Holding

The 15‑year rule for restoration of the commuted portion of pension is valid and must apply to both civilian and defence pensioners, with restoration effective from 1 April 1985.

Summary

The petitioners, including the society Common Cause, challenged provisions of the Central Civil Services (Commutation of Pension) Rules, 1981, arguing that the rule fixing a 15‑year period after retirement before the commuted portion of pension is restored is arbitrary in view of increased life expectancy and that defence personnel should not be treated differently. The Union of India argued the petitions were non‑maintainable and that the existing rule was justified. After the Union agreed to restore the commuted portion for civilian pensioners at age 70 or after 15 years, the Court examined whether the 15‑year rule should apply to defence personnel as well. The Court held that the 15‑year rule is equitable, that restoration should occur after 15 years for both civilian and armed‑forces pensioners, and that the effective date should be back‑dated to 1 April 1985. Consequently, the petitions were allowed and the Government was directed to implement the order.

Issues considered

Whether the 15‑year rule for restoration of commuted pension under the Central Civil Services (Commutation of Pension) Rules, 1981 violates constitutional principles.
Whether increased life expectancy justifies striking down the 15‑year period.
Whether defence personnel can be excluded from the restoration provision applicable to civilian pensioners.
Whether the Union may amend the pension commutation rules without legislative enactment.

Subjects

Pension commutationRestoration of pensionCivil service rulesDefence personnelArticle 32Writ petitionLife expectancyEquity

Judgment

"COMMON CAUSE" A REGISTERED SOCIETY AND OTHERS
v.
A
~··
UNION OFINDIA

DECEMBER 9, 1986

[P.N. BHAGWATI CJ AND RANGANATH MISRA, JJ.] B

?: Central Civil Services (Commutation of Pension) Rules, 1981-
Commuted value of pension-Deduction from monthly pension-
Restoration of-After completion of 15. years from date of retirement-Both
for Civilian employees and Armed Forces personnel-Benefit effective from
~ ) -April J, 1985. C

The Central Civil Services (Commutation of Pension) Rules, 1981 are
·~--; the rules applicable to civilian employees under the Government of India .. In
, regard to Defence personnel a similar set of regulations is in force. In the case
of civilians the total amount of pension which can be commuted is upto one-
third, while in the case of Defence personnel, commutation is admissible upto D
43% in the case of officers and upto 45% in respect of other ranks.
/

In petitions under Article 32, the petitioners have asked for striking
down certain provisions of the said Rules as they permit the Union to recover
more than what is paid to the pensioners upon commutation and for a
direction that an appropriate scheme rationalising the provisions relating to E
commutation be brought into force because there has been a substantial
improvement in the life expectancy of the people, and since commutation
portion out of the pension is ordinarily recovered within about 12 years, there
is no justification for fixing the period at 15 years.

The respondent-Union of India challenged the maintainability of the F

r
;16..
petitions as· also the claim of the petitioners. On the suggestion of the Court,
the Union of India examined the matter and agreed to restore the commuted
portion of the pension in regard to civilian employees at the age of 70 years or
after 15 years, whichever is later, effective from April 1, 1986. So far as
Defence employe"" were concerned, it was contended that retirement in their
case was at an early age and merely .with la(llle of a period of 15 years fuU G
· pension could not be restored because theyieceive in consideration of the
exigencies of the service a higher rate of pension as compared to civilian
employees and the benefit contained in the Government order cannot be
~ extended to all classes of Defence personnel.

AlloWing the petitions, H

497
498 SUPREME COlRT REPORTS [1987) I S.C.R.

HELD: 1. When a pensioner commutes any part of his pension upto the
A authorised limit, his. pension is reduced for the remaining part of his life by
deducting the commuted portion from the monthly pension. [501 BJ

2. C.ommutation brings about certain advantages. The commuting
pensioner gets a lump sum amount which ordinarily he would have received in
B course of a spread over period subject to his continuing to live. Two ~
advantages are certainly forthcoming out of commutation-( I) availability of
a lump sum amount, and (2) the risk lact':!r. Many State Governments have
already formulated schemes accepting the 15 years rule. This Court would not
be justified in disturbing the 15 years formula so far as civilian pensioners are \
concerned. [501 C-DJ >

c 3. On the expiry of 15 years from the date of retirement, restoration of ,.--
commuted value of pension would take place and it would be just and
equitable that the benefit of commuted portion of the pensi<>n should- he
effective from 1.4.1985 so far as civilian <mployees are concerned. [500 E, 501 GJ

D 4. The decision of the respondcmt-Government does not cover all
classes of Defence personnel, having Jieen confined to personnel of Armed
Forces in whose case the retirement age varies in accordance with the colour.
service prescribed for the rank (attaining the age of 37 /38 years or more).
Previously the retiring age for the lower ranks such as sepoys, used to be after
15 years' service but now it has been enhanced to 20 years' service. A sepoy
E retiring after 20 years' service is entitled to 5 years of weightage, for his pension
entitlement. Similarly a Naik retiring a:fter 22 years' of service and a Havildar
after 24 years' service are also given credit of five years. While a civilian
employee ordinarily retires after a full term of service eptitling him to full
pension, it does not happen in the Ca!ie of the lower ranks in the Defence
s.ervices and with the extra-advantage by the addition of years of credit, the
F benefit in terms of money works out in the range of about .75% to 6%. · 7
[501 H-502 BJ -\....
5. More than 50% of the Defenc.e personnel belong to the lowest rank
and about 81 % in all retire early. Th< weightage factor relied upon by the
respondent to treat the Defence personnel differently is not a tenable feature.
The Defence personnel are a class by themselves. In their case, retirement takes
G effect in certain classes as justified by th'' exigencies of the service rather early.
Weightage, if any, is intended to cover this so that an equation for other
purposes could be established. There i<; no merit in the stand of respondent
that the early age of retirement is fully compensated by the higher rate of
pension. [502C - DJ ·
H 6. No separate period need be fix,,d for the Armed Forces personnel and
"COMMON CAUSE", v. UNION OF INDIA [MISRA, J.] 499
~;:

they should also be entitled to restoration of the commuted portion of the A
pension on the expiry of 15 years as is conceded in the case of civil pensioners,
and for them too the effective date should be from 1.4.1985. [502 F - G]

7. In dealing with a matter of this nature it is not appropriate to be
guided by the example of Life Insurance; equally unjust it would be to adopt
the interest basis. The conclusion should be evolved by relating it to the 'years B
of purchase' basis. An addition ·of two years to the period necessary for the
recovery on the basis of years of purchase justifies the adoption of the 15 year
rule, which appears to be equitable. [502 E]

ORIGINAL JURISDICTION: Writ Petition No. 3958-61 of 1983.
c
(Under Article 32 of the Constitution of India)

H. Salve, P.H. Parekh and P.K. 'Manohar, for the Petitioners:

P.P. Singh, R.D. Agarwala, Ms. S. Relan, C.V.S. Rao, L.R. Singh and
S.R. Srivastava for the Respondent. D'

The Judgment of the Court was delivered by

RANGANATH MISRA, J. By these applications under Artick 32 of
the Constitution Common Cause, a registered Society and three retired
Government servants have asked for striking down certain provisions of the I;.
Communication of Pension Rules applicable to civilian and defence

- pensioners as they permit the Union oflndia to recover more than what is paid
to the pensioners upon commutation and for a direction that. an appropriate
scheme rationalising the provisions relating to commutation be brought into
force. The respondent has filed a counter-affidavit challenging the
maintainability of the petition as also the claim of the petitioners and the F.
matter has been heard at considerable length from time to time. Parties have
filed written submissions supplementing their oral arguments.

The Central Civil Services (Commutation of Pension), Rules, 1981 are
the approximate rules In force so far as civilian employees under the G
Government of India are concerned. A set of regulations is in force in regard to
Defence personnel.

• It is not disputed that in the case of civilians the total amount of pension
which can be commuted is upto one-third while in the case of Defence
personnel, commutation is admissible upto 43 per cent in the case of officers H

,
500 SUPREME COURT REPORTS [1987] 1 S.C.R.

A and upto 45 per cent in respect of other rah ks. The argument advancement on
behalf of the petitioners that there has been a substantial improvement in the
life expectancy of the people in India has not been refuted on behalf of the
respondent. This Court suggested to the respondent in course of the hearing
that in the changed situation now prevailing in the country, a new look should
be given to the matter. In deference to the suggestion made by this Court the
B respondent took time to consider the various aspects raised in the writ .":
petitions and the oral submissions advanced at the hearing as also the written
notes submitted in Court. It also t.ook into account the fact that several State
Governments have changed the rule applicable to commutation and have
restored full pension to the pensioners who commuted a part of their pension
after lapse of fifteen years. Union of India has now agreed to restore the
C commuted portion of the pension in regard to all civilian employees at the age
of seventy years or .after fifteen years, whichever is later, and has agreed to
make this effective from April l, 1986. This decision of the Respondent was
communicated to the learned Attorney G'neral by a letter dated 20.3. 1986
reading thus:

D "I am glad to inform you that Government have taken a
decision in the matter of recovery from pension towards
commuted value of pension. The decision is as follows:

(i) Recovery from pension payable every month towards
commuted value of pension will stop on the completion of 15
E years from the date of retirement on superannuation or on the
pensioner completing the aE:e of 70 years, whichever is later.

(ii) The formulation will apply to all civilian pensioners in
whose case the age of retirerr.ent on superannuation is 58 years
-
and the personnel· of Armed Forces in whose case the
F retirement age varies in accordance with the colour service ··~
·prescribed for the rank (att1ining the age of 37 / 38 years or
more).

(iii) Government have taken this decision as an act of goodwill
to pensioners and to extend to them some measure of relief in
G the evening of their lives. It is sincerely believed that there will
be no further demand on thif issue and that the pensioners will
accept the decision of the Government without dissent or
reservation.

(iv) The decision will take_ effect prospectively (from April, 1,
H 1986)."
. ecoMMON CAUSE" v. UNION OF INDIA [MISRA, J.] 501

· A distinction has been made in the case of Defence employees on the ground A
that retirement in.their case is at an early age and merely with lapse of a period
of fifteen years full pension could not be restored. It has also been pointed out
that the Defence personnel receive in consideration of the exigencies of the
service a higher rate of pension as compared to civilian employees.

As the position now stands, when a pensioner commutes any part of his B
pension upto the authorised limit his pension is reduced for the remaining part
of his life by deducting the commuted portion from the monthly pension.

)- pensionTheis ordinarily
petitioners have contended that the commuted portion out of the
recovered within about 12 years and, therefore, there is no
justification for fixing the period at 15 years. Commutation brings about c
cert~in advantages. The commuting· pensioner gets a lump sum amount which
ordinarily he would have received in course of a spread over period subject to
his continuing to live. Thus, two advantages are certainly forthcoming out of
commutation--( I) availability of a lump sum amount, and (2) the risk factor.
Again many of the State Governments have alreaqy formulated schemes
accepting the 15 year rule. In this background, we do not think we would be · D
justified in disturbing the 15 year formula so far as civilian pensioners are
concerned.

The age of superannuation used to be 55 until it was raised to 58. It is not
necessary to refer to the age of the co'llmuting pensioner when the benefit
would be restored. It is sufficient to indicate that on the expiry of fifteen years E
from the period of retirement such restoration would take place .

.... The respondent-Government ha~ agreed that this benefit should be
extended with effect from 1.4.1986. The writ applications were filed in 1983.
The matter was placed on board for hearing in February 1984. The Union
Government took some time for responding to the suggestion of the Court and F
that is how the disposal was initially delayed. Thereafter, the hearing of the
matter has again been delayed on account of pressing business in the Court. In
these circumstances, we think it just and equitable that the benefit agreed to be
extended in respect of the commuted portion of the pension should be effective
from 1.4.1985 so far as the civilian employees are concerned.
G

, ,. The decision of the respondent-Government contained· in the above
communication rloes not cover all classes of Defence personnel having-been
confined to personnel of Armed Forces in whose case the retirement age varies
in accordance the colour service prescribed for the rank (attaining the age of
37 / 38 years or more). In regard to those who are excluded it has been
contended that the retirement is at too early an age and since a higher rate of
H
502 SUPREME CO'JRT REPORTS [1987] I S.C.R.'

·A pension as compared to civilian employees is admissible, the benefit contained
in the Government order cannot be ''xtended to that class. Previously the
retiring age for the lower ranks such as sepoys, used to be after 15 years'service
but now it has been enhanced to 20 years' service. A sepoy retiring after 20
years' servioe is entitled to five years of weightage, for his pension entitlemei:it.
Similarly a Naik retiring after 22 years of service and a Havildar after24 years'
B
servioe are also given cr~dit of five years. While a civilian employee ordinarily
retires after a full term of service entitling him to full pension, it does not
happen in the case of the lower rank> in the Defence services and with the
extra-advantage by the addition of .years of credit, the benefit in terms of
money works out in the range of about .75% to 6%. It has to be remembered
that more than 50% of the Defenoe personnel belong to the lowest rank and
c about 81% in all retire early. The weightage factor relied upon by the
Respondent to treat the Defenoe personnel differently is not a ten~ble feature. r-
Undoubtedly the Defence personnel are a class by themselves. In their case,
retirement takes effect in certain clas;.es as justified by the exigencies of the
service rather early. Weightage, if any, is intended to cover this so that an
equation for other purposes could be established. There is really no merit in
D
the stand of the Respondent that the early age of retirement is fully
compensated by the higher rate of pension.

In dealing with a matter oflhis nature, it is not appropriate to be guided
by the example of Life Insurance; equally unjust it would be to adopt the
interest basis. On the other hand, the conclusion should be evolved by relating
E
it to the 'years of purchase' basis. An addition of two years to the period
necessary for the recovery on the basis of years of purchase justifies the
adoption of the 15 years rule. That is more cir less the basis which appears to be
equitable. It may be that this would give rise to an additional burden on the
exchequer but it would not be heavy and after all it would bring some relief to
those who have served the cause of the Nation at great sacrifice. We are,
F
therefore, of the view that no separate period need be fixed for the Armed
Foroes personnel and they should also be entitled to restora:i9n of the
commuted portion of the pension on the expiry of 15 years as is conceded in
the case of civil pensioners. And for them' too the effective date should be from
1.4.1985.
G
We direct the respondent-Government to give effect to this order within
a period of three months from now. Wi: plaoe o;, record our appreciation of the
consideration shown by the Union of Tndia to ameliorate the hardship of the
pensioners. There will be no order as to the costs.

H A.P.J. Petitions allowed;