retirement.

Amount of pension is to be determined as per the Rules. That Rule is modified and the petitioners seek relief on the basis of the amended rule on the ground that there cannot be any discrimination between the employees who retired prior to or after a particular date, as held in Nakara ~· case which is followed by this Court in various decisions including V. Kasturi (Supra). Further, there, is no question of pensioners (retired employees) dividing the pension fund and/ or payment of pension to be made only from the pension fund. The liability to pay pension arises because of provision made in the rules. In this view of the matter, the decision in Sasadhar Chakravarty (Supra) wo!.!ld have no bearing.

Further, in All India Reserve Bank Retired Officers Association v. Union of India, [1992] Supp. l SCC 661, Ahmadi J., (as he then ws) speaking for the Court in the aforesaid decision highlighted the observations in Nakara 's case found at p.333 para 46 to the following effect (SCC p. 674 para 7):

" ... the pension will have to be recomputed in the light of the formula enacted in the liberl'J, lised 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 F retiral bene.fi.t. It is an upward revision of an existing benefit. If it was a wholly new concept, a new retiral benefit, one could hav~ appreciated an argument that those who had alfe'ady retired could nt expect it."

The Court further observed : G

" ..... It must be realised that in the case of an employee governed by the CP.F (Contributory Provident Fund) scheme his relations with the employer come to an end on his etirement and receipt of the CPF amount but in the case of an employee governed under the pension scheme his relations with the employer merely undergo a change but H

do not snap altogether. That is the reason why this Court in NalWra case drew a distinction betwen liberalisation of an existing benefit and introduct_ion of a totally new scheme. In the case of pensioners it is 1!-ec; essary to revise the pensio.n periodically as the continuous fall in the rupee value and the rise in prices of essential commodities .necessitates an adjustment of the pension amount but that is not the case of employees governed under the CPF scheme, since they had received the lump .sum payment which they were at liberty to invest in a manner that .would yield optimum return which would take care of the inflationary trends. This distinction between those belonging lo the pension scheme and those belonging to the CPF scheme has been rightly emphasised by this Court in Krishena case'."

Same is the position in the present case. As observed in the aforesaid case, in case of an employee governed under the Pension S.cheme, relations with the employer merely undergo a change, but are not snapped altogether.

There is no new scheme of payment pension, but it is only a revision of the existing pension scheme .. Under the new Pension Schme, pension is required .· to be paid on the basis of 40 per cent of the average of the last 10 months salary including average dearness allowance drawn by the officer over the last 10 m1; mths of his service instead of earlier 40 per cent of the average annual basic salary for the last five years of service immediately preceding the date of retirement.

1n view of the aforesaid legal position, this petition is required to be partly allowed and the Respondents are.'ditected to give pensionary benefits to the petitioners nn the basis of notificat.ion dated 10th March, 1995 by deleting the Words "retiring from Decmber, 1994 onwards" from the said notification, The Writ Petition stands disposed of accordingly. There shall tie no order .as to cost.s.

K.K.T.

Petition disposed of.