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PETITIONER: KRISHENA KUMAR AND ANR. ETC. ETC.

       Vs.

RESPONDENT: UNION OF INDIA AND ORS.

DATE OF JUDGMENT13/07/1990

BENCH: SAIKIA, K.N. (J) BENCH: SAIKIA, K.N. (J) MUKHARJI, SABYASACHI (CJ) RAY, B.C. (J) KANIA, M.H. AGRAWAL, S.C. (J)

CITATION:  1990 AIR 1782            1990 SCR  (3) 352  1990 SCC  (4) 207        JT 1990 (3)   173  1990 SCALE  (2)44  CITATOR INFO :  RF         1991 SC 672  (19)  RF         1991 SC1182  (14,21)  F          1991 SC1743  (2,4)  RF         1991 SC1818  (5)  RF         1992 SC 767  (7,10)

ACT:     Constitution  of  India, 1950:  Article  141--Policy  of courts  is  to stand by precedent and  not  disturb  settled point.     Civil  Services:  Railway Board Circular  dated  May  8, 1987-Change over of railway employees from SRPF (Contributo- ry Scheme) to Pension Scheme--12th option--Exercise of  Para 3.1--Whether constitutionally valid.

HEADNOTE:     The  petitioners are retired railway employees who  were covered  by the Railway Contributory Provident Fund  Scheme. The  Provident Fund Scheme was replaced in the year 1957  by the Pension Scheme. The employees who entered Railway  serv- ice  on or after 1.4.1957 were automatically covered by  the Pension  Scheme  instead of the Provident Fund  Scheme.  The employees who were already in service on 1.4.1957 were given an option either to retain the Provident Fund benefits or to switch over to the pensionary benefits. The petitioners  had opted for Contributory Provident Fund Scheme.     The  petitioners’  case is that till  1.4.1957  or  even sometime thereafter, the pensionary benefits and the  alter- native Contributory Provident Fund benefits were  considered to be more or less equally beneficial; at the time when  the option  was  given to choose between pension  and  Provident Fund, the employees had no idea that in future  improvements would be made to either of them; and that as a result of the decision  of the Railways to implement the judgment of  this Court  in D.S. Nakara v. Union of India, [1983] 2  SCR  165, and to extend the liberalised pension benefits even to those railway employees who had retired long before the  liberali- sations  of  pension were introduced, the  pension  retirees

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derived  manifold  benefits while  P.F.  retirees’  benefits remained stagnant.     The main legal contention of the petitioners is that the Railways  had issued twelve notifications giving  option  to certain Provident Fund retirees after the respective cut-off dates, to opt for the Pension Scheme 353 even  after their retirement, but the same options were  not given  to other similarly situated Provident  Fund  retirees beyond the respective cut-off dates, which was discriminato- ry and hence violative of Art. 14 of the Constitution. It is further contended that the notifications specifying  cut-off dates were arbitrary and un-related to the objects sought to be achieved by giving of the option, and therefore violative of  Article 14 and also of the principle laid down in  Naka- ra’s  case.  According  to counsel, the  principle  is  that pension  retirees  could not be divided  by  such  arbitrary cut-off dates for the purpose of giving benefits to some and not  to other similarly situated employees. It is  submitted that  by analogy the principle is equally applicable to  the Provident Fund retirees as a class.     On  these  grounds, it is prayed that applying  the  law laid  down in Nakara’s case this Court should simply  strike down  or  read down paragraph 3.1 of the 12th  option  dated 8.5.1987.  That paragraph said that all Contributory  Provi- dent  Fund beneficiaries who were in service on  1.1.86  and who were still in service on the date of the order would  be deemed  to have come over to the pension scheme. It is  sub- mitted  that once this limiting requirement is  removed  all the  Contributory  Provident  Fund  beneficiaries  shall  be eligible and will be deemed to have come over to the pension scheme. As the basis for striking or reading down  paragraph 3.1  on  Nakara’s ratio, it is urged that  all  the  Railway employees  both  in service and  pensioners  constitute  one family  and must be treated as one class,  and  Government’s obligation to look after the retired Railway employees  both under the pension scheme and the provident fund scheme being the  same,  they could not be treated differently,  and  any differential treatment will be discriminatory and  violative of Article 14 of the Constitution of India. In Nakara’s case the  date arbitrarily chosen was struck down and, as  a  re- sult,  the  revised formula for computing pension  was  made applicable to all the retired pensioners.     On  behalf of the respondents it was contended that  the options were meant to give the Provident Fund retirees after the specified dates option to switch over to Pension  Scheme and  that each specified date had nexus with the reason  for granting the particular option. It is further submitted that the  petitioners’ basic assumption is erroneous inasmuch  as Nakara’s case did not hold that whenever there was a  liber- alisation  of pension, aH other pension retirees and  Provi- dent  Fund retirees must be given the option, and  that  the older system of pension or Provident Fund was always  insuf- ficient.     Dismissing  the  writ petitions and  the  Special  Leave Petition, this Court, 354     HELD:  (1)  The doctrine of precedent,  that  is,  being bound  by  a previous decision, is limited to  the  decision itself and as to what is necessarily involved in it. It does not  mean  that this Court is bound by the  various  reasons given in support of it, especially when they contain "propo- sitions wider than the case itself required." [374A-B]     (2)  The  enunciation of the reason  or  principle  upon which  a question before a court has been decided  is  alone

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binding as a precedent. The ratio decidendi is the  underly- ing  principle, namely, the general reasons or  the  general grounds  upon  which the decision is based on  the  test  or abstract  from the specific peculiarities of the  particular case which gives rise to the decision. [382A; 374D]     Caledonian Railway Co. v. Walker’s Trustees, and Quin v. Leathern, [1901] A.C. 495 (502), referred to.     (3)  Apart  from  Article 141 of  the  Constitution  the policy of courts is to stand by precedent and not to disturb settled point. When court has once laid down a principle  of law as applicable to certain state of facts, it will  adhere to  that principle, and apply it to all future  cases  where facts are substantially the same. [381F-G]     (4). In Nakara’s case it was never required to be decid- ed  that  all  the retirees formed a class  and  no  further classification  was  permissible. At the same  time  it  was never  held in that case that both the pension retirees  and the  Provident Fund retirees formed a homogeneous class  and that  any further classification among them could be  viola- tive of Article 14. On the other hand, the Court had clearly observed  that  it  was not dealing with the  problem  of  a "fund". [380H]     (5) The Railway Contributory Provident Fund is by  defi- nition a fund. Besides, the Government’s obligation  towards an employee under Contributory Provident Fund Scheme to give the  matching contribution begins as soon as his account  is opened and ends with his retirement when his rights qua  the Government  in  respect  of the Provident  Fund  is  finally crystalized, and thereafter no statutory obligation  contin- ues.  Whether there still remained a moral obligation  is  a different  matter.  On  the other hand,  under  the  Pension Scheme the Government’s obligation does not begin until  the employee  retires when only it begins and it continues  till the  death  of the employee. Thus, on the retirement  of  an employee  Government’s legal obligation under the  Provident Fund account ends while under the Pension Scheme it  begins. Therefore, the provident fund retirees could not be  treated at par with the living 355 pensioners. There was, therefore, no discrimination, and the question of striking down or reading down clause 3.1 of  the 12th option does not arise. [380H; 381A-B; 382F]     Union  of India v. Ghansham Das & Ors., S.L.P. No.  5973 of  1988 and Union of India v. Bidhubhushan Malik, [1984]  3 SCC 95, distinguished.     (6)  The  rules  governing the Provident  Fund  and  its contribution are entirely different from the rules governing pension.  It  would not, therefore, be reasonable  to  argue that  what is applicable to the pension retirees  must  also equally be applicable to Provident Fund retirees. [381C]     (7) An imaginary definition of obligation to include all the Government retirees in a class was not decided and could not form the basis for any classification for the purpose of this  case.  Nakara cannot, therefore, be an  authority  for this case. [381E] D.S. Nakara v. Union of India, [1983] 2 SCC 165, explained.     (8) The argument is that the State’s obligation  towards pension retirees is the same as that towards Provident  Fund retirees. That may be morally so. But that was not the ratio decidendi of Nakara. Legislation has not said so. To say  so legally would amount to legislation by enlarging the circum- ference of the obligation and converting a moral  obligation into a legal obligation. [380C-D]     (9) The statements made on behalf of the respondents  to the effect that cut-off dates had nexus with the reason  for

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granting  the particular option, has been  substantiated  by facts. The cut-off dates were not arbitrarily chosen but had nexus  with  the  purpose for which the  option  was  given. [382B-D]     (10)  That  the Pension Scheme and  the  Provident  Fund Scheme  are structurally different is also the view  of  the Central  Pay Commissions, and hence ex-gratia benefits  have been recommended, which may be suitably increased. [383E]

JUDGMENT:     CIVIL  APPELLATE  JURISDICTION: Special  Leave  Petition (Civil) No. 8461 of 1986.     From  the  Judgment  and Order dated  31.3.1986  of  the Central  Administrative  Tribunal, New  Delhi,  in  Original Appln. No. 40 of 1986. 356 AND Writ Petition Nos. 1285, 1575/86, 352,361 & 1165 of 1989. (Under Article 32 of the Constitution of India). Petitioners in Person in SLP 8461 of 1986 and W.P. No.  1285 of 1986.     Shanti Bhushan, Mrs. Swaran Mahajan, Ms. Anuradha  Maha- jan,  Mrs. Rekha Pandey, Jayant Bhushan, Badri  Das  Sharma, C.V. Francis, Ramesh Babu, Ms. Santosh Paul and G.  Prakash, for  the Petitioners in W.P. No. 1575 of 1986,  352,361  and 1165 of 1989.     Kapil  Sibal, Additional Solicitor General, R.B.  Datar, Mukul Mudgal, C.V. Subba Rao, B.D. Sharma, R.B. Mishra, B.K. Prasad and A.M. Khanwilkar for the Respondents. N.P. Saxena for the Intervener. The Judgment of the Court was delivered by     K.N.  SAIKIA,  J. This analogous cluster  of  five  writ petitions  and one special leave petition involves a  common question of law. The petitioner in Writ Petition No. 352  of 1989  is the President of the All India  Retired  Railwaymen (P.F. Terms) Association and the petition has been filed  in a  representative capacity on behalf of all the  members  of the  Association who retired with Provident  Fund  benefits. Writ Petition No. 361 of 1989 has been filed by three  indi- vidual  retired  Railway  employees who  also  retired  with Provident Fund benefits. The petitioner in Writ Petition No. 1285 of 1986 retired as Block Inspector of Northern  Railway on  7.1.1968,  a non-pensionable post. All  the  petitioners except  petitioner  No. 5 in W.P. No. 1575 of  1986  retired from Railway service high posts. Petitioner No. 1 retired as Additional Member, Railway Board on 5.11.1960 with Provident Fund  benefits. Petitioner No. 2 was Member,  Railway  Board and similarly retired on 1.3. 1968 opting for Provident Fund Scheme  as  at  that time the maximum  monthly  pension  was Rs.675  only. Petitioner No. 3 similarly retired as  General Manager  on  5.12.1960. Petitioner No. 4 retired  as  Member (Staff)  Railway Board and Ex-officio Secretary to the  Gov- ernment of India on 30.6.1977 opting for the Provident  Fund Scheme.  Petitioner No. 5 also retired on  19.6.1972  opting for  the Provident Fund Scheme. Petitioner No. 6 retired  on 28.8.1962 as Director 357 Health,  Railway  Board opting for  Provident  Fund  Scheme. Petitioner No. 7 similarly retired on 17.2.1968 as Director, Railway Board. Petitioner No. 8 retired as General  Manager, Indian  Railways on 15.10.1966 with the Contributory  Provi- dent Fund Scheme. The petitioners in Writ Petition No.  1165

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of 1989are also similarly retired persons. The petitioner in Special  Leave Petition (Civil) No. 8461 of 1986 retired  as Assistant  Auditor, with Provident Fund benefits. His  claim to switch over to pension after retirement was rejected. The petitioners  are  thus retired railway  employees  who  were covered by or had opted for the Railway Contributory  Provi- dent  Fund Scheme. It is the petitioners’ case  that  before 1957 the only scheme for retirement benefits in the Railways was  the Provident Fund Scheme wherein each employee had  to contribute  till retirement a portion of his  annual  income towards the Provident Fund and the Railways as the  employer would  make a matching contribution thereto. This  provident Fund  Scheme  was replaced in the year 1957 by  the  Pension Scheme  whereunder the Railways would give posterior to  his retirement certain monthly pension to each retired  employee instead of making prior contribution to his Provident  Fund. It is stated that the employees who entered Railway  service on  or  after  1.4.1957 were automatically  covered  by  the Pension  Scheme instead of the Provident Fund Scheme. In  so far  as  the  employees  who  were  already  in  service  on 1.4.1957,  they  were given an option either to  retain  the Provident Fund benefits or to switch over to the  pensionary benefits on condition that the matching Railway contribution already  made to their Provident Fund accounts would  revert to the Railway on exercise of the option.      It is the petitioners’ case that till 1.4.1957 or  even sometime thereafter, the pensionary benefits and the  alter- native Contributory Provident Fund benefits were  considered to be more or less equally beneficial, wherefore,  employees opted for either of them. That the benefits of the two  were evenly balanced was evidenced by the Railway Board  circular dated  17.9.1960 which gave an option to the employees  cov- ered by the Provident Fund Scheme to switch over to  pension scheme and vice versa. Mr. Shanti Bhushan, the learned counsel for the  petitioners in  Writ  Petition Nos. 352 and 361 of  1989,  submits  that between  1957  and 1987 the pensionary benefits  of  Railway employees  were enhanced on several occasions  by  different ways such as altering the formula for computing the pension, by  including  dearness allowance in the pay  for  computing pension, by removal of the ceiling on pension, and by intro- 358 ducing  or liberalising the Family Pension Scheme  etc.  The Railway, it is urged, had expressed no intention of  extend- ing  the benefits of this liberalised pension to  those  em- ployees who had already retired. At the time when the option was given to choose between pension and Provident Fund,  the employees  had no idea that in future improvements would  be made to either of them. However, it is stated, this Court in D.S.  Nakara  and Ors. v. Union of India, [1983] 2  SCR  165 held  that the benefit of any liberalisation in  computation of pension would also have to be extended to those employees who had already retired as they were similarly situated with those  who  were yet to retire. It is submitted,  that  even though  Nakara’s case related to Central Government  employ- ees, the Railways also implemented the Judgment and extended the liberalised pension benefits even to those employees who had  retired long before the liberalisations concerned  were introduced.  The decision to implement Nakara’s Judgment  to Railway  employees  is admittedly contained in G.O.  No.  FI (3)-EV/83  dated  22.10.1983.  This has,  according  to  the learned  counsel,  given  rise to  the  "strange  situation" namely,  that  while two alternative benefits  of  provident fund  and pension were more or less equal at the  time  when the petitioners were to make their choice, the pensions have

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thereafter  been liberalised manifold to the benefit of  the pension  retirees,  whereas no similar  benefits  have  been extended  to  those who retired opting for  Provident  Fund, hereinafter called ’the P.F. retirees’. It is asserted  that due  to successive liberalisations of pensions, the  pension retirees derived manifold benefits while the P.F.  retirees’ benefits  remained  stagnant. It is submitted that  had  the petitioners,  all  of  whom are P.F.  retirees,  known  that pensionary benefits might subsequently be so increased, they would  no doubt have opted for pension instead of  Provident FUnd, The following twelve notifications given such  options are referred to: ------------------------------------------------------------ Date of Notification         Cut-off date chosen ------------------------------------------------------------ 1. 17.09.60                  01.07.59 2. 26.10.62                  01.09.62 3. 03.03.66                  31.12.65 4. 13.09.68                  01.05.68 5. 23.07.74                  01..01.73 359  6. 23.08.79                  31.03.79  7  01.09.80                  23.02.80  8. 04.10.82                  31.08.82  9. 09.11.82                  31.01.82 10. 13.05.8                   31.01.82 11. 18.06.85                  31.03.85 12. 08.05.87                  01.01.86     It may be noted that in case of each option the  cut-off date  was anterior to the respective dates  of.announcement, and  as  a result, employees who retired after  the  cut-off date (specified date) and before the notification date  were also  made  eligible for exercising the option  despite  the fact  that  they already retired in the meantime.  From  the above,  the  ’main  legal point’ that  arises,  submits  Mr. Shanti Bhushan, is that the Railways issued the above  noti- fication  giving option to certain P.F. retirees  after  the respective cut-off dates to opt for the Pension Scheme  even after their retirement, but the same options were not  given to other similarly situated P.F. retirees beyond the respec- tive  cut-off dates. This, it is submitted, is clearly  dis- criminatory and violative of Art. 14 of the Constitution and deserves to be struck down.     It  is  contended by the petitioners that  each  of  the above notifications including the last one, dated 8.5.  1987 had given a fresh option to some of the P.F. retirees  while denying that option to other P.F. retirees who were  identi- cally  placed but were separated from the rest by the  arbi- trary  cut-off date. Each of the notifications  specified  a date  and provided that the P.F. retirees who retired on  or after that date would have fresh option of switching over to the  pensionary  benefits even though they had  already  re- tired, and also had already drawn the entire Provident  Fund benefits  due to them. It is also contended that the  speci- fied dates in these notifications having formed the basis of the  discrimination between similarly placed  P.F.  retirees those were arbitrary and un-related to the objects sought to be achieved by giving of the option and were clearly  viola- tive  of  Art.  14 and also of the principle  laid  down  in Nakara’s  case, which according to counsel, is that  pension retirees could not be divided by such arbitrary cut-off 360 dates for the purpose of giving benefitS’ to some and not to other similarly situated employees; and that by analogy  the rule is equally applicable to the Provident Fund retirees as

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a class.     Mr. Kapil Sibal, the learned Additional Solicitor Gener- al  refuting the argument submits that each of  the  options was  meant  to give the P.F. retirees  after  the  specified dates option to switch over to Pension Scheme and that  each specified  date had nexus with the reason for  granting  the particular option. He relies on the following statements  to substantiate his submission.      STATEMENT SHOWING PENSION OPTIONS          GIVEN TO RAILWAY EMPLOYEES ------------------------------------------------------------ S1. No. Option    Granted       Option        Reasons for                   Rly. Board’s  validity      granting                   letter No.    period        option                   date ------------------------------------------------------------ 1        2            3             4             5 ------------------------------------------------------------ 1.      I Option    F(E) 50/RTI/6  1.4.57 to 31.3.58 Intro-                     dated 16.11.57 (For those      duction                                    in service on   system                                    1.4.1957        on Rai-                                                      lways     Extensions     F(P) 58.PN-1/6   Extended upto                    dated 7.3.58     30.6.56                    F(P)58.PN-1/6    Extended upto                    dated 19.6.58    31.12.58                    F(P)58.PN-1/6    Extended upto                    dated 24.12.58   31.3.59                    F(P)58.PN-1/6    Extended upto                    dated 28.3.59    30.9.59 2.   II Option     PC-60/RB/2/2     1.7.59 to 15.12.60 Revi-                    dated 17.9.60    (For those in      sion                                     service on       of Pay                                                      Struc-                                                      ture (2                                                      nd Pay                                                      Commiss-                                                      ion re-                                                      commenda-                                                      tion) 361    Extensions      PC-60/RB-2/2   Extended upto                    dated 7.4.61   30.6.61                    PC/60/RB-2/2   Extended upto                    dated 2.11.61  31.12.61 3.   III Option    F(P)62.PN-1/2  1.9.62 to 31.3.63 Consequ-                    dated 26.10.62 (For those in    ent upon                                   service on 1.9.62 decision                                                     to count                                                    officiati-                                                   ng pay for                                                   pensionary                                                   benefits. 4.  IV Option     F(P)63.PN/1/   1.1.64 to 16.7.66 Introduc-                   40 dated 17.1.64                tion of                                                   family                                                   pension                                                   scheme. 5.  V Option       F(P)65.PN1/41  31.12.65 to  In  pursuance                    dated 3.3.66   30.6.66      of decision                                  (for those    to liberalise                                  in service on  the family                                  31.12.65     pension Scheme                                               by Extending

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                                            it  to  employ-                                              ess who die wh-                                              ile in service. 6. VI Option     F(E) III.68.PN-1.5.68 to 31.12.68 In  pursu                  1/2 dated 13.9.88 (for those in   ance of                                     service on      decision                                    1.5.68          to change                                                    the defi-                                                    nition of                                                  "pay"  w.e.                                                 f.1.5.68 for                                                 the  purpose                                                of pensionary                                                benifits. 362 Extensions  F(E)III.68PN-     Extended upto                 1/2 dated 31.1.69 31.3.69 7. VII Option   F(E)III.71.PN     15.7.72 to  As a result of                 1/3 dated 15.7.72 21.10.72    demandes from                                   (for those  orgnised                                   in service  labour.                                   on 15.7.72 8. VIII Option PC-III.73.PN/3    1.1.73 to 22.1.75 Consequet                dated 23.7.74     (for those  to acceptance                                  in service  III Pay Commis-                                on 1.1.73)  sions’ Recommen-                                                 dations.    Extensions PC-III.73.PN/3  Extended upto  Extended becau-               dated 18.1.75 & 30.6.76 &   se by schedule for               25.6.75         31.12.75    vsrious categories               PC-III, 73.PN/3    Extended upto were being               Pt I               30.6.76      Finalised.               dated 16.12.75               PC-III.73 PN/3     Extended upto               Pt.I               31.12.76               dated 30.6.76               PC-III 73 PN/3    Extended upto               Pt.I              30.6.76               dated 3.1.77               PC-III 73 PN/3    Extended upto               Pt.I              31.12.77               dated 12.7.77               PC-III 73 PN/3    Extended upto               Pt.I              30.6.78               dated 17.4.78               PC-III 73 PN/3    Option Exercised               Pt.I              upto 31.12.78 be               dated 20.5.78     considered as valid               PC-III.78 PN/3    (staff who were in               Pt.I              service as on 1.1.73 &               dated 27.12.78    retired/died/quited                                 service during the period                                 from 1.1.73 to 31.12.78) 363 9. IX Option  F(E) III. 79. PN 31.3.79 to   On account               - 1/4          22.2.80        of liberalisa-               dated 23.8.79  (For those in  tion of pen-                              service on     sion formula                              1.4.79)        and introduc-                                             tion of slab                                             system.    Extensions F(E) III. 79. PN Extended upto                -1/4 dated 1.9.80 22.2.81 10. X Option   F(E) III 82.    31.8.82 to 28.2.830n account                   PN 1/7       (For those in  of part of DA

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                 dated 4.10.82   service on     treated as                                   31.8.82)       pay.      Extension F(E)III 82. PN  Extended upto                 1/7 dated 13.5.83 31.8.83                                 % made applicable                                 from 31.1.82 under                                 letter No. F(E)                                 III 82 PN 1/7 dated                                 9.11.82 11.    XI Option  F(E) III 85.    31.3.85 to   Consequent                   PN 1/5          17.12.85     upon DA/                   dated 18.6.85   (For those inADA upto                                   service on  average price                                   31.3.85 )  index at point                                              568 treated as                                           pay for retire-                                               ment benefits. 12. XII Option  PC-IV/87/13/  1.1.86 to 30.9.87 All CPFbene-                 881                        ficiaries who                 dated 8.5.87 (for those in   were in service                              service on      on 1.1.86 and                              1.1.86)         who are still                                              in service will                                              be deemed to 364                                              have come                                              over to pen-                                              sion Scheme                                              unless they                                              specifically                                              opt out pension                                              scheme and                                              desire to                                              retain the CPF                                              scheme. INTRODUCTION OF PENSION SCHEME OF RAILWAYS AND            SUBSEQUENT PENSION OPTION (i) Introduction of Pension Scheme     Pension  Scheme  was  introduced  on  the  Railways   on 16.11.57 and was applicable to the following: (a)  To all Railway servants who enter service on and  after 16.11.57 and (b)  To  all non-pensionable Railway servants  who  were  in service on 1.4.57 or join Railway Service between 1.4.57 and 16.11.57 and opt for the Pension Scheme.     The  scheme was made applicable from 1.4.57 because  the financial  year commences from April each year. This  option was  extended 4 times from time to time and was  valid  upto 28.3.59. The extensions were given because there were repre- sentations  for  its extension so that the staff  could  get time  to  weigh the merits of the Schemes before  they  take decision. (ii) Pension option dated 17.9. 1960     Orders  were issued on 2.8.1960 notifying Railway  Serv- ices  (Authorised Pay) Rules, 1960. Under this  notification new  pay scales were introduced for Railway Servants.  These new pay scales were effective from 1st July, 1959.     Fresh option was granted on 17.9.60 to Railway employees who  were in service on 1.7.59 to come over to  the  pension scheme. The last 365 date  for exercising the option was 15.12.60. This  was  ex- tended  upto 31.12.60 to enable the concerned  employees  to come to a considered decision whether to retain the P.F.  or opt for the pension scheme.

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(iii) Pension Option dated 26.10.62     A decision was taken on 26.10.62 to count the  officiat- ing  pay for the purpose of retirement benefits in  case  of those  who were in service on 1.9.62. Accordingly,  a  fresh option was given to staff to come over to pension scheme  on 26.10.62. This option remained open till 31.3.63. (iv) Pension Option dated 17. 1. 1964     As  a  result of introduction of Family  Pension  Scheme 1964,  which came into force on 1.1.1964 orders were  issued on 17.1.64 to the effect that all Railway employees who were in service could opt for pension scheme within a period of 6 months. This option was extended upto 16.9.64. (v) Pension Option dated 3.3.66     Family  Pension Scheme was further liberalised  for  em- ployees  who die while in service. In view of this  improve- ment in Pension Scheme, pension option under Railway Board’s orders  dated  3.3.66  was given to employees  who  were  in service  on  31.12.65. Since the  liberalisation  in  Family Pension Scheme came into effect from 1st January, 1966,  the option  was  open  for  employees who  were  in  service  on 31.12.65 and was open upto 30.6.1966. (vi) Pension Option dated 13.9.68     The  definition  of ’Pay’ for  pensionary  benefits  was changed  from 1.5.68, through Board’s orders dated  13.9.68. In  view of this, a further option was given on  13.9.68  to Railway employees who were in service on and after 1.5.68 to opt  for  the  Pension Scheme. This  option  was  open  upto 31.12.68. This was further extended upto 31.3.69. (vii) Pension Option dt. 15.7. 72     On representation from the recognised labour federations that many employees had not clearly understood the liberali- sation introduced in the pension scheme, a fresh option  was allowed  on 15.7.72 to all serving employees. This was  open till 21.10.72. 366 (viii) Pension Option dated 23.7. 74     This option was based on similar orders issued by Minis- try  of Finance. The rationale behind this option  was  that the recommendations of the 3rd Pay Commission became  effec- tive from 1.1.73 but pay structure of all employees who were in  service  on  1.1.73 got altered  through  orders  issued piecemeal  from time to time. There were liberalisations  in the  pension  scheme  also in the form of  increase  in  the amount  of gratuity as also introduction of the  concept  of Dearness  Relief  made  available to  the  pensioners.  This option  was  made  available to all employees  who  were  in service on 1.1.73. Employees who had retired earlier did not get  affected in any way by the recommendations of  the  3rd Pay Commission and were accordingly not given this option to come over to Pension Scheme. This option was available  upto 22.1.75, a period of 6 months.     The  option  given vide letter of 23.7.74  was  extended from time to time till 31.12.78. The reason why this  exten- sion  had  to  be allowed was that the  revised  pay  scales recommended by the Pay Commission for many of the categories could  not  be finalised and notified. Till such  time,  the revised  pay  scale  admissible to each  category  was  made known,  it was impossible for the concerned staff to  assess the  benefit admissible for opting for the revised scale  as also  for the pension option. The pension option had  there- fore to be extended from time to time in this manner.     The letters authorising extension of the date of  option were  not very clearly worded with the result that the  pen- sion  option  during the periods of extension  was  granted, even  to those who had retired before such extension  became

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admissible but who were in service on 1.1.73. The clarifica- tion was accordingly issued to all the Railways stating that the  subsequent  orders extending the date  of  option  were applicable to serving employees only, but the cases  already decided  otherwise may be treated as closed and need not  be opened again.     It was subsequently represented by the organised  labour that the options actually exercised upto 31.12.78 should  be treated  valid  even  though such cases may  not  have  been decided  by that date. This was agreed to and orders  issued accordingly. (ix) Pension Option dated 23.8. 79 A  liberalised  formula and slab-system for  calculation  of pension 367 effective  from  31.3.79 was notified by  Railway  Board  on 1.6.79. Accordingly, orders were issued on 23.8.79  allowing pension option to those Railway employees who were in  serv- ice on 31.3.79. This option was initially open till  22.2.80 but was extended subsequently to enable wider  participation upto 22.2.1981. (x) Pension Option dated 4. 10.82     Orders  were issued by Board on 30.4.82 ordering that  a portion  of  Dearness Allowance will be treated as  pay  for retirement  benefits  w.e.f. 31.1.82.  Accordingly  a  fresh option  was allowed on 4.10.82 which could be  exercised  by Railway  employees  who  were in service  on  31.1.82.  This option was available upto 31.8.83. (xi) Pension Option dated 18.6.85     Orders  were issued by Railway Board on 17.5.85  merging Dearness Allowance to the price index upto 568 with pay  for the  purpose of retirement benefits and raising the  ceiling of  DCRG from 36,000 to 50,000 w.e.f. 31.3.85.  Accordingly, another option was granted to the Railway employees who were in  service  on  31.3.85. This option was  available  for  a period of 6 months i.e. upto 17.12.1985. (xii) Pension Option dated 8.5.87     Consequent upon acceptance of the recommendations of the 4th  Pay Commission the revised pay scales were notified  on 19.9.86  and 14.3.87, effective from  1.1.1986.  Accordingly another  pension option was given to the  Railway  employees who  were in service on 1.1.86 vide orders of 8.5.87.  Under these  orders  those  who did not specifically  opt  out  of pension scheme by 17.12.87 would he automatically deemed  to have opted for the pension scheme.     We  may now examine these options. The  Railway  Board’s letter No. F(E) 50-RTI/6 dated November 16, 1967  introduced the  pension scheme for railway servants. It said  that  the President had been pleased to decide that the pension rules, as  liberalised vide Railway Board’s Memo No.  E-48  OPC-208 dated  8.7.1950  as amended or clarified from time  to  time should apply "(a) to all railway servants who entered  serv- ice  on  or after issue of that letter and (b) to  all  non- pensionable  railway servants who were in service on  1.4.57 or  have  joined railway service between that date  and  the date  of issue of the order." The Railway servants  referred to in para (b) were required 368 to  exercise an unconditional and unambiguous option on  the prescribed  form  on or before 31.3.1958  electing  for  the pensionary  benefits or retaining their existing  retirement benefits  under the State Railway Provident Fund  Rules.  It further said that any such employee from whom an option form prescribed for the employee’s option was not received within the  above  time  limit or whose option  was  incomplete  or

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conditional  or ambiguous shall be deemed to have opted  for the pensionary benefits and if any such employee had died by that  date or on or after 1.4.57 without  exercising  option for  the  pensionary scheme, his dues would be paid  on  the provident fund system. The period of validity of this option was  first  extended  upto 30.6.58,  31.12.58,  31.3.59  and lastly  upto  30.9.59. There could, therefore, be  no  doubt that those who did not opt for the pension scheme had  ample opportunity to choose between the two.     The  second option was given by the Board’s  letter  No. PC-60/ RB/2/2 dated 17.9.60 to elect the retirement benefits under  the  Provident Fund Rules or the Pension  Rules.  All Railway  servants  who were in  non-pensionable  service  on 15.11.57 prior to the introduction of the pension scheme  on the  Railways and who were still in service including  (IPR) on 1.7.59 were granted this option to have their  retirement benefits regulated by the State Railway Provident Fund Rules or the Railway Pension Rules. Every eligible railway servant was  given the option to change over from P.F.  benefits  to pensionary  benefits  or vice versa. It  clearly  said  that Railway  servants  who  did not exercise  the  option  would continue to be eligible for the P.F. benefits or  pensionary benefits  as  the  case might be for which  he  was  already eligible.     The option was subject to the special conditions  stated therein.  Where  the Railway servants opted  for  pensionary benefits,  the part of the Government contribution  together with  interest  thereon and/or special contribution  to  the Railway  servants’ P.F. account had already been  paid,  the excess of the amount over the gratuity due under the Pension Rules should be refunded to the Government. It clearly  said that:  "the option once exercised shall, however,  be  final and  irrevocable irrespective of the decision taken on  that issue." If a Railway servant opted for P.F. benefits and  if the  payment of pensionary benefits had  already  commenced, further payment would be stopped and his P.F. account  would be  reconstructed  as if he had never opted  for  pensionary benefits. The period of validity of option was extended upto 30.6.61,  and then upto 31.12.61. This letter clearly  indi- cated  the reason for giving this option as "under  the  re- vised  pay  structure introduced from 1.7.59,  the  bulk  or whole of the D.A. previously payable 369 have been absorbed into pay and a number of changes are also being made in the rules regarding retirement benefits."     In  pursuance of the 3rd Pay Commission Report,  Govern- ment  decided  to give opportunity to  opt  for  liberalised Railway  Pension Rules including benefits of Family  Pension Scheme,  1964,  to Railway employees, who had  retained  the contributory P.F. Rules and who were in service on 31.3.1979 and  retired  on or after that date provided  they  gave  in writing  their option within six months. Employees  who  had retired  under  the said State Railway  P.F.  (Contributory) Rules,  their  option would be valid if  they  refunded  the entire  Government contribution and the excess, if  any,  of special contribution to P.F. received by them over  D.C.R.G. due to them under Pension Rules. In case of deceased employ- ees request could be made for option by valid nominee and in the  absence. of him by legal guardian. Thereafter a  number of representations were made and the Government extended the time for giving option for adopting Pension Scheme in  place of contributory P.F. Scheme.     As a result of treatment of a portion of ADA as pay  for purpose of retirement benefits and consequently  enhancement in  pensionary  benefits,  the date for  giving  option  was

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further  extended by 28.2.1983 only for these employees  who were  in service on 31.8.1982 and who quitted/retired on  or after  that  date. The date of option was  further  extended from time to time.      Keeping  in  view the treatment of entire DA  upto  the price  index line of 568 as pay for retirement benefit  with effect from 31.3.85, removal of ceiling limit of Rs. 1500 on pension  and  raising of ceiling of DCRG from  Rs.36,000  to Rs.50,000  the  date  of option for employees  who  were  in service  on  31.3.85  and  onwards  and  still  governed  by S.R.P.F.  (Contributory)  Rules, was further  extended  upto 17.12.1985  provided  the  amount  of   death-cum-retirement gratuity  and  the excess, if any, of  special  contribution over the D .C.R.G., was refunded. The 12th option was as under. "Government of India/Bharat Sarkar Ministry of Railways/Rail Mantralaya (Railway Board) Machine No. PC-IV/87/13/881  No. PC-IV/87/Imp. PW 1 370      The General Managers,               RBBIS. No. 116/87      All Indian Railways,      New Delhi, dated 8th May,                                  1987      Production Units etc.      as per mailing list. Subject:-  Change  over of Railway employees from  the  SRPF (Contributory  Scheme) to Pension  Scheme’Implementation  of the recommendation of the IV Central Pay  Commission-regard- ing.           The Railway employees who are covered by the  SRPF (Contributory  Scheme) CPF Scheme have been  given  repeated options in the past to come over the Pension Scheme.  Howev- er,  some  Railway employees still continue  under  the  CPF Scheme. The Fourth Central Pay Commission has now recommend- ed that all CPF beneficiaries in service on January 1, 1986, should be deemed to have come over to the Pension Scheme  on that  date,  unless they specifically opt  out  to  continue under the GPF Scheme. 2.  After careful consideration the President is pleased  to decide  that the said recommendation shall be  accepted  and implemented in the manner hereinafter indicated. 3.1.  All CPF beneficiaries, who were in service  on  1.1.86 and  who are still in service on the date of issue of  these orders,  will  be deemed to have come over  to  the  Pension Scheme.                               ? 3.2.  The  employees of the category mentioned  above  will, however, have an option to continue under the CPF Scheme, if they  so  desire. The option will have to be  exercised  and conveyed to the concerned Head of Office by 30.9.87, in  the form  enclosed, if the employees wish to continue under  the GPF  Scheme. 1f no option is received by the Head of  Office by the above date the employees will be deemed to have  come over to the Pension Scheme. 3.3.  The  CPF  beneficiaries,  ,who  were  in  service   on 1.1.1986, but have since retired and in whose cases  retire- ment benefits have also been paid under the CPF Scheme, will have an option to ’have their retirement benefits calculated under the Pension Scheme provided they refund 371 to  the Government the Government contribution to  the  Con- tributory Provident Fund and the interest thereon, drawn  by them  at  the time of settlement of the CPF  Account.   Such option shall be exercised latest by 30.9. 1987. 3.4. CPF beneficiaries, who were in service on 1.1.1986  but were  since retired, and in whose cases the CPF Account  has

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not  already been paid, will be allowed retirement  benefits as if they were borne on pensionable establishments,  unless they specifically opt, by 30.9.87, to have their  retirement benefits settled under the CPF Scheme. 3.5.  Cases  of CPF beneficiaries, who were  in  service  on 1.1.86,  but  have since died, either before  retirement  or after  retirement, will be settled in accordance  with  para 3.3. or 3.4 above, as the case may be. Options in such cases will  be exercised, latest by 30.9.87, by the  widow/widower and, in the absence of widow/widower, by the eldest  surviv- ing  member  of the family, who would  have  otherwise  been eligible to family pension under the Family Pension  Scheme, if such Scheme were applicable. 3.6. The option, once exercised, shall be final. 3.7.......................... 4.1............................. 4 . 2 In  the  case  of  employees   referred    to    above who    come  over  or are deemed to have come  over  to  the Pension  Scheme,  the Government’s contribution to  the  CPF together  with  the interest thereon, credited  to  the  CPF Account of the employee, will be resumed by the  Government. Special  contribution to Provident Fund if already  paid  in these cases, will be adjusted against the death/  retirement Gratuity, payable under these orders. The employee’s contri- bution, together with the interest thereon at his credit  in the  CPF account, will be transferred to the CRPF  (Non-Con- tributory)  Account,  to be allotted to him, on  his  coming over to the Pension Scheme. 4.3............................................ 5   ’A proposal to grant ex-gratia payment to the  benefici- aries, who retired prior to 1.1.1986 and to the 372 families of CPF beneficiaries who died prior to 1.1.1986, on the  basis of the recommendations of the Fourth Central  Pay Commission, is separately under consideration of the Govern- ment.  The said ex-gratia payment, if and  when  sanctioned, will  not be admissible to the employees or  their  families who  opt  to  continue under the CPF  Scheme  from  1.1.1986 onward. 6...........................                     (G. Chatterjee) Executive Director, Pay                       Commission                       Railway Board."     The  learned  Additional Solicitor General  stated  that each  option  was given for stated reasons  related  to  the options.  On  each occasion time was given not only  to  the persons in service on the date of the Railway Board’s letter but  also  to persons who were in service  till  the  stated anterior date but had retired in the meantime. The period of validity  of option was extended in all the  options  except Nos.  3rd, 4th, 5th and 7th. We find the statements to  have been  substantiated  by facts. The cut-off  dates  were  not arbitrarily chosen but had nexus with the purpose for  which the option was given.     Mr. Shanti Bhushan however submits that applying the law laid  down in Nakara’s case this Court should simply  strike down  or  read down paragraph 8.1 of the above  12th  option dated 8.5. 1987. That paragraph said that aH C.P.F.  benefi- ciaries who were in service on 1.1.86 and who were still  in service on the date of issue of the order would be deemed to have  come over to the pension scheme. It is submitted  that once  this  limiting requirement is removed all  the  C.P.F. beneficiaries  shall be eligible and will be deemed to  have come over to the pension scheme.     As  the basis or justification for striking  or  reading

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down  paragraph 3.1 on Nakara’s ratio, it is urged that  all the  Railway employees numbering about 22  lakhs  comprising 16,22,000 in service and about 6 lakhs pensioners constitute one  family and must be treated as one class as the  Govern- ment’s obligation to look after the retired Railway  employ- ees  both  under the pension scheme and the  provident  fund scheme being the same, they could not be treated  different- ly.  Any differential treatment will be  discriminatory  and violative  of  Article 14 of the Constitution of  India.  In Nalcara’s case the date arbitrarily 373 chosen  was struck down and as a result the revised  formula for computing pension was made applicable to all the retired pensioners.  The  same  principle, it is urged,  has  to  be extended to the provident fund retires also otherwise  there would  be  discrimination. It is stated that though  at  the time  of choosing between provident fund and pension  scheme both  the alternative appeared to be more or less equal  and the retired provident funders took their lump sum yet subse- quently  stage  by stage the pensioners  benefits  were  in- creased in such ways and to such extent that it became  more and  more discriminatory against the provident  funders  old and new. It was because of this discrimination that  aucces- sive options were given by the Railway Board for the  provi- dent funders to become pensioners. Hence the submission that this limitation must go, and all the provident funders  must be deemed to have become pensioners subject to the condition that the Government contribution received by them along with interest  thereon  is refunded or adjusted.  Obviously  this gives  no importance to the condition in  the  notifications that option once exercised shall be final and binding and to the fact that in each option a cut-off date was there relat- ed to the purpose of giving that option:     Admittedly, the entire case of the petitioners is sought to  be  based on the decision in Nakara’s  case.  Mr.  Kapil Sibal  submits  that the petitioners’  basic  assumption  is erroneous inasmuch as Nakara’s case did not hold that  when- ever there was a liberalisation of pension all other pension retirees and P.F. retirees must be given option and that the older system of pension or Provident Fund was always  insuf- ficient.  According to counsel the only question decided  in Nakara  can be gathered from the following paragraph of  the report at page 172: "Do pensioners entitled to receive superannuation or  retir- ing  pension under Central Civil Services  (Pension)  Rules, 1972  (’ 1972 Rules’ for short) form a class as a whole?  Is the  date of retirement a relevant consideration for  eligi- bility when a revised formula for computation of pension  is ushered  in and made effective from a specified date?  Would differential treatment to pensioners related to the date  of retirement  qua the revised formula for computation of  pen- sion attract Article 14 of the Constitution and the  element of discrimination liable to be declared unconstitutional  as being violative of Art. 14?"      The  basic  question  of law that has  to  be  decided, therefore, is what was the ratio decidendi in Nakara’s  case and how far that would 374 be applicable to the case of the P.F. retirees.     The  doctrine  of precedent, that is being  bound  by  a previous decision, is limited to the decision itself and  as to what is necessarily involved in it. It does not mean that this Court is bound by the various reasons given in  support of it, especially when they contain "propositions wider than the case itself required." This was what Lord Selborne  said

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in  Caledonian  Railway Co. v. Walker’s  Trustees  and  Lord Halsbury  in Quinn v. Leathem, [1981] A.C. 495,  (502).  Sir Frederick Pollock has also said: "Judicial authority belongs not  to the exact words used in this or that  judgment,  nor even  to all the reasons given, but only to  the  principles accepted and applied as necessary grounds of the decision."     In other words, the enunciation of the reason or princi- ple upon which a question before a court has been decided is along  binding  as a precedent. The ratio decidendi  is  the underlying  principle,  namely, the general reasons  or  the general grounds upon which the decision is based on the test or abstract from the specific peculiarities of the  particu- lar  case which gives rise to the decision. The ratio  deci- dendi  has to be ascertained by an analysis of the facts  of the  case and the process of reasoning involving  the  major premise  consisting  of a pre-existing rule of  law,  either statutory  or judge-made, and a minor premise consisting  of the  material facts of the case under  immediate  considera- tion. If it is not clear, it is not the duty of the court to spell it out with difficulty in order to be bound by it.  In the words of Halsbury, 4th Edn., Vol. 26, para 573: "The concrete decision alone is binding between the  parties to it but it is the abstract ratio decidendi, as ascertained on  a consideration of the judgment in relation to the  sub- ject  matter of the decision, which alone has the  force  of law  and which when it is clear it is not part of  a  tribu- nal’s duty to spell out with difficulty a ratio decidendi in order to bound by it, and it is always dangerous to take one or two observations out of a long judgment and treat them as if  they gave the ratio decidendi of the case. If more  rea- sons than one are given by a tribunal for its judgment,  all are taken as forming the ratio decidendi."     The question then is, has the court said in Nakara  that what  was applicable to pensioners vis-a-vis  liberalisation of pension was to be equally applicable to P.F. retirees? In Nakara’s case petitioners 1 and 375 2  were  retired pensioners of the Central  Government,  the first being a civil servant and the second being a member of the  service personnel of the Armed Forces. The third  peti- tioner  was a society registered under the Societies  Regis- tration Act, 1860, formed to ventilate the legitimate public problems  and was espousing the cause of the pensioners  all over  the country. The first petitioner retired in 1972  and on  computation, his pension worked out at Rs.675 per  month and  with dearness allowance he was drawing monthly  pension of  Rs.935. The second petitioner retired at or  about  that time  and at the relevant time was in receipt of  a  pension plus dearness relief of Rs .981.     The  Union of India had been revising  and  liberalising the pension rules from time to time. The Central  Government servants on retirement from service were entitled to receive pension  under the Central Civil Services  (Pension)  Rules, 1972.  Successive  Central Pay Commissions  recommended  en- hancement  of pension in different ways. The  first  Central Pay Commission (1946-47) recommended raising of the  retire- ment age to 58 years and the scale of pension to 1/80 of the emoluments of each year of service subject to a limit  35/80 with a ceiling of Rs.8,000 per year for 35 years of service. The  Second Central Pay Commission (1957-58) did not  recom- mend  any increase in the non-contributory retirement  bene- fits.  The  Administrative Reforms Commissioner  (ARC)  1956 took  note of the fact that the cost of living had  shot  up and correspondingly the possibility of savings had gone down and accordingly recommended that the quantum of pension  may

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be  raised to 3/6 of the emoluments of the last three  years of  service from existing 3/8 and the ceiling to  be  raised from  Rs.675  per month to Rs. 1,000 per month.  Before  the Government  acted upon it, the Third Central Pay  Commission did not examine the question of relief to pensioners because of its terms and recommended no change in the pension formu- la except that the existing ceiling to be raised from Rs.675 to  Rs. 1,000 per month and the maximum gratuity  should  be raised from Rs.24,000 to Rs.30,000.      On  May  25,  1979, Government of  India,  Ministry  of Finance, issued Office Memorandum No. F-19(3)-EV-79  whereby the  formula for computation of pension was liberalised  but made  it  applicable.  to Government servants  who  were  in service  on  March 31, 1979 and retired from service  on  or after  that date. The formula introduced a slab  system  for computation  of  pension which was applicable  to  employees governed  by the 1972 rules retiring on or after the  speci- fied date. The pension for the service personnel which would include  Army, Navy and Air Force staff was governed by  the relevant regulations. By 376 the  Memorandum  of  the Ministry  of  Defence  bearing  No. B/40725/ AG/PS4-C/1816/AD (Pension)/Services dated September 28, 1979, the liberalised pension formula introduced for the government servants governed by the 1972 rules was  extended to the armed forces personnel subject to the limitations set out in the memorandum with a condition that the new rules of pension  would  be effective from April 1, 1979 and  may  be applicable  to all service officers who become/ became  non- effective  on or after that date. This liberalised  ’pension formula  was  to be applicable prospectively  to  those  who retired  on  or after March 31, 1979 in case  of  government servants  governed by 1972 rules and in respect  of  defence personnel those who became/become non-effective on or  after April 1, 1979. Consequently those who retired prior to  -the specified date would not be entitled to the benefits of  the liberalised pension formula.     On  the above facts the petitioners’  therein  contended that this Court would consider the raison d’etre for payment of pension, namely, whether it was paid for past satisfacto- ry service rendered, and to avoid destitution in old age  as well  as a social welfare or socioeconomic justice  measure, the differential treatment for those who retired prior to  a certain date and those retiring subsequently, the choice  of the date being wholly arbitrary would amount to  discrimina- tion  and violative of Art. 14; and whether the  classifica- tion  based on fortuitous circumstance of retirement  before or subsequent to a date, fixing of which was not shown to be related  to any rational principle, would be equally  viola- tive  of  Art. 14. It was contended that pensioners  of  the Central  Government formed a class for the purpose  of  pen- sionary benefits and there could not be  mini-classification within the class designated as pensioners.     The Court considered the nature and purposes of  pension in  the  context of a welfare State and  found  that  though unquestionably  pension was linked to length of service  and the  last pay drawn which did not imply the pay on the  last day of retirement but average emoluments of 36 months  serv- ice which under the liberalised scheme was reduced to  aver- age  emoluments  of 10 months preceding the date  which  was expected to be higher than that of the higher average emolu- ments of 36 months, coupled with the slab system for  compu- tation  amounted to liberalisation of pension  in  different ways.  If the pensioners who retired prior to the  specified date  had  to earn pension on the average emoluments  of  36

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months’ salary just preceding the date of retirement,  natu- rally  the average would be lower and they would  be  doubly hit because the slab system newly introduced was not  avail- able to them 377 while  the ceiling was at a lower level and thus they  would suffer  "triple  jeopardy, viz., lower  average  emoluments, absence  of  slab  system and lower  ceiling."  This  Court, therefore, wanted to know what was the purpose in  prescrib- ing  the specified date vertically dividing  the  pensioners between  those who retired prior to the specified  date  and those  who retired subsequent to that date and why  was  the pension scheme liberalised. Receiving no satisfactory  reply the Court observed: "Both  the  impugned memoranda do not spell out  the  raison d’etre for liberalising the pension formula. In the  affida- vit  in opposition by Shri S.N. Mathut, it has  been  stated that  the liberalisation of pension of  retiring  Government servants  was decided by the Government in view of the  per- sistent  demand of the Central Government  employees  repre- sented  in the scheme of Joint Consultative Machinery.  This would clearly imply that the pre-liberalised pension  scheme did  not provide adequate protection in old age and  that  a further liberalisation was necessary as a measure of econom- ic  security.  When Government favorably  responded  to  the demand  it  thereby  ipso facto conceded that  there  was  a larger  available national cake part of which could be  uti- lised for providing higher security to erstwhile  government servants who would retire. The Government also took note  of the  fact  that Continuous upward movement of  the  cost  of living  index as a sequel of inflationary inputs and  dimin- ishing  purchasing power of rupee necessitated upward  revi- sion  of  pension. If this be the underlying  intendment  of liberalisation of pension scheme, can any one be bold enough to  assert that it was good enough only for those who  would retire  subsequent to the specified date but those  who  had already  retired did not suffer the pangs of  rising  prices and falling purchasing power of the rupee?"      The  Court then proceeded to examine whether there  was any  rationale  behind  the  eligibility  qualification  and finding no rationale concluded: "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." 378     The  Court accordingly concluded that the  division  was thus arbitrary and unprincipled and therefore the  classifi- cation did not stand the test of Art. 14. It was also  arbi- trary  as  the  Court did not find a  single  acceptable  or persuasive  reason  for  this division  and  this  arbitrary action violated the guarantee of Art. 14. The Court observed that the pension scheme including the liberalised scheme  to the Government employees was non-contributory in’ character. The payment of pension was a statutory liability  undertaken by  the Government and whatever became due and  payable  was 2budgeted for. The Court specifically observed: "One  could  have appreciated this line of  reasoning  where there is a contributory scheme and a pension fund from which alone  pension is disbursed. That being not the case,  there is  no  question  of pensioners dividing  the  pension  fund which, if more persons are admitted to the scheme, would pro rata  affect the share. Therefore, there is no  question  of dividing  the pension fund. Pension is a liability  incurred

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and has to be provided for in the budget." The Court further observed: "If from the impugned memoranda the event of being in  serv- ice and retiring subsequent to specified date is served, all pensioners  would  be governed by  the  liberalised  pension scheme. The pension will have to be recomputed in accordance with  the  provisions of the liberalised pension  scheme  as salaries  were required to be recomputed in accordance  with the recommendation of the Third Pay Commission but  becoming operative from the specified date. It does therefore  appear that the reading down of impugned memoranda by severing  the objectionable  portion  would  not  render  the  liberalised pension scheme vague, unenforceable or unworkable."     The Court in Nakara was not satisfied with the  explana- tion that the legislation had defined the class with clarity and precision and it would not be the function of this Court to enlarge the class. The Court held in paragraph 65 of  the report: "With the expanding horizons of socio-economic justice,  the Socialist  Republic and welfare State which we endeavour  to set up and largely influenced by the fact that 379 the  old men who retired when emoluments were  comparatively low  and  are  exposed to vagaries  of  continuously  rising prices,  the  falling  value of the  rupee  consequent  upon inflationary inputs, we are satisfied that by introducing an arbitrary  eligibility  criterion:  ’being  in  service  and retiring subsequent to the specified date’ for being  eligi- ble for the liberalised pension scheme and thereby  dividing a  homogeneous class, the classification being not based  on any  discernible  rational principle and having  been  found wholly  unrelated  to the objects sought to be  achieved  by grant  of liberalised pension and the  eligibility  criteria devised being thoroughly arbitrary, we are of the view  that the eligibility for liberalised pension scheme of ’being  in service  on  the specified date and retiring  subsequent  to that date’ in impugned memoranda, Exs. P-1 and P-2, violates Article 14 and is unconstitutional and is struck down.  Both the memoranda shall be enforced and implemented as read down as under: In other words, Ex. P-1, the words: ’that in respect of  the government  servants who were in service on March  31,  1979 and retiring from service on or after that date’; and  in  Ex. P-2, the words: ’the new rates of  pension  are effective  from April 1, 1979 and will be applicable to  all service officers who became/become non-effective on or after that date’; are unconstitutional and are struck down with this  specifi- cation  that the date mentioned therein will be relevant  as being one from which the liberalised pension scheme  becomes operative to all pensioners governed by 1972 Rules irrespec- tive of the date of retirement. Omitting the unconstitution- al  part it is declared that all pensioners governed by  the 1972 Rules and Army Pension Regulations shall be entitled to pension  as  computed under the liberalised  pension  scheme from the specified date, irrespective of the date of retire- ment. Arrears of pension prior to the specified date as  per fresh computation is not admissible."     Thus  the Court treated the pension retirees only  as  a homogeneous  class. The P.F. retirees were not in mind.  The Court  also clearly observed that while so reading  down  it was not dealing with any fund 380 and  there  was no question of the same cake  being  divided amongst larger number of the pensioners than would have been

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under  the notification with respect to the specified  date. All  the pensioners governed by the 1972 Rules were  treated as  a  class  because payment of pension  was  a  continuing obligation  on the part of the State till the death of  each of  the  pensioners  and, unlike the  case  of  Contributory Provident  Fund, there was no question of a fund in  libera- lising pension.     The  argument of Mr. Shanti Bhushan is that the  State’s obligation  towards  pension retirees is the  same  as  that towards P.F. retirees. That may be morally so. But that  was not the ratio decidendi of Nakara. Legislation has not  said so. To say so legally would amount to legislation by enlarg- ing  the  circumference of the obligation and  converting  a moral  obligation into a legal obligation. It reminds us  of the  distinction between law and morality and  limits  which separate  morals from legislation. Bentham in his Theory  of Legislation, Chapter XII, page 60 said: "Morality in general is the art of directing the actions  of men in such a way as to produce the greatest possible sum of good.  Legislation ought to have precisely the same  object. But  although these two arts, or rather sciences,  have  the same end, they differ greatly in extent. All actions, wheth- er public or private, fall under the jurisdiction of morals. It is a guide which leads the individual, as it were, by the hand through all the details of his life, all his  relations with  his  fellows. Legislation cannot do this; and,  if  it could, it ought not to exercise a continual interference and dictation  over the conduct of men. Morality  commands  each individual to do all that is advantageous to the  community, his own personal advantage included. But there are many acts useful  to  the  community which legislation  ought  not  to command.  There  are also many injurious  actions  which  it ought  not to forbid, although morality does so. In  a  word legislation has the same centre with morals, but it has  not the same circumference."     In Nakara it was never held that both the pension  reti- rees  and the P.F. retirees formed a homogeneous  class  and that  any further classification among them would be  viola- tive  of  Art. 14. On the other hand the Court  clearly  ob- served that it was not dealing with the problem of a "fund". The Railway Contributory Provident Fund is by 381 definition  a  fund. Besides,  the  Government’s  obligation towards an employee under C.P.F. Scheme to give the matching contribution  begins  as soon as his account is  opened  and ends with his retirement when his rights qua the  Government in respect of the Provident Fund is finally crystallized and thereafter no statutory obligation continues. Whether  there still remained a moral obligation is a different matter.  On the  other  hand under the Pension Scheme  the  Government’s obligation  does not begin until the employee  retires  when only  it begins and it continues till the death of  the  em- ployee. Thus, on the retirement of an employee  Government’s legal obligation under the Provident Fund account ends while under the Pension Scheme it begins. The rules governing  the Provident  Fund and its contribution are entirely  different from  the rules governing pension. It would not,  therefore, be  reasonable to argue that what is applicable to the  pen- sion retirees must also equally be applicable to P.F.  reti- rees.  This  being  the legal position the  rights  of  each individual P.F. retiree finally crystallized on his  retire- ment  whereafter no continuing obligation remained while  on the other hand, as regards Pension retirees, the  obligation continued till their death. The continuing obligation of the State  in respect of pension retirees is adversely  affected

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by fall in rupee value and rising prices which,  considering the corpus already received by the P.F. retirees they  would not  be so adversely affected ipso facto. It cannot,  there- fore, be said that it was the ratio decidendi in Nakara that the State’s obligation towards its P.F. retirees must be the same  as  that  towards the pension  retirees  An  imaginary definition  of  obligation  to include  all  the  Government retirees in a class was ’not decided and could not form  the basis  for any classification for the purpose of this  case. Nakara cannot, therefore, be an authority for this case.      Stare decisis et non guieta movere. To adhere to prece- dent  and not to unsettle things which are settled.  But  it applies  to  litigated facts and necessarily  decided  ques- tions. Apart from Art. 141 of the Constitution of India, the policy of courts is to stand by precedent and not to disturb settled point. When court has once laid down a principle  of law as applicable to certain state of facts, it will  adhere to  that principle, and apply it to all future  cases  where facts  are substantially the same. A deliberate  and  solemn decision  of  court made after argument on question  of  law fairly arising in the case, and necessary to its  determina- tion,  is  an authority, or binding precedent  in  the  same court,  or in other courts of equal or lower rank in  subse- quent  cases  where the very point is again  in  controversy unless there are occasions when departure is rendered neces- sary  to  vindicate  plain, obvious principles  of  law  and remedy continued injustice. It should be invariably applied 382 and should not ordinarily be departed from where decision is of  long  standing and rights have been acquired  under  it, unless  considerations  of public policy demand it.  But  in Nakara  it  was never required to be decided  that  all  the retirees  formed a class and no further  classification  was permissible.     The next argument of the petitioners is that the  option given  to the P.F. employees to switch over to  the  pension scheme  with effect from a specified cut-off date is bad  as violative  of Art. 14 of the Constitution for the same  rea- sons for which in Nakara the notification were read down. We have  extracted  the 12th option letter.  This  argument  is fallacious in view of the fact that while in case of pension retirees  who  are  alive the Government  has  a  continuing obligation and if one is affected by dearness the others may also  be similarly affected. In case of P.F.  retirees  each one’s  rights  having finally crystallized on  the  date  of retirement  and receipt of P.F. benefits and there being  no continuing  obligation thereafter they could not be  treated at  par  with the living pensioners. How  the  corpus  after retirement  of a P.F. retiree was affected or benefitted  by prices  and interest rise was not kept any track of  by  the Railways.  It  appears in each of the cases  of  option  the specified  date bore a definite nexus to the objects  sought to  be achieved by giving of the option. Option  once  exer- cised was told to have been final. Options were  exercisable vice  versa.  It is clarified by Mr. Kapil  Sibal  that  the specified date has been fixed in relation to the reason  for giving  the option and only the employees who retired  after the specified date and before and after the date of  notifi- cation  were made eligible. This submission appears to  have been substantiated by what has been stated by the successive Pay  Commissions.  It would also appear  that  corresponding concomitant benefits were also granted to the Provident Fund holders.  There  was, therefore, no discrimination  and  the question of striking down or reading down clause 3.1 of  the 12th Option does not arise.

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   It would also appear that most of the petitioners before their filing these petitions had more than one opportunities to  switch  over to the Pension Scheme which  they  did  not exercise. Some again opted for P.F. Scheme from the  Pension Scheme.     Mr. Shanti Bhushan then submits that the same relief  as is being canvassed by the petitioners herein has been upheld by  this Hon’ble Court by dismissing the SLP No. 5973/88  of the Government in the case of Union of India v. Ghansham Das and Ors. against the Judgment of the Central  Administrative Tribunal, Bombay. The Tribunal 383 had  held the same notifications as were impugned herein  to be  discriminatory and had directed that a flesh  option  be given to all P.F. retirees subject to refund of the  Govern- ment contribution to Provident Fund received by adjusting it against their pensionary rights. Similarly, it is submitted, in a Rajasthan case, both the single Judge and the  Division Bench have held that all the retirees would have to be given a  flesh option as the notifications giving the option  only to some retirees are clearly discriminatory. This view  has, it  is  urged, again been upheld by this  Hon’ble  Court  by dismissing  the  Special Leave Petition No. 7192/87  of  the Government by order dated 11.8.87.     We  have perused the judgments. The Central  Administra- tive  Tribunal  in  Transferred Application  No.  27/87  was dealing  with the case of the petitioners’ right  to  revise options during the period from 1.4.69 to 14.7.72 as both the petitioners  retired  during that period. The  tribunal  ob- served that no explanation was given to it nor could it find any  such  explanation.  In State of  Rajasthan  v.  Retired C.P.F. Holder Association, Jodhpur, the erstwhile  employees of  erstwhile Princely State of Jodhpur who  after  becoming Government servants opted Contributory Provident Fund wanted to  be given option to switch over to Pension  Scheme,  were directed to be allowed to do so by the Rajasthan High  Court relying on Nakara which was also followed in Union of  India v.  Bidhubhushan Malik, [1984] 3 SCC 95, subject  matter  of which  was High Court Judges’ pension and as such  both  are distinguishable on facts.     That  the Pension Scheme and the P.F. Scheme are  struc- turally  different is also the view of the Central Pay  Com- missions and hence ex gratia benefits have been recommended, which may be suitably increased.     In the report of the Third Central Pay Commission  1973, Vol. 4 at page 49, dealing with State Railway Provident Fund it was said: "49. Both gazetted and non-gazetted Railway employees with a service  of not less than 15 years who are governed  by  the State Railway Provident Fund Scheme are at present allowed a special  contribution at the rate of 1/4th of a month’s  pay for  each  completed  6 monthly period of  service  but  not exceeding 15 months’ pay or Rs.35,000, whichever is less. We have  been informed by the Railway Board that for  such  em- ployees the Government contribution and the special  contri- bution to the Provident Fund 384 together  constitute the retirement benefits which in  other civil  departments  are given in the shape  of  pension  and death-cum-retirement     gratuity.     Accordingly,     when pensionery  benefits to the other civil employees  were  im- proved in 1956 and 1957, the maximum of the special  contri- bution  to the provident fund for the Railway employees  was also  increased  from Rs.25,000 to Rs.35,000.  We  have  not examined whether and to what extent any further increase  in

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this  contribution  should be made consequent upon  the  en- hancement  of the maximum pension and gratuity being  recom- mended  by us for pensionable employees. The Government  may decide the same as they deem fit."     In  the Report of the Fourth Central Pay Commission,  in Chapter  9  the Commission has discussed the  State  Railway Provident Fund Scheme including Contributory Provident  Fund Scheme. In para 9.1 of the report, the Commission said  that the employees who joined railways prior to November 16, 1957 and  did  not opt for the pension scheme were  also  covered under  the C.P.F. Scheme known as State  Railways  Provident Fund Scheme (SRPF). About 50,000 employees were stated to be covered  under the C.P.F. Scheme of which the majority  were in  the railways. The number of employees who retired  under the  CPF  and SRPF schemes were 1.20 lakhs.  Under  the  CPF scheme every employee was required to subscribe a minimum of 8-1/3  per cent of his reckonable emoluments to be  credited to  the fund. The Government makes a matching  contribution. Both  the contributions earned interest at a rate  specified by the Government from time to time. On retirement,  employ- ees governed under the scheme was paid his contribution, the contribution made by the Government and the interest  earned on the total amount. In para 9.3 of the Report it was stated: "The SRPF scheme in the railways was replaced by the pension scheme as applicable to other Central Government  employees, in November, 1957 and those employees who were in service on April 1, 1957 and were governed by the scheme were given  an option  to come under the pension scheme.  Whenever  changes occurred in the pension structure for the Central Government employees  an  option was given to railway  employees  still covered  by  the  scheme. Such options have  been  given  on eleven occasions in the 385 past  and  the  last such option was  valid  upto  December, 1985." Comparing the advantage and disadvantage of the schemes  the Commission said: "While  pension scheme has been improved, enlarged and  lib- eralised  from time to time, there has been no  similar  im- provement  in the CPF scheme, excepting through  improvement of rates of interest which were modified from 7 per cent  on 1974 to 9 per cent in 1983-84, to 10 per cent in 1984-85 and to  12  per  cent in 1985-86. While those  governed  by  the pension  scheme  are  entitled to  receive  dearness  relief sanctioned  from time to time to compensate for increase  in the  cost  of living, those under the CPF  scheme  were  not entitled  to such relief. The employees governed by the  CPF scheme are also not entitled to the family pension available to  those governed by the pension scheme. The matching  gov- ernment  contribution in the case of CPF employees  is  paid for  the full period of service the restriction of 33  years for those governed by pension scheme does not apply in their case.  Those  who have retired under the CPF scheme  have  a corpus  yielding  regular  return. In the  case  of  railway employees, special contribution to PF is paid at the time of retirement  equivalent  to half a month’s  salary  for  each completed year of service subject to a maximum of 16 months’ salary or Rs.60,000 whichever is less. The amount of special contribution  has been raised from time to time as and  when the limit on death-cum-retirement gratuity was changed." In para 9.5 of the Report as to ex gratia alternative it  is stated: "As the pension scheme was introduced on the railways m’ 1957, those who retired earlier did not have an  opportunity

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to opt for pension. It was, therefore, decided to give  some ex gratia payment to them in consideration of the fact  that the retirement benefits were lower than what they would have received if they had retired under the pension scheme. Since this applied mainly to the low paid employees, the ex gratia payment  ranging  from  Rs. 15 to Rs.22.50  per  mensem  was sanctioned to those drawing pay upto Rs.500 per month.  They were also given relief on a 386 graded  scale subsequently. The amount of ex gratia  payment together with the relief now ranges from Rs. 170 to Rs.  283 per mensem." In  para 9.6, the Commission said that the P.F. and  pension schemes are structurally different. Accordingly  alternative ex gratia reliefs were suggested: "We have received a number of suggestions from  individuals, associations  and other organisations in respect of the  CPF scheme.  It has been stated that the objective of  both  the schemes,  viz., pension scheme and the CPF scheme being  the same,  there  should  not be differences in  the  matter  of retirement benefits between the pensioners and the benefici- aries of the CPF. It has been urged that the  liberalisation in the pension scheme needs to be appropriately extended  to the  beneficiaries under the CPF scheme. Since  the  schemes are  structurally different, equality of benefits under  the two  schemes is not feasible. We are, however, of  the  view that the CPF beneficiaries who have retired on low scales of pay  deserve some measure of relief. We according  recommend that  all  the CPF beneficiaries who have retired  prior  to March  31, 1985 with a basic pay upto Rs.500 per mensem  may be  given  an ex gratia payment of Rs.300 per  mensem  which will be in addition to the benefits already received by them under the CPF scheme. The ex gratia payments and the period- ic  increases already received by those who retired  on  pay upto  Rs.500  may be so adjusted that the  total  ex  gratia amount is not less than Rs.300. We further recommend that ex gratia  amount of Rs.300 per mensem may be reviewed  as  and when dearness relief is sanctioned to pensioners." "9.7. Railways have suggested grant of ex gratia payment  to the  widows  and dependent children  of  deceased  employees covered  by  CPF scheme at 50 per cent of the  rate  for  ex gratia payment. We agree and recommend accordingly for those getting pay upto Rs.500 per mensem. The eligibility of widow and  minor children for the purposes of this relief  may  be same as laid down under the pension rules." "9.8. In so far as the CPF beneficiaries still in service on 387 January 1, 1986 are concerned, we recommend that they should be  deemed to have come over to the pension scheme  on  that date unless they specifically opt out to continue under  the CPF scheme. The CPF beneficiaries who decide to continue  to remain  under that scheme should not be eligible on  retire- ment  for  ex gratia payment recommended by us for  the  CPF retirees.  Government  may, however, extend the  benefit  of DCRG  to CPF beneficiaries in other departments on the  same lines as in railways." "9.9. Government may also consider the feasibility of giving an  option  to all other CPF retirees who  are  not  covered under paragraph 9.6 above to come over to the pension scheme with effect from January 1, 1986 subject to their  refunding to  government the entire amount of government  contribution inclusive  of interest thereon credited to  their  Provident Fund account at the time of their retirement."     We have no doubt about the above recommendations receiv- ing due consideration by the Union of India. The 12th Option

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already given has to be viewed in this context.     The next question debated is that of financial  implica- tions.  It is submitted that given the fact that the  budget for  the year 1990-91 for disbursement of pension is  Rs.900 crores (as per page 11 of the Budget of the Railway  Revenue and Expenditure of the Central Government for 1990-91),  the additional  liability which would arise by giving relief  to the  Petitioners would be insignificant in  comparison.  Ac- cording  to  the petitioners as per  their  affidavit  dated 15.9.88,  the  additional  liability would come  to  Rs.  18 crores per annum and this figure would steadily decrease  as the number of P.F. retirees diminishes every year due to the fact that this question arises only with respect to very old retirees,  and a substantial number of them pass away  every year.     The Government in its affidavit dated 21.9.88 has stated that the additional liability as far as the Railway  employ- ees  are  concerned, would be Rs.50 crores a year.  This  is based on the assumption that there are 79,000 surviving P.F. retirees. Apart from the fact that this number of 79,000 was based  on  calculations made in 1988, and would  be  greatly reduced by this time, the petitioners submit that the actual number  of survivors would only be about 38,000.  Thus,  the actual burden would be less than half. Further, even  assum- ing that the figure 388 of 79,000 put forth by the Government is correct, the  aver- age annual expenditure per retiree for pension calculated by the Government is incorrect as the calculation includes  the non-recurring  arrear payments for the year 1987-88.  Taking the correct figures of total pension outlay and total number of  beneficiaries  the per capita  pension  expenditure  per annum  works  out  to Rs.4521. Multiplying  this  by  79,000 (assuming  the  figures of the Railways to be  correct)  the annual  expenditure comes to Rs.35.71 crores. This  compared to the current budget of pensions of Rs.900 crores, is quite insignificant and can be easily awarded by this Court as was done in Nakara, it is urged.     It  is submitted in the alternative that if  this  Court feels  that a positive direction cannot be made to the  Gov- ernment in this regard, it is prayed that at least an option should  no given to the respondents either to  withdraw  the benefit  of switching over to pension from every one  or  to give it to the petitioners as well, so that the  discrimina- tion must go.     We  are not inclined to accept either of  these  submis- sions.  The  P.F. retirees and pension retirees  having  not belonged  to  a class, there is no  discrimination.  In  the matter  of  expenditure includable in the  Annual  Financial Statement,  this Court has to be loath to pass any order  to give  any  direction, because of the division  of  functions between  the three co-equal organs of the  Government  under the Constitution.     Lastly,  the question of feasibility of  converting  all living  P.F. retirees to Pension retirees was  debated  from the point of view of records and adjustments. Because of the view  we  have taken in the matter, we do  not  consider  it necessary to express any opinion.     Mr.  C.V.  Francis in W.P. No. 1165 of 1989  argued  the case  more  or  less adopting the arguments  of  Mr.  Shanti Bhushan.  Mrs.  Swaran Mahajan, in W.P. No.  1575  of  1986, submitted  that the rule as to commuted portion of the  pen- sion  reviving  after  15 years should be  applied  to  P.F. retirees so that the corpus of Provident Fund dues  received more  than 15 years ago should be treated as committed  por-

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tion  of  pension and be allowed to revive  for  adjustments against  pension. In the view we have taken in this case  it is not necessary to express any opinion on this question. 389     Mr.  R.B. Datar for the respondent in W.P. No.  1575  of 1986  and  W.P.  No. 352 of 1989 more or  less  adopted  the arguments of the learned Additional Solicitor General.     In  the result, all the Writ Petitions and  the  Special Leave  Petition  are dismissed, but  the  petitioners  being retirees, we make no order as to costs. R.S.S.’                                            Petitions dismissed. 390