2005 (8) TMI 717 - SC - Indian Laws

State Government's employees - Seeking higher quantum of death-cum-retirement gratuity - Whether the decision of the Central and State Governments to restrict the revision of the quantum of gratuity as well as the increased ceiling of gratuity consequent upon merger of a portion of dearness allowance into dearness pay reckonable for the purpose of calculating gratuity, was irrational or arbitrary - HELD THAT - It is difficult to accede to the argument on behalf of the employees that a decision of the Central Government/ State Governments to limit the benefits only to employees, who retire or die on or after 1.4.1995, after calculating the financial implications thereon, was either irrational or arbitrary. Financial and economic implications are very relevant and germane for any policy decision touching the administration of the Government, at the Centre or at the State level. Even at that time, interestingly, the benefits were not made admissible from 1.3.1988, i.e. the date of the Average Consumer Price Index of 729.91, but from a much further date i.e. 16.9.1993. The Central Government adopted the same policy while issuing the O.M. dated 14.7.1995. Although, dearness allowance linked to the All India Average Consumer Price Index 1201.66 (as on 1.7.1993), was treated as reckonable part of dearness allowance for the purpose of calculating the death-cum-retirement gratuity, the benefit was actually made available to the employees who retired or died on or after 1.4.1995. Similarly, the increase in the ceiling of gratuity was a mere consequential step, which was also made applicable from 1.4.1995. As we have already noticed, 1.4.1995 was the date suggested by the Fifth Central Pay Commission ( Pay Commission ) in its Interim Report. The Central Government took a conscious stand that the consequential financial burden would be unbearable. It, therefore, chose to taper down the financial burden by making the benefits available only from 1.4.1995. It is trite that, the final recommendations of the Pay Commission were not ipso facto binding on the Government, as the Government had to accept and implement the recommendations of the Pay Commission consistent with its financial position. This is precisely what the Government did. Such an action on the part of the Government can neither be characterized as irrational, nor as arbitrary so as to infringe Article 14 of the Constitution. More recently, in Veerasamy 1999 (3) TMI 677 - SUPREME COURT , this Court observed that, financial constraints could be a valid ground for introducing a cut-off date while implementing a pension scheme on a revised basis. In that case, the pension scheme applied differently to persons who had retired from service before 1.7.1986, and those who were in employment on the said date. It was held that they could not be treated alike as they did not belong to one class and they formed separate classes. In the result, we set aside the common judgment and order of the High Court of Punjab Haryana in CWP and in connected matters decided thereby, in so far as they purport to grant the revised death-cum- retirement gratuity to government employees who died or retired before the prescribed cut-off date of 1.4.1995. We also set aside judgment and orders of the High Court of Himachal Pradesh in CWP. We further allow Civil Appeal, Civil Appeal @ SLP (C) and T.C. (and set aside the order dated 21.9.2001 of the CAT (Mumbai Bench) in O.A. and dismiss Civil Appeal. In the circumstances of the case, there shall be no order as to costs.

Summary

Issues Involved:
1. Entitlement to increased retirement/death gratuity for government employees who retired or died before the cut-off date of 1.4.1995.
2. Validity of the cut-off date of 1.4.1995 for the application of revised gratuity benefits.
3. Alleged violation of Article 14 of the Constitution due to the cut-off date.

Detailed Analysis:

1. Entitlement to Increased Retirement/Death Gratuity for Government Employees Who Retired or Died Before the Cut-off Date of 1.4.1995:
The respondents, comprising retired employees from various departments of the Government of Punjab and other entities, sought the benefits of increased retirement/death gratuity as per the Central Government's Office Memoranda (O.M.) dated 14.7.1995 and the Punjab Government's order dated 13.12.1996. These documents stipulated that a portion of the dearness allowance would be treated as dearness pay for calculating gratuity, but only for employees who retired or died on or after 1.4.1995. The High Court of Punjab & Haryana partially allowed the claims, extending the benefits to employees who retired on or after 1.7.1993 but before 1.4.1995. The Supreme Court, however, set aside the High Court's judgment, ruling that the benefits were not applicable to employees who retired or died before 1.4.1995.

2. Validity of the Cut-off Date of 1.4.1995 for the Application of Revised Gratuity Benefits:
The Supreme Court examined whether the cut-off date of 1.4.1995 was arbitrary or irrational. The Court noted that the cut-off date was recommended by the Fifth Central Pay Commission and was adopted by the Central Government due to financial constraints. The Court emphasized that financial and economic implications are relevant and germane for any policy decision. The Court found that the decision to restrict the benefits to employees who retired or died on or after 1.4.1995 was a conscious and rational decision by the government, considering the heavy financial burden that would otherwise ensue.

3. Alleged Violation of Article 14 of the Constitution Due to the Cut-off Date:
The employees argued that the cut-off date violated Article 14 of the Constitution, which guarantees equality before the law. They contended that all retirees and deceased employees formed a homogeneous class and that any discrimination based on the cut-off date was arbitrary. The Supreme Court rejected this argument, distinguishing the present case from the precedent set in D.S. Nakara v. Union of India, which dealt with pensionary benefits. The Court noted that subsequent judgments had watered down the rigid view taken in D.S. Nakara and that financial constraints could justify the introduction of a cut-off date. The Court cited several cases, including Union of India v. P.N. Menon and Ors., Action Committee South Eastern Railway Pensioners v. Union of India, and State of Rajasthan and Anr. v. Amritlal Gandhi & Ors., to support its decision that the cut-off date was not arbitrary or discriminatory.

Conclusion:
The Supreme Court set aside the judgments of the High Court of Punjab & Haryana and the High Court of Himachal Pradesh, which had extended the benefits of revised gratuity to employees who retired or died before the cut-off date of 1.4.1995. The Court upheld the validity of the cut-off date, emphasizing the relevance of financial constraints and the rational basis for the government's policy decision. The appeals by the Union of India and the State Governments were allowed, and the claims of the employees who retired or died before 1.4.1995 were dismissed.