Kerala High Court

R.Parasurama Iyer vs State Bank Of Travancore on 26 September, 1996

IN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT:

THE HONOURABLE THE CHIEF JUSTICE MR.ASHOK BHUSHAN
THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE
&
THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR

THURSDAY, THE 3RD DAY OF MARCH 2016/13TH PHALGUNA, 1937

OP.NO. 3489 OF 1997 (M)
----------------------------------

PETITIONER(S):
-----------------------

1. R.PARASURAMA IYER
S/O RAMALINGA IYER, 'SRENIVAS', KIZHAKKENADA
THIRUVARPPU POST, KOTTAYAM- 686 033.

2. K.A.JOSEPH,
S/O AUGUSTINE, KADIAMKUTTY, S.P.III/1021
CHERUVALLY LANE, GANDHIPURAM, SREEKARIAM POST
THIRUVANANTHAPURAM- 695 017.

3. N.VELAPPAN NAIR, S/O NAMBI,
'INDU', T.C. 26/789, OFFICERS NAGAR
OOTTUKUZHY, THIRUVANNATHAPURAM- 695 001.

4. P.K.THAMPACHAN, S/O KURIAN,
T.C.NO.11/737, CHAVADIYIL, DIVISION
OFFICE ROAD, VIKAS BHAVAN
THIRUVANANTHAPURAM- 695 015.

5. L.T.MATHEW, S/O THOMAS,
"LATHARA", CONVENT ROAD, NALLANCHIRA
THIRUVANANTHAPURAM- 695 015.

6. V.KARUNAKARAN NAIR,
S/O VELU PILLAI, 'SARANGA', SHANKAR ROAD
SASTHAMANGALAM, THIRUVANANTHAPURAM- 695 010.

7. T.C.OOMMEN, S/O CHACKO,
THENOLIL LILLY BHAVAN, T.C. 50/91, KALADY
KARAMANA, THIRUVANANTHAPURAM- 695 002.

OP.NO. 3489 OF 1997 (M)

8. M.K.RAMACHANDRAN NAIR,
MALIAKKAL HOUSE, CHIRAKKADAVU CENTRE POST
(VIA) THEKKATHU KAVALA, PONKUNNAM.

9. K.K.KURIAN, S/O KURIAN, KUNNEL HOUSE,
PATTAPPARA, PONKUNNAM.

10. KURIAN P.MATHEW, S/O MATHEW,
MELADATH HOUSE, PALLAM P.O, KOTTAYAM.

11. G.BHAVANANDAN, S/O GOVINDAN,
THITTAYIL HOUSE, SARKARA, CHIRAYANKKIL
THIRUVANANTHAPURAM.

12. V.PHILIPOSE,
S/O MATHAI ABRAHAM, VELLIYIL HOUSE, PH WARD
ALAPUZHA-7

13. P.K.VARGHESE,
S/O KURIAKOSE, KAVILAVEETTIL, PUTHENPURAYIL
PACHA, CHEKKEDIKADU POST, EDATHUA.

14. E.J.JOSEPH,
S/O JOHN, ERATTUPUZHA, NEAR MANORAMA JUNCTION
CHERTHALA.

15. K.P.DAVID,
S/O PETER, VALAVUCHIRAKAL, PUTHENANGADI
KOTTAYAM- 686 001.

16. ADDL. P16
S.N.MUTHULAKSHMI, AGED 67 YEARS
W/O LATE R.PARASURAMA IYER, 'SREENIVAS'
THIRUVARPPU P.O, KOTTAYAM- 686 033.
(ADDL.P 16 IS IMPLEADED AS PER ORDER DTD. 08/07/11
IN IA 10157/11)

17. ADDL. P17
SARADA NAIR, AGED 65 YEARS
WIFE OF LATE V.KARUNAKARAN NAIR, T.C. 9/1732, SARANGA
SANKAR ROAD, SASTGAMANGALAM
THIRUVANANTHAPURAM- 695 010.

OP.NO. 3489 OF 1997 (M)

18. ADDL. P18 MARIYAMMA JOSEPH,
AGED 69 YEARS, WIFE OF LATE E.J.JOSEPH
ERATTUPUZHA HOUSE, NEAR MANORAMA JUNCTION, CHERTHALA

(ADDL. P16 IS IMPLEADED AS PER ORDER DTD.
08.07.2011 IN IN IA 10157 OF 2011)
RESPECTIVELYIN OP

(ADDL. P17 &P18 ARE IMPLEADED AS PER ORDER DTD.
18.11.11 IN IA 10724/11 AND IA NO.16205/11, RESPECTIVELY

BY ADVS.SRI.H.B.SHENOY
SRI.B.ASHOK SHENOY
SMT.LAKSHMI B.SHENOY

RESPONDENT(S):
--------------------------

STATE BANK OF TRAVANCORE, REPRESENTED BY ITS
MANAGING DIRECTOR, HEAD OFFICE, P.B.NO.34,
THIRUVANANTHAPURAM - 695 001.

BY ADV. SRI.P.RAMAKRISHNAN

THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 17.02.2016
ALONG WITH OP. 20427/1997, THE COURT 03.03.2016 DELIVERED THE
FOLLOWING:

OP.NO. 3489 OF 1997 (M)

APPENDIX

PETITIONER(S)' EXHIBITS:

EXHIBIT P1 TRUE COPY OF REPRESENTATION DATED 26.09.1996 SENT
TO RESPONDENT BANK BY THE 1ST PETITIONER.

EXHIBIT P2 TRUE COPY OF REPLY LETTER DATED 03.1.1996 RECEIVED
BY 1ST PETITIONER FROM RESPONDENT BANK.

EXHIBIT P3 TRUE COPY OF THE RELEVANT EXTRACT OF STATE BANK
OF TRAVANCORE (OFFICERS') SERVICE REGULATION 1979.

EXHIBIT P4 TRUE COPY OF THE STATE BANK OF TRAVANCORE
(PAYMENT OF GRATUITY TO EMPLOYEES) REGULATIONS 1972.

RESPONDENT(S)' EXHIBITS: NIL

TRUE COPY

"C.R."

ASHOK BHUSHAN, C.J.,
A.M. SHAFFIQUE
&
A.K. JAYASANKARAN NAMBIAR, JJ.
======================================
O.P. Nos.3489 & 20427 of 1997
======================================
Dated this the 03rd day of March, 2016

J U D G M E N T

Ashok Bhushan, C.J.

A Division Bench, while hearing the above Original

Petitions was faced with conflicting judgments of two

Division Benches, i.e., Syndicate Bank v. Celine Thomas

(2005 KHC 1841) and State Bank of Travancore and Others

v. P.Gopinathan Nair and Others (W.A.No.2185 of 2009

decided on 10th June, 2011). By the referring order

dated 08.02.2016, the Division Bench made a reference to

a larger Bench for authoritative pronouncement on the

whole issue, in consequence of which the matter has been

placed before this Full Bench.

2. For answering the reference, it is necessary

to note the facts of both the Original Petitions.

O.P Nos.3489 & 20427 of 1997

-: 2 :-

O.P.No.20427 of 1997

3. Petitioner who was working as an Officer in the

Canara Bank retired from service on attaining the age of

superannuation on 31.08.1993. Salary revision for

Officers of Public Sector Banks was discussed by the

Indian Banks' Association (IBA) High Power Committee and

representatives of Officers of Organisations of Public

Sector Banks. An agreement dated 23.06.1995 was

entered between the IBA and All India Bank Officers

Confederation wherein various recommendations were made

regarding scales of pay, fitment, dearness allowance,

house rent allowance, city compensatory allowance,

provident fund, advance increment, gratuity and some

other benefits. The agreement also fixed different dates

for extending various benefits as recommended by the

agreement. Clause 15 of the agreement provided that

scales of pay and dearness allowance shall be revised

from 01.07.1993 whereas for entitlement of gratuity,

medical aid, hospitalisation expenses, second stagnation

increment in scale III and certain other allowances,

O.P Nos.3489 & 20427 of 1997

-: 3 :-

the date fixed was 01.11.1994. The petitioner who had

retired on 31.08.1993 although was given the benefit of

revision of scales of pay and dearness allowance with

effect from 01.07.1993, he was not entitled for gratuity

which was made effective from 01.11.1994. Petitioner

demanded payment of arrears of gratuity due to him on

the revised scales of pay effected from 01.07.1993, but

the Bank declined to pay the same on the premise that

as per the proviso to Regulation 46(2) of the Canara

Bank (Officers') Service Regulations, 1979 amended in

pursuance of the wage settlement, the gratuity payable

to the Officers who retired between 01.07.1993 and

31.10.1994 is to be calculated based on the pre-

revised scales. Reply dated 27.08.1997 was sent by the

Bank to the petitioner rejecting the request for payment

of gratuity based on the revised pay scale.

Petitioner alleging discrimination and unfair treatment

has filed the Original Petition praying for the

following reliefs:

"(a) Call for the records relating to Ext.P4 and

O.P Nos.3489 & 20427 of 1997

-: 4 :-

declare that part of Ext.P4 amendment which denies

gratuity on the basis of revised basic pay effective from

01.07.1993, to the petitioner and officer employees who

retired during the period 1.7.1993 to 31.10.1994, as

unconstitutional and invalid.

(b) Declare that petitioner is entitled to get

gratuity on the basis of his revised Basic Pay effective

from 1.7.1993.

(c) Issue a writ in the nature of Mandamus or

any other appropriate writ, direction or order directing the

respondent to calculate the gratuity payable to petitioner

on the basis of his revised basic pay effective from

1.7.1993 and to pay the petitioner arrears of gratuity

thereof after deducting the gratuity already paid to him,

with interest at 18% per annum from 16.8.1997 till the

date of payment.

(d) Issue such other writ, direction or order as

this Hon'ble Court may deem fit and proper in the

circumstances of the case.

(e) Award the costs of the petitioner in these

proceedings."

O.P. No.3489 of 1997

4. Petitioners who are 18 in number were working

as Officers of the State Bank of Travancore retired

from service on attaining the age of superannuation on

various dates between 01.07.1993 and 30.10.1994.

O.P Nos.3489 & 20427 of 1997

-: 5 :-

Subsequent to the retirement of the petitioners, pay

revision with regard to various benefits an agreement

was arrived at between the IBA and the Confederation on

23.06.1995 extending various benefits as noted above.

Although all the petitioners received the pensionary

benefits on the revised scales of pay with effect from

01.07.1993, they were not given any benefit regarding

gratuity. Payment of gratuity is governed by the State

Bank of Travancore (Officers) Service Regulations, 1979

(hereinafter referred to as 1979 Regulations).

Petitioners claimed that they are entitled to be paid

gratuity on the basis of revised basic pay drawn by them

and pay having been revised with effect from 01.07.1993

and they having been paid arrears of pay, they are

entitled to get arrears of gratuity on the revised pay

effective from 01.07.1993, hence all the petitioners are

entitled to get arrears of gratuity due to them on their

revised scales of pay after deducting the gratuity

already paid. There is artificial classification

between the Officers of the Bank who retired between

O.P Nos.3489 & 20427 of 1997

-: 6 :-

01.07.1993 and 31.10.1994 and those who retired on or

after 01.11.1994. Both of them formed a unified class,

hence non-payment of the benefit on the revised pay

scale for computation of gratuity is arbitrary,

discriminatory and violative of the principles of

equality. Petitioners in the Writ Petition prayed for

the following reliefs:

(a) Declare that the petitioners are entitled to get

gratuity under Exts.P3 and P4 Regulations calculated on

the basis of their revised Basic Pay effective from

1.7.1993.

(b) Issue a writ in the nature of Mandamus or

any other appropriate writ, direction or order directing the

respondent to calculate the gratuity payable to petitioners

under Exts.P3 and P4 Regulations on the basis of their

revised basic pay effective from 1.7.1993 and to pay the

petitioners arrears of gratuity thereof after deducting the

gratuity already paid to them, with interest at 18% per

annum from 1.8.1995 till the date of payment.

(c) Issue an interim order directing the

respondent to calculate the gratuity payable to petitioners

under Exts.P3 and P4 Regulations on the basis of their

revised basic pay effective from 1.7.1993 and to pay the

petitioners arrears of gratuity thereof after deducting the

gratuity already paid to them, pending final disposal of the

Original Petition.

O.P Nos.3489 & 20427 of 1997

-: 7 :-

(d) Issue such other writ, direction or order as

this Hon'ble Court may deem fit and proper in the

circumstances of the case

and

(e) Award the costs of the petitioners in these

proceedings."

5. Originally, the petitions were heard by a

learned Single Judge. Before the learned Single Judge,

Division Bench judgment of this Court in Syndicate Bank

v. Celine Thomas (supra) decided on 08.08.2005 was

cited. The learned Single Judge referring to two

judgments of the Apex Court in State of Punjab and

others v. Amar Nath Goyal and Others ([2005] 6 SCC 754)

and State of Bihar and Others v. Bihar Pensioners Samaj

([2006] 5 SCC 65) took the view that the judgment of the

Division Bench in Syndicate Bank v. Celine Thomas

(supra) requires a second look in the light of the later

judgments of the Apex Court. By Order dated 28.05.2007,

the learned Single Judge adjourned the matter to be

heard by a Division Bench. The matter was then taken

up by the Division Bench which in turn by Reference

O.P Nos.3489 & 20427 of 1997

-: 8 :-

Order dated 08.02.2016 referred the matter to be placed

before a larger Bench in view of the subsequent

Division Bench decision of this Court in State Bank of

Travancore and Others v. P.Gopinathan Nair and Others

(W.A.No.2185 of 2009 decided on 10th June, 2011).

6. We have heard Shri. Ashok B.Shenoy, learned

counsel for the petitioners, Shri. P.Ramakrishnan,

learned counsel for the State Bank of Travancore and

Smt. Shahna Karthikeyan the learned counsel appearing

for the Canara Bank.

7. Learned counsel for the petitioners in support

of the Writ Petitions contended that benefit of

revision of pay scale having been granted with effect

from 01.07.1993 and the petitioners having received

arrears on the revised pay scale, the said pay scale

ought to have been taken into consideration for

computation of gratuity. Since the emoluments which is

the basis for computing gratuity stood revised, the

non-payment of gratuity on the basis of revised pay

scale is arbitrary and discriminatory, there is no

O.P Nos.3489 & 20427 of 1997

-: 9 :-

rationale for extending the benefit of revised gratuity

only with effect from 01.11.1994 and when the pay scale

has been revised with effect from 01.07.1993, all

benefits should have been extended from the aforesaid

day. It is submitted that computation of gratuity is

based on statutory regulations, namely, the 1979

Regulations which Regulations provided for computation

of gratuity, hence by a non-statutory order/instrument,

the statutory provisions of Regulations for computation

of gratuity cannot be modified. Pay revision which was

effected on the basis of an agreement can in no manner

affect any statutory Regulation. It is submitted that no

material has been placed before the Court to the effect

that the State Bank of Travancore has amended the

Statutory Regulations in accordance with the agreement

arrived at, whereas the agreement contemplated amendment

in the Statutory Regulations of different Banks. It is

submitted that non-payment of gratuity to those who

retired between 01.07.1993 and 31.10.1994 and payment

of revised gratuity to those who retired after

O.P Nos.3489 & 20427 of 1997

-: 10 :-

01.11.1994 is without any rationale, it is

discriminatory, arbitrary and violative of
Article 14

of the Constitution of India. Learned counsel for the

petitioners in support of the arguments placed reliance

on the judgments of the Apex Court in D.S.Nakara v.

Union of India ([1983] 1 SCC 305), Chairman, Railway

Board and Others v. C.R.Rangadhamaiah ([1997] 6 SCC

623), Syndicate Bank v. Celine Thomas (2005 KHC 1841)

and LIC of India v. Retired LIC Officers Association

([2008] 3 SCC 321).

8. Learned counsel appearing for the State Bank of

Travancore refuting the submissions of the learned

counsel for the petitioners contended that entitlement

of gratuity of the petitioners is crystalized on the

date of retirement and as per a Statutory Regulation,

their gratuity was computed and paid. Subsequent

revision of pay scale which was enforced with effect

from 01.07.1993 can have no effect on payment of

gratuity to the petitioners since the agreement itself

fixed a date for extending the benefit of revised

O.P Nos.3489 & 20427 of 1997

-: 11 :-

gratuity, i.e., with effect from 01.11.1994. When the

benefits of revision of pay scale, gratuity and other

allowance have been given under a negotiated

settlement, it is not open for the petitioners to claim

benefit of part of the agreement and negate another

part of the agreement. The entire settlement has to be

accepted in toto. It is submitted that benefit of the

1979 Regulations for computation of gratuity has already

been pressed into service while computing gratuity of

petitioners and making payment of gratuity to the

petitioners on the basis of the existing pay scale.

There is no further right in the petitioners to claim

redetermination of the gratuity, even if there is any

subsequent enhancement in the pay scale. Learned counsel

for the State Bank of Travancore further contended that

there was amendment also made in the 1979 Regulations

incorporating the terms of settlement. However, even if

it is assumed that no amendments were carried out

within the time, that shall not make any difference

regarding the claim of petitioners for revised gratuity.

O.P Nos.3489 & 20427 of 1997

-: 12 :-

Learned counsel for the State Bank of Travancore relied

on the judgment of the Apex Court in
State Government

Pensioners' Association and Others v. State of Andhra

Pradesh
([1986] 3 SCC 501), State of Punjab v. Amar Nath

Goyal ([2005] 6 SCC 754), State of A.P. v. A.P.

Pensioners' Association ([2005] 13 SCC 161) and Sudhir

Kumar Consul v. Allahabad Bank ([2011] 3 SCC 486) and

the Division Bench judgment of this Court in State Bank

of Travancore and Others v. P.Gopinathan Nair and Others

(W.A.No.2185 of 2009 decided on 10th June, 2011).

9. Learned counsel for the Canara Bank has adopted

the submissions made by the learned counsel for the

State Bank of Travancore. It is further submitted by the

learned counsel for the Canara Bank that in so far as

the Canara Bank is concerned, Regulation 1979 was

amended incorporating different recommendations made

in the settlement. Statutory provisions having been

amended petitioners had no claim regarding revision of

gratuity. It is further submitted that fixation of

date for extending the benefit of revision of pay scale

O.P Nos.3489 & 20427 of 1997

-: 13 :-

and benefit of revision of gratuity are neither

arbitrary nor discriminatory. Petitioners' challenge to

the Regulation 46 providing for different dates for

implementation of benefit of pay scale and gratuity are

to be rejected on the same ground.

10. We have considered the submissions made by the

learned counsel for the parties and perused the records.

11. The two Division Bench judgments, i.e.,

Syndicate Bank v. Celine Thomas (2005 KHC 1841) and

State Bank of Travancore and Others v. P.Gopinathan Nair

and Others (W.A.No.2185 of 2009 decided on 10th June,

2011) were although cases which were on the same issue,

i.e., claim for benefit of revised gratuity on the

ground of enforcement of pay revision with effect from

01.07.1993, the Division Bench in Syndicate Bank v.

Celine Thomas (supra) has held that non-payment of

gratuity is arbitrary and discriminatory and the

classification between two classes of retirees, i.e.,

one those who retired between 01.07.1993 and 31.10.1994

and the other those who retired on or after 01.11.1994

O.P Nos.3489 & 20427 of 1997

-: 14 :-

in so far as payment of gratuity is concerned is

arbitrary and violative of
Article 14
of the

Constitution of India. To the contrary, the subsequent

Division Bench in State Bank of Travancore and Others

v. P.Gopinathan Nair and Others (W.A.No.2185 of 2009

decided on 10th June, 2011) has upheld the non-payment of

revised gratuity to those who retired between 01.07.1993

and 31.10.1994 and held that there is no occasion for

holding the cut off dates as arbitrary or

discriminatory. Thus the issue before us is as to

which of the above two Division Bench decisions lays

down the correct law since the the issue before the

aforesaid Division Bench and these Original Petitions is

one and the same.

12. Before proceeding further, it is useful to

refer the aforesaid two Division Bench judgments in some

detail.

13. In Syndicate Bank v. Celine Thomas (supra) the

petitioners retired during the period between 01.07.1993

and 31.10.1994. Payment of gratuity was regulated by the

O.P Nos.3489 & 20427 of 1997

-: 15 :-

Statutory Regulations applicable to the Syndicate Bank.

Clause 46 of the Regulations provided for payment of

gratuity. Apart from the Syndicate Bank, cases of

employees from the Central Bank were also before the

Court. In the Statutory Regulations of the Syndicate

Bank amendments were made in the Regulations as noted in

paragraph 5 of the judgment which is quoted as follows:

"5. The said statutory regulations provide, Payment

of Gratuity, in Clause.46 as follows:

Gratuity:

46.1) Every Officer shall be eligible for gratuity on:

a) Retirement,

b) Death,

c) Disablement rendering him unfit for further service as

certified by a Medical Officer approved by the Bank,

d) Resignation after completing ten years of continuous

service, or

e) Termination of service in any other way except by way

of punishment after completion of 10 years of service.

2) The amount of gratuity payable to an Officer shall be

one month's pay for every completed year of service,

subject to a maximum of 15 months' pay.

Provided that where an officer has completed more than 30

years of service, he shall be eligible by way of gratuity for

an additional amount at the rate of one half of a month's

pay for each completed year of service beyond 30 years.

O.P Nos.3489 & 20427 of 1997

-: 16 :-

Provided further that pay for the purpose of Gratuity for an

Officer who ceased to be in service during the period 1-7-

1993 to 31-10-1994 shall be with regard to scale of pay as

specified in Sub-Regulation (1) of Regulation.4."

5. When we come to the case of Central Bank of India, the

only difference is that the last proviso is absent. Payment

of Gratuity in terms of this provision is a statutory benefit.

That cannot be disputed. A person becomes eligible for

gratuity; (a) on retirement, b) on death, (c) on

disablement, (d) on resignation and (e) on termination of

service and the amount payable "shall be one month's pay

for every completed year of service, subject to a

maximum of 15 months' pay." There is further provision

with regard to payment of gratuity in respect of those who

completed service of more than 30 years."

With regard to the Central Bank the proviso as was added

in Regulation 46 of the Regulations was absent. The

issue before the Court was noted in paragraph 6 which is

to the following effect:

"6. Therefore, gratuity shall have to be

computed on the basis of monthly pay eligible for an

employee. Whether that is the pay as on the date of

retirement actually drawn by him or the pay to which

he becomes entitled, in case a revision takes place

with retrospective effect is the point to be considered.

It is contended based on a clause contained in the

Memorandum of Understanding dated 23.6.1995 that

O.P Nos.3489 & 20427 of 1997

-: 17 :-

in respect of those who retired from service between

1.11.1992 and 30.10.1994, gratuity paid would not

be revisable, on account of pay revision ordered with

retrospective effect from 1.11.1992, with

corresponding monetary benefit on 1.7.1993."

The Division Bench had taken the view that the

Memorandum of Understanding cannot meddle with the

statutory prescriptions. The following was laid down in

paragraph 7:

"7. Memorandum of Understanding cannot meddle

with the statutory prescriptions. Nobody can agree by way

of a settlement at the behest of an organisation taking

away the benefit conferred on individuals by way of

statutes or statutory rules. There need not have any

authority to substantiate this. Statutory prescriptions

crystallize the rights in favour of the subjects of that

statute. It cannot be varied to their disadvantage unless

otherwise by amendment to the statute. Of course, in the

case of regulation governing the employees of the

Syndicate Bank, the regulation has been amended as

provided in the last proviso to Clause.46 quoted above.

But, that amendment had been incorporated far later than

the date of retirement of the petitioners in O. P. No. 3502

of 2002 and no provision in the parent statute enabling

retrospective amendment is brought to our notice.

Therefore, such amendment can have only prospective

effect affecting those who retried later than such

O.P Nos.3489 & 20427 of 1997

-: 18 :-

amendment. But going by the words contained in that

provision it cannot affect even such persons. So, that

amendment will not adversely affect any of the statutory

benefit entitled to the petitioners in O. P. No. 3502 of

2000."

The Division Bench accepted the arguments of the

petitioners that the classification between those who

retired between 01.07.1993 and 31.10.1994 and those who

retired on or after 01.11.1994 is arbitrary. The

following was observed in paragraphs 10 and 13:

"10. On the other hand, it is submitted by the writ

petitioners that going by the statutory regulations, the

gratuity has to be quantified based on the pay. Pay means

pay entitled as on the date of retirement. When a

subsequent pay revision with retrospective effect has come

into effect and payment has been accorded in terms of

such retrospective pay revision, the pay to be reckoned for

the purpose of quantifying gratuity shall be such revised

pay which has been actually paid to them by the employer.

It is further submitted that even on the date of retirement

pay revision was on the anvil by reason of the discussion

with the association. Any delay in arriving at an

understanding cannot on any account transgress into the

statutory entitlement for gratuity. Therefore, whatever

clauses contained in the Memorandum of Understanding for

revision of pay to restrict the quantum of gratuity only to

O.P Nos.3489 & 20427 of 1997

-: 19 :-

those retired on or before 1.11.1994 cannot have any

binding effect. It is further contended that even though the

Memorandum of Understanding was arrived at on

23.6.1995, in respect of those bank employees retired

between 1.11.1994 and 23.6.1995, the revised gratuity is

paid. So in such circumstances, those who retired between

1.11.1992 and 31.10.1994 should not have been excluded

from this benefit. This amounts to mini classification of

homogenous class violating the rights enshrined under

Art.14
of the Constitution. So, the learned single Judge was

perfectly justified in directing payment of gratuity based

on revised scale of pay.

13. The mini classification, which is complained of,

is a serious one. Even admittedly by the Banks concerned,

though they have entered into Memorandum of

Understanding only on 23.6.1995, revised gratuity based

on the revised pay had been given to those who retired

prior to 23.6.1995, but on or later than 1.11.1994. At the

same time revision of pay scales takes effect from

1.11.1992. In such circumstances, denial of the very same

benefits to those who retired between 1.11.1992 to

1.11.1994 amounts to mini classification offending the

mandate of
Art.14
of the Constitution of India. No nexus is

pointed out for bringing any classification between those

who retired between 1.4.1992 and 31.10.1994 and those

who retired between 1.11.1994 and 23.6.1995. Both these

artificial groups of retirees had retired from service prior to

the date of arriving at the Memorandum of Understanding,

but after the date of retrospectivity to the MoU. They

O.P Nos.3489 & 20427 of 1997

-: 20 :-

therefore form themselves into one class as all of them

retired later than the giving effect to the pay revision by

the Memorandum of Understanding. When persons forming

same class are treated differently it violates
Art.14
of the

Constitution denying them equal protection of law and

equality before law. Denial of gratuity to the writ

petitioners is therefore discriminatory. Consequently, on

that reason atone, we have to sustain the view taken by

the learned single Judge."

14. Now coming to the judgment in State Bank of

Travancore and Others v. P.Gopinathan Nair and Others

(W.A.No.2185 of 2009 decided on 10th June, 2011), the

respondent retired from service on 30.06.1993. He

claimed commuted value of pension, gratuity and grant of

arrears pension, salary etc., on the basis of pay

revision from 01.11.1992 with 18% interest. Learned

Single Judge allowed the Writ Petition against which the

Bank had filed the appeal. The Division Bench has noted

certain clauses of the joint note (which evidenced the

conclusions of discussion between the Indian Banks'

Association and the various Organisations of the

Officers of Public Sector Banks). The Division Bench

O.P Nos.3489 & 20427 of 1997

-: 21 :-

also noted the effective dates given in paragraph 15 of

the settlement where although pay revision was

prescribed from 01.07.1993, gratuity was made admissible

with effect from 01.11.1994. The Division Bench also

noticed the earlier Division Bench judgment in

Syndicate Bank v. Celine Thomas (supra). But before the

Division Bench only short notes of the case were cited.

The Division Bench held that the agreement which was

entered between the Indian Banks' Association and

Officers of the Banks was more or less a settlement.

The following was observed in paragraph 10, 11 and 12:

"10. The legal relationship between an employer and

an employee is contractual. However under the

Constitution, in the context of employment under the

State, the legal relationship is described to be one of

"status" and normally regulated by law. Even in the context

of employment by private employers (non-state), terms

and conditions of such employment can always be the

subject matter of legislation by a competent legislature.

However in the absence of any specific legislation or the

existence of any other instrument, which has the force of

law regulating the terms of employment, the terms and

conditions of the employment are always the subject

matter of a contract between the employer and employee.

O.P Nos.3489 & 20427 of 1997

-: 22 :-

In the context of certain categories of the persons

employed in industrial establishments, having regard to the

nature and scale of the employment and the need to

protect the interest of the employees who generally have

an unequal bargaining power compared to the employer,

the service conditions are regulated in this country in the

manner provided under the
Industrial Disputes Act
and

various other allied enactments governing the field. Officers

of the Banks such as the respondent herein do not strictly

fall within the definition of "workmen" as defined under the

Industrial Disputes Act
or other allied enactments.

Notwithstanding such legal position, the magnitude of work

force in the category of officers employed under various

banks in the country gives them a certain amount of

collective bargaining power with the employers, that is the

Banks. Obviously in a bid to secure a peaceful and

congenial environment, the Banks and the Officers'

Association thought it fit to have a settlement of the

various conditions of service of the officers of the Banks

through negotiations. Such negotiations fructified into

Ext.P4 joint note. Therefore, the rights and obligations of

the parties to the joint note emanate from the said

document alone which in substance is akin to a settlement

under
Section 18
of the Industrial Disputes Act.

11. In adjudicating the claim like the one raised by

the respondent herein, in our opinion, the Court is required

only to look at the document (Ext.P4 in the instant case)

which creates the rights and obligations and reliance upon

other documents like the staff circular No.36/95 in our

O.P Nos.3489 & 20427 of 1997

-: 23 :-

view is not legally permissible. If the rights and obligations

of the parties emanate out of Ext.P4 document, the

document is to be interpreted to ascertain the rights and

obligations flowing out of the said document in the light of

the settled principles of interpretation of documents alone.

One of the settled principles of interpretation of the

documents is that one external evidence is inadmissible

with respect to the content of a document. The principle

contained in
Section 91
of the Evidence Act in our opinion

squarely is applicable to the case on hand.
Section 91
of

the Evidence Act in so far as it is relevant reads as

follows:-

91. Evidence of terms of contracts,
grants and other dispositions of property
reduced to form of documents:-

When the terms of contract, or of a
grant, or of any other disposition of property
have been reduced to the form of a
document, and in all cases in which any
matter is required by law to be reduced to the
form of a document, no evidence shall be
given in proof of the terms of such contract,
grant or other disposition of property, or of
such matter, except the document itself, or
secondary evidence of its contents in cases in
which secondary evidence is admissible under
the provisions hereinbefore contained.

12. It can be seen from the above where the terms

of contract are reduced to the form of a document, no

evidence in proof of the terms of such contract is

admissible. Irrespective of the fact whether Section 91 is

applicable to the document such as Ext.P4, in our opinion,

the principle underlying
Section 91
of the Evidence Act

should govern the situation. The rights emanating from

O.P Nos.3489 & 20427 of 1997

-: 24 :-

Ext.P4 cannot either be enlarged or curtailed by either of

the parties to the settlement evidenced by Ext.P4

unilaterally. Assuming for the sake of argument that the

intention of the author of staff circular No.36/95 is that the

arrears due to the officers of the appellant Bank are

required to be paid with effect from November, 1992. Such

an intention in our opinion cannot either bind the Bank

which is a body corporate nor create any right in favour of

the officers of the Bank."

The Division Bench also observed that the judgment in

Syndicate Bank v. Celine Thomas (supra) was based on the

doctrine of classification whereas it overlooked the

fact that such classification if any is the result of

a negotiated settlement of the parties but not made by

any statute or statutory instrument which derives its

authority from the coercive power of the State. It

further held that the invocation of
Article 14
in the

context of the negotiated settlement in question was

uncalled for. The following was observed in paragraph

15:

"15. The subject matter for discussion in the said

judgment is the same joint statement which is the subject

matter of discussion in the instant judgment. The Division

O.P Nos.3489 & 20427 of 1997

-: 25 :-

Bench applied the doctrine of classification and found the

same offensive of
Article 14
overlooking the fact that such

classification if any is a result of a negotiated settlement of

the parties but not made by any statute or statutory

instrument which derives its authority from the coercive

power of the State. The invocation of
Article 14
in the

context of the negotiated settlement in question in our

opinion is uncalled for."

15. Facts leading to pay revision and revision of

other benefits with regard to Officers of the Public

Sector Banks now needs to be noted to appreciate the

issues. For salary revision for Officers, the IBA High

Power committee held discussion with Officers

Organizations. A joint note dated 23.06.1995 was

prepared and signed by the IBA High Power Committee as

well as different Officers Organizations. Annexure-I of

the joint note contained the outcome of the discussions

and recommendations. The joint note further stated that

recommendation be made to Public Sector Banks to

initiate the process of amendment of the Regulations to

give effect to what is stated in Annexure-I. The first

three paragraphs and the last paragraph of the joint

O.P Nos.3489 & 20427 of 1997

-: 26 :-

note are as follows:

"The IBA's High power committee for discussions

with officers' Organisations held several rounds of

discussions with the representatives of the officers'

organizations on the salary revision for officers in public

sector banks. During these discussions common views

have emerged between the two sides. The outcome of

such discussions acceptable to both sides in given in the

Annexure-I.

The representatives of the officers' Organisations

state that the outcome of the discussions as given in the

Annexure-I was in full satisfaction of their demands raised

during the discussions in this regard and the existing service

condition be modified to that extent. The residual issues

shall be taken up for discussions as early as possible.

The IBA agree that it shall recommend to the public

sector banks to initiate the process to amend the Officers'

Service regulations, to give effect to what is stated in the

Annexure-I. The IBA shall also recommend to the

Government of India to approve the amendments and to

issue appropriate guidelines necessary for this purpose.

..........

The representatives of Officers' organizations have

suggested that pending formal amendments to the

officers Service regulations as per procedure laid down

under
Section 19
(!0 of the Banking companion

(acquisition and Transfer of undertaking) Act, 1970/1980,

the IBA may advise the banks to disburse immediately an

O.P Nos.3489 & 20427 of 1997

-: 27 :-

and too amount, equivalent to the nest arrears payable

for the period November, 1992 to June, 1995 and

continue to pay revised salary and allowances on and too

basis. The IBA has agreed to make appropriate

recommendations t the Government in this regard for its

consideration."

Annexure-I to the joint note contained various

recommendations. Paragraph 15 of the joint note

contained a heading "Date of Effect". Various benefits

were recommended to be effected from different dates.

It is useful to quote paragraph 15 of the joint note:

"15. Date of Effect

For payment of arrears, the benefits under various

provisions as above shall be effective from the dates

specified hereunder:-

W.E.F.

(i) House Rent Allowance on

revised basic pay 1.11.1992

(ii) Scales of Pay and

Dearness Allowance 1.07.1993

(iii) City Compensatory Allowance,

Provident Fund, Advance Increment

and Fixed Personal Allowance 1.11.1993

(iv) Gratuity, Medical Aid,

Hospitalisation Expenses, Second

Stagnation Increment in Scale III,

O.P Nos.3489 & 20427 of 1997

-: 28 :-

Professional Qualification Allowance

Recovery of House/Furniture Rent 1.11.1994

(v) Categorisation of Branches May, 1995

(vi) Halting Allowance 1.06.1995."

16. Service Conditions of different Public Sector

Banks were regulated by various Statutory Regulations

framed under different Statutes. With regard to Canara

Bank, Canara Bank (Officers') Service Regulations, 1979

were framed in exercise of the power conferred under

Section 19(2)
of the Banking Companies (Acquisition and

Transfer of Undertakings) Act, 1970.
Regulation 3(e)

defined "Emoluments" which meant the aggregate of

salary and allowances, if any.
Regulation 4
provided

for Grade and Scales of pay. Regulation 46 provided for

gratuity. In view of the recommendation by the IBA dated

23.06.1995 as noted above, the Regulations were amended

to be in tune with the recommendation by settlement

dated 23.06.1995. It is useful to refer to
Regulation
as amended which is as follows:

"
Regulation 4(1)
Grades and Scales of payment

On and from 1.11.1987, the scales of pay specified

O.P Nos.3489 & 20427 of 1997

-: 29 :-

against each grade shall be under:

(a) Top Executive Grade:

Scale VII - Rs.6400 - 150 - 7000

Scale VI - Rs.5950 - 150 - 6050

(b) ...

(c ) ...

(d) .....

(2) On and from 1.7.1993, the scales of pay

specified against each grade shall be as under:

(a) Top Executive Grade:

Scale VII Rs.12650 - 300 - 13250 - 350 - 13600 -

400 -14000

Scale VI - Rs.11450 - 300 - 12650

(b) ......

(c) .....

(d) ....

Regulation 46(2) which provided for gratuity was also

amended and a proviso, viz., second proviso was added

which is to the following effect:

"46(2). The amount of gratuity payable to an

Officer shall be one month's pay for every completed year

of service, subject to a maximum of 15 months' pay.

Provided that where an Officer has completed more

than 30 years of service, he shall be eligible by way of

gratuity for years of service, he shall be eligible by way of

gratuity for an additional amount at the rate of one half of

a month's pay for each completed year of service beyond

O.P Nos.3489 & 20427 of 1997

-: 30 :-

30 years.

Provided further that pay for the purposes of

Gratuity for an Officer who ceased to be in service during

the period 1.7.1993 to 31.10.1994 shall be with regard to

scale of pay as specified in sub-regulation (1) of regulation

4.

Note:

If the fraction of service beyond completed years of

service is 6 months or more, gratuity will be paid prorate

for the period."

The second proviso provided that Officers who ceased to

be in service during the period from 01.07.1993 to

31.10.1994, for the purpose of gratuity, shall be

entitled to scale of pay as specified in
Regulation 4

(1)
meaning thereby they shall be entitled to the

unrevised scale of pay. Statutory Regulation thus

incorporated the provision of settlement.

17. State Bank of Travancore (Officers') Service

Regulations, 1979 were framed in exercise of the powers

conferred under
Section 64
of the State Bank of India

Subsidiary Banks) Act, 1959.
Regulation 3(f)
defines

"Emoluments" to mean the aggregate of salary and

allowances, if any. Regulation 49 defines gratuity

O.P Nos.3489 & 20427 of 1997

-: 31 :-

which is as follows:

"49. Gratuity.

(1) An Officer shall be eligible for gratuity on:

(a) retirement

(b) death

(c) disablement rendering him unfit for

further service as certified by a

medical officer approved by the Bank.

(d) resignation after completion of ten

years of continuous service.

or

(e) Termination of service in any other

way except by way of punishment

after completion of 10 years service.

(2) The amount of gratuity payable to an officer

shall be one month's pay for every completed year of

service, subject to a maximum of 15 months' pay.

Provided that where an officer has completed more

than 30 years of service, he shall be eligible by way of

gratuity for an additional amount at the rate of one half of

a month's pay for each completed year of service beyond

30 years.

NOTE: If the fraction of service beyond

completed years of service is six months or more, gratuity

will be paid pro-rata for the period."

18. There is an issue between the parties as to

whether Regulation 49 was amended after joint note dated

O.P Nos.3489 & 20427 of 1997

-: 32 :-

23.06.1995 or not. Learned counsel for the Banks

submitted that amendments were carried out which is

refuted by the learned counsel for the petitioners.

19. There is another Regulation, viz., State Bank

of Travancore (Payment of Gratuity to Employees)

Regulations, 1972.
Regulation 2(d)
contemplated

"gratuity fund" which is as follows:

"2. In these Regulations, unless the context

otherwise requires:

....

(d) the Gratuity Fund means the gratuity fund

as may be defined in the Gratuity Trust Deed that may be

executed by the Bank and till such deed is executed such

provisions that the Bank may have or hereafter make,

for payment of gratuity to its employees."

Regulations 11 and 12 deals with gratuity.
Regulation
deals with the amount admissible which is as

follows:

"(13) Without prejudice to the provisions of

regulations No.12, the amount of gratuity admissible to an

employee shall be:-

(a) a sum equal to one month's pay for each

completed year of service in the Bank subject to a

maximum of 15 months' pay and

O.P Nos.3489 & 20427 of 1997

-: 33 :-

(b) an additional sum equal to half month's pay in

respect of each completed year of service in the Bank in

excess of 30 years.

(c) service rendered beyond the completed years

of service shall also be reckoned for gratuity purpose if it is

6 months and more but less than one year for the purpose

referred to in sub-paragraphs (a) and (b) above.

Provided that if the amount of gratuity payable to an

employee in accordance with the provisions of the

payment of
Gratuity Act, 1972
or any statutory

modification thereof for the time being in force is higher

than the amount of gratuity admissible to an employee

determined in pursuance of clauses (a), (b), and (c)

hereinabove, the employee shall be entitled to be paid

such higher amount payable to him in accordance with the

provisions of the payment of
Gratuity Act
."

20. As noted above, the issue to be considered in

this case is as to whether denial of benefit of gratuity

on the basis of revised pay scale with effect from

01.07.1993 to the petitioners is arbitrary,

discriminatory and violative of
Article 14
of the

Constitution of India. Paragraph 15 of Annexure-I to the

joint note dated 23.06.1995 provided the date of effect

of the extended benefit of gratuity and certain other

O.P Nos.3489 & 20427 of 1997

-: 34 :-

benefits only with effect from 01.11.1994. The

petitioners who retired between 01.07.1993 and

31.10.1994 and were denied benefit of re-computation of

gratuity have come up in the Writ Petition complaining

the action as discriminatory and arbitrary. Division

Bench judgment of this Court in Syndicate Bank v. Celine

Thomas (supra), the correctness of which is to be

examined has held the denial of gratuity based on the

revised pay scale as arbitrary and violative of
Article
of the Constitution of India. The Division Bench held

that the mini classification between those who retired

between 01.07.1993 and 31.10.1994 and those who retired

on or after 01.11.1994 offends
Article 14
of the

Constitution. In paragraph 13 of the judgment as quoted

above, reasons were given by the Division Bench.

Another reason given by the Division Bench is that the

memorandum of understanding (23.06.1995) cannot meddle

with the statutory prescriptions. The Division Bench

in Syndicate Bank v. Celine Thomas (supra) was

considering the Regulation framed by the Syndicate Bank,

O.P Nos.3489 & 20427 of 1997

-: 35 :-

Regulation 46 of the 1979 Regulations regarding payment

of gratuity. After the settlement dated 23.06.1995

Regulation 46 was amended by adding second proviso in

the Regulation which has been quoted by the Division

Bench in paragraph 5 which has already been quoted.

21. The issue of fixing a cut off date for grant

of various retiral benefit and whether such fixation

violates
Articles 14
and
of the Constitution have

come up for consideration before the Apex Court in

large number of cases. The Apex Court has considered the

facts and issues in each case and explained the

principles to find out as to when the fixation of a cut

off date or denial of a particular benefit has to be

treated as violative of
Articles 14
and
of the

Constitution of India. Cases arising out of similar

facts also came for consideration before the Apex Court.

To find out the ratio laid down in above cases, we need

to refer a few judgments of the Apex Court in detail.

22. The first judgment on which reliance has been

placed by the learned counsel for the petitioners is

O.P Nos.3489 & 20427 of 1997

-: 36 :-

D.S.Nakara and Others v. Union of India ([1983] 1 SCC

305) which needs to be noted in detail. In the

aforesaid case, Government of India, Ministry of

Finance issued Office Memorandum dated 25.05.1979

whereby the formula for computation of pension was

liberalised but made it applicable to Government

servants who were in service on 31.03.1979 and retired

from service on or after that date. The formula

introduced a slab system for computation of pension.

Prior to the above liberalisation, average emoluments

of 36 months' service provided the measure of pension

because the pension was related to the average 36

months' just preceding the retirement. By the

liberalaised scheme average emoluments of 10 months

preceding the date of retirement has to be taken for

computation of pension, a slab system for computation

of average pension has been introduced and ceiling was

raised. However, the pensioner who retired prior to the

specified date, i.e., 31.03.1979 had to earn pension on

the average emoluments of 36 months' salary just

O.P Nos.3489 & 20427 of 1997

-: 37 :-

preceding the date of retirement which naturally was

lower and the slab system and enhanced ceiling was not

available to them. Petitioners, who had retired prior to

31.03.1979 challenged the aforesaid decision of

Government of India, Ministry of Finance contending

violation of
Article 14
and it was contended that the

retirees prior to 31.03.1979 and those who retired after

31.03.1979 forms a homogeneous class and discrimination

between them regarding computation of pension is

arbitrary and discriminatory. Question which was raised

before the Apex Court was noted in paragraph 2 of the

judgment which is as follows:

"2. Do pensioners entitled to receive

superannuation or retiring pension under Central Civil

Service (Pension) Rules, 1972 ('1972 Rules' for short)

form a class as a whole? Is the date of retirement a

relevant consideration for eligibility when a revised

formula for computation of pension is ushered in and

made effective from a specified date? Would differential

treatment to pensioners related to the date of retirement

quo the revised formula for computation of pension

attract
Art.14
of the Constitution and the element of

discrimination liable to be declared unconstitutional as

O.P Nos.3489 & 20427 of 1997

-: 38 :-

being violative of
Art.14?
These and the related questions

debated in this group of petitions call for an answer in the

backdrop of a welfare State and bearing in mind that

pension is a socio economic justice measure providing

relief when advancing age gradually but irrevocably

impairs capacity to stand on one's own feet."

23. In the above case, the Apex Court had stated

the entire history of payment of pension and considered

the object and purpose of pension. While elaborating

the goals and objects of pension, the following was

stated in paragraph 26:

26. Let us therefore examine what are the goals

that pension scheme seeks to subserve? A pension

scheme consistent with available resources must provide

that the pensioner would be able to live: (i) free from

want, with decency, independence and self respect, and

(ii) at a standard equivalent at the pre-retirement level.

This approach may merit the criticism that if a developing

country like India cannot provide an employee while

rendering services a living wage, how can one be assured

of it in retirement? This can be aptly illustrated by a small

illustration. A man with a broken arm asked his doctor

whether he will be able to play the piano after the cast is

removed. When assured that he will, the patient replied,

'that is funny, I could not before'. It appears that

determining the minimum amount required for living

O.P Nos.3489 & 20427 of 1997

-: 39 :-

decently is difficult, selecting the percentage representing

the proper ratio between earnings and the retirement

income is harder. But it. is imperative to note that as self

sufficiency declines the need for his attendance or

institutional care grows. Many are literally surviving now

than the past. We owe it to them and ourselves that they

live, not merely exist. The philosophy prevailing in a given

society at various stages of its development profoundly

influences its social objectives. These objectives are in

turn a determinant of a social policy. The law is one of the

chief instruments whereby the social policies are

implemented and

'pension is paid according to rules which can
be said to provide social security law by
which it is meant those legal mechanisms
primarily concerned to ensure the provision
for the individual of a cash income adequate,
when taken along with the benefits in kind,
provided by other social services (such as
free medical aid) to ensure for him a
culturally acceptable minimum standard of
living when the normal means of doing so
failed', (sec Social Security law by Prof. Harry
Calvert, p. 1)."

24. The Apex Court held that pension is not only

compensation for loyal service rendered in the past,

but pension also has a broader significance, in that it

is a measure of socio-economic justice which inhers

economic security in the fall of life. The following

was observed in paragraph 29:

O.P Nos.3489 & 20427 of 1997

-: 40 :-

"29. Summing up it can be said with confidence

that pension is not only compensation for loyal service

rendered in the past, but pension also has a broader

significance, in that it is a measure of socio economic

justice which inheres economic security in the fall of life

when physical and mental prowess is ebbing

corresponding to aging process and, therefore, one is

required to fall back on savings, One such saving in kind

is when you gave your best in the hey day of life to

employer, in days of invalidity, economic security by way

of periodical payment is assured. The term has been

judicially defined as a stated allowances or stipend made

in consideration of past service or a surrender of rights or

emolument to one retired from service. Thus the pension

payable to a Government employee is earned by

rendering long and efficient service and therefore can be

paid to be a deferred portion of the compensation or for

service rendered. In one sentence one can say that the

most practical raison d'etre for pension is the inability to

provide for oneself due to old age. One may live and

avoid unemployment but not senility and penury if there

is nothing to fall back upon."

25. In the above background the Apex Court examined

the Office Memorandum dated 25.05.1979 and held that

classification between those who retired prior to

31.03.1979 and those who retired after that date is

arbitrary and has no nexus to the object to be achieved.

O.P Nos.3489 & 20427 of 1997

-: 41 :-

In paragraph 42, the Apex Court held the division

arbitrary and unprincipled in the following words:

"42. If it appears to be undisputable, as it is 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 national

principle behind it for granting these benefits only to those

who retired subsequent to that date simultaneously

denying the same to those who retired prior to that date.

If the liberalisation was considered necessary for

augmenting social security in old age to Government

servants then those who retired earlier cannot be worst

off than those who retire later. Therefore, this division

which classified pensioners into two classes is not based

on any rational principle and if the rational principle is the

one of dividing pensioners with a view to giving something

more to persons otherwise equally placed, it would be

discriminatory. To illustrate, take two persons, one retired

just a day prior and another a day just succeeding the

specified date. Both were in the same pay bracket, the

O.P Nos.3489 & 20427 of 1997

-: 42 :-

average emolument was the same and both had put in

equal number of years of service. How does a fortuitous

circumstance of retiring a day earlier or a day later will

permit totally unequal treatment in the matter of pension.

One retiring a day earlier will have to be subject to ceiling

of Rs. 8,100/- p. a. and average emolument to be worked

out on 36 months' salary while the other will have a ceiling

of Rs. 12,000/- p.a. and average emolument will be

computed on the basis of last ten months average. The

artificial division stares into face and is unrelated to any

principle and whatever principle, if there be any, has

absolutely no nexus to the objects sought to be achieved

by liberalising the pension scheme. In fact this arbitrary

division has not only no nexus to the liberalised pension

scheme but it is counter productive and runs counter to

the whole gamut of pension scheme. The equal treatment

guaranteed in
Art.14
is wholly violated in as much as the

pension rules being statutory in character, since the

specified date, the rules accord differential and

discriminatory treatment to equals in the matter of

commutation of pension. A 48 hours difference in matter

of retirement would have a traumatic effect. Division is

thus both arbitrary and unprincipled. Therefore, the

classification does not stand the test of
Art.14."

26. However, it is relevant to note that the Apex

Court held that even though persons who retired on

31.03.1979 are entitled to take benefit of the

O.P Nos.3489 & 20427 of 1997

-: 43 :-

liberalised pension scheme, they are not entitled to

claim any arrears of pension. The following was laid

down in paragraph 49:

"49. But we make it abundantly clear that arrears

are not required to be made because to that extent the

scheme is prospective. All pensioners whenever they

retired would be covered by the liberalised pension

scheme, because the scheme is a scheme for payment of

pension to a pensioner governed by 1972 Rules. The date

of retirement is irrelevant. But the revised scheme would

be operative from the date mentioned in the scheme and

would bring under its umbrella all existing pensioners and

those who retired subsequent to that date. In case of b

pensioners who retired prior to the specified date, their

pension would be computed afresh and would be payable

in future commencing from the specified date. No arrears

would be payable. And that would take care of the

grievance of retrospectivity. In our opinion, it would make

a marginal difference in the case of past pensioners

because the emoluments are not revised. The last revision

of emoluments was as per the recommendation of the

Third Pay Commission (Reghubar Dayal Commission). If

the emoluments remain the same, the computation of

average emoluments under amended R.34 may raise the

average emoluments, the period for averaging being

reduced from last 36 months to last 10 months. The slab

will provide slightly higher pension and if someone

reaches the maximum the old lower ceiling will not deny

O.P Nos.3489 & 20427 of 1997

-: 44 :-

him what is otherwise justly due on computation. The

words "who were in service on 31st March, 1979 and

retiring from service on or after that date" excluding the

date for commencement of revision are words of limitation

introducing the mischief and are vulnerable as denying

equality and introducing an arbitrary fortuitous

circumstance can be severed without impairing the

formula. Therefore, there is absolutely no difficulty in

removing the arbitrary and discriminatory portion of the

scheme and it can be easily severed."

27. One more aspect which was examined by the

Constitution Bench in the above case was the financial

implication in such matters. The Apex Court made the

following pertinent observations in paragraph 63:

"63. The financial implication in such matters has

some relevance... ..Therefore, we are satisfied that the

increased liability consequent upon this judgment is not

too high to be unbearable or such as would have

detracted the Government from covering the old

pensioners under the scheme."

28. The Apex Court had also noted in the said case

that there is no such fund as pension fund and the

pension being non-contributory, liability of the State

continues to pay pension till life.

O.P Nos.3489 & 20427 of 1997

-: 45 :-

29. It is relevant to note that in D.S. Nakara's

case, the Apex Court was considering the question of

benefit to be extended to the retirees of a specified

date of liberalised pension. The formula for computation

of liberalised pension was held to be applicable to

retirees prior to the specified date and subsequent to

it. However, liberalised formula was to be applied on

the emoluments which were received by the retirees

prior to the date and only benefit extended was for

computation. In the present case we are concerned with

the entitlement of gratuity. We shall notice a little

later how it is different from computation of pension.

30. Judgment of the Apex Court which has been

relied on by the learned counsel for the Bank relating

to payment of gratuity needs to be noted is
State

Government Pensioners' Association and Others v. State

of Andhra Pradesh
([1986] 3 SCC 501). In
the above case

a large number of employees retired prior to

01.04.1978. By a Government Order dated 26.03.1980, the

principle for computation of gratuity was liberalised.

O.P Nos.3489 & 20427 of 1997

-: 46 :-

The issue which arose for consideration has been noted

by the Apex Court in paragraph 1 of the judgment which

is to the following effect:

"Does that part of the provision which provides for

payment of a larger amount of gratuity with prospective

effect from the specified date offend
Art. 14
of the

Constitution of India? Whether gratuity must be paid on

the stepped up basis, to all those who have retired before

the date of the upward revision, with retrospective effect,

even if the provision provides for prospective operation, in

order not to offend
Art. 14
of the Constitution of India? A

Division Bench of the High Court of Andhra Pradesh says ,

no'. In our opinion it rightly says so. The petitioners,

erstwhile Government employees who had retired "before"

April 1, 1978, inter alia claimed and contended before the

High Court that they were entitled to the benefit of the

Government order No. 88 dated 26th March, 1980

providing that :

"(b) Retirement gratuity may be 1/3rd of pay drawn
at the time of retirement for every 6 monthly service
subject to maximum of 20 months pay limited to Rs.

30,000/-."

The said order in so far as gratuity is concerned is made

effective from 1st April, 1978. Says the High Court :-"

31. The Apex Court in the aforesaid case held that

the Revised Pension Rules 1980 are not admissible to

O.P Nos.3489 & 20427 of 1997

-: 47 :-

those who retired prior to 01.04.1978 because at the

time of retirement they were governed by the then

existing rules and their gratuity was calculated and

paid. The following was further observed in paragraph 1:

"In our opinion, the arrears relating to gratuity benefit

computed according to the Revised Pension Rules of 1980

may not be paid to the pensioners that retired prior to 1-4-

1978 because at the time of retirement they were governed

by the then existing Rules and their gratuity was calculated

on that basis. The same was paid. Since the revised scheme

is operative from the date mentioned in the scheme, i.e. 1-4-

1978, the continuing rights of the pensioners to receive

pension and family pension must also be revised according to

that scheme. But the same cannot be said with regard to

gratuity, which was accrued and drawn. The reason why their

Lordships of the Supreme Court in Nakara's case, AIR 1983

SC 130 refused to grant arrears to the pensioners that retired

prior to the stipulated date would ipso facto apply for refusing

to grant the revised gratuity, since that would amount to

asking the State Government to pay arrears, relating to

gratuity after revising them according to the new scheme for

those that retired prior to 1-4-1978 and that would amount

to giving retrospective effect to the A.P. Revised Pension

Rules, 1980, which came into effect from 29-10-1979 and in

the case of Part II of those Rules from 1-4-1978. The scheme

is prospective and not retrospective."

32. The High Court in the aforesaid case dismissed

O.P Nos.3489 & 20427 of 1997

-: 48 :-

the Writ Petition filed by the employees which judgment

was challenged in the Apex Court. The Apex Court

approved the view of the High Court. Revision of

gratuity from a specified date was upheld by the Apex

Court. It was held that such revision of gratuity by

a specified date cannot be in any manner violative of

Article 14
of the Constitution. The following was held

in paragraph 2:

"2. We fully concur with the view of the High

Court. The upward revision of gratuity takes effect from

the specified date (April 1, 1978) with prospective effect.

The High Court has rightly understood and correctly

applied the principle propounded by this Court in Nakara's

case AIR 1983 SC 130. There is no illegality or

unconstitutionality (from the platform of
Art.14
of the

Constitution of India) involved in providing for prospective

operation from the specified date. Even if that part of the

Notification which provides for enforcement with effect

from the specified date is struck down the provision can

but have prospective operation not retrospective

operation. In that event (if the specified date line is

effaced), it will operate only prospectively with effect from

the date of issuance of the notification since it does not

retrospectively apply to all those who have already retired

before the said date. In order to make it retrospective so

O.P Nos.3489 & 20427 of 1997

-: 49 :-

that it applies to all those who retired after the

commencement of the Constitution on 26th January, 1950

and before the date of issuance of the notification on 26th

March, 1980, the Court will have to rewrite the

notification and introduce a provision to this effect saying

in express terms that it shall operate retrospectively.

Merely striking down (or effacing) the alleged offending

portion whereby it is made effective from the specified

date will not do. And this, the Court cannot do. Besides,

giving prospective operation to such payments cannot by

any stretch of imagination be condemned as offending

Art. 14.
An illustration will make it clear. Improvements in

pay scales by the very nature of things can be made

prospectively so as to apply to only those who are in the

employment on the date of the upward revision. Those

who were in employment say in 1950, 1960 or 1970,

lived, spent, and saved, on the basis of the then

prevailing cost of living structure and pay scale structure,

cannot invoke
Art. 14
in order to claim the higher pay

scale brought into force say, in 1980. If upward pay

revision cannot be made prospectively on account of
Art.
, perhaps no such revision would ever be made. Similar

is the case with regard to gratuity which has already been

paid to the petitioners on the then prevailing basis as it

obtained at the time of their respective dates of

retirement. The amount got crystallized on the date of

retirement on the basis of the salary drawn by him on the

date of retirement. And it was already paid to them on

that footing. The transaction is completed and closed.

O.P Nos.3489 & 20427 of 1997

-: 50 :-

There is no scope for upward or downward revision in the

context of upward of downward revision of the formula

evolved later on in future unless the provision in this

behalf expressly so provides retrospectively (downward

revision may not be legally permissible even). ..."

33. The Constitution Bench judgment of the Apex

Court in D.S.Nakara's case (supra) was considered by

another Constitution Bench of the Apex Court in
Krishena

Kumar v. Union of India
([1990] 4 SCC 207) especially on

the ratio of
the said judgment
. In the aforesaid case,

petitioners were the employees who retired from Railway

and were in receipt of provident fund benefits.

Provident Fund Scheme was current in the Railways since

long. In the year 1957 Provident Fund Scheme was

replaced by a pension scheme. Employees who entered into

Railway service on or after April 1, 1957 were

automatically covered by the scheme. Those employees who

were already in service on April 1, 1957 were given an

option either to retain the Provident Fund benefits or

to switch over to the pensionary benefits. The pension

scheme was liberalised on several occasions. The

O.P Nos.3489 & 20427 of 1997

-: 51 :-

Railway had even subsequent to 1957 gave option to the

provident fund retirees to opt for the pension scheme.

Petitioners have not opted for pension. Challenge in

the Writ Petition was that Railway by various

Notifications, last being 08.05.1987 gave fresh option

to some of the provident fund retirees while denying the

benefit to the other provident fund retirees who were

identically placed but were separated from the rest by

the arbitrary cut off date. It was contended that the

specified date in the Notification giving option having

formed the basis for discrimination between the

similarly placed provident fund retirees which was

arbitrary and against the objects to be achieved and is

clearly violative of
Article 14.

Heavy reliance was

placed on D.S.Nakara's case (supra) by the petitioners

in
Krishena Kumar
's case (supra). In the context of

precedent, the Apex Court made the following

observations in paragraphs 19 and 20:

"19. The doctrine of precedent, that is being

bound by a previous decision, is limited to the decision

O.P Nos.3489 & 20427 of 1997

-: 52 :-

itself and as to what is necessarily involved in it. It does

not mean that this Court is bound by the various reasons

given in support of it, especially when they contain

"propositions wider than the case itself required." This was

what Lord Selborne said in Caledonian Railway Co. v.

Walker's Trustees (1882 (7) AC 259) and Lord Halsbury in

Quinn v. Leathem, 1901 AC 495 (502). Sir Frederick

Pollock has also said: "Judicial authority belongs not to the

exact words used in this or that judgment, nor even to all

the reasons given, but only to the principles accepted and

applied as necessary grounds of the decision."

20. In other words, the enunciation of the reason

or principle upon which a question before a Court has

been decided is alone as a precedent. The ratio decidendi

is the underlying principle, namely, the general reasons or

the general grounds upon which the decision is based on

the test or abstract from the specific peculiarities of the

particular case which gives rise to the decision. The ratio

decidendi has to be ascertained by an analysis of the facts

of the case and the process of reasoning involving the

major premise consisting of a pre existing rule of law,

either statutory or judge - made, and a minor premise

consisting of the material facts of the case under

immediate consideration. If it is not clear, it is not the

duty of the Court to spell it out with difficulty in order to

be bound by it. In the words of Halsbury, 4th Edn., Vol.

26, para 573:

"The concrete decision alone is binding between the
parties to it but it is the abstract ratio decidendi, as
ascertained on a consideration of the judgment in relation

O.P Nos.3489 & 20427 of 1997

-: 53 :-

to the subject matter of the decision, which alone has the
force of law and which when it is clear it is not part of a
tribunal's duty to spell out with difficulty a ratio decidendi
in order to be bound by it, and it is always dangerous to
take one or two observations out of a long judgement and
treat them as if they gave the ratio decidendi of the case.
If more reason than one are given by a tribunal for its
judgment, all are taken as forming the ratio decidendi."

34. Referring to D.S. Nakara's case the Apex Court

held that in D.S. Nakara's case, the court had treated

the pension retirees in a homogeneous class and the

provident fund retirees were not in mind. The Apex

Court held that in D.S. Nakaras case it was never held

that both the pension retirees and the provident fund

retirees formed a honogenous class and that any further

classification among them would be violative of Article

14. The Apex Court in
Krishena Kumar
's case (supra)

held that rights by the Government in respect of

provident fund is finally crystalised on the date of

retirement whereas under the pension scheme the

Government's obligation does not begin until the

employee retires. Rules governing provident fund are

entirely different from the Rules governing pension.

The following was observed in paragraph 32:

O.P Nos.3489 & 20427 of 1997

-: 54 :-

"32. In Nakara (AIR 1983 SC 130) 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
Art. 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 Government'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 not begin until

the employee retires when only it begins and it continues

till the death of the employee. Thus, on the retirement of

an, employee Government's legal obligation under the

Provident Fund account ends while under the Pension

Scheme it begins. 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 crystallised on his retirement whereafter no

continuing obligation remained while, on the other hand,

as regards pension retirees, the obligation continued till

O.P Nos.3489 & 20427 of 1997

-: 55 :-

their death. The continuing obligation of the State in

respect of pension retirees is adversely affected by fall in

rupee value and rising prices which, considering the

corpus already received by the P. F. retirees they would

not be so adversely affected ipso facto. It, cannot,

therefore, be said that it was the ratio decidendi in Nakara

that the State's obligation towards its P. F. retirees must

be the same as that towards the pension retirees. An

imaginary definition of obligation to include all the

government retirees in a class was not decided and could

not form the basis for any classification for the purpose of

this case. Nakara cannot, therefore, be an authority for

this case."

35.
In another Constitution Bench judgment in

Indian Ex-Services League v. Union of India
([1991] 2

SCC 104), the Apex Court had again occasion to consider

the ratio of D.S.Nakara's case. Writ Petition was filed

by ex-servicemen. The liberalised pension formula was

made applicable by the Government of India, Ministry of

Finance dated 05.05.1979 also to the members of the

Armed Forces. Apart from other claims in some of the

Writ Petitions before the Apex Court claim for payment

of gratuity on the ground of liberalised pension was

also raised by the pre-April 1978 retirees. Apex Court

O.P Nos.3489 & 20427 of 1997

-: 56 :-

held that the concept of gratuity is different from

pension and claim of gratuity can be made only on the

date of retirement on the basis of salary drawn on the

date of retirement and the said amount being already

paid, transaction was completed and closed. Following

was observed in paragraph 21:

"21. One of the prayers made in these writ

petitions is for grant of same Death cum Retirement

Gratuity to the pre-1-4-1979 retirees as to the post-1-4-

1979 retirees. A similar claim was rejected by this Court in

State Government Pensioners' Association v. State of

Andhra Pradesh
1986 (3) SCC 501 (AIR 1986 SC 1907) on

the ground that the claim for gratuity can be made only on

the date of retirement on the basis of the salary drawn on

the date of retirement and being already paid on that

footing the transaction was completed and closed. It could

then not be reopened as a result of the enhancement

made at a later date for persons retiring subsequently.

This concept of gratuity being different from pension has

also been reiterated by the Constitution Bench in
Krishena

Kumar
's case (AIR 1990 SC 1782). With respect, we are in

full agreement with this view. This claim of the petitioners

also, therefore, fails."

The Apex Court
in
the above case
has quoted with

approval earlier judgment of the Apex Court in State

O.P Nos.3489 & 20427 of 1997

-: 57 :-

Government Pensioners' Association v. State of A.P.

(supra) which we have already noted above.

36. Another judgment which is relevant to be

noticed is Union of India v. P.N. Menon ([1994] 4 SCC

68). In the above case, the respondent had retired prior

to 30.09.1977. Office Memorandum dated 25.05.1997 was

issued by the Government of India treating portion of

the dearness allowance as pay for the purpose of

retirement benefits in respect of Government servants

who retired on or after 30.09.1977. Petitioners filed

Writ Petition in the High Court claiming that the said

benefit should also be extended to the all retired

Government servants including those who retired prior to

30.09.1977. Petitioners placed reliance on the judgment

in D.S. Nakara's case and contended that the

classification between retirees prior to 30.09.1977 and

subsequent to 30.09.1977 is arbitrary and violative of

Article 14
of the Constitution of India. The Apex Court

held in the said case that due to many constraints it

is not always possible for the Government to extend the

O.P Nos.3489 & 20427 of 1997

-: 58 :-

same benefit to one and all irrespective of

superannuation and a scheme implemented with cut of

date cannot be held to be violative of
Article 14
,

which is fully sustainable. In paragraph 8, the

following has been stated:

"8. Whenever the Government or an authority,

which can be held to be a State within the meaning of

Art.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 some

benefits to one and all, irrespective of 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
Art.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 1301, 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."

37. Another judgment which is to be noticed is

State of Punjab v. Amar Nath Goyal
([2005] 6 SCC 754).

In
the above case
, respondents were employees of the

O.P Nos.3489 & 20427 of 1997

-: 59 :-

Government of Punjab who retired during 31.07.1993 to

31.03.1995. A Circular was issued by the Government on

13.12.1996 under which a Government employee who

retired/died on or after 01.04.1995 is entitled to get

gratuity on the basis of addition of a portion of the

dearness allowance to the basic pay which benefit was

refused to the respondents, hence they filed the Writ

Petition in the High Court. The High Court partially

allowed the Writ Petition and held that those employees

who retired on or after 01.07.1993 shall be entitled to

get higher amount, consequent to the merger of a

portion of dearness allowance to the basic pay.

Judgment of the High Court was challenged by the State

of Punjab. Before the Apex Court, the argument was made

on the ground of violation of
Article 14
in so far as

the employees who retired prior to 01.04.1995 and those

who retired thereafter.

Reliance was placed on the

judgment of the Apex Court in
D.S. Nakara
's case. In

paragraph 22, the Apex Court had noted the contention of

the parties which is extracted below:

O.P Nos.3489 & 20427 of 1997

-: 60 :-

"22. The thrust of the arguments by the learned

counsel on behalf of the employees has been on the

alleged violation of
Art.14
of the Constitution. They

contend that the decision of the Central

Government/State Governments to make available the

increased quantum of gratuity (with revised ceiling) only

to employees, who retired or died on or after 1-4-1995, is

discriminatory and arbitrary. They also contend that all

retirees/dead persons form a homogeneous class and any

discrimination or distinction between retirees/dead

persons prior to 1-4-1995 and those who retired/died on

or after 1-4-1995 had no rational basis, nor was intended

to serve any purpose. Heavy reliance was placed on the

judgment of this Court in D.S. Nakara v. Union of India1

("D. S. Nakara"). We are afraid that the refrain of D. S.

Nakara (1983 (1) SCC 305 : 1983 SCC (L&S) 145) has

been played too often to retain its initial charm, which has

been worn thin by subsequent dicta."

38. The Apex Court did not accede to the argument

of the petitioner that decision of the Government to

limit the benefit who retired after 01.04.1995 is

either irrational or arbitrary. The Apex Court further

held that the financial and economic implications are

also relevant and germane for any policy decision. The

following was observed in paragraphs 26, 32 and 37:

O.P Nos.3489 & 20427 of 1997

-: 61 :-

"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 very relevant and germane for any policy

decision touching the administration of the Government,

at the Centre or at the State level.

32. The importance of considering financial

implications, while providing benefits for employees, has

been noted by this Court in numerous judgments

including the following two cases. In State of Rajasthan v.

Amrit Lal Gandhi (1997 (2) SCC 342 : 1997 SCC (L&S)

512 : AIR 1997 SC 782) this Court went so as far as to

note that:

"Financial impact of making the
Regulations retrospective can be the sole
consideration while fixing a cutoff date. In
our opinion, it cannot be said that this cutoff
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." (Ibid
(emphasis supplied).

37. In the instant case before us, the cutoff date

has been fixed as 1-4-1995 on a very valid ground,

namely, that of financial constraints. Consequently, we

reject the contention that fixing of the cutoff date was

arbitrary, irrational or had no rational basis or that it

offends
Art.14."

O.P Nos.3489 & 20427 of 1997

-: 62 :-

39. Thus in the above case the challenge to the cut

off date for extending the benefit of merger of dearness

allowance into pay which consequently increases the

computation of gratuity with a specified date was upheld

and was not held to be violative of
Articles 14
and
16.

40. Another judgment which needs to be noted is

State of A.P. v. A.P. Pensioners' Association
([2005] 13

SCC 161). The State of Andhra Pradesh constituted a Pay

Revision Commission which recommended revision of pay

scale notionally from 01.07.1998 with financial benefits

from 01.04.1999. Government Order dated 11.08.1999 was

issued which provided that persons who retired between

01.07.1998 and 31.03.1999 shall also be eligible for the

revised pay scales, 1999. The notional pay fixed in the

revised pay scales shall in such cases count towards

pensionary benefits. But no Government employee shall be

entitled to any monetary benefit for any period prior to

01.04.1999. Original Applications were filed before the

Administrative Tribunal by the retired employees who had

retired between the period 01.07.1998 and 01.04.1999

O.P Nos.3489 & 20427 of 1997

-: 63 :-

praying for payment of pensionary benefits including

commutation, pension, gratuity and encashment of leave.

The Tribunal held that the applicants were not entitled

to gratuity and encashment of earned leave based on

their notional pay fixed in the revised scale of pay.

But they were held to be eligible for commutation of

pension. Both the State as well as the employees filed

Writ Petitions before the High Court. The High Court

dismissed the Writ Petition filed by the State while the

Writ Petition filed by the employees were allowed. The

State filed a Special Leave Petition before the Apex

Court. Similar submission which is sought to be raised

in the present case was raised before the Apex Court

challenging the cut off date, 01.04.1999 for giving

pensionary benefits. It is useful to quote paragraph 19

of the judgment which contained the relevant

submissions:

"19. Mr. Uday Umesh Lalit, learned senior counsel

appearing on behalf of the Respondents, on the other

hand, supported the judgment of the High Court

contending that it is not a case where 1.4.1999 was fixed

O.P Nos.3489 & 20427 of 1997

-: 64 :-

as a cut off date for the purpose of grant of terminal

benefits in terms of the rules. The rules, it was urged,

read as a whole would clearly point out that the same had

come into force with effect from 1.7.1998 wherefor a legal

fiction has been created and in that view of the matter,

although the monetary benefit was to be paid with effect

from 1.4.1999, the entitlement to the scale of pay for all

purposes including that of computation of the amount of

gratuity as also commutation of pension, etc. cannot be

denied. Other GOMs Nos. 156,157, 158 and 206 issued

after GO No. 114, having not been issued under the

proviso to
Art.309
of the Constitution of India, whereas

GO NO. 114 having been so issued, the same could not

whittle down the effect of a statutory rule. In any event,

the said GOMs have been declared ultra vires by the

Tribunal which finding has not been set aside by the High

Court."

41. The Apex Court held that those employees who

retired between the period 01.07.1998 and 01.04.1999

would have received the actual benefit calculated in

terms of the said Rule and the submission of the learned

counsel for the respondents that they became entitled to

get enhanced pay and gratuity from 01.07.1998 was

rejected. The Apex Court made the following observations

in paragraph 28:

O.P Nos.3489 & 20427 of 1997

-: 65 :-

"28. Computation of retirement gratuity payable to

a Government servant is, therefore, required to be done

on the basis of the formula laid down therein. A bare

perusal of the aforementioned rule clearly shows that for

the purpose of computation either 1/4th of the

emolument for each completed six monthly period of

service, or 3/16th of emoluments for each completed six

monthly period of service, is to be taken into

consideration. Such emoluments necessarily were payable

either immediately before the date of retirement or the

date of death. On 1.4.1999, in view of the clear

expressions contained in the aforementioned GO No. 114,

those employees who retired between the period

1.7.1998 and 1.4.1999 would have received the actual

benefit calculated in terms of the said rule. The

submission of Mr. Lalit to the effect that they became

entitled to enhanced pay and, therefore, to enhanced

gratuity from 1.7.1998 is not wholly correct. They became

entitled thereto but only notionally for the purpose of

calculation of such recurring liability of the State which

became payable with effect from 1.4.1999. The High

Court has heavily relied upon the purported legal fiction

created in the said rule to the effect that the same would

come into force with effect from 1.7.1998. The legal

fiction undoubtedly is to be construed in such a manner

so as to enable a person, for whose benefit such legal

fiction has been created, to obtain all consequences

flowing therefrom."

42. It was stated by the Apex Court that the rule

O.P Nos.3489 & 20427 of 1997

-: 66 :-

not only created a legal fiction but also provided the

operation of limitation thereof. It was held that the

Rule itself provided a limitation for operation, the

consequences flowing from the legal fiction have to be

understood in the light of the limitations prescribed.

The following was
laid down in
paragraph 30:

"30. The case at hand indeed poses a different

problem. Although like Gurupad Khandappa Magdum

(supra) a notional revision of pay was to be considered as

if the same took effect from 1.7.1998, but the rule went

further and stated that actual monetary benefit thereof

shall be given with effect from 1.4.1999. The rule,

therefore, not only creates a legal fiction but also provides

the limitations in operation thereof. If the effect of the

legal fiction is extended in the manner suggested by Mr.

Lalit, clause (4) of the rule will become otiose. In other

words, all the consequences ordinarily flowing from a rule

would be given effect to if the rule otherwise does not

limit the operation thereof. If the rule itself provides a

limitation on its operation, the consequences flowing from

the legal fiction have to be understood in the light of the

limitations prescribed. Thus, it is not possible to construe

the legal fiction as simply as suggested by Mr. Lalit."

43. Ultimately in paragraph 41, the Apex Court held

that the intention of the State was not to grant any

O.P Nos.3489 & 20427 of 1997

-: 67 :-

benefit towards payment of gratuity even in relation to

those employees who had retired in between 01.07.1998

and 31.03.1999. The following was held in paragraph 41:

"41. We, therefore, are of the opinion that the

intention of the State was not to grant any benefit

towards payment of gratuity even in relation to those

employees who had retired in between 1.7.1998 and

31.3.1999."

44. The above case fully supports the submission

raised by the learned counsel for the Banks. In the

above case also the pay scale was revised with effect

from 01.07.1998 but the rule contemplated that no

benefit towards gratuity between the period 1st April,

1998 and 31.03.1999 shall be payable. The argument that

revision of pay scale from 01.07.1998 creates a legal

fiction and it has to be deemed that those employees who

received higher revised pay scale and that should also

count towards receiving monetary benefits by the

retired employees during the relevant period was

rejected on the ground that the rules itself contained

a limitation which has to be given effect to.

O.P Nos.3489 & 20427 of 1997

-: 68 :-

45. Another judgment which closely resembles with

the facts of the present case is the judgment in State

of Bihar v. Bihar Pensioners Samaj ([2006] 5 SCC 65).

The State of Bihar issued a Notification dated

19.04.1990 regulating pension, family pension and death-

cum-retirement gratuity. The effective date of

notification was fixed as 01.01.1986. However, the

Notification declared that financial benefits of

revision of pay should be only with effect from March,

1989 and no arrears will be paid from 01.03.1989. Apart

from the pension, the notification also revised death-

cum-retirement gratuity but again no revision of death-

cum-retirement gratuity was made in respect of

Government servants who retired/died in harness on or

after 01.01.1986 and upto 28.02.1989. The Association of

the employees filed a Writ Petition challenging the

Notification. The High Court quashed the Notification

and directed the Government to take a decision in

accordance with law. Judgment of the High Court was

challenged in the Apex Court and the Special Leave

O.P Nos.3489 & 20427 of 1997

-: 69 :-

Petition was summarily rejected. On 15.12.2000 the

Governor of Bihar issued an Ordinance, namely, the Bihar

State Government Employees Revision of Pension, Family

Pension and Death-cum-Retirement Gratuity (Validation

and Enforcement) Ordinance, 2000. The said Ordinance was

subsequently replaced by the Bihar Act 3 of 2001. The

said Act validated the revision of pension and gratuity

in accordance with the Notification as mentioned above.

Writ Petition was filed by the Bihar Pensioners Samaj

which was allowed and the Validation Act was struck

down. Appeal was filed by the State of Bihar.

Provisions of Section 4 of the Validation Act has been

extracted in paragraph 15 of the judgment, which is to

the following effect:

"15. In our view, the contention is unsound. In

any event, we need not pursue this contention any

further, as the Division Bench of the High Court had itself

taken the view that it was perfectly open to the State

Government to fix 1-3-1989 as the effective date of the

notifications and, in any event, the two earlier judgments

of the Division Benches had merely directed the State

Government to consider the issue in the light of the

O.P Nos.3489 & 20427 of 1997

-: 70 :-

judgments. What is more relevant to us today is that,

after considering the effect of the two judgments, the

State Legislature passed "the Validation Act" in which the

validating
S.4
and
read as under:

"4. Validation of revision of
pension/gratuity. -- Notwithstanding any
judgment, decree or order of any court,
tribunal or authority the Government
Resolutions Nos. 1853(F) and 1854(F) both
dated 19-4-1990 would be deemed to have
been enforced from 1-3-1989 and the
benefits of pension/family pension and
gratuity given to the government employees
under the said two resolutions would be
deemed to have been due to the employees
w.e.f. 1-3-1989 only and the said date would
be deemed always to have been the cut off
date for the said two resolutions.

5. Overriding effect of the Act. --

Notwithstanding anything to the contrary
contained in any judgment, decree or order
passed by any court, tribunal or authority
and in any other law for the time being in
force the provisions of this Act shall prevail
and have effect."

46. The Apex Court set aside the judgment of the

High Court and held that fixation of the cut off date

for payment of the revised benefits under the two

notifications concerned was not arbitrary and fixing of

a cut-off date for granting of benefits is well within

the powers of the Government. It was further held that

financial constraints is also a valid ground for

O.P Nos.3489 & 20427 of 1997

-: 71 :-

introducing a cut-off date. The following was observed

in paragraphs 17 and 18:

"17. We think that the contention is well founded.

The only ground on which
Art.14
has been put forward by

the learned counsel for the respondent is that the fixation

of the cut off date for payment of the revised benefits

under the two notifications concerned was arbitrary and it

resulted in denying arrears of payments to certain

sections of the employees. This argument is no longer res

Integra. It has been held in a catena of judgments that

fixing of a cut off date for granting of benefits is well

within the powers of the Government as long as the

reasons therefor are not arbitrary and are based on some

rational consideration.

18. A supplementary affidavit filed on behalf of

the State Government by Mukesh Nandan Prasad dated 9-

9-2002 brings out in para 8 that the total amount of

financial burden, which would arise as a result of making

effective the payments from 1-1-1986 would be about

2038.34 crores. In other words, the State Government

declined to pay the arrears from 1-1-1986 on the ground

of financial consideration, which, undoubtedly, is a very

material consideration for any administration.
In
State of

Punjab v. Amar Nath Goyal
(2005 (6) SCC 754) this Court

had occasion to consider the very same issue. After

referring to a number of other authorities, it was held that

financial constraints could be a valid ground for

introducing a cut off date while introducing a pension

O.P Nos.3489 & 20427 of 1997

-: 72 :-

scheme on revised basis. Thus, refusal to make payments

of arrears from 1.1.1986 to 28-2-1989 on the ground of

financial burden cannot be held to be an arbitrary ground

or irrational consideration. Hence, the argument based on

Art.14
of the Constitution must fail."

47. Now we proceed to consider the other judgments

relied on by the learned counsel for the petitioners.

We have already noticed in detail the Division Bench

judgment in Syndicate Bank v. Celine Thomas (2005 KHC

1841).

48. Next judgment relied on by the learned counsel

for the petitioners is Chairman, Railway Board v.

C.R.Rangadhamaiah [1997] 6 SCC 623), a Constitution

Bench judgment. In the above case, challenge was made to

the Notification issued by the Railway Administration

making amendments in Rule 2544 of Indian Railway

Establishment Code. The provision of Rule 2544 provided

that for the purpose of calculation of average

emoluments actual amount of running allowance drawn by

a railway servant during the month limited to maximum

75% has to be taken into consideration. The said rule

O.P Nos.3489 & 20427 of 1997

-: 73 :-

was amended. Letter dated 17.07.1981 was issued by the

Railway Board communicating the decision that for the

purpose of retirement benefits 55% of the basic pay

shall be taken into account and the said provision was

made applicable to 1st April, 1979. The said letter has

been noticed in paragraph 6 of the judgment which is to

the following effect:

"6. By letter of the Railway Board dated July 17,

1981 the decisions taken on the recommendations of its

Committee on Running Allowances were communicated.

In the said letter it was stated :

"3.23. Reckoning of Running Allowance as Pay. (i)

For the specified purposes for which running allowance is

reckoned as Pay at present, 30% of the basic pay of the

running staff concerned will be reckoned except as

below :

(a) for the purpose of retirement benefits, 55% of

basic pay will be taken into account. This provision will be

made applicable retrospectively from 1-4-1979 so that

those running staff who have already retired with effect

from that date or afterwards will also have their

retirement benefits recalculated and resettled.

(ii) xxxx xxxx xxxx"

49. Earlier letter dated 22.03.1976 was issued by

the Railway Board where the decision regarding

O.P Nos.3489 & 20427 of 1997

-: 74 :-

modification of the existing rules pertaining to

treatment of running allowance was also indicated. Writ

Petitions were filed before the Delhi High Court which

were subsequently transferred to Central Administrative

Tribunal which were allowed and order of the Railway

Board dated 23.06.1976 was quashed. Notification dated

05.12.1988 was issued by the Railway Board amending Rule

2544 by which certain amendments were made which

amendment reduced the running allowance to the maximum

of 45% and was made effective from 01.04.1979. In

paragraph 8 of the judgment amendments have been

extracted which are to the following effect:

"8. No steps were taken by the Railway

Administration to challenge the correctness of the said

judgment of the Tribunal and it has become final. After

the said decision of the Tribunal, the impugned

notifications were issued on December 5, 1988.

Notification No. G.S.R. 1143 (E) is as follows :

"G.S.R. 1143 (E) :- In exercise of the powers

conferred by the proviso to
Art.309
of the Constitution,

the President is pleased to amend R.2544 of Indian

Railway Establishment Code, Volume II (Fifth Reprint) as

in the Annexure.

O.P Nos.3489 & 20427 of 1997

-: 75 :-

This amendment will be effective from 1-1-1973.

ANNEXURE

R.2544

Sub-rule g(i) and g(ii) may be substituted by the

following :

g(i) "For the purpose of calculation of average

emoluments :- actual amount of running allowance drawn

by the Railway servant during the month limited to a

maximum of 45% of pay, in the revised scales of pay".

g(ii) "For the purpose of gratuity and / or death

cum retirement gratuity :- the monthly average of

running allowances drawn during the 365 days of running

duty immediately preceding the date of quitting service

limited to 45% of average pay drawn during the same

period, in the revised scale of pay."

Notification No. G.S.R. 1144 (E) is as under :

"G.S.R. 1144 (E) :- In exercise of the powers

conferred by the proviso to
Art.309
of the Constitution,

the President is pleased to amend R.2544 of the Indian

Railway Establishment Code, Volume II (Fifth reprint) as

in the Annexure.

The amendment will be effective from 1-4-1979.

ANNEXURE

R.2544

Sub-rule g(i) and g(ii) may be substituted by the

following :

g(i) "For the purpose of calculation of average

emoluments :- 55% of basic average pay, in the revised

scales of pay, drawn during the period;"

O.P Nos.3489 & 20427 of 1997

-: 76 :-

g(ii) "For the purpose of gratuity and / or death

cum retirement gratuity :- 55% of basic average pay, in

the revised scales of pay, drawn during the period."

50. Question which was up for consideration before

the Apex Court has been extracted in paragraph 14 which

is to the following effect:

"14. The question which, therefore, needs to be

examined is whether the amendments made in R.2544 by

the impugned notifications, to the extent they have been

given effect from January 1, 1973 and April 1, 1979, can

be treated as a valid exercise of the power to make rules

under the Proviso to
Art.309
of the Constitution."

51. The Apex Court after examining the amendment

held that the rule which seeks to reverse from an

anterior date a benefit which has been granted or

availed as being violative of
Articles 14
and
of the

Constitution of India to the extent it operates

retrospectively. The following was laid down in

paragraphs 20, 25 and 28:

"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

retrospectivity as being violative of
Art.14
and
of the

O.P Nos.3489 & 20427 of 1997

-: 77 :-

Constitution, but a rule which seeks to reverse from an

anterior date a benefit which has been granted or availed,

e.g., promotion or pay scale, can be assailed as being

violative of
Art.14
and
of the Constitution to the extent

it operates retrospectively.

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.

28. It has also been laid down by this Court that

the reckonable emoluments which are the basis for

computation of pension are to be taken on the basis of

emoluments payable at the time of retirement. (See :

Indian Ex-services League v. Union of India
, 1991 (1) SCR

158 at p. 173 : 1991 AIR SCW 327 at p. 339)."

52. Ultimately, the Apex Court stuck down the said

amendments by stating the following in paragraphs 32 and 33:

"32. It is no doubt true that on December 5, 1988

when the impugned notifications were issued, the rights

guaranteed under
Art.31(1)
and
19(1)(f)
were not

available since the said provisions in the Constitution

stood omitted with effect from June 20, 1979 by virtue of

the Constitution (Forty fourth
Amendment) Act, 1978
. But

the notifications G.S.R. 1143 (E) and G.S.R. 1144 (E)

O.P Nos.3489 & 20427 of 1997

-: 78 :-

have been made operative with effect from January 1,

1973 and April 1, 1979 respectively on which dates the

rights guaranteed under
Art.31(1)
and
19(1)(f)
were

available. Both the notifications insofar as they have been

given retrospective operation are, therefore, violative of

the rights then guaranteed under
Art.19(1)
and
31(1)
of

the Constitution.

33. Apart from being violative of the rights then

available under
Art.31(1)
and
19(1)(f)
, the impugned

amendments, insofar as they have been given

retrospective operation, are also violative of the rights

guaranteed under
Art.14
and
of the Constitution on the

ground that they are unreasonable and arbitrary since the

said amendments in R.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 R.2544 that were in force at the

time of their retirement."

53. The above judgment of the Apex Court has no

application to the present case. Present is not a case

of reducing any retiral benefit which was admissible to

the Writ Petitioners. Gratuity which was crystalised at

the time of retirement of petitioners was computed and

paid. Present is a case where petitioners were asking

enhanced payment of gratuity on the ground of pay

O.P Nos.3489 & 20427 of 1997

-: 79 :-

revision. The above
case has no application
which is

clearly distinguishable.

54. Next judgment which has been relied on by the

learned counsel for the petitioners is LIC of India v.

Retired LIC Officers Association ([2008] 3 SCC 321).

Question up for consideration was whether the Chairman

of the Life Insurance Corporation can issue instructions

in terms of Regulation 51 of the Life Insurance

Corporation of India (Staff) Regulations, 1960 with

regard to gratuity. The LIC effected revision of scales

of pay for the period from 01.08.1992 to 01.07.1994.

Different cut off dates were fixed for grant of

different nature of allowances as also the pay. The

Chairman of the LIC in purported exercise of his power

under Regulation 51 issued an order fixing 01.04.1993 as

the cut off date for revision of pay and 01.08.1994 as

the cut off date for the purpose of payment of gratuity

on the basis of revised pay. However, so far as those

employees who had retired prior to 01.08.1994 are

concerned, they were directed to be entitled to reduced

O.P Nos.3489 & 20427 of 1997

-: 80 :-

gratuity based on unrevised scale of pay with effect

from 01.04.1993 and arrears of pay were directed to be

paid only with effect from 01.08.1994. The High Court

upheld the validity of the instructions issued by the

Chairman. Claim of the respondent were allowed in part

by the learned Single Judge. The judgment of the

learned Single Judge was extracted in paragraph 6 which

is to the following effect:

"6. The claim of Respondent No. 1 was allowed

in part by a learned Single Judge of the High Court by his

order dated 8th July, 2003 holding:

"A reading of Ext. P3 (instructions
issued by the Chairman for supplementary of
Revisionist in respect of class I officers and
claimed IV will definitely go to show that it
cannot operate as far as the claims for
gratuity is concerned. It is admitted that at
least certain officers, represented by the
petitioner Association were deemed as
having revised salary from April, 1993
onwards. In that view, at the time of
retirement, they were deemed as getting a
salary which alone could have been taken
notice of for computing gratuity, if Regulation
No. 77 has any application. It is definite that
the restriction in Ext. P3 and benevolence in
Regulation No. 77 could not have coexisted
because the Corporation is offering gratuity
at the rate less than the amount an
employee had notionally drawn at the time of
their respective retirement. It is also
pertinent to note that when powers were

O.P Nos.3489 & 20427 of 1997

-: 81 :-

conferred on the Chairman under Regulation
No. 51(2), specific reference was there about
the incidents of DA and other allowances.
There is no reference to any alteration
permissible in respect of gratuity. It leads to
the position that the regulation did not permit
the Chairman to disturb criterian for gratuity
payment by exercise of powers under
Regulation No. 51(2)."

It was further held:

"There was no power on the part of the Bank
Management in that case to disturb the
settlement, and the gratuity was to be paid
on the basis of last drawn pay. Likewise, in
the present case, it would not have been
permissible for the Chairman to unsettle the
benefits that had been spoken to by
Regulation No. 77 while issuing Ext. P3
order."

55. Decision of the learned Single Judge was

affirmed by the Division Bench. The LIC filed an

appeal challenging the said judgment. In paragraph 10

of the judgment Regulation 51 was extracted which is to

the following effect:

"10. Appellant Corporation in exercise of its

powers conferred upon it by clauses (b) and (bb) of sub-

section (2) of
S.49
of the Life Insurance Corporation Act,

1956, with the previous approval of the Central

Government, made Regulations known as "Life Insurance

Corporation of India (Staff) Regulations, 1960 (in short

'the Regulations'). Chapter IV of the said Regulations deal

with "Pay and Allowances". Regulation 51 thereof reads as

O.P Nos.3489 & 20427 of 1997

-: 82 :-

under:

51. "Scales of Pay:(1) The scales of
pay, dearness allowance and other
allowances (wherever payable) applicable to
the employees of the Corporation in India
shall be as prescribed in Schedule II hereto.

(1A) The basic pay and other allowance
admissible from time to time to an employee
belonging to Class II shall be regulated in
accordance with the provisions contained in
Schedule III.

(2) Whereas the scales of pay, dearness
allowance or other allowances applicable to
the employees of the Corporation or any
class of them are revised in pursuance of any
award, agreement or settlement, or
otherwise, the method of fixation of pay in
the new scales, the eligibility for the benefit
of revision, the date from which the revision
shall apply, and other matters connected
therewith or incidental thereto shall be
regulated by instructions issued by the
Chairman in this behalf."

(Emphasis supplied)"

56. Question before the Apex Court was whether the

power conferred on the Chairman can be exercised with

regard to the payment of gratuity which is otherwise

covered by the Regulation 77. In paragraphs 12, 18 and

19, the following has been stated:

"12. Regulation 51 indisputably confers power

upon the Chairman to fix a date from which the revision in

pay shall apply. It applies to pay, dearness allowance and

other allowances applicable to the employees of the

Corporation. The question, as would appear from the

O.P Nos.3489 & 20427 of 1997

-: 83 :-

discussions made hereinafter, is as to whether the

expression "the date from which the revisions shall apply,

and other matters connected therewith or incidental

thereto", would also include the matter relating to

payment of gratuity which is otherwise covered by

Regulation 77 thereof.

18. It may be true, as was contended by Mr.

Patwalia, that the cut off dates were fixed upon holding

negotiations with the Unions. However, the jurisdiction of

the Chairman to fix a cut off date is in question in terms of

sub regulation (2) of Regulation 51. Instructions have

been issued under the said provision alone. Instructions

not only cover the scales of pay from a particular date but

different dates have been fixed for different types of

allowances. We have noticed hereinbefore that whereas

dearness allowance and some other allowances, as for

instance 'house rent allowance' and 'city compensatory

allowance' are envisaged by IInd Schedule appended to

the said Regulations, the other allowances, and for

instance, the 'Provident Fund' and 'Gratuity' have nothing

to do therewith. Provident Fund and Gratuity are ordinarily

governed by the Acts enacted by the Parliament, subject

to the conditions contained therein.

19. Regulation 77 of the Regulations, specifies

the employees who would be entitled to payment of

gratuity. Clause (2) of Regulation 77 provides for the

manner in which the amount of gratuity shall be payable.

Neither the payment of Provident Fund nor the payment of

Gratuity is thus covered by the provisions contained in

O.P Nos.3489 & 20427 of 1997

-: 84 :-

Chapter IV of the Regulations."

57. In paragraph 26, the following has been stated:

"26. The Chairman of the Corporation has himself

given a retrospective effect to revision in scales of pay.

Such a retrospective effect has also been given so as to

benefit a class of employees. The employees, irrespective

of the fact whether they had superannuated or not, were

given the benefit of arrears of pay from 1st August, 1993.

By reason of grant of such benefit both to serving

employees as also the superannuated employees, both

the class of employees became entitled thereto as of

right. If by reason thereof, even a retired employee, as

on the date of retirement, became entitled to the benefit

of the revised scale of pay, the same for all intent and

purpose must be taken to be the permanent basic pay,

apart from other allowances, if any, which are required to

be taken into consideration for the purpose of

computation of the amount of gratuity.

58. The observations made in paragraph 26 does

appear to hold that when the benefit of arrears of pay

was given from 01.08.1993, those employees who retired

became entitled to the benefit of revised scales of pay.

However, there are two reasons due to which the above

case has to be held as distinguishable from the facts

of the present case. The reasons are: (i) in the above

O.P Nos.3489 & 20427 of 1997

-: 85 :-

case it was held that Chairman of the LIC could not have

exercised any power under Regulation 51(2) with regard

to gratuity which was payable according to computation

under Regulation 77 and it is clear from the facts of

the case that revision of scales of pay was made during

the period from 01.04.1993 and the Chairman has issued

direction fixing different cut off dates for different

nature of allowances. The Apex Court had noticed the

question which was to be answered in paragraph 1 which

is to the following effect:

"1. Jurisdiction of the Chairman of the Life

Insurance Corporation of India (Corporation) to issue

instructions in terms of Regulation 51 of the Life

Insurance Corporation of India Class I Officers (Revision

of Terms and Conditions of Service) Instructions, 1996 is

in question in this appeal which arises out of a judgment

and order dated 29th September, 1995 passed by a

Division Bench of the Kerala High Court in Writ Appeal

No.32 of 2004."

59. Paragraphs 18 and 19 as extracted above made

it clear that the Chairman has no power to issue any

order under Regulation 51 regulating the gratuity. It

O.P Nos.3489 & 20427 of 1997

-: 86 :-

was held by the Apex Court that the power of sub

delegatee is more restricted and a delegatee cannot act

in violation of the statute. Further a sub-delegatee

cannot exercise any power which is not meant to be

conferred upon him by reason of statutory provisions.

In paragraph 28, the following was stated:

"28. Contention of Mr. Patwalia that the

Chairman of the Corporation having power even to

fix the cut off dates for different purposes, the

jurisdiction exercised by him to do so for payment

of gratuity, which has a direct nexus with the

revised pay of scale cannot be accepted. Once he

fixes a cut off date for the purpose of giving effect

to the agreement vis a vis the payment of arrears

in terms thereof, he cannot exercise further

jurisdiction in respect of a matter which is not

controlled by Chapter IV but is controlled by other

provisions of statutes and Parliament Acts

governing the field. A delegatee must exercise its

powers within the four corners of the statute. The

power of a sub delegatee is more restricted. A

delegatee cannot act in violation of a statute. A sub

delegatee cannot exercise any power which is not

meant to be conferred upon him by reason of

statutory provisions. It must conform not only to

the provisions of the Regulations and the Act but

O.P Nos.3489 & 20427 of 1997

-: 87 :-

also other Parliamentary Acts. (See - Kurmanchal

Inst. of Degree and Diploma and Others v.

Chancellor, M.J.P. Rohilkhand Univ. and Others,

2007 KHC 3640 : 2007 (6) SCC 35 : AIR 2007 SC

2253, Kerala Samsthana Chethu Thozhilali Union v.

State of Kerala and Others, 2006 KHC 536 : 2006

(4) SCC 327 : 2006 (2) KLT 270 : ILR 2006 (3)

Ker. 65 : JT 2006 (5) SC 41 : 2006 (3) LLN 124 :

2006 (2) CLR 15 : 2006 SCC (L&S) 796, Bombay

Dyeing and Mfg. Co. Ltd. v. Bombay Environmental

Action Group and Others, 2006 KHC 406 : 2006 (3)

SCC 434 : AIR 2006 SC 1489 :
JT 2006 (3) SC

235, State of Kerala and Others v. Unni and

Another
, 2007 (2) SCC 365 : 2007 (1) KHC 73 :

2007 (1) KLT 151 : AIR 2007 SC 819 : 2007 (1)

KLJ 97, State of Orissa and Another v. M/s.

Chakobhai Ghelabhai and Company, 1961 (1) SCR

719 : AIR 1961 SC 284 : 1960 (11) STC 716 and

M/s.
Shroff and Co. v. Municipal Corporation of

Greater Bombay and Another
, 1989 Supp (1) SCC

347 : 1989 (72) STC 150 : 1989 (21) ECC 24).

60. Thus
the above case
principally turns on the

finding that the Chairman could not have issued any

executive instruction in exercise of the powers under

Regulation 51 for fixing the cut off date for payment of

gratuity. Hence benefit of payment of gratuity from the

O.P Nos.3489 & 20427 of 1997

-: 88 :-

date of revision of pay scale was extended. In the

present case there is no such issue that the pay

revision and various dates for extending benefits were

beyond the power of settlement which was entered into

between IBA and Officers of the Public Sector Banks. In

the present case revision of pay scale as well as fixing

cut off date for extending benefit of gratuity has been

done by the orders issued by the banks and there is no

challenge to the settlement. The question as to whether

the joint note dated 23.06.1995 violates any statutory

provision shall also be considered hereinafter

separately. (ii) Chairman was held to be sub-delegatee

in the subordinate legislation, i.e. LIC Regulation,

1960 and that he could not exercise the power beyond his

delegation.

61. In view of the aforesaid facts, the above

judgment is distinguishable.

62. From the above discussion, it is clear that

fixation of cut off date for extending benefit of

gratuity from a different date as compared to revision

O.P Nos.3489 & 20427 of 1997

-: 89 :-

of pay scale can neither be said to be arbitrary,

discriminatory nor violative of
Articles 14
and
of

the Constitution. Fixation of such cut off date have

already been upheld by the Apex Court in
State Govt.

Pensioners' Association v. State of A.P.
,
State of A.p.

V. A.P. Pensioners' Association
and State of Bihar v.

Bhiar Pensioners Samaj (supra). Thus, we do not find

any illegality on the ground of fixation of cut off date

as 01.11.1994 for extending the benefit of gratuity in

the present case.
Thus, the view of the Division Bench

in Syndicate Bank v. Celine Thomas (supra) holding cut

off as arbitrary cannot be approved.

63. Petitioners in O.P. No.20427 of 1997 has also

challenged the second proviso to Regulation 46(2) which

proviso was added in Regulation 46(2) after joint note

dated 23.06.1995 and was in accordance with the said

settlement. The proviso held that those Officers who

ceased to be in service during the period 01.07.1993 to

31.10.1994 shall receive gratuity with regard to scale

of pay as applicable at the time of their retirement and

O.P Nos.3489 & 20427 of 1997

-: 90 :-

shall not get the benefit of revised pay scale. We

having already found the classification valid and the

respondents having power to fix a cut off date for

extending benefit of gratuity, challenge to the second

proviso to Regulation 46(2) of the Canara Bank

Regulations, 1979 also fails.

64. One more submission which is raised by the

learned counsel for the petitioners is that Regulation

1979 of the State Bank of Travancore has not been

amended in accordance with the joint note dated

23.06.1995. The said submission has been refuted by the

learned counsel for the Bank and he submitted that

amendment were also carried out in the Regulation in

pursuance of the joint note. But the amendment having

not been produced before us, we proceed to examine the

said submission on the premise that amendments have not

been carried out. Further, whether the joint note dated

23.06.1995 violates any statutory provisions of 1979

Regulation is another issue to be answered.

65. Regulation 46(2) of the 1979 Regulation

O.P Nos.3489 & 20427 of 1997

-: 91 :-

provides for computation of gratuity. There is no

dispute in the present case that according to

Regulation 46 as existing at the time of retirement, the

gratuity was paid to them. The Constitution Bench of the

Apex Court in
Indian Ex-Services League v. Union of

India
(supra) had laid down that claim for gratuity can

be made only on the date of retirement on basis of the

salary drawn on the date of retirement and after

receiving the payment of gratuity on that footing the

transaction was treated as complete and closed

(paragraph 21 of the judgment). Joint note and

settlement dated 23.06.1995 revised the pay scale and

gave benefits of gratuity to those employees who retired

on or after 01.11.1994. The benefit of pay revision

which have been extended to the petitioners by a

subsequent settlement between the Management and

Officers Organisations which gives some benefits to them

cannot be said to violate any provisions of statutory

regulation. Similarly, giving any particular benefit

with effect from 01.11.194, i.e., financial benefit of

O.P Nos.3489 & 20427 of 1997

-: 92 :-

gratuity cannot be said to violate any provisions of

statutory regulation when the right of petitioners to

receive gratuity was crystalised on the date of

retirement and they had already received gratuity. We

thus are of the view that giving various benefits with

different dates to the petitioners under the settlement

dated 23.06.1995 cannot be said to be violative of any

provisions of the 1979 Regulation. Thus, the above

argument has to be rejected.

66. There is one more reason due to which the

challenge by the petitioners cannot be accepted. From

the facts brought on record it is clear that benefits

of pay revision and extension of other benefits were

extended on the basis of the joint note and settlement

dated 23.06.1995 after series of discussion with IBAs

and Officers of the Public Sector Banks and all having

agreed for the said benefits and the manner of extension

of such benefits, recommendation was made which was

accepted by the Management and orders were issued

thereunder. Although the joint note and settlement dated

O.P Nos.3489 & 20427 of 1997

-: 93 :-

23.06.1995 cannot be said to be a "settlement" within

the meaning of the
Industrial Disputes Act, 1947
, the

principles laid down with regard to the ground for

challenge of a "settlement" can also be applied to the

settlement entered between the IBA and Officers of the

Public Sector Banks. The Apex Court in
Herbertsons

Limited v. The Workmen of Herbertsons Limited and Others

([1976] 4 SCC 736) had occasion to consider the nature

of settlement entered into between the workmen and

Management under the
Industrial Disputes Act, 1947
.

The Apex Court held that settlement has to be taken as a

package deal and when labour has gained in the matter of

wages and if there is some reduction in the matter of

dearness allowance so far as the award is concerned, it

cannot be said that the settlement as a whole is unfair

and unjust. The following observations were made in

paragraph 21:

"21. ...... When, therefore, a negotiations

take place which have to be encouraged,

particularly between labour and employer in the

interest of general peace and well being there is

O.P Nos.3489 & 20427 of 1997

-: 94 :-

always give and take. Having regard to the nature

of dispute, which was raised as back as 1968, the

very fact of the existence of a litigation with regard

to the same matter which was bound to take some

time must have influenced both the parties to come

to some settlement. The settlement has to be taken

as a package deal and when labour has gained in

the matter of wages and if there is some reduction

in the matter of dearness allowance so far as the

award is concerned, it cannot be said that the

settlement as a whole is unfair and unjust."

67. Further the Apex Court held that the

settlement cannot be judged on the touchstone of the

principles which are
laid down by
the Supreme Court for

adjudication. The following was stated in paragraph 24:

"24....The settlement, therefore, cannot be

judged on the touchstone of the principles which

are
laid down by
this Court for adjudication.

68. Lastly, the Apex Court held that the settlement

cannot be in bits and pieces and the settlement has to

be accepted or rejected as a whole. The following was

observed in paragraph 27:

"27. It is not possible to scan the settlement

in bits and pieces and hold some parts good and

O.P Nos.3489 & 20427 of 1997

-: 95 :-

acceptable and others bad. Unless it can be

demonstrated that the objectionable portion is such

that it completely outweighs all the other

advantages gained the Court will be slow to hold a

settlement as unfair and unjust. The settlement has

to be accepted or rejected as a whole and we are

unable to reject it as a whole as unfair or

unjust....."

69. The Apex Court in
Reserve Bank of India v.

C.N.Sahasranaman
([1986 (supp)] SCC 143) has held that

settlement of disputes by direct negotiations or

settlement through collective bargaining is always to be

preferred. The following was
laid down in
paragraph 60:

"60. It is well to bear in mind the fact that

settlement of disputes by direct negotiations or

settlement through collective bargaining is always to

be preferred for it is best suited for industrial peace

which is the aim of legislation for settlement of

labour disputes. See the observations in
New

Standard Engineering Co. Ltd. v. N. L. Abhyankar
,

AIR 1978 SC 982 at P. 984 : 1978 (2) SCR 798.

This view has again been reiterated by this Court in

Tata Engineering and Locomotive v. Their Workmen
,

AIR 1981 SC 2163 : 1982 (1) SCR 929. The order of

this Court dated 2nd May, 1984 and the referendum

and the result thereof have been set out

hereinbefore."

O.P Nos.3489 & 20427 of 1997

-: 96 :-

70. The Division Bench judgment of this Court in

State Bank of Travancore and Others v. P.Gopinathan Nair

and Others (W.A.No.2185 of 2009 decided on 10th June,

2011) had also taken the view that invocation of
Article
in the context of negotiated settlement was uncalled

for and on the aforesaid ground it did not agree with

the earlier Division Bench judgment in Syndicate Bank

v. Celine Thomas (2005 KHC 1841).

71. In view of the foregoing discussion, we are of

the opinion that extending the benefit of gratuity only

with effect from 01.11.1994 to the Officers of the Banks

can neither be said to be arbitrary, discriminatory nor

violative of
Articles 14
and
of the Constitution of

India.

72. We thus hold that the Division Bench judgment

in Syndicate Bank v. Celine Thomas (2005 KHC 1841) does

not lay down the correct law and the judgment of the

Division Bench in State Bank of Travancore and Others v.

O.P Nos.3489 & 20427 of 1997

-: 97 :-

P.Gopinathan Nair and Others (W.A.No.2185 of 2009

decided on 10th June, 2011) lays down the correct law

and is approved.

73. The Reference is answered accordingly.

In the result, both the Original Petitions are

dismissed.

ASHOK BHUSHAN,
CHIEF JUSTICE.

A.M.SHAFFIQUE,
JUDGE.

A.K. JAYASANKARAN NAMBIAR,
JUDGE.

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