2022 (1) TMI 1408 - SC - Indian Laws

Pension Scheme - retirement benefits - vested or accrued rights of an employee - whether at the given time, such vested or accrued rights can be divested with retrospective effect by the Rule making authority? - HELD THAT - The concept of vested/accrued right in the service jurisprudence and particularly in respect of pension has been examined by the Constitution Bench of this Court in CHAIRMAN, RAILWAY BOARD AND ORS. VERSUS C.R. RANGADHAMAIAH AND ORS. ETC. ETC. 1997 (7) TMI 662 - SUPREME COURT where it was held that The Full Bench of the Tribunal has, in our opinion, rightly taken the view that the amendments that were made in Rule 2544 by the impugned notifications dated december 5, 1988, to the extent the said amendments have been given retrospective effect so as to reduce the maximum limit from 75% to 45% in respect of the period from January 1, 1973 to March 31, 1979 and reduce it to 55% in respect of the period from April 1, 1979, are unreasonable and arbitrary and are violative of the rights guaranteed under Articles 14 and 16 of the Constitution. Later, in U.P. RAGHAVENDRA ACHARYA AND ORS. VERSUS STATE OF KARNATAKA AND ORS. 2006 (5) TMI 514 - SUPREME COURT , the question which arose for consideration was that whether the Appellants who were given the benefit of revised pay scale with effect from 1st January, 1996 could have been deprived of their retiral benefits calculated with effect therefrom for the purpose of calculation of pension. In that context, while examining the scheme of the Rules and relying on the Constitution Bench Judgment in Chairman, Railway Board and Ors., this Court observed The Appellants had retired from service. The State therefore could not have amended the statutory Rules adversely affecting their pension with retrospective effect. In the instant case, the Bank pension scheme was introduced from 1st April 1989 and options were called from the employees and those who had given their option became member of the pension scheme and accordingly pension was continuously paid to them without fail and only in the year 2010, when the Bank failed in discharging its obligations, Respondent employees approached the High Court by filing the writ petitions. The Bank later on withdrawn the scheme of pension by deleting Clause 15(ii) by an amendment dated 11th March, 2014 which was introduced with effect from 1st April, 1989 and the employees who availed the benefit of pension under the scheme, indeed their rights stood vested and accrued to them and any amendment to the contrary, which has been made with retrospective operation to take away the right accrued to the retired employee under the existing Rule certainly is not only violative of Article 14 but also of Article 21 of the Constitution. Thus, non-availability of financial resources would not be a defence available to the Appellant Bank in taking away the vested rights accrued to the employees that too when it is for their socio-economic security. It is an assurance that in their old age, their periodical payment towards pension shall remain assured. The pension which is being paid to them is not a bounty and it is for the Appellant to divert the resources from where the funds can be made available to fulfil the rights of the employees in protecting the vested rights accrued in their favour. Appeal dismissed.

Summary

Issues Involved:
1. Vested/accrued rights of employees under the pension scheme.
2. Financial viability of the pension scheme.
3. Legitimacy of retrospective amendments to service rules.
4. Double pension concerns under different schemes.
5. Legal recourse for orders passed under the Employees Provident Fund Act.

Issue-wise Detailed Analysis:

1. Vested/Accrued Rights of Employees Under the Pension Scheme:
The core issue revolves around whether the pension scheme introduced by the Punjab State Cooperative Agricultural Development Bank Ltd. (the Bank) in 1989, which was later amended retrospectively in 2014, infringes on the vested rights of the employees. The Supreme Court emphasized that the pension scheme, introduced with effect from April 1, 1989, created vested rights for the employees who opted for it. The Court held that any retrospective amendment that takes away these vested rights is violative of Articles 14 and 21 of the Constitution. The Court relied on precedents like the Constitution Bench judgment in Chairman, Railway Board and Ors. v. C.R. Rangadhamaiah and Ors., which established that amendments with retrospective effect that diminish accrued benefits are unconstitutional.

2. Financial Viability of the Pension Scheme:
The Bank argued that the pension scheme became financially unviable, leading to its decision to discontinue the scheme and revert to the Contributory Provident Fund. The Supreme Court dismissed this argument, stating that financial constraints cannot justify the retrospective withdrawal of vested rights. The Court noted that the Bank, when introducing the scheme, was presumed to have considered the financial implications and should have ensured adequate funding for the pension scheme.

3. Legitimacy of Retrospective Amendments to Service Rules:
The retrospective amendment to Rule 15(ii) of the 1978 Rules, which effectively nullified the pension scheme, was a significant point of contention. The Supreme Court held that such amendments, which adversely affect vested rights, are arbitrary and discriminatory. The Court reiterated that rules which reverse benefits retrospectively violate Articles 14 and 16 of the Constitution. The Court cited several judgments, including U.P. Raghavendra Acharya and Ors. v. State of Karnataka and Ors., to reinforce that retrospective amendments cannot take away accrued benefits.

4. Double Pension Concerns Under Different Schemes:
The Bank contended that allowing employees to receive pensions under both the Bank's scheme and the statutory Employees Pension Scheme 1995 would result in double payment, which is impermissible. The Supreme Court clarified that the employees' entitlement to pension under the Bank’s scheme, which they opted for and contributed to, does not negate their rights under the statutory scheme. The Court emphasized that the Bank must fulfill its obligations under both schemes without depriving employees of their vested rights.

5. Legal Recourse for Orders Passed Under the Employees Provident Fund Act:
The Supreme Court acknowledged the Bank's concerns regarding orders passed under Sections 7A, 14B, and 7Q of the Employees Provident Fund Act, which imposed liabilities on the Bank for failing to deposit due contributions. The Court stated that these issues were not the subject matter of the current proceedings and advised the Bank to seek appropriate legal recourse separately.

Conclusion:
The Supreme Court dismissed the appeals, upholding the employees' right to receive pensions under the Bank's scheme. The Court directed the Bank to pay arrears of pension in installments and ensure regular pension payments from January 2022. The judgment reaffirmed the principle that retrospective amendments cannot infringe on vested rights, underscoring the importance of protecting employees' socio-economic security.