Allowed

Bharat Bhushan v. State

Himachal Pradesh HC19 Dec 2013CWP/96/2010

Case brief

AI extract

What is this about?

Employees of Himachal Pradesh Public Sector Undertakings who opted for the 1999 corporate pension scheme challenged the State's 2004 notification repealing it with retrospective effect. The High Court held the repeal could not take away vested rights, declared the 2.12.2004 cut-off ultra vires as discriminatory, and read down the notification to cover the petitioners.

What did the court decide?

All writ petitions allowed; cut-off date 2.12.2004 declared ultra vires and the notification read down; RPFC to transfer CPF with interest to the corpus fund; pension sanctioned with 9% interest withi

Bharat Bhushan Vs State — Pension and Retirement Benefits | Himachal Pradesh HC (2013)

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IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA.

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CWP No. 1577/2009 alongwith CWP Nos. 2548, 3809, 4281, 4425, 4700, 4701, 5030, 5031, 5033, 5037, 5043, 5044, 5045, 5046, 5047, 5048, 5076/2009, 94, 95, 96, 97, 98, 113, 114, 115, 116, 117, 119, 120, 121, 122, 233, 261, 262, 460, 461, 464, 467, 468, 731, 739, 740, 741, 742, 787, 1305, 1425, 1843, 1882, 2760, 4170, 4433, 4602, 6005, 8890/2010, 2862, 2921, 2937, 7354, 7397, 8288, 8740, 8896, 9683, 10275, 10276, 10801, 11088 of 2011 and 1897 of 2012.

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Reserved on : 27.11.2013

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Decided on: 19.12. 2013

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_____________________________________________ 1. CWP No. 1577/2009 Rajesh Chander Sood …Petitioner. Vs. State of H.P. and others. …Respondents. 2. CWP No. 2548/2009 Ashok Kumar Sharma …Petitioner Vs. State of H.P. and others. …Respondents. 3. CWP No. 3809/2009 H.K. Vaidya and others. …Petitioners. Vs. State of H.P. and others. …Respondents. 4. CWP No. 4281/2009 Roshan Lal Parmar …Petitioner. Vs. State of H.P. and others. …Respondents. 5. CWP No. 4425/2009 P.D. Nanda …Petitioner Vs. State of H.P. and others. …Respondents. 6. CWP No. 4700/2009

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Baldev Kumar …Petitioner

¶8

Vs.

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State of H.P. and others. 7. CWP No.4701/2009 Brijesh Kumar Sharma

…Respondents.

.......Petitioner.

Versus

State of H.P. and others.

¶14

…Respondents.

¶15

8. CWP No. 5030/2009

Amar Dass

…Petitioner.

Vs.

State of H.P. and others. 9. CWP No.5031/2009 Atma Ram

…Respondents.

…Petitioner.

Vs.

State of H.P. and others. …Respondents. 10. CWP No. 5033/2009

M.P. Singh

…Petitioner.

Vs.

State of H.P. and others. …Respondents. 11. CWP No. 5037/2009 Ashwani Kumar …Petitioner.

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…Petitioner. …Respondents.

¶29

Vs.

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State of H.P. and others. 12. CWP No. 5043/2009

Ashok Kumar.

…Petitioner

Vs.

State of H.P. and others. …Respondents. 13. CWP No.5044/2009 Surender Pal Sharma …Petitioner. Vs.

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State of H.P. and others. …Respondents. 14. CWP No. 5045/2009

Avinash Kaur

…Petitioner.

Vs.

State of H.P. and others. …Respondents.

¶40

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15. CWP No. 5046/2009

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Ganga Ram.

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…Petitioner.

¶44

Vs. State of H.P. and others. …Respondents. 16. CWP No. 5047/2009 Kala Ram. …Petitioner.

¶45

Vs.

¶46

State of H.P. and others. …Respondents. 17. CWP No. 5048/2009 Inder Singh Sain. …Petitioner.

¶47

Vs.

¶48

State of H.P. and others. …Respondents.

¶49

18. CWP No. 5076/2009

Damodar Ram.

…Petitioner.

Vs.

State of H.P. and others. …Respondents. 19. CWP No. 94/2010

Chaman Lal.

…Petitioner.

Vs.

State of H.P. and others. …Respondents. 20. CWP No. 95/2010 Babu Ram. …Petitioner.

¶58

Vs.

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State of H.P. and others. …Respondents. 21. CWP No.96/2010 Bharat Bhushan. …Petitioner.

¶60

Vs.

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State of H.P. & others …Respondents. 22. CWP No. 97/2010 . Bimla Devi …Petitioner.

¶62

Vs.

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State of H.P. and others. …Respondents. 23. CWP No. 98/2010 Bhag Singh …Petitioner.

¶64

¶65

Vs.

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State of H.P. and others. 24. CWP No.113/2010

Nek Chand

…Respondents.

… Petitioner.

Vs.

State of H.P. and others. 25. CWP No. 114/2010

Yash Pal Goel

…Respondents.

…Petitioner.

Vs.

State of H.P. and others. 26. CWP No. 115/2010

Dhian Singh

…Respondents.

…Petitioner

Vs.

State of H.P. and others. 27. CWP No. 116/2010

Katku Ram

…Respondents.

…Petitioner.

Vs.

State of H.P. and others. 28. CWP No. 117/2010

Pawan Kumar

…Respondents.

…Petitioner.

Vs.

State of H.P. and others.

¶92

…Respondents.

¶93

29. CWP No. 119/2010

Sobha Ram

…Petitioner

Vs.

State of H.P. and others. 30. CWP No. 120/2010

Krishan Chand

…Respondents.

…Petitioner.

Vs.

State of H.P. and others. …Respondents. 31. CWP No. 121/2010

Tej Ram Sharma

…Petitioner.

Vs.

State of H.P. and others. …Respondents.

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32. CWP No. 122/2010

Jagat Ram Sharma.

…Petitioner.

Vs.

State of H.P. and others. 33. CWP No. 233/2010

Pawan Kumar Sharma

…Respondents.

…Petitioner.

Vs.

State of H.P. and others. 34. CWP No. 261/2010

Tulsi Ram

…Respondents.

…Petitioner.

Vs.

State of H.P. and others.

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…Respondents.

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35. CWP No. 262/2010

Y.S. Thakur.

…Petitioner.

Vs.

State of H.P. and others.

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…Respondents.

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36. CWP No. 460/2010

Phoola Devi.

…Petitioner.

Vs.

State of H.P. and others. …Respondents. 37. CWP No. 461/2010

Kamleshwar Singh

…Petitioner.

Vs.

State of H.P. and others. …Respondents.

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38. CWP No. 464/2010

Vineet Kaushik

…Petitioner.

Vs.

State of H.P. and others. …Respondents.

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39. CWP No. 467/2010

Shyam Singh.

…Petitioner.

Vs.

State of H.P. and others.

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…Respondents.

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40. CWP No. 468/2010

Bhola Ram.

…Petitioner.

Vs.

State of H.P. and others. 41. CWP No. 731/2010

Mani Ram

…Respondents.

…Petitioner.

Vs.

State of H.P. and others.

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…Respondents.

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42. CWP No. 739/2010

Satya Dev Negi.

…Petitioner.

Vs.

State of H.P. and others. 43. CWP No. 740/2010

Ramesh Chand Dhiman.

…Respondents.

…Petitioner.

Vs.

State of H.P. and others. 44. CWP No. 741/2010

Sita Ram.

…Respondents.

…Petitioner.

Vs.

State of H.P. and others. 45. CWP No. 742/2010 Ravinder Singh Tegta.

…Respondents.

…Petitioner.

Vs.

State of H.P. and others.

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…Respondents.

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46. CWP No. 787/2010

Kanta Devi.

…Petitioner.

Vs.

Himachal Pradesh Horticultural Produce Marketing and Marketing and Processing Corporation Ltd. and another. …Respondents.

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…Respondents.

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47. CWP No. 1305/2010

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Dola Ram Thakur. …Petitioner. Vs. State of H.P. and others. …Respondents. 49. CWP No. 1425/2010 Kishori Lal. …Petitioner.

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¶191

Vs.

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State of H.P. and others. 50. CWP No. 1843/2010

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Harish Mitter Moudgil.

…Respondents.

…Petitioner.

Vs.

State of H.P. and others. 51. CWP No. 2760/2010 Surender Kumar Jaret.

…Respondents.

…Petitioner.

Vs.

State of H.P. and others. 52. CWP No. 4170/2010

Lekh Raj.

…Respondents.

…Petitioner.

Vs.

State of H.P. and others. 53. CWP No. 4433/2010

Prem Lal Sharma.

…Respondents.

…Petitioner.

Vs.

State of H.P. and others. 54. CWP No. 4602/2010

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Rajinder Singh Sublaik.

…Respondents.

…Petitioner.

Vs.

State of H.P. and others. 55. CWP No. 6005/2010

Bal Krishan Sharma.

…Respondents.

…Petitioner.

Vs.

State of H.P. and others. 56. CWP No. 8890/2010 Surender Kumar Sharma.

…Respondents.

…Petitioner.

Vs.

State of H.P. and others. …Respondents. 57. CWP No. 2862/2011 Uday Ram. …Petitioner.

¶226

Vs.

¶227

State of H.P. and others. …Respondents.

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¶229

58. CWP No. 2921/2011

Rattan Singh.

…Petitioner.

Vs.

State of H.P. and others. …Respondents. 59. CWP No. 2937/2011 Mohinder Singh. …Petitioner.

¶234

Vs.

¶235

State of H.P. and others. …Respondents. 60. CWP No. 7354/2011

Dharam Singh.

…Petitioner.

Vs.

State of H.P. and others. …Respondents.

¶240

61. CWP No. 7397/2011

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Ram Kumar Sharma & others.

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…Petitioners.

¶243

Vs.

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State of H.P. and others. …Respondents.

¶245

62. CWP No. 8288/2011

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Shyam Lal and others.

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…Petitioners.

¶248

Vs.

¶249

State of H.P. and others. …Respondents. 63. CWP No. 8740/2011

Nanak Chand.

…Petitioner.

Vs.

State of H.P. and others. …Respondents. 64. CWP No. 8896/2011

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Baldev Singh and others.

¶255

…Petitioners.

¶256

Vs.

¶257

State of H.P. and others. …Respondents.

¶258

65. CWP No. 9683/2011

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Chuni Lal and others.

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…Petitioners.

¶261

Vs.

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State of H.P. and others.

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…Respondents.

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66. CWP No. 10275/2011

Bhagwan Dass.

…Petitioner.

Vs. State of H.P. and others. …Respondents. 67. CWP No. 10276/2011 Ram Murti. …Petitioner. Vs. State of H.P. and others. …Respondents. 68. CWP No. 10801/2011 Phulkar Chand. …Petitioner. Vs. State of H.P. and others. …Respondents. 69. CWP No. 11088/2011 Bidhi Chand. …Petitioner. Vs. State of H.P. and others. …Respondents. 70. CWP No. 1897/2012 Rajan Jain and others. …Petitioners. Vs. State of H.P. and others. …Respondents.

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Coram:

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Hon’ble Mr. Justice Rajiv Sharma, Judge. Hon’ble Mr. Justice V.K. Sharma, Judge.

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Whether approved for reporting?¹ Yes

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For the Petitioner : Mr. Dilip Sharma, Senior Advocate with Mr. Ajay Mohan Goel, P.D. Nanda, J.R. Gazta, Mr. B.M. Chauhan and T.S. Chauhan, Advocates for the respective petitioners. For the Respondents : Mr. Shrawan Dogra, Advocate General with Ms. Minakshi Sharma, Addl. A.G. and Mr. Vivek Attri, Dy. A.G. for respondent-State.

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1 Whether reporters of the local papers may be allowed to see the judgment? yes

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Mr. K.D. Sood, Sr. Advocate with Mr. Sanjeev Sood, Mr. Ajit Saklani, Ms. Ritta Goswami, Mr. Bhupinder Thakur, Mr. V.B. Verma and Mr. Sushil Guatam, Advocates for the respective respondents.

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Mr. Sandeep Sharma, Asstt. Solicitor General of India for Union of India.

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Per Justice Rajiv Sharma, Judge .

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Since common questions of law and facts are involved in all these petitions, the same were taken up together and are being disposed of by a common judgment. However, in order to maintain clarity, facts of CWP No. 4425/2009, titled P.D. Nanda vs. State of Himachal Pradesh and others have been taken into consideration.

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Petitioner was appointed as Assistant in respondent No.3-corporation on 20.4.1976. He was promoted to the post of Senior Assistant on 23.7.1977. He was promoted to the post of Office Manager on 27.3.1981. He was appointed as Superintendent equivalent to the post of Office Manager (Senior) with effect from 14.3.1984. He was promoted to the post of Manager Marketing from 18.11.1988 in the pay scale of ` 1200-1700.

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Decision making process of the scheme called as “Himachal Pradesh Corporate Sector Employees (Pension, Family Pension Commutation of pension and Gratuity) Scheme, 1999” was notified on 29.10.1999.

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Petitioner has placed on record the

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information received under the Right to Information Act the manner in which the decision was taken, which led to issuance of notification dated 29.10.1999 notifying the “Himachal Pradesh Corporate Sector Employees (Pension, Family Pension Commutation of pension and Gratuity) Scheme, 1999” with effect from 1.4.1999. According to note No. 229, the Hon’ble Chief Minister announced that pensionery benefits would be extended to the employees of corporate sector with effect from 1.4.1999. Thereafter, matter was placed before the Cabinet on 12.1.1999 and it was approved. The salient features of the scheme approved by the Cabinet read as

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under:

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1. The Central Civil Services (Pension) Rules 1972 and the Central Civil Services (Commutation of Pension) Rules, 1981 as adopted by the H.P. Government for the State Government employees from time to time shall govern the pensionery benefits to be granted to PSU employees.

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2. It shall come into effect from 1^st April, 1999 and will apply to all the employees who join the Corporations/Boards after this date.

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3. The existing employees of the concerned Corporations as on 31.3.1999 shall have the option either to elect the Pension Scheme or to continue under the existing Provident Fund Scheme.

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4. The existing employees who opt for the Pension Rules shall automatically forfeit their claim to employer’s share of CPF including interest thereon to the Corporation.

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5. The existing corpus upto 31.3.1999 under the E.P.F. scheme shall be credited to the Consolidated Fund of the State Government.

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6. The State Government shall receive Corporation’s monthly contribution/share in respect of all the eligible

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employees w.e.f. 1.4.1999 at the rate of 12% of the basic pay + DA or at the rate as may be prescribed by the State Government from time to time.

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7. The retirement age of 58 years (60 years for class-IV employees), on the pattern of State Government will have to be incorporated in the Service Bye Laws of those Corporations/Boards where it is on higher side.

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8. Each Corporation will have to obtain the approval of its Board of Directors for introducing these Pension Rules after the State Government accepts it.”

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Since the rules envisage transfer of funds maintained with the Regional Provident Fund Commissioner (RPFC) to the State Government and operation of the scheme under the Central Civil Services (Pension) Rules through the Consolidated Fund of the State, it was necessary to consult the Regional Provident Fund Commissioner, A.G. H.P. and the Law Department in this regard. The RPFC, Shimla with whom the CPF was being deposited by the PSUs had agreed to transfer both the shares of CPF of employees and PSUs to Government in respect of regular employees of PSUs while retaining the CPF in respect of employees on part time, daily wages, piece meal rate, casual, contract basis. The Accountant General has made the following observations on 16.8.1999 as per note No. 231:

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i. “In the proposed scheme all pensionery benefits of the employees of corporate sector are proposed to be governed by the CCS Pension Rules, 1972 and CCS Commutation of Pension Rules, 1981 as amended and adopted by the H.P. Government for State employees. The above rules apply only to the Government servants

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appointed to substantive Civil Services and posts in connection with the affairs of the State which are borne on pensionable establishment. These rules are not applicable automatically to the employees of PSUs until amendment is made in these rules.

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ii. The draft scheme does not indicate the source from which pensionery benefits to the employees of PSUs will be made.

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iii. The Heads of Account under which such transactions will be accounted for has also not been indicated in the said scheme.

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iv. The authority who will be responsible for maintaining GPF accounts of such employees has also not been indicated.

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v. Whether the State Government indents to make pensionery benefit out of Consolidated Fund of State or the State Government would like to create a Pension and Gratuity Fund for the purpose, needs to be indicated.”

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The Law Department gave the opinion that the AD before framing any scheme shall have to amend the various enactments under which the PSU’s have been established and after framing the scheme the AD shall have to issue notification under section 5 of Payment of Gratuity Act, 1972 and also under section 17 of Employees Provident Fund and Miscellaneous Provisions Act, 1952. The Law Department also has opined that it was not possible to frame a scheme for the employees of public sector undertakings which have been established under the provisions of Central enactments for that purpose the Company Act shall have to be examined separately. It also opined that since in terms of Article 283 (1) only public money received by or on behalf of the State Government can

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be credited to consolidated fund as such for the purpose of crediting the public fund so created for the employees of public sector undertaking, the views of Accountant General have to be obtained.

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The Financial Commissioner-cum-Secretary (Finance) on 27.9.1999 observed to create a central account and transfer the corpus of various corporations to a non-governmental entity so created specifically for the purpose. Opinion of the Law Department was again sought on the following issues as per note No. 244:

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i. Can a scheme be framed through suitable salutatory enactment for Pension to PSUs payable through the consolidated fund or would this is hit by some constitution bar?

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ii. Can a PSU employee pension scheme be framed which is not to be operated through consolidated fund but through or fund kept separately but which would be maintained by a special cell of State Government employees and which would envisage budgetary support also without statutory enactment?

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iii. If (ii) above requires statutory enactment then what form can such an enactment take can such an enactment be restrictive and cover only such Boards/Corporations/Cooperatives as are specified or will this constitute discrimination which can be held to be unconstitutional.”

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Senior Law Officer gave the opinion as per note No. 246 and opined that amicable salutation to the problem can be achieved if all the Public Sector Undertakings are directed to amend their rules/regulations framed under the Act whereunder these were established for making a provision to the

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effect that pensionery benefits shall be admissible to the employees of the undertakings as per the pension scheme framed by the State Government in this behalf and in such event there would be no necessity to enact a special law or to amend the respective enactments because every Act under which a Public Undertaking was established might have delegated powers to the Board of the respective Public Sector Undertakings to frame rules regulating the condition of service of the employees of the Public Sector Undertakings. Thereafter, as per note No. 247, it was noted that since the proposed scheme no longer involve the consolidated fund of the State, it was not to include the Milkfed and involve creation of a corporate Pension Cell in the Finance Department. It was noted as discussed and verbally conveyed by Chief Minister, ex-post approval of CMM be obtained. The Law Department was requested to vet the draft notification. Secretary (Law) as per note No. 249, opined that repeal and saving clause was required to be deleted from the scheme as the State Government has no power to repeal the rules, regulations and orders etc. issued by the competent authority of the Public Sector Undertaking under the powers conferred by the Statutes in which said Public Sector Undertakings have been established. It was further opined by him that after the rules, regulations

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or orders are amended by the respective Public Sector Undertakings providing that the pensionery benefits of the employees shall be regulated by the scheme framed by the State Government then on amendment, such rules regulations, orders shall cease to have effect on the matters covered under the scheme. It is in this backdrop, the scheme called “Himachal Pradesh Corporate Sector Employees (Pension, Family Pension Commutation of Pension and Gratuity) Scheme, 1999 was notified on 29.10.1999 with effect from 1.4.1999.

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The object of the scheme is to provide for the constitution, custody control and operation of Pension Fund for the payment of pension/commutation of pension and gratuity to the employees of the Public Sector Undertakings. The scheme has come into force with effect from 1.4.1999. According to sub-para (2) of para 1, all pensionery benefits of the employees of the participating H.P. Corporate Sector were to be determined in accordance with the provisions laid down in Central Civil Services (Pension) Rules, 1972, the Central Civil Services (Commutation of Pension) Rules, 1981 as amended and adopted by the Himachal Pradesh Government for the State Government employees save as otherwise provided in the scheme. According to para 2, the scheme was made applicable to the employees of Himachal Pradesh Corporate Bodies as

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specified in appendix appended to the scheme with a further rider that the governing body/Board of Directors of these Corporate Bodies would provide in their respective bye laws/rules/regulations governing their conditions of service by amending respective service bye laws/rules/ regulations that pension, family pension and commutation of pension and gratuity would be payable to the employees/beneficiaries under the scheme. The scheme was made applicable to those employees who opt for benefits under the scheme. The employees were required to give an option in writing in the form within a period of 30 days from the date of notification of the scheme. It was further stipulated in the scheme that any employee who did not exercise his/her option within the specified period for whatsoever reasons would be deemed to have exercised option for this scheme. Para 3 is a definition clause. It has defined the expression “Board”, “H.P. Corporate Sector” and “employee”. “Existing employees” has been defined to mean any employee in the service of the Himachal Pradesh Corporate Sector on regular basis as on 1.4.1999. It has also defined the terms “Pension Sanctioning Authority”, “Pension Disbursing Authority”, “Participating H.P. Corporate Sector”, “Head of Department” and “Head of Office”. According to para 4 of the scheme, any claim to pension was to be regulated

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by the provision of the scheme in force at the time when an employee retires or is retired or dies or is discharged as the case may be. The existing employees of the Corporation as on 1.4.1999 had the option either to elect the pension scheme or to continue under existing provident fund scheme, 1995. It was further stipulated therein that all the employees who opted for pension scheme were to automatically forfeit their claim to employer’s share of CPF including interest thereon to the State Government as well as other claims under CPF schemes by whatsoever name called in respect of all past accumulations upto 31.3.1999. The amount of their subscriptions to the fund alongwith interest was to be transferred to GPF account to be allotted and maintained by the concerned Corporate Sector Organization as per rules adopted by them. Para 5 provides that the entire amount of the PSUs contribution including interest thereon in the CPF account upto 31.3.1999 was to be transferred to a corpus fund to be administered and maintained by the Government of Himachal Pradesh in the Finance Department. PSUs contribution/share in respect of all the eligible employees with effect from 1.4.1999 at the rate of 12% of the basic pay plus D.A. or at the rate as the State Government may prescribe from time to time but not less than the rate provided as above was to be

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transferred to the corpus called the ‘pension contribution’. The concerned PSUs were also required to transfer the pension contribution as per sub-para (3) of para 5 to the State Government latest by 10^th of the succeeding month provided that in the event of nontransfer of the contribution upto 10^th of succeeding month interest at the rate of 12% per annum was payable by the PSUs for any delayed payment. The disbursement of pension was visualized under para 6 of the scheme.

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It is not in dispute that all the PSUs amended their bye laws towards the implementation of scheme notified on 29.10.1999. Petitioner has also given his option on 12.11.1999.

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Respondent-State has amended rule 2 of the

¶324

Central Civil Services (Pension) Rules, 1972 on 15.5.2003. Notification dated 15.5.2003 reads as under:

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1. Short title and 1. (1) These Rules may be called the commencement:Central Civil Services (Pension) (Himachal Pradesh First Amendment) Rules, 2003. (2) They shall come into force from the date of publication in the Rajpatra Himachal Pradesh.

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2. Amendment of rule2. After clause (h) of rule-2 of the 2:Central Civil Services (Pension) Rules, 1972 the following new clause (i) shall be inserted, namely:-

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“(i) All appointments made in the State Government of Himachal Pradesh on

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or after the date of publication of the notification in Rajpatra, Himachal Pradesh.

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Petitioner and similarly situate persons were legitimately expecting that the scheme notified on 29.10.1999 would continue and they would be entitled to pension. However, respondent-State started a process of repealing notification dated 29.10.1999, which has come into force with effect from 1.4.1999.

¶331

The decision making process the manner in which the scheme notified on 29.10.1999 was repealed on 2.12.2004 with effect from 1.4.1999.

¶332

Petitioner has sought the information under Right to Information Act the manner in which scheme notified on 29.10.1999 was repealed vide notification dated 2.12.2004. This noting portion starts from page 62 of the paper book of CWP No.4425/2009. Serious reservations about the scheme had been expressed from time to time as per note No. 148. It is also borne out from the notes that the group of officers were asked to re-examine the entire scheme about the feasibility of the operationalization of scheme. The constitution of the committee was as under:

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1) Managing Director, H.P. Financial Corporation Chairperson/Chairman)

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2) Managing Director, HPSIDC (Member) 3) Managing Director, HRTC (Member)

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1. Managing Director, H.P. Civil Supplies Corporation (Member)

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The report of the Managing Director H.P. Financial Corporation is at page 100 of CWP No. 1577/2009. According to the recommendations of the committee, pension scheme for Corporate Sector employees based on contribution by the State Government was not viable on a self sustaining basis mainly due to the following reasons:

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i) “Uncertainty in the rate of interest regime.

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ii) Declining recruitment in the Corporate Sector would deplete the size of the corpus to be created and it would be difficult to honour liabilities accruing after 10-12 years.

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iii) The pension plan envisages payment of pension to corporate sector employees. Government employees at present are entitled to pension @ 50% of the basic pay last drawn with linkage to ADA. This return does not appear to be possible from the pension fund proposed to be created for corporate sector employees.”

¶341

The report of group of officers was received as per page 62 of CWP No. 4425/2009 in the month of October, 2003. It was proposed by Secretary (IF) vide note Nos. 151, 152 and 153 that the scheme notified on 29.10.1999 be rescinded. Initially, opinion of the Law Department was sought but the proposal was withdrawn and it was decided to seek additional opinion from the eligible PSU’s as per note Nos. 151, 152 and 153. Thereafter, ACS (Finance), as per note No.154, has sought the opinion of the Law Department whether scheme could be withdrawn with retrospective effect or

¶342

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with immediate effect. The Law Department, as per note No. 157, opined that if the scheme was rescinded at that stage, it would have the effect of taking away the vested right of the employees and the employees whose right was likely to be effected may challenge the same in the court of law. In other words, the liability of the Government to pay pension under the scheme could not be avoided at least upto the date of withdrawal of the scheme to those employees who have opted for the scheme and had retired between the period intervening from 1.4.1999 till the date the scheme was rescinded. The opinion of the Law Department was again sought. The Law Department opined that reason of inapplicability of the notification dated 15.5.2003 to the Corporate Sector employees was that the Corporate Sector employees were directly covered under the independent scheme of 1999 notified vide notification dated 29.10.1999 and they were not directly governed under the Central Civil Services (Pension) Rules, 1972. It was further observed that the employees of the Corporate Sector first should be covered under the scheme only thereafter the Central Civil Services (Pension) Rules, 1972 would be applicable. Therefore, unless the Corporate Sector employees appointed after a particular date were not excluded from the applicability of the scheme of 1999 the Central Civil Services

¶344

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(Pension) Rules could be made applicable as amended vide notification dated 15.5.2003. This opinion is at page 68 of the paper book of CWP No. 4425/2009. Additional Secretary (Finance) opined vide note No. 161 that they could initiate action to atleast make 1999 scheme inapplicable to the fresh entrants in the PSUs. The matter was ultimately placed before the Cabinet as per note No.201 and the following decision was taken:

¶346

“Approved. However, Government will be supportive of any effort by individual PSU’s to set up their own pensionery systems.”

¶347

The agenda alongwith point for consideration is at page 85 of the paper book of CWP No. 4425/2009. It is also borne out from the record that the benefit of the scheme was to be given to those employees who opted for the scheme and retired between 1.4.1999 till the date of withdrawal of the scheme, i.e. 2.12.2004.

¶348

Respondent-State vide notification dated 2.12.2004 repealed the earlier notification dated 29.10.1999. However, notwithstanding such repeal, the employees of Himachal Pradesh Corporate Sector, who retired from services with effect from 1.4.1999 upto the date of publication of this notification, i.e. 2.12.2004 were to continue to be governed under the provisions of the scheme so repealed provided such retired employees have opted for such scheme and have otherwise become

¶349

¶350

eligible for pension under the scheme. According to the text of notification, after the repeal of the scheme, other employees were to continue to be governed under provisions which were applicable to them as on 31.3.1999. It is in these circumstances, present petitions have been filed assailing notification dated 2.12.2004 seeking further direction to the respondents to pay the petitioners pension in accordance with the Himachal Pradesh Corporate Sector Employees (Pension, Family Pension Commutation of Pension and Gratuity) Scheme 1999, notified on 29.10.1999.

¶351

Respondent-State after amendment in the Central Civil Services (Pension) Rules, 1972 on 15.5.2003 has notified rules called the “Himachal Civil Services Contributory Pension Rules, 2006” on 17.8.2006 vide Annexure R-IV. Notification dated 17.8.2006 is at page 163 of the paper book of CWP No. 1577/2009.

¶352

According to the supplementary affidavit filed by the Special Secretary (Finance) to the Government of Himachal Pradesh in CWP No. 1577/2009, the scheme could not be implemented for various reasons beyond the control of the Government. According to the supplementary affidavit, the Government constituted a committee constituting of four members to work out modalities for operating a

¶353

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Pension Scheme for Corporate Sector Employees on a self sustaining basis. The committee in its report concluded that the pension scheme for Corporate Sector employees based on contribution by the State Government was not viable on a self sustaining basis due to three reasons assigned. These reasons have already been quoted by us in the opening portion of the judgment. Thereafter, the State Government considered the report of the Committee and decided to repeal the scheme.

¶355

The Court passed the following order on

¶356

5.3.2012 in CWP No. 1577/2009:

¶357

“The crucial issue in all these cases pertains to the claim made by the petitioners for pension in accordance with the provisions laid down in Central Civil Services (Pension) Rules, 1972 and the rule regarding commutation in that regard, as amended and adopted by the H.P. Government. Prior to 1.4.1999, all the petitioners were governed by the Employees Provident Fund Pension Scheme, which provided for a contribution from the employer and employees. However, the Government in its wisdom issued a notification dated 29.10.1999 to the effect that all the employees in service as on 1.4.1999 and joining thereafter will be governed by the CCS (Pension) Rules, 1972, as amended and adopted by the H.P. Government. All the Corporate Sectors were directed to amend their service Rules. Accordingly, all the Corporate Sectors where the petitioners have been working amended their service Rules making the CCS (Pension Rules) applicable to them. While so after more than five years, on 2.12.2004, the decision to apply the above referred decision to CCS (Pension) Rules was cancelled. In the said order, two things were made clear; (i) all those who retired from service w.e.f. 1.4.1999 to 2.12.2004 would be governed by the CCS (Pension Rules) as amended and adopted by the State of Himachal Pradesh; (ii) all other employees “shall continue to

¶358

¶359

be governed under the provisions which were applicable to them as on 31.3.1999.

¶360

2. We fail to understand as to how a scheme which ceased to operate w.e.f. 1.4.1999 which required a contribution from the employer and employees would be continued after 5 years and 8 months. It is also to be seen as to how the right conferred on them to be governed by CCS (Pension Rules) can be taken away without any substitute arrangement, which is equally beneficial, after five years.

¶361

3. In this context, it will be significantly relevant to refer to the decision of the State Government to discontinue CCS (Pension Rules) in the case of Government employees. The Government issued a notification dated 15.5.2003 to the effect that all employees joining service after 15.5.2003 will not be entitled to the CCS (Pension Rules). For such employees, the Government had introduced another scheme dated 17.8.2006.

¶362

4. Having regard to the position that the employees prior to 2.12.2004 had been given a right to be covered by the CCS (Pension Rules) and the employees having been thus brought under the CCS (Pension Rules) and the employees having discontinued to contribute to the pension scheme and in the case of the Government employees, the discontinuance of the CCS (Pension Rules) was only prospective to the issuance of the notification dated 15.5.2003, we are of the considered view that the Government should seriously address as to whether the operation of notification dated 2.12.2004 also should be only prospectively. In other words, as in the case of the Government employees, should re-introduction of the EPF Pension Scheme for the employees of Corporate Sectors be made applicable only to those joining in the Corporate Sectors after 2.12.2004 or not?

¶363

5. There will be a direction to the respondents to file response in that regard positively within three weeks.”

¶364

The response was filed by the State

¶365

Government at page 105 of CWP No. 1577/2009. According to the response filed by respondents No.1 and 3, the scheme could not be implemented for even a single day and the pension scheme being run by

¶366

¶367

Regional Provident Fund Commissioner, Shimla under Employees Provident Fund and Miscellaneous Provisions Act, 1952, which was available to the present petitioner with effect from 1.4.1999, in fact, never ceased to operate and the contribution from employer and employee are continuously being deposited by the employer of the petitioner till the date of filing of the affidavit for employees in service. In other words, stand of the respondent-State was that while repealing the pension scheme dated 29.10.1999 vide notification dated 2.12.2004, the existing system of pension under Employees Provident Fund and Miscellaneous Provisions Act, 1952 in fact continued to be in operation even during the period from 1.4.1999 to 2.12.2004. Thus, according to the State Government, there was no question of the petitioner to be governed under Central Civil Services (Pension) Rules without any substitute arrangement. According to the affidavit, the State Government had issued notification on 15.5.2003 to the effect that all the employees who joined Government service after 15.5.2003 shall not be entitled to the Central Civil Services (Pension) Rules. The Government has framed Himachal Pradesh Civil Services Contributory Pension Rules, 2006 for such employees notified on 17.8.2006. It is further stated that the decision of the Government to discontinue the Central

¶368

¶369

Civil Services (Pension) Rules dated 15.5.2003 related to the employees of the State Government and the petitioner, who was an employee of the State Government Public Sector Undertaking, did not fall under the category of Government employee since employees of Government and Public Sector Undertaking are two distinctly separate categories, which could not be equated on any ground. It was further averred that rights of the petitioners and similarly situate persons were not taken away since at the time of joining service, no right of pension under Central Civil Services (Pension) Rules was available to the petitioners and after cancellation/withdrawal of decision with effect from 2.12.2004, the petitioners have the same right as was available at the time of joining service. It was also averred that the petitioners never remained without a proper pension scheme. It was also averred in para 5 of the affidavit that the employer of the petitioner had deducted employee’s share of provident fund from the salary of petitioner as per provisions of EPF and Misc. Provisions Act, 1952 and after making matching contribution both the shares of provident fund deposited with Regional Provident Fund Commissioner, Shimla regularly. Lastly it was averred that the respondent-State had been constrained to take decision of withdrawal/cancellation of notification dated

¶370

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29.10.1999 on account of financial health of the State as well as Boards/Corporations/Undertakings of State of Himachal Pradesh and the revival/continuation of the notification dated 29.10.1999 was to be unbearable burden on the system.

¶372

The Court passed the following order on 31.7.2012 in CWP No. 1882/2010:

¶373

“All the establishments referred to in these writ petitions are covered under the employees’ Provident Fund and Miscellaneous Provisions Act, 1952 and the EPF Scheme, 1995. Under Sections 17 (1) read with section 17 (1C) of the Act, the appropriate Government is free to exempt prospectively or retrospectively any establishment from the operation of all or any of the provisions of the Pension Scheme by an appropriate notification. The only condition is that the pensionary benefits offered by the appropriate Government should be at par or more favourable than the Pension Scheme under the Act.

¶374

2. Para 39 of the Scheme deals with the procedure on exemption from the operation of the Pension Scheme. As per this provision under the Scheme, application for exemption should be presented to the Regional Provident Fund Commissioner of competent jurisdiction. That application for exemption should be disposed of within six months from the date of receipt of the same or such further time as extended for reasons to be recorded in writing and if not the exemption applied for shall be deemed to have been granted.

¶375

3. Two questions require the response from the Regional Provident Fund Commissioner/Provident Fund Establishment:

¶376

i) Even if the Scheme offered by the appropriate Government is more beneficial to the employees than the Scheme under the Employees Pension Scheme, 1995, can the permission for exemption be denied? ii) What is the consequence if the appropriate Government offers a more beneficial Scheme and operating the same without the permission from the EPF Organization? In other words whether the

¶377

¶378

permission from the EPF for issuance of a notification for exemption under section 17 (1) and 17 (1C) read with para 39 of the Scheme is mandatory.

¶379

4. There will be a direction to the Regional Provident Fund Commissioner to file an affidavit within a week from the date of production of a copy of this order by the petitioners before the Regional Provident Fund Commissioner.”

¶380

The response was filed by the Regional Provident Fund Commissioner wrongly in CWP No. 4425/2009. However, the same is at page 48 of CWP No. 1882/2010, i.e. Rajiv Malhotra and others vs. State of Himachal Pradesh . While issuing order dated 31.7.2012, the Court has taken into consideration two letters dated 11.9.2001 and 17.9.2001. The sum and substance of the affidavit filed by the Regional Provident Fund Commissioner was that any exemption granted under section 17 of the Act or under paragraph 27-A of the scheme would be subject to the terms and conditions as given in appendix ‘A’., meaning thereby that prior recommendation from the Employee’s Provident Fund Organization for issuance of notification for exemption under section 17 (1) and 17(1C) was necessary. Respondent-State has also filed response to the affidavit filed by the Regional Provident Fund Commissioner pursuant to order dated 13.7.2012 and 31.7.2012. This is at page 264 of CWP No. 4425 of 2009. It has been specifically averred that section 16 (1) (b) was substituted in the EPF & MP Act, 1952 by

¶381

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the Act 33 of 1988 with effect from 1.8.1988 and the PSUs of the Himachal Pradesh were established during the late 1960’s and early 1970’s. Thus, section 16 (1) (b) was not attracted. According to the affidavit, PSUs of Himachal Pradesh were not excluded under section 16 (1) (b) of the EPF & MP Act, 1952 and they came to be governed under the EPF & MP Act, 1952. It is also stated that since the EPF & MP Act was in operation for all the Boards/Corporations, hence, the provisions of section 17 were applicable for considering and exempting such establishments from the operation of provisions of this Act.

¶383

The Additional Central Provident Fund Commissioner (Pension) has sent a communication to the Secretary, Government of India, Ministry of Labour, New Delhi on 11.9.2001. The text of letter reads as under:

¶384

“Kindly refer to letter no.II-11020/99/2000 SS II dated 22.8.2001 regarding introduction of Pension Scheme for the employees of State Govt. Public Sector Undertaking by Govt. of Himachal Pradesh and requests for exemption from the EPF and MP Act.

¶385

On scrutiny of the reference dated 8.03.2001 of Govt. of Himachal Pradesh, particulars of ownership of the said 14 Undertakings were called for Govt. of Himachal Pradesh vide their letter No. Fin-IF(C)1-9/97-II dated 20.08.2001 has submitted the percentage of State/Central Govt. Share holding in these Undertakings (Copy of the same enclosed herewith).

¶386

On verification if the above and the Notification dated 29.10.1999, it is noticed that all regular employees of these Corporate-Sector are entitled for payment of pension,

¶387

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commutation of pension, gratuity as applicable to the Government servants of the Himachal Pradesh. Out of 14 establishments, 13 are fully owned by State/Central Govt. and only one establishment i.e., Himachal Pradesh Industries Corporation is having 97% share by General Public.

¶389

As per section 16(1)(b), the EPF and MP Act, shall not apply to any other establishments belonging to or under the control of Central Govt. or State govt. and whose employees are entitled to the benefit of contributing PF or old age pension in accordance with any scheme or rule framed by the Central govt. or the State Govt. governing such benefits.

¶390

It is also seen that in the above case, the pension would be discharged by the Finance Department of Himachal Pradesh government, fund would be managed and administered by the Government and the establishments are either fully owned or fully controlled by the Government of Himachal Pradesh. This in terms of Section 16(1) (b) of the Act, establishments are out of the purview of the Act from the date the Notification comes in to force.

¶391

In view of the above, it appears that the above 14 establishments fall within the ambit of Section 16(1)(b) and the EPF and MP Act, 1952 would not apply on them w.e.f. 1.4.99 as the Himachal Pradesh Govt. has notified a pension scheme to the employees of those 14 Undertaking. Government may like to inform the position to Govt. of Himachal Pradesh accordingly.”

¶392

It is evident from the text of this letter that

¶393

as per section 16 (1) (b), the EPF and MP Act shall not apply to any other establishment belonging to or under the control of Central Government or State Government and whose employees are entitled to the benefit of contributing PF or old age pension in accordance with any scheme or rule framed by the Central Government or the State Government governing such benefits. It is stipulated therein that the pension would be disbursed by the Finance Department of Himachal Pradesh

¶394

¶395

Government, fund would be managed and administered by the Government and the establishments are either fully owned or fully controlled by the Government of Himachal Pradesh. Thus, in terms of section 16 (1) (b) of the Act, establishments are out of the purview of the Act from the date the notification came in to force.

¶396

Similarly, Mr. Shard Yadav, Hon’ble Minister has also informed the Hon’ble Chief Minister, Government of Himachal Pradesh that he has got the matter examined and it was noted from the notification of the State Government dated 29.10.1999 that all the regular employees of the undertakings are entitled to pension, commutations of pension, gratuity as applicable to the State Government Employees of Himachal Pradesh. Thus, EPF and MP Act, 1952 shall not apply. The pension would be disbursed by the Himachal Pradesh Government in terms of Section 16 (1) (b). These establishments would be out of the purview of the Act from the date the notification has come into force. It is on the basis of two letters dated 11.9.2001 and 17.9.2001, the Court passed orders on 13.7.2012 and 31.7.2012 in CWP No.4425/2009.

¶397

It is evident from the bare reading of section 16 (1) (b) of the EPF and MP Act, 1952 that the moment notification dated 29.10.1999 was issued, all the

¶398

¶399

Government undertakings mentioned in the scheme were exempted from the EPF and MP Act, 1952.

¶400

This Court on 19.10.2013 has passed the following order in CWP No. 1882/2010:

¶401

“Learned Advocate General prays for time on the ground that the Secretary (Finance) to the Government of H.P. is presently unavailable. Since we are adjourning the matter on this ground at the request of the State, we expect the State to file response by way of affidavit of the Secretary (Finance) to the Government of H.P. dealing with the issues delineated in order dated 5^th March, 2012. We hope and trust that the Government should take some decision in the matter with regard to the observations noted in order dated 5^th March, 2012, if already not taken and place that before the Court alongwith affidavit of the Secretary (Finance) to the Government of H.P. to be filed on or before 22^nd November, 2013. Post these matters on 27^th November, 2013. Copy Dasti.”

¶402

Respondent-State has filed response to the same at page 133 of CWP No.1577/2009. According to this affidavit, the Government has notified the scheme on 29.10.1999 by an executive order. The scheme was repealed on 2.12.2004. It is further averred that a Pension Corpus Fund was required to be created for this purpose as per para 5 of the Pension Scheme wherein entire amount of the PSUs contribution including interest thereon in the CPF account upto 31.3.1999 was to be transferred. The PSUs contribution/employer share at the rate of 12% of the basic pay plus DA or at the rate as the State Government may prescribe from time to time, but not

¶403

¶404

less than the rate as provided was continuously to be transferred in the Pension Fund Corpus with effect from 1.4.1999 onwards to make H.P. Corporate Sector Employees Pension Scheme 1999 operational and sustainable. According to the affidavit, the Pension Fund Corpus was never created and no pension contribution/employer share was ever transferred to the corpus fund to make the Pension Scheme, 1999 operational and sustainable. According to the affidavit, the Pension Scheme, 1999 remained inoperative. It is also stated that the Employees Provident Fund and Misc. Provisions Act, 1952 applicable to the H.P. Corporate Sector Employees prior to the introduction of Pension Scheme, 1999 had been in force to these employees during the period from 1.4.1999 to 2.12.2004 and the petitioners were still members of that scheme. It is also stated that the appropriate Government has not issued any notification for exemption of the scheme. It is also reiterated that the scheme has been withdrawn on the basis of the recommendations made by the four members’ committee. According to the decision of the Government to discontinue the CCS Pension Rules dated 15.5.2003 related to the employees of the State Government, a distinct and separate category of employees and the petitioners who were employees of the State Government Public Sector Undertaking did not

¶405

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fall under the category of Government employee since

¶407

employees of Government and Public Sector Undertaking are two distinctly separate categories and could not be equated on any ground. It is also reiterated that the State Government employees appointed prior to 15.5.2003 were covered under the Central Civil Services (Pension) Rules and had no other pension scheme applicable for them, whereas the employees of the Public Sector Undertakings/Corporations were covered under EPF Pension from the date of joining service and continued to be covered under the pension scheme of EPF authority, i.e. Employee’s Pension Scheme, 1995. It is also stated that as far as reintroduction of EPF Pension Scheme for employees who joined the service of Corporate Sector after 2.12.2004 is concerned, it was submitted that the provisions of Employees Provident Fund and Misc. Provisions Act, 1952 had never been withdrawn from any Board/Corporation by the Government for even a single day. Hence, employees joining the services of Corporate Sector after 2.12.2004 were automatically covered under the EPF Pension Scheme. It is also stated that the employer of the petitioner had deducted employee’s share of provident fund from the salary of petitioner as per provisions of EPF & Misc. provisions Act, 1952 and after making

¶408

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matching contribution both shares of provident Fund deposited with Regional Provident Fund Commissioner regularly. It is also stated that in all those cases of the retirees, who retired between 1.4.1999 to 2.12.2004 when the scheme was in operation, were given relief as per para 2 of the notification dated 2.12.2004.

¶410

Mr. Dilip Sharma, learned Senior Advocate alongwith Mr. Ajay Mohan Goel, Mr. P.D. Nanda, Mr. J.R. Gazta and Mr. T.S. Chauhan, appearing on behalf of the petitioners, has vehemently argued that the notification dated 29.10.1999 could not be repealled retrospectively with effect from 1.4.1999. He then contended that all the employees, who have become members of the Pension Scheme, 1999 constitute homogenous class and the payment of pension could not be restricted only to the employees who have retired between 1.4.1999 to 2.12.2004. He also contended that on the basis of the promise held out on the basis of Pension Scheme, 1999, petitioners have altered their position by opting to the scheme. They were legitimately expecting on the basis of the scheme notified on 29.10.1999 that they would get pension after their retirement. He also contended that the petitioners were not issued any notice before the issuance of notification dated 2.12.2004. In other words, according to him, there is violation of principles of natural justice.

¶411

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He also contended that once the 1999 scheme framed by the State has come into force, all the PSUs would be deemed to have been exempted under section 16 of the Employees Provident Fund and Miscellaneous Provisions Act, 1952. He further contended that as per sub-para (2) of para 1 of the scheme, notified on 29.10.1999, pension benefits were to be determined in accordance with the provisions laid down in Central Civil Services (Pension) Rules, 1972 and the Central Civil Services (Commutation of Pension) Rules, 1981 as amended and adopted by the Himachal Pradesh Government for the State Government employees save as otherwise provided in the scheme. In other words, his submission is that the State Government has amended Central Civil Services (Pension) Rules, 1972 only with effect from 15.5.2013 whereby clause (i) has been inserted in section 2 and for those employees who have been appointed on or after 15.5.2003, the rules had been notified on 17.8.2006. According to him, petitioners ought to have been granted the same treatment already granted to the existing employees of the State Government once a conscious decision has been taken to frame the scheme on 29.10.1999, more particularly, in view of sub-para 2 of para 1. He further contended that the scheme has come into force with effect from 1.4.1999 and the corpus stood created under

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para 5 of the scheme and the transfer of the funds from the EPF was only ministerial act. He lastly contended that once the petitioners have been covered under the scheme notified on 29.10.1999, they would remain the members of the same and cannot become the members of the 1995 scheme again. He has further elaborated his submission that once the petitioners have become the members of the scheme notified on 29.10.1999, they cease to be the members of Pension Scheme, 1995.

¶415

Mr. Shrawan Dogra, learned Advocate General has vehemently argued that the scheme, which was notified on 29.10.1999 has been repealed on 2.12.2004 with effect from 1.4.1999. He further contended that the corpus fund was never created under para 5 of the scheme and all the employees of the PSUs remained the members of the Pension Scheme, 1995. He then contended that the scheme was created by an executive power and the same has been withdrawn by exercising this power on 2.12.2004. According to him, there is valid classification of the employees, who retired between 1.4.1999 to 2.12.2004. He also argued that principles of natural justice are not applicable in the present case since according to him, no vested/acquired rights of the petitioners have been destroyed. He also contended that the employees, who were recruited by the State Government after

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15.5.2003, would be entitled to retiral benefits in view of rules notified on 17.8.2006. According to him, this notification could not be applied to the existing employees since they had no alternative pension scheme. He further contended that the PSUs have not been exempted under section 16 (1) (b) of the Employees Provident Fund and Miscellaneous Provisions Act, 1952. He also contended that it is always open to the State Government to change the policy.

¶418

Mr. K.D. Sood, learned Senior Advocate has supported the submissions made by Mr. Shrawan Dogra, learned Advocate General.

¶419

Mr. Sandeep Sharma, learned Assistant Solicitor General of India has made submissions on the basis of the affidavit filed by the Regional Provident Fund Commissioner in response to order dated 13.7.2012 and 31.7.2012 of CWP No. 1882 of 2010.

¶420

We have heard the learned counsel for the parties and have perused the pleadings carefully.

¶421

Mr. Dilip Sharma, learned Senior Advocate has vehemently argued that petitioners have acquired vested/acquired rights to get the pension on the basis of notification dated 29.10.1999. He also submitted that the rights of the petitioners and similarly situate persons have crystallized on the date when they opted for the scheme and have become members of the

¶422

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scheme. We have gone through the scheme

¶424

meticulously.

¶425

Respondent-State has issued notification on 29.10.1999 in order to frame a scheme to provide for the constitution, custody control and operation of Pension Fund for the payment of Pension/Commutation of Pension and Gratuity to the employees of the Public Sector Undertakings. Sub-para (2) of para 1 of the scheme notified on 29.10.1999 clearly stipulates that all pensionery benefits of the employees of the participating H.P. Corporate Sector would be determined in accordance with the provisions laid down in the Central Civil Services (Pension) Rules, 1972 and the Central Civil Services (Commutation of Pension) Rules, 1981 as amended and adopted by the Himachal Pradesh Government for the State Government employees save as otherwise provided in the same. It is not in dispute that all the PSUs covered have modified their service bye laws strictly in accordance with notification dated 29.10.1999. Petitioners and similarly situate persons were required to give option as per para 2 of the scheme. Petitioner in CWP No. 4425/2010 has given his option on 12.11.1999. According to sub para (b) of para 4 of the scheme notified on 29.10.1999, the existing employees who opted for pension scheme were to automatically forfeit their claim to employer’s share of

¶426

¶427

CPF including interest thereon to the State Government

¶428

as well as other claims under CPF Schemes by whatsoever name called in respect of all past accumulations upto 31.3.1999. The amount of their subscriptions to the fund alongwith interest excluding employer’s share and interest thereon was to be transferred to CPF account to be allotted and maintained by the concerned Corporate Sector organization as per rules adopted by them. Thereafter, as per para 5, pension fund was to be created. It was the responsibility of the PSUs to transfer the CPF account upto 31.3.1999 to corpus fund to be allotted and maintained by the Government of Himachal Pradesh in the Finance Department. The PSUs share in respect of all the eligible employees w.e.f. 1.4.1999 at the rate of 12% of the basic pay plus D.A. or at the rate as the State Government may prescribe from time to time but not less than the rate provided as above was to be continued to be transferred to corpus called the pension. The PSUs were required to transfer the pension contribution as per sub-para (2) to the State Government latest by 10^th of the succeeding month and in the eventuality of non-transfer of the contribution upto 10^th of succeeding month interest at the rate of 12% per annum was to be payable by the PSU for any delayed period. It is, thus, evident that it was the duty

¶429

¶430

of the PSUs to do the needful once the petitioners and similarly situate persons exercised their option to transfer the contribution upto 31.3.1999 in corpus. It was only ministerial act.

¶431

It has come in the noting portion, as noticed hereinabove, that Regional Provident Fund Commissioner had agreed to transfer the amount also. The Hon’ble Chief Minister has announced that the pensionery benefits would be extended to the employees of Corporate Sector with effect from 1.4.1999 as per note No.229. Thereafter, the salient features of the scheme approved by the Government have been reproduced hereinabove. The opinion of the Accountant General and Law Department have been obtained repeatedly before the issuance of notification 29.10.1999. The pros and cons of the issuance of scheme for paying pensionery benefits to the employees of PSUs was duly considered by the Cabinet, which led to issuance of notification dated 29.10.1999.

¶432

Petitioners and similarly situate persons became the members of the scheme. The scheme has remained enforced with effect from 1.4.1999 till 2.12.2004. The State Government constituted a committee of four officers to look into the viability of the scheme. The members of the committee have made the recommendations, which are available at page 100 of

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the paper book of CWP No.1577/2009. The reasons assigned by the Committee for discontinuation of the scheme were that there was uncertainty in the rate of interest regime, declining recruitment in the Corporate Sector would deplete the size of the corpus to be created and it would be difficult to honour liabilities accruing after 10-12 years and the pension plan envisages payment of pension to Corporate Sector employees as was being paid to the Government employees. Government employees were entitled to pension @ 50% of the basic pay last drawn with linkage to ADA. This return did not appear to be possible from the pension fund proposed to be created for Corporate Sector employees. The opinion of the Law Department was also sought. The Law Department has expressed its reservation whether the scheme could be withdrawn in its entirety or not. The Law Department has also given opinion the manner in which the notification dated 15.5.2003 has been issued. The Law Department has highlighted that the employees who have retired between 1.4.1999 to 2.12.2004 qua them scheme was to be continued. However, fact of the matter is that the scheme notified on 29.10.1999 was repealed on 2.12.2004.

¶435

Now, the Court will advert to whether the petitioners have acquired vested rights on the basis of

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scheme notified on 29.10.1999. Petitioners have become the members of the scheme by exercising their option. Option has been exercised by them strictly as per the scheme. According to para 4 of the scheme, the employees, who opted for the pension scheme have automatically forfeited their claim to employer’s share of CPF including interest thereon to the State Government. The amount of their share to the fund alongwith interest was to be transferred to the CPF account to be allotted and maintained by the concerned corporate sector organization as per rules adopted by them. Thereafter, corpus fund was to be created as per para 5 of the scheme. It is duly established that the petitioners have acquired vested right to be governed under the scheme notified on 29.10.1999 once they automatically forfeited their claim to employer’s share as per sub-para (b) of para 4 of the scheme. They have acquired vested rights as per scheme notified on 29.10.1999. A conscious decision had been taken to extend pensionery benefits upon the employees of the Corporate Sector. The decision was duly approved by the Cabinet as noted hereinabove.

¶438

We have also gone through the notification dated 2.12.2004 whereby the scheme notified on 29.10.1999 has been repealed with immediate effect. We are of the considered view that the notification dated

¶439

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2.12.2004 is prospective in nature and the vested right of the petitioners and similarly situate persons, who have become the members of the scheme cannot be taken away. It is settled law that the law looks forward and not backward.

¶441

Their Lordships of the Hon’ble Supreme Court in Chairman, Railway Board and others versus C.R. Rangadhamaiah and others , (1997) 6 SCC 623 have held that the 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 Articles 14 and 16 of the Constitution of India, but a rule which seeks to reverse from an anterior date a benefit which has been granted or availed of, e.g., promotion or pay scale, can be assailed as being violative of Articles 14 and 16 of the Constitution to the extent it operates retrospectively. Their Lordships have held as under:

¶442

“17. In B.S. Vadera (supra) it has been held that the rules under the proviso to Article 309 have effect subject to the provisions of the Act made by the appropriate Legislature under the main part of Article 309, if the appropriate Legislature has passed an Act under Article 309 and in the absence of any Act of the appropriate Legislature on the matter the rules made under the proviso to Article 309 are to have full effect both prospectively and retrospectively. Since the power of the appropriate legislature to enact a law under Article 309 has to be exercised subject to the provisions of the Constitution, the power to make rules under the Proviso to Article 309 has to be exercised subject to the provisions of the Constitution. The Court has, therefore, said :

¶443

¶444

"Apart from the limitations, pointed out above, there is none other, imposed by the proviso to Article 309, regarding the ambit of the operation of such rules. In other words, the rules, unless they can be impeached on grounds such as breach of Part III, or any other constitutional provision, must be enforced, if made by the appropriate authority." (p. 585]

¶445

18. This means that even though the President in exercise of his power under the Proviso to Article 309, can make rules which may have prospective or retrospective operation, the said rules may be open to challenge on the ground of violation of the provisions of the Constitution, including the Fundamental Rights contained in Part III of the Constitution.

¶446

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 Articles 14 and 16 of the Constitution, but a rule which seeks to reverse from an anterior date a benefit which has been granted or availed, e.g., promotion or pay scale, can be assailed as being violative of Articles 14 and 16 of the Constitution to the extent it operates retrospectively.

¶447

21. In B.S. Yadav & Ors. Etc. v. State of Haryana & Ors. Etc., [1981] 1 SCR 1024, a Constitution Bench of this Court, while holding that the power exercised by the Governor under the Proviso to Article 309 partakes the characteristics of the legislative, not executive, power and it is open to him to give retrospective operation to the rules made under that provision, has said that when the retrospective effect extends over a long period, the date from which the rules are made to operate must be shown to bear, either from the face of the rules or by extrinsic evidence, reasonable nexus with the provisions contained in the rules. (SCR p. 1068 : SCC p/557, para 76)

¶448

22. In State of Gujarat & Anr. v. Raman Lal Keshav Lal Soni & Ors., [1983] 2 SCR 287, decided by a Constitution Bench of the Court, the question was whether the status of ex- ministerial employees who had been allocated to the Panchayat service as Secretaries, Officers and Servants of Gram and Nagar Panchayats under the Gujarat Panchayat Act, 1961 as government servants could be extinguished by making retrospective amendment of the said Act in 1978. Striking down the said amendment on the ground that it

¶449

¶450

offended Articles 311 and 14 of the Constitution, this Court said :

¶451

"The legislature is undoubtedly competent to legislate with retrospective effect to take away or impair any vested right acquired under existing laws but since the laws are made under a written Constitution, and have to conform to the do's and don'ts of the Constitution neither prospective nor retrospective laws can be made so as to contravene Fundamental Rights. The law must satisfy the requirements of the Constitution today taking into account the accrued or acquired rights of the parties today. The law cannot say, twenty years ago the parties had no rights, there-fore, the requirements of the Constitution will be satisfied if the law is dated back by twenty years. We are concerned with today's rights and not yesterday's. The legislature cannot legislate today with reference to a situation that obtained twenty years ago and ignore the march of events and the constitutional rights accrued in the course of the twenty years. That would be most arbitrary, unreasonable and a negation of history." (pp. 319-320)

¶452

23. The said decision in Raman Lal Keshav Lal Soni & Ors. (supra) of the Constitution Bench of this Court has been followed by various Division Benches of this Court. (See : Ex. Capt. K.C. Arora & Anr. v. State of Haryana & Ors., [1984] 3 SCR 623; T.R. Kapur & Ors. v. State of Haryana & Ors., [1987] 1 SCR 584; P.D. Aggarwal & Ors. v. State of U.P. & Ors., [1978] 3 SCR 427; K.R. Narayanan & Ors. v. State of Kamataka & Ors., [1994] Supp. 1 SCC 44; Union of India & Ors. v. Tushar Ranjan Mohanty & Ors., [1994] 5 SCC 450 and K. Ravindranath Pai & Anr. v. State of Kamataka & Anr., [1995] Supp. 2 SCC 246.

¶453

24. In many of these decisions the expressions "vested rights" or "accrued rights" have been used while striking down the impugned provisions which had been given retrospective operation so as to have an adverse effect in the matter of promotion, seniority, substantive appointment, etc. of the employees. The said expressions have been used in the context of a right flowing under the relevant rule which was sought to be altered with effect from an anterior date and thereby taking away the benefits available under the rule in force at that time. It has been held that such an amendment having retrospective operation which has the effect of taking away a benefit already available to the employee under the existing rule is arbitrary, discriminatory and violative of the

¶454

¶455

rights guaranteed under Articles 14 and 16 of the Constitution. We are unable to hold that these decisions are not in consonance with the decisions in Roshan Lal Tandon (supra), B.S. Yadav (supra) and Raman Lal Keshav Lal Soni & Ors., (supra).

¶456

33. Apart from being violative of the rights then available under Articles 31(1) and 19(l)(f), the impugned amendments, in so far as they have been given retrospective operation, are also violative of the rights guaranteed under Articles 14 and 16 of the Constitution on the ground that they are unreasonable and arbitrary since the said amendments in Rule 2544 have the effect of reducing the amount of pension that had become payable to employees who had already retired from service on the date of issuance of the impugned notifications, as per the provisions contained in Rule 2544 that were in force at the time of their retirement.”

¶457

The Apex Court in State of Madhya

¶458

Pradesh and others versus Gogendra Shrivastava , 2010 (2) S.L.J. 169 has held that the rights and benefits which have already been earned and acquired under the existing rules cannot be taken away by amending the rules with retrospective effect. Their Lordships have held as under:

¶459

“12. It is no doubt true that Rules under Article 309 can be made so as to operate with retrospective effect. But it is well settled that rights and benefits which have already been earned or acquired under the existing rules cannot be taken away by amending the rules with retrospective effect. [See : N.C. Singhal vs. Director General, Armed Forces Medical Services - 1972 (4) SCC 765; K. C. Arora vs. State of Haryana - 1984 (3) SCC 281; and T.R. Kapoor vs. State of Haryana - 1986 Supp. SCC 584]. Therefore, it has to be held that while the amendment, even if it is to be considered as otherwise valid, cannot affect the rights and benefits which had accrued to the employees under the unamended rules. The right to NPA @ 25% of the pay, having accrued to the respondents under the unamended Rules, it follows that

¶460

¶461

respondents-employees will be entitled to Non-Practising Allowance @ 25% of their pay upto 20.5.2003.”

¶462

According to the text of notification dated 2.12.2004, the employees of Himachal Pradesh Corporate Sector, who retired from services with effect from 1.4.1999 to the date of publication of notification, i.e. 2.12.2004 are ordered to be continued to be governed under the provisions of the scheme. In other words, rights of the employees, who have retired between 1.4.1999 to 2.12.2004 are saved and also to be governed under pension scheme notified in the year 1999. All the employees of the Himachal Pradesh Corporate Sector constitute homogenous class. Petitioners and similarly situate persons could not be discriminated against only on the ground that they happened to retire after 2.12.2004. The aim and object of the scheme is to give pensionery benefits to all the employees of Himachal Pradesh Corporate Sector irrespective of their date of retirement as per scheme dated 29.10.1999. The cut-off date must have rationale and it cannot be bereft of the object of a particular enactment or scheme. If the submission of Mr. Shrawan Dogra, learned Advocate General is accepted then the employees who had retired even on 3.12.2004 will not be entitled to pension. The classification made on the basis of notification dated 2.12.2004 is arbitrary,

¶463

¶464

irrational and unreasonable. Thus, violative of Articles 14 and 16 of the Constitution of India. It is declared that all the employees, who have become members of the scheme after exercising their option would be entitled to pensionery benefits on the basis of scheme notified on 29.10.1999 even though they have retired after 2.12.2004.

¶465

Their Lordships of the Hon’ble Supreme Court in D.S. Nakara and others versus Union of India AIR 1983 SC 130 have held that classification in revised pension formula between pensioners on the basis of the date of retirement specified in memoranda was arbitrary and violative of Article 14 of the Constitution of India. The classification made by the executive was held to be wholly arbitrary since the Court did not find a single acceptable or persuasive reason for this division. Their Lordships reiterated the established principle that classification has to be based on some rational principle and that must have nexus to the objects sought to be achieved. Their Lordships have also repelled the contention raised by the Union of India that the scheme was being made retroactive. The Court held:

¶466

".......Petitioners accordingly contend that this Court may consider the raison d'etre for payment of pension. If the pension is paid for past satisfactory service rendered, and to avoid destitution in old age as well as a social welfare or socio-economic justice measure, the differential treatment

¶467

¶468

for those retiring prior to a certain date and those retiring subsequently, the choice of the date being wholly arbitrary, would be according differential treatment to pensioners who form a class irrespective of the date of retirement and, therefore, would be violative of Article 14. It was also contended that classification based on fortuitous circumstance of retirement before or subsequent to a date, fixing of which is not shown to be related to any rational principle, would be equally violative of Article 14......

¶469

.........The Court realistically appraising the social stratification and economic inequality and keeping in view the guidelines on which the State action must move as constitutionally laid down in Part IV of the Constitution, evolved the doctrine of classification. The doctrine was evolved to sustain a legislation or State action designed to help weaker Sections of the society or some such segments of the society in need of succour. Legislative and executive action may accordingly be sustained if it satisfies the twin tests of reasonable classification and the rational principle correlated to the object sought to be achieved. The State, therefore, would have to affirmatively satisfy the Court that the twin tests have been satisfied. It can only be satisfied if the State establishes not only the rational principle on which classification is founded but correlates it to the objects sought to be achieved. This approach is noticed in Ramana Dayaram Shetty v. International Airport Authority of India, (1979) 3 SCR 1014 at p. 1034 : (AIR 1979 SC 1628 at pp. 1637-38) when at page 1034, the Court observed that a discriminatory action of the Government is liable to be struck down, unless it can be shown by the Government that the departure was not arbitrary, but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory.

¶470

…..What is a pension? What are the goals of pension? What public interest or purpose, if any, it seeks to serve? If it does seek to serve some public purpose, is it thwarted by such artificial division of retirement pre and post a certain date? We need seek answers to these and incidental questions so as to render just justice between parties to this petition.

¶471

....The challenge is not to the validity of the pension liberalisation scheme. The scheme is wholly acceptable to the petitioners, nay they are ardent supporters of it, nay further they seek the benefit of it. The petitioners challenge only

¶472

¶473

that part of the scheme by which its benefits are admissible to those who retired from service after a certain date. In other words, they challenge that the scheme must be uniformly enforced with regard to all pensioners for the purpose of computation of pension irrespective of the date when the Government servant retired subject to the only condition that he was governed by the 1972 Rules. No doubt, the benefit of the scheme will be available from the specified date, irrespective of the fact when the concerned Government servant actually retired from service........

¶474

..If it appears to be undisputable, as it does to us that the pensioners for the purpose of pension benefits form a class, would its upward revision permit a homogeneous class to be divided by arbitrarily fixing an eligibility criteria unrelated to purpose of revision, and would such classification be founded on some rational principle? The classification has to be based, as is well settled, on some rational principle and the rational principle must have nexus to the objects sought to be achieved. We have set out the objects underlying the payment of pension. If the State considered it necessary to liberalise the pension scheme, we find no rational principle behind it for granting these benefits only to those who retired subsequent to that date simultaneously denying the same to those who retired prior to that date. If the liberalisation was considered necessary for augmenting social security in old age to Government servants then those who retired earlier cannot be worse off then 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......

¶475

Further the classification is wholly arbitrary because we do not find a single acceptable or persuasive reason for this division. This arbitrary action violated the guarantee of Article 14.......

¶476

..........By pur approach, are we making the Scheme retroactive? The answer is emphatically in the negative. Take a Government servant who retired on April 1, 1979. He would be governed by the liberalised pension scheme. By that time he had put in qualifying service of 35 years. His length of service is a relevant factor for computation of pension. Has the Government made it retroactive, 35 years backward

¶477

¶478

compared to the case of a Government servant who retired on 30th March, 1979? Concept of qualifying service takes note of length of service, and pension quantum is correlated of qualifying service. Is it retroactive for 35 years for one and not retroactive for a person who retired two days earlier. It must be remembered that pension is relatable to qualifying service. It has correlation to the average emoluments and the length of service. Any liberalisation would pro tanto be retroactive in the narrow sense of the term. Otherwise it is always prospective. A statute is not properly called a retroactive statute because a part of the requisites for its action is drawn from a time antecedent to its passing. (See Craies on Statute Law, 6th Edn., p. 387). Assuming the Government had not prescribed the specified date and thereby provided that those retiring pre and post the specified date would all be governed by the liberalised pension scheme. Undoubtedly, it would be both prospective and retroactive. Only the pension will have to be recomputed in the light of the formula enacted in the liberalized pension scheme and effective from the date the revised scheme comes into force. And beware that it is not a new scheme, it is only a revision of existing scheme. It is not a new retiral benefit. It is an upward revision of an existing benefit. If it was a wholly new concept, a new retiral benefit, one could have appreciated an argument that those who had already retired could not expect it. It could have been urged that it is an incentive to attract the fresh recruits. Pension is a reward for past service. It is undoubtedly a condition of service but not an incentive to attract new entrants because if it was to be available to new entrants only, it would be prospective at such distance of thirty-five years since its introduction. But it covers all those in service who entered thirty-five years back. Pension is thus not an incentive but a reward for past service. And a revision of an existing benefit stands on a different footing than a new retiral benefit. And even in case of new retiral benefit of gratuity under the Payment of Gratuity Act, 1972 past service was taken into consideration. Recall at this stage the method adopted when pay-scales are revised. Revised pay-scales are introduced from, a certain date. All existing employees are brought on to the revised scales by adopting a theory of fitments and increments for past service. In other words, benefit of revised scale is not limited to those who enter service subsequent to the date fixed for introducing revised scales but the benefit is

¶479

¶480

extended to all those in service prior to that date. This is just and fair. Now if pension as we view it, is some kind of retirement wages for past service, can it be denied to those who retired earlier, revised retirement benefits being available to future retirees only. Therefore, there is no substance in the contention that the Court by its approach would be making the scheme retroactive, became it is implicit in theory of wages."

¶481

In Union of India and another v. SPS

¶482

Vains (Retd.) and others , 2008 (12) Scale 360, the Court considered the position in D.S. Nakara's (supra) and held that pensioners cannot be divided on the basis of date of retirement. The Court ruled:

¶483

"..........The question regarding creation of different classes within the same cadre on the basis of the doctrine of intelligible differentia having nexus with the object to be achieved, has fallen for consideration at various intervals for the High Courts as well as this Court, over the years. The said question was taken up by a Constitution Bench in the case of D.S. Nakara (supra) where in no uncertain terms throughout the judgment it has been repeatedly observed that the date of retirement of an employee cannot form a valid criterion for classification, for if that is the criterion those who retired by the end of the month will form a class by themselves. In the context of that case, which is similar to that of the instant case, it was held that Article 14 of the Constitution had been wholly violated, inasmuch as, the Pension Rules being statutory in character, the amended Rules, specifying a cutoff date resulted in differential and discriminatory treatment of equals in the matter of commutation of pension. It was further observed that it would have a traumatic effect on those who retired just before that date. The division which classified pensioners into two classes was held to be artificial and arbitrary and not based on any rational principle and whatever principle, if there was any, had not only no nexus to the objects sought to be achieved by amending the Pension Rules, but was counter productive and ran counter to the very object of the pension scheme. It was ultimately held that the classification did not satisfy the test of Article 14 of the Constitution.

¶484

¶485

However, before we give such directions we must also observe that the submissions advanced on behalf of the Union of India cannot be accepted in view of the decision in D.S. Nakara's case (supra). The object sought to be achieved was not to create a class within a class, but to ensure that the benefits of pension were made available to all persons of the same class equally. To hold otherwise would cause violence to the provisions of Article 14 of the Constitution. It could not also have been the intention of the authorities to equate the pension payable to officers of two different ranks by resorting to the step up principle envisaged in the Fundamental Rules in a manner where the other officers belonging to the same cadre would be receiving a higher pension."

¶486

In State Bank of India v. L. Kannaiah and others , (2003) 10 SCC 499, while interpreting Rules 7 and 8 -of the State Bank of India Employees' Pension Fund Rules the Court ruled:

¶487

"......The reason for prescribing the maximum age limit of 35 or 38, as the case may be, for the purpose of induction into pension fund appears to be that the employee would be able to render minimum service of 20 years as contemplated by Rule 22 of the Pension Fund Rules. However, there does not appear to be any rationale or discernible basis for fixing the cut-off date as 1.1.1965, notwithstanding their earlier confirmation in Bank service. True, a new benefit has been conferred on the ex-servicemen and therefore a cut-off date could be fixed for extending this new benefit, without offending the ratio of the decision in D.S. Nakara and others v. Union of India [AIR 1983 SC 130]; but, there could be no arbitrariness or irrationality in fixing such date. Minimum qualifying service being the essential consideration, even according to the Bank, there is no reason why the exservicemen like the respondents, who from the date of their confirmation had put in more than twenty years of service, even taking the retirement age as 58, should be excluded. No reason is forthcoming in the counter-affidavit filed by the Bank for choosing the said date. When it is decided to extend the pensionary benefits to ex-servicemen drawing pension, the denial of the benefit to some of the serving employees

¶488

¶489

should be based on rational and intelligible criterion. In substance, that is the view taken by the High Court and we see no reason to differ with that view."

¶490

Their Lordships have not sustained the observations of the High Court "that the petitioners were not entitled to pension as they were not employees of the State Bank of India originally as they have joined the service prior to 1.7.1955.

¶491

In R.L. Marwaha v. Union of India and others , (1987) 4 SCC 31, the Apex Court has held that fixing of a date for the grant of benefit must have nexus with object sought to be achieved. Their Lordships have held as under:

¶492

"There is no dispute that the ICAR though it is a body registered under the Societies Registration Act, 1960, is a body which is sponsored, financed and controlled by the Central Government. There has been a continuous mobility of personnel between Central Government departments and autonomous bodies, like the ICAR both ways and the Government thought, and rightly so, that it would not be just to deprive an employee who is later on absorbed in the service of the autonomous body, like the ICAR the benefit of the service rendered by him earlier in the Central Government for purposes of computation of pension and similarly the benefit of service rendered by an employee who is later on absorbed in the Central Government service the benefit of the service rendered by him earlier in the autonomous body for purposes of computation of pension. If that was the object of issuing the notification then the benefit of such notification should be extended to all pensioners who had rendered service earlier in the Central Government or in the autonomous body as the case may be with effect from the date of the said Government order. Now let us take the case of a person who had rendered service under the Central Government between January 1, 1953 and July 1, 1955 but who has retired from service of the ICAR in

¶493

¶494

1985. There is no dispute that such a person gets the benefit of the service put in by him under the Central Government for purposes of his pension. But another pensioner who has put in service under the Central Government during the same period will not get similar concession if he has retired prior to the date of the Government order if paragraph 7 of that order is applied to him. The result will be that whereas in the first case there is pensionary liability of the Central Government in the second case it does not exist although the period of service under the Central Government is the same. This discrimination arises on account of the Government order. There is no justification for denying the benefit of the Government order to those who had retired prior to the date on which the Government order was issued. The respondents have not furnished any acceptable reason in support of their case, except saying that the petitioner was not entitled to the benefit of the Government order because the order says that it would not be applicable to those who had retired prior to the date on which it was issued. In the absence of any explanation which is worthy of consideration it has to be held that the classification of the pensioners who were working in the Government/autonomous bodies into two classes merely on the basis of the date of retirement as unconstitutional as it bears no nexus to the object to be achieved by the order.

¶495

We do not also find much substance in the plea that this concession being a new one it can only be prospective in operation and cannot be extended to employees who have already retired. It is true that it is prospective in operation in the sense that the extra benefit can be claimed only after August 29, 1984 that is the date of issue of the Government order. But it certainly looks backward and takes into consideration the past event that is the period of service under the Central Government for purposes of computing qualifying service because such additional service can only be the service rendered prior to the date of issue of the Government order. By doing so the Government order will not become an order having retrospective effect. It still continues to be prospective in operation. Whoever has rendered service during any past period would be entitled to claim the additional financial benefit of that service if he is alive on August 29, 1984 under the Government order but with effect from August 29, 1984."

¶496

¶497

Similarly in Union of India and another v. Deoki Nandan Aggarwal , 1992 Supp. (1) SCC 323, the Court ruled that a person retiring prior to the cut-off date could not be denied the benefit of liberalized pension scheme. Their Lordships have held as under:

¶498

"At this stage itself, we may note that this Amending Act 38 of 1986 provided that the amended liberalised pension scheme would apply only to a Judge "who has retired on or after the commencement of the High Court and Supreme Court Judges (Conditions of Service) Amendment Act, 1986." A similar provision which made the amendment by Act 35 of 1976 applicable only to those judges who have retired on or after October 1, 1974 was held ultra vires and struck down in the two decisions of this Court above referred to and it was held that the benefit of the amendment was available to all the retired judges irrespective of the date of retirement but subject to the condition that the enhanced pension was payable only with effect from October 1, 1974. That was also the ratio of the decision of the Constitution Bench of this Court in D.S. Nakara v. Union of India, (1983) 2 SCR 165 : (AIR 1983 SC 130). On the same reasonings and logic we have to hold that Amending Act 38 of 1986 could not restrict the applicability of the amended provision to only those who have retired on or after the commencement of the Amending Act. The resultant position would be that the provisions of pension in Part I of First Schedule as amended by Act 38 of 1986 would be applicable to all the Judges irrespective of the dates of retirement and they would be entitled to be paid pension at the rates provided therein with effect from November 1, 1986."

¶499

In State of West Bengal and others v.

¶500

Ratan Behari Dey and others , (1993) 4 SCC 62, the Court ruled that the State can specify a date with effect from which the Regulations framed, or amended, as the case may be, shall come into force and only condition is

¶501

¶502

that in such cases the State cannot pick a date out of its hat. It has to prescribe the date in a reasonable manner, having regard to all the relevant facts and circumstances. Their Lordships have held as under:

¶503

"........A date can be specified both prospectively as well as retrospectively. The only question is whether the prescription of the date is unreasonable or discriminatory........."

¶504

In Subrata Sen and others v. Union of India and others , (2001) 8 SCC 71, the Court held that no discrimination can be created between the employees who retired prior to and after a particular date for being entitled to the benefits of the revised pension scheme. Their Lordships have held as under:

¶505

"In our view the aforesaid para does not in any way support the contention of the respondents. On the contrary, on parity of reasoning, we would also reiterate that let us be clear about this misconception. Firstly, the Pension Scheme including the liberalized scheme available to the employees is non-contributory in character. Payment of pension does not depend upon Pension Fund. It is the liability undertaken by the Company under the Rules and whenever becomes due and payable is to be paid. As observed in Nakara's case (supra), pension is neither a bounty, nor a matter of grace depending upon the sweet will of the employer, nor an ex gratia payment. It is a payment for the past services rendered. It is a social welfare measure rendering socioeconomic justice to those who in the hey-day of their life ceaselessly toiled for the employer on an assurance that in their old age they would not be left in lurch. May be that in the present case, the Trust for pension fund is created for Income tax purposes or for smooth payment of pension, but that would not affect the liability of employer to pay monthly pension calculated as per the Rules on retirement from service and this retirement benefit is not based on availability of pension fund. There is no question of

¶506

¶507

pensioners dividing the Pension Fund or affecting the pro rata share on addition of new members to the Scheme. As per Rule (1) quoted above, an employee would become member of the Fund as soon as he enters into a specified category of service of the Company. Under Rule (8) Trustees may withhold or discontinue a pension or annuity or any part thereof payable to a member or his dependants, and that pension amount is non-assignable. Further, the payment of pension was the liability of the employer as per the rules and that liability is required to be discharged by the UOI in lieu of its taking over of the Company. The rights of the employees (including retired) are protected under Section 11 of the Burmah Oil Company Acquisition of Shares of Oil India (Act 41) Limited and of the undertakings in India of Assam Oil Company Limited and the Burmah Oil Company (India Trading) Limited Act, 1981.

¶508

In our view, the ratio of the aforesaid judgment is not applicable in the present case. In the said case, Indian Oxygen Ltd. had set up a 'non-contributory superannuation fund' known as the Indian Oxygen Ltd. Executive Staff Pension Fund. As per the Rules, an employee was entitled to receive an annuity under a policy purchased by the trustee of the fund from the Life Insurance Corporation of India. Petitioners in that case contended that the scheme of such non-contributory approved superannuation fund should be modified so as to provide for disbursement of pension by the fund themselves or in the alternative by a statutory body to be newly constituted under a new scheme. Further, the fund was constituted for the purpose of providing an annuity to the beneficiaries and the trustees were required to accumulate the contribution in respect of each beneficiary and purchase and annuity from the Life Insurance Corporation of India at the time of retirement or death of each employee or on his becoming incapacitated prior to retirement as per Rule 89(2) of the Income-tax Rules, 1962. Therefore, when an employee retired, all accumulated contribution in respect of employee concerned made by the employer to the pension fund of the trust was crystallised for the benefit of employee. In that set of circumstances, the Court observed that the right of the employee to receive the annuity and quantum of his annuity gets crystallised at the time of purchase of annuity under the then existing scheme of Life Insurance Corporation of India. The Court also observed that the contention was based on misunderstanding

¶509

¶510

of the nature of the annuity which is purchased in the interest of each employee as and when he retires. The position in the present case is altogether different. Right to get pension is obviously different from getting annuity on the basis of accumulated contribution. The rules for grant of pension provide that an employee mentioned in specified category shall automatically be member of pension fund and is entitled to get pension on the date of his retirement. Amount of pension is to be determined as per the Rules. That Rule is modified and the petitioners seek relief on the basis of the amended rule on the ground that there cannot be any discrimination between the employees who retired prior to or after a particular date, as held in Nakara's case which is followed by this Court in various decisions including V. Kasturi (supra). Further, there is no question bf pensioners (retired employees) dividing the pension fund and/or payment of pension to be made only from the pension fund. The liability to pay pension arises because of provision made in the rules. In this view of the matter, the decision in Sasadhar Chakravarty (supra) would have no bearing."

¶511

The Constitution Bench of the Hon’ble

¶512

Supreme Court in the State of Mysore and another versus P. Narasinga Rao , AIR 1968 SC 349 have held that classification of two grades of tracers, one for matriculate tracers with a higher pay scale and the other for non-matriculate tracers with a lower pay scale is not violative of Article 14 or 16 of the Constitution of India. Their Lordships have held as under:

¶513

“3. The first question to be considered in this appeal is whether the creation of two pay scales of tracers in the new Mysore State who were doing the same kind of work amounted to a discrimination which violated the provisions of Articles 14 and 16 of the Constitution.

¶514

4. The relevant law on the subject is well settled. Under Article 16 of the Constitution, there shall be equality of opportunity for all citizens in matters relating to employment or appointment to any office under the State or to promotion from one office to a higher office thereunder.

¶515

¶516

Article 16 of the Constitution is only an incident of the application of the concept of equality enshrined in Article 14 thereof. It gives effect to the doctrine of equality in the matter of appointment and promotion. It follows that there can be a reasonable classification of the employees for the purpose of appointment or promotion. The concept of equality in. the matter of promotion can be predicated only when the promotees are drawn from the same source. This Court in dealing with the extent of protection of Art. 16 (l) observed in General Manager, Southern Rly. v. Rangachari, 1962 (2) SCR 586 at p. 596 = (AIR 1962 SC 36 at pp. 40-41).

¶517

"Thus construed it would be clear that matters relating to employment cannot be confined only to the initial matters prior to the act of employment. The narrow construction would confine the application of Article 16 (l) to the initial employment and nothing else; but that clearly is only one of the matters relating to employment. The other matters relating to employment would inevitably be the provision as to the salary and periodical increments therein, terms as to leave, as to gratuity, as to pension and as to the age of superannuation. These are all matters relating to employment and they are, and must be, deemed to be included in the expression 'matters relating to employment' in Article l6 (l)............This equality of opportunity need not be confused with absolute equality as such. What is guaranteed is the equality of opportunity and nothing more. Article l6 (l) or (2) does not prohibit the prescription of reasonable rules for selection to any employment or appointment to any office. Any provision as to the qualifications for the employment or the appointment to office reasonably fixed and applicable to all citizens would certainly be consistent with the doctrine of the equality of opportunity; but in regard to employment like other terms and conditions associated with and incidental to it, the promotion to a selection post is also included in the matters relating to employment, and even in regard to such a promotion to a selection post all that Article l6 (1) guarantees is equality of opportunity to all citizens who enter service...........................In this connection it may be relevant to remember that Article l6 (l) and (2) really give effect to the equality before law guaranteed by

¶518

¶519

Article 14 and to the prohibition of discrimination guaranteed by Article l5 (l). The three provisions form part of the same constitutional code of guarantees and supplement each other. If that be so, there would be no difficulty in holding that the matters relating to employment must include all matters in relation to employment both prior and subsequent, to the employment which are incidental to the employment and form part of the term and conditions of such employment."

¶520

The argument was stressed on behalf of the respondent that success in the S. S. L. C. examination had no relevance to the post of tracer and the tracers of the erstwhile State of Hyderabad who were allotted to the new State of Mysore were persons similarly situated and there was no justification for making a discrimination against only some of them by creating a higher pay scale for tracers who had passed the S. S. L. C. examination. It was contended for the respondent that all the tracers who were allotted to the new State of Mysore were persons who were turning out the same kind of work and discharging the same kind of duty and there was no rational basis for making two classes of tracers, one consisting of those who had passed the S. S. L. C. examination and the other consisting of those who had not. In our opinion there is no justification for the argument put forward in favour of the respondent. It is well settled that though Article 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation. When any impugned rule or statutory provision is assailed on the ground that it contravenes Article 14, its validity can be sustained if two tests are satisfied. The first test is that the classification on which it is founded must be based on an intelligible differentia which distinguishes persons or things grouped together from others left out of the group, and the second test is that the differentia in question must have a reasonable relation to the object sought to be achieved by the rule or statutory provision in question. In other words, there must be some rational nexus between the basis of classification and the object intended to be achieved by the statute or the rule. As we have already stated, Articles 14 and 16 form part of the same constitutional code of guarantees and supplement each other. In other words, Art. 16 is only an instance of the application of the general rule of equality laid down in Art. 14 and it should be construed as such. Hence,

¶521

¶522

there is no denial of equality of opportunity unless the person who complains of discrimination is equally situated with the person or persons who are alleged to have been favoured; Article l6 (l) does not bar a reasonable classification of employees or reasonable tests for their selection. It is true that the selective test adopted by the Government for making two different classes will be violative of Articles 14 and l6 if there is no relevant connection between the test prescribed and the interest of public service. In other words, there must be a reasonable relation of the prescribed test to the suitability of the candidate for the post or for employment to public service as such. The provisions of Article 14 or Article 16 do not exclude the laying down of selective tests, nor do they preclude the Government from laying down qualifications for the post in question. Such qualifications need not be only technical but they can also be general qualifications relating to the suitability of the candidate for public service as such. It is therefore not right to say that in the appointment to the post of tracers the Government ought to have taken into account only the technical proficiency of the candidates in the particular craft. It is open to the Government to consider also the general educational attainments of the candidates and to give preference to candidates who have better educational qualifications besides technical proficiency of a tracer. The relevance of general education even to technical branches of public service was emphasised long ago by Macaulay as follows :

¶523

"Men who have been engaged, up to one and two and twenty, in studies which have no immediate connection with the business of any profession, and the effect of which is merely to open, to invigorate, and to enrich the mind, will generally be found, in the business of every profession, superior to men who have at eighteen or nineteen devoted themselves to the special studies of their calling. Indeed, early superiority in literature and science generally indicates the existence of some qualities which are securities against vice-industry, self-denial, a taste for pleasures not sensual, a laudable desire of honourable distinction, a still more laudable desire to obtain the approbation of friends and relations. We, therefore, think that the intellectual test about to be established

¶524

¶525

will be found in practice to be also the best moral test that can be devised."

¶526

(Hansard, Series 3, CXXVIII, 754, 755). In our opinion, therefore, higher educational qualifications such as success in the S.S.L.C. examination are relevant considerations for fixing a higher pay scale for tracers who have passed the S. S. L. C. examination and the classification of two grades of tracers in the new Mysore State, one for matriculate tracers with a higher pay scale and the other for non-matriculate tracers with a lower pay scale is not violative of Arts. 14 or 16 of the Constitution.

¶527

5. We proceed to consider the next question raised on behalf of the respondent viz., that the condition of service of the respondent has been adversely affected by the creation of two new pay scales and that there was a violation of the provisions of Section 115 of the States Reorganisation Act, 1956 (Act No. 37 of 1956) which states :

¶528

"115. Provisions relating to other services -(l) Every person who immediately before the appointed day is serving in connection with the affairs of the Union under the administrative control of the Lieutenant-Governor or Chief Commissioner in any of the existing State of Ajmer, Bhopal, Coorg, Kutch and Vindhya Pradesh, or is serving in connection with the affairs of any of the existing States of Mysore, Punjab, Patiala and East Punjab States Union and Saurashtra shall, as from that day, be deemed to have been allotted to serve in connection with the affairs of the successor State to that existing State.

¶529

(2) Every person who immediately before the appointed day is serving in connection with the affairs of an existing State part of whose territories is transferred to another State by the provisions of Part II shall, as from that day, provisionally continue to serve in connection with the affairs of the principal successor State to that existing State unless he is required by general or special order of the Central Government to serve provisionally in connection with the affairs of any other successor State.

¶530

(3) As soon as may be, after the appointed day, the Central Government shall, by general or special order, determine the successor State to which every person referred to in sub-section (2) shall be finally allotted for service and the date with effect from

¶531

¶532

which such allotment shall take effect or be deemed to have taken effect.

¶533

(4) Every person who is finally allotted under the provisions of sub-section (3) to a successor State shall, if he is not already serving therein be made available for serving in that successor State from such date as may be agreed upon between the Governments concerned, and in default of such agreement, as may be determined by the Central Government.

¶534

(7) Nothing in this Section shall be deemed to

¶535

affect after the appointed day the operation of the provisions of Chapter I of Part XIV of the Constitution in relation to the determination of the conditions of service of persons serving in connection with the affairs of the Union or any State:

¶536

Provided that the conditions of service applicable immediately before the appointed day to the case of any person referred to in sub-section (1) or sub-section (2) shall not be varied to his disadvantage except with the previous approval of the Central Government."

¶537

It was stated that in the erstwhile Hyderabad State the respondent was kept in one grade along with matriculate tracers and there has been a violation of the proviso to Sec. 115(7) of the States Reorganisation Act, 1956, because in the new Mysore State the respondent has been made to work in a separate grade of non-matriculate tracers. We do not think there is any substance in this contention. We do not propose, in this case, to consider what is the full scope and meaning of the phrase "Conditions of service" occurring in the proviso to Section 115 of the States Reorganisation Act. It is sufficient for us to say that, in the present case, there is no violation of the proviso and the respondent is not right in contending that his condition of service is adversely affected because he is made to work in the grade of non-matriculate tracers in the new Mysore State. It was alleged by the respondent that according to Hyderabad rules 20 per cent of the vacancies of Sub-Overseers were to be from the grade of tracers and for those who were not promoted there was another grade of Rs. 90 -120 and if the order of the Superintending Engineer dated March 19, 1958 was to stand, the respondent's chance of promotion would be affected. In their counter-affidavit the

¶538

¶539

appellants have said that 10 per cent of the tracers in the new State of Mysore are entitled to be promoted to the grade of Assistant Draftsmen in the scale of Rs. 110-220. The basis of promotion to the higher grade was the inter-State seniority list prepared under the provisions of the States Reorganisation Act . It was stated that the seniority of the respondent was not affected and he had not been deprived of any accrued benefits. The basis of promotion to the higher grades was selection based on meri-cum-seniority. In other words, both matriculates and non-matriculate tracers were eligible for promotion on the basis of the inter-State seniority list prepared for this Department. In our opinion, Counsel on behalf of the respondent is unable to make good his submission on this aspect of the case.”

¶540

A conscious decision has led to issuance of notification dated 29.10.1999. Petitioners and similarly situate persons were asked to give their option and after submitting their option they have changed their position

¶541

to their detriment by forfeiting their rights under the scheme notified on 29.10.1999. They have forfeited their claim to employer’s share of CPF including interest thereon to the State Government as per sub-para (b) of para 4 of the scheme. Respondent-State has repealed the notification dated 29.10.1999 on the basis of notification dated 2.12.2004. Petitioners and similarly situate persons were legitimately expecting that once they became members of the scheme, they would be entitled to pensionery benefits. However, the same has been set to naught by the respondent-State by issuing notification dated 2.12.2004. The principle of legitimate expectation is based on fair play. It is not the case of

¶542

¶543

the respondent-State that the petitioners and similarly situate persons have ever misled the authorities at the time of issuance of notification dated 29.10.1999. The matter was deliberated at the highest level. The opinion of the Accountant General and Law Department was sought before promulgation of the scheme notified on 29.10.1999. Petitioners and similarly situate persons on the basis of notification dated 29.10.1999 have been given assurance that they would get the pensionery benefits after their retirement.

¶544

Their Lordships of the Hon’ble Supreme Court in Navjyoti Coop. Group Housing Society and others versus Union of India and others , (1992) 4 SCC 477 have held that the doctrine of ‘legitimate expectation’ imposes in essence a duty on public authority to act fairly by taking into consideration all relevant factors relating to such ‘legitimate expectation’. Within the conspectus of fair dealing in case of ‘legitimate expectation’, the reasonable opportunities to make representation by the parties likely to be affected by any change of consistent past policy come in. In a case of ‘legitimate expectation’ if the authority proposes to defeat a person’s ‘legitimate expectation’ it should afford him an opportunity to make representation in the matter. In this case, before the issuance of new guidelines as contained in the memorandum of January

¶545

¶546

20, 1990 the principle for allotment had always been on the basis of date of registration and not the date of approval of the list of members. Their Lordships have held as under:

¶547

“15. It also appears to us that in any event the new policy decision as contained in the impugned memorandum of January 20, 1990 should not have been implemented without making such change in the existing crietrion for allotment known to the Group Housing Societies if necessary by way of a public notice so that they might make proper representation to the concerned authorities for consideration of their view points. Even assuming that in the absence of any explanation of the expression "first come first served" in Rule 6(vi) of Nazul Rules there was no statutory requirement to make allotment with reference to date of Registration, it has been rightly held, as a matter of fact, by the High Court that prior to the new guideline contained in the memo of January 20, 1990 the principle for allotment had always been on the basis of date of Registration and not the date of approval of the list of members. In the brochure issued in 1982 by the DDA even after Gazette Notification of Nazul Rules on September 26, 1981 the policy of allotment on the basis of seniority in registration was clearly indicated. In the aforesaid facts, the Group Housing Societies were entitled to 'legitimate expectation' of following consistent past practice in the matter of allotment, even though they may not have any legal right in private law to receive such treatment. The existence of 'legitimate expectation' may have a number of different consequences and one of such consequences is that the authority sought not to act to defeat the 'legitimate expectation' without some overriding reason of public policy to justify its doing so. In a case of 'legitimate expectation' if the authority proposes to defeat a person's 'legitimate expectation' it should afford him an opportunity to make representations in the matter. In this connection reference may be made to the discussions on 'legitimate expectation' at page 151 of Volume 1 (I) of Halsbury's Laws of England Fourth Edition (Re -issue). We may also refer to a decision of the House of Lords in Council of Civil Service Unions v. Minister for Civil Service reported in (1984) 3 All ER 935. It has been held in the said decision that an aggrieved person

¶548

¶549

was entitled to judicial review if he could show that a decision of the public authority affected him of some benefit or advantage which in the past he had been permitted to enjoy and which he legitimately expected to be permitted to continue to enjoy either until he was given reasons for withdrawal and the opportunity to comment on such reasons.

¶550

16. It may be indicated here that the doctrine of 'legitimate expectation' imposes in essence a duty on public authority to act fairly by taking into consideration all relevant factors relating to such 'legitimate expectation'. Within the conspectus of fair dealing in case of 'legitimate expectation', the reasonable opportunities to make representation by the parties likely to be affected by any change of consistent past policy, come in. We, have not been shown any compelling reasons taken into consideration by the Central Government to make a departure from the existing policy of allotment with reference to seniority in Registration by introducing a new guideline. On the contrary, Mr. Jaitley the learned counsel has submitted that the DDA and/or Central Government do not intend to challenge the decision of the High Court and the impugned memorandum of January 20, 1990 has since been withdrawn. We therefore feel that in the facts of the case it was only desirable that before introducing or implementing any change in the guideline for allotment, an opportunity to make representations against the proposed change in the guideline should have been given to the registered Group Housing Societies, if necessary, by way of a public notice.”

¶551

Mr. Shrawan Dogra, learned Advocate

¶552

General has also argued that the State can always change the policy. We are of the considered view that the policy cannot be changed unilaterally and it is imperative in terms of Article 14 that a change in policy must be made fairly and should not give the impression that it was so done arbitrarily or by any ulterior criteria.

¶553

¶554

Their Lordships of the Hon’ble Supreme Court in Bannari Amman Sugars Limited versus Commercial Tax Officer and others , (2005) 1 SCC 625 have held that while the discretion to change the policy in exercise of the executive power, when not trammeled by any statute or rule is wide enough, what is imperative and implicit in terms of Article 14 is that a change in policy must be made fairly and should not give the impression that it was so done arbitrarily or by any ulterior motive. Their Lordships have further held that the wide scope of Article 14 and the requirement of every State action qualifying for its validity on this touchstone irrespective of the field of activity of the State is an accepted tenet. Their Lordships have held as under:

¶555

“9. While the discretion to change the policy in exercise of the executive power, when not trammelled by any statute or rule is wide enough, what is imperative and implicit in terms of Article 14 is that a change in policy must be made fairly and should not give the impression that it was so done arbitrarily or by any ulterior criteria. The wide sweep of Article 14 and the requirement of every State action qualifying for its validity on this touchstone irrespective of the field of activity of the State is an accepted tenet. The basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. Actions are amenable, in the panorama of judicial review only to the extent that the State must act validly for discernible reasons, not whimsically for any ulterior purpose. The meaning" and true import and concept of arbitrariness is more easily visualised than precisely defined. A question whether the impugned action is arbitrary or not is to be ultimately answered on the facts and

¶556

¶557

circumstances of a given case. A basic and obvious test to apply in such cases is to see whether there is any discernible principle emerging from the impugned action and if so, does it really satisfy the test of reasonableness.

¶558

Their Lordships of the Hon’ble Supreme

¶559

Court in Union of India and others versus Asian Food Industries , (2006) 13 SCC 542 have held that by reason of a policy, vested or accrued right cannot be taken away. Their Lordships have held as under:

¶560

“48. The Delhi High Court, however, in our view correctly opined that the notification dated 4.07.2006 could not have been taken into consideration on the basis of the purported publicity made in the proposed change in the export policy in electronic or print media. Prohibition promulgated by a statutory order in terms of Section 5 read with the relevant provisions of the policy decision in the light of Sub-section (2) of Section 3 of the 1992 Act can only have a prospective effect. By reason of a policy, a vested or accrued right cannot be taken away. Such a right, therefore, cannot a fortiori be taken away by an amendment thereof.”

¶561

Their Lordships of the Hon’ble Supreme Court in Tamil Nadu Electricity Board and another versus Status Spinning Mills Limited and another , (2008) 7 SCC 353, have held that a distinction must be made between a policy decision and a statute. Whereas prima facie a policy decision may not have any retroactive operation, a statute may have. Their Lordships have held as under:

¶562

“51. A distinction must be made between a policy decision and a statute. Whereas prima facie a policy decision may not have any retroactive operation, a statute may have. Only because it affects a past transaction the same, by itself, would not come in the way of the legislature in enacting an

¶563

¶564

enactment or the executive government to exercise its power of subordinate legislation.”

¶565

Petitioners and similarly situate persons have become members of the scheme notified on 29.10.1999. Their rights were crystallized with effect from 1.4.1999. They have forfeited their claim to employer’s share of CPF including interest thereon to the State Government. They ceased to be the members of pension scheme 1995 after the issuance of notification dated 29.10.1999. The only ministerial act was required to be carried by the PSUs and Employees’ Provident Fund Commissioner by transferring the money to the fund created under para 5 of the scheme. Petitioners were not even put to notice before issuance of notification dated 2.12.2004. Petitioners have suffered civil and evil consequences and it was expected from the respondent-State to hear the petitioners before the scheme was repealed on 2.12.2004. Since the respondent-State has failed to comply with the principles of natural justice, decision to withdraw the scheme on 2.12.2004 is void ab initio .

¶566

Their Lordships of the Hon’ble Supreme Court in Delhi Transport Corporation vs. D.T.C. Mazdoor Congress and others , 1991 Supp (1) SCC 600 have held that the employees of public/semi-govt. undertakings, statutory, statutory corporations or

¶567

¶568

instrumentalities of State covered by Article have status. Employment in such undertakings being public employment, society has a stake and interest in it. Efficiency of employees is prime consideration and employees must have service security. Their Lordships have further held that audi alteram partem rule which in essence, enforces the quality clause in Article 14 of the Constitution is applicable not only to quasi judicial orders but to administrative orders affecting prejudicially the party in question unless the application of the rule has been expressly excluded by the Act or Regulation or Rule which is not the case here, Rules of natural justice do not supplant but supplement the Rules and Regulations. Their Lordships have held as under:

¶569

“202. Thus on a conspectus of the catena of cases decided by this Court the only conclusion follows is that Regulation 9(b) which confers powers on the authority to terminate the services of a permanent and confirmed employee by issuing a notice terminating the services or by making payment in lieu of notice without assigning any reasons in the order and without giving any opportunity of hearing to the employee before passing the impugned order is wholly arbitrary, uncanalised and unrestricted violating principles of natural justice as well as Art. 14 of the Constitution. It has also been held consistently by this Court that the Government carries on various trades and business activity through the instrumentality of the State such as Government Company or Public Corporations. Such Government Company or Public Corporation being State instrumentalities are State within the meaning of Art. 12 of the Constitution and as such they are subject to the observance of fundamental rights embodied in Part III as well as to conform to the directive principles in

¶570

¶571

Part IV of the Constitution. In other words the Service Regulations or Rules framed by them are to be tested by the touchstone of Art. 14 of Constitution. Furthermore, the procedure prescribed by their Rules or Regulations must be reasonable, fair and just and not arbitrary, fanciful and unjust. Regulation 9(b),. therefore, confers unbridled, uncanalised and arbitrary power on the authority to terminate the services of a permanent employee without recording any reasons and without conforming to the principles of natural justice. There is no guideline in the Regulations or in the Act, as to when or in which cases and circumstances this power of termination by giving notice or pay in lieu of notice can be exercised. It is now well settled that the 'audi alteram partem' rule which in essence, enforces the equality clause in Article 14 of the Constitution is applicable not only to quasi judicial orders but to administrative orders affecting prejudicially the party in question unless the application of the rule has been expressly excluded by the Act or Regulation or Rule, which is not the case here. Rules of natural justice do not supplant but supplement the Rules and Regulations. Moreover, the Rule of Law which permeates our Constitution demands that it has to be observed both substantially and procedurely. Considering from all aspects Regulation 9(b) is illegal and void as it is arbitrary, discriminatory and without any guidelines for exercise of the power. Rule of law posits that the power to be exercised in a manner which is just, fair and reasonable and not in an unreasonable, capricious or arbitrary manner leaving room for discrimination. Regulation 9(b) does not expressly exclude the application of the 'audi alteram partem' rule and as such the order of termination of service of a permanent employee cannot be passed by simply issuing a month's notice under Regulation 9(b) or pay in lieu thereof without recording any reason in the order and without giving any hearing to the employee to controvert the allegation on the basis of which the purported order is made.”

¶572

It is no more res integra that principles of natural justice form integral part of Article 14 of the Constitution of India and it also amounts to right to fair treatment. In the case in hand, the petitioners had

¶573

¶574

been deprived of their retiral/pensionery benefits in violation of principles of natural justice. The expressions ‘civil and evil consequences’ and ‘rules of natural justice’ have succinctly been explained by their Lordships of the Hon’ble Supreme Court in Sahara Indian (Firm), Lucknow versus Commissioner of Income Tax, Central-I and another , (2008) 14 SCC 151. Their Lordships have held as under:

¶575

“15. Rules of "natural justice" are not embodied rules. The phrase "natural justice" is also not capable of a precise definition. The underlying principle of natural justice, evolved under the common law, is to check arbitrary exercise of power by the State or its functionaries. Therefore, the principle implies a duty to act fairly, i.e. fair play in action. As observed by this Court in A.K. Kraipak & Ors. Vs. Union of India & Ors. , the aim of rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. They do not supplant the law but supplement it. (Also see: Income Tax Officer & Ors. Vs. M/s Madnani Engineering Works Ltd., Calcutta ).

¶576

17. Initially, it was the general view that the rules of natural justice would apply only to judicial or quasi-judicial proceedings and not to an administrative action. However, in State of Orissa Vs. Binapani Dei & Ors. , the distinction between quasi-judicial and administrative decisions was perceptively mitigated and it was held that even an administrative order or decision in matters involving civil consequences, has to be made consistently with the rules of natural justice. Since then the concept of natural justice has made great strides and is invariably read into administrative actions involving civil consequences, unless the statute, conferring power, excludes its application by express language.

¶577

19. Thus, it is trite that unless a statutory provision either specifically or by necessary implication excludes the application of principles of natural justice, because in that event the Court would not ignore the legislative mandate, the requirement of giving reasonable opportunity of being

¶578

¶579

heard before an order is made, is generally read into the provisions of a statute, particularly when the order has adverse civil consequences for the party affected. The principle will hold good irrespective of whether the power conferred on a statutory body or tribunal is administrative or quasi-judicial.

¶580

29. In Rajesh Kumar (supra) it has been held that in view of Section 136 of the Act, proceedings before an Assessing Officer are deemed to be judicial proceedings. Section 136 of the Act, stipulates that any proceeding before an Income Tax Authority shall be deemed to be judicial proceedings within the meaning of Sections 193 and 228 of Indian Penal Code, 1860 and also for the purpose of Section 196 of I.P.C. and every Income Tax Authority is a court for the purpose of Section 195 of Code of Criminal Procedure, 1973. Though having regard to the language of the provision, we have some reservations on the said view expressed in Rajesh Kumar's case (supra), but having held that when civil consequences ensue, no distinction between quasi judicial and administrative order survives, we deem it unnecessary to dilate on the scope of Section 136 of the Act. It is the civil consequence which obliterates the distinction between quasi judicial and administrative function. Moreover, with the growth of the administrative law, the old distinction between a judicial act and an administrative act has withered away. Therefore, it hardly needs reiteration that even a purely administrative order which entails civil consequences, must be consistent with the rules of natural justice. (Also see: Mrs. Maneka Gandhi Vs. Union of India & Anr. and S.L. Kapoor Vs. Jagmohan & Ors. .”

¶581

Their Lordships of the Supreme Court in Rajasthan State Road Transport Corporation and another versus Bal Mukund Bairwa (2), (2009) 4 SCC 299 have held that arbitrary or unreasonable State action and gross violation of principles of natural justice violates Article 14 of the Constitution of India. Their Lordships have further held that the purpose of the

¶582

¶583

principles of natural justice is prevention of miscarriage of justice and hence, the observance thereof is the pragmatic requirement of fair play in action. Their Lordships have finally concluded that the action taken without complying the principles of natural justice is a nullity.

¶584

“34. Appellant, as noticed hereinbefore, is a State within the meaning of Article 12 of the Constitution of India. If an act on its part is found to be wholly unreasonable or arbitrary, the same would be violative of Article 14 of the Constitution of India. In certain situations, even gross violation of the principles of natural justice has been held to come within the ambit of Article 14. {See also Satyavir Singh & ors. vs. Union of India & ors. [(1985) 4 SCC 252], Delhi Transport Corporation vs. D.T.C. Mazdoor Congress & ors. [1991 Supp (1) SCC 600], Union of India & Anr. vs. Tulsiram Patel [(1985) 3 SCC 398], Central Inland Water Transport Corporation Limited & Anr. vs. Brojo Nath Ganguly & Anr. [(1986) 3 SCC 156]}

¶585

35. Any order passed in violation of the principles of natural justice save and except certain contingencies of cases, would be a nullity. In A.R. Antulay (supra), this Court held:

¶586

"No prejudice need be proved for enforcing the fundamental rights. Violation of a fundamental right itself renders the impugned action void. So also the violation of the principles of natural justice renders the act a nullity."

¶587

47. The purpose of principles of natural justice is prevention of miscarriage of justice and hence the observance thereof is the pragmatic requirement of fair play in action. {See Sawai Singh vs. State of Rajasthan [(1986) 3 SCC 454], Narinder Mohan Arya vs. United India Insurance Co. Ltd. & ors. [(2006) 4 SCC 713]}”

¶588

Their Lordships of the Hon’ble Supreme

¶589

Court in State of Union of India and another vs. P.N. Natarajan and others , (2010) 12 SCC 405 have held

¶590

¶591

that the retiral benefits payable to respondents could not have been revised to their disadvantage without giving them action-oriented notice and opportunity of hearing. Their Lordships have held as under:

¶592

“11. At the commencement of arguments, Shri A.K. Srivastava, learned counsel for the appellants referred to the order dated 17-9-2009 ESI Corpn. v. Bhakra Beas Management Board, (2009) 10 SCC 671 : (2010) 1 SCC (L&S) 97 passed by this Court and suggested that disposal of these appeals may be deferred and liberty may be given to the competent authority to pass fresh order in the matter of retiral benefits payable to the respondents after giving them notice and opportunity to make representation, but having found that the Court is not inclined to approve the mechanism of post-decisional hearing, the learned counsel submitted that the impugned orders are liable to be set aside because the learned Single Judge and the Division Bench of the High Court did not consider the plea of the appellants that in view of the bipartite settlement arrived at between the Unions of the employees and the management of the Corporation, the respondents are not entitled to the benefits of dearness relief on a par with the Central Government employees.

¶593

15. We have considered the respective submissions and carefully scrutinised the records. Although neither the learned Single Judge nor the Division Bench considered the issue of violation of the rules of natural justice, having given serious thought to the entire matter, we are convinced that the retiral benefits payable to the respondents could not be revised to their disadvantage without giving them actionoriented notice and opportunity of hearing. By virtue of the option exercised by them under Section 12-A(4)(b) and consequential action taken by the competent authority to fix their pension, etc., the private respondents acquired a valuable right to accordingly receive the financial benefits and the same could not have been reduced without complying with one of the basic rules of natural justice that no one shall be condemned unheard. The rule of audi alteram partem has been treated as fundamental to the system established by rule of law and any action taken or order passed without complying with that rule is liable to be

¶594

¶595

declared void-State of Orissa v. Dr. Binapani Dei AIR 1967 SC 1269 and Sayeedur Rehman v. State of Bihar (1973) 3 SCC 333 : 1973 SCC (L&S) 122 .

¶596

16. It is not in dispute that before directing revision of the pension, etc. payable to the private respondents, the Central Government did not give them action-oriented notice and opportunity of showing cause against the proposed action. Therefore, it must be held that the direction given by the Central Government to revise the retiral benefits including the pension payable to the respondents was nullity.”

¶597

In the instant case, the moment petitioners

¶598

became the members of the scheme they have acquired a vested right and they were to be heard before they were taken out of the ambit of scheme.

¶599

Pension is not a bounty. It is earned by rendering long satisfactory and efficient service. It is settled law that the pension is a portion of past service. It is a social security and the same cannot be arbitrarily and unreasonably denied. It is socio-economic environment, more particularly, when the PSUs are State within the meaning of Article 12 of the Constitution of India.

¶600

The pension scheme has come into force with effect from 1.4.1999. The State Government in its wisdom has decided to amend rule 2 of the Central Civil Services (Pension) Rules, 1972 by inserting clause (i). The effect of insertion of clause (i) was that the employees who were recruited after 15.5.2003 were not entitled to get the pension under the Central Civil

¶601

¶602

Services (Pension) Rules, 1972 and for them separate rules have been framed on 17.8.2006. Sub-para (2) of para 1 of the scheme dated 29.10.1999 reads as under:

¶603

“(2) All pensionery benefits of the employees of the participating H.P. Corporate Sector shall be determined in accordance with the provisions laid down in Central Civil Services (Pension) Rules, 1972, the Central Civil Services (Commutation of Pension) Rules, 1981 as amended and adopted by the Himachal Pradesh Government for the State Government employees save as otherwise provided in this scheme.”

¶604

It is evident from the phraseology employed in sub- para (2) of para 1 of the scheme dated 29.10.1999 that all pensionery benefits of the employees of the participating H.P. Corporate Sector were to be determined in accordance with the provisions laid down in Central Civil Services (Pension) Rules, 1972, the Central Civil Services (Commutation of Pension) Rules, 1981 as amended and adopted by the Himachal Pradesh Government for the State Government employees save as otherwise provided in this scheme. It is settled law that the employees of H.P. Corporate Sector cannot be treated at par with the employees of the State Government. However, the State Government in its own wisdom has decided to extend pensionery benefits to the employees of H.P. Corporate Sector as per provisions laid down in Central Civil Services (Pension) Rules, 1972, the Central Civil Services (Commutation of Pension) Rules, 1981.

¶605

¶606

This Court on 5.3.2012 has asked the State Government in CWP No. 1577/2009 how the right conferred on the employees to be governed by Central Civil Services (Pension) Rules can be taken away without any substitute arrangement, which was equally beneficial after five years. The Court has also noticed that the Government has issued a notification dated 15.5.2003 to the effect that all employees joining service after 15.5.2003 would not be entitled to the Central Civil Services (Pension) Rules and for such employees, the State Government has framed rules on 17.8.2006. The Court has noticed that discontinuation of Central Civil Services (Pension) Rules was only prospective to the issuance of notification dated 15.5.2003 and the employees who had already retired between 1.4.1999 to 2.12.2004 were to be governed under the Central Civil Services (Pension) Rules. The State Government was required to seriously address this issue whether the operation of notification dated 2.12.2004 be also made prospective. In other words, as in the case of the Government employees, should reintroduction of the EPF Pension Scheme for the employees of Corporate Sectors be made applicable only to those joining in the Corporate Sector after 2.12.2004 or not. The State Government has filed detailed reply. According to the State Government, since notification dated 15.5.2003

¶607

¶608

has given exemption to the employees who have already joined service before that date since there was no scheme for giving them any pensionery benefits. According to them, since the petitioners and similarly situate persons were the members of 1995 pension scheme, their rights were not effected. It was also stated in the affidavit that the scheme notified on 29.10.1999 remained inoperative as corpus fund was not created. There is no merit in this contention. Since the petitioners and similarly situate persons were covered under the Central Civil Services (Pension) Scheme, 1972 as per sub-para 2 of para 1. The arrangement which has been made applicable for the State Government employees vide notification dated 15.5.2003 should have also been adopted qua the petitioners. In other words, employees, who were to be appointed after 2.12.2004 they could be covered under the pension scheme notified in the year 1995, but the petitioners and similarly situate persons, who had already become the members of the scheme and were to be governed under the Central Civil Services (Pension) Scheme Rules, 1972, their acquired rights could not be destroyed. The scheme has become operational with effect from 1.4.1999, more particularly, when the petitioners and similarly situate persons have exercised their option and forfeited their claim to employer’s share

¶609

¶610

of CPF including interest. We have already noticed hereinabove that only ministerial act was required to be undertaken to create corpus fund under para 5 of the scheme. The Regional Provident Fund Commissioner had agreed to transfer the amount.

¶611

We also make it clear that when the scheme was framed and notified on 29.10.1999, the State Government was aware of all the legal implications by paying pensionery benefits to the employees of the H.P. Corporate Sector. There is remissness on the part of the State Government and the PSUs towards the implementation of the scheme. PSUs were required to immediately transfer the funds towards creation of corpus fund under para 5 of the scheme.

¶612

Petitioners have opted for the scheme dated 29.10.1999 and automatically ceased to be the members of Pension Scheme, 1995. There is no merit in the contention of Mr. Shrawan Dogra, learned Advocate General that the permission was required to be sought for exempting PSUs. The moment scheme has been promulgated by the State Government on 29.10.1999, all the PSUs would be deemed to be exempted under section 16 of the Employees Provident Fund and Miscellaneous Provisions Act, 1952. There was no requirement to take recourse to section 17 or paragraph 27-A of the scheme. The scheme has been

¶613

¶614

framed by the State Government and was to be made operational by it. Once the petitioners have become members of the scheme, they would remain the members of the same till their date of retirement. There is fallacy in the argument of the State Government that once the scheme has been repealed on 2.12.2004, there would be automatic revival of the membership of the petitioners and similarly situate persons in Pension Scheme of 1995. There would not be any automatic revival of membership of the petitioners and similarly situate persons to the Pension Scheme, 1995. Petitioners after repeal of the scheme dated 29.10.1999 would not be member of Pension Scheme 1995, as argued by the State Government. The best solution, which was available with the State Government, being welfare State, was to treat them on the analogy of the State Government employees.

¶615

Their Lordships of the Hon’ble Supreme Court in Regional Provident Fund Commissioner v. Sanatan Dharam Girls Secondary School and others , AIR 2007 SC 276 have explained the words “ belonging to ” and “ under the control of ” mentioned in section 16 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. Their Lordships have further held that the institutions had satisfied both the conditions (i) and (ii)

¶616

¶617

and as such they would fall within the exception contained under section 16 (1) (b) of the E.P.F. Act, 1952. Their Lordships have held as under:

¶618

“30. In respect to the contention of the respondent that the establishment belonging to or under the control of the Central Government or a State Government, it was submitted that the establishments must either be (a) belonging to or (b) under the control of the Central Government or the State Government. In our view, the two words used in the said Section have different connotations. The words "belonging to" signifies ownership i.e. the Government owned institutions would be covered under the said part and the words "under the control of" signifies control other than ownership since ownership has already been covered under the words "belonging to". It must be also noted that the two words are separated by the word "OR" and therefore these two words refer to two mutually exclusive categories of institutions. While the institutions "belonging" to the Central or the State Government would imply the control of the State but the privately owned institutions can be "under the control of" the Government in various ways.

¶619

33. In our view, the State Act is a complete code in itself with regard to the educational institutions and the State Government exercises substantive control over the institutions even though the institutions are not "owned" by it. The word "control" has not been defined under the EPF Act, 1952.

¶620

35. We further observe that the State Government has the power of Superintendent or the authority to direct, restrict or regulate the working of the educational institutions. It was, therefore, submitted that the institutions had satisfied both the conditions (i) and (ii) mentioned above and as such they would fall within the exception contained under Section 16(1)(B) of the EPF Act, 1952.

¶621

37. In addition to the above, the said case is also distinguishable with regard to the contention of repugnancy and Article 254(2) of the Constitution. In the said case, the Act in relation to the State of Madhya Pradesh came into force prior to the application of the provisions of the EPF Act, 1952 on educational institutions and therefore the benefit of Art. 254(2) was not available to it. In the present

¶622

¶623

case, however, admittedly the State Act has been enacted and has received the assent of the president subsequent to the applicability of the EPF Act, 1952 on the educational institutions. In this regard, this Court in the said case noted as under:

¶624

"13. It was by reason of the notification of 06.03.1982 that the Central Act was extended to educational institutions. The Employees' Provident Funds and Miscellaneous Provisions Act, 1952, therefore, became applicable to educational institutions in the State of Madhya Pradesh for the first time on 6-3-1982. This was much later than the enactment of the State Act 20 of 1978. The parliamentary enactment, therefore, would prevail over the State Act 20 of 1978, assuming that the State Act of 1978 created or effected any scheme for provident fund. Article 254(2), therefore, has no application in the present case."

¶625

Learned Single Judge of Orissa High Court

¶626

in Cuttack Development Authority v. Regional Provident Fund Commissioner , 2010 Lab. I.C. 63 has held that since the Cuttack Development Authority was constituted under Orissa Development Authority act, its employees were made entitled to benefit of old age pension in accordance with resolution of Cuttack Development Authority and establishment of Cuttack Development Authority was clearly exempted from application of provisions of Act. Learned Single Judge has held as under:

¶627

“10. Addressing to the question as to whether the C.D.A. is exempted from the application of the provisions of the Act, 1952, a bare reading of section 16 (1) (c), as quoted above, clearly established that the C.D.A. having been constituted/established under the O.D.A. Act and its employees having been made entitled to the benefit of old age pension in accordance with the resolution of the C.D.A.

¶628

¶629

referred to above, the said establishment of the C.D.A. is clearly exempted from the application of the provisions of the Act, 1952.”

¶630

It is made clear by way of abundant precaution that since the notification dated 2.12.2004 is bad in law, amendment made pursuant to this notification in the service bye laws of all the PSUs is also declared null and void. The service bye laws framed immediately after the notification dated 29.10.1999 will stand revived automatically. The cut-off date 2.12.2004 is declared ultra vires/irrational. However, in normal circumstances, we would have declared the notification dated 2.12.2004 unconstitutional and invalid, but instead of striking down the notification dated 2.12.2004, we have decided to read down notification dated 2.12.2004 to include the petitioners for the purpose of disbursement of pension.

¶631

Their Lordships of the Hon’ble Supreme Court in Pannalal Bansilal Pitti and others vs. State of A.P. and another , (1996) 2 SCC 498 have held that it is an accepted principle of interpretation so as to sustain the provision as well as to effectuate the purpose of the statute. Their Lordships have held as under:

¶632

“28. Keeping this pragmatic perspective in consideration, the question that emerges is whether Section 17 and 29 (5) are valid in law? Reading down the provisions of an Act is a settled principle of interpretation so as to sustain their

¶633

¶634

constitutionality, as well as for effectuation of the purpose of the statute. With the above in mind we may examine the validity of Section 17 and 29(5). These statutory provisions are grounded on the findings of the report of Challa Kondaiah Commission, which indicated mismanagement and misutilisation of funds of charitable and Hindu religious institution and endowment in a big way. This is however a general finding; and we are prepared to agree with the learned counsel for the petitioners that all the charitable and religious institutions may not be painted with the same brush. We have no doubt that there would be charitable or religious institution in the State which are neither mismanaged nor there is misutilisation of funds. Even so if the legislature acted on the general findings recorded by the Commission due weightage has to be given to the same. Our view that the board of trustees should be headed either by the founder or a member of his family would go a long way in seeing the fulfillment of the wishes and desires of the founder.”

¶635

In the instant case, by including the

¶636

petitioners as well as to effectuate the purpose of the scheme, the notification is required to be read down instead of declaring the same unconstitutional or bad in law.

¶637

Their Lordships of the Hon’ble Supreme Court in State of Maharashtra and others vs. Ravdeep Singh Sohal , (2000) 9 SCC 184 have held that reading down of provision to save it from the vice of arbitrariness or irrationality is permissible. Their Lordships have held as under:

¶638

“3. The respondent, taking note of the prospectus issued by appellant No. 1 for admission to M.B.B.S./B.D.S. Courses for the year 1995-96 and finding himself eligible, submitted his application for admission to the M.B.B.S. Course as per the prescribed procedure. The respondent had sought admission both in the Open Merit Category as well as in the reserved

¶639

¶640

Defence 3 Category. In the Provisional Merit List, displayed on 27/06/1995 by the College, the name of the respondent appeared at Sl. No. 517 in the Open Merit Category and at Sl. No. 1 in Defence 3 Category. In the Final Merit List, which was displayed on 3/07/1995, while the name of the respondent was shown at Sl. No. 51/8 in the Open Merit Category it had been removed from Defence 3 Category and another candidate was shown at Sl. No. 1, who had less marks than the respondent. the respondent was not apprised of the reasons for the removal of his name from the Merit List at Sl. No. 1 reserved for Defence 3 Category. He, through his father, filed a Writ Petition in the High Court and sought striking down of the provisions of Rule 5.2.2.3.1 of the Rules for admission to M.B.B.S. and B.D.S. Courses 1995-96 framed by the Government of Maharashtra on the ground that the cutoff date (1-7- 1994) given in that Rule would render all other Rules meaningless and inoperative. Rule 5.2.2.3.1. inter alia provides that the concerned defence service person ought to have been transferred to Maharashtra, in public interest, on or after 1/07/1994. the Division Bench of the High Court, after a detailed discussion, and keeping in view the peculiar situation in which Defence Personnel are placed and the exigencies of their transfer, in public interest, during an academic year, instead of striking down the said Rule read it down to harmonise it with other Rules and opined that the respondent having passed the qualifying examination from a recognised school/college situate in the State of Maharashtra itself could not be denied admission on the ground that his father had been transferred to the State of Maharashtra in October, 1993, i.e., before the cut-off date given in the Rule. We agree with the opinion expressed by the High Court that if the cut-off date of 1/07/1994 was strictly made applicable, the object of providing reservation to the Category of students belonging to Defence 3 Category, who come to the State of Maharashtra from outside on account of transfers of their parents in public interest, would be virtually defeated because transfers of defence personal are made in public interest not at any fixed period of time. The High Court, as a matter of fact, has harmonised the Rule by reading it down and saved it from the vice of irrationality or arbitrariness. In our opinion, the view taken by the High Court in the peculiar facts and circumstances of this case is unexceptionable. We see no reason to interfere. the appeal, therefore, fails and is dismissed. No costs.

¶641

¶642

Their Lordships of the Hon’ble Supreme Court in State of T.N. and another vs. P. Krishnamurthy and others , (2006) 4 SCC 517 have held that if rule is partly valid and partly invalid, the part that is valid and several is save and even the part which is found to be invalid, can be read down to avoid being declared as invalid. Their Lordships have held as under:

¶643

“31. If a rule is partly valid and partly invalid, the part that is valid and severable is saved. Even the part which is found to be invalid, can be read down to avoid being declared as invalid. We have already held that premature termination of existing leases, in law, can be only after granting a hearing as required under sub-section (3) of section 4A for any of the reasons mentioned in section 4A(1) or (2). Therefore, let us examine whether we can save the offending part of Rule 38A (which terminates quarrying leases/permissions forthwith) by reading it down. Apart from the statutory provision for termination in section 4A(3), there is a contractual provision for termination in the mining leases granted by the State Government. This provision enables either party to terminate the lease by six months notice. No cause need be shown for such termination nor such termination entails payment of compensation or other penal consequences. In this case, after considering the High Level Committee Report, the State has taken a decision that all quarrying by private agencies in pursuance of the quarrying leases granted in regard government lands or permissions granted in respect of ryotwari land should be terminated in public interest. If Rule 38A is read down as terminating all mining leases granted by the government by six months notice (in terms of clause 11 in the lease deeds based on the model form at Appendix 1 to the Rules) or for the remainder period of the lease whichever is less, it can be saved, as it will then terminate the leases after notice, in terms of the lease.”

¶644

¶645

Their Lordships of the Hon’ble Supreme Court in P. Tulsi Das and others vs. Government of A.P. and others , (2003) 1 SCC 364 have held that rights, benefits and perquisites acquired by the teachers concerned could not be said to be rights acquired otherwise than in accordance with law or brushed aside and trampled at the sweet will and pleasure of the government, with impunity. Their Lordships have further held that the provisions of the Act, though can be valid in its operation 'in future' can not be held valid in so far as it purports to restore status quo ante for the past period taking away the benefits already available, accrued and acquired by the teachers. Their Lordships have held as under:

¶646

14. On a careful consideration of the principles laid down in the above decisions in the light of the fact situation in these appeals we are of the view that they squarely apply on all fours to the cases on hand in favour of the appellants. The submissions on behalf of the respondent-state that the rights derived and claimed by the appellants must be under any statutory enactment or rules made under Article 309 of the Constitution of India and that in other respects there could not be any acquisition of rights validly, so as to disentitle the state to enact the law of the nature under challenge to set right serious anomalies which crept in and deserved to undone, does not merit our acceptance. It is by now well settled that in the absence of rules under Article 309 of the Constitution in respect of a particular area, aspect or subject, it was permissible for the state to make provisions in exercise of its executive powers under Article 162 which is coextensive with its legislative powers laying conditions of service and rights accrued to or acquired by a citizen would be as much rights acquired under law and protected to that extent. The orders passed by the government, from time to

¶647

¶648

time beginning from February 1967 till 1985 and at any rate upto the passing of the Act, to meet the administrative exigencies and cater to the needs of public interest really and effectively provided sufficient legal basis for the acquisition of rights during the period when they were in full force and effect. The orders of the High Court as well as the tribunal also recognised and upheld such rights and those orders attained finality without being further challenged by the government, in the manner known to law. Such rights, benefits and perquisites acquired by the teachers concerned cannot be said to be rights acquired otherwise than in accordance with law or brushed aside and trampled at the sweet will and pleasure of the government, with impunity. Consequently we are unable to agree that the legislature could have validly denied those rights acquired by the appellants retrospectively not only depriving them of such rights but also enact a provision to repay and restore the amounts paid to them to the state. The provisions of the Act, though can be valid in its operation 'in future' can not be held valid in so far as it purports to restore status quo ante for the past period taking away the benefits already available, accrued and acquired by them. For all the reasons stated above the reasons assigned by the majority opinion of the tribunal could not be approved in our hands. The provisions of sections 2 and 3 (a) insofar as they purport to take away the rights from 10-2-1967 and obligates those who had them to repay or restore it back to the state is hereby struck down as arbitrary, unreasonable and expropriatory and as such is violative of Articles 14 and 16 of the Constitution of India. No exception could be taken, in our view, to the prospective exercise of powers thereunder without infringing the rights already acquired by the appellants and the category of the persons similarly situated whether approached the courts or not seeking relief individually. The provisions contained in section 2 have to be read down so as to make it only prospective, to save the same from the unconstitutionality arising out of its retrospective application.

¶649

There is no merit in the contention of

¶650

learned Advocate General that the scheme could not be implemented due to financial crunch. The State was aware of the financial implication at the time of

¶651

¶652

issuance of notification dated 29.10.1999. It is the sovereign responsibility of the State to garner revenue to make welfare measures, including payment of pensionery/retiral benefits.

¶653

It cannot be gathered from the plain language that either expressly or by implication notification dated 2.12.2004 would apply retrospectively.

¶654

Accordingly, in view of the analysis and discussion made hereinabove, all the writ petitions are allowed. The cut-off date 2.12.2004 is declared ultra vires. Notification dated 2.12.2004 is read down to save it from unconstitutionality, irrationality, arbitrariness or unreasonableness by including the petitioners and similarly situated employees also, who had become members of the scheme notified on 29.10.1999 and have retired after 2.12.2004 and those employees who were already in service when the pension scheme was notified on 29.10.1999 and had become members of that scheme and shall retire hereinafter, for the purpose of pensionery benefits after applying the principles of severability. The Regional Provident Fund Commissioner, Shimla is directed to transfer the entire amount of the CPF to a corpus fund to be administered and maintained by the Government of Himachal Pradesh in the Finance Department including upto date

¶655

¶656

interest, within a period of two weeks. Thereafter, the Pension Sanctioning Authority is directed to sanction the pension/gratuity/commutation of pension after proper scrutiny of the cases forwarded by the concerned Public Sector Undertaking and issue pension payment order to Pension Disbursing Authority strictly as per para 6 of the scheme notified on 29.10.1999 with interest @ 9% per annum, within a period of 12 weeks from today. Pending application(s), if any also stand disposed. No costs.

¶657

(Justice Rajiv Sharma),

¶658

Judge.

¶659

(Justice V.K. Sharma),Judge

¶660

19.12. 2013

¶661

awasthi

Bharat Bhushan v. State

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Bharat Bhushan v. State

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