Holding

The Supreme Court held that the High Court erred in not examining the effect of the Government’s letter and the nature of incorporation of the Kerala Service Rules, and therefore remitted the matter to the High Court for fresh determination of the cut‑off date issue and related questions.

Summary

The Kerala State Road Transport Corporation (the Corporation) absorbed employees of the State Transport Department whose pension rights were protected under Section 34 of the Road Transport Corporation Act, 1950 and were to be governed by Part III of the Kerala Service Rules, 1959 (KSR). The State Government, by a letter dated 17‑Mar‑1984, authorised the Corporation to pay pension in accordance with the KSR, and the Corporation, by a letter dated 5‑May‑1984, took note of this. Owing to financial constraints, the Corporation later fixed cut‑off dates (1992, 1994) for payment of enhanced pension and dearness relief, which the pensioners challenged in writ petitions seeking payment at the enhanced rates on par with government employees. The Kerala High Court held that there was no rational basis for the cut‑off dates and ordered payment from the date government employees received the benefits. The Supreme Court held that the High Court had failed to examine whether the Government’s letter constituted a direction under Section 34 and the effect of that on the Corporation’s authority to fix a cut‑off date, as well as the nature of incorporation of the KSR. Consequently, the Supreme Court remitted the matter to the High Court for fresh consideration of these issues, without interfering with the High Court’s orders on recovery of excess payments.

Issues considered

The letter dated 17‑Mar‑1984 (and the Corporation’s note of 5‑May‑1984) whether it is a direction under Section 34 of the Road Transport Corporation Act, 1950 binding the Corporation to pay pension per the Kerala Service Rules without a cut‑off date.
Whether the Corporation has the power to fix a cut‑off date for enhanced pension and dearness relief in view of financial stringency.
The manner in which Part III of the Kerala Service Rules is applied to the Corporation – by incorporation or by reference – and the effect of subsequent amendments.
Whether the High Court correctly concluded that there was no rational basis for fixing a cut‑off date.
Whether the various writ petitions raise identical issues and can be decided together.
The propriety of the High Court’s order directing recovery of amounts allegedly paid in excess.

Legislation cited

Kerala Service Rules, 1959s. Part III
Road Transport Corporation Act, 1950s. 34

Subjects

service lawpensiondearness reliefstatutory interpretationincorporation by referencecut‑off datefinancial stringencyKerala Service RulesRoad Transport Corporation Act

Judgment

.. KERALA STATE ROAD TRANSPORT CORPN. A
I'
K.O. VARGHESE AND ORS.

APRIL 17, 2003

[SHIVARA1 V. PATIL AND ARIJIT PASA YAT, 11.] B

Service law---Road Transport Corporation Act, 1950-Section 34-
Kera/a Service Rules, 1959-Part JIJ-Absorption of employees of Stale
Transport Department by State Road Transport Corporation-Enhancement
r
of pension rates-State Government authorizing Corporation to pay pension
c
to employees as per Kera/a Service Rules-Co1poration fixing cut-off date for
payment of enhanced pension and dearness relief due to financial stringency-
High Court holding fixing of cut-off dale irrational-On appeal, held: High
Court not examining the effect of Corporation's instructions based on State
Government's instructions and its impact on the authority of Corporation to D
fix cut-off date-Hence mat/er remitled to High Court for fresh examination.

lnte1prelation of s/alutes-Statutory construction-Adoption of statute
by incorporation and by reference-Discussed

Appellant-State Road Transport Corporation absorbed persons employed E
in the State Transport Department. Their service conditions were protected
under section 34 of the Road Transport Corporation Act, 1950. In 1978 other
employees who opted for pension were also granted pension at par with these
employees. State Government by letter dated 17.3.1984 authorized the
~··· Corporation to pay pension to its employees in terms of Part III of Kerala
Service Rules, 1959 (KSR). Corporation by letter dated 5.5.1984 took note of
F
the letter. In 1992 and 1994 the date from which the amount is to be paid was
deferred since Corporation had no means to pay the enhanced rate of pension
as per the Fifth Kerala Pay Commission. Respondents filed writ petition
seeking declaration for pension a·nd dearness relief itt enhanced rates on par
with the employees of the State Government. Appellant-Corporation also filed G
writ petitions. Corporation contended that it is an instruction in terms of section
34 of the Act while pensioners contended that the Government only allowed
the Corporation to defer the matter for some time. High Court held that there
was no rationale for fixing the cut-off date for payment of the enhanced pension
and the dearness relief since Part III of the KSR had been adopted; that in the
779 H
I

)t

780 SUPREME COURT REPORTS [2003] 3 S.C.R.
....
A absence of any rule or regulation framed by the Corporation, KSR is applicable
to the employees appointed by it; and that the employees transferred from State
Transport Department are to be paid pension and dearness relief from the date
the Government servants got it.

In the other appeals in addition to the general questions raised, the issue
B raised relates to the recovery of the amounts paid in excess due to wrong fixation
orders.

Appellants-Corporation contended that the wage structure is the domain
of the Corporation- employer a nil it has the choice to fix the cut off date for
C enhanced pension and dearness reliefs; that even if it is accepted for the sake
of arguments that the letter of the Government was not an instruction in terms
of Section 34 of the Act, yet the Corporation was not denuded of its power to
fix the wage structure and for good and sufficient reasons it fixed the cut off
dates, the High Court should not have interfered with it; that the take over
document has not been considered by the High Court properly; and that whether
D the KSR was applicable by incorporation or by reference has not been decided
by the High Court and this may be one of the factors which was to be considered,
but it did not have any determinative force on the issue as to whether the
Corporation has the power to fix a different cut off date taking into account
several relevant factors like financial stringencies etc.
E
Respondents contended that by take over notification whatever was given
to the Government servants was also to be given to those employees who have
been transferred from the Department to the Corporation; that there is no right
to vary the cut off date, even if it is accepted that Corporation's financial health
is failing, the old pensioners should not be deprived of their legitimate
F entitlements of pension, thus the order of the High Court suffers from no
infirmity; that there was no question of fixing a different cut off date as the
Corporation by letter dated 5.5.1984 took note of the State Government's letter
dated 17.3.1984 by which it authorized the Corporation to pay pension to its
employees as per Kerala Service Rules; and that this was the adoption of a
G statut<? by incorporation and not by reference.

Disposing of the appeals, the Court

HELD: 1.1. In the instant case there was no dispute about entitlement
but it related to the date for which the payment was to be made. High Court's
H holding that there was no question of any cut off date since Part Ill of the KSR
KERALA STATE ROAD TRANSPORT CORPN. v. K.0. VARGHESE 78 J
was being adopted in the past is prima facie not correct. Stand of the A
Corporation right through has been that it had fixed the date from which the
payments were to be made and for that purpose relied on the letter of the
Government. Whether the letter constituted a direction under Section 34 of
the Road Transport Corporation Act, 1950 is an issue which is linked with
several other issues like power of the Corporation to fix a different date de B
hors any special direction of the Government under Section 34 of the Act. Even
if it is held that the letter was not in the nature of a special direction, the
other issues were required to be considered. That has apparently not been done.
What is the effect of the letter dated 5.5.1984 and its impact on the authority,
if any, of the Corporation to fix cut off date has not been examined by the High
Court.1793-A-C; 794-GI C
Union of India and Ors. v. Lieut (Mrs.) E. Jacats, 119971 7 SCC 334 and
State of Rajasthan and Anr. v. Amrit/a/ Gandhi and Ors., [199712 SCC 342,
relied on.

1.2. All the writ petitions did not involve identical issues. High Court's D
attention was focused on the stand of those employees who originally belonged
to the State Transport Department Their cases stand on a different footing
vis-a-vis other employees, even according to the pleadings of the parties.
Therefore, in the peculiar circumstances the matter is remitted back to the
High Court for fresh consideration, so that it can deahvith the respective stands E
of the parties. It shall be open to the parties to place additional materials in
support of their respective stands before the High Court which shall decide
the matter de novo. 1786-D, EI

2.1. Indication of KSR Part Ill on the question of paying pension in
Corporation's order dated 5.5.1984 needed consideration. A distinction has F
been made between a mere reference or citation of the statute into another
and incorporation. A statute may instead of referring to a particular previous
statute or to any specific provision therein refer to the law on the subject
generally. In such cases a reference is construed to mean that the law is as it
reads thereafter including amendments subsequent to the time of adoption. G
1793-D, EI

2.2. The legislation by referable incorporation falls into two categories.
That is (i) where a statute by specific reference incorporates the provisions of
another statute as at the time of adoption and (ii) where a statute incorporates
by general reference. The law concerning a particular subject has a genus. In H
'782 SUPREME COURT REPORTS (2003] 3 S.C.R.

A the former case, the subsequent amendments made in the referred statute
cannot automatically be read into the adopting statute. But in the second
category it may be presumed that the legislative intent was to include all the
subsequent amendments also made from time to time in the generic law on the
subject adopted by the general reference. (793-F(

B 2.3. In the former case, a modification, repeal or re-enactment or'the
statute that is referred will also have effect on the statute in which it is referred;
but in the latter case any change in the incorporation statute by way of
amendment or repeal has no repercussion on the incorporating statute. The
rule that the repeal or amendment of an Act which is incorporated in a later
C Act has no effect on the later Act or on the provisions incorporated therein is
subject to four exceptions. They are (i) where the two acts are in pari materia
(iii) where the amendment of the earlier Act if not imported in the later Act
would render it wholly unworkable and (iv) where the amendment of the earlier
Act either expressly or by necessary intendment also supplies to the later Act.
Even though only particular sections of an earlier Act are incorporated into
D later statute, in constru~ng the incorporated provisions it may be necessary
and permissible to refer to other parts of the earlier statute which are not
incorporated. This does not however, mean that a provision in the nature of a
proviso or exception in the earlier Act which is not brought in by incorporation
can be read in a manner so as to limit the meaning of the provision
E incorporated. Reference to other provisions of the earlier statute is only
permissible to cull out meaning of the provision incorporated.
(793-G, H; 794-A-C(

2.4. Further more the clear intention of the incorporating Act cannot be
defeated by such provisions of the earlier Act which have not been incorporated.
F In the interpretation of an incorporated provision, the Court is some times
required to formulate variations of details in the context of the incorporating
statute. The merit of legislation by incorporation is brevity which is some times
counterbalanced by difficulties and obscurities which it is likely to create.
(794-E, Fl

G Martyappa v. Stale of Karna/aka, JT I 19981 I SC 734, relied on.

Minis/er of Housing and local Government v. Hartnell, (1965( I All E.R.
490 (HL) and Re Wood's £stale Ex parte, Works and Buildings Commissioners,
(1986) JI Ch. 0. 607, referred to.
I
H Sta/Ulory Construe/ion by S111herland Vol.2, 3rd Edn., p.550 and
KERAL.A STATE ROADTRANSPORTCORPN. 1·. K.O. VARGHESE [ARIJIT PASAYAT. J 1783

Supplement [1956] p.119, referred to. A
3. Taking note of the peculiar circumstances as noticed by the High
Court, there is no scope for interference with the High Court's directions
relating to the recovery of the amounts allegedly paid extra to the employees.
The other issues will be examined by the High Cuurt afresh. 1795-DI
B
D.S. Nakara v. Union of India, AIR 11983) SC 130; State of Kera/a and
Ors. v. M Padmanabhan Nair, AIR I19851SC356; Dr. Uma Agrawal\'. Sr ate
ofU P. andAnr., AIR 11999] SC 1212 and Unionojlndiav. P.N Menon. AIR
IJ 9941 SC 222 I, referred to.
r
Dodge v. Board of Education, 119371302 US 74:82 Law Edn. 58, referred
c
to.

"Northoote-Treve/yan Report; Gerald Rhodes Public Sector Pensiom,
pp. 18-19; Encyclopaedia Britannica, Vol. 17, p. 575; HalsblllJ''s Lall' of
England, Fourth Edition, Reissue- Vo/.16; Social Sernrity Law ofl'rof Han)' D
Calvert, p.l; American Jurisprudence, 24.881 and Corpus Juris Secundum,
Vol. 70 p.423, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6651-6654 of
2000.
E
From the Judgment and Order dated 14.7.2000 of the Kerala High Court
in W.A. Nos. 890/93, 258/97, I24 and 2456 ofl998.

WITH

C.A.Nos. 6656, 6657, 6655/2000, 3487, 3490-93/2003, l 8I-182 of2002. F
L. Nageshwara Rao, S. Balakrishna, P. Krishnamoorthy, Harish Beeran,
Jayant Muthuraj, M.K.D. Namboodiri. Sree Narain Jha, K.R. Sasiprabhu, John
Mathew, Sushi! K. Tekriwal, B.V. Deepak, Dilip Pillai, K.M.K. Nair, Ms. K.
Sarada Devi, Roy Abraham, Himinder Lal and Ranbir Singh Yadav for the
Appearing parties. G

The Judgment of the Court was delivered by

ARIJIT PASAYAT,J.

C.A. Nos. 6651-665412000, 6655/2000, 665612000, 665712000, SLP (C) Nos. H
784 SUPREME COURT REPORTS [2003) 3 S.C.R.

· A 682012001 6518-6521/200 I, C.A. Nos. I 8 I- I8212002
Leave granted in SLP(C) Nos. 6820/2001and6518-6521/2001.

Since these appeals have some similarity so far as pivotal is1ares are
concerned, are, therefore, disposed of by this common judgment.
B
Several writ petitions were filed by the respondents herein before the
Kerala High Court seeking declaration about their entitlement to receive
pension and dearness relief at enhanced rates in par with the employees of
the State Government. They were employees of the Kerala State Road Transport
Corporation (hereinafter referred to as 'the 'Corporation) which is the appellant
C in all these appeals. Though the reliefs sought for were not exactly identical,
by the impugned judgment four appeals were disposed of by a Division
Bench of the High Court. Two of the writ appeals were filed by the writ
petitioners, while two were filed by the Corporation.

The Corporation was formed on 1.4.1965; some persons who were then
D employed with State Transport Department were absorbed by the Corporation;
their service conditions were protected vide Notification No. 4936/TC4/64/PW
22.3.1965 in terms of directions under Section 34 of the Road Transport
Corporation Act, 1950 (in short 'the Act'). On the basis of conditions 11 and
12 of the Notification, which shall be extracted infra, pension was paid to
E erstwhile State Transport Department employees, in terms of Part III of Kerala
Service Rules, 1959 (in short 'KSR'). In 1978, other employees who opted for
pension were also granted pension at par with these employees. In 1992,
(w.e.f. 1.1.1992) a departure was made by fixing subsequent dates of entitlement
for dearness relief. Similar was the situation in 1994. While on the first
instance date fixed was 1.7 .1992, for the latter case it was directed to be
F operative from 1.11.1996, when the Government had fixed the date to be
1.4.1994.

Huge extra cost involved and shattered financial condition were the
reasons indicated as such deferment. Reliance was also placed on a letter of
G the State !=Jovernment dated 24.9.1992 which according to it was a direction
in terms of Section 34 of the Act. According to this letter, in view of financial
position of the Corporation, the matter relating to payment of the enhanced
amounts may be deferred for better times. This letter was in response to the
Corporation's letter to the effect that since it had no means to pay the
enhanced rate of pension as per the Fifth Kerala Pay Commission, the date
H from which the amount is to be paid should be postponed. There is a great
KERALASTATEROADTRANSPORTCORPN.1·. K.0. VARGHESE[ARIJITPASAYAT, J.J785

detail of controversy as to the true nature of the said government letter (Ex.P- A
I). While the Corporation's stand is that it is an instruction in terms of Section
34 of the Act, the pensioners took the stand that the Government only
allowed the Corporation to defer the matter for some time. High Court accepted
the stand of the writ petitioners. It also observed that the Government only
allowed the Corporation to defer the matter for some time, in fact that was B
deferred, but full payments including the arrears with effect from the date of
implementation in Government service also were made by the Corporation
subsequently. High Court noted that till 1991 all the orders relating to
enhancement of pension as well as dearness reliefs were paid to the pensioners
of the Corporation without any difference in dates. It held that in Ex.P-1, what
is mentioned relates to deferment of payment for some time, and revised C
pension benefits were in fact given with arrears after some time. It further
noted that since Part Ill of the KSR had been adopted, there was no rational
for fixing the cut off date for payment of the enhanced pension and the
dearness reliefs. In the absence of any rule or regulation framed by the
Corporation, KSR is applicable to the employees appointed by it. In respect D
of employees transferred from State Transport Department, the position was
clear that they are to be paid from the date the government servants got it.
Reference was made to the conditions of transfer. Accordingly, the appeals
filed by the respondents (writ petitioners) were allowed while those filed by
the appellant-Corporation were dismissed.
E
In support of the appeals, it is submitted that the High Court has not
examined the respective cases and has .broadly taken the view about entitlement
of the pensioners, though the writ petitions were not for identical reliefs.
There was no pensionable post in the Corporation till 1984. The wage structure
is the domain of the employer-Corporation and it has the choice to fix the cut F
off date for enhanced pension and dearness reliefs. Even if it is accepted for
the sake of arguments that the letter of the Government (Ex.P-1) was not an
instruction in terms of Section 34 of the Act, yet the Corporation was not
denuded of its power to fix the wage structure and when- for good and
sufficient reasons it fixed the cut off dates, the High Court should not have
interfered. Financial stringency is a relevant factor for fixing the cut off date. G
The High Court acted on erroneous premises by proceeding as if there was
controversy as regards the conferment of the benefits. What was really in
controversy was the dates while there is no dispute about entitiement. The
take over document has not been considered by the High Court properly. It
only says that as and when the benefits accrue the relevant ru Jes, notifications H
786 SUPREME COURT REPORTS (2003] 3 S.C.R.

A and orders of the governments in force and applicable immediately before the
transfer had to operate.

Per contra, learned counsel appearing for the respondents who were
originally in the State Transport Department submitted that clauses 11 and 12
of the take over notification made the position clear that whatever was given
B to the governments servants was also to be given to those employees who
had been transferred from the department to the Corporation. The entitlements
were to be fixed keeping in view the position as it stood on date of transfer.
There is no right to vary the cut off date. Even if it is accepted that Corpor:ition's
financial health is failing, the old pensioners should not be deprived of their
C legitimate enti:Iements of pension. Keeping in view the laudable object for
which pension is paid and its socio-economic importance for the old and
infirm pensioners, the order of the Hig~ Court suffers from no infirmity. The
expression "as and when such benefits accrue" was for the purpose of
identification of the rules applicable.

D Further all the writ petitions did not involve identical issues. High
Court's attention was focused on the stand of those employees who originally
belonged to the State Transport Department. Their cases stand on a different
footing vis-a-vis other employees, even according to the pleadings of the
parties. Therefore, in the peculiar circumstances as noted above, we feel the
E proper course would be to remit the matter back to the High Court for fresh
consideration, so that it can deal with the respective stands of the parties.
It shall be open to the parties to place additional materials in support of their
respective stands before the High Court which shall decide the matter de
novo.

F The question of employer having the domain to fix the cut off date has
no relevance so far as the present disi;ute is concerned. There was no
question of fixing a different cut off date as the Corporation by letter dated
5.5.1984 took note of the State Government's letter dated 17.3-1984 by which
it authorized the Corporation to pay pension to its employees as per Kerala
Service Rules. This was the adoption of a statute by incorporation and not
G by reference.

Learned counsel for the appellants in response to this plea submitted
that whether the KSR was applicable by incorporation or by reference has not
been decided by the High Cou11 and this may be one of the factors which
H was to be considered, but it did not have any detem1inative force on the issue
KERALA STATE ROAD TRANSPORTCORPN. v. K.O. VARGHESE [ARIJIT PASAYAT. J) 787

as to whether the Corporation has the power to fix up a different cut off date A
taking into account several relevant factors like financial stringencies etc.

There is no appearance on behalf of the other respondents.

Before we deal with their respective contentions, it is necessary to
appreciate the concept of pension. There are different classes of pensions B
and different conditions govern their grant. It is almost in the nature of
deferred compensation for services rendered. There is a definition of pension
in Article 366( 17) of the Constitution of India, 1950 (in short the 'Constitution'),
but the definition is not all pervasive. It is essentially a payment to a person
in consideration of past services rendered by him. It is a payment to a person
who had rendered services for the employer, when he is almost in the twilight C
zone of his life.

A political society which has a goal to set up a welfare state, would
introduce and has, in fact, introduced as a welfare measure wherein the retiral
benefit is grounded on consideration of State obligation to its citizens who D
having rendered service during the useful span of life must not be left to
penury in their old age. But, the evolving concept of social security is a later
day development, and this journey was over a rough terrain. To note only one
stage in 1856 a Royal Commission was set up to consider whether changes
were necessary in the system established by the operative 1834 Act. The
Report of the Commission is known as "Northoote-Trevelyan Report". The E
Report was pungent in its criticism when it says that: "in civil services
comparable to lightness of work and the certainty of provision in case of
retirement owing to bodily incapacity, furnish strong inducement to the parents
and friends of sickly youth to endeavour to obtain for them employment in
the service of the Government, and the extent to which the public are F
consequently burdened, first with the salaries of officers who are obliged to
absent themselves from their duties on account of ill health, and afterwards
with their pensions when they retire on the same plea, would hardly be
credited by those who have not had opportunities of observing the operation
of the system. (See Gerald Rhodes Public Sector Pensions, pp. 18-19)
G
This approach is utterly unfair because in modern times public services
are manned by those who enter at a comparatively young age, with selection
through stiff competitive examinations and ordinarily the best talent gets the
opportunity.

Let us, therefore, examine; as was done by this Couti in D.S. Nakara H
788 SUPREME COURT REPORTS [2003] 3 S.C.R.

A v. Union ofIndia, AIR (I 983) SC 130 as to what are the goals that any 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
B 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 in determining the minimum amount required for
c 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 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 I"
D influences its social objectives. The law is one of the chief instruments j!I
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 I meant
those legal mechanisms primarily concerned to ensure the provision for the
individual or a cash income adequate, when taken along with the benefil in
E 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 of Prof. Harry Calvert, p. l)

Viewed in the light of the present day notions pension is a term applied
to periodic money payments to a person who retires at a certain age considered
F age of disability; payments usually continue for the rest of the natural life of
the recipient. The reasons underlying the grant of pension vary from country
to country and from scheme to scheme. But broadly stated they are: (i) as
compensation to former members of the armed forces or their dependants for
old age, disability, or death (usually from service causes), (ii) as old age
retirement or disability benefits for civilian employees, and (iii) as social
G security payments for the aged, disabled or deceased citizens made in
accordance with the rules governing social service programmes of the country. ,•
Pensions under the first head are of great antiquity. Under the second head
they have been in force in one form or another in some countries for over Ill
a century but those coming under the third head are relatively of recent origin,
H though they are of the greatest magnitude. There are other views about

I
KERALA STATE ROAD TRANSPORT CORPN. v. K.O. VARGllESE[ARIJITPASAYAT, J.J 789

pensions such as charity, paternalism, deferred pay, reward for service rendered, A
or as a means of promoting general welfare (See Encyclopaedia Britannica Vol.
17, p.575). But these views have become otiose.

Pension to civil employees of the Government and the defence personnel
as administered in India appear to be a compensation for service rendered -in
the past. However, as held in Dodge v. Board of Education, (1937) 302 US B
74:82 Law Edn.58) a pension is closely akin to wages in that it consists of
payment provided by an employer, is paid in consideration of past service and
the purpose of helping the recipient meet the expenses of living. This appears
to be the nearest to our approach to pension with the added qualification that
it should ord.inarily ensure freedom from undeserved want.
, I
c
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 foil of life when physical and mental powers
start ebbing corresponding to aging progress and therefore, one is required D
to fall back on savings. One such saving in kind is when you gave your best
in the hey day 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 or emoluments to one retired from service. Ttius the
pension payable to an employee is earned by rendering long and sufficient E
service and therefore can be said to be a deferred portion of the compensation
for service rendered. In one sentence one can say that the most practical
raison d'etre for pension is the inability to provide for oneself due to old age.
One may live and avoid unemployment but not senility and pecuniary ifthere
is nothing .to fall back upon. p
The discernible purpose thus underlying pension scheme or a statute
introducing the pension scheme must inform interpretative process and
accordingly it should receive a liberal construction and the Courts may not
so interpret such statute as to render them obscure (S'ee American
Jurisprudence 24.881 ). G
From the aforesaid analysis three things emerge: (i) that pension is
neither bounty nor a matter of grace depending upon the sweet will of the
employer and that it creates a vested right subject to the statute, if any,
holding the field, (ii) that the pension is not an ex gratia payment but it is a
payment for the past service rendered; and (iii) it is a social welfare measure H
790 SUPREME COURT REPORTS [2003) 3 S.C.R.

A rendering socio-economic justice to those who in the hey day of their life
ceaselessly toiled for employers on an assurance that in their ripe old age
they would not be left in lurch. It must also be noticed that the quantum of
pension is a certain percentage correlated to the emoluments earlier drawn.
Its payment is dependent upon an additional condition of impeccable
behaviour even subsequent to retirement. That is, since the cessation of the
B contract of service and that it can be reduced or withdrawn as a disciplinary
measure.

In Corpus Juris Secundum, Vol. 70 at p.423, it is stated that the title
'pension' includes pecuniary allowances paid periodically by government to
C persons who have rendered services to the public or suffered loss or injury
in the public service, or to their representatives; who are entitled to such
allowances and rate and amount thereof; and proceedings to obtain and
payment of such pensions.

In its strict sense a pension is not a matter of contract, and is not
D founded on any legal liability, it is a mere bounty or gratuity "springing from
the appreciation and consciousness of the sovereign", and it may be given
or withheld at the discretion of the sovereign. It may be bestowed on such
persons and on such terms as the law-making body of the government
•
prfscribes, and it is, at most, an expectancy granted by the law. The term
'pension' has been compared and distinguished from 'bonus', 'compensation',
E 'profits' and 'retirement payment'. A pension fund is to be distinguished from
an annuity fund derived in part from voluntary contributions under a statutory
option to contribute or refrain from contributing.

In State of Kera/a and Ors. v. M Padmanabhan Nair, AIR (1985) SC
F 356, it was observed that pension and gratuity are no longer any bounty to
be distributed by the Government to its employees on their retirement but are
valuable rights and property in their hands and any culpable delay in settlement
and disbursement thereof must be visited with the penalty of payment of
interest at the current market rate till actual payment. The view was reiterated
in Dr. Uma Agrawal v. State of U.P. and Anr., AIR (1999) SC 1212.
G
It is to be noted that in certain countries wrongful withholding of
pension money has been made a criminal offence and it has been observed
in some of the western countries that the federal statute making the wrongful
withholding of pension money a criminal offence must be strictly construed.
The purpose of the statute, it was held, is to protect the pensioner against
H fraud until the unconditional payment of the money to him.
KERA LA STATE ROAD TRANSPORT CORPN. "· K.0. VARGHESE [ARIJIT PASAYA T.J.J 79 J

In Halsbury's Law of England, Fourth Edition, Reissue-Vol.16, it has A
been observed on the subject as follows:

"Pension means, a periodical payment or lump sum by way of
pension, gratuity or superannuation allowance as respects which the
Secretary of State is satisfied that it is to be paid in accordance with
any scheme of arrangement having for its object or one of its objects B
to make provision in respect of persons serving in particular
employments for providing them with retirement benefits and, except
in the case of such a lump sum which had been paid to the employee,
that:

(I) the scheme or arrangements is established by Act of Parliament C
or of the Parliament of Northern Ireland, or other instrument having
the force of law, or
(2) the benefits under the scheme or arrangement are secured by an
irrecoverable trust which is subject to the laws of any part of the
Great Britain; or D
.. (3) the benefits under the scheme or arrangements are secured by a
contract of assurance or an annuity contract which is made with:
(a) an insurance company to which the Insurance Companies
Act, 1982 applies; or (b)a registered friendly society; or (c)an E
industrial and provident society registered under the Industrial
and Provident Societies Act, 1965; or

(4) the benefits under ihe scheme or arrangement are secured by any
regulation or other instrument, not being a regulation or instrument
having the force of law, made with the authority of a Minister of F
the Crown or with the consent of the Treasury for the purpose
of authorizing the payment to persons not employed in the Civil
Service of the State of such pensions, gratuities or other like
benefits as might have been granted to person so employed; or
(5) the scheme or arrangement is established by an enactment or ,G
other instrument having the force of law in any part of the
Commonwealth outside the United Kingdom;
and that the provision made to enable oenefits to be paid,
taking into account any additional resources which could and
would be provided by the employer, or any person connected H
792 SUPREME COURT REPORTS (2003] 3 S.C.R.

A with the employer to meet any deficiency, is adequate to ensure
payment in full of such benefits.

'Pension' includes any part of the pension. 'Pension' does not include:

(~ a payment of an employee which consists of solely of a return of
his own contributions, with or without interest;
B
(ii) that· part of a payment to an addition which is attributable solely
to additional voluntary contributions by that employee made in
accordance with the scheme or arrangement;

(iii) a periodical payment or lump sum, in so far as that payment or
C lump sum represents compensation under statutory compensation
scheme and is payable under a statutory provision whether made
or passed before, on or after 31st July, 1978.

If in any case the Secretary of State is satisfied that benefits under
the scheme or arrangement are wholly or mainly provided for the
D benefit of persons not resident to Great Britain, he may, if he thinks
fit and subject to such conditions, if any, as he thinks proper, waive
the requirement contained in head (2) above in respect of a scheme
or arrangement the benefits under which are secured by an irrecoverable
trust or the requirements of head 3(a), 3(b) or 3(c) above in the case
of a scheme or arrangement the benefits under which are secured by
E a contract of assurance or an annuity contract."

In Union of India v. P.N. Menon, AIR (1994) SC 2221, this Court
observed that not only in the matters of revising the pensionary benefits, but
also in respect of revision of scales of pay a cut off date on some rational
or reasonable basis has to be and can be fixed for extending the benefits. The
F cut off date may be justified on the ground that additional financial out lay
is involved or the fact that under the terms of appointment the employee was
not entitled to the benefit of the pension on retirement. (See Union of India
and Ors. v. Lieut (Mrs.) E. lacats, [1997] 7 SCC 334. Depending upon financial
conditions a cut off date can be fixed when a new pension scheme is being
G introduced. (See State of Rajastshan and Anr. v. Amritlal Gandhi and Ors.,
[I997J 2 sec 342.

The High Court has referred to the fact that the Corporation did not
frame any regulation and on following Part Ill of KSR it was paying pension
to the employees at par with the government employees with some conditions.
H That according to the High Court made the position clear that no fixation of
..
I

'i

KERALASTATE ROADTRANSPORTCORPN. v. K.O. VARGHESE[ARIJIT PASAYAT,J.1793

cut off date was involved. A
From the perusal of the order passed by the Division Bench, it appears
that it proceeded on the basis a~ if the questions for consideration related
entitlement to receive enhanced pension and dearness reliefs. As noted above,
there was no dispute about entitlement and what was in controversy related
to the date for which the payment was to be made. The High Court further B
proceeded on the basis that there was no question of any cut off date since
Part III of the KSR was being adopted in the past. The same prima facie is
not correct. Stand of the Corporation right through has been that it had fixed
the date from which the payments were to be made and for that purpose relied
on Ex.P-1, letterofthe Government. Whether the letter (Ex.P-1) constituted a
direction under Section 34 of the Act is an issue which is linked with several C
other issues like power of the Corporation to fix a different date de hors any
special direction of the Government under Section 34 of the Act. Even if it
is held that the letter in Ex.P-1 was not in the nature of a special direction,
the other issues were required to be considered. That has apparently not been
done. I)

One of the issues which needed consideration was indication of KSR
Part III on the question of paying pension in Corporation's order dated
5.5.1984. A distinction has been made between a mere reference or citation
of one statute into another and incorporation. A statute may instead of
referring to a particular previous statute or to any specific provision therein E
refer to the law on the subject generally. Jn such cases a reference is construed
to mean that the law is as it reads thereafter including amendments subsequent
to the time of adoption, as was noted by Sutherland in Statutory Construction
Vol.2, 3rd Edn., p.550 and supplement (1956), P.119.

The legislation by referable incorporation falls into two categories. That F
is (i) where a statute by specific reference incorporates the provisions of
another statute as at the time of adoption and (ii) where a statute incorporates
by general reference. The law concerning a particular subject has a genus. In
the former case the subsequent amendments made in the referred statute
cannot automatically be read into the adopting statute. But in the second G
category it may be presumed that the legislative intent was to include all the
subsequent amendments also made from time to time in the generic law on
the subject adopted by the general reference.

In the former case a modification, repeal or re-enactment of the statute
that is referred will also have effect on the statute in which it is referred; but H
794 SUPREME COURT REPORTS [2003] 3 S.C.R.

A in the latter case any change in the incorporation statute by way of amendment
or repeal has no repercussion on the incorporating statute. The rule that the
repeal or amendment of an Act which is incorporated in a later Act has no
effect on the later Act or on the provisions incorporated therein is subject
to four exceptions. They are (i) where the later Act and the earlier Act are
supplemental to each other, (ii) where the two Acts are in pari materia, (iii)
B where the amendment of the earlier Act if not imported in the later Act would
render it wholly unworkable and (iv) where the amendment of the earlier Act
either expressly or by necessary intendment also applies to the later Act.
Even though only particular sections of an earlier Act are incorporated into

C
later statute, in construing the incorporated provisions it may be necessary
and permissible to refer to other parts of the earlier statute which are not
incorporated. This does not however mean that a provision in the nature of
a proviso or exception in the earlier Act which is not brought in by
-
incorporation can be read in a manner so as to limit the meaning of the
provision incorporated. Reference to other provisions of the earlier statute is
only permissible to cull out meaning of the provision incorporated.
D
In the illuminating words of Lord Esher MR: "If a subsequent Act
brings into itself by reference some of the clauses of a former Act, the legal
.
,
effect of that, as has often been held, is to write those sections into the new
Act as if they had been actually written in it with the pen, or printed on it."
E (See Re. Wood's Estate, Ex Parte, Works and Buildings Commissioners (1986)
31 Ch.D. 607).

It may be added that clear intention of the incorporating Act cannot be
defeated by such provision of the earlier Act which have not been
incorporated. In the interpretation of an incorporated provision, the Court is
p some times required to formulate variations of details in the context of the
incorporating statute. [See Mariyappa v. State of Karnataka, JT (1998 I SC
734)). The merit of legislation by incorporation is brevity which is some times
counterbalanced by difficulties and obscurities which it is likely to create.

In Minister of Housing and Local Government v. Har111e// (1965) I All
G E.R. 490(HL), it was observed that there is a regrettable modern tendency to
overdo legislation by reference and to attempt brevity at the expense of
lucidity.

What is the effect of the letter dated 5.5.1984 and its impact on the
authority, if any, of the Corporation to fix cut off date has not been examined
H by the High Court.
1l
KERALA STATE ROADTRANSPORTCORPN. 1·. KO. VARGHESE [ARIJIT PASAYAT,J J795

C.A.No.6655 of 2000 A
In addition to the general questions raised in other appeals, one other
aspect which. needs to be noted is that some amount was sought to be
recovered from the respondents on the ground that they were paid amounts
in excess of their legal entitlements. The attempt to recover the amount was
resisted by the respondent-employees who filed writ petitions before the High B
Court which at the first instance directed disposal of the representations filed
by them. On fresh consideration, orders were passed for recovery. The ground
taken for directing recovery was that there was wrong fixation of pay. That
was again challenged before the High Court. Taking note of the fact that pay
was fixed in 1974 and the writ petitioners were not responsible for any wrong C
fixation of pay, the recovery of the amount was held to be inequitable by
learned Single Judge of the High Cou1t. The writ appeal was also dismissed.
In addition to the questions raised in other appeals, the Corporation has
assailed the directions of the High Court not to recover. On hearing learned
counsel for the parties and taking note of the peculiar circumstances noticed
by the High Court, we do not find any scope for interference with that part D
of the High Court's directions which related to recovery of the amounts
allegedly paid extra to the employees. So far as other issues are concerned,
this shall be examined by the High Court afresh as directed.

The appeals are disposed of accordingly but in the circumstances with
no order as to costs. E

N.J. Appeals disposed of.