BANK OF INDIA AND OTHERS versus UNITED BANK OF INDIA RETIREES’ WELFARE ASSOCIATION AND OTHERS ETC. on 16 May 2018

SUPREME COURT REPORTS

[2018] 5 S.C.R.

A UNITED BANK OF INDIA AND OTHERS

v.

UNITED BANK OF INDIA RETIREES’ WELFAREASSOCIATION AND OTHERS ETC.

(Civil Appeal Nos. 5252-5255 of 2018)

B

MAY 16, 2018

[ADARSH KUMAR GOEL AND UDAY UMESH LALIT, JJ.]

Service law: Pension – Dearness allowance – Claim of retireesfor full compensation against price rise on dearness relief –CGrievance of retirees was that appellant-bank made distinction interms of dearness relief on the basis of dates of retirement ofpensioners and that denial of benefit of full dearness relief to retireesprior to 1.11.2002 was arbitrary – High Court held that there wasno justification for making distinction between pre November 2002Dretirees and post November 2002 retirees and the appellant mustpay dearness relief to all pensioners at the same rate – Aggrieved,Banks appealed – Held: Each class is governed by distinct anddifferent parameters – The conferral of advantages of benefits ontwo different classes of retirees has a completely distinct formulaand rates and it is not possible to have a synthesis on any count orEto put both the sets of retirees on any common parameters – It isthus hazardous to adopt a flat rate – Any attempt to tinker witheither the formula or the rate would make the whole schemeunworkable – Both the categories of retirees, namely, pre November2002 and post November, 2002 stand on different footing, theparameters which govern the computation of dearness relief areFalso on a different level – High Court failed to appreciate theseaspects – The impugned judgment was completely erroneous and isset aside.

Allowing the appeals and dismissing writ petition, the Court GHELD: 1.1 Appendix II to the Pension Regulations hadcategorized employees in three different segments and thedearness relief payable on basic pension in respect of employeesin these three categories was on the basis of tapering formulawhich differed in each of the categories. In respect of those whowere in the first category i.e. those who had retired earliest, theH

dearness relief was 0.67% on the first slab namely uptoRs.1250/- of basic pension. The rate then tapered and finallywas 0.17% of basic pension in excess of Rs.2130/-. At the sametime in respect of retirees in the second category, the rate ofdearness relief was 0.35 per cent in respect of first slab namelyupto Rs.2400/-. Here also the dearness relief was on a taperingformula and finally was 0.09% of basic pension in excess ofRs.4100/-. The third category which was in respect of employeeswho retired after 01.04.1998, the rate was 0.25% for the firstslab upto Rs.3380/-. Going by the tapering formula, the rate was0.06 per cent of the basic pension in excess of Rs.5770/-. IfClause 7(2) of the 9[th] Bipartite Settlement dated 27.04.2010 iscompared with the last category of the Appendix II of the PensionRegulations, there is hardly any change in respect of retireesduring the period 01.04.1998 to 31.10.2002. Thus, whateverbenefit was conferred and was enjoyable by the employees whoretired before November 2002 was not taken away. [Para 21][464-G-H; 465-A-D]

1.2 If both categories dealt with by 9[th] Bipartite Settlementdated 27.04.2010 are further compared, the retirees prior to01.11.2002 would be entitled to dearness relief on a taperingformula where the initial slab upto Rs.3550/- is to be governedby quotient of 0.24%. The tapering formula then ends with 0.06%of basic pension in excess of Rs.6010/-. The starting point is at alevel of 0.24% while the end point tapers to 0.06%. The maximumadvantage is sought to be given to those who are getting basicpension at lower levels of slab who would get the dearness reliefat 0.24%. As against this, the retirees after 01.11.2002 are to begiven dearness relief at a flat rate of 0.18% of the basic pension.Theoretically, the starting level for the retirees prior to 01.11.2002is at a higher level of 0.24% as against the retirees after01.11.2002. It could possibly be said that for those who are withbasic pension in the region of Rs.6000/-, on the basis of a taperingformula may well, in the ultimate analysis, average to the samelevel of 0.18%.[Para 22] [465-E-G]

2. The parity that was sought in the petition was not somuch regarding applicability of same rate of 0.18% but was inrespect of “flat rate” idea. The calculation of dearness allowance AB

CD

E

F

G

H

Aof Rs.14274/- on basic pension of Rs.7880/- in the case ofSantipriya Roy is in keeping with tapering formula as given in theBipartite Settlement dated 27.04.2010. The tabular chart thenproceeds to calculate full compensation on account of dearnessallowance with slab rate of 0.24% on the entire basic pension ofRs.7880/- which figure comes to Rs.18912/-. Thus the submissionBwas that the dearness relief be computed on 0.24% for the entiretyof basic pension and not just for the first slab upto Rs.3550/-.But such calculation completely disregards that rate which is aflat rate applicable in case of post 01.11.2002 retirees is not 0.24%for the entire amount of basic pension but at a different level ofC0.18% and the threshold requirement of quarterly average ofthe Index is also different. If we were to simply borrow the samerate of 0.18% in the case of retirees prior to 01.11.2002, theconcerned retirees may well be at a disadvantage. For instance,the basic pension of Rs. 7880/- of said Santipriya Roy would yield a figure of Rs. 14184/- with flat rate of 0.18%. It will not thereforeDbe correct to adopt and apply the same rate as is made applicablein case of post 01.11.2002 retirees. [Para 23] [465-G-H; 466-A-C]3. The tapering formula undoubtedly begins with 0.24%for the first segment of Rs.3550/- of basic pension and thenprogressively steps down and finally reaches the level of 0.06%Ewhere the basic pension is in excess of Rs.6010/-. What is devisedby way of such tapering formula is higher rate at the lower levelsof segments so that larger number of peoples would get maximumadvantage and the rate thereafter keeps stepping down. Thebenefit which is sought to be conferred by the tapering formulaFlies in the averaging which comes to near about the same quantumas is given to the post 01.11.2002 retirees. No illustration hasbeen placed on record to submit that even with 0.18% dearnessallowance those who retired after November 2002 walk away withsubstantially greater advantage as against pre November 2002retirees. Each class is governed by distinct and differentGparameters. Both classes are distinct and do not form ahomogenous group. It would be extremely difficult and hazardousto adopt a flat rate as is sought to be projected. [Para 24] [466-E-G; 467-A-B]

4. Any attempt to tinker with either the formula or the rateHwould make the whole scheme unworkable. It is true that the A

tapering formula was done away with by Reserve Bank of Indiabut that by itself cannot entitle the retirees prior to 01.11.2002either to be conferred the advantage at the same rate madeapplicable by Reserve Bank of India or at the flat rate of 0.24%as was sought to be projected. [Para 25] [467-C, E]

Indian Ex-Services League and Others v. Union of Indiaand Others (1991) 2 SCC 104 : [1991] 1 SCR 158;Union of India v. P. N. Menon and Others (1994) 4SCC 68; Kunhayammed and Others v. State of Keralaand Another (2000) 6 SCC 359 : [2000] 1 Suppl. SCR538 – relied on.

B

C

D. S. Nakara v. Union of India (1983) 1 SCC 305 :[1983] 2 SCR 165; Kallakkurichi Taluk RetiredOfficials Association Tamil Nadu and others v. State ofTamil Nadu (2013) 2 SCC 772 : [2013] 4 SCR 883;Krishena Kumar v. Union of India and Others (1990) 4SCC 207 : [1990] 3 SCR 352; State of Punjab v. JusticeS. S. Dewan (Retired Chief Justice) and Others (1997)4 SCC 569 : [1997] 3 SCR 1027; Col. B. J. Akkara(Retd.) v. Government of India and Others (2006) 11SCC 709 : [2006] 7 Suppl. SCR 58– referred to.

D

E

Case Law Reference

G

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 5252-5255 of 2018

A

From the Judgment and Final Order dated 26.09.2016 read withOrder dated 05.12.2016 of the High Court at Calcutta in APO No. 315of 2015, APO No. 316 of 2015 and RVWO No. 57 of 2016 respectively.

Dhruv Mehta, V. K. Bali, Jitendra Sharma, A.S. Nambiar, Ms. V.Mohana, Sr. Advs., Rajesh Kumar, Gaurav Kumar Singh, RakeshBChaurasiya, Bhumit Solanki, M/s Mitter & Mitter Co., Arun K. Sinha,P.N. Jha, Ms. Richa Nayak, Ms. Ritu Puri, Aditya Soni, Sumit Sinha,Sinha Shrey Nikhilesh, Harsh B., Sewa Ram, C.S. Waliya, P. K. Manohar,Rajshekhar Rao, Kotla Harshvardhan, Ms. Amita Singh Kalkal,Ms. Aditi Gupta, Advs. for the appearing parties.

CThe Judgment of the Court was delivered by UDAY UMESH LALIT, J. 1. Leave granted.

2. These appeals by special leave are directed against (i) thecommon Judgment and Final Order dated 26.09.2016 passed by the HighCourt at Calcutta in APO Nos.315 and 316 of 2015; and (ii) against theDorder dated 05.12.2016 passed by the High Court at Calcutta in RVWONos.57 and 58 of 2016 in aforementioned APO Nos.315 and 316 of2015. By its Judgment and Orders under appeal, the High Court heldthat there was no justification for making a distinction between preNovember, 2002 retirees and post November, 2002 retirees and theEappellant must pay dearness relief to all pensioners at the same rate.

3. A Memorandum of Settlement dated 29.10.1993 was enteredinto between the managements of 58 banks as represented by the IndianBanks’ Association on one hand and their workmen as represented bythe All India Bank Employees’ Association on the other. Said memorandum recited that the parties had agreed to introduce pensionFscheme in banks for the workmen/employees in lieu of employers’contribution to the provident fund and that the pension scheme so agreedwas to be broadly on Central Government/Reserve Bank of India pattern. Paragraph 6 of the memorandum dealt with Dearness Allowance reliefto the pensioners and it stipulated:

G

“Dearness relief to pensioners will be granted at such rates asmay be determined from time to time in line with the DearnessAllowance formula in operation in Reserve Bank of India”

4. In exercise of powers conferred by Clause (f) of sub-Section(2) of Section 19 of Banking Companies (Acquisition and Transfer of H

UNITED BANK OF INDIA v. UNITED BANK OF INDIARETIREES’ WELFARE ASSO. [UDAY UMESH LALIT, J.]

Undertakings) Act, 1970, the Board of Directors of the Union Bank ofIndia after consultation with the Reserve Bank of India and with theprevious sanction of the Central Government made “Union Bank of India(Employees’) Pension Regulations, 1995 (hereinafter referred to as the“Pension Regulations”). Paragraph 2(d) defined “average emoluments”to be the average of pay drawn by an employee during last 10 months ofservice in the bank while Para 2(s) defined “pay”. Para 37 of the PensionRegulations was as under:

“Dearness Relief- (1) Dearness relief shall be granted on basicpension or family pension or invalid Pension or on compassionateallowance in accordance with the rates specified in Appendix II.”

Appendix II to the Pension Regulations dealt with DearnessAllowance on basic pension. It categorized employees as under:- “(a) Those workmen who had retired on or after 01.01.1986 andbefore 01.11.1992 and those officers who had retired on orafter 01.01.86 but before 01.07.1993.

(b) Those workmen who retired on or after 01.11.1992 and officerswho retired on or after 01.07.1993 and

(c) Those employees who would retire on or after 01.04.1998.”

Different rates of Dearness Allowance relief as percentage ofbasic pension were prescribed in respect of aforesaid three categoriesin said appendix II as under:

“APPENDIX-II

(See Regulation 37)

Dearness relief on basic pension shall be as under:

(1) In the case of employees who were in the workmen cadreand who retired on or after the 1st day of January, 1986, butbefore the 1st day of November, 1992; and in the case of employeeswho were in the officers cadre and who retired on or after the1st day of January, 1986, but before the 1st day of July, 1993,dearness relief shall be payable for every rise or be recoverablefor every fall, as the case may be, of every 4 points over 600points in the quarterly average of the all India Average ConsumerPrice Index for Industrial Workers in the series 1960 = 100. Such A

B

C

D

E

F

G

H

(2) In the case of employees who are in workmen cadre and whoretire on or after 1st day of November, 1992; and in the case ofemployees who are in the officers’ cadre and who retire on orafter 1st day of July, 1993, dearness relief shall be payable forFevery rise or be recoverable for every fall, as the case may be, ofevery 4 points over 1148 points in the quarterly average of AllIndia Average Consumer Price Index for Industrial workers inthe series 1960=100. Such increase or decrease in dearness relieffor every said four points shall be calculated in the manner givenGbelow:Scale of basic pension The rate of dearness relief as a per Per month month percentage of basic pension (1) (2) H

ScPe

(i(ii

(ii

(iv

as a per basic

0 plus sion in 0 plus ference . 1250 basic 00.0 plus ference . 1250 f the 130 &cent of of Rs.

a per nsion

(i) Up to Rs.24000.35 per cent.A(ii)Rs.2401 to 0.35 per cent of Rs.2400 plus 0.29 Rs.3850 per cent of basic pension in excess of Rs.2400. (iii)Rs.3851 to 0.35 per cent of Rs.2400 plus 0.29 Rs.4100 per cent of the difference between Rs.3850 and Rs.2400 plus 0.17 per Bcent of basic pension in excess of Rs.3850. (iv)Above Rs.4100 0.35 per cent of Rs.2400 plus 0.29 per cent of the difference between Rs.3850 and Rs.2400 plus 0.17 per cent of the difference between CRs.4100 & Rs. 3850 Plus 0.09 per cent of basic pension in excess of Rs.4100.

3. In the case of employees who retire on or after the 1st day ofApril, 1998, dearness relief shall be payable for every rise or berecoverable for every fall, as the case may be, of every 4 points over1616 points in the quarterly average of the All India Average ConsumerPrice Index for Industrial workers in the series 1960=100. Such increaseor decrease in dearness relief for every said four points shall be calculatedin the manner given below:

D

Scale of basic pensionThe rate of dearness relief as a per EPer month month percentage of basic pension (1) (2) (i)Up to Rs. 3380 0.25 per cent. (ii)Rs. 3381 to 0.25 per cent of Rs.3380 plus 0.21 Rs. 5420 per cent of basic pension in excess Fof Rs.3380. (iii)Rs. 5421 to 0.25 per cent of Rs. 3380 plus 0.21 Rs. 5770 per cent of the difference between Rs.5420 and Rs.3380 plus 0.12 per cent of basic pension in excess of Rs.5420. (iv) Above Rs.5770 0.25 per cent of Rs.3380 plus 0.21 Gper cent of the difference between Rs.5420 and Rs.3380 plus 0.12 per cent of the difference between Rs.5770 & Rs. 5420 Plus 0.06 per cent of basic pension in excess of Rs.5770.H

A

A5. On 02.06.2005 a Bipartite Settlement was arrived at betweenthe managements of 50 banks, represented by the Indian Banks’Association on one hand and their workmen, represented by the AllIndia Bank Employees’ Association, National Federation of BankEmployees, Bank Employees’ Federation of India, Indian National BankEmployees’ Federation and National Association of Bank Workers onBthe other. It was inter alia recited:

“(D) The AIBEA, NCBE, BEFI, INBEF and NOBW (hereafterjointly called the Unions) submitted their Charter of Demands onvarious dates between 10[th] June 2002 and 5[th] September 2002for revision in wages and other service conditions of workmen toCIBA and requested for negotiations on the same, with a view toarriving at an amicable settlement.

(E) Simultaneously, IBA also raised with the Unions, issues onbehalf of the managements of banks concerned, to be discussedand settled with a view to improving efficiency of operations,Dcustomer service, utilisation of manpower, discipline andmaintaining harmonious industrial relations.

(F) The parties initially agreed after negotiations that the totalquantum of wage increase arising out of a Settlement to be signedin this regard shall be Rs.1,288 crores per annum including theEcost of superannuation benefits and accordingly exchangedrdminutes on 23 November 2004 at Mumbai. It is agreed that forthe purpose of this settlement, the additional cost of pension beshared between the parties at the ratio as agreed and pensioncosted accordingly.”

F

Para 7 of the Settlement dealt with Dearness Allowance whichwas provided at following rates:

“1. (i) Subordinate Staff

0.18% of ‘pay’

G (ii) Clerical Staff

(a) 0.18% of ‘pay’ upto Rs.9,650/- plus

(b) 0.15% of ‘pay’ above Rs.9,650/- and upto Rs.15,350/- plus H

(c) 0.09% of ‘pay’ above Rs.15,350/- and upto Rs.16,350/-.

(d) 0.04% of ‘pay’ above Rs.16,350/-.

st 2. On and from 1 February, 2005, Dearness Allowance shallbe payable at 0.18% of Pay.”

Para 38 provided for implementation of various provisions of theSettlement and insofar as “Dearness Allowance- Single Slab Rate (0.18%of pay)”, the date of implementation was stated to be 01.02.2005.

6. On 02.06.2005 itself, a Joint Note with caption, “Salary Revisionfor Officers–Conclusion of Discussions between the Indian Banks andthe Officers’ Association” was prepared. It recited, “The representativesof the Officers’ Associations have also agreed that the existing serviceconditions be modified to the extent what has been stated in AnnexureI.” Annexure I to the Joint Note inter alia dealt with Dearness Allowanceand the relevant paragraph of said Annexure I was to the followingeffect:

“2) Dearness Allowance

“2) Dearness Allowance

stst(a) For the period from 1 November 2002 to 31 January,2005, Dearness Allowance shall be payable for every rise orfall of 4 points over 2288 points in the quarterly average of theAll India Average Working Class Consumer Price Index(General) Base 1960=100 at the following rates:

(i) 0.18% of ‘pay’ upto Rs.9,650/- plus

(ii) 0.15% of ‘pay’ above Rs.9,650/- and upto Rs.15,350/-plus

(iii) 0.09% of ‘pay’ above Rs.15,350/- and upto Rs.16,350/-.

(iv) 0.04% of ‘pay’ above Rs.16,350/-.

st(b) On and from 1 February, 2005, Dearness Allowance shall bepayable for every rise or fall of 4 points over 2288 in the quarterlyaverage of the All India Average Working Class Consumer PriceIndex (General) Base 1960=100 at 0.18 of Pay.”

7. The Bipartite Settlement dated 02.06.2005 was operational fortha period of five years from 01.11.2002. Thereafter 9 BipartiteSettlement was arrived at between the parties on 27.04.2010 and was A

B

C

D

E

F

G

H

thAmade operational for five years from 01.11.2007. Clause 7(2) of the 9Bipartite Settlement was as under:- “(i) On and from 1.05.2005, in the case of employees whoretired during the period 1.04.1998 to 31.10.2002, dearness reliefshall be payable for every rise or be recoverable for every fall, asBthe case may be, of every four points over 1684 points in thequarterly average of the All India Average Consumer price Indexfor Industrial Workers in the series 1960=100. Such increase ordecrease in dearness relief for every said four points shall becalculated in the manner given below:

C

Scale of basic pensionThe rate of Dearness Relief payable Per month as a percentage of Basic Pension 0.24 (1) per cent (2)(i)Up to Rs.3550 0.24 per cent. D(ii)Rs.3551 to 0.24 per cent of Rs.3550 plus 0.20 per Rs. 5650 cent of basic pension in excess of Rs.3550. (iii)Rs. 5651 to 0.24 per cent of Rs.3550 plus 0.20 per ERs. 6010 cent of the difference between Rs.5650 and Rs.3550 plus 0.12 per cent of basic pension in excess of Rs.5650. (iv) Above Rs. 6010 0.24 per cent of Rs.3550 plus 0.20 per Fcent of the difference between Rs.5650 and Rs.3550 plus 0.12 per cent of the difference between Rs.6010 & Rs. 5650 Plus 0.06 per cent of basic pension in excess of Rs.6010. G

H

(ii) In respect of retirees for the period 01.11.2002 to 30.04.2005for whom pension has been revised w.e.f. 01.05.2005 based ondefinition of pay in terms of Clause 6 of the Bipartite Settlementnddated 2 June, 2005, dearness relief shall be payable w.e.f.

payable on 0.24

0.20 per cess of

0.20 per between .12 per cess of

0.20 per between .12 per between .06 per cess of 01.05.2005 for every rise or be recoverable for every fall as thecase may be of every four points over 2288 points in the quarterlyaverage of All India Average Consumer Price Index for IndustrialWorkers in the series 1960=[REDACTED]%of the basic pension.

A

(iii) In respect of employees who retire on or after 1.05.2005,dearness relief shall be payable for every rise or be recoverablefor every fall, as the case may be, of every four points over 2288points in the quarterly average of All India Average Consumerprice index for Industrial Workers in the series 1960=100, at therate of 0.18 per cent of basic pension.

B

(iv) In respect of employees who retired or died while in serviceCon or after 1.05.2005 Dearness Relief shall be payable at 0.18%of the basic pension or family pension or invalid pension orcompassionate allowance as the case may be. Dearness Reliefin the above manner shall be paid for every rise or fall of 4 pointsover 2288 points in the quarterly average of the All India AverageDConsumer Price Index for industrial workers in the series1960=100.

Note: The Dearness Relief as above shall be payable for the halfststyear commencing from the 1 day of February and ending 31day of July on the quarterly average of index figures published forthe months October, November and December of the previousstyear and for the half year commencing from 1 day of Auguststand ending with the 31 day of January on the quarterly averageof the index figures published for the months of April, May andJune of the same year.”

E

F

8. Thus, in case of employees who had retired during the period01.04.1998 to 31.10.2002, dearness relief at the rate of 0.24% wasawardable upto Rs. 3550/- of basic pension per month and thereafterthe percentage for amounts in excess of Rs. 3550/- was successively atreduced rates. On the other hand, in case of employees who retiredduring the period 01.11.2002 to 30.04.2005 the percentage of 0.18%was without any such tapering formula. Further, comparison withAppendix II as originally forming part of the Pension Regulations showsthat with respect to three categories of retirees the dearness relief wasearlier computed on tapering formula. The idea of tapering formulaunder the Bipartite Settlement dated 27.04.2010 was retained with respect G

H

Ato pre November 2002 retirees while the dearness relief to post November2002 retirees was to be at the flat rate of 0.18 %.

9. Around this time, Reserve Bank of India, which initially wasnot giving full compensation against price rise on dearness relief toemployees who retired prior to 01.11.2002 that is to say, was also givingBdearness relief on a tapering formula, started giving full compensationi.e. without any tapering formula as would be evident from its circularsas under:

(A) Circular dated 01.04.2008

“TELEGRAM: “RESERVE BANK RESERVE BANK OF INDIA

C

TELEPHONE: 022-2260100 CENTRAL OFFICE

FAX : 022-22661892 HUMAN RESOURCES

022 – 22702524 DEVELOPMENT

D

DEPARTMENT

E-MAIL : [REDACTED] MUMBAI – 400 001.CO.HRDD.No.10139/21.01/2007-08 April 1, 2008

Chaitra 12, 1930 (S)

E

The Regional Director/Principal Chief General Manager Chief General Manager-in-Charge/

Chief General Manager/General Manager (Officer-in-Charge)/

Principal,

F

Reserve Bank of India,

— — — — —-

Dear Sir,

Payment of Dearness Relief on pension/family pension G

In respect of employees retired before November 1, 2002Please refer to the instructions contained in paragraphs 2 (ii), (iii)and (iv) of circular CO.HRDD.No.G.97/7704/17.06.05/2007-08dated February 1, 2008 with regard to payment of Dearness Reliefin respect of employees retired before November 1, 2002.

H

PenPayNovPayNovPayNov

2. It has been decided that, with effect from March 1, 2008, insupersession of the above instructions, the Dearness Relief inrespect of employees who retired/died in harness beforeNovember 1, 2002, may be paid as per the rates indicated below:

A

Pension/family pension based onRate of Dearness Relief for the period March 1, 2008 to July 31, 2008. Payscales effective from 82.32% of pension/family November 1, 1997 (CPI = 1684) pension. Payscales effective from 166.95% of pension/family November 1, 1992 (CPI = 1148)pension Payscales effective from 411.38% of pension/family November 1, 1987 (CPI=600) pension B

C

D

3. The instructions contained in the “Note” at the end ofparagraphs 2(iii) of the abovementioned circular will stand modifiedto that extent. You are requested to recalculate the DearnessRelief and make payment accordingly.

Yours faithfully,

(A.K. Sarangi)General Manager”

E

(B) CIRCULAR DATED 01.08.2008

F

“RESERVE BANK OF INDIAwww.rbi.org.in

CO.HRDD.No.G 46/1344/17.06.05/2008-2009

August 1, 2008

GShravana 10, 1929 (Saka)

The Principal Chief General Manager/Regional Director/

Chief General Manager-in-Charge/Chief General Manager/

H

A

General Manager (Officer-in-Charge),

Principal,Reserve Bank of India

__________________

Dear Sir,

BPayment of Dearness Allowance/Dearness Relief Based on All-India Consumer Price Index numbers for IndustrialWorkers (base 1960 = 100) available for the quarter ended June2008, rate of Dearness Allowance for the quarter August 2008 toOctober 2008 for employees in Classes I, III and IV, drawing payin the scales of pay based on CPI = 2288, works out to 39.78% ofpay, half of 79.56%.

C

2. The rates of Dearness Relief on Pension/Family Pension/Ex-Gratia, for the period August 2008 to January 2009, shall beworked out as under:

D

(i) On Pension based on the revised pay scales effective fromNovember 1, 2002 – 39.78% of basic pension.

(ii) The rates of Dearness Relief in respect of employees whoretired/died in harness before November 1, 2002:

EPension/family pension Rate of Dearness Relief for the based on period August 2008 to January, 2009Pay-scales effective from 89.28% of pension/family November 1, 1997 pensionF(CPI = 1684)Pay-scales effective from 177.10% of pension/family November 1, 1992 pension(CPI = 1148)GPay-scales effective from 430.81% of pension/family November 1, 1987 pension(CPI = 600)

for the nuary, family

family

family

3. You may please arrange to calculate and pay the DearnessAllowance on “Pay” Dearness Relief on Pension, Family Pensionand Ex-Gratia amount, on the above basis, unless you receiveinstructions from Central Office contrary to above.

Yours faithfully,

(Neeraj Nigam)

Deputy General Manager”

10. Since the benefit of grant of full compensation against pricerise on dearness relief as was extended by Reserve Bank of India, wasnot extended to the retirees of United Bank of India who had retiredprior to 01.11.2002, Respondent Nos.1 to 4 herein preferred Writ PetitionNo.507 of 2012 in the High Court at Calcutta. It was submitted thatthough Reserve Bank of India started giving full compensation againstprice rise on dearness relief to retirees prior to 01.11.2002 vide circularsdated 01.04.2008, 01.08.2008 and 01.07.2010, the Appellant Bankcontinued to make distinction in terms of dearness relief on the basis ofdates of retirement of the pensioners and that such action on part ofappellant was clearly opposed to para 6 of the Settlement dated29.10.1993. Submitting that the cut-off date fixed by Appellant Bankwas in violation of Reserve Bank of India formula as well as was arbitraryand irrational, the respondent Nos.1 to 4 claimed full compensation againstprice rise on dearness relief. By way of example cases of respondentNos.3 to 4 were presented in para 30 of the petition in support of thesubmission that the retirees prior to 01.11.2002 were getting prejudiced. Said para 30 of the petition is quoted here for ready reference.

“30. The loss being suffered every month by the petitioner Nos. 3and 4 for denial of RBI dearness relief formula on pension is asfollows:- Santipriya Roy Date of Retirement 30.09.2002

Basic Pension Rs.7880/-

Dearness Relief per slab on slab basis

Rs. 3550/- x 0.24% Rs. 8,520/-

Next Rs. 2100/- x 0.20 % Rs. 4,200/-

A

B

C

D

E

F

G

H

Difference = Rs.3,283.70 ———————————————Kalpataru BhattachajeeDDate of Retirement 31.10.2002Basic Pension Rs. 5431/-Dearness Relief per slab on slab basis Rs. 3550/- x 0.24% Rs. 8,520/-ENext Rs. 1881/- x 0.20% Rs. 3,762/- Rs. 5431/- Rs. 12,282/-Dearness Relief per slab for full compensation against price rise. Rs. 5431/- x 0.24% F Rs.13,034/-Difference per slab Rs.13,034/- (-) Rs.12,282/- = Rs. 752/-Total D.R. on Slab basis Rs.12,282/- x 708 slab Rs. 8,695.65Total D.R. on 100% Rs.13,034/- x 708 slab Rs. 9,228.07G —————————- Difference Rs. 532.42"

—————————-

11. In the affidavit in reply filed on behalf of the appellants it wasinter alia submitted that Pension Regulations having come into force in1995 the settlement dated 29.10.1993 had no force and as such no benefitcould be drawn on the basis of Regulations or Circulars issued by ReserveBank of India. It was further submitted that the distinction in respect ofretirees prior to 01.11.2002 was on the basis of a Bipartite Settlementdated 27.04.2010 and thus the genesis was stated to be in the agreementbetween the parties.

12. The aforesaid writ petition was allowed by Single Judge ofthe High Court vide judgment and order dated 04.03.2015. It wasobserved that there was nothing in Pension Regulations indicating thatthe Appellant Bank had abandoned its policy as spelt out in para 6 of theSettlement of 1993 to follow the rates of relief and formula adopted byReserve Bank of India. Relying upon the decision of this Court in D.S.Nakara v. Union of India[1], it was observed that the classification madein the instant case denying the benefit of full dearness relief to retireesprior to 01.11.2002 was arbitrary and irrational. The Single Judge howeverdirected the Appellant Bank to take a reasoned decision with regard togrant of 100% dearness relief to retirees prior to 01.11.2002.

13. The Judgment and order passed by the Single Judge directingthe appellant Bank to take fresh decision was questioned by the respondentNos.1 to 4 by filing APO No.315 of 2015, while the appellant bankquestioned the decision by filing APO No.316 of 2015, in so far as thefindings rendered and directions issued by the Single Judge wereconcerned. Both these appeals were disposed of by the Division Benchon 26.09.2016. The Division Bench relied upon the decision of this Courtin D.S. Nakara (supra) and in Kallakkurichi Taluk Retired OfficialsAssociation Tamil Nadu and others v. State of Tamil Nadu[2] andobserved as under:

“The effect of the joint note is that employees who retired beforethe cut-off date would get dearness relief at a lower rate thanthose who retired after that date. The dearness relief paid isrelatable to the cost of living index and varies in direct proportionto the same. It must be borne in mind that dearness relief is anamount paid to the retirees to neutralise the astronomical rise inprices. The object of paying dearness relief is the same, 1 (1983) 1 SCC 305

2 (2013) 2 SCC 772

ABC

D

EF

G

H

Airrespective of the date on which the employee retires. Inflationhits the employees who retire before the cut-off date as hard as itdoes those who retire later. Therefore the dearness relief cannotbe different for two sets of retirees.”

It further observed as under:B

“There is no dispute that the Bank Pension Regulations, 1995have not been amended. These Regulations have been framed inconsonance and under the powers conferred on the Bank underthe Banking Companies Act. They have a statutory force of law. Clause 6 of the Pension regulations mandates that the dearnessCrelief will be paid to the employees of the member banks inconsonance with that paid by the Reserve Bank of India to itsemployees. Therefore a joint note cannot take away the right ofemployees to that dearness relief.”

Holding the distinction between pre-November 2002 retirees andDpost-November 2002 retirees to be unreasonable, arbitrary anddiscriminatory the Division Bench directed the appellant to pay thedearness relief to all pensioners at the same rate. The direction wasissued in following terms:

“Therefore, we direct the Bank to comply with Regulation 6 ofEthe Pension Regulations and to pay pension to the pre-2002 retireesat the same rate as enjoyed by the post-2002 retirees, as has beenpaid to the retired employees of the Reserve Bank of India. Thejudgment of the learned Single Judge is modified to that extent.”

14. The appellant preferred Review Applications being RVWONos.57 and 58 of 2016 submitting that the decision dated 26.09.2016Frequired certain typographical changes. The Division Bench of the HighCourt vide its order dated 05.12.2016 effected changes as stated thereinand disposed of the Review Applications.

15. The appellant bank being aggrieved, challenged the decisionsdated 26.09.2016 and 05.12.2016 rendered by the Division Bench byGfiling these appeals by special leave on or about 07.02.2017. By thattime, a decision rendered by Division Bench of Madras High Court inWrit Appeal Nos.355 of 2013 and allied matters on 17.06.2013 wasaffirmed by this Court by dismissing appeals arising therefrom on01.02.2017. H

16. At this stage it may be noted that Writ Petition Nos.50000-50002 of 2006 and allied writ petitions titled as A.B. Kasturirangan v.Canara Bank etc. were allowed by Single Judge of Madras High Courtby judgment and order dated 14.12.2012. The challenge was to the non-grant of benefit of 100% neutralization of dearness relief to retireesprior to 01.11.2002 on lines similar to the challenge raised in the presentmatters. It was observed by the Single Judge that the Bipartite Settlementdated 02.06.2005 introduced dearness relief at the slab rate of 0.18% ofthe basic pension; that the change from tapering rate of slab rate wasnot an introduction of a new scheme but was a modification of the existingone. He further observed that the classification introduced by the bankwas artificial and arbitrary and was not based on any rational principleand that the bank had virtually created class within a class. The matterwas carried in appeal. While allowing the appeals and setting aside thedecision of the Single Judge, the Division Bench observed as under:

“… the settlement has to be taken as a package deal and whenlabour has gained in the matter of wages and if there is somereduction in the matter of dearness allowance so far as the awardis concerned, it cannot be said that the settlement as a whole isunfair and unjust and it is not possible to scan the settlement inbits and pieces and hold some parts good and acceptable andothers bad. It has been further held that unless it can bedemonstrated that the objectionable portion is such that itcompletely outweighs all the other advantages gained, the Courtwill be slow to hold a settlement as unfair and unjust and thesettlement has to be accepted or rejected as a whole.

……..

……..

… in the case on hand, the respondents are not covered by the8[th] Bipartite Settlement/Joint Note and they were covered byearlier Bipartite Settlement/Joint Note and they are not eligible toget the benefits payable to the persons who are covered by the8[th] Bipartite Settlement/Joint Note as they were made applicableonly to those employees who were in service on 01.11.2002. Thepayment of pension and other related benefits are covered by theearlier Settlement/Joint Note and hence, it is not open to therespondents to contend that the benefits in the form of DearnessAllowance at 0.18% is to be given to them. In the considered A

B

C

DE

F

G

H

456SUPREME COURT REPORTS

Aopinion of this Court, the respondents are not covered under the8[th] Bipartite Settlement/Joint Note and hence, the above citedjudgment has no application to the case on hand.”

This view was under challenge in Civil Appeal Nos.8420-8421 of2013 and was affirmed by this Court on 01.02.2017.

B17. The appellant in the present matters contended inter alia thatthe view taken by Division Bench of Madras High Court was alreadyaffirmed by this Court by dismissing the appeal therefrom on 01.02.2017;that the retirees prior to 01.11.2002 could not claim same benefit/parityat par with those who retired after 01.11.2002; that the dearnessallowance payable to the pensioners was linked to the pay and preC01.11.2002 retirees were being paid pension or dearness relief thereonas per service conditions applicable to them at the time of retirement;that the decision of this Court in D.S. Nakara (supra) would not beapplicable in the present case and that the High Court was in error inrelying upon para 6 of Settlement dated 29.10.1993 as said settlementDhad worked itself out. In its affidavit in reply the Retirees Associationsubmitted inter alia that in the Bipartite Settlement dated 02.06.2005,100% neutralization of dearness allowance was introduced for the firsttime by doing away with tapering rate of payment of dearness allowanceand post 01.02.2005 dearness allowance was to be paid at a single slabrate of 0.18%. However, by subsequent Bipartite Settlement datedE27.04.2010 a distinction was made between pre and post 01.11.20002retirees. The respondents submitted that the view taken by the HighCourt did not call for any interference.

18. In this appeal, we heard Mr. Dhruv Mehta, learned SeniorCounsel for the appellant – Bank while the respondent namely RetireesFWelfare Association was represented by Mr. V.K. Bali, learned SeniorCounsel. Mr. A.S. Nambiar and Ms. V. Mohna, learned Senior Counselappeared in IAs 51316 and 50769 respectively for interveners.

19. Before we deal with the controversy in the present matters,the law on the point as laid down by this Court may be adverted to:G

A] In D.S. Nakara & Others (supra) the principal question whicharose was, “is the date of retirement a relevant consideration for eligibilitywhen a revised formula for computation of pension is ushered in andmade effective from a specified date.”[3] The inquiry was limited to non- 3 Para 2 of D.S. NakaraH

contributory superannuation or retirement pension paid by governmentto its erstwhile employee and for the purpose and object underlying it.[4]In that case formula for computation of pension was liberalized videoffice memorandum dated 25.05.1979 but the benefit was restricted tothose government servants who were in service on 31.03.1979 and retiredon or after that date. The challenge was to arbitrary division of ahomogenous class by fixing the eligibility criteria unrelated to the purposeof revision. In that context the observations of this Court in Para 42 arerelevant. Said Para 42 was as under:

“42. If it appears to be undisputable, as it does to us that thepensioners for the purpose of pension benefits form a class, wouldits upward revision permit a homogeneous class to be divided byarbitrarily fixing an eligibility criteria unrelated to purpose ofrevision, and would such classification be founded on some rationalprinciple? The classification has to be based, as is well settled, onsome rational principle and the rational principle must have nexusto the objects sought to be achieved. We have set out the objectsunderlying the payment of pension. If the State considered itnecessary to liberalise the pension scheme, we find no rationalprinciple behind it for granting these benefits only to those whoretired subsequent to that date simultaneously denying the sameto those who retired prior to that date. If the liberalisation wasconsidered necessary for augmenting social security in old age togovernment servants then those who, retired earlier cannot beworse off than those who retire later. Therefore, this division whichclassified pensioners into two classes is not based on any rationalprinciple and if the rational principle is the one of dividing pensionerswith a view to giving something more to persons otherwise equallyplaced, it would be discriminatory. To illustrate, take two persons,one retired just a day prior and another a day just succeeding thespecified date. Both were in the same pay bracket, the averageemolument was the same and both had put in equal number ofyears of service. How does a fortuitous circumstance of retiringa day earlier or a day later will permit totally unequal treatment inthe matter of pension? One retiring a day earlier will have to besubject to ceiling of Rs.8100 p.a. and average emolument to beworked out on 36 months’ salary while the other will have a ceiling A

B

C

D

E

F

G

Aof Rs.12,000 p.a. and average emolument will be computed onthe basis of last 10 months’ average. The artificial division staresinto face and is unrelated to any principle and whatever principle,if there be any, has absolutely no nexus to the objects sought to beachieved by liberalising the pension scheme. In fact this arbitrarydivision has not only no nexus to the liberalised pension schemeBbut it is counter-productive and runs counter to the whole gamutof pension scheme. The equal treatment guaranteed in Article 14is wholly violated inasmuch as the pension rules being statutory incharacter, since the specified date, the rules accord differentialand discriminatory treatment to equals in the matter of commutationCof pension. A 48 hours’ difference in matter of retirement wouldhave a traumatic effect. Division is thus both arbitrary andunprincipled. Therefore, the classification does not stand the testof Article 14.”

B] The principle laid down in D.S. Nakara (Supra) was explainedDin two decisions rendered by Constitution Benches of this Court inKrishena Kumar v. Union of India and Others[5] and in Indian Ex-Services League and Others v. Union of India and Others[6].Paragraphs 12 and 14 of the latter decision in Indian Ex-ServicesLeague (Supra) were as under:E“12. The liberalised pension scheme in the context of which thedecision was rendered in Nakara provided for computation ofpension according to a more liberal formula under which “averageemoluments” were determined with reference to the last tenmonths’ salary instead of 36 months’ salary provided earlier yieldinga higher average, coupled with a slab system and raising the ceilingFlimit for pension. This Court held that where the mode ofcomputation of pension is liberalised from a specified date, itsbenefit must be given not merely to retirees subsequent to thatdate but also to earlier existing retirees irrespective of their dateof retirement even though the earlier retirees would not be entitledGto any arrears prior to the specified date on the basis of the revisedcomputation made according to the liberalised formula. For thepurpose of such a scheme all existing retirees irrespective of thedate of their retirement, were held to constitute one class, any 5 (1990) 4 SCC 2076 (1991) 2 SCC 104H

further division within that class being impermissible. Accordingto that decision, the pension of all earlier retirees was to berecomputed as on the specified date in accordance with theliberalised formula of computation on the basis of the averageemoluments of each retiree payable on his date of retirement. Forthis purpose there was no revision of the emoluments of the earlierretirees under the scheme. It was clearly stated that ‘if thepensioners form a class, their computation cannot be by differentformula affording unequal treatment solely on the ground that someretired earlier and some retired later’. This according to us is thedecision in Nakara and no more.

14. Nakara decision came up for consideration before anotherConstitution Bench recently in Krishena Kumar v. Union ofIndia. The petitioners in that case were retired Railway employeeswho were covered by or opted for the Railway ContributoryProvident Fund Scheme. It was held that PF retirees and pensionretirees constitute different classes and it was never held inNakara that pension retirees and PF retirees formed ahomogeneous class, even though pension retirees alone didconstitute a homogeneous class within which any furtherclassification for the purpose of a liberalised pension scheme wasimpermissible. It was pointed out that in Nakara , it was neverrequired to be decided that all the retirees for all purposes formedone class and no further classification was permissible. We havereferred to this decision merely to indicate that another ConstitutionBench of this Court also has read Nakara decision as one oflimited application and there is no scope for enlarging the ambit ofthat decision to cover all claims made by the pension retirees or ademand for an identical amount of pension to every retiree fromthe same rank irrespective of the date of retirement, even thoughthe reckonable emoluments for the purpose of computation oftheir pension be different.”

C] In Union of India v. P.N. Menon and Others[7] the challengeto the cut off date and prayer for extension of similar relief of treating aportion of dearness allowance as pay for the purpose of retirementbenefits was the subject matter. While accepting the appeal and negating AB

C

DE

F

G

H

Athe challenge raised by the concerned retirees, this Court in paragraphs10 and 11 observed as under:

“10. The concept of ‘dearness pay’ was evolved in respect ofemployees in different pay ranges with different percentages ofthe dearness pay. Thereafter the pension and gratuity were workedout and an option was given to persons, who retired on or after30-9-1977 but not later than 30-4-1979, to choose either of thetwo alternatives — (i) to have their pension and death-cum-retirement gratuity calculated on their pay excluding the elementof dearness pay as indicated in paragraph 2 of the said officememorandum; or (ii) to have their pension and death-cum-retirement gratuity recalculated after taking into account theelement of dearness pay. If the stand of the respondents is to beaccepted that this scheme should have been made available,without there being a cut-off date, to all including those who haveretired even 20 to 25 years before the introduction of the scheme,then, according to us, the whole scheme shall be unworkable,because it is linked with the payment of dearness allowance, whichis based on the level of price index. Different institutions/departments have introduced the system of payment of dearnessallowance at different stages to mitigate the hardship of theiremployees with the rise in the prices of the essential articles as aresult of the inflation.

B

C

D

E

11. On behalf of the Union of India, it has been stated that in theaforesaid office memorandum dated 25-5-1979, 30-9-1977 wasfixed as the cut-off date, with reference to the average cost ofliving index at 272, which fell on 30-9-1977. It has been furtherstated that those who were entitled to the benefits of the saidoffice memorandum, were given option either to opt for the revisedformula or retain the existing formula. Some of the persons entitledto the new formula opted to retain their existing position, becausein their case the application of the new formula would have resultedeither in the reduction of the total pension or the increase whichwould have been only marginal. It has been said that under theoffice memorandum aforesaid, dearness allowance with referenceto average price index level at 272 was treated as dearness payfor the purpose of pension for those who retired after 30-9-1977.It has also been pointed out that pensioners, who retired on or F

G

H

after 30-9-1977 with the benefits of dearness pay, became entitledto less dearness relief, as compared to those who retired before30-9-1977 or retired after 30-9-1977, but had opted not to get thebenefit of the impugned office memorandum.”

D]. In State of Punjab v. Justice S.S. Dewan (Retired ChiefJustice ) and Others[8] by way of an amendment, the years put in by ajudicial officer as an advocate prior to his induction in judicial servicewere to be added for computing length of service for the purpose ofpension. The question was whether the State was justified in limitingthis relief to those who retired after 22.02.1990. The ratio of decision inD.S. Nakara (Supra) was distinguished on the ground that the benefitconferred was a new benefit and not an upward revision of the existingpension scheme. This Court found that it was not a case of liberalizationof the existing scheme but introduction of a new retiral benefit and assuch the State was justified in making a distinction between the sets ofretirees and limiting the benefit to those who retired after the cut offdate. The observations in paragraphs 6 and 7 quoted hereunder arerelevant:

“6. The change brought about by the amendment is that whereasin respect of death-cum-retirement benefits members of the PunjabSuperior Judicial Service were earlier governed by the All IndiaServices (Death-cum-Retirement Benefits) Rules, now they aregoverned by the Punjab Civil Services Rules. Moreover, now inthe case of a direct recruit to the Punjab Superior Judicial Servicethe actual period of practice at the Bar not exceeding 10 yearshas to be added to his service for the purpose of determining thequalifying service. Formerly, that is, prior to 22-2-1990, qualifyingservice of a member of the Punjab Superior Judicial Service wasthe length of service rendered by him as a member of the PunjabSuperior Judicial Service and also as a Judge of the High Court, ifhe was elevated to that position before retirement. Even in caseof a direct recruit to that Service his standing at the Bar wasirrelevant but now that period has to be added for determining thequalifying service. Obviously, this enlargement of the period ofqualifying service would lead to an increase in the quantum ofpension. This has been regarded by the High Court and as A

BCD

EFG

Acontended by the respondent, liberalisation of the pension scheme.For that reason, it further held that benefit of a rule liberalisingpension cannot be restricted to persons retiring subsequently thatis after the date of such liberalisation otherwise it would amountto vicious discrimination violative of Article 14 of the Constitution.The High Court has also held that there is nothing in the languageBof the rule to suggest that the benefit conferred by it is confined tothe persons retiring after 22-2-1990.

7. Therefore, what we have to consider is what is the nature ofthe change made by the amendment. Is it by way of upwardrevision of the existing pension scheme? Then obviously the ratioCof the decision in D.S. Nakara case would apply. If it is held tobe a new retiral benefit or a new scheme then the benefit of itcannot be extended to those who retired earlier.”

E] In Col. B.J. Akkara (Retd.) v. Government of India andOthers[9] The principles to be considered in such matters were culled outDin para 20 as under:

“20. The principles relating to pension relevant to the issue arewell settled. They are:

(a) In regard to pensioners forming a class, computation of pensionEcannot be by different formula thereby applying an unequaltreatment solely on the ground that some retired earlier and someretired later. If the retiree is eligible for pension at the time of hisretirement and the relevant pension scheme is subsequentlyamended, he would become eligible to get enhanced pension asper the new formula of computation of pension from the dateFwhen the amendment takes effect. In such a situation, the additionalbenefit under the amendment, made available to the same classof pensioners cannot be denied to him on the ground that he hadretired prior to the date on which the aforesaid additional benefitwas conferred.

G

(b) But all retirees retiring with a particular rank do not form asingle class for all purposes. Where the reckonable emolumentsas on the date of retirement (for the purpose of computation ofpension) are different in respect of two groups of pensioners,who retired with the same rank, the group getting lesser pension cannot contend that their pension should be identical with or equalto the pension received by the group whose reckonable emolumentwas higher. In other words, pensioners who retire with the samerank need not be given identical pension, where their averagereckonable emoluments at the time of their retirement weredifferent, in view of the difference in pay, or in view of differentpay scales being in force.

(c) When two sets of employees of the same rank retire at differentpoints of time, it is not discrimination if:

(i) when one set retired, there was no pension scheme and whenthe other set retired, a pension scheme was in force;

(ii) when one set retired, a voluntary retirement scheme was inforce and when the other set retired, such a scheme was not inforce; or

(iii) when one set retired, a PF scheme was applicable and whenthe other set retired, a pension scheme was in force.

One set cannot claim the benefit extended to the other set on theground that they are similarly situated. Though they retired withthe same rank, they are not of the “same class” or “homogeneousgroup”. The employer can validly fix a cut-off date for introducingany new pension/retirement scheme or for discontinuance of anyexisting scheme. What is discriminatory is introduction of a benefitretrospectively (or prospectively) fixing a cut-off date arbitrarilythereby dividing a single homogeneous class of pensioners intotwo groups and subjecting them to different treatment.”

F] In Kallakkurichi Taluk Retired Officials Association, TamilNadu and Others v. State of Tamil Nadu[10] the effect of governmentorders as regards pension was that employees retiring on or after01.06.1988 were at a disadvantage as against those who had retiredbefore 01.06.1988. Paragraphs 38 and 39 of said decision are quotedhereunder:

“38. The instant controversy should not be misunderstood as adetermination of the total carry-home pension of an employee.All the government orders referred to above, deal with the quantumof “dearness allowance” to be treated as “dearness pay” for the A

B

C

D

E

F

G

H

Acalculation of pension. “Dearness pay” is one of the manycomponents, which go into the eventual determination of pension.Therefore, the focus in the adjudication of the present controversymust be on “dearness pay”, rather than on the eventual carry-home pension. The relevance and purpose of treating “dearnessallowance” as “dearness pay”, has been brought out in the foregoingBparagraphs. Therefore, clearly, the object sought to be achievedby adding “dearness pay” to the wage of a retiree, whiledetermining pension payable to him, is to remedy the adverseeffects of inflation. The aforesaid object has to be necessarilykept in mind, while examining the present controversy. AnyCclassification without reference to the object sought to be achieved,would be arbitrary and violative of the protection afforded underArticle 14 of the Constitution of India, it would also bediscriminatory and violative of the protection afforded under Article16 of the Constitution of India.

D39. Having given our thoughtful consideration to the controversyin hand, it is not possible for us to find a valid justification for theState Government to have classified pensioners similarly situatedas the appellants herein (who had retired after 1-6-1988), fromthose who had retired prior thereto. Inflation, in case of all suchpensioners, whether retired prior to 1-6-1988 or thereafter, wouldEhave had the same effect on all of them. The purpose of addingthe component of “dearness pay” to wages for calculating pensionis to offset the effect of inflation. In our considered view, therefore,the instant classification made by the State Government in theimpugned Government Order dated 9-8-1989 placing employeesFwho had retired after 1-6-1988 at a disadvantage, vis-à-vis theemployees who had retired prior thereto, by allowing them a lowercomponent of “dearness pay”, is clearly arbitrary anddiscriminatory, and as such, is liable to be set aside as violative ofArticles 14 and 16 of the Constitution of India.”

G20. In the light of the principles laid down by this Court as aforesaid,let us now consider factual perspective in the present matters.

21. At the outset it must be stated that Appendix II to the PensionRegulations had categorized employees in three different segments andthe dearness relief payable on basic pension in respect of employees in H

these three categories was on the basis of tapering formula which differedin each of the categories. In respect of those who were in the firstcategory i.e. those who had retired earliest, the dearness relief was0.67% on the first slab namely upto Rs.1250/- of basic pension. Therate then tapered and finally was 0.17% of basic pension in excess ofRs.2130/-. At the same time in respect of retirees in the second category,the rate of dearness relief was 0.35 per cent in respect of first slabnamely upto Rs.2400/-. Here also the dearness relief was on a taperingformula and finally was 0.09% of basic pension in excess of Rs.4100/-.The third category which was in respect of employees who retired after01.04.1998, the rate was 0.25% for the first slab upto Rs.3380/-. Goingby the tapering formula, the rate was 0.06 per cent of the basic pensionin excess of Rs.5770/-. If Clause 7(2) of the 9[th] Bipartite Settlementdated 27.04.2010 is compared with the last category of the Appendix IIof the Pension Regulations, there is hardly any change in respect ofretirees during the period 01.04.1998 to 31.10.2002. Thus, whateverbenefit was conferred and was enjoyable by the employees who retiredbefore November 2002 was not taken away.

22. If both categories dealt with by 9[th] Bipartite Settlement dated27.04.2010 are further compared, the retirees prior to 01.11.2002 wouldbe entitled to dearness relief on a tapering formula where the initial slabupto Rs.3550/- is to be governed by quotient of 0.24%. The taperingformula then ends with 0.06% of basic pension in excess of Rs.6010/-. The starting point is at a level of 0.24% while the end point tapers to0.06%. The maximum advantage is sought to be given to those who aregetting basic pension at lower levels of slab who would get the dearnessrelief at 0.24%. As against this, the retirees after 01.11.2002 are to begiven dearness relief at a flat rate of 0.18% of the basic pension.Theoretically, the starting level for the retirees prior to 01.11.2002 is at ahigher level of 0.24% as against the retirees after 01.11.2002. It couldpossibly be said that for those who are with basic pension in the regionof Rs.6000/-, on the basis of a tapering formula may well, in the ultimateanalysis, average to the same level of 0.18%.

23. The parity that was sought in the petition was not so muchregarding applicability of same rate of 0.18% but was in respect of “flatrate” idea. The illustrations given in para 30 of the writ petition that wehave quoted hereinabove bring home the point. The calculation of dearnessallowance of Rs.14274/- on basic pension of Rs.7880/- in the case of ABCD

E

F

G

H

ASantipriya Roy is in keeping with tapering formula as given in the BipartiteSettlement dated 27.04.2010. The tabular chart then proceeds to calculatefull compensation on account of dearness allowance with slab rate of0.24% on the entire basic pension of Rs.7880/- which figure comes toRs. 18912/-. Thus the submission was that the dearness relief becomputed on 0.24% for the entirety of basic pension and not just for theBfirst slab upto Rs.3550/-. But such calculation completely disregardsthat rate which is a flat rate applicable in case of post 01.11.2002 retireesis not 0.24% for the entire amount of basic pension but at a differentlevel of 0.18% and the threshold requirement of quarterly average ofthe Index is also different. If we were to simply borrow the same rateCof 0.18% in the case of retirees prior to 01.11.2002, the concerned retireesmay well be at a disadvantage. For instance, the basic pension of Rs.7880/- of said Santipriya Roy would yield a figure of Rs.14184/- with flat rateof 0.18%. It will not therefore be correct to adopt and apply the samerate as is made applicable in case of post 01.11.2002 retirees. What is prayed for is also not the same rate but the same principle, namely, flatDrate be made applicable to pre 01.11.2002 retirees as well but at a rateof 0.24%.

24. Would that be the correct approach? The tapering formulaundoubtedly begins with 0.24% for the first segment of Rs.3550/- ofbasic pension and then progressively steps down and finally reaches theElevel of 0.06% where the basic pension is in excess of Rs.6010/-. Whatis devised by way of such tapering formula is higher rate at the lowerlevels of segments so that larger number of peoples would get maximumadvantage and the rate thereafter keeps stepping down. Neither canwe apply the rate of 0.18% which will then cause great harm and damage Fto the retirees nor can we adopt a flat rate of 0.24% for the entireamount of basic pension. The benefit which is sought to be conferredby the tapering formula lies in the averaging which comes to near aboutthe same quantum as is given to the post 01.11.2002 retirees. At thisstage it is noteworthy that no illustration has been placed on record tosubmit that even with 0.18% dearness allowance those who retired afterGNovember 2002 walk away with substantially greater advantage as againstpre November 2002 retirees. In any case, this is not a matter where asection of employees merely on account of date of retirement are beingdifferentiated. If we adopt a flat rate of 0.24% as is being prayed for,the class of retirees who retired before 01.11.2002 will stand conferred H

better rate than those employees who retired after 01.11.2002. Norcan we apply a flat rate of 0.18% for them. Each class is governed bydistinct and different parameters. These are all matters of policy making. The conferral of advantages of benefits on two different classes ofretirees has a completely distinct formula and rates and it would not bepossible to have a synthesis on any count or to put both the sets ofretirees on any common parameters. Both classes are distinct and donot form a homogenous group. It would be extremely difficult andhazardous to adopt a flat rate as is sought to be projected. It is not acase of creating a class within a class.

25. In our view any attempt to tinker with either the formula orthe rate would make the whole scheme unworkable as was cautionedby this Court in the case of P.N. Menon and Others (supra). As held inthe case of Indian Ex-Services League and Others (supra) the decisionof this Court in D.S. Nakara (supra) is one of limited application andthere is no scope for enlarging the ambit of that decision to cover allschemes made by the retirees or a demand for an identical amount ofpension irrespective of the date of retirement. The reliance on theresolutions/circulars issued by Reserve Bank of India was alsomisplaced. It is true that the tapering formula was done away with byReserve Bank of India but that by itself cannot entitle the retirees priorto 01.11.2002 either to be conferred the advantage at the same ratemade applicable by Reserve Bank of India or at the flat rate of 0.24%as was sought to be projected.

In our considered view, the assessment made by the DivisionBench of the Madras High Court was absolutely correct. The settlementhas to be taken as a package deal and it would be impossible to holdcertain parts good and acceptable while finding other parts to be bad. Moreover, the recitals D, E and F in the Bipartite settlement dated02.06.2005 (quoted hereinabove) show that a package deal was enteredinto and Rs.1288 crores per annum towards all the benefits was setapart for the benefit of the employees. Any stepping up of benefit for asection of employees is bound to inflate the figure of Rs.1288 crores perannum though that by itself is not a ground that weighs with us. In ourview both the categories of retirees, namely, pre November 2002 andpost November, 2002 stand on different footing, the parameters whichgovern the computation of dearness relief are also on a different level. The decisions rendered by the Single Judge as well as by the Division AB

CD

E

F

G

H

ABench of the High Court failed to appreciate these aspects and in ourview, the said decisions are completely erroneous.

26. It may also be noted that the decision of the Division Bench ofthe Madras High Court having been confirmed by this Court, the matterstands concluded. As has been observed in paragraphs 32, 41 and 44 ofBKunhayammed and Others v. State of Kerala and Another[11], onceleave to appeal had been granted and the appellate jurisdiction of thisCourt was invoked the order passed in appeal would attract the doctrineof merger. Be that as it may, we are satisfied that the Bipartite Settlementdid not create any distinction which was inconsistent with the principleslaid down by this Court.

C

27. We therefore allow these appeals, set aside the judgmentsand orders passed in the appeals and dismiss Writ Petition No.507 of2012 preferred by respondent Nos. 1 to 4 herein. No order as to costs.

DDevika Gujral

Appeals allowed and Writ Petition dismissed.

E

F

G