http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6  

PETITIONER: STATE GOVERNMENT PENSIONERS’ ASSOCIATION & OTHERS

       Vs.

RESPONDENT: STATE OF ANDHRA PRADESH

DATE OF JUDGMENT25/07/1986

BENCH: THAKKAR, M.P. (J) BENCH: THAKKAR, M.P. (J) RAY, B.C. (J)

CITATION:  1986 AIR 1907            1986 SCR  (3) 383  1986 SCC  (3) 501        JT 1986    31  1986 SCALE  (2)138  CITATOR INFO :  F          1988 SC 501  (3)  F          1991 SC1182  (21)

ACT:      Andhra Pradesh  Revised Pension Rules, 1980-Part II and G.O.  No.   88  dated  26.3.80-Applicability  of-Payment  of gratuity at  revised rates  to pensioners  retired prior  to 1.4.78-Whether admissible.

HEADNOTE:      The Government  Order No.  88 dated  26th  March,  1980 provided that  retirement gratuity may be 1/3rd of pay drawn at the  time of  retirement  for  every  6  monthly  service subject to  maximum of  20 months  pay limited to Rs.30,000. This order  in so  far as  gratuity  is  concerned  is  made effective from 1st April, 1978.      The petitioners, erstwhile Government employees who had retired "before" April 1, 1978, filed petition under Article 226 in  the High  Court, contending  that gratuity is a part and parcel of the pensionary benefits and the same cannot be looked separately  from the  other  pensionary  reliefs  and therefore, they are also entitled to the benefit of gratuity retrospectively at the enhanced rate though they had retired before April  1, 1978 and had been paid gratuity at the then prevailing rate.      On behalf  of the  State the petition was contested and it was  contended that  gratuity is something different from the  other  pensionary  benefits  like  pension  and  family pension,  which  are  continuing  ones.  The  gratuity  that accrued to  the petitioners prior to 1.4.1978 was calculated on the  then existing Rules and paid, and the pensioners who retired prior  to 1.4.1978  form themselves  into a distinct class for  purposes of  the payment  of benefit  of gratuity from the  others who  retired after  1.4.1978, the date from which, the  revised pension rules are made applicable by the Government.      The High  Court dismissed the petition holding that the upward revision  of gratuity takes effect from the specified date (April 1, 1978) with prospective effect. 384      Dismissing  the   Special   Leave   Petition   of   the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6  

Pensioners’ Association this Court, ^      HELD: 1.  The upward  revision of gratuity takes effect from the  specified date  (April 1, 1978) with ’prospective’ effect. The  High Court has rightly understood and correctly applied the  principle propounded  by this Court in Nakara’s case, wherein it was held that no arrears are required to be paid because  to that  extent  the  scheme  is  prospective. [388B-C]      V.P. Gautama,  IAS Retd.  v.  Union  of  India  (S.L.J. 1984(1) 120),  and M.P. Tandon v. State of U.P., [1984] Lab. I.C.677, referred to.      D.S. Nakara  v. Union  of India,  (A.I.R. 1983SC  130), relied upon.      2.  There   is  no  illegality  or  unconstitutionality involved in  providing for  prospective operation  from  the specified date.  Even if that part of the Notification which provides for enforcement with effect from the specified date is struck  down  the  provision  can  but  have  prospective operation-not retrospective operation. In that event it will operate only  prospectively with  effect from  the  date  of issuance   of   the   notification   since   it   does   not retrospectively apply  to all  those who had already retired before the said date. [388C-E]      3. In  order to  make the notification retrospective so that it  applies to  all those  who had  retired  after  the commencement of  the Constitution  on 26  January, 1950  and before the  date of issuance of the notification on 26 March 1980, the  Court will  have to re-write the Notification and introduce a provision to this effect saying in express terms that it  shall operate retrospectively. Merely striking down or effecing the alleged offending portion whereby it is made effective from the specified date will not do. And this, the Court cannot  do. Besides,  giving prospective  operation to such payments  cannot  by  any  stretch  of  imagination  be condemned as offending Article 14. [388D-F]      4. Those  who were  in employment  say in 1950, 1960 or 1970, lived,  spent, and  saved, on  the basis  of the  them prevailing cost of living structure and pay-scale structure, cannot invoke  Article 14  in order to claim the higher pay- scale brought  into  force  say,  in  1980.  If  upward  pay revision cannot  be made prospectively on account of Article 14, perhaps  no such revision would ever be made. Similar is the case with regard to gratuity which has already been paid to the  petitioners on  the  then  prevailing  basis  as  it obtaind at the time of their respective dates of retirement. And it  was already  paid  to  them  on  that  footing.  The transaction is completed and closed. [388F-H; 389A]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Special  Leave  Petition (Civil) Nos. 14179-80 of 1985 385      From the  Judgment and  Order dated  11.7.1985  of  the Andhra Pradesh  High Court  in Writ Appeal No. 1443 and 1467 of 1984.      T.U. Mehta and A. Subba Rao for the Petitioners.      Dr. Y.S. Chitale, T.V.S.N. Chari and Miss Vrinda Grover for the Respondent.      The Judgment of the Court was delivered by      THAKKAR, J.  Does that  part  of  the  provision  which provides for  payment of  a larger  amount of  gratuity with prospective effect from the specified date offend Article 14

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6  

of the  Constitution of India? Whether gratuity must be paid on the  stepped up  basis, to  all those  who  have  retired before the  date of  the upward revision, with retrospective effect, even  if  the  provision  provides  for  prospective operation,  in  order  not  to  offend  Article  14  of  the Constitution of India? A Division Bench of the High Court of Andhra Pradesh says ’no’. In our opinion it rightly says so. The petitioners,  erstwhile  Government  employees  who  had retired "before"  April 1,  1978,  inter  alia  claimed  and contended before  the High  Court that they were entitled to the benefit  to the  Government order No. 88 dated 26 March, 1980 providing that:           "(b) Retirement gratuity may be 1/3rd of pay drawn           at the  time of  retirement for  every  6  monthly           service  subject  to  maximum  of  20  months  pay           limited to Rs.30,000." The said  order in  so far  as gratuity is concerned is made effective from 1st April, 1978. Says the High Court:           "Therefore, we are now only concerned whether this           G.O. Ms.  No. 88,  dated 26-3-1980, should be made           applicable to the pensioners that retired prior to           1-4-1978 by  revising their  gratuity  payable  to           them. The learned Advocate General, contends, that           gratuity is  something different  from  the  other           pensionary  benefits  like  the  pension  and  the           family pension,  which are  continuing  ones.  The           Gratuity that  accrued to the petitioners prior to           1-4-1978 was calculated on the then existing Rules           and paid.  In that  way,  the  pensioners  retired           prior to  1-4-1978 will  form  themselves  into  a           distinct class for purposes of the pay- 386           ment of  benefit of  gratuity from the others that           retired  after  1-4-1978,  from  which  date,  the           revised pension  rules are  made to  be applied by           the Government.  On the  other  hand,  it  is  the           contention of  the writ  petitioners that gratuity           is a  part and  parcel of  the pensionary benefits           and the  same cannot be looked separately from the           other pensionary  reliefs. The learned counsel for           the  Writ   Petitioners,  no   doubt,  cited   two           decisions (1)  V.P. Gautama, IAS Retd. v. Union of           India (SLJ  1984 (1) 120) (2) M.P. Tandon v. State           of  U.P.   (1984  LAB.   I.C.  677),  where  their           Lordships that  decided the above two cases, held,           that no  distinction can be made in the pensionary           benefits including  death-cum-retirement  gratuity           benefit between  the pensioners that retired prior           to the  stipulated date  and after  the stipulated           date. In  the decision  D.S. Nakara  v.  Union  of           India, (A.I.R.  1983 S.C. 130), their Lordships of           the Supreme  Court  enunciated  the  principle  as           follows:                "With the expanding horizons of socioeconomic                justice, the  Socialist Republic  and Welfare                State which  the country endeavours to set up                and the  fact that  the old  man who  retired                when emoluments  were comparatively  low  are                exposed to  vegaries of  continuously  rising                prices,  the   falling  value  of  the  ruppe                consequent  upon   inflationary  inputs,   by                introducing    an    arbitrary    eligibility                criteria,  ’being  in  service  and  retiring                subsequent to  the specified  date’ for being                eligible for  the liberalised  pension scheme

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6  

              and thereby dividing a homogeneous class, the                classification  being   not  based   on   any                discernible  rational   principle  and  being                wholly unrelated  to the objects sought to be                achieved by  grant of liberalised pension and                the  eligibility   criteria   devised   being                throughly  arbitrary,   the  eligibility  for                liberalised  pension   scheme  of  "being  in                service on  the specified  date and  retiring                subsequent to  that date"  in  the  memoranda                Exs. P-1  and P-2,  violated Art.  14 and  is                unconstitutional  and  liable  to  be  struck                down." After thus  enunciating the  principle, their Lordships have taken care to observe as follows:           "But we  make it abundantly clear that arrears are           not re- 387           quired to  be made  because  to  that  extent  the           scheme is prospective."           In our  opinion, the  arrears relating to gratuity           benefit computed  according to the Revised Pension           Rules of  1980 may  not be  paid to the pensioners           that retired prior to 1-4-1978 because at the time           of retirement,  they  are  governed  by  the  then           existing Rules  and their  gratuity was calculated           on that  basis.  The  same  was  paid.  Since  the           revised  scheme   is  operative   from  the   date           mentioned  in   the  scheme,  i.e.  1-4-1978,  the           continuing rights  of the  pensioners  to  receive           pension and  family pension  must also  be revised           according to  that scheme.  But the same cannot be           said with  regard to  gratuity, which  was accrued           and drawn.  The reason  why their Lordships of the           Supreme Court  in Nakara’s  case refused  to grant           arrears to  the pensioners  that retired  prior to           the stipulated  date would  ipso facto  apply  for           refusing to grant the revised gratuity, since that           would amount to asking the State Government to pay           arrears relating  to gratuity  after revising them           according to the new scheme for those that retired           prior to  1-4-1978 and that would amount to giving           retrospective effect  to the  A.P. Revised Pension           Rules, 1980,  which came  into effect  from 29-10-           1979 and  in the  case of  Part-II of  those Rules           from 1-4-1978.  The scheme  is prospective and not           retrospective.           Moreover, we  must remember  that when  the  State           Government appointed the Pay Revision Commissioner           to review  the then  existing scales  of pay under           G.O. Ms.  No. 745, General Administration (Spl. A)           Department,  dated  3-11-1978,  the  Pay  Revision           Commissioner was asked to take into account, while           making his recommendation, the economic conditions           in the  State, the  financial implications  of his           recommendations, and  the impact  thereof  on  the           resources  avilable   for  the   plan  and   other           essential non-plan  expenditure. Surely,  the  Pay           Revision   Commissioner,    when   he   made   his           recommendations to revise the pensionary benefits,           is not  contemplating to  make his recommendations           retrospective.  Otherwise,  he  would  have  taken           financial implications  of  those  recommendations           and the  impact thereof on the resources available           for plan  and other essential non-plan expenditure

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6  

         of the  State. For  this reason  also,  we  cannot           direct the State Government to re- 388           vise the  gratuity benefit, which was already paid           to these  petitioners who  retired prior  to  1-4-           1978. The  Supreme Court  has  clearly  stated  in           Nakara’s case  that arrears are not required to be           paid  because   to  that   extent  the  scheme  is           prospective. Similar  is the  case with  regard to           the case  of gratuity  that was  accrued and  paid           prior to  the stipulated day mentioned in the G.O.           promulgating the Revised Pension Rules of 1980."      We fully  concur with  the view  of the High Court. The upward revision  of gratuity takes effect from the specified date (April 1, 1978) with prospective effect. The High Court has rightly  understood and  correctly applied the principle propounded by  this Court  in Nakara’s  case, AIR  1983 S.C. 130. There is no illegality or unconstitutionality (from the platform  of  Article  14  of  the  Constitution  of  India) involved in  providing for  prospective operation  from  the specified date.  Even if that part of the Notification which provides for enforcement with effect from the specified date is struck  down  the  provision  can  but  have  prospective operation-not retrospective operation. In that event (if the specified date  line  is  effaced),  it  will  operate  only prospectively with  effect from  the date of issuance of the notification since  it does not retrospectively apply to all those who  have already  retired before  the said  date.  In order to  make it  retrospective so  that it  applies to all those who retired after the commencement of the Constitution on 26  January, 1950  and before the date of issuance of the notification on  26 March,  1980, the Court will have to re- write the  notification and  introduce a  provision to  this effect  saying  in  express  terms  that  it  shall  operate retrospectively. Merely  striking  down  (or  effacing)  the alleged offending  portion whereby it is made effective from the specified  date will  not do. And this, the Court cannot do. Besides,  giving prospective  operation to such payments cannot  by  any  stretch  of  imagination  be  condemned  as offending Art  14.  An  illustration  will  make  it  clear. Improvements in  pay scales by the very nature of things can be made  prospectively so  as to apply to only those who are in the  employment on the date of the upward revision. Those who were  in employment  say in  1950, 1960  or 1970, lived, spent, and  saved, on  the basis of the then prevailing cost of living  structure and  pay-scale structure, cannot invoke Art. 14  in order to claim the higher pay-scale brought into force say,  in 1980.  If upward  pay revision cannot be made prospectively on  account of  Article 14,  perhaps  no  such revision would ever be made. Similar is the case with regard to gratuity  which has  already been paid to the petitioners on the  then prevailing  basis as it obtained at the time of their  respective   dates  of  retirement.  The  amount  got crystallized on 389 the date  of retirement  on the basis of the salary drawn by him on  the date  of retirement.  And it was already paid to them on  that footing.  The  transaction  is  completed  and closed. There is no scope for upward or downward revision in the context  of upward  of downward  revision of the formula evolved later  on in  future unless  the provision  in  this behalf  expressly  so  provides  restrospectively  (downward revision may  not be  legally premissible even). It would be futile to contend that no upward revision of gratuity amount can be  made in  harmony with  Article  14  unless  it  also

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6  

provides for  payment on  the revised basis to all those who have already retired between the date of commencement of the Constitution in 1950, and the date of upward revision. There is therefore  no escape  from the  conclusion that  the High Court was perfectly right in repelling the petitioners’ plea in this  behalf. For  the sake of record we may mention that our attention  was called to an order of a Division Bench of the High  Court of  Gujarat LPA 280 of 1983 dated 8.9.83 per P.D. Desai  Acting C.J.,  which does  not discuss the issues involved but is based on a concession said to have been made by the Advocate General who appeared for the State. And also to a  decision of  the Allahabad High Court, (M.P. Tandon v. State of  U.P., [1984]  Lab. I.C. 677) and (Punjab & Haryana High Court  (V.P. Gautama  v. Union  of  India,  A.I.R.  SLJ [1984] (1)  120.) In  none ot  these decisions  the relevant passage from  D.S. Nakara  v. Union of India, [1983] SC 130, was considered.  Nor was  the aspect  regarding  prospective operation considered on principle. The High Court considered it shocking  and was  carried  away  by  the  fact  that  an employee who  retired even one day before the enforcement of the upward  revision  would  not  get  the  benefit  if  the specified date  of enforcement  was not  effaced by striking down the relevant provision. But in all cases of prospective operation it  would be so. Just as one who files a suit even one day  after the expiry of limitation would lose his right to sue,  one who  retires even a day prior to enforcement of the upward  revision would  not get the benefit. This cannot be helped,  there is  nothing shocking  in it unless one can say legislation  can never  be made prospective, and nothing turns on  it. These  are the  reasons which  impelled us  to dismiss the Special Leave Petition on 18 July, 1986. A.P.J.                                   Petition dismissed. 390