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CASE NO.: Appeal (civil)  1389 of 2006

PETITIONER: U.P. Raghavendra Acharya and Ors.

RESPONDENT: State of Karnataka and Ors.

DATE OF JUDGMENT: 12/05/2006

BENCH: S.B. SINHA & P.P. NAOLEKAR

JUDGMENT: J U D G M E N T

WITH  [CIVIL APPEAL NOS.1390-1395 OF 2006 &  1865 OF 2006]

S.B. SINHA, J.   

These appeals involving identical questions of fact and law were  taken up for hearing together and are being disposed of by this common  judgment.  

The appellants in these appeals are retired teachers of the University  and Private Aided Colleges (to whom UGC scales of pay were applicable).  They have retired during the period 1.1.1996 to 31.3.1998. So far as the  teachers of the University or Privates Aided Colleges are concerned,  indisputably, they were being paid the same salary as was being paid to the  teachers of the Government colleges. The appellants in Civil Appeal  No.1391/2006, have retired from the Karnataka Regional Engineering  College, Surathkal, Karnataka, which was established by the Government  of India at the request of the Government of Karnataka. It is a centrally  aided institution as envisaged under Entry 64 of List 1 of the Seventh  Schedule to the Constitution of India.  So far as the said institution is  concerned, its expenditure used to be borne by the Government of India  and the State of Karnataka. It, however, has been notified by the  Government of India as a Deemed University with effect from 26.6.2002.  

               It is not in dispute that the revised scales of pay as recommended  by the  Pay Revision Committee became applicable to the appellants with  effect from 1.1.1986. It is also not in dispute that the UGC scales of pay  were applicable to them. The Government of Karnataka, by a letter dated  17.12.1993 directed that the matter relating to the fixation of pension on the  basis of  UGC pay scales would be governed by Rule 296 of the Karnataka  Civil Services Rules (hereinafter referred to as ’the Rules’), providing for  computation of emoluments for the purpose of pension and gratuity of a  Government servant.  In the said letter it was stated:   

"The term ’emoluments’ has been defined and redefined  from time to time whenever pension has been revised by  Executive orders. The terms Emoluments for purpose of  pensionary benefits as defined in G.O. Dated 17.8.87  benefits includes among other things the last pay drawn.  It is therefore, clarified that the pay drawn by the teachers  of degree colleges in respect of whom UGC scales have  been extended by G.O. No.ED 88 UNI 88 dtd. 30.3.90  w.e.f. 1.1.86 and who have opted to UGC scales of pay,  the last pay drawn by them in the UGC scales of pay  among other things may be treated as emoluments for  purpose of pensionary benefits under G.O. Dtd. FD 20  SRS 87 (I) dtd. 17.8.87."

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        In continuation of the said letter dated 17.12.1993, the  Government of Karnataka by letter 12.10.1994, clarified that the pay drawn  by the teachers of degree colleges in respect of whom UGC scales of pay  had been extended by G.O. No.ED 28 UNI 88 dtd. 30.3.90, may be treated  as emoluments for the purpose of settling pensionary benefits under G.O.  No.FD 20 SRS 87(F) dated 17.8.87.  It was further stated:   

"It is further clarified that the clarification issued                    already on 17.12.93 equally applies in respect of teachers  of aided degree colleges also to whom the benefit of  UGC scales of pay as contemplated in G.O. ED 88 UNI  88 dated 30.3.90 have been extended. Action may be  taken accordingly."

       By a notification bearing G.O. No.ED No.442 dated 12.5.88, the  Government of Karnataka extended the revision of pensionary benefits  contemplated by the aforesaid order dated 17.8.87, to the teachers of the  aided educational institutions, whose pension was to be paid out of the  consolidated fund of the State. It stands admitted that whereas 80% of the  additional amount required for discharging the said liability was to be  borne by the Central Government, 10% thereof was to be borne by the  institution concerned and the rest 10% amount was to be raised by way of  additional generation of revenue, as would appear from the letter of the  Ministry of Human Resource Development, Department of Education,  Government of India dated 17.8.98.          

       It is furthermore not in dispute that the Central Government  pursuant to or in furtherance of the recommendations made by the Central  Pay Commission, revised the scales of pay of its employees with effect  from 1.1.1996. The revision of such pay scales was also accepted by the  University Grants Commission.  Grant of revision of such pay scales was  also recommended for the posts held by the appellants herein. On or about  22.7.1999, the Government of India by a letter addressed to the Education  Secretaries of all the States and Union Territories, stated in a categorical  stand that the revision of pension structure for retired teachers shall be as is  applicable to the employees working in Central Universities.  It was stated:  

"Since the Central Govt. has already revised the pension  structure of its employees and the same has been extended  to the teachers in Central Universities, it is requested that  appropriate orders in this regard may kindly be issued at  an early date for the teachers in State Universities and  Colleges.

The AIFUCTO delegations further highlighted the  problems faced by teachers in getting recognition of past  service for pensionary benefits and condonation of break  in service while moving from one State to another.  It is  requested that the guidelines issued by UGC in this regard  may be followed and the State Govts. May have  reciprocal arrangements amongst themselves to obviate  the problems faced by the teachers."

       The Government of Karnataka issued appropriate notification  extending the UGC pay scales as revised from 1.1.1996, inter alia to the  teachers of Government and Aided Colleges, stating:  

"5. Government is pleased to revise the pay scales of  teachers, librarians and physical education directors in  Government and aided colleges under the control of the  Department of Collegiate Education as detailed below.

6. Coverage:

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This scheme applies to Lecturers, Lecturers (Senior  Scale), Lecturers (Selection Grade), Librarians,  Librarians (Senior Scale), Librarians (Selection Grade),  Director of Physical Education, Directors of Physical  Education (Senior Scale) and Directors of Physical  Education (Selection Grade), Principals Grade-I and  Principals Grade-II.  

7. Date of effect: The revised UGC pay scales will be retrospectively  effective from 1st January, 1996, and other benefits  prospectively from the date of this order."

The said revised scales of pay were to be inclusive of basic pay,  dearness allowance, interim relief and fixed dearness allowance admissible  as on 1.1.1996. However, on 22.7.2000, a notification was issued by the  Government of Karnataka, extending the UGC pay scales from 1.1.1996, to  the teachers, librarians, etc. of the Government/Aided Colleges stating:  

"Revised UGC pay scales have been extended to the  Teachers, Librarians and Physical Education Directors in  the Government/Aided Colleges of the Collegiate  Eduction Department in GO read at (1) above.  Subsequently, various clarifications have been issued by  the Government of India and UGC on  the  implementation of the pre-revised scale will become  entitled to one increment in the revised scale with effect  from 1.1.1996 and the lecturers drawing pay at 14th and  15th stage of the pre-revised scale will become entitled to  two increments in the revised scale on 1.1.1996. As the  lecturers drawing pay from 10th to 15th stage will get the  benefit of bunching, they will become entitled to the next  increment in the revised scale on completion of 12  months from the date of stepping up of their pay viz. 12  months from 1.1.1996."   However, paragraph 27A was inserted thereto in respect of  revision of pensionary benefits, which is to the following effect:

       "27-A: Revision of pensionary benefits:

(i) UGC scales as revised from 1.1.96 have been  linked to the index level of 1510 points inasmuch as  the revised pay scale structured includes the DA  admissible as on 1.1.96 to the extent of 138% of basic  pay.  As on 1‘.1.96 the pensionary benefits under the  State Government had not been revised. The revised  pay scales of the State Government employees came  into force from 1.4.98 by merging the DA as on  1.1.96. The pensionary benefits were also  simultaneously revised w.e.f. 1.4.98. Therefore, the  revised pay drawn in the UGC pay scales for the  period from 1.1.96 upto 31.3.98 shall not be taken as  emoluments for the purpose of pensionary benefits.  Accordingly,

(a) In respect of teachers drawing UGC pay scales  who have retired during the period from 1.1.96 to  31.3.98 they shall be eligible for the benefit of the  fixation of pay and arrears under the revised UGC  scales of pay only. There shall not be any change in  their pensionary benefits with reference to the revised  UGC pay and the retirement benefits already  sanctioned in the pre-revised UGC pay scales will not

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undergo any modifications. However, they shall be  entitled to the benefit of fixation of revised  pension/family pension as contemplated in GO  No.FD(Spl.) 2 PET 99 dated 15.2.99 only w.e.f. 1st  April, 1998. Para 6 of GO No.FD (Spl.) 2 PET 99  dated 15.2.99 stand modified to this extent.

(b) In respect of teachers drawing UGC pay scales and  who have issued on or after 1.4.98, the pay drawn in  the revised UGC pay scales shall be counted for the  purpose of pensionary benefits and the orders revising  the pensionary benefits vide GO No.FD (Spl.) 1 PET  99 dated 15.2.99 shall be made applicable."      

       A similar amendment was made in respect of the Regional  Engineering Colleges by inserting para 31A.          The mode of payment of arrears in the revised scales of pay in  terms of the notification was to be made as under:

"10. Mode of payment of arrears: (a) The arrears of pay and allowances during the period  from 1.1.1996 to 31.5.1999 shall be invested in the NSC  VIII issue in multiples of Rs.100 to the extent of 80% of  the amount, the balance amount being paid in cash."

(b) In case of employees who cease to be in service due  to death, retirement or resignation the arrears shall be  fully payable in cash."  

               A further notification was issued on 8.8.2000, extending the  AICTE pay scales from 1.1.1996 to the teachers, librarians, etc. of the  Government Aided Colleges and Engineering Colleges, which was to the  same effect.

               Writ petitions were filed before the Karnataka High Court  questioning the said notifications dated 22.7.2000 and 8.8.2000. The said  writ petitions were allowed holding that the impugned notifications were  illegal. The learned Single Judge in his judgment opined that in view of the  notification dated 22.7.1999, issued by the State of Karnataka, the revised  scales of pay became applicable in respect of those teachers who had retired  during the period from 1.1.1996 to 31.3.1998 and they could not have been  deprived of the said benefit. It was held that the impugned notifications  were arbitrary as these resulted in discrimination between the teachers  working in the Government Colleges and the teachers working in the Non- Government Colleges which would mean treating the equals unequally. It  was further opined that, in any event, the teachers of the Government Aided  Colleges as also the teachers of the Regional Engineering Colleges formed  a class by themselves and no discrimination could have been made between  the employees who retired prior to 31.3.1998 and those retiring subsequent  thereto.

The appeals preferred by the State of Karnataka against the said  judgment were allowed by the Division Bench of the Karnataka High  Court, holding as under:    

"It is not disputed that method of calculation of pension,  50% of last pay drawn is same to all and there is no  change in the method of calculation. However, for the  purpose of revised pension, cut off date is fixed as  1.4.1998. As stated, the pensionary benefits were  uniformly revised in respect of all classes of teachers  with effect from 1.4.1998 and in view of this, the cut off  date fixed on 1.4.1998 by inserting clauses 27-A & 31-A  by orders dated 29.7.2000, 7.8.2000 and 8.8.2000 in

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Government Order dated 15.11.1999 cannot be said to be  bad. Therefore, the order of learned Single Judge  quashing the orders dated 29.7.2000, 7.8.2000 and  8.8.2000 in setting aside the grant of pension from  1.4.1998 on the ground of discrimination vis-a-vis the  Government employees, is not correct. Policy decision  has been taken in fixing cut off date having regard to  expenditure involved, financial implications and other  relevant considerations. It cannot be said to be arbitrary  or irrelevant in fixing the cut off date which is applicable  uniformly to all categories of pensioners including  Government servants which is in consonance with  Articles 14 and 16 of the Constitution and the impugned  orders of the Government do not violate Articles 14 and  16 of the Constitution of India.  Therefore, the order of  the learned Single Judge is liable to be set aside and  accordingly set aside."

The review petitions filed thereagainst were dismissed.          Mr. S.B. Sanyal, leaned senior counsel appearing on behalf of the  appellants raised a short question in support of these appeals. Learned  counsel would submit that having regard to the fact that the appellants  were given the benefit of the revised scales of pay w.e.f. 1.1.1996, and,  thus, having acquired a vested right in relation thereto, the quantum of their  pensionary benefits must be computed on the basis of 50% of the last pay  drawn and in that view of the matter although they had been given the  benefit of the revised pay scales from 1.1.1996, the pensionary benefits  could not have been directed to be given from 1.4.1998.  

       Mr. Sanjay R. Hegde, learned counsel appearing for the State of  Karnataka, on the other hand, submitted that Rule 296 of the Rules was not  applicable to the case of the appellants herein as they were not Government  servants. It was contended that the action on the part of the State cannot be  said to be suffering from any infirmity whatsoever inasmuch as so far as   the employees of the State of Karnatake are concerned the benefit of the  revised scales of pay was given effect on and from 1.4.1998. According to  the learned counsel, although the State of Karnataka had given the benefits  of the revised scales of pay in terms of the recommendations of the UGC,  with retrospective effect from 1.1.1996, it was not obligatory on its part to  extend the retiral benefits thereof to the appellants also from the said date.   Our attention in this behalf has been drawn to the notification dated  24.12.1998 issued by the UGC which reads as under:

"17.0 Superannuation benefits:

17.1.0  The benefit in service to a maximum of 3 years  should be provided for the teachers who have acquired  Ph.D. Degree at the time of entry so that, almost all  teachers get full retirement benefits, which are available  after 33 years of service subject to overall age of  superannuation;  

17.2.0 Other conditions with respect of superannuation  benefits may be given as per the Central/State  Government Rules."

       In view of the rival contentions of the parties as noticed  hereinbefore, the question which arises for consideration before this Court  is as to whether the appellants having been given the benefit of the revised  pay   scales  w.e.f. 1.1.1996, could have been deprived of the retiral  benefits calculated with effect therefrom.

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The fact that the appellants herein were treated to be at par with  the holders of similar posts in Government Colleges is neither denied nor  disputed. The appellants indisputably are governed by the UGC scales of  pay. They are entitled to the pensionary benefits also. They had been given  the benefits of the revision of scales of pay by 10th Pay Revision Committee  w.e.f. 1.1.1986. The pensionary benefits payable to them on attaining the  age of superannuation or death were also stated to be at par with the  employees of the State Government. The State of Karnataka, as noticed  hereinbefore, for all intent and purport, has treated the teachers of the  Government Aided Colleges and the Regioinal Engineering Colleges on the  one hand and the teachers of the colleges run by the State itself on the other  hand at par. Even the financial rules were made applicable to them in terms  of the notifications, applying the rule of incorporation by reference.  Although Rule 296 of the Rules per se may not be applicable so far as the  appellants are concerned, it now stands admitted that the provisions thereof  have been applied  to the case of the appellants also for the purpose of  computation of pensionary benefits. Therefore there cannot be any doubt  whatsoever that the term "Emoluments" as contained in Rule 296 of the  Rules would also apply to the case of the appellants.  Rule 296 of the Rules  reads as under: "296. In respect of retirement or death while in service of  Government Servants on or after first day of July, 1993,  the term "Emoluments" for the purpose of this Chapter  means, the Basic pay drawn by the Government servant  in the scale of pay applicable to the post on the date of  retirement or death and includes the following, but does  not include pay and allowance drawn from a source other  than the Consolidated Fund of the State,- .............................................. Note:- (a) Basic pay means the pay drawn in the time  scale of pay applicable to the post immediately before  retirement or death."

       Note (a) appended to the Rule 296, states that basic pay would  mean the pay drawn in the time scale of pay applicable to the post  immediately before the retirement or death. Other rules being Rule 296B,  296C, 296D, etc. specifying  different dates of retirement or death used  similar terminology. Rule 297 provides that the term "average  emoluments" means the average calculated upon the last three years of  service.

       It is one thing to say that the State can fix a cut off date unless and  until the same is held to be arbitrary or discriminatory in nature, the same  would be given effect for carrying out the purpose for which it was fixed..  In this case, the cut-off date for all intent and purport had been fixed as  1.1.1996. It is, thus, not a case where cut-off date was fixed as 1.4.1998 as  the State merely intended to confer only same benefits.  It is, thus, also not  a case like Transmission Corporation, A.P. Ltd. vs. P. Ramachandra Rao &  Anr. [2006 (4) SCALE 362}, where a section of the employees were  excluded from being given the benefit of revised pension as they had  retired prior to the cut-off date.

       The State while implementing the new scheme for payment of  grant of pensionary benefits to its employees, may deny the same to a class  of retired employees who were governed by a different set of rules. The  extension of the benefits can also be denied to a class of employees if the  same is permissible in law. The case of the appellants, however, stands  absolutely on a different footing. They had been enjoying the benefit of the  revised scales of pay. Recommendations have been made by the Central  Government as also the University Grant Commission to the State of  Karnataka to extend the benefits of the Pay Revision Committee in their  favour.  The pay in their case had been revised in 1986 whereas the pay of  the employees of the State of Karnataka was revised in 1993. The benefits  of the recommendations of the Pay Revision Committee w.e.f. 1.1.1996,

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thus could not have been denied to the appellants.                      The stand of the State of Karnataka that the pensionary benefits  had been conferred on the appellants w.e.f. 1.4.1998 on the premise that the  benefit of the revision of scales of pay to its own employees had been  conferred from 1.1.1998, in our opinion, is wholly misconceived. Firstly,  because the employees of the State of Karnataka and the appellants, in the  matter of grant of benefit of revised scales of pay, do not stand on the same  footing as revised scales of pay had been made applicable to their cases  from a different date.  Secondly, the appellants had been given the benefit  of the revised scales of pay w.e.f. 1.1.1996. It is now well settled that a  notification can be issued by the State accepting the recommendations of  the Pay Revision Committee  with retrospective effect as it was beneficent  to the employees. Once such a retrospective effect is given to the  recommendations of the Pay Revision Committee, the concerned employees  despite their reaching the age of superannuation in between the said dates  and/or the date of issuance of the notification would be deemed to be  getting the said scales of pay as on 1.1.1996. By reason of such notification  as the appellants had been derived of a vested right, they could not have  been deprived therefrom and that too by reason of executive instructions.  

The contention of the State that the matter relating to the grant of  pensionary benefits vis-a-vis the revision in the scales of pay stands on  different footing, thus, must be rejected.   Pension, as is well known, is not a bounty. It is treated to be a  deferred salary. It is akin to right of property. It is co-related and has a  nexus with the salary payable to the employees as on the date of retirement.  

               These appeals involve the question of revision of pay and  consequent revision in pension and not the grant of pension for the first  time. Only the modality of computing the quantum of pension was required  to be determined in terms of the notification issued by the State of  Karnataka. For the said purpose, Rule 296 of the Rules was made  applicable. Once this rule became applicable, indisputably the computation  of pensionary  benefits was required to be carried out in terms thereof. The  Pension Rules envisage that pension should be calculated only on the basis  of the emoluments last drawn. No order, therefore, could be issued which  would be contrary to or inconsistent therewith. Such emoluments were to be  reckoned only in terms of the statutory rules. If the State had taken a  conscious decision to extend the benefit of the UGC pay scales w.e.f.  1.1.1996, to the appellants allowing them to draw their pay and allowances  in terms thereof, we fail to see any reason as to why the pensionary benefits  would not be extended to them  from the said date.   

               In fact the status of the appellants that they were at par with  teachers of the Government colleges was not disputed.  A Division Bench  of the Karnataka High Court in V.P. Babar & Ors. vs. State of Karnataka  (W.P. Nos.32163-32208/1998) has clearly held so. It has not been disputed  that the said judgment has become final as the State of Karnataka did not  prefer any appeal thereagainst.   

               The impugned orders furthermore is opposed to the basic  principles of law inasmuch as by reason of executive instructions an  employee cannot be deprived of a vested or accrued right. Such a right to  draw pension to the extent of 50% of the emoluments, computed in terms of  the rules, w.e.f. 1.1.1996, vested to the appellants in terms of Government  notification read with Rule 296 of the Rules.  

       As the amount calculated on the basis of the revised scales of pay  on and from 1.1.1996 to 31.3.1998 have not been paid to the appellants by  the State of Karnataka as ex gratia, and in fact was paid by way of  emoluments to which the appellants became entitled to in terms of their  conditions of service, which in turn are governed by the statutory rules,  they acquired a vested right therein. If the appellants became entitled to  the benefits of the revised scales of pay, and consequently to the pension

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calculated on the said basis in terms of the impugned rules, there would be  reduction of pension with retrospective effect which would be violative of  Articles 14 and 16 of the Constitution of India.                    In Chairman, Railway Board and Ors. vs. C.R. Rangadhamaiah  and Ors. [1997 (6) SCC 623], a Constitution Bench of this Court opined:

"Apart from being violative of the rights then available  under Articles 31(1) and 19(1)(f), the impugned  amendments, insofar as they have been given  retrospective operation, are also violative of the rights  guaranteed under 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."      

       The appellants had retired from service. The State therefore could  not have amended the statutory rules adversely affecting their pension with  retrospective effect.                  In Subrata Sen and Ors. vs. Union of India and Ors. [2001 (8) SCC  71], a Division Bench of this Court applying the principles laid down in  D.S. Nakara vs. Union of India [1983 (1) SCC 305], observed:  

"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 liberalised 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 case  (1983 (1) SCC 305), pension is neither a bounty, nor a  matter of grace depending upon the sweet will of the  employer, nor an ex gratia payment.  It is a payment for  the past services rendered. It is a social welfare measure  rendering socio-economic justice to those who in the  heyday of their life ceaselessly toiled for the employer on  an assurance that in their old age they would not be left  in the lurch. Maybe 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 the employer to pay monthly pension  calculated as per the Rules on retirement from service  and this retirement benefit is not based on availability of  Pension Fund. There is no question of pensioners  dividing the Pension Fund or affecting the pro rata share  on addition of new members to the Scheme. As per Rule  1 quoted above, an employee would become a 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  Union of India in lieu of its taking over of the Company.  The rights of the employees (including retired) are  protected under Section 11 of the Burmah Oil Company

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[Acquisition of Shares of Oil India Limited and of the  Undertakings in India of Assam Oil Company Limited  and the Burmah Oil Company (India Trading) Limited]  Act, 1981."                           Yet again, in State of West Bengal and Anr. vs. W.B. Govt.  Pensioners’ Associations and Ors. [2002 (2) SCC 179], this Court stated  the law in the following terms: "Because the scales of pay had been revised from  1.1.1986, the recomputation of pension for such  employees as had been granted the revised scales of  necessity was limited to the same cut-off date. All that  the impugned Memorandum No.4056-F dated 25.4.1990  did was to recompute the benefits in favour of post- 1.1.1986  retirees according to the existing formula as  provided by Memorandum No.7530-F and No.7531-F,  both dated 6.7.1988. The same formula continues to be  applied to the pre-1986 pensioners is only on account of  the revision of pay scales and not on account of failure of  the State Government to equitably apply the liberalised  Pension Scheme formula. The quantum of the  emoluments formed no part of the formula for grant of  pension during 1986 to 1995."

 [Also see K.L. Rathee vs. Union of India & Ors., 1997 (6) SCC 7, and  Indian Ex-Services League & Ors. vs. Union of India, 1991 (2) SCC 104]                          It is also trite that persons similarly situated cannot be  discriminated against. [See K.T. Veerappa & Ors. vs. State of Karnataka &  Ors., 2006 (4) SCALE 293].                  For the reasons stated above, the impugned judgment cannot be  sustained and is accordingly set aside.  The appeals are allowed with costs.  Counsel fee is assessed at Rs.5,000/- in each appeal.