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Judgment
This writ petition is filed seeking a writ of mandamus to declare the prescription of cut-off date viz., 19-11-1991 and limit the eligibility to the payment of gratuity prescribed in the Group Gratuity Scheme to employees retiring on or after the said date in the orders of the respondent Federation in circular letter No.2779/GGS/ 90 dated 24-2-1992 as void, without jurisdiction, illegal and arbitrary; and consequently direct the respondent to extend the uniform gratuity facility based on the formula applied to the Group Gratuity Scheme introduced through Life Insurance Corporation of India without limiting the eligibility to employees of the respondent retiring on or after 19-11-1991 and pay the difference of the amount to the petitioners and pass such other order or orders.
The brief facts as stated by the petitioners are that the petitioners No.1 to 5, who are the employees of the State Government viz., Animal Husbandry Department, were transferred to the Andhra Pradesh Dairy Development Corporation through G.O. Ms. No.647 P& RD dated 16-8-1977. They retired from service on 31-8-1987, 31-3-1991 : 31-5-1990 : 28-2-1987 and 31-12-1989 respectively.
The petitioners who were the erstwhile Government employees have opted for Pension Scheme, whereas the other employees have been covered by the Employees Provident Fund Scheme. Therefore the employees of the respondent-Federation were divided into above two categories. So far as the payment of gratuity is concerned, it is payable to both the category of employees in accordance with the DCRG Regulations, 1974 adopted by the respondent Federation on 15-6-1976.
The respondent-Federation to cover its gratuity liability to its employees, entered into an agreement with the Life Insurance Corporation of India, which is called Group Gratuity Scheme. Under the arrangement with LIC of India, gratuity payable to the employees of the respondent-federation is calculated according to a formula i.e., (15/ 26 multiplied by pay plus DA multiplied by the number of completed years of service) or rupees one lakh which ever is less. In accordance with this formula, the gratuity is computed and LIC of India pays the said amount as and when the benefit of gratuity becomes due and payable on retirement/ death of any employee of the respondent-Federation. The entire gratuity liability is fully covered by the Group Gratuity Scheme of LIC of India: and the gratuity amount is being paid by the LIC of India to the respondent in accordance with the formula stated above; and the respondent-federation is actually paying much lesser amount as gratuity to those employees who were erstwhile Government employees on their retirement or death in accordance with the Government rules applicable to them. The amounts actually paid as gratuity to the petitioners and payable to them and the amount as per Group Gratuity Scheme with LIC of India are set out in the table hereunder:
From the above, it is abundantly clear that the first petitioner is entitled for Rs.77,2211-00, but he was paid only Rs.36,000-00 and the balance amount payable is Rs. 41,211-00. In the case of second petitioner, he is entitled to for Rs. 1,00,000-00, but he was paid Rs.58,575-00 keeping the balance of Rs.41,215-00 pending. In respect of third petitioner, who is eligible to receive Rs. 1,00,000-00, he is paid only Rs.71,445-00 and the balance amount payable is Rs.28,555-00. In the case of fourth petitioner though he is entitled to Rs.60,800-00 he has been paid only
Name of the retd., Officer Pay & DA drawn at the time of retirement (per month) Total Amount of gratuitypaid Gratuity as per CGS with LIC of India Balance due
Rs. Rs. Rs. Rs.
Dr. R. Janardhan Rao 1st petitioner 3,600-00 36,000-00 77,211-00 41,211/-
T. Reddappa Reddy 2nd petitioner 5,355-00 58,575-00 1,00,000-00 41,215/-
K. Ramakrishna Rao 3rd petitioner 5,520-00 71,445-00 1,00,000-00 28,555/-
P. Satyanarayana 4th petitioner 3,294-00 35,000-00 60,800-00 24,800/-
A. Sanjiva Reddy 5th petitioner 5,855-00 50,000-00 1,00,000-00 50,000/-
Rs.36,000-00 and the balance amount payable is Rs.24,800/-. Lastly, the fifth petitioner is entitled for Rs. 1,00,000-00 but he was paid Rs.50,000-00 and the balance payable is Rs.50,00-00. In view of the method adopted by the respondent-federation, there is substantial loss in payment of gratuity amount to the petitioners.
The Federation has adopted the payment of rupees one lakh to the employees who opted for Government set up rules for payment of gratuity through Minute No.24 dated 19-11-1991. In accordance with the said Minute, the respondent issued circular letter No.2779/GGS/90, dated 24-2-1992 stating that the orders contained in the Board resolution will apply in the case of all employees who retired or otherwise demit office on or after 19-11-1991. It is further submitted that the Minute itself did not contain any recital that it shall apply only to employees retiring on or after a particular date. The circular emanating from the Vice-Chairman and the Managing Director limited the applicability of the orders introducing uniform gratuity to employees retiring on or after 19-11-1991. But the scheme with LIC of India is in force with effect from 1-8-1977. Therefore, questioning the above letter, the present writ petition is filed by the writ petitioners.
It is submitted by the learned Counsel for the petitioners that the services of the petitioners were transferred from Government under a Government Order and they had become the employees of the respondent-Federation and they have opted for payment of Government Pension Scheme and further the respondent-Federation have adopted the Group Gratuity Scheme on 15-6-1976 through a resolution. Therefore, the payment of half of the gratuity amount to the petitioners, who retired on the respective dates menlioned supra is contrary to law and offending Articles 14 and 16 of the Constitution of India. The respondent-federation itself adopted the Group Gratuity Scheme of LIC of India from 1976 and when a representation was made by some of the employees of the Federation, the respondents have taken a decision to pay one lakh as gratuity to all employees of Federation but imposed a cut-off date by the respondent-Federation that those who are retired on or after 19-11-1991 are entitled for receiving the full gratuity, but the above decision is discriminating among the employees, who were transferred from the Government, i.e., the employees who retired before 1991 were paid 50% of one lakh but those who retired after 1991 were paid one lakh. For the above stated grounds, the impugned proceedings issued by the respondent are liable to be set aside as offending Article 14 of the Constitution of India.
Learned Standing Counsel for the respondents is not present. No representation. Heard the learned Counsel for the petitioners.
The respondent filed counter affidavit stating that it is true that since most of the employees of the Federation opted for the rules applicable to the Government servants for payment of pay and pensionary benefits, care was taken that the said employees who were absorbed in the Federation would receive the gratuity and other benefits in accordance with the various Government Orders issued from time to time; and the employees appointed by the Federation after 2-4-1974 were given the benefits of gratuity etc., in accordance with the provisions of the payment of Gratuity Act, 1972 with certain modifications indicated by the Life insurance Corporation of India. It is also admitted that the Federation has introduced the Group Gratuity Scheme of LIC of India and hence the payment of gratuity is tagged on to LIC scheme and the same was made applicable with effect 2-4-1974 and it is an improvement over payment of Gratuity Scheme as applicable to the Andhra Pradesh Government Employees. It is further stated that the above scheme is an improvement over the provisions of the "Payment of Gratuity Act" wherein maximum ceiling of Rs. 50,000-00 has been fixed. It is a beneficial scheme adopted by the Federation and they have supported the stand taken with the Federation in their 89th meeting held on 19-11-1991 and resolved to extend Gratuity facilities uniformly to all the employees of Federation by calculating Pay including DA also subject to a ceiling of rupees one lakh and the scheme was made applicable from the date of acceptance by the Board i.e., 19-11-1991 and has no retrospective effect. It is very clear from the above facts and circumstances, the petitioners, who were originally the Government employees and who opted for payment of gratuity as per the Government orders or pension rules have been paid likewise. Their gratuity has never been less than that of the Government employees and that the petitioners have been retired from service between 1987 and 1991 and have been paid the gratuity as per the Government Orders in force from time to time. Therefore, the question of offending Articles 14 and 16 of the Constitution of India does not arise.
The Federation has come to a decision for payment of gratuity uniformly to all the employees that is from 19-11-1991 and if the Federation has extended the benefit with retrospective effect, the petitioners are entitled to receive the same at a maximum ceiling of rupees one lakh. Ultimately, the Federation contended that if the payment of maximum ceiling limit of gratuity is payable to the petitioners from 2-4-1974 to all the employees, who are former Government employees working and retired, it will be an enormous financial burden, which will cripple the Federation. So, it is clear from the facts and circumstances of the case that the petitioners are erstwhile employees of the Government and were transferred to the Federation and they were absorbed and retired as employees of the Federation. But however, the petitioners and some of the employees of the Federation, who were erstwhile Government employees, have opted for payment of pension and gratuity as per the Government rules. But the Federation has adopted the Group Gratuity Scheme of LIC of India for payment of all the employees with effect from 2-4-1974 and made effective from 1977. Mode of payment of premium to the Group Gratuity Scheme of the LIC of India is entirely borne and paid by the LIC of India and there is no financial contribution or liability on the part of the Federation. Therefore, as contended by the learned Counsel for the petitioners Mr. V. Srinivas that when the LIC of India as per its scheme is paying rupees one lakh as the maximum ceiling, imposing restriction by the respondent-Federation is contrary to the tenns of the scheme and law. Therefore, the decision taken by the respondent-federation is liable to be set aside. It is further contended that the respondent-Federation is dividing the employees by treating the employees transferred from the Government as a separate class, which is nothing but a discrimination against the employees transferred from the Government, who retired after 19-11-1991. Therefore, it is offending Article 14 of the Constitution of India. I see some force in the contentions raised by the learned Counsel for the petitioners.
The fundamental principle is that Article 14 forbids class Legislation but permits reasonable classification for the purpose of Legislation which classification must satisfy the twin tests of classification being founded on an intelligible differentia which distinguishes persons or things that are grouped together from those that are left out of the group and that differentia must have a rational nexus to the object sought to be achieved by the statute in question. The doctrine of classification was evolved to sustain a Legislation or State action designed to help weaker Sections of the society or some such segments of the society in need of succor Legislative and execution action may accordingly be sustained if it satisfied the twin tests of reasonable classification and the rational principle correlated to the object sought to be achieved. Where all the relevant considerations are the same, persons holding identical posts may not be treated differently in the matter of their pay merely because they belong to different departments. If that cannot be done when they are in service, can that be done during their retirement? Expanding this principle, it can confidential be said that if pension form a class, their computation cannot be by different formula affording unequal treatment solely on the ground that some retired earlier and some retired later.
The learned Counsel for the petitioner has strongly relied on the Judgment of the Supreme Court in D.S. Nakara and Others Vs. Union of India (UOI), . In the famous Nakara''s case, wherein the cut-off date was fixed by the respondent/Union Government entitling the employees to receive the revised amount of pension to such of those employees who retired on a particular date and disentitling the employees who retired before the said date. In those circumstances, the Supreme Court has held that it is a discrimination between the same class of employees and the Union Government has no power to discriminate in the homogenous group.
But as seen from the judgment in the above case, it made a distinction between pension and gratuity in Nakara''s case, the Supreme Court enunciated the principle and has taken care to observed as under:
".....But we make it abundantly clear that arrears are not required to be made because to that extent the scheme is prospective. In our opinion the arrears relating to gratuity benefit computed according to the revised Pension Rules of 1980 may not be paid to the pensioners that retired prior to 1-4-1978 because at the time of retirement they were governed by the then existing Rules and their gratuity was calculated on that basis. The same was paid....."
Following Nakara''s case the Supreme Court in State Government Pensioners'' Association and Others Vs. State of Andhra Pradesh, , has held as under:
".....Since the revised scheme is operative from the date mentioned in the scheme i.e., 1-4-1978, the continuing rights of the pensioners to receive pension and family pension must also be revised according to that scheme. But the same can not be said with regard to gratuity, which was accrued and drawn. The reason why their Lordships of the Supreme Court in D.S. Nakara and Others Vs. Union of India (UOI), refused to grant arrears to the pensioners that retired prior to the stipulated date would ipso facto apply for refusing to grant the revised gratuity, since that would amount to asking the State Government to pay arrears relating to gratuity after revising them according to the new scheme for those that retired periorof 1-4-1978 and that would amount to giving retrospective effect to the A.P. Revised Pension Rules, 1980, which came into effect from 29-10-1979 and in the case of Part-II of those Rules from 1-4-1978. The scheme is prospective and not retrospective....."
It is further held by the Supreme Court that the Andhra Pradesh High Court is right in holding that the upward revision of gratuity takes effect from the specified date i.e., 1-4-1978 with prospective effect. It is further held as under:
"......The High Court has rightly understood and correctly applied the principle pronounced (sic propounded) by this Court in Nakara''s case. There is no illegality or unconstitutionality (from the platform of Article 14 of the Constitution of India) involved in providing for prospective operation from the specified date. Even if that part of the notification which provides for enforcement with effect the specified date is struck down the provision can but have prospective operation - not retrospective operation. In that event (if the specified date line is effaced), it will operate only prospectively with effect from the date of issuance of the notification since it does not retrospectively apply to all those who have already retired before the said date. In order to make it retrospective so that it applies to all those who retired after the commencement of the Constitution on 26th January, 1950, and before the date of issuance of the notification on 26th March, 1980, the "Court will have to re-write the notification and introduce a provision to this effect saying in express terms that it shall operate retrospectively......"
"Improvement in pay scales by the very nature of things can be made prospectively so as to apply to only those who are in the employment on the date of the upward revision. Those who were in employment say in 1950, 1960 or 1970, lived, spent and saved, on the basis of the then prevailing cost of living, structure and pay scale structure, cannot invoke Article 14 in order to claim the higher pay-scale brought into force say in 1980. If upward pay revision cannot be made prospective on account of Article 14, perhaps no such revision would ever be made. Similar is the case with regard to gratuity which has already been paid to the retired employees on the then prevailing basis as it obtained at the time of their respective dates of retirement."
The above observations made by the Supreme Court were followed by it in another judgment Union of India Vs. P.N. Menon and others, , Wherein the Supreme Court held that the decision to merge a part of the dearness allowance with pay, when the price index level was at 272, appears to have been taken on basis of the recommendation of the Third Pay Commission. In this background, it cannot be said that the date, 13-9-1977, was picked out in an arbitrary or irrational manner, without proper application of mind. The option was given to the employees, who retired on or after 30-9-1977 but not later than 30-4-1979, to exercise an option to get their pension and death-cum-retirement gratuity calculated by excluding the element of dearness pay as indicated in the aforesaid office memorandum or to get it included in their pension and death-cum-retirement gratuity, was not an exercise to create a class within a class. The decision, having a nexus with the price index level at 272, which it reached on 30-9-1977, was just and valid. The respondents not being in service on the said date, were not eligible for the said benefit and no question of refunding the amount, which had already been contributed by them, did not arise. It is further held that as such any revised scheme in respect of post-retirement benefits, if implemented, with a cut-off date, which can be held to be reasonable and rational in the light of Article 14 of the Constitution, need not be held to be valid. Whenever a revision takes place, a cut-off date becomes imperative because the benefit has to be allowed within the financial resources available with the Government.
Therefore, the Apex Court in Nakara''s case and the later two judgments of the Supreme Court have held that in payment of revised gratuity from a particular date and the cut off date fixed by the Government is also valid and does not offend Article 14 of the Constitution of India. While taking the decision, the Government has to fix cut-off date to extend the revised pay scale benefits to the employees who retired after a particular date are entitled to receive the same and the employees who retire prior to that date are not entitled to. On the other hand, if the Court direct the Government to make notification with retrospective effect for payment of the revised pension and death cum retirement gratuity, it will have an impact on the financial resources of the State. The Government based on the recommendations of the Pay Revision Commission, an Expert Body, and on the value of the rupee, any inflation, the Government will take a decision to implement the revised pay scales from a particular date. Therefore, it is not the duty of the Courts to direct the Government to extend the revised pension or death-cum-retirement gratuity benefit with retrospective effect which amounts to re-writing the notification to it retrospective effect. So taking into consideration the financial implications of the Government, the Supreme Court in Nakara''s case, has made a distinction between the revised pension and gratuity. The principle laid down for payment of revised pension is not applicable to the payment of gratuity. Therefore, applying the principle laid down by the Supreme Court in the above said judgments to the facts and circumstances of the present case, it can be held that fixing of a particular date i.e., 19-11-1991 viz., the employees those who retired prior to 19-11-1991 are not entitled to get the gratuity of one lakh, is correct and valid under law.
But the learned Counsel for the petitioner submitted that the amount of Rs.1.00 lakh under the Group Gratuity Scheme of LICof India is to be paid by the Life Insurance Corporation of India and there is no contribution to the said scheme by the respondents and the duty of the respondents is to claim the gratuity amount from the LIC when the employees retire and to pay said sum to the concerned on his retirement. Accordingly, the respondent has withdrawn the amount of Rs. one lakh in the case of each petitioner. Thus there is no financial implication on the respondent-Federation in payment of Rs.1.00 lakh by way of gratuity to the petitioners. Therefore, the principle laid down by the Supreme Court in Nakara''s case (supra), the employees who retired prior to the cut off date are not entitled to receive the revised gratuity cannot be applied. I see some force in the submission of the learned Counsel for the petitioners, with regard to the payment of balance of gratuity amount withheld by the respondent, though the Supreme Court in Nakara''s case held that the arrears of revised pension and gratuity need not paid to the employees who retired prior to the cut off date on the premise that they will have financial implication on both the State and Central Government. But in this case, the respondents have already withdrew an amount of Rs.1.00 lakh towards gratuity in respect of each employee, but paid only 50% and the remaining balance was withheld by the respondent-Federation.
Therefore, it is held that the cutoff date 19-11-1991 fixed by the respondent-Federation is valid and does not offend Article 14 of the Constitution of India. However, as there are no financial implications on the part of the respondent-Federation as the gratuity of Rs.1.00 lakh has to be borne by the Life Insurance Corporation of India under the scheme of Group Gratuity and the duty of the Federation is only to claim the amount and pay to the retired employees. Further the respondents have already claimed the gratuity amount of Rs.1.00 lakh for each petitioner on the eve of their retirement, but paid only Rs.50,000/-. Therefore, the respondents are directed to pay the difference of gratuity of Rs. 1.00 lakh to the petitioners. The writ petition is accordingly allowed. No costs.