Hindustan Machines Tools Ltd. (HMT Ltd.) and Another vs M.S. Kang

S.S. Nijjar, J.—This judgment will dispose of Letters Patent Appeal No. 2 of 1996 and Letters Patent Appeal No. 3 of 1996. These two Letters Patent Appeals arise out of common judgment of the learned Single Judge rendered in Civil Writ Petition Nos. 14889 of 1992 and 14890 of 1992, decided on July 4, 1995. Both the Civil Writ Petitions were allowed and the impugned orders directing refund of voluntary retirement benefits granted to the petitioners were quashed.

Briefly stated the facts of the civil writ petition No. 14889 of 1992 (L.P.A. No. 2 of 1996) are that the petitioner, M.S. Kang was in service of the Hindustan Machine Tools Limited (H.M.T. Limited) since 19.4.1963. The appellants introduced a Voluntary Retirement Scheme on 31.3.1989 for the employees of the H.M.T. Limited. This scheme was in two parts i.e. Scheme A and Scheme B. The petitioner submitted an application for voluntary retirement under the voluntary retirement scheme B on 1.5.1989. His application was accepted and he was retired under the aforesaid Voluntary Retirement Scheme on 31.7.1989. The petitioner was given the necessary retirement benefits under the Scheme. On 1.3.1991, the appellant Management issued an order whereby the pay scales of various categories of employees were revised with retrospective effect i.e. from 1.1.1987. These revised pay scales were made applicable on pro-rata basis to the employees, who were on the roll of the Company as on 31.12.1986, but have subsequently separated due to superannuation, voluntary retirement, discharge on medical grounds etc. Consequent upon the implementation of the revised pay scale with retrospective effect, the petitioner was granted additional voluntary retirement compensation amounting to Rs. 15,400/-. He was not, however, paid the arrears of pay, service gratuity and arrears of bonus at enhanced rate. While the petitioner was making a claim that he be paid the remaining dues, the appellants issued the impugned orders calling upon the petitioner to refund Rs. 15,400/- paid to him by way of additional voluntary retirement compensation on the ground that the said payment has been made by mistake. The appellants also declined to release the amount of gratuity and arrears of pay admissible to the petitioner.

The petitioner, P.N. Kashyap, in Civil Writ Petition No. 14890 of 1992 also joined the service of H.M.T. Limited in 1963 and retired with effect from 31.7.1989 under the aforesaid Voluntary Retirement Scheme. In similar circumstances, he was given retirement compensation amounting to Rs. 17,575/- after introduction of the revised pay scale with effect from 1.1.1987. The aforesaid amount has been directed to be refunded on the ground that the additional voluntary retirement compensation was paid by mistake.

Both the petitioners challenged the impugned orders on the ground that the action taken by the respondents is without jurisdiction, arbitrary and unconstitutional. It was pleaded before the learned Single Judge that with the retrospec- tive revision of the pay scales, the petitioners became entitled to the grant of all benefits on the basis of the revised pay scales. It was further pleaded that there was no justification to withhold the payment of higher monetary benefits to the petitioners. Both the petitions were opposed on the ground that after having accepted the benefits under the Voluntary Retirement Scheme, the petitioners are not entitled to the grant of higher compensation merely because the pay scale have been revised with retrospective effect. Relevant parts of the Scheme are as under :-

"Paragraph 1.1. and 2.2 of the order (Annexure 2) dated 1.3.1991 and paragraph 1.1 and 1.2 of the order (Annexure P.3) dated 13.11.1991, covering letter and paragraph v(b) of the Voluntary Retirement Scheme are reproduced below :-

"Order dated 1.3.1991 :

Effective date and duration:

1.1 The revised pay-scales shall be effective from 1.1.1987 and will remain in force for a period of 5 years upto 31.12.1991.

Coverage:

2.2 The revised pay-scales shall be applicable on a pro-rata basis to the following categories of employees who were on the rolls of the company as on 31.12.1986, but have subsequently separated due to

2.2.1 Superannuation

2.2.1 Voluntary Retirement

2.2.3 Discharge on medical grounds

2.2.4 Death while in service.

2.2.5 Joining other Public Sectors on Selection by PSEB.

2.2.6 Joining other public sectors or Government service by resigning with mutual consent of the organisation.

2.2.7 Release on deputation.

2.2.8 Release after retaining lien in the Company.

Order dated 13.11.1991:

Pay revision arrears to resigned cases:

1.1 The revised pay-scales shall also be applicable on a pro-rata basis to the Supervisors and Executives who were on the rolls of the company as on 1.1.1987 but have subsequently separated by submitted resignation and whose resignations have been accepted in advance by the Company. Consequently, recoveries/adjustment may be made on account of first adhoc relief, second adhoc relief one-time adhoc payment, house rent recoveries, annual bonus etc. from the revised pay as was done in any other cases.

1.2 Supervisors and Executives who left the services of the company on the following grounds are not entitled to the pay revision arrears :-

1.2.1 Dismissal.

1.2 2 Resignation without permission or notice.

1.2.3 Those who have abandoned the service or proceeded on leave/absented and tendered resignation thereafter, even if their resignations were technically accepted subsequently.

1.2.4 Those who resigned after disciplinary proceedings have been initiated against them.

1.2.5 Resignation without fulfilling the obligation arising out of service bond/contract.

Covering Letter :

H.M.T. LIMITED

Cunningham Road, Bangalore-560052 Office Order No. 71/88, dated March 31,1989.

Subject:- Voluntary Retirement Scheme :-

It has been decided to introduce a Voluntary Retirement Scheme for the employees of the Company as per the enclosed copy comprising of two parts viz. Scheme A and Scheme B. The Scheme will be in operation from 1.4.1989 for a period of three months subject to the following further conditions:

(i) Scheme A shall be applicable only to the employees of Lamp Unit, Hyderabad in WG Cadre with the terms and conditions specified in Scheme A for a period of three months from 1.4.1989.

(ii) Scheme B shall be applicable to all the Units/Divisions (including Lamp), Business Group Directorate, other offices and corporate office with the terms and conditions specified in the enclosed Scheme, for a period of three months from 1.4.1989.

(iii) The scheme does not confer any right on any employee to have his request for voluntary retirement accepted by the competent authority; right to accept or reject the application for voluntary retirement shall entirely vest with the company.

(iv) Acceptance of application for voluntary retirement shall depend inter-alia upon availability of funds in the respective Units/Divisions, business Group Directorates other offices and corporate office.

(v) The eligible employee requesting for voluntary retirement, subject to acceptance of their requests by the competent authority shall be entitled to such benefits as are specified in the scheme. Such employees may be persuaded to deposit the benefits received in the Company a Fixed Deposit Scheme.

The existing medical retirement scheme introduced for Hyderabad based Units of the Company shall stand discontinued with the introduction of the above voluntary retirement scheme.

The units and areas within the Units where the Scheme could be implemented will separately be intimated by the DPS.

The progress of implementation of the Scheme with regard to the number of employees in each cadre and the total amount paid on account of compensation shall be reported to DPS every month.

Sd/- M.R. Naidu,

Chairman & Managing Director

Para v(b) of the Scheme:

V. Benefits:

(a)x x x x x x x x x

b) Under Scheme B : The eligible employees requesting for voluntary retirement, subject to acceptance of their requests at the following rates for the remaining period of service prior to the date of retirement on superannuation from the services of the company:

For less than 1 year of remaining service : Nil

One year of remaining Service : 6 months'' salary.

Two year of remaining Service : 11 -do-

Three years -do-: 15 -do-

For four years of remaining service : 18 months'' salary

Five years of remaining service : 20 months'' salary

Six years of remaining service : 21 months'' salary

Seven years of remaining service : 22 months'' salary

Eight years of remaining service : 24 months'' salary

Nine years of remaining service : 27 months'' salary

Ten years of remaining service : 30 months'' salary

Eleven years of remaining service : 33 months'' salary

Twelve years of remaining service : 36 months'' salary

Thirteen years of remaining service : 39 months'' salary

Provided, however, that the maximum benefit payable under Scheme ''B'' shall not exceed the amount equivalent to 11/2 month''s salary for each completed years of service of the employees.

NOTE : "Salary" mentioned under the Scheme A and B shall mean Basic Pay, Dearness Allowance Interim Relief/Adhoc Relief and Personal Pay, if any, and shall be calculated on the basis of a calendar month."

After noticing the arguments of both the sides the learned single Judge has rightly concluded that the cases of the petitioners are covered by Scheme B contained in Annexure P-l. Both the petitioners were regular/permanent employees of the appellants. In terms of Para V(b), the employees seeking voluntary retirement were entitled to receive monetary benefits by way of salary in proportion to the period of remaining service. The word ''salary'' has been defined in the Note appended to clause V(b) as Basic Pay, Dearness Allowance, Interim Relief/Adhoc Relief and Personal Pay. Both the petitioners retired under the Voluntary Retirement Scheme with effect from 31.7.1989. The pay scales were revised with retrospective effect with effect from 1.1.1987. The revised pay scales were applicable to the employees who were on the rolls of the company as on 31.12.1986. This was so irrespective of the fact that even if the employees had ceased to be on the rolls of the company due to superannuation, voluntary retirement, resignation etc. Admittedly the petitioners were the employees on the rolls of the Company on 31.12.1986 and, therefore, their cases were clearly covered by the provisions contained in the scheme dated 1.3.1991. The appellate rightly gave revised voluntary retirement benefits to the petitioners on the basis of the revised pay scales. Learned counsel for the appellants has reiterated the arguments raised before the learned single Judge. The main plank of the arguments of Mr. Chhiber, learned Senior Advocate, is that clause 2.2 $ the office order dated 1.3.1991 by which the pay scales have been revised with retrospective effect with effect from 1.1.1987 is completely silent about the terminal benefits. The only provisions with regard to the terminal benefits in this office order, which has been attached as Annexure R-3 is contained in paragraph 6.13. The said provisions are reproduced hereunder :-

"6.13 : Terminal Benefits :

Gratuity : Gratuity paid/payable to employees covered under clause 2.2 will be recalculated on the revised pay subject to the prescribed ceiling."

Relying on the aforesaid paragraph, it has been submitted that the learned single Judge has failed to take into consideration the aforesaid paragraph. However, we have not been persuaded to take a view different from the one taken by the learned Single Judge. When the pay has been revised with effect from 1.1.1987 and made applicable to all those employees who were on the rolls of the Company on 31.12.1986, then all natural consequence must flow therefrom. Both the petitioners sought retirement with effect from 31.7.1989 and were no more the employees of the company on or with effect from 1.8.1989. They would be paid gratuity which is clearly linked with the salary which was being drawn by them. It is for this reason that paragraph 6.13 rather supports the claim of the petitioners to the effect that gratuity paid to the employees covered under Clause 2.2 to receive the benefits of the revision of pay scales from 31.12.1986. That being so, the gratuity of the petitioners had to be recalculated on the basis of the revised pay scales. We are in respectfully agreement with the judgment of the learned single Judge that the acceptance of the arguments of the learned counsel for the appellants would lead to a patently discriminatory situation. Furthermore, if clause 6.13 is to be read in the manner canvassed by the learned counsel for the appellants, it would amount to amending the scheme. Furthermore, it would mean that those employees who had taken voluntary retirement will not get the complete benefits of the revision of pay scales. This would result in creating two classes of retirees i.e. those retiring on superannuation and those retiring under the Voluntary Retirement Scheme. This would lead to hostile discrimination violating Articles 14 and 16 of the Constitution of India.

Learned counsel for the appellants has further submitted that the payment of gratuity being one time payment cannot be varied merely on the revision of pay scales. He cites Krishena Kumar and Others Vs. Union of India and others, , to contend that on retirement the rights of the petitioners have crystallized. They had been paid gratuity on the basis of the salary they were withdrawing at the time of retirement. In this case, the pension scheme was introduced. The employees were given an option to switch over from the Provident Fund Scheme to the Pension Scheme. Having opted for the Provident Fund Scheme, the employees subsequently wanted to switch-over to the Pension Scheme. This claim was rejected by the Supreme Court on the ground that subsequent introduction of the Pension Scheme does not entitle the employees to claim benefits of the new schemes. Since the employees had already taken advantage of the Provident Fund Scheme, they were not permitted to switch over to the Pension Scheme.

Learned counsel further relied upon a Full Bench decision of this Court in case Sher Singh Ghuman (Retd.) and Another Vs. The State of Haryana and Another, . In this case also, it has been held that there is distinction between the Provident Fund Retirees and the Pension Retirees. In the present case, the controversy is wholly different. The petitioners are simply claiming that the payment of gratuity has to be co-rfelated to the salary being drawn by them on the date of their retirement. The pay scales having been revised with effect from 1.1.1987, the gratuity naturally has to be re-calculated on the basis of the revised pay scales. We are, therefore, entirely in agreement with the judgment of the learned Single Judge.

For the reasons recorded above, we find no merit in the appeals, which are dismissed. There would be no order as to costs.