Chandrasekhara Menon, T. vs The Union of India (UOI) and Others

C.S. Rajan, J.—The Petitioner is a retired Judge of this Court. His career as a Judge of this Court has been described as "one long glorious straight line". The Petitioner is the third retired High Court Judge who had approached this Court for settling pensionary claims in the recent years. The Petitioner''s pension and allied matters are governed by the High Court Judges (Conditions of Service) Act, 1954 (hereinafter referred to as ''the Act''). Following the provisions of the Act the Petitioner was granted a pension of Rs. 16,000 per annum evidenced by Ext. P-1. There was a revision of pension payable to the High Court Judges who retired before 1st November 1986. The Petitioner retired on 19th December 1983. Consequent on the revision of the pension, the basic pension of the Petitioner was fixed at Rs. 2,191 per mensem. In 1991 the pension was again revised to Rs. 3,144 per mensem. In addition to the basic pension, the Petitioner is also receiving dearness relief on pension according to the rates in force from time to time. The present fate of dearness relief as on the date of the filing of the Original Petition, is contained in Ext. P-2 dated 7th April 1995. In accordance with Ext. P-2 the Petitioner is receiving dearness relief on his pension at the rate of 81 percent subject to a minimum of Rs. 2,820 per mensem.

The percentage of dearness relief on pension is the same to all the serving Judges of the High Court, All India Service Officers and other Central Government Officials. Whenever the dearness allowance is increased in the case of Central Government Officers, a corresponding increase is ordered in the case of Judges, both serving and retired. Ext. P-3 dated 28th March 1995 is the order by which the percentage of dearness allowance payable to Central Government Officers was fixed. By the letter dated 28th April 1995 the above increase was extended to the sitting Judges of the High Court. The complaint of the Petitioner is that though the percentage of rate of dearness relief and dearness allowance for all the persons covered by the Government Orders is the same, the amount that is taken into account for payment of the dearness relief for retired Judges is different. The Petitioner has illustrated the above disparity by giving a table which is as follows:

TABLE

Period Pay per month (Pension/Family Pension per month) Rate of dearness allowance per month (Rate of dearness relief per month)

(1) (2) (3)

1�1�1995 onwards (i) Not exceeding Rs. 3,500 125 per cent of pay

[(i) Not exceeding Rs. 1,750] [125 per cent of pension/family pension]

(ii) Exceeding Rs. 3,500 but not exceeding Rs. 6,000 94 per cent of pay subject to a minimwn of Rs. 4,375

[(ii) Exceeding Rs. 1,750 but not exceeding Rs. 3,000] [94 per cent of pension/family pension subject to a minimum of Rs. 2,188]

(iii) Exceeding Rs. 6,000 81 per cent of pay subject to a minimum of Rs. 5,640

[(iii) Exceeding Rs. 3,000] 81 per cent of pension/family pension subject to a minimum of Rs. 2,820]

Therefore in the case of pensioners, there is a discriminatory treatment. According to the Petitioner, the pensioner is also entitled to be paid dearness allowance at the same rate which a serving officer is getting. According to the Petitioner, this classification has no relation to the objects sought to be achieved. The object of payment of the dearness relief and dearness allowance is to compensate the fall in the value of rupee and the increasing cost of living. A serving officer as well as a retired person is feeling the impact of the fall in the value of rupee and the increase in the cost of living in a similar manner. In fact, according to the Petitioner, the impact of the objects would be more keenly felt by the pensioners than in the case of serving officers.

Sri P.K. Kurian, learned Senior Counsel appearing for the Petitioner elaborated the above argument with the help of various Supreme Court rulings. The learned Senior Counsel referred to various paragraphs of D.S. Nakara and Others Vs. Union of India (UOI), In the above case Justice Desai has analysed the evolution of the concept of pension in the following words:

The antequated notion of pension being a bounty, a gratuitous payment depending upon the sweet will or grade of the employer not claimable as a right and, therefore, no right to pension can be enforced through Court has been swept under the carpet by the decision of the Constitution Bench in Deokinandan Prasad Vs. The State of Bihar and Others, wherein this Court authoritatively ruled that pension is a right and the payment of it does not depend upon the discretion of the Government but is governed by the rules and a Government servant coming within those rules is entitled to claim pension. It was further held that the grant of pension does not depend upon anyone''s discretion. It is only for the purpose of quantifying the amount having regard to service and other allied chatter that it may be necessary for the authority to pass an order to that effect but the right to receive pension flows to the officer not because of any such order but by virtue of the rules. This view was reaffirmed in State of Punjab and Another Vs. Iqbal Singh,

In the course of transformation of society from feudal to welfare and as socialistic thinking acquired respectability, State obligation to provide security in old age, an escape from undeserved what was recognised and as a first step pension was treated not only as a reward for past service but with a view to helping the employee to avoid destitution in old age. The quid pro quo was that when the employee was physically and mentally alert, he rendered into master the best, expecting him to look after him in the fall of life. A retirement system therefore exists solely for the purpose of providing benefits. In most of the plans of retirement benefits, everyone who qualifies for normal retirement receives the same amount (see Retirement Systems for Public Employees by Bleakney, P. 33)

Let us therefore examine what are the goals that pension scheme seeks to subserve? A pension scheme consistent with available resources must provide that the pensioner would be able to live; (i) free from want, with decency, independence and self-respect and (ii) at a standard equivalent at the pre-retirement level. This approach may merit the criticism that if a developing country like India cannot provide an employee while rendering service a living wage, how can one be assured of it in retirement? This can be aptly illustrated by a small illustration. A man with a broken arm asked his Doctor whether he will be able to play the piano after the cast is removed. When assured that he will, the patient replied, ''that is funny, I could not before''. It appears that determining the minimum amount required for living decently is difficult, selecting the percentage representing the proper ratio between earnings and the retirement income is harder. But it is imperative to note that as self-sufficiency declines the need for his attendance or institutional care grows. Many are literally surviving now than in the past. We owe it to them and ourselves that they live, not merely exist. The philosophy prevailing in a given society at various stages of its development profoundly influences its soeial objectives. These objectives are in turn a determinant of a social policy. The law is one of the chief instruments whereby the social policies are implemented and pension is paid according to rules which can be said to provide social security law by which it is meant those legal mechanisms primarily concerned to ensure the provision for the individual of a cash income adequate, when taken along with the benefits in kind provided by other social services (such as free medical aid) to ensure for him a culturally acceptable minimum standard of living when the normal means of doing so failed (See Social Security Law by Prof. Harry Culvert, P1)

Summing up it can be said with confidence that pension Is not only compensation for loyal service rendered in the past, but pension also has a broader significance, in that it is a measure of socio-economic justice which inheres economic security in the fall of life when physical and mental prowess is ebbing corresponding to aging process and, therefore, one is required to fall back on savings. One such saving in kind is when you give your best in the heyday of life to your employer, in days of Invalidity, economic security by way of periodical payment is assured. The term has been judicially defined as a stated allowance or stipend made in consideration of past service or a surrender of rights of emoluments to one retired from service. Thus the pension payable to a Government employee is earned by rendering long and efficient service and therefore can be said to be a deferred portion of the compensation or for service rendered. In one sentence one can say that the most practical raison d''etre for pension is the eibability to provide for oneself due to old age. One may live and avoid unemployment but not senility and penury If there is nothing to fall back upon.

From the above discussion the following conclusions emerge (1) The pension is neither a bounty nor a matter of grace depending upon the sweet will of the employer and that it creates a vested right and also property in the hands of the pensioner. (2) The pension is not an ex gratia payment, but it is a payment for past service rendered. (3) It is a social welfare measure rendering socio-economic justice to those who in the heyday of their life ceaselessly toiled for the employer on an assurance that in their old age they would not be left in lurch.

This Court also had occasion to consider the concept of ''pension'' and ''the dearness relief on pension'' in the ruling reported in Narayanan v. Union of India 1994 (1) KLT 897. Guttal, J. in a well considered judgment has observed as follows:

As time passed by, the pensioner found that his money was not able to but, as much as it did on the date of his retirement. Inflation eroded his capacity to buy the necessities within the amount of pension. The Union of India, aware of the need to keep the ex-servicemen living in dignity, stepped in by accepting the reports of the Pay Commissions and decided to make up for the lost value of the pension. The device adopted by the Central Government was to pay to the pensioners the dearness relief on pension, just as dearness allowance is paid to its employees. The amount of dearness relief, is an additive to the original pension. It has not been absorbed into the original pension to make the two sums into one whole fixed sum of money. The relief on pension is, by its very natural variable-it increases or decreases with the cost of living. Therefore it is illogical to test the validity of the Petitioner''s submission on the consideration whether the relief on pension has been absorbed into the basic pension. The exaggerated emphasis on the separate existence of the number, representing the relief on pension is misleading. It ignores the fundamental fact that pension is not an arithmetical figure. Pension is the value of reward of compensation for past services.

Mr. Parameswaran, learned Counsel for the Central Government, urged, with his characteristic tenacity, that pension is always a fixed sum" and therefore the "additive" known as the amount of relief on pension nevery absorbed in basic pension, is not a component of pension. This argument is based on the traditional concept of pension when the amounts of pension were unalterable, because in those days the value of money was stable. In the current economy of the country the value of money is not stable. Therefore it is not rational to expect that the amount of relief on pension together with the original pension could be expressed as an unalterable fixed constant sum. Pension is the value of the compensation for past services. It is realised through the mechanism of granting relief on pension. In this process of the cost of living adjustment, it is inevitable that the total sum received by the pensioner varies with the cost of living. The argument of Mr. Parameswaran is not tenable.

To simplify the matter I propose to illustrate whey relief on pension is the inseparable component of pension:

Aware of the bewildering rate at which the value of the rupee fell, eroding the capacity of the original amount, received by the pensioner, to provide a decent living, the Central Government stepped into restore the amount of pension to its intended value. This cost of living adjustment may be illustrated thus:

The pension granted, say, in 1970 .. Rs. X Suppose in 1975 the inflation reduced the amount of pension to .. Rs. X-5

The Central Government added Rs. 5 to secure to the pensioners the intended value of Rs. X .. Rs. (X-5) +5 = Rs. X

Therefore the additional amount of Rs. 5 was granted for the purpose of continued receipt by the pensioner of the original value of Rs. X. Therefore the pension is always the value of Rs. X. In the words of the Fourth Central Pay Commission, this adjustment by granting relief on Rs. 5 "is a necessary concomitant of the very concept of pensionary benefits.

The Supreme Court had occasion to refer to the above ruling in Narayanan''s case 1994 (1) KLT 897 in the ruling reported in Union of India v. Vasudevan Pillay (1995) 2 S.C.C. 32, though the question was left open by the Supreme Court. The court held as follows:

It has, however, been strenuously contended by learned Counsel appearing for the re-employed ex-servicemen that pension being a right (and not a bounty) available to a retired employee as held in Nakara''s and D.R. being a part of pension, right to receive the same could not have been infringed merely because the incumbent sought re-employment to take care of the hardship which he might have otherwise faced after retirement. To sustain the submission, strength is sought to be derived from the decision of the Kerala High Court in Narayanan v. Union of India in which a view has been taken that the D.R. became an integral part of pension, because of which it could not have been discontinued on re-employment. As against this, the view of the Delhi High Court in Writ No. 1699 of 1992 (disposed of on 23rd February 1993) is that the D.R. is different from pension. For the disposal of the present cases it is not necessary to express any opinion on that aspect of the matter in as much as, according to us, even if Dearness Relief be an integral part of pension, we do not find any legal inhibition in disallowing the same in cases of those pensioners who get them selves re-employed after retirement. In our view this category of pensioners can rightfully be treated differently from those do not get re-employed; and in the case of the re-employed pensioners it would be permissible in law to deny D.R. on pension in as much as the salary to be paid to them On re-employment takes care of erosion in the value of the money because of rise in prices, which lay at the back of grant of D.R., as they get Dearness Allowance on their pay which allowance is not available to those who do not get re-employed.

The learned Senior Counsel also took me to the origin of Dearness Allowance and also its evolution through decades in India. In the earlier days, Dearness Allowance was regarded as an amount which enables the employee to face the increase in dearness of essential commodities. The National Commission on Labour (1969), while dealing With Dearness Allowance observed:

We consider that payment of D.A. has to be viewed in broader context of wage policy, many elements of which have been discussed in the previous chapter. In a developing economy where price stabilisation has proved ineffective, or the inflationary potential cannot be controlled, any arrangement for compensating for price rise will have its raison d''etre. At the same time, a direct linkage between a rise in the index and the D.A. may create problems for price stabilisation. It can hardly be disputed that the index is the best available indicator of changes of price level. The reason for a disproportionately high D.A. is the fixation of basic wage on a date far remote from the present.

The Commission further observed:

It is obvious that unless money wages rise as fast as the consumer prices, it would result in an erosion of real wages. But the extent of its impact will depend on the margin of cushion available at different levels of income.... We accordingly recommend that 95 per cent neutralisation should be granted against rise in cost of living to those drawing minimum wage in non-scheduled employments.

The Supreme Court had occasion to consider the principles of fixing of Dearness Allowance in the ruling reported in Bengal Chemical and Pharmaceuticals Works Ltd. v. Its Workmen AIR 1969 S.C. 860. In the above ruling the Supreme Court held as follows:

Full neutralisation is not normally given, except to the very lowest class of employees.

The purpose of dearness allowance being to neutralise a portion of the increase in the cost of living, it should ordinarily be on a sliding scale and provide for an increase on the rise in the cost of living and a decrease on a fall in the cost of living.

The basis of fixation of wages and dearness allowance is industry-cum-region.

Employees getting the same wages should get the same dearness allowance, irrespective of whether they are working as clerks or members of subordinate staff or factory workmen.

The additional financial burden which a revision of the wage structure or dearness allowance would impose upon an employer, and his ability to bear such burden, are very material and relevant factors to be taken into account.

The above ruling was quoted with approval by the Supreme Court in the ruling reported in Killick Nixon Limited Vs. Killick and Allied Companies Employees'' Union, .

Sri C.P. George Tharakan, learned Senior Central Government Standing Counsel argued that the claim of the Petitioner for grant of dearness relief at a higher rate with reference to the dearness allowance admissible to existing employees drawing salary equivalent to Petitioner''s pension is not tenable. According to him, the argument of discrimination would have been found to be acceptable had there been any discrimination in the payment of pensionary benefits with reference to similarly placed High Court Judges. But I do not think that the above approach is correct. What is contended before me by the Petitioner is that there is no nexus between the classification and the object sought to be achieved. The object of payment of dearness relief and Dearness Allowance is the same for both retired High Court Judges/Officers and serving High Court Judges/Officers. Therefore there cannot be any difference between the percentage of rate of Dearness Allowance to be paid to both these groups.

There cannot be any dispute that the purpose of Dearness Allowance is to neutralise a portion of the increase in the cost of living. Employees getting the same wages/salary should get the same Dearness Allowance. Full neutralisation may not be possible in all cases, In this connection it is pertinent to point out that in Ext. R-1(b) (the scheme of providing neutralisation against inflation for price rise on the recommendation of the Fourth Central Pay Commission), the relevant extracts from the report of the Fourth Central Pay Commission regarding grant to dearness relief to pensioners have been given, which read as follows:

At present the dearness relief payable to pensioners has no relation to the compensation for price rise which was admissible to them while they were in service. The relief is also subject to a ceiling of Rs. 12.50 for every increase of 8 points in the 12 monthly index average which becomes applicable to all pensioners drawing pension above Rs. 500 per mensem. This has created a number of anomalies in the existing pension structure. We have recommended a regular scheme for compensation against price rise to serving employees in Part I of our report. We are of the view that the pensioners also need to be given relief against price rise as a regular arrangement. We accordingly recommend that the dearness relief in future should provide full neutralisation of price rise to pensioners drawing pension upto Rs. 1,750 per mensem, 75 percent to those getting pension between Rs. 1,751 and Rs. 3,000 and 65 percent to those getting pension above Rs. 300 subject to marginal adjustments.

Thus it can be seen that pensioners also must be given relief against price rise and that deafness relief should provide full neutralisation of price rise to pensioners drawing pension up to Rs. 1,750 and according to various percentage for those who get pension above the aforesaid ceiling limit. When this principle is accepted, I do not find any justification for adopting a different percentage for pensioners. I see considerable force in the argument of the Petitioner that the object of compensation on the fall in the value of rupees and the neutralisation of cost of living is completely defeated by payment of dearness relief after reducing the slab at all stages. As recommended by the Pay Commission, the lower the pay/salary, the higher should be the degree of neutralisation. As illustrated by the Petitioner, a pensioner drawing a monthly basic pension of Rs. 3,000 is treated on a par with a person drawing a basic pay of Rs. 6,000 in the matter of payment of Dearness Allowance/dearness relief. The action of the Respondents in calculating the percentage pf dearness relief after making an increase to the extent of 100 percent in pension is rather unfair and unreasonable. Therefore I do not find any justification for adopting the above method in fixing the rate of Dearness Allowance/dearness relief to the Petitioner and other retired High Court Judges.

Therefore the Respondents are directed to make payments to the Petitioner by way of dearness relief at the rate at which Dearness Allowance is paid to those in service and drawing an equivalent amount as monthly pay. The Petitioner is also entitled to get the above amount by way of increase in the dearness relief after adjusting the amount already paid. But the Petitioner is entitled to the above increase in the dearness relief only from the month of August 1995, the date of filing of the Original Petition.

The Original Petition is allowed as indicated above.