Holding

Employees of the Central Government who were absorbed into Central Public Sector Undertakings before 1 April 1979 and who fully commuted their pension are not Central Government pensioners and thus are not eligible for benefits under the Liberalised Pension Formula, and the Office Memoranda are not violative of Articles 14 and 16.

Summary

The petitioners were Central Government officers who, after being permanently absorbed into the Food Corporation of India, retired and fully commuted their pensions for lump‑sum payments. They claimed that Office Memoranda dated 13 February 1976 and 22 October 1983, which denied them relief and ad‑hoc reliefs under the Liberalised Pension Formula, violated Articles 14 and 16 of the Constitution because the Rules made no distinction between officers who commuted part of their pension and those who did not. The Court examined whether such absorbed employees, who had taken the full commutation, qualified as Central Government pensioners for the purpose of receiving the liberalised pension benefits. It held that those who were absorbed before 1 April 1979 and had fully commuted their pension were not Central Government pensioners and therefore were not entitled to the benefits, and that the Office Memoranda were not unconstitutional. Consequently, the writ petitions and the appeal were dismissed.

Issues considered

Whether Central Government employees absorbed into Central Public Sector Undertakings before 1 April 1979 and who fully commuted their pension are entitled to relief and ad‑hoc reliefs under the Liberalised Pension Formula.
Whether the Office Memoranda dated 13 February 1976 and 22 October 1983, which deny such benefits, violate Articles 14 and 16 of the Constitution.
Whether the act of full pension commutation disqualifies the employee from being classified as a Central Government pensioner for the purposes of the liberalised pension scheme.

Subjects

pension commutationCentral Government employeesPublic Sector UndertakingsLiberalised Pension FormulaArticles 14 and 16constitutional discriminationrelief and ad‑hoc relief

Judgment

DES RAJ BHATNAGAR AND ANR. ETC.
A
V.
UNION OF INDIA

FEBRUARY 13, 1991

B [N.M. KASLIWAL AND K. RAMASWAMY, JJ.]

Constitution of India: Articles 14 and 16. Central Government
employees absorbed in Central Public Sector Undertakings-Entitle- - " y -
inent of pensionary benefits-Central Civil Service (Pension) Rules,
1972: 0. Ms. dated 13.2.1976 and 22.10.1983-Validity of.
c Service Law: Central Civil Service (Pension) Rules, 1972: _..,. _
Liberalised Pension Formula, 1979: 0. Ms. dated 13.2.1976 and
22. 10.1983-Central Government pensioners-Relief and adhoc relief
on pension-Central Government employees absorbed in Central'-
Public Sector Undertakings-Retiring from Central Government service --..,,....----_
D -Commuted original pension-Whether eligible to be treated as Cent-
ral Government pensioners.

Central Civil Service (Pension) Rules, 1972: Commutation of
pensiolJ,-:.Effect of

E The petitioners, who were Central Government employees, on
their absorption in a Central Public Sector Undertaking, retired from
Central Government service on different dates prior to 31.3.1979, and
commuted their original pension for a lump sum as permissible under
the Civil Service (Pension) Rules, 1972.

F The Central Government issued O.M. dated 13.2.1976, enabling
an officer who commuted a portion of his pension to be eligible for relief
and ad hoc reliefs on the full amount of his original pension, but -~ -
persons who got themselves absorbed in Public Sector Undertakings
were not eligible to the said benefits. Taking note of the erosion in the
value of the rupee, the Government, by O.M. dated 25.5.1979, intro-
G duced the ~Liberalised Pension Formula, benefit of which, by this
Court's decision in D.S. Nakara's case was extended to all Central
Government pensioners irrespective of the dates of their retirement. In
order to implement the said decision, the Government issued O.M. ' r -
d,ated 22.10.1983, but the benefit was not given to those persons who got
them-selves absorbed in Central Public Sector Undertakings and
H received/opted to receive commuted raise of lf3rd of pension as well as

35()
DES RAJ V. U.0.1. 357

-----~terminal benefits equal to the commuted value of the balance amount of
A
-; pension left after such commutation.

The petitioners challenged the validity of the aforesaid 0. Ms.
dated 13.2.1976 and 22.10.1983 and contended that for the purposes of
grant of the full benefit of relief or ad hoc relief, the Rules do not make
any distinction between an officer who has sought commutation of a
_portion of his original pension and one who has not sought any such
-~ commutation; and as the petitioners who opted for commutation of
their original pension in accordance with the Rules were being arbitrar-
ily and without just and reasonable cause deprived of the relief, the
~ aforesaid Office Memoranda were vitiated by an inherent discrimina-
tion and were violative of Articles 14 and 16 of the Constitution.

The facts of the appeal were identical to those of the petitions
except that the appellant came before this Court in appeal against the
-~ order of the High Court which dismissed his writ petition.
On the question: whether the petitioners/appellants fell in the D
category of Central Government pensioners for the purpose of entitle-
ment to the benefit of the Liberalised Pension Formula or did they fall in
a different class altogether and were not entitled to get any such benefit,

Dismissing the writ petitions and the appeal, this Court,
E
HELD: 1. Clause 5 of O.M. dated 22.10.1983 is clear that such
Central Government employees who got themselves absorbed under
Central Public Sector Undertakings prior to 1.4.1979 and opted to
receive commuted raise for 1/3rd of pension as well as terminal benefit
equal to the commuted value of the balance amount of pension were not
--"\ entitled to any benefit as they were not Central Government Pensioners F
t -~son 1.4.1979. [362B-C]

2. Commutation brings about certain advantages. The person
who commutes his pension gets a lump sum which ordinarily he would
have received in the course of his spread over period subject to his
continuing to live. The two advantages of the commutation are-the G
. availability of a lump sum and the risk factor. The allowance of Family
-- --.... Pension to such persons does not however make them entitled to get any
benefit that is given to the pensioners on account of Liberalised Pension
Rules taking note of the fallen value of the rupee. [362F-G, 363A-B]
'
3.1 In the instant case, the petitioners had not only got 1/3rd of H,
358 SUPREME COURT REPORTS [1991] 1 S.C.R.

A their pension commuted but exercised the option of getting the entire
pension commuted and in lieu thereof got a lump sum. Such persons
cannot fall in the category of Central Government pensioners for the
purposes of getting benefit of the Liberalised Pension Rules which can be
made applicable only to Central Government pensioners. [362G-H, 363A]

B · 3.2 The petitioners fell in a different class altogether and were not
entitled to claim any benefit granted to the Central Government
Pensioners. After getting a lump sum in lieu of entire pension, they did
not fall in the class of Central Government pensioners and were not
entitled to any benefit granted to such pensioners. The case of the
Central Government pensioners who got their I/3rd pension commuted
c also fall in a different class inasmuch as they got 2/3rd pension, and
after 15 years of such commutation or having attained the age of 70
years whichever was later, they became entitled to full pension. [363C-D]

"Common Cause" a Registered Society & Ors. v. Union of India, '-·...,._---~
[1987] 1sec142, distinguished.
D
D.S. Nakara & Ors. v. Union of India, [1983] 2 SCR 165, refer-
·red to. ·

ORIGINAL JURISDICTION: Writ Petition Nos. 11757 &
11758of1984. ~
E
(Under Article 32 of the Constitution of India).
WITH
Civil Appeal No. 1124 of 1985.

F P.P. Rao, K. Jagan Mohan Rao and Ra1·u Ramachandran for
the Petitioners. ~\·~·

V.C. Mahajan, Ms. A Subhashini ·and R.B. Mishra for the
Respondent.

G The Judgment of the Court was delivered by

KASLIWAL, J. The above writ petitions and appeal are dis- 'r-
posed of by one single order as identical question of la~ are involved
in these cases. In order to appreciate the controversy we would narrate
the facts of the writ petitions. Shri Des Raj Bhatnagar, Petitioner
H No. 1 and Shri Ved Pal Seth, Petitioner No. 2 were employees of the
DES RAJ v. U.0.1. [KASLIWAL, J.] 359

...,. Central Government. The petitioner No. 1 after serving in various
capacities in the Department of food of the Central Government from
A
24.10.1941 to 31.8.1971 (29 years and 10 months} was permanently
absorbed in Food Corporation of India as Assistant on 1st September,
1971 and retired from the Government service.

1 The petitioner No. 2 after serving the Government in various B
capacities for the period from 5.11.1947 to 8.2.1972 (20 years and 3
- ·y months) was permanently absorbed on 9 .2.1972 in Food Corporation
of India as Sr. Asstt. Manager and retired from the Government
service.

On absorption in the Food Corporation of India, the petitioners
were required to exercise either of the following two options: c
(a) Receiving the pro-rata monthly pension and death-cum-
retirement gratuity as admissible under the rules; and ·

(b) Receiving the pro-rata gratuity and a lumpsum amount in D
lieu of pension worked out with reference to commutation table
obtaining on the date from which the pension was to be admissi-
ble and under the option order.

-.:: """' The office of the Pay and Accounts Officer, Ministry of Food and
Agriculture determined the original pension payable to the petitioners E,
per mensem. The petitioners were sanctioned original pensions in
accordance with the provisions of the Central Civil Service (Pension)
Rules, 1972. In case of petitioner No. 1 the original pension was
determined at Rs.240 per mensem payable from 1st September, 1971.
In case of petitioner No. 2 the original pension admissible was
. determined at Rs.287 per mensem payable from 9.2.1972. F
1~· .
The petitioner No. 1 received his pension@ Rs.240 per mensem
for the period from 1.9.1971 to 29.10.1972. Petitioner No. 2 received
his pension @ Rs.287 per mensem for the period from 9.2.1972 to
16.8.1972. Under the above Rules maximum of one third of the
amount of admissible pension could be commuted. However, fo the G
case of Government officers including Industrial Management Pool
-- ---.. Officers who were opting for permanent. absorption in Public Sector
Undertakings, an option was given to commute the full amount of
their original pension. The petitioner No. 1 and petitioner No. 2 com-
muted their original pensions for a lumpsum of Rs.35,568 and
Rs.43,601on30.10.1972 and 17.8.1972 respectively. H:
360 SUPREME COURT REPORTS [1991] 1 S.C.R.

The Third Central Pay Commission was required to make its •
A
recommendations in the matter of providing relief to Government · ~. ._
pensioners. The Pay Commission, in order to secure Government
pensioners against the continuing erosion in the value of the rupees
and to recommend appropriate measures for protecting the pension of
Government servants from such erosion on account of the possible
B increase in the case of living in future and after having considered the r
matter, recommended that irrespective of the amount of pension
drawn by them, pensioners should be given relief at the rate of 5% of y - -
their pension subject to a minimum of Rs.5 per mensem and a
maximum of Rs.25 per mensem. The relief at those rates were recom-
mended to be given to the Government pensioners as and when there -..(
was a 16 point rise in the 12 months average of the All India Working
c Class Consumer Price Index ( 1960-100). The relief for the first time, at
these rates was to be paid when the 12th monthly average of this index
reached 216. The said recommendation made by the Pay Commission,. _
was duly accepted by the Central Government. ~-

D The Ministry of Finance Office Memorandum No. F. 22(8)-
EV(A)/75 dated 13.2.1976 inter alia, provided that where an officer on
his retirement commutes a portion of his pension he is eligible for
relief and ad hoc reliefs in pension on the full amount of original pen-
sion as admissible to him. Under the said O.M. the term 'Pension'
includes for the purposes of ad hoc relief the commuted portion of
E pension, if any. The case of the petitioners is that according to these
Rules, an officer who has commuted any part of this pension and an
officer who has not opted for any commutation both receive the full
quantum of relief and ad hoc relief on full amount of original pension.
It has thus been contended that for the purposes of grant of the full
benefit of relief or ad hoc relief the Rules do not make any distinction
F between an officer who has sought commutation of his original pension
and one who has not sought any such commutation. The petitioner and
other Government servants who opted for commutation of their origi-
nal pension in accordance with the Rules are being arbitrarily and
without just and reasonable cause are deprived of the relief and ad hoc
relief on commutation in pursuance of the Office Mamorandum dated
G 13.2.1976. Though, an officer who commutes one third of his pension
gets relief and· ad hoc relief on the basis of original amount of his
pension but whereas an officer commutes whole of his original pension
is deprived of the entire amount of the relief or ad hoc relief. The
petitioners have thus contended that aforesaid Office Memorandum
dated 13.2.1976 is vitiated by an inherent discrimination and is viola-
H tive of Articles 14 and 16 of the Constitution.
DES RAJ V. U.0.1. [KASLIWAL, J.] 361

The petitioners have further submitted that they are entitled to
A
,.. the aforesaid reliefs granted to all other Government pensioners, and·
the amount of relief to which pensioners are entitled and has been
denied to them under the impugned Office Memorandum dated
13.2.1976 works out to Rs.13,592 and Rs.15,040 in case of petitioner
No. 1 and petitioner No. 2 respectively upto 29.2.1984. The Ministry
of Finance in their Office Memorandum No. F. 2(8)/EV/82 dated B
.10.10.1983 has sanctioned the grant of relief and ad hoc reliefs to
Government servants who retired prior to 10th September, 1979 @
92.5% of their original pension subject to minimum of Rs.93 and
maximum of Rs.463 with effect from 1st July, 1983. This has been
done by taking in view the decline in the purchasing power of the
rupee and the original sanction being insufficient and meagre to
sustain the pensioners. c
Apart from the above the petitioners have submitted that they
are also entitled to the benefit of Liberalised Pension Formula of 1979,
which was introduced vide the Finance Ministry's Office Memoran-
dum No. F. 19(37)/EV/79 dated 25.5.1979, in respect of the approved D.
pensionable service rendered by them in the Central Government as
admissible to other pensioners who retired from Government service
between 17.4.1950 to 31.3.1979. The said Memorandum was made
applicable only to those Government servants who retired from
~ service on or after 31.3.1979. However, this Court in D.S. Nakara &
.., Others v. Union of India, [1983] 2 SCR 165 held that all Central E
Government pensioners governed by the Central Civil Service
(Pension) Rules, 1972 were entitled to pension w.e.f. 1.4.1979 as com-
puted under the Liberalised Pension Formula irrespective of the date
of their retirement. Placing reliance on the above decision it has been
claimed that there should be no discrimination between the applicabi-
• lity of the Liberalised Pension Formula to pre 31.3 .1979 pensioners F
· ~ and there is no just and reasonable cause in denying such benefit to
the petitioners under the impugned Office Memorandum No. F. 1(3)/
EV /83 dated 22.10.1983.

Clause 5 of the Office Memorandum dated 22. 10.1983 reads as
under: G

"Central Government employees, who got themselves
absorbed under Central Public sector undertaking/autono-
. mous bodies prior to 1.4.1979 and have received/or opted
t'o receive commuted raise for 1/3rd of pension as well as
terminal benefit equal to the commuted value of the H
362 SUPREME COURT REPORTS [1991] 1 S.C.R.
)
balance amount of pension left after commuting 1/3rd, of ~
A pension, are not entitled to any benefit under these orders
as they were not Central Government pensioners as on
1.4.79. In cases where only a portion of pension has been
commuted the pension will have to be enhanced in accor-
dance with these orders with effect from 1.4.1979".
B
The above clause makes it clear that such Central Government
employees, who got themselves absorbed under Central Public Sector ~
Undertakings prior to 1.4.1979 and opted to receive commuted raise
for 1/3rd of pension as well as terminal benefit equal to the commuted
value of the balance amount of pension left after commuting 1/3rd of .--._
pension were not entitled to any benefit as they were not Central
c Government pensioners as on 1.4.1979. An identical writ petition No.
1068/1987 under Art. 32 of the Constition was filed on behalf of the
Welfare Association of absorbed Central Government Employees in
Public Enterprises and this Court dismissed the said writ petition on Y
April 12, 1990. In the said writ petition benefit of Judgment of this
D Court in "Common Cause" a Registered Society & Ors. v. Union of
India, [1987] 1 SCC 142 was claimed but the same was negatived by
making a distinction that the Writ Petition "Common Cause" was on
behalf of the Government servants who had commuted their pension
partially ~nd this Court for the reasons indicated in the judgment came
to hold that on the expiry of 15 years from the date of commutation the ___;...
E entire pension revived. The petitioners were persons who had, at the
time of retirement from Government .
service and entering into public
I
sector had taken the advantage of commuting the entire pension. They
certainly belong to a class different from those whose case was before
this Court at the instance of the common cause in Writ Petition Nos.
1955-61 of 1983. It was further held in the above case that the commu-
F tation does bring certain advantages to the committees and the class of 'a
Government officers whom the petitioner seeks to represent have ._....-~
derived such benefits:

We find no reason to take a different view. The commutation
brings about certain advantages. The commuting pensioner gets a
G lumpsum amount which ordinarily he would have received in the
course of his spread over period subject to his continuing to live. Thus,
two advantages are certainly forthcoming out of commutation-(1)
availability of a lumpsum amount, and (2) the risk factor. In the
present case the petitioners had not only got 1/3rd of their pension
commuted but exercised the option of getting the entire pension com-
H muted and in lieu thereof got a lumpsum. Such persons cannot fall in
DES RAJ v. U.O.l. [KASLIWAL, J.] 363

. -_'-.,_ the category of Central Government pensioners for the purposes of
~"/ getting benefit of Liberalised Pension Rules which can be made applic- A
_. - able only to Central Government Pensioners. It is no doubt correct
that the family pension has been allowed in case of the persons like the
petitioners but that does not make them entitled to get any benefit
given to the pensioners on account of the liberalised Pension Rules
taking note of the fallen value of the rupee. ,B
_ -~ - It was contended by Mr. Rao on behalf of the petitioners that the
petitioners are not claiming any pension but their contention is that the
Liberalised Pension Rules which given benefit to those pensioners who
had got their 1/3rd pension commuted should be granted to the
)----- petitioners by awarding lumpsum after increasing their pension and
.......... calculating such amount in proportion to the i~creased pension. We c
find no force in this contention as tbe petitioners fall in a different class
altogether and are not entitled to claim any benefit granted to Central
·--~ Government pensioners. After getting a lumpsum in lieu of entire
pension, they do not fall in the class of Central Government pensio-
ners and are not entitled to any benefit granted to Central Govern-
ment pensioners. The case of such Central Government pensioners ID
who got their 1/3rd pension commuted also fall in a different class in as
much as they get 2/3rd pension, and after 15 years of such commuta- :
tion or having attained the age of 70 years whichever was later they
_.:...i6 become entitled to full pension. Petitioners on the other hand were not
____,- ---., entitled to any pension after having received the lumpsum amount in :
·lieu of pension being commuted and having opted to receive such E
imount in lumpsum at the time of entering the service in Public Sector
Undertaking.
In the above mentioned civil appeal the legal question is identical 1

except that the appellant in this case became a pensioner of the Cent-
~ ral Gove.rnment w.e.f. 1.4.1977 and the pension determined as pay- F
, ~ -able to him was Rs.609 per month and the same was got commuted by !

the appellant for a lumpsum amount on and from 7 .8.1978. The appel-
lant-had exercised the option for absorption in Steel Authority of India -
Limited (SAIL) a Public Sector Enterprise. The Writ Petition filed by
1

him before the High Court of Delhi ~as dismissed on 25.8.1982. The
appellant then filed a S.L.P. against the said order. This Court had : G
granted special leave on 25.3.1985 and had given a direction to hear,
-- ---{ the appeal alongwith the writ petition Nos. 11757 & 11758 of 1984.
I

In the result we find no force in all these cases and the same are
dismissed with no order as to costs.
R.P. Petitions and Appeal
dismissed.