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PETITIONER: UNION OF INDIA & ORS.

       Vs.

RESPONDENT: L.V. VISHWANATHAN ETC.

DATE OF JUDGMENT:       11/11/1997

BENCH: SUJATA V. MANOHAR, M. JAGANNATHA RAO

ACT:

HEADNOTE:

JUDGMENT:                THE 11TH DAY OF NOVEMBER, 1997 Present:             Hon’ble Mrs. Justice Sujata V.Manohar             Hon’ble Mr. Justice M.Jagannadha Rao N.N.Goswami, Sr.  Adv.,  Ms.  Kanupriya  Mittal,  Adv..  for C.V.Subba Rao, Adv. with him for the appellants. M.S.Balaganesan  and  Mohd.Tahir  Siddiqui,  Advs.  for  the Respondents in C.A.No.885/94                       J U D G M E N T      The following Judgment of the Court was delivered:                    [With C.A. No.8851/94] Mrs. Sujata V.Manohar.J.      The respondents  in both these appeals retired as Audit Officers from  the Office  of the Accountant General, Andhra Pradesh,  after   more  than   30  years   of  service.  The respondents, some  time prior  to their retirement, had been sent on  deputation to  the Andhra  Pradesh Secretariat  and they continued  to be  deputation till  the  date  of  their retirement. Each person when he is sent on deputation has an option either to opt fro the pay in the parent office plus a deputation allowance  or to  opt for the scale of pay in the deputation  post.   Both  the   respondents  had  opted  for retaining their  pay in  the parent office plus a deputation allowance. The  respondent in  Civil Appeal  No.3343 of 1990 (L.V.Vishwanathan) retired on 31.1.1987 while the respondent in Civil  Appeal No. 8851 of 1994 (M.S. Sabhesan) retired on 31.5.1986. At the time of their retirement, under Rule 33 of the Central  Services Pension  Rule which  are applicable to the respondents, emolument for the purpose of calculation of pension were  defined to  mean pay as defined in Fundamental Rule 9(21). Fundmental rule 9(21) is as follows:-      "9(21): (a)  Pay means  the  amount      drawn  monthly   by  a   Government      servant as --      (i) the pay, other than special pay      or  pay  granted  in  view  of  his      personal qualifications,  which has      been sanctioned  for a post held by      him   substantively    or   in   an      officiating capacity,  or to  which

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    he is  intitled by  reason  of  his      position in a cadre; and      (ii) overseas  pay, special  ay and      personal pay; and      (iii) any  other  emoluments  which      may be  specially classed as pay by      the President.      It is an admitted position that the Government of India treated deputation  allowance as  special  pay.  Emoluments, therefore, at  the time of the retirement of the respondents included   deputation   allowance   for   the   purpose   of calculations of pension.      After  the   Fourth  Central   Pay  Commission  Report, Government orders  were issued in June 1986 revising the pay scales with  effect from  1st of  January, 1986.  Thereafter under an Officer Memorandum dated 14th of April, 1987 issued by the  Government of  India, Ministry  of Personnel, Public Grievances  and  Pensions,  there  was  a  revision  in  the provisions regulating,  inter alia,  pension. IN the opening part of  the  Officer  Memorandum  it  is  stated  that  "In pursuance of the Government decisions on the recommendations of the  Fourth Central  decisions on  the recommendations of the Forth Central Pay Commission the President is pleased to introduce  the   following  modifications   in   the   rules regulating pension, death-cum-retirement gratuity and family pension  under   the  CCS   (Pensions)  Rules,   1972."  The Modifications  were  applied  retrospectively  from  1st  of January 1986  so as to coincide with the revision in the pay scales. As  per the modifications, the term ’emoluments’ for the purposes  of  calculating  various  retirement  benefits including pensions,  was re-defined  to mean  basic  pay  as defined in Fundamental Rule 9(21)(a)(i) which the Government servant was  receiving  immediately  before  is  retirement. Similarly, the term ’average emolument’ was to be determined with reference  to the  emoluments  drawn  by  a  Government servant during the last ten months of his service.      As a result of this modification only sub-clause (i) of Fundamental  Rule   9(21)(a)  would  constitute  basic  pay, excluding sub-clause (ii) and (iii). Therefore since special pay is  excluded from  sub-clause (i),  the basic  pay would have to  be calculated by excluding deputation allowance. In consequence, rule 33 of the C.C.S. Pension Rules was amended in 1988 with retrospective effect from 1.1.1986. Previously, Rule 33  of the  CCS Pensions  rules defined "emoluments" as follows:      "The expression  ’Emoluments’ means      pay as defined in rule 9(21) of the      Fundamental    Rules     (including      Dearness Pay  as determined  by the      order of the Government issued from      time  to   time)  which  Government      servant was  receiving  immediately      before his  retirement  or  on  the      date of his death."      The amended  Rule 33  (with retrospective  effect  from 1.1.1986) is as follows:      "Emoluments:     The     expression      ’emoluments’  means  basic  pay  as      defined in  rule 9(21)(a)(i) of the      Fundamental    Rules     which    a      Government  servant  was  receiving      immediately before  his  retirement      or on  the dat  of his  death;  and      will  also  include  non-practising      allowance   granted    to   medical

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    officer   in    lieu   of   private      practice."      In the  same office  Memorandum  clause  10.1  makes  a provision  for   those  who   retire  between  1.1.1986  and 30.6.1987. These persons have an option to retain their pre- revised scales  of pay  and have  their  pension  calculated under the  rules in  force prior to the office Memorandum of 14.4.1987. In  other words,  they have  the option to retain pre-revised scales  of pay  and the  pre revised formula for calculation of  pension. The  other option  is for  them  to accept the new scales of pay from 1.1.1986 but their pension will be  under the amended Pension Rules i.e. without taking into account  the deputation  allowances. This was expressly provided in  the Office  Memorandum to  prevent  any  actual prejudice in  the form  of lesser  pension  being  given  on account  of  retrospective  operation  of  the  new  pension formula.      The Office  Memorandum of 14.4.1987 was modified on 8th of December,  1987 on  account of many representations which were received.  As per  the modification,  in case where ten months’ average  has to  be calculated on either side of the date  1.1.1986,  the  emoluments  as  per  Fundamental  Rule 9(21)(a)(i) will  be calculated  only for the period falling after 1.1.1986.  Once again  retrospective was  curtailed to prevent any actual prejudice.      Since the  Office Memorandum  was  given  retrospective operation from  1.1.1986, the  respondents who  had  retired after 1.1.1986  but before  14.4.1987, were affected by this Office Memorandum.  They opted  for    revised  pay  scales, Hence, for  the purpose  of calculation of pension, only the basic pay  as revised  excluding  deputation  allowance  was taken into account for determining pension.      The  respondents   contend  that   by  a  retrospective amendment in  the pension  rules,  their  right  to  include deputation allowance  as a part of their emoluments has been taken away.  They contend that such retrospective operations of the  pension rules  must be  set aside  as arbitrary  and violative of  Articles 14  and 16.  This contention has been upheld by  the Central  Administrative  Tribunal,  Hyderabad Bench .  Hence the  Union of  India has  filed  the  present appeals.      It is  contended by  the appellants  that  the  changes consequent upon  on the Fourth Central Pay commission Report have to  be taken as a package. By accepting the revised pay scales with  retrospective effect  from 1.1.1986 the Central Government  Employees  got  benefits  in  pay,  pension  and gratuity  form  1.1.1986.  When  they  take  these  benefits retrospectively from  1.1.1986, they cannot reject a part of that package which is disadvantageous" to them. In fact, the actual pension  which the  respondents got is much more than what they  would have  got had  they opted for the old rules prevailing when  the old  pay scales  were in  force. In the office Memorandum of 14.4.1987 there is a specific provision for people  like the  respondents  who  have  retired  after 1.1.1986 but  before 30th  of June,  1987 (i.e.  the  period prior to the Office Memorandum) giving them an option either to retain  their old  pay scales  and the old benefits which they were getting or to opt for their new pay scales and get benefits as per the new scheme. So that in those cases where the retrospective  operation of  the  "package"  causes  any prejudice, the  employee can  reject it  and retain  his old benefits.      A Constitution Bench of this Court has recently, in the case of Chairman, Railway Board & Ors. V. C.R. Rangadhamaiah & Ors.  (JT 1997 [7] S.C. 180), considered a situation where

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a retrospective  effect was given to a reduced percentage of running allowance  being taken  into account for determining average emoluments  for pension  of railway  employees.  The Constitution Bench  has held  that pension  would have to be calculated on  the basis  on which  it was  required  to  be calculated on  the date  when the  person  retired.  A  more restrictive formula  for calculation  of pension was held as arbitrary and  violative of Articles 14 and 16 to the extent that it  was made  applicable with  retrospective effect. In the present  case, however,  there is  a clear nexus between the upward  revision in  the pay  scales and the new formula for calculating  pension. Both  are given with retrospective effect from  1.1.1986. The  Office Memorandum  which changes the formula for pension also provides that those who retired after  1.1.1986  but  before  the  issuance  of  the  Office Memorandum would  have  the  option  to  get  their  pension determined under  the then  existing rules  on the  basis of emoluments they  were then  getting. The  effect is that (1) those who  retired prior  to 1.1.1986 got old emoluments and pension as  per the  old formula  (2) those who retire after 30.6.1987 get  new pay scales and pension as per new formula and (3) those who retire between 1.1.1986 and 30.6.1987 have the option to choose to be with either those in (1) or those in (2) whichever is more advantageous to them.      The respondents  want to  carve out  a fourth category. Those who  retire between 1.1.1986 and 30.6.1987 should have the new pay scales and also the more liberal old formula for calculating pension  as applied  to the  new pay  scales. If this is  accepted, those  who retire  between  1.1.1986  and 30.6.1987 will  get higher  pension than  all those who have retired before  1.1.1986 as  also all those who retire after 30.6.1987. There  is no  justification for  conferring  such higher benefits  only on  a small group that retired between 1.1.1986 and  30..1987. The  Office  Memorandum,  therefore, rightly gives  them the  choice, to obviate any prejudice to this small  group. The  retrospective  operation  of  Office Memorandum, therefore,  cannot be  considered as prejudicial to this  small group  as it has made an express provision to prevent any  actual prejudice to this group The ratio of the decision  of  this  Court  in  Chairman,  Railway  Board  v. rangadhamaiah (supra)  does not,  therefore,  apply  in  the facts and circumstances of the present case.      The Judgment of the Central Administrative Tribunal, in so far  as it  strikes down  the retrospective  operation of Office Memorandm  of 14.4.1987  is, therefore, set aside and the appeals are allowed. There will, however, be no order as to costs.