Classification of employees on the basis of date of retirement

Prachi Kumari

The Supreme Court in the case of Manojbhai N. Shah & Ors. Vs UOI & Ors (({Transfer Case (civil) No. 48 of 2010 (Supreme Court, 11/01/2015)})). made a classification of employees retiring in normal course and employees taking VRS i.e. Voluntary Retirement Scheme for the purpose giving of retiral benefits.

In the instant case the employers, in order to curtail the expenditure, decided to reduce the number of employees and in pursuance of this Scheme, offers were invited from the employees who wanted to opt for voluntary retirement even before completion of the period of normal pensionable service.

As per the provisions of the Scheme, it was open to the employees to opt for retirement even on completion of 10 years of qualifying service, provided they had attained the age of 40 years.

The Scheme had a limited duration of 60 days, during which the employees had to decide whether they wanted to opt for the Scheme. The employees opting for retirement under the Scheme were also to be given some additional benefits, namely, payment of 60 days’ salary for each completed year of their service or salary for the number of months of their remaining service, whichever was less. So far as determination of the amount of pension is concerned, as per the Scheme, five years’ service was to be notionally added to the service of the retiring employees and on that basis pension was to be paid to them.

In addition to the afore stated benefits, the retiring employees were also to get usual benefits under the provisions of the Payment of Gratuity Act, 1972 and the amount of Provident Fund, which they were otherwise entitled to.

Thus, the employees opting for voluntary retirement under the Scheme were to get benefit of ex gratia amount as well as benefit of additional pension which would result from the addition of the notional five years’ service.

Several employees took benefit under the Scheme and retired in pursuance of the afore-stated Scheme in 2004.

After retirement of the afore stated employees, the Employers revised pay scales of their employees under Notification dated 21st December, 2005 giving benefit of revision of pay retrospectively with effect from 1st August, 2002, provided the employees were in service on or after 1st August, 2002.

The issue involved in this case was whether after acceptance of voluntary retirement under the Scheme, such retired employees would be entitled to get benefit of the revision of pay, which was retrospectively given from 1st August, 2002 under the Notification dated 21st December, 2005, which was called the “General Insurance (Rationalisation of Pay Scales and Other Conditions of Officers) Second Amendment, 2005 and hereinafter referred to as “the Notification”.

The Employers denied the benefit of the said Notification or retrospective increase in the salary to the employees who had retired under the Scheme, whereas the said retired employees claimed that they should be given benefit of the retrospective increase in their pay and their pension should be revised because they were in service on 1st August, 2002 and had retired only in or after 2004.

A bench of Anil R. Dave, J. and Shiv Kriti Singh, J. observed: Normally a person gets pension when he retires from service after putting in the period of pensionable service as per his service conditions….we are of the view that the employees who had taken benefit under the Scheme and had already retired would not be entitled to additional pension due to retrospective increase in pay in pursuance of Notification dated 21st December, 2005.

The Supreme Court further held: Normally, retrospective rise in salary is given to those who are in service at the relevant time or who had retired in normal circumstances. The employees who had opted under the Scheme had not retired as per the normal conditions of service but had retired under the Scheme upon taking some special additional benefits.

Author thinks it is reasonable classification and it does not violate Article 14 of the constitution. Article 14 permits classification. Classification is merely a systematic arrangement of things into groups or classes, usually in accordance with some definite scheme, but the classification permitted in Art. 14 must rest upon reasonable grounds of distinction. It must not be “arbitrary, artificial or evasive” it must be a reasonable classification ((Anukul Chandra Pradhan Vs UOI AIR 1997 SC 814)).

Since, those who had retired under the Scheme had been given additional benefits and as their relationship with the Employers had come to an end, there was no question of making payment of additional pension to them and hence no discrimination made.