Holding

The Himachal Pradesh Government’s repeal of the 1999 pension scheme, including the cut‑off date, was a lawful exercise of its administrative power and did not infringe any constitutional right, as no vested right had vested in the employees and estoppel was inapplicable.

Summary

The Himachal Pradesh Government introduced the 1999 Pension Scheme for employees of state-owned corporations, replacing the Employees' Provident Funds Scheme, 1995. After a high‑level committee found the scheme financially unsustainable, the Government issued a notification on 2 December 2004 repealing the scheme, allowing only those who had retired before that date to retain benefits. A group of employees challenged the repeal, alleging a vested right to pension, discrimination, violation of Articles 14, 16, 21 and 300A of the Constitution, and invoking estoppel. The High Court read down the notification and allowed the employees, but the State appealed. The Supreme Court held that no vested right had accrued, the cut‑off date was a reasonable classification based on financial viability, and the repeal was a valid exercise of administrative power, rendering the employees' constitutional claims untenable.

Issues considered

The 1999 Scheme created a vested or contingent right to pension for the employees.
The repeal notification with a cut‑off date is arbitrary, discriminatory, or violative of Articles 14, 16, 21 and 300A of the Constitution.
The principle of estoppel or promissory estoppel can be invoked to restrain the State from withdrawing the scheme.
Whether the State has the authority to review and repeal a welfare scheme after it has become operational.
The validity of the classification of employees based on the retirement date (cut‑off date).

Legislation cited

Companies Acts. 619, s. 620
Employees' Provident Funds and Miscellaneous Provisions Act, 1952s. 16(1)(b)
General Clauses Acts. 6
Payment of Gratuity Act, 1972

Subjects

pension schemevested rightestoppeladministrative lawcut‑off dateArticle 14Article 21Article 300Afinancial viabilitystate corporation employeesrepeal notification

Judgment

[2016] 6 S.C.R. 851

STATE OF H.P. & ORS. A
v.
RAJESH CHANDER SOOD ETC. ETC.
(Civil Appeal Nos. 9750-9819of2016)
SEPTEMBER 28, 2016 8

[JAGDISH SINGH KHEHAR AND C. NAGAPPAN, JJ.)
Service law:
Himachal Pradesh Government Corpora/e Sec/or E111ployees
Pension (Fa111ily Pension, Co111mu1a1io11 of Pension and Gratuity) c
Scheme' 1999 - Pension scheme - Wilhdrawal of - Scheme of 1999
not financially viable - Repeal of 1999 Scheme vide Notification
dated 02.12.2004 - Legalily of - Held: Notification dated 2.12.2004
is legal and constitulional - It cannot be said /hat the notification
was unconstitutional, irrational, arbitrary or unreasonable - Scheme
D
of 1999 created a contingent right in the employees of corporate
bodies, who had opted for 'the 1999 Schenle ', i111111ediately on its
having been introduced; all those, who were deemed to have opted;
and all those appointed after the illlroduction of 'the 1999 Scheme'
- There was no employer and employees relationship betlveen the
State Government and employees -All the corporate bodies in which E
employees were/are engaged, are independent juristic entities - Thus,
the claim raised by employees fm· pension, is not based on any
right or obligation be/ween the parties - No right can· be stated to
have been violated u/Arts. 14, 16, 21 and 300A - Further, the action
of the State Government, was well within its authority and was based
F
on due consideration - Repealing of the Scheme was a policy
decision jailing in lhe realm of executive determinalion and 110 court
has any role therein - Administrative law - Policy decision.
Scheme of 1999 - Cut-off date postulated by Slate
Government, whereby some of the employees governed by 1999
Scheme (/hose who had re/ired prior lo 2.12.2004) 11•ere entitled lo G
draw pension under the 1999 Scheme, whereas others, who had
not retired by the time the repeal notification was issued on
2.12.2004, were deprived of such benefits - Justification of - Held:
Cut-off date has been upheld for extending better and higher
H
851
852 SUPREME COURT REPORTS [20f6] 6 S.C.R.

A pensionary benefits, based on the financial health of the employer
- Cut-off date can therefore, legitimately be prfi1·cribed for extending
pensionary benefits, if the funds available cannot assuage the
liability, to all the existing pensioners - Thus, it is well within the
authority of the State Government, in exercise of its administrative
B . powers, to fix a cut-off date, for continuing the right to receive
pens.ion in some, and depriving some others.
Scheme of 1999 - Right to pension under, whether a vested
right - Held: As soon as the concerned employees came to be
governed by 'the 1999 Scheme', a contingent right came to be vested
in them, on the date when 'the 1999 Scheme' became operational,
c or to the direct entrants who entered service thereafter - Said
contingent right created a right in the employees to claim pension,
at the time of their retirement - Said right :would crystalise only
upon the fulfillment of the postulated conditions, on having rendered,
the postulated qualijj;ing service - However, once such a contingent
D right was created, every such employee, could not be prevented
from fulfilling the postulated conditions, to claim pension.
Principle of estoppel/promissory estoppel - Applicability of
- When original position (the rights enjoyed by the employees, under
the Employees Provident Fund Scheme, 1995) available before 'the
E 1999 Scheme' was given effect to, has actually been restored - Held:
Principle of estoppel/promissory estoppel is not applicable.
Constitution of India - Art. 21 - 1999 Scheme, whether
violative of Art. 21 - Held: Employees' Provident Funds Scheme,
1995, was sought to be replaced, by 'the 1999 Scheme'- 1999
F Scheme' was an effort at the behest of the State Government, to
provide still better retiral benefits - 1999 Scheme' was not a measure,
aimed at providing basic human rights - Thus, 'the 1999 Scheme'
cannot be treated as irreversible - Repealing of 'the 1999
Scheme 'cannot be deemed to have in any manner, violated the. right
of the employees, u/Art. 21 - After the repeal notification dated
G 2.12.2004, the erstwhile Scheme of 1995, has been restored to such
of the employees, who were impacted by the said repeal notification.
Allowing the appeals, the Court
HELD: 1. 'The 'Himachal Pradesh Government Corporate
Sector Employees Pension (J<'amily Pension, Commutation of
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC: ETC. 853

Pension and Gratuity) Scheme' 1999', created a contingent right A
in the respondent-employees. The respondent-employees
comprise of all those employees of corporate bodies, who had
opted for 'the 1999 Scheme', immediately on its having been
introduced; all those, who were deemed to have opted for 'the
\. 1999 ~heme' by not having exercised any option; and all those
B
who were appointed after the introduction of 'the 1999 Scheme'.
The claim whether any express right or obligation existed,
between the respondent-employees and the State Government,,
arises out of an obligation between an employer and his
employees, where there is a quid pro quo - a trade off based on a
relationship (as between, a';' employer and employee). However, c
it is concluded, that there was no such relationship between the
State Government, and the respondent-employees. All the
corporate bodies in which the respondent-employees were/are
engaged, are independent juristic entities. It is therefore apparent,
that the claim raised by the respondent-employees, is not based
D
on any right or obligation between the parties. No right can be
stated to have been violated, thereunder. The issue whether
administrative review was permissible, after 'the 1999 Scheme'
had become operational, has been answered in the affirmative.
Thus, the exercise of such power, while issuing the repeal
notification, was based on due considerati011. Therefore, the E
legality and constitutionality of the notification dated 2.12.2004
is upheld. (Para 71)(954-F-H; 955-A-C]
2.1 With effect from 1.4.1999, the employees who had opted
for the Scheme' 1999' (or, who were deemed to have opted for
~the same) were no longer governed by the provisions of the F
Provident Fund Act (under which they had statutory protection,
for th_e payment of provident fund). Consequent upon an
exemption having been granted to the concerned corporate
bodies by the competen! authority under the Provident Fund Act,
the Employees Provident Funds Scheme, 1995, was replaced, by
'the 1999 Scheme'. All direct entrants after 1.4.1999, were also G
entitled to the rights and privileges of 'the 1999 Scheme'.
Therefore, the submissions that no vested right accrued to the
employees of the concerned corporate bodies, on the date when
'the 1999 Scheme' became operational (with effect from 1.4.1999),
H
854 SUPREME COURT REPORTS [2016] 6 S.C.R.

A or to the direct entrants who entered service thereafter, cannot
be accepted. As soon as the concerned employees came to be
governed by 'the 1999 Scheme', a contingent right came to be
vested in them. The said contingent right created a right in the
employees to claim pension, at the time of their retirement.
Undoubtedly, the said contingent right would crystalise only upon
B
the fulfillment of the postulated conditions, expressed on behalf
of the appellants (on having rendered, the postulated qualifying
service). However, once such a contingent right was created,
every employee in whom the said right was created, could not be
prevented or forestalled, from fulfilling the postulated conditions,
c to claim pension. Any action pre-empting the right to pension,
emerging out of the conscious option exercised by the employees,
to be governed by 'the 1999 Scheme' (or to the direct entrants
after the introduction of 'the 1999 Scheme'), most definitely did
vest a right in the respondent-employees. [Para 49][936-H; 937-
A-E]
D
2.2 The right to receive pension, emerge from the very
day, an employee enters a pensionable service. From that very
date, the employee commences to accumulate qualifying service.
His claim for pension would obviously crystalise, when he acquires
the minimum prescribed qualifying service, and also, does not
E suffer a disqualification, disentitling him to a claim for pension.
In view thereof, it is not possible to accept, that the rights of the
concerned employees under 'the 1999 Scheme', can be stated to
get vested, ortly on the date when a concerned employee would
attain the age of superannuation, and satisfy all the pre-requisites
F for a claim towards pension. The submission that the cause of
action to raise a claim for pension, would arise on the date when
a concerned employee actually retires from service, is accepted.
Any employee governed by a pension scheme, enrolls to earn
qualifying service, immediately on his enrolment into the
pensionable service. Every such employee must be deemed to
G have commenced to invest in his eventual claim for pension, from
the very day he enters service. More so, in the instant case, by
having expressly ,chosen to forego his rights, under the
Employees' Provident Funds Scheme, 1995. [Paras 50, 51][937-
F-H; 938-A-C)
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 855

2.3 This Court has repeatedly upheld a cut-off date, for A
extending better and higher pensionary benefits, based on the
financial health of the employer. A cut-off date can. therefore
legitimately be prescribed for extending pensionary benefits, if
the funds available cannot assuage the liability, to all the existing
pensioners. Therefore, it is well within the authority of the State
B
Government, in exercise of its administrative powers (which it
exercised, by issuing the impugned repeal notification dated
2.12.2004) to fix a cut-off date, for continuing the right to receive
pension in some, and depriving some others of the same. This
right was unquestionably exercised by the State Government, in
the *R.R. Verma case wherein this Court held that the Government c
was vested with the inherent power to review, and that the
Government was free to alter its earlier administrative decisions
and policy. This is what the State Government did in the instant
case. [Para 54)(939-A-C]
*R.R. Verma v. Union of India (1980) 3 SCC 402:1980 D
(3) SCR 478 - referred to.
2.4 It is equally true, that the power of administrative review
can only be exercised, for a good and valid justification. Such
justification besides being founded on reasonable consideration,
should also not be violative of any legal right - statutory or E
constitutional, vested in the affected employees. [Para 55)(939-
D-E)
2.5 It is not as if the rights which had accrued to the
respondent-employees onder the Employees' Provident Funds
Scheme, 1995 (under which the respondent-employees were F
governed, prior to their being. gover~ed by 'the 1999 Scheme')
have in ally manner been altered to their disadvantage. All that
was taken away, and given up by the respondent-employees by
way of foregoing the employer's contribution upto 31.3.1999
(including, the accrued interest thereon), by way of transfer to
the corpus fund, was restored to the respondent-employees. AH G
the respondent-employees, who have been deprived of their
pensionary claims by the repeal notification dated 2.12.2004,
would be entitled to all the rights which_had accrued to·them,
under the Employees' Provident Funds Scheme, 1995. It is
therefore, not possible-to accept, that the respondent-employees
856 SUPREME COURT REPORTS [2016] 6 S.C.R.

A can be stated to have been made to irretrievably alter their
position, to their detriment. Furthermore, all the corporate bodies
(with which the respondent-employees, are engaged) are
independent juristic entities. The mere fact, that the corporate
bodies under reference, are fully controlled by the State
Government, and the State Government is the ultimate authority
B
to determine their conditions of service, under their Articles of
Association, is inconsequential. Undoubtedly, the respondent-
employees are not Government employees. The State
Government, as a welfare measure, had ventured to honestly
extend some post-retiral benefits to employees of such
c independent legal entities, on the mistaken belief, arising out of
a miscalculation, that the same can be catered·to, out of available
resources. This measure was adopted by the State Government,
not in its capacity as the employer of the respondent-employees,
but as a welfare measure. When it became apparent, I
that the
welfare measure extended by the State Government, could not
D
be sustained as originally understood, ,the same was sought to be
withdrawn. [Para 58)(941-C-H; 942-A)
Mis. Bhagwati Vanaspati Traders v. Senior
Superintendent of Post Offices, Meerut AIR 2015 SC
901:2014 (10 ) SCR 762 - referred to.
E
2.6 It is apparent from the factual position that the original
action of the State Government was bonafide, and for the welfare
of the respondent-employees. The State Government cannot be
accused of having misrepresented to the respondent-employees
in any manner. The provisions of 'the 1999 Scheme', clearly bring
F out, that the pension scheme would be self-financing, and would
be administered from the corpus fund created out of the
employer's contribution to their CPF account (alongwith the
accrued interest thereon). When the said foundational basis for
introducing the pension scheme, was found to be an incorrect
G determination/calculation, the same was withdrawn. In view
thereof, it would not be possible to infer, that the State
Government, induced the respondent-employees, to move to 'the
1999 Scheme'. Accordingly, it would not be possible to apply the
principle of estoppel/promissory estoppel, to the facts of the
instant case. [Para 5811945-E-G) .
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 857 '

2.7 The principle of estoppel/promissory estoppel, is not A
applicable in a situation, where the original position, which the
individual enjoyed before altering his position (by opting; or
deemingly opting - for being governed by 'the 1999 Scheme')
can be restored. Since there is no dispute, that the original position
(the rights enjoyed by the respondent-employees, under the
B
Employees Provident Fund Scheme, 1995) available before 'the
1999 Scheme' was given effeet to, has actually been restored,
the principle sought to be invoked on behalf of the respondent-
employees, cannot augur in a favourable determination for them,.
because it is not possible to conclude, that it would be unfair to
restore them to their original position. In fact, in view of the c
financial incapacity to continue '.the 1999 Scheme', the only fair
action would be to restore the gmployees, to the Employees
Provident Funds Scheme, 1995. This has actually been done by
the State Government. Thus, it is not possible in law, to apply the
principle of estoppellpromissory estoppel, to the facts of the case.
D
[Para 59][945-G-H; 947-A-C]
Pratima Chowdhury v. Kalpana Mukherjee (2014) 4
SCC 196: 2014 (2) SCR.656 - referred to.
2.8. With the advice tendered by the Law Department it
was decided, that 'the 1999 Scheme' should not be withdrawn E
retrospectively; that those who had commenced to draw
pensionary benefits under 'the 1999 Scheme', would not •.be
deprlved of the same; and that, 'the 1999 Scheme' should be
withdrawn prospectively, for those whose right tc;> receive
pensionary benefits had not atisen, as they had not yet retired
from service. [Para 61)(947-F-H] F
2.9. The calculations were projected at the behest of the
r· State Government, to demonstrate the financial unviability of the
scheme. The basis thereof, projected by the high level committee,
admittedly constitutes tlie ration.ale for issuing the repeal
notification dated 4.12.2004. The consideration at the hands of
the State Government was conscious and pointed out and was
supported by facts and figures. It is apparent, that O'ut of 17
corporations/boards who were invited to express their views on
the issue, only 7 had actually done so. It is not the case of the
respondent-employees, that any one of those who had expressed
H
858 SUPREME COURT REPORTS [2016] 6 S.C.R.

A their views, contested the fact, that the pension scheme was not
self-financing. Those who expressed their views, affirmed that
the pension scheme could be salvaged only with Government
support. The position projected by the State Government,
therefore, cannot be considered to have been effectively rebutted.
Financial calculations can not be made casually, on a generalized
B
basis. In the absence of any authenticity, and that too with
reference to all the 20 corporate entities specified in Schedule I
of 'the 1999 Scheme', the projections made on behalf of the
respondent-employees, cannot be accepted, as constituting a
legitimate basis, for a favourable legal determination. Since the
c respondent-employees have not been able to demonstrate, that
the foundational basis for withdrawing 'the 1999 Scheme', was
not premised on any arbitrary consideration, or alternatively, was
not founded on any irrelevant consideration, it cannot be accepted
that the withdrawal of 'the 1999 Scheme', was not based on due
consideration, or that, it was irrational or arbitrary or
D.
unreasonable. The action of the State Government, in allowing
those who had alrl)ady started earning pensionary benefits under
'the 1999 Scheme', was based on a legitimate classification,
acceptable in law. In view thereof, the action of the State
Government cannot be described as arbitrary, and as such,
E violative of Article 14 of the Constitution of India. The
understanding of the State Government (which had resulted in
introducing 'the 1999 Scheme') on being found to be based on an
incorrect calculation, with reference to the viability of the corpus
fund (to operate 'the 1999 Scheme'), had to be administratively
reviewed. And that, the State Government's determination in
F
exercising its power of review, was well_ founded. [Para 63][948-
F-H; 949-A-F]
2.10. It is also not possible to accept, that imy Court has
the jurisdiction to fasten a monetary liability on the State
Government, as is the natural consequence, of the impugned
G order passed by the High Court, unless it emerges from the rights
and liabilities canvassed in the lis itself. Budgetary allocations,
are a matter of policy decisions. The State Government while
promoting 'the 1999 Scheme', felt that the same would be self-
financing. The State Government, never intended to allocate
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 859

financial resources out of State funds, to run the pension scheme. A
The State Government could not have been burdened with the
liability, which it never contemplated, in the first place. Moreover,
it is the case of the respondent-employees themselves, that a
similar pension scheme, floated for civil servants in the State,
has also been withdrawn. The State Government demonstrated
B
its incapacity, to provide the required financial resources. Thus,
the High Court should not (as it could not) have transferred the
financial liability to run 'the 1999 Scheme', to the State
Government. Similar suggestions made by the concerned
corporate bodies, cannot constitute a basis for fastening the
residuary liability on the Government. [Para 64][949-F-H; 950- c
A-C)
2.11 It is not possible to accept that the employees of
corporate bodies, can demand as of right, to be similarly treated
as Government employees. Whilst it can be stated that
Government employees of the State ofHimachal Pradesh are civil D
servants, the same is not true for employees of corporate bodies.
Corporate bodies arc independent entities, and their employees
cannot claim parity with employees of the State Government. The
State Government has a master-servant relationship with the civil
servants of the State, whilst it has no such direct or indirect nexus
E
with the employees of corporate bodies. The State Government
may legitimately choose to extend different rights in terms of
pay-scales an~ retiral benefits to civil servants. It may disagree,
· to extend the i;ame benefits to employees of corporate bodies.
The State Government would be, well within its right, to deny
similar benefits to employees of corporate bodies, which are F
financially unviable, or if their activities have resulted in financial
losses. It is common knowledge, that when pay-scales are
periodically reviewed for civil servants, they do not automatically
become applicable to employees of corporate bodies, which are
wholly financed by the Government. And similarly, not even to
employees of Government companies. Likewise, there cannot G
be parity with Government employees, in respect of allowances.
So also, of retiral benefits. The claim for parity with Government
employees is therefore wholly misconceived. Thus, it cannot be
said that the action of the State Government was discriminatory.
H
860 SUPREME COURT REPORTS [2016] 6 S.C.R.

A [Para 66][950-G-H; 951-A-D)
2.12 The action of the State Government was not
discriminatory since despite having revoked 'the 1999 Scheme'
through the notification, the State Government had permitted such
of the Government owned corporations in the State of Himachal
B Pradesh, which were not suffering any losses, to promote their
own pension schemes, and to extend pensionary benefits to their
employees, on an individual basis, in the same/similar fashion as
had been attempted by th~· State Government, through 'the 1999
Scheme'. [Para 67][951-D-E)
c 2.13. The employees of corporate bodies, who were
extended the benefits of 'the 1999 Scheme' were not employees
of the State Government. 'The 1999 Scheme' was, therefore, just
a welfare scheme introduced by the State Government, with the
object of ameliorating the financial condition of employees, who
had rendered valuable service in State owned corporations. The
D sustenance of the organization itself, is of paramount importance.
The claim of employees, who have been engaged by the
organization, to run the activities of the organization, is of
secondary importance. If an organization does not remain
financially viable, the same cannot be required to remain
E functional, only for the reason that its employees, are not
adversely impacted. When and how a decision to wind up an
organization is to be taken, is a policy decision. The decision to
wind up a corporation may be based on several factors, including
the nature of activities rendered by it. In a given organization,
sometimes small losses may be sufficient to order its closure, as
F its activities may have no vital bearing on the residents of the
State. Where, an organization is raised to support activities on
which a large number of people in the State are dependent, the
same may have to be sustained, despite the fact that there are
substantial losses. The situations are unlimited. Each situation
G bas to be regulated administratively, in terms of the policy of the·
State Government. Whether a corporate body can no longer be
sustained, ~ecause its activities are no longer workable,
practicable, useable, or effective, either for the State itself, or for
the welfare of the residents of the State, is for the State
Government to decide. Similarly, when and how much, is to be
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 861

paid as wages (or allowances) to employees of an organization, is A
also a policy decision. So also, post-retiral benefits. All these
issues fall in the realm of executive determination. No Court has
any role therein. Thus, the conditions of service includ_ing wages,
allowances and post-retiral benefits of employees of corporate
bodies, will necessarily have to be determined administratively,
on the basis of relevant factors. Financial viability, is an important
factor, in such consideration. In the facts and circumstances of
the instant case, it is not possible to accept, the submission on
behalf of the res11ondent-employees, that the State Government
should provide financial support for sustaining 'the 1999
Scheme', at least for such of the employees, who were engaged c
on or before the date of issuance of the repeal notification
(4.12.2004). The respondent-employees have not been able to
make out a case, that the notification dated 2.12.2004, repealing
'the 1999 Scheme', was in any manner, capricious, arbitrary, illegal
or uninformed, and as such, the respondent-employees cannot
D
be considered as being entitled, to any relief, through judicial
process. [Para 68)[951-G-H; 952-A-H; 953-A-B)
2.14. A welfare scheme, may or may not aim at providing,
the very basic rights to sustain human dignity. In situations where
a scheme targets to alleviate basic human rights, the same may
possibly constitute an irreversible position, as withdrawal of the E
same, would violate Article 21,of the Constitution. Not so,
otherwise. The Employees' Provident Funds Scheme, 1995,
sponsore<L!ulder the Provident Fund Act, is in place. The same
was sought tooe replaced, by 'the 1999 Scheme'. 'The 1999
Scheme' was an effort at the behest' of the State Government, to F
provide still better retiral benefits. 'The 1999 Scheme' was not a
measure, aimed at providing basic human rights. Therefore, 'the
1999 Scheme' cannot be treated as irreversible. The repealing
of 'the 1999 Scheme', cannot be deemed to have in any manner,
violated the right of the respondent-employees, under Article 21
of the Constitution of India. After the repeal notification dated G
2.12.2004, the erstwhile Employees' Provident Funds Scheme,
1995, has been restored to such of the employees, who were
impacted by the said repeal notification. [Para 69)[953-E-H; 954-
A)
H
862 SUPREME COURT REPORTS [2016] 6 S.C.R.

A 2.15. The action of the State Government, was well within
its authority. The same was based on due consideration. Therefore,
it cannot be said that the impugned notification dated 2.12.2004,
was unconstitutional, irrational, arbitrary or unreasonable.
Accordingly, the challenge raised by the respondent-employees,
that they had been deprived of their right to pensionary benefits,
8
without the authority in law cannot be accepted. Therefore the
claim raised on behalf of the respondent-employees, by placing
reliance on Article 300A of the Constitution of India, is
misconceived. [Para 70][954-C-D]
U.P. Raghavendra Acharya v. State of Karnataka (2006)
c 9 sec 630: 2006 (2) Suppl. SCR 582 - held
inapplicable.
State of Punjab v. Amar Nath Goyal (2005) 6 SCC 754:
2005 (2) Suppl. SCR 549; A.K. Bindal v. [;i1io11 of India
2003 (5) sec 163: 2003 (3) SCR 928; D.P.L. v.
D Chairman & MD., I.D.P.L. (2003) 6 SCC 490: 2003
(1) Suppl. SCR 720; BALCO Employees' Union 1' Union
of India (2002) 2 SCC 333: 2001 (5) Suppl. SCR 511;
M Ramanatha Pillai v. State of Kera/a (1973) 2 SCC
650: 1974 (1) SCR 515; Excise Commissioner, U.P..
E Allahabad v. Ram Kumar (1976) 3 SCC 540:1976 (0)
Suppl. SCR 535; Union ofIndia\\ Godji·ey Philips India
Ltd. (1985) 4 sec 369: 1985 (3) Suppl. SCR 123;
Commissioner of Income-tax, Kera/a and Coimbatore
v. L. W. Russel (1964) 7 SCR 569; Krishena Kumar v.
Union of India (1990) 4 SCC 207: 1990 (3) SCR 352;
F Union ~f India v. P.N. Menon (1994) 4 SCC 68; State
of West Bengal v. Ratan Behari Dey (1993) 4 SCC
62: 1993 (1) Suppl. SCR 514; State of Rajasthan v.
Amrit Lal Gandhi (1997) 2 SCC 342: 1997 (1) SCR
121; Howrah Municipal Corporation v. Ganges Rope
G Co. Ltd. (2004) 1 sec 663: 2003 (6) Suppl. SCR 1212;
Union of India v. R. Sarangapani (2000) 4 SCC
335: 2000 (2) SCR 495; D.S. Nakara \\ Union -0f India
(1983) 1 SCC 305: 1983 (2) SCR 165; Chairman,
Railway Board v. C.R. Rangadhamaiah (1997) 6 SCC
623:1997 (3) Suppl. SCR 63; Asger Ibrahim Amin v.
H
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 863

Life Insurance Corporation of India (2015) 10 SCALE A
639; State of Madhya Pradesh v. Yogendra Shrivastava
(2010) 12 SCC 538: 2009 (14) SCR 1137; Stute of
Jharkhand v. Jitendra Kumar Srivastava (2013) 12
SCC 210: 2013 (8) SCR 177; Union of India v. SPS
Vains (Retd.) (2008) 9 SCC 125: 2008 (13) SCR 257;
B
Pepsu Road Transport Corporation, Patiala v. Mangat
Singh (2011) 11 SCC 702: 2011 (6) SCR 564; State of
Assam v. Barak Upatyaka D. U. Karmachari Sanstha
(2009) 5 sec 694 - referred to.
Case Law Reference
c
2005 (2) Suppl. SCR 549 referred to Para 14
2003 (3) SCR 928 referred to Para 14
2003 (1) Suppl. SCR 720 referred to Para 14
2001 (5) Suppl. SCR 511 referred to Para 15
1974 (1) SCR 515 referred to Para 17 D
1976 (0) Suppl. SCR 535 referred to Para 17
1985 (3) Suppl. SCR 123 referred to Para 18
(1964) 7 SCR 569 referred to Para 18
1990 (3) SCR 352 referred to Para 18
E
(1994) 4 sec 68 referred to Para 19
1993 (1) Suppl. SCR 514 referred to Para 19
1997 (1) SCR 121 referred to Para 19
2003 (6) Suppl. SCR 1212 referred to Para25
2000 (2) SCR 495 referred to Para 27 F
1983 (2) SCR 165 referred to Para 30
1997 (3) Suppl. SCR 63 referred to Para30
(2015) 10 SCALE 639 referred to Para 32
2009 (14) SCR 1137 referred to Para32
G
2013 (8) SCR 177 referred to Para 34
2008 (13) SCR 257 referred to Para 37
2011 (6) SCR ~64 referred to Para 39
(2009) 5 sec 694 referred to Para 45
1980 (3) SCR 478 referred to Para 54 H
864 SUPREME COURT REPORTS [2016] 6 S.C.R.

A 2006 (2) Suppl. SCR 582 held inapplicable Para 56
2014 (10) SCR 762 referred to Para 58
2014 (2) SCR 656 referred to Para 59
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 9750-
B 9819of2016.
From the Judgment and Order dated 19.12.2013 of the High Court
ofHimachal Pradesh at Shimla in Civil Writ Petition No. 1577 of2009.
P. P. Rao, R. Venkataramani, Surya Narayana Singh, (A.G), Sr.
Advs., Ms. Pragati Neekhra, Yashraj Singh Bundela, Neelam Singh,
c Swarnendh Chatterjee, M. P. Sri Vignesh, Ms. Ahaaya Sarkar, Advs.
for the Appellants.
Guru Krishna Kumar, Sr. Adv., Anand Verma, Ms. Sneha Ravi
Iyer, Raj iv Dubey, Kamlendra Mishra, Advs. for the Respondents.
The Judgment of the Court was delivered by
D
JAGDISH SINGH KHEHAR, J, I. The State of Himachal
Pradesh came to be created, with effect from 25 .1.1971. Consequent
upon the creation of the State ofHimachal Pradesh, employees engaged
by the corporate sector, on their retirement, were being paid provident
fund, under the provisions of the Employees' Provident Funds and
E Miscellaneous Provisions Act, 1952 (hereinafter referred to as the
Provident Fund Act). The Central Government framed the Employees'
Provident Funds Scheme, 1995, whereby, it replaced the earlier statutory
schemes, framed under the Provident Fund Act. This scheme was
adopted for the corporate sector employees, engaged in the State of
F Himachal Pradesh.
2. In order to extend better retiral benefits to these employees,
the Himachal Pradesh Government framed another scheme on 29.10.1999
- the Himachal Pradesh Corporate Sector Employees Pension (Family
Pension, Commutation of Pension and Gratuity) Scheme, 1999. In the
G present judgment, the instant scheme will be referred to as 'the 1999
Scheme'. A perusal of 'the 1999 Schenie' reveals that its application
extended to employees of some of the corporate bodies (- specified in
Annexure-1, appended to 'the 1999 Scheme') in Himachal Pradesh. There
were in all 20 corporate entities, named in Annexure-1. These corporate
bodies functioned as independent entities; under the Departments of
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 865
[JAGD1SH SINGH KHEHAR, J.]

Industries, Welfare, Horticulture, Forest, Food and Supplies, Tourism,
Town and Country Planning, Housing and General Administration.
3. Paragraph 2 of 'the 1999 Scheme', provided for the zone of
application of the said Scheme. It expressly provided, that the same
would apply to only such of the employees, "who opted for the benefit
under the scheme". It is necessary to expressly notice, that paragraph B
2 of 'the 1999 Scheme' required, that the above option would be exercised
by the employees in writing, in the format provided forthe same. This
option, was required to be submitted within 30 days of the notification of
the scheme - by 27.11.1999. It was also provided in paragraph 2, that
such of the employees who failed to exercise any option, within the
period provided for, for whatever reason, would be deemed to have
c
exercised their option, to be regulated by 'the 1999 Scheme'. It is
therefore apparent, that it was imperative for all concerned employees,
to express their option, to be governed by the Employees Provident Funds
Scheme, 1995, in case the concerned employees, desired to avoid 'the
1999 Scheme'. In case of the exercise of such option, the concerned D
employee would continue to be governed by the Employees Provident
Funds Scheme, 1995. Failing which, every employee, whether he opted
for 'the 1999 Scheme', or chose not to make any option, would be
regulated by 'the 1999 Scheme', with effect from the day the scheme
was made operational - 1.4. 1999. ·
E
4. It is also essential to indicate, that only those employees who
had been appointed on regular basis, in corporate bodies, to which 'the
1999 Scheme' was applicable, could avail of the benefits of 'the 1999
Scheme'. In other words, employees engaged " ... on part time basis,
daily wage basis, piece-meal rate basis, casual and contract basis ... "
were not entitled to opt for 'the 1999 Scheme'. F

5. Paragraph 4 of'the 1999 Scheme' further provided, that those
regular employees, who were entitled to the benefits postulated by 'the
1999 Scheme', would automatically forfeittheir claim, to the employer's
contribution in their provident fund account (including interest thereon),
under the prevailing Employees Provident Funds Scheme, 1995, to the G
Government. The forfeited amount, would include the amount due and
payable, under the Employees Provident Funds Scheme, 199·5, up to
31.3.1999. The forfeited amount in consonance with paragraph 5 of
'the 1999 Scheme', was to be transferred to a corpus fund, to be
administered and managed by the Government of Himachal Pradesh. H
866 SUPREME COURT REPORTS [2016] 6 S.C.R.

A The aforesaid corpus fund, was to be treated as the pension fund, for
payment of pension under 'the 1999 Scheme'.
6. It is of utmost relevance to mention, that paragraph 4 of 'the
1999 Scheme' provided as under:-
"4. Regulation of Claim to Pension:-
8
Any claim to pension shall be regulated by the provision of
this scheme in force at the time when an employee retires or is
retired or dies or is discharged as the case may be subject to the
following:-

c (a) The existing employees of the Corporation as on 1.4.99 shall
have the option either to elect the pension scheme or to continue
under existing Provident Fund scheme.
(b) The existing employees who opt for Pension Scheme shall
automatically forfeit their claim to employer's share of CPF
including interest thereon to the State Government as well as other
D
claims under CPF Schemes by whatsoever name called in respect
of all past accumulations upto 31.3.1999. The amount of their
subscriptions to the fund alongwith interest (excluding employer's
__ ..,,,. ·---' share and interest thereon) shall be transferred to GPF account
to be allotted and maintained by the concerned Corporate Sector
E Organisation as per Rules adopted by them".
It is apparent from the above extract, that even though 'the 1999
Scheme' was to take effect from 1.4.1999 (- under paragraph 1(3) of
'the 1999 Scheme'), a claim for pension by an employee governed by
the above scheme, would arise only at the time of the employee's
F retirement, on attaining the age of superannuation, or when he was retired
from service by the employer, or in case of his death in harness. This is
how, the appellant-State views the above provision (detailed submissions,
are being noticed separately).
7. It is not disputed, that regular employees of corporate bodies,
G to whom 'the 1999 Scheme' was applicable, had opted in writing (or
were deemed to have opted) to be governed by 'the 1999 Scheme', or
alternatively, had been engaged on regular basis after the induction of
'the 1999 Scheme' but before 'the 1999 Scheme' was repealed (- on
2.12.2004 ).

H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 867
[JAGDISH SINGH KHEHAR, J.]

8. While adjudicating upon the controversy, it is important to point A
out, that for the implementation of 'the 1999 Scheme', permission was
sought from the Regional Provident Fund Commissioner, Shimla, for the
transfer of the accumulated provident fund corpus, to the proposed
pension fund under 'the 1999 Scheme'. It is also relevant to notice, that
the Regional Provident Fund Commissioner, through a communication
B
dated 23.2.2000, declined to accord the above permission, because 'the
1999 Scheme' included only regular employees. Part time, daily wage,
piece rate, casual and contract employees, were not covered by 'the
1999 Scheme'. According to the Regioi:ial Provident Fund Commissioner,
there was no provision under the Provident Fund Act, to exclude a part
of the employees, from the purview of the Provident Fund Act. The c
Regional Provident Fund Commissioner was of the view, that permission
sought by the State Government could be accorded, only if all employees
of the concerned corporate bodies, were to be regulated by the
substituting scheme (-'the 1999 Scheme'). The Regional Provident
Fund Commissioner accordingly, through his communication dated
D
23.2.2000, advised the concerned corporate bodies, to continue to comply
with the provisions of the Provident Fund Act, in respect of all their
employees. The above communication of the Regional Provident Fund
Commissioner, was superseded by another, dated 11.9.2001, addressed
by the Additional Central Provident Fund Commissioner (Pension), to
the Secretary to the Government of India (with copy to the Regional E
Provident Fund Commissioner, Himachal Pradesh). It was pointed out,
that a perusal of the aforesaid communication would reveal, that out of
the concerned corporate bodies, almost all were fully owned by the State
or the Central Government, and the share capital of the general public in
the remaining, was less than one per cent. It was therefore, that the
F
concerned corporate bodies were found to be eligible for the exemption,
and were accordingly exempted from the applicability of the Provident
Fund Act. It is apparent, thatthe communication dated 11.9.2001 clarified,
that as the corporate bodies fell within the ambit of Section 16(1)(b) of
the Provident Fund Act, it would not be applicable to the concerned
establishments in the State of Himachal Pradesh, with effect from G
1.4.1999.
9. The above communication dated 11.9.2001, came to be endorsed
by the Union Minister of Labour, on 17.9.2001. The observations
recorded in the order of the Union Minister are extracted hereunder:
H
868 SUPREME COURT REPORTS (2016] 6 S.C.R.

A "I have had the matter examined. It has been, noted from the
Notification of the State Government dated 29. I 0.1999 that all
regular employees of these undertakings are entitled to pension,
commutation ofoension, gratuity as applicable to the State Govt.
Employees ofHimachal Pradesh. In such circumstances the EPF
& MP Act, 1952 shall not apply. The Pension would be'31scharged
B by the Himachal Pradesh Government in terms of Section 16( I )(b ).
These establishments would be out of the purview of the Act
from the date the Notification has come into force."
In view of the factual position narrated herein above, the provisions
of the Provident Fund Act were not in any way an obstacle, to the
c operation of 'the 1999 Scheme'. As such, 'the 1999 Scheme' became
operational, with effect from 1.4.1999. Atthe instant juncture, it would
suffice to record, that 'the 1999 Scheme' remained operational till it was
repealed, by a notification date 2.12.2004.
10. After the implementation of 'the 1999 Scheme', a high level
D committee was constituted by the Finance Department of the State
Government, on 21.1.2003. The said committee was comprised of four
managing directors of state public-sector undertakings and corporations.
The high level committee was entrusted with the task of examining, the
financial viability of'the 1999 Scheme'. The committee submitted its
E report on 15.11.2003. Briefly stated, the high level committee arrived at
the conclusion, that the pension scheme for regular employees of
corporate bodies, given.effect to under 'the 1999 Scheme', would not be
financially viable on a self-sustaining basis. One of the observations
recorded in the report of the high level committee was, with reference
to the Himachal Road Transport Corporation. It was _pointed out, that
F the pension fund cash flow chart (year-wise) revealed, that in case new
appointments were not made against retirees, it would have extremely
-grave financial consequences, inasmuch as, after the year 2009-10, the
income by way of income tax, as well as, the contribution to the pension
fund would continue to reduce, whereas pension payment expenditure,
G would continue to increase. It was expected, that by the year 2015-16,
the balance amount left with the Himachal Road Transport Corporation
Pension Fund, would be reduced to approximately Rs. I 0.82 crores,
whereas the pension liability of the retired employees of the Himachal
Road Transport Corporation, for the sai<lyear, would be approximately
Rs.14.56 crores. Accordingly, it was inferred, that from the year 2015-
H
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 869
[JAGDISH SINGH KHEHAR, J.]

16 onwards, it would not be possible to make payments, towards the A
recurring pension liability. The report also determined the viability of the
scheme, with reference to the Himachal Road Transport Corporation,
even ifthe staff strength is kept at the same level, as was then prevalent
(-in 2003). The instant analysis resulted in the deduction, that the pension
contribution would be slightly more, as against the available pension fund
B
of Rs. I 0.82 crores. In case the staff strength was maintained at the
same level, the pension fund balance would be Rs.15.76 crores. Keeping
in mind, the approximate pension liability ofRs.14.56 crores for the year
2015-16, it was inferred, that the financial liability towards pension for
the following year, i.e., 2016-17 would not be met, out of the pension
fund. It was therefore infrerred, that the payment of pension to regular c
employees of the concerned corporate bodies, could not be paid and
sustained, out of the pension fund contemplated under 'the 1999 Scheme'.
Accordingly, the high powered committee recorded its conclusions as
under:
"In view of the above "the committee" is of the view that the D
pension scheme for Corporate Sector employees based on
contribution by the State Government will not be viable on a self
sustaining basis. mainly due to the following reasons:-
i). Uncertainty in the rate of interest regime.
ii). Declining recruitment in the Corporate Sector would E
deplete the size of the corpus to be created and it would be
difficult to honour liabilities accruing after I 0-12 years.
iii). The pension plan envisages payment of pension to
Corporate Sector employees as is being paid to the
Government employees. Government employees at present F
are entitled to pension@ 50% of the basic pay last drawn
with linkage to ADA. This return does not appear to be
possible from the pension fund proposed to be created for
corporate sector employees."
At the instant juncture, it would also be necessary to mention that, G
as is apparent from the submissions advanced on behalf of the State
Government, three factors primarily weighed with it for reconsidering
the continuation of 'the 1999 Scheme'. Firstly, uncertainty in the rate of
interest regime; secondly, decline in recruitment in the corporate sector;
and thirdly, on account of the fact that the respondent-employees would
H
870 SUPREME COURT REPORTS [2016) 6 S.C.R.

A be entitled to pension at the rate of 50% of the basic pay last drawn,
with linkage to an additional dearness allowance. And as such, it was
not possible for the pension fund, to cater to the payment towards pension,
under 'the 1999 Scheme'. It would also be relevant to mention, that
besides the above three reasons depicted in the committee's report, the
Cabinet Memorandum dated 12. l 0.2004, expressly took into consideration
B
the poor financial health of the concerned corporations, and the current
financial health of the State Government. Both the above factors also
indicated, that it was not possible for the State Government to take upon
itself, the financial burden of 'the 1999 Scheme'. And, there were also
more pressing alternative claims. It was submitted, that as oii 31.3.2014,
c the cumulative losses of Government owned corporations, stood at
Rs.2,819 .86 crores. The aforesaid Cabinet Memorandum was appended
to the special leave petition, as Annexure P-4. The Cabinet in its meeting
held on 29.11.2004, also approved, that the Government would be
supportive of efforts by individual Government owned corporations, for
setting up their own pensionary scheme(s).
D
11. After considering the report of the high level committee, the
State Government took a decision on 29 .11.2004 to repeal 'the 1999
Scheme'. While repealing 'the 1999 Scheme', it was decided, that regular
employees who had retired from corporate bodies, during the period of
the subsistence of 'the 1999 Scheme' from 1999 to 2004, would not be
E affected. For the implementation of the decision of the State Government
dated 29.11.2004, a notification dated 2.12.2004 was issued, repealing
'the 1999 Scheme'. A number of employees who had been deprived of
the benefit of 'the 1999 Scheme' by the notification dated 2.12.2004,
challenged the repeal notification, by filing a number of writ petitions,
F before the High Court of Himachal Pradesh, at Shimla (hereinafter
referred to as the High Court). By the impugned common order dated
19.12.2013, the High Court allowed all the writ petitions. The final
determination of the High Court, is apparent from the following conclusions
recorded by it:

G "78. There is no merit in the contention of learned Advocate
General that the scheme could not be implemented due to financial
crunch. The State was aware of the financial implication at the
time of issuance of notification dated 29.10.1999. It is the
sovereign responsibilitv of the State to garner revenue to make
welfare measures, including payment of pensionery/retiral
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 871
[JAGDISH SINGH KHEHAR, J.]

benefits. A
79. It cannot be gathered from the plain language that either
expressly or by implication notification dated 2.12.2004 would
apply retrospectively.
80. Accordingly, in view of the analysis and discussion made
hereinabove, all the writ petitions are allowed. The cut-off date B
2.12.2004 is declared ultra vires. Notification dated 2.12.2004 is
read down to save it from unconstitutionality, irrationality,
arbitrariness or unreasonableness by including the petitioners and
similarly situated employees also, who had become members of
the scheme notified on 29 .10.1999 and have retired after 2.12.2004 c
and those employees who were already in service when the pension
scheme was notified on 29.10.1999 and had become members of
that scheme and shall retire hereinafter. for the purpose of
pensionery benefits after applying the principles of severability.
The Regional Provident Fund Commissioner, Shimla is directed to
transfer the entire amount of the CPF to a corpus fund to be D
administered and maintained by the Government of Himachal
Pradesh in the Finance Department including upto date interest,
within a period of two weeks. Thereafter, the Pension Sanctioning
Authority is directed to sanction the pension/gratuity/commutation
of pension after proper scrutiny of the cases forwarded by the E
concerned Public Sector Undertaking and issue pension payment
order to Pension Disbursing Authority strictly as per para 6 of the
scheme notified on 29. I 0.1999 with interest@ 9% per annum,
within a period of 12 weeks from today."
12. Dissatisfied with the judgment rendered by the High Court,
F
dated 19.12.2013, the State of Himachal Pradesh has approached this
Court, challenging the common impugned judgment dated 19.12.2003.

13. Leave granted.
14. The first contention advanced at the hands of Mr. P.P. Rao, G
learned senior counsel for the appellants, was premised on the proposition,
that the State Government which had promulgated 'the 1999 Scheme',
was well within its rights to repeal the same, for good and sufficient
reasons. It was submitted, that it stands established on the record of this
case, that 'the 1999 Scheme' was not financially viable, inasmuch as, it
H
872 SUPREME COURT REPORTS [2016] 6 S.C.R.

A could not be characterized as a self-sustaining scheme. It was asserted,
that the determination of the State Government to scrap 'the 1999
Scheme', on the basis that the Scheme was not financially viable, was
legal and bonafide. In order to canvass the instant proposition, learned
counsel, relied on State of Punjab v. Amar Nath Goyal, (2005) 6 SCC
754, and invited the Court's attention, to the following observations
B
recorded therein:
"25. The only question, which is relevant and needs consideration,
is whether the decision of the Central and State Governments to
restrict the revision of the quantum of gratuity as well as the
increased ceiling of gratuity consequent upon merger of a portion
c of dearness allowance into dea~ness pay reckonable for the
purpose of calculating gratuity, was irrational or arbitrary.
26. It is difficult to accede to the argument on behalf of the
employees that a decision of the Central Government/State
Governments to limit the benefits only to employees, who retire
D or die on or after 1.4.1995, after calculating the financial
implications thereon, was either irrational or arbitrary. Financial
and economic implications are ve1y relevant and germane for any
policy decision touching the administration of the Government, at
the Centre or at the State level."
E On the same proposition, reliance was also placed on A.K. Bindal
v. Union oflndia, 2003 (5) SCC 163, and our attention was drawn to the
following observations recorded therein:
"13~ The change in policy effected by these memorandums was
that the Government would not provide any budgetary support for
F the wage increase and the undertakings themselves will have to
generate the resources to meet the additional expenditure, which
will be incurred on account of increase in wages. So far as sick
enterprises which were registered with BIFR are concerned, it
was directed that the revision in pay scale and other benefits would
G be allowed only if it was actually decided to revive the industrial
unit. The question which arises for consideration is whether the
employees of public sector enterprises have any legal right to
claim that though the industrial undertakings or the companies in
which thev are working did not have the financial capacity to
grant revision in pay scale, yet the Government should give
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 873
[JAGDISH SINGH KHEHAR, J.]

financial support to meet the additional expenditure incurred in A ·
that regard.
xxx xxx xxx
17. The legal position is that identity of the government
company remains distinct from the Government. The government
company is not identified with the Union but has been placed B
under a special system of control and conferred certain privileges
· by virtue of the provisions contained in Sections 619 and 620 of
the Companies Act. Merely because the entire shareholding is
owned by the Central Government will not make the incomorated
company as Central Government. It is also equally well settled c
that the employees of the government company are not civil
servants and so are not entitled to the protection afforded by
Article 311 of the Constitution (Pyare Lal Sharma v. Managing
Director, (1989) 3 SCC 448). Since employees of government
companies are not governmenfservants, they have absolutely no
legal right to claim that government should pay their salary or that D
the addition expenditure incurred on account ofrevision of their
pay scale should be met by the government. Being employees of
the companies it is the responsibility of the companies to pay them
- -,_.
salary and if the compa.ny is.sustaining losses continuouslvover a
period and does not have the financial capacity to revise or enhance E
the pay scale, the petitioners cannot claim any legal right to ask
for a direction to the Central Government to meet the additional
expenditure which mayb,e incurred on account ofrevision of oay
scales. It appears that prior to issuance of the office memorandum
dated 12-4-1993 the Government had been providing the necessary .
funds for the management of public ·sector enterprises which had F
been incurring losses. After the change in economic policy
introduced in early nineties, Government took a decision that the
public sector undertakings will have to generate their own resources
to meet the additional expenditure incurred on account of increase
in wages and that the government will not provide any funds for G
the same. Such of the public sector enterprises (government
companies) which had become sick and had been referred to
BIFR, were obviously running on huge losses and did not have
their own resources to meet the financial liability which would
have been incurred by revision of pay scales. By the office
H
874 SUPREME COURT REPORTS [2016] 6 S.C.R.

A memorandum dated 19-7-1995 the Government merely reiterated
its earlier stand and issued a caution that till a decision was taken
to revive the undertakings, no revision in pay scale should be
allowed. We, therefore, do not find any infirmity, legal or
constitutional in the two office memorandums which have been
challenged in the writ petitions.
B
18. We are unable to accept the contention of Shri Venkataramani
that on account of non-revision of pay scales of the petitioners in
the year 1992, there has been any violation of their fundamental
rights guaranteed under Article 21 of the Constitution.
Article 21 provides that no person shall be deprived of his life or
c personal liberty except according to procedure established by law.
The scope and content of this article has been expanded by judicial
decisions. Right to life enshrined in this article means something
more than survival or animal existence. It would include the right
to live with human dignity. Payment of a very small subsistence
D allowance to an employee under suspension which would be wholly
insufficient to sustain his living, was held to be violative of
Article 21 of the Constitution in State of Maharashtra
v. Chandmbhan Tale, (1983) 3 SCC 387. Similarly, unfair conditions
of labour in People's Union for Democratic Rights v. Union of
India, (1982) 3 SCC 235. It has been held to embrace within its
E field the right to livelihood by means which are not illegal, immoral
or opposed to public policy in Olga Tellis v. Bombay Municipal
Corpn., ( 1985) 3 SCC 545. But to hold that mere non-revision of
pay scale would also amount to a violation of the fundamental
right guaranteed under Article ;u would be stretching it too far
F and cannot be countenanced. Even under the industrial law, the
view is that the workmen should get a minimum wage or a fair
wage but not that their wages must be revised and enhanced
periodically. It is true that on account ofinflation there has been a
general price rise but by that fact alone it is not possible to draw
an inference that the salary currently being paid to them is wholly
G inadequate to lead a life with human dignity. What should be the
salary structure to lead a "life with human dignity" is a difficult
exercise and cannot be measured in absolute terms .....
xxx xxx xxx
22. In South Malabar Gram in Bank v. Coordination Committee of
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 875
[JAGDISH SINGH KHEHAR, J.]

S.M.G.B Employees' Union and S.M.G.B Officers' Federation, A
(2001) 4 SCC I 01, relied upon by the learned counsel for the
petitioners, the Central Government had referred the dispute
regarding the pay structure of the employees of the Bank to the
Chairman of the National Industrial Tribunal headed by a fonner
Chief Justice of a High Court. The Tribunal after consideration of
B
the material placed before it held that the officers and employees
of the Regional Rural Banks will be entitled to claim parity with
the officers and other employees of the sponsor banks in the matter
of pay scale, allowances and other benefits. The employees of
nationalised commercial banks were getting their pay scales on
the basis of the 5!!! bipartite settlement and by implementation of c
the award of the National Industrial Tribunal, the employees of
the Regional Rural Banks were also given the benefits of the
same settlement. Subsequently, the pay structures of the employees
of the nationalised commercial banks were further revised by the
§!!!and 7!!! bipartite settlements but the same was not done for the
D
employees of the Regional Rural Banks who then filed writ
,<,
petitions. It was contended on behalf of the Union of India and
also the Banks that financial condition of the Regional Rural Banks
was not such that they may give their employees the pay structure
of the employees of the nationalised commercial banks. It was in
these circumstances that this Court observed that the decision of E
the National Industrial Tribunal in the form of an award having
been implemented by the Central Government, it would not be
permissible for the employer bank or the Union of India to take
such a plea in the proceedings before the Court. The other case
namely All India Regional Rural Bank Officers Federation v. Govt.
F
oflndia, (2002) 3 sec 554, arose out of interlocutory applications
and contempt petitions which were filed for implementation of
the direction issued in the earlier case, namely, South Malabar
Gramin Bank. Any observation in these two cases to the effect
that the financial capacity of the employer cannot be held to be a
germane consideration for determination of the wage structure of G
the employees must, therefore, be confined to the facts of the
aforesaid case and cannot be held to be of general application in
all situations. In Associate Banks Officers' Assn. v. State Bank
oflndia, ( 1998) 1 SCC 428, it was observed that many ingredients
go into the shaping of the wage structure of any organisation which
H
.876 SUPREME COURT REPORTS [2016] 6 S.C.R.

A may have been shaped by negotiated settlements with employees'
unions or through industrial adjudication or with the help of expert
committees. The economic capability of the employer also plays
a crucial part in it; as also its capacity to expand business or earn
more profits. It was also held that a simplistic approach; granting
higher remuneration to workers in one organisation because
B
another organisation had granted them, may lead to undesirable
results and the application of the doctrine would be fraught with
danger and may seriously affect the efficiency and at times. even
the functioning of the organisation. Therefore. it appears to be the
consistent view of this Court that the economic viability or the
c financial capacity of the employer is an important factor which
cannot be ignored while fixing the wage structure. otherwise the
unit itself may not be able to function and may have to close down
>Vhich will inevitably have disasfrous consequences for the
employees themselves. The materiafon record clearly shows that
both FCl and HFC had been suffering heavy losses for the last
D
many years and the Government had been giving a considerable
amount for meeting the expenses of the organisations. In such a
situation, the employees cannot legitimately claim that their pay
scales should necessarily be revised and enhanced even though
the organisations in which they are working a~e making continuous
E losses and are deeply in the red."
Last of all, learned counsel drew our attention to Officers &
Supervisors of 1.0.P.L. v. Chairman & M.0., 1.0.P.L., (2003) 6 SCC
490, and reference was made to the following;
."7. In the above background, the question which arises for
F consideration is whether the employees of public sector enterprises
have any legal right to claim revision of wages that though the
industrial undertakings or the companies in which they are working
did not have the financial capacity to grant revision in pay-scale,
yet the Government should give financial support to meet the
G additional expenditure incurred in that regard.
8. We have carefully gone through the pleadings, the Annexures
filed by both sides and the orders passed by the BIFR and the
judgments cited by the counsel appearing on either side. Learned
counsel for the contesting respondent drew our attention to a
H recent judgment of this Court in A.K. Bindal andAnr. v. Union of
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 877
[JAGDISH SINGH KHEHAR, J.)

India, (2003) 5 SCC 163, in support of her contention. We have A
perused the said judgment. In our opinion, since the employees of
Government companies are not Government servants, they have
absolutely no legal right to claim that the Government should pay
their salary or that the additional expenditure incurred on account
ofrevision of their pay-scales should be met by the Government.
B
Being employees of the companies, it is the responsibility of the
companies to pay them salary and ifthe company is sustaining
losses continuously over a period and does not have the financial
capacity to revise or enhance the pay-scale, the petitioners, in our
view, cannot claim any legal right to ask for a direction to the
Central Government to meet the additional expenditure which may c
be incurred on account of revision of pay-scales. We are unable
to countenance the submission made by Mr. Sanghi that economic
viability of the industrial unit or the financial capacity of the
employer cannot be taken into consideration in the matter of revision
of pay-scales of the employees."
D
15. Based on the conclusions drawn in the above judgments, it
was the contention of learned counsel, that the decision of the State
Government to repeal 'the 1999 Scheme', on the basis of the report of
the high powered committee, dated 28.10.2003, cannot be faulted. It
was submitted, that the determination rendi;ired by the High Court, was
in clear disregard to the decisions in the cited cases. It was acc9rdingly E
urged, that the option exercised by the State Government, on the basis
of legitimate material and consideration, could not be interfered with, as
the same constituted a legal and valid basis, for the discontinuation of
'the 1999 Scheme'.
16. In order to support the State Government's claim, it was also F
the contention of learned counsel, that the State Government has an
inherent right to review its policy decisions, and as long as the decisions
of the State Government are based on bonafide consideration, the same
, cannot be assailed in law. In order to support the instant contention,
learned counsel placed reliance on BALCO Employees' Union v. Union G
of India, (2002) 2 SCC 333, and invited our attention to the following
observations, expressed therein:
"45. In Narmada Bachao Andolan v. Union of India, (2000) 10
sec 664, there was a challenge to the validity ofthe establishment
of a large dam. It was held by the majority at p. 762 as follows: H
878 SUPREME COURT REPORTS [2016] 6 S.C.R.

A (SCC para 229)
"229. It is now well settled that the courts, in the exercise of their
jurisdiction, will not transgress into the field of policy decision.
Whether to have an infrastructural project or not and what is the
type of project to be undertaken and how it has to be executed,
B are part of policy-making process and the courts are ill-equipped
to adjudicate on a policy decision so undertaken. The court, no
doubt, has a duty to see that in the undertaking of a decision, no
law is violated and people's fundamental rights are not transgressed
upon except to the extent permissible under the Constitution."

c 46. It is evident from the above that it is neither within the domain
of the courts nor the scope of the judicial review to embark upon
an enquiry as to whether a particular public policy is wise or
whether better public policy can be evolved. Nor are our courts
inclined to strike down a pol icy at the behest of a petitioner merely
because it has been urged that a different policy would have been
D fairer or wiser or more scientific or more logical.
47. Process of disinvestment is a policy decision involving complex
economic factors. The courts have consistently rtl1:~l11ed from
interfering with economic decisions as it has b~
economic expediencies lack adjudicative <lisp( ....... " . , ..
E the economic decision, based on economic expediencies, is
demonstrated to be so violative of constitutional or legal limits on
power or so abhorrent to reason, that the Courts would decline to
interfere. In matters relating to economic issues, the Government
has, while taking a decision, right to "trial and error" as long as
F both trial and error are bona tide and within limits of authority.
There is no case made out by the petitioner that the decision to
disinvest in BALCO is in any way capricious, arbitrary, illegal or
uninformed. Even though the workers may have interest in the
manner in which the Company is conducting its business, inasmuch
as its policy decision may have an impact on the workers' rights,
G nevertheless it is an incidence of service for an employee to accept
a decision of the employer which has been honestly taken and
which is not contrary to law. Even a government servant, having
the protection of not only Articles 14 and 16 of the Constitution
but also of Article 311, has no absolute right to remain in service.
H For example, apart from cases of disciplinary action, the services
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 879
[JAGDISH SINGH KHEHAR, J.]

of government servants can be terminated if posts are abolished. A
If such employee cannot make a grievance based on Part llI of
the Constitution or Article 311 then it cannot stand to reason that
like the petitioners, non-government employees working in a
company which by reason of judicial pronouncement may be
regarded as a State for the purpose of Part III of the Constitution,
B
can claim a superior or a better right than a government servant
and impugn it's change of status. In taking of a policy decision in
economic matters at length, the principles of natural justice have
no role to play. While it is expected of a responsible employer to
take all aspects into consideration including welfare of the labour
before taking any policy decision that, by itself, will not entitle the c
employees to demand a right of hearing or consultation prior to
the taking of the decision."
17. Learned counsel submitted, that the respondent-employees
could not claim a vested right, with reference to the provisions of 'the
1999 Scheme'. In this behalf, it was submitted, that neither the principle D
of estoppel, nor that of promissory estoppel, could be invoked by the
employees, so as to claim a right to be governed by 'the 1999 Scheme'.
For canvassing that the principle of estoppel could not be invoked by the
employees, learned counsel placed reliance on M. Ramanatha Pillai v.
State ofKerala, (1973) 2 SCC 650, and invited the Court's attention to
the following: E

"36. The abolition of post may have the consequence of
termination of service of a government servant. Such termination
is not dismissal or removal within the meaning of Article 3 I 1 of
the Constitution. The opportunity of showing cause against the
proposed penalty of dismissal or removal does not therefore arise F
in the case ofabolition of post. The abolition of post is not a personal
penalty against the government servant. The abolition of post is
an executive policy decision. Whether after abolition of the post
the Government servant who was holding the post would be offered
any employment under the State would therefore be a matter of G
policy decision of the Government because the abolition of post
does not confer on the person holding the abolished post any right
to hold the post."
Reliance was also placed on Excise Commissioner, U.P., Allahabad
v. Ram Kumar, (1976) 3 SCC 540, and reference was made to the H
880 SUPREME COURT REPORTS [2016] 6 S.C.R.

A following observations recorded therein:
"Appeals Nos. 399 to 404of1975 which raise another point as
well viz. the validity of the appellants' demand from the respondents
in respect of sales tax at the rate of ten paise per rupee on the
retail sales of country spirit made by the latter with effect from
B April 2, 1969 stand on a slightly different footing. Section 3-A
and 4 of the U.P. Sales Tax Act, 1948 clearly authorise the State
Government to impose sales tax. The fact that sales of country
liquor had been exempted from sales tax vide Notification No.
ST-1149/X-802(33)-51 dated April 6, 1959 could not operate as
an estoppel against the State Government and preclude it from
c subjecting the sales to tax if it felt impelled to do so in the interest
of the Revenues of the State which are required for execution of
the plans designed to meet the ever increasing pressing needs of
the developing society. It is now well settled by a catena of
decisions that there can be no question of estoppel against the
D Government in the exercise of its legislative, sovereign or executive
powers."
To demonstrate that the principle of promissory estoppel could
not be invoked by the respondent-employees, reference was also made
to Union oflndia v. Godfrey Philips India Ltd., (1985) 4 SCC 369, wherein
E it has been held as under:
"13. Of course we must make it clear, and that is also laid down
in Motilal Sugar Mills case, ( 1979) 2 SCC 409, that there can be
no promissory estoppel against the Legislature in the exercise of
its legislative functions nor can the Government or public authority
F be debarred by promissory estoppel from enforcing a statutory
prohibition. It is equally true that promissory estoppel cannot be
used to compel the Government or a public authority to carry out
a representation or promise which is contrary to law or which
was outside the authority or power of the officer of the Government
or of the public authority to make. We may also point out that the
G doctrine of promissory estoppel being an equitable doctrine, it must
yield when the equity so requires: if it can be shown by the •
Government or public authority that having regard to the facts as
they have transpired, it would be inequitable to hold the Government
or public authority to the promise or representation made by it, the
H Court would not raise an equity in favour of the person to whom
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 881
[JAGDISH SINGH KHEHAR, J.]

the promise or representation is made and enforce the promise or A
representation against the Government or public authoritv. The
doctrine oforomissoi:y estoppel would be displaced in such a case.·
because on the facts, equity would not require that the Government
or public authority should be held bound by the promise or
representation made by it. This aspect has been dealt with fully in
B
Motilal Sugar Mills case and we find ourselves wholly in agreement
with what has been said in that decision on this point."
18. In order to support the contention, that the respondent-
employees had no vested right under 'the 1999 Scheme', reliance was
placed on paragraph 4 of 'the 1999 Scheme' (already extracted above}.
It was the pointed assertion oflearned counsel, based on paragraph 4 of
c
. 'the 1999 Scheme', that a claim towards pension could be raised by an·
employee under 'the 1999 Scheme' only " ... when an employee retires
or is retired or dies or is discharged as the case may be ... ". It was
submitted, that only such of the employees who could avail the benefit
of pension, were protected from the effect of the repeal notification D
dated 2.12.2004. It was submitted, that such of the employees who had
opted for 'the 1999 Scheme', but were not occasioned with the effect of
the contingencies contemplated under paragraph 4 of 'the 1999 Scheme',
were not entitled to claim a vested right. It was urged, that a vested
right can only be established, when all the incidents which would entitle
an employee to draw pensionary rights, under 'the 1999 Scheme', stood E
satisfied. It was pointed out, that only on the happening of one of the
events depicted in paragraph 4, a vested right would emerge. It was the
unequivocal submission oflearned counsel for the appellants, that none
of the respondent-employees in the present controversy, can claim a
vested right under 'the 1999 Scheme', as neither of them had retired on F
attaining the age of superannuation (after putting in the postulated
qualifying service), or had been retired by the employer, or had died in
harness, or had been discharged from service. It was therefore asserted,
that the challenge raised at the hands of the respondents, to the notification
dated 2.12.2004, was legally unacceptable. In this behalf, learned counsel
invited our attention to Commissioner of Income-tax, Kerala and G
Coimbatore v. L.W. Russel, (1964) 7 SCR 569, wherefrom our attention
was drawn to the following:
"Before we attempt to construe the scope of s. 7( I) of the Act it
will be convenient at the outset to notice the provisions of the
H
882 SUPREME COURT REPORTS [2016] 6 S.C.R.

A scheme, for the scope of the respondent's right in the amounts
representing the employer's contributions thereunder depends
upon it. The trust deed and the rules dated July 27, 1934, embody
the superannuation scheme. The scheme is described as the English
and Scottish Joint Co-operative Wholesale Society Limited
Overseas European Employees' Superannuation Scheme,
B
hereinafter called the Scheme. It is established for the benefit of
the male European members of the Society's staff employed in
India, Ceylon and Africa by means of deferred annuities. The
Society itself is appointed thereunder as the first trustee. The
trustees shall act as agents for and on behalf of the Society and
c the members respectively; they shall effect or cause to be effected
such policy or policies as may be necessary to carry out the scheme
and shall collect and arrange for the payment of the moneys
payable under such policy or policies and shall hold such moneys
as trustees for and on behalf of the person or persons entitled
thereto under the rules of the Scheme. The object of the Scheme
D
is to provide for pensions by means of deferred annuities for the
members upon retirement from employment on attaining certain
age under the conditions mentioned therein, namely, every
European employee of the Society shall be required as a condition
of employment to apply to become a member of the Scheme frorrf
E the date of his engagement by the Society and no member shall
be entitled to relinquish his membership except on the termination
of his employment with Society; the pension payable to a member
shall be provided by means of a policy securing a deferred annuity
upon the life of such member to be effected by the Trustees as
agents for and on behalf of the Society and the members
F respectively with the Co-operative Insurance Society Limited
securing the payment to the Trustees of an annuity equivalent to
the pension to which such member shall be entitled under the
Scheme and the Rules; the insurers shall agree that the Trustees
shall be entitled to surrender such deferred annuity and that, on
G such deferred annuity being so surrendered, the insurers will pay
to the Trustees the total amount of the premiums paid in respect
thereof together with compound interest thereon; all moneys
received by the Trustees from the insurers shall be held by them
as Trustees for and on behalf of the person or persons entitled.
thereto under the Rules of the Scheme; any policy or policies
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 883
[JAGDISH SINGH KHEHAR, J.]

issued by the insurers in connection with the Scheme shall be A
deposited with the Trustees; the Society shall contribute one-third
of the premium from time to time payable in respect of the policy
securing the deferred annuity in respect of each member as
thereinbefore provided and the member shall contribute the
remaining two-thirds; the age at which a member shall normally
B
retire from the service of the Society shall be the age of 55 years
and on retirement at such age a member shall be entitled to receive
a pension of the amount specified in Rule 6; a member may also,
after following the prescribed procedure, commute the pension to
which he is entitled for a payment in cash in accordance with the
fourth column of the Table in the Appendix annexed to the Rules; c
if a member shall leave or be dismissed from the service of the
Society for any reason whatsoever or shall die while in the service
of the Society there shall be paid to him or his legal personal
representatives the total amount of the portions of the premiums
paid by such member and if he shall die whilst in the service of
D
the Society there shall be paid to him or his legal personal
representatives the total amount of the portions of the premiums
paid by such member and ifhe shall die whilst in the service of
the Society or shall leave or be dismissed from the service of the
Society on account of permanent breakdown in health (as to the
bona tides of which the Trustees shall be satisfied) such further E
proportion (if any) of the total amount of the portions of the
premiums paid by the Society in respect of that member shall be
payable in accordance with Table C in the Appendix to the Rules;
if the total amount of the portions of the premiums in respect of
such member paid by the Society together with interest thereon
F
as aforesaid shall not be paid by the Trustees to him or his legal
personal representatives under sub-s. (I) of r. 15 then such
proportion or the whole, as the case may be, of the Society's
portion of such premiums and interest thereon as aforesaid as
shall not be paid by the Trustees to such member or his legal
personal representatives as aforesaid shall be paid by the Trustees G
to the Society; the rules may be altered, amended or rescinded
and new rules may be made in accordance with the provisions of
the Trust Deed but not otherwise.
We have given the relevant part of the Scheme and the Rules.
H
884 SUPREME COURT REPORTS [2016] 6 S.C.R.

A The gist of the Scheme may be stated thus: The object of the
Scheme is to provide for pensions to its emP.loyees. It is achieved
by creating a trust. The Trustees appointed thereunder are the
agents of the employer as well as of the employees and hold the
. moneys received from the employer, the employee and the insurer
in trust for and on behalf of the person or persons entitled thereto
B
under the rules of the Scheme. The Trustees are enjoined to take
out policies of insurance securing a deferred annuity upon the life
of each member, and funds are provided by contributions from
the employer as well as from the employees. The Trustees realise
the annuities and pay the pensions to the employees. Under certain
c contingencies mentioned above, an employee would be entitled te
the pension only after superannuation. If the employee leave the
service of the Society or is dismissed from service or dies in the
service of the Society, he will be entitled only to get back the total
amount of the portion of the premium paid by him, though the
trustees in their discretion under certain circumstances may give
D
him a proportion of the premiums paid by the Society. The entire
amount representing the contributions made by the Society or part
thereof, as the case may be, will then have to be paid by the
Trustees to the Society. Under the scheme the employee has not
acquired any vested right in the contributions made by the Society.
E Such a right vests in him only when he attains the age of
superannuation. Till that date that amount vests in the Trustees to
be administered in accordance with the rules; that is to say, in
case the employee ceases to be a member of the Society by death
or otherwise, the amount contributed by the employer with interest
thereon, subject to the discretionary power exercisable by the
F
trustees, become payable to the Society. If he reaches the age of
superannuation, the said_contributions irrevocably become fixed
as part of the funds yielding the pension. To put it in other words,
till a member attains the age of superannuation the employer's
share of the contributions towards the premiums does not vest in
G the employee. At best he has a contingent right therein. In one
contingency the said amount becomes payable to the employer
and in another contingency, to the employee."
For the same proposition, learned counsel, placed reliance on
Krishena Kumar v. Union of India, (1990) 4 SCC 207, and drew our
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC.
[JAGDISH SINGH KHEHAR, J.]

attention to the following: . A
"32. In Nakara, ( 1983) 1 SCC 305, it was never held that both the
pension retirees and the P.F. retirees formed a homogeneous class
and that any further classification among them would be violative
·of Article 14. On the other hand the court clearly observed that it
was not dealing with the problem of a "fund". The Railway B
Contributory Provident Fund is by definition a fund. Besides, the
goven1ment's obligation towards an employee under C.P.F. Scheme
to give the matching contribution begins as soon as his account is
opened and ends with his retirement when his rights qua the
Government in respect of the Provident Fund is finally crystallized
and thereafter no statutory obligation continues. Whether there
c
still remained a moral obligation is a different matter. On the other
hand under the Pension Scheme the Government's obligation does
not begin until the employee retires when only it begins and it
continues till the death of the employee. Thus, on the retirement _,,...
ofan employee government's legal obligation under the Provident D
Fund account ends while under the Pension Scheme it begins.
The rules governing the Provident Fund and its contribution are
entirely different from the rules governing pension. It would not,
therefore, be reasonable to argue that what is applicable to the
pension retirees must also equally be applicable to P.F. retirees.
E
This being the legal position the rights of each individual P.F. retiree
finally crystallized on his retirement whereafter no continuing
obligation remained, while on the other hand, as regards Pension
retirees, the obligation continued till their death ..... "
Based on the legal position declared by this Court in the above
judgments, it was urged, that in the absence of any vested right, a F
challenge to the notification dated 2.12.2004, was neither sustainable
nor maintainable in law.
19. It would be relevant to notice, that 'the 1999 Scheme' became
operational with effect from 1.4.1999. It remained operational till the
issuance of notification dated 2.12.2004. While repealing 'the 1999 G
Scheme', the notification dated 2.12.2004, did not deprive such of the
employees who had retired during subsistence of the Scheme, of the
benefits that had ac'crued to them, under 'the 1999 Scheme'. Only such
of the employees who were to retire on or after 2.12.2004, were disentitled
to the benefits under the Scheme. It was the submission of learned H
886 SUPREME COURT REPORTS [2016] 6 S.C.R.

A counsel for the appellants, that the choice of the cut-off date - 2.12.2004
in the present controversy, is a pennissible incident in law. It was pointed
out, that the instant proposition has been repeatedly examined by this
Court, wherein cut-off dates have been upheld; sometimes even where
the cut-off date had been made applicable retrospectively. For the instant
proposition, learned counsel placed reliance on Union of India v. P.N.
B
Menon, (1994) 4 SCC 68, and invited the Court's attention to the following
observations:
"8. Whenever the Government or an authority, which can be held
to be a State within the meaning of Article 12 of the Constitution,
frames a scheme for persons who have superannuated from
c service, due to many constraints, it is not always possible to extend
the same benefits to one and all, irrespective of the dates of
superannuation. As such any revised scheme in respect of post-
retirement benefits, if implemented with a cut-off date, which can
be held to be reasonable and rational in the light of Article 14 of
D the Constitution, need not be held to be invalid. It shall not amount
to "picking out a date from the hat'', as was said by this Court in
the case of D.R. Nim v. Union of India, AIR 1967 SC 130 I, in
connection with fixation of seniority. Whenever a revision takes
place, a cut-off date becomes imperative, because the. benefit
has to be allowed within the financial resources available with the
E Government."
Reliance was also placed on State of West Bengal v. Ratan Behari
Dey, ( 1993) 4 SCC 62, and our attention was drawn to the following
conclusions:

F "7. In our opinion, the principle ofNakara, ( 1983) I SCC 305, has
no application to the facts of this case. The precise principle
enunciated in Nakara (supra) has been duly explained in Krishena
Kumar, (1990) 4 SCC 207, by a coordinate Bench. For reasons to
be assigned hereinafter, it cannot be said that prescribing April I,
1977 as the date from which the new Regulations were to come
G into force is either arbitrary or discriminatory. Now, it is open to
the State or to the Corporation, as the case may be. to change the
conditions of service unilaterally. Terminal benefits as well as
pensionary benefits constitute conditions of service. The employer
has the undoubted Rower to revise the salaries and/or thtU1fil'.:
H scales as also terminal benefits/pensionary benefits. The power
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 887
[JAGDISH SINGH KHEHAR, J.]

to specify a date from which the revision of pay scales or terminal A
benefits/pertsionaiy benefits, as the case may be, shall take effect
is a concomitant of the said power. So long as such date is specified
in a reasonable manner, i.e., without bringing about a discrimination
between similarly situated persons, no interference is called for
by the court in that behalf. It appears that in the Calcutta
B
Corporation, a pension scheme was in force prior to 1914. Later,
that scheme appears to have been given up and the Provident
Fund Scheme introduced under the Provident Fund Scheme, a
certain amount was deducted from the salary of the employees
every month and credited to the Fund. An equal amount was
contributed by the employer which too was credited to the Fund. c
The total amount to the credit of the employee in the Fund was
paid to him on the date of his retirement. The employees, however,
were demanding the introduction of a pension scheme. The demand
fell on receptive years in the year 1977 ... maybe because in that-
year the Left Front Government came to power in that State, as
D
suggested by the writ petitioners. The State Government appointed
a Commission to examine the said demand and to recommend the
necessary measures in that behalf. The three members constituting
the Commission differed with each other in certain particulars.
The Government examined their recommendations and accepted
them with certain modifications in the year 1981 . After processing E
the matter through relevant departments, the Regulations were
issued and published in the year 1982. In the above circumstances,
the State Government thought that it would be appropriate to give
effect to the said Regulations on and from April l, 1977 i.e., the ·
first day of the financial year in which the Pay Commission was
appointed by .the Government - a fact which could not have · F
been unknown to the Corporation employees. We cannot say that
the Government acted unreasonably in specifying the said date: It
may also be said that, that was the year' in which the Left Front
came into power in that State, but does not detract from the validity
of the aforesaid reasons assigned by the State in its counter- G
affidavit filed before the Division Bench of the High Court. We
are not in agreement with the opinion expressed by the High Court
that the reasons assigned by the State Government are neither
relevant nor acceptable.
H
888 SUPREME COURT REPORTS . [2016] 6 S.C.R.

A 8. In this context, it may be remembered that the power of the
State to specify a date with effect from which, the Regulations
/
framed, or amended, as the case may be, shall come into force is
unquestioned. A date can be specified both prospectively as well
as retrospectively. The only question is whether the prescription
of the date is unreasonable or discriminatory. Since we have
B
found that the prescription of the date in this case is neither
arbitrary nor unreasonable, the complaint of discrimination must
fail.
9. Now coming to the argument of Sri P.P. Rao that the Regulations
bring about an unreasonable classification between similarly placed
c employees, we must say that we are not impressed by it. It is not
submitted that the Corporation had no power to give retrospective
effect to the Regulations. It was within the power of the
Corporation to enforce the Regulations either prospectively or
with retrospective effect from such date as they might specify.
D Of course, as repeatedly held by this Court, in such cases the
State cannot, as the expression goes, pick a date out of its hat. It
has to prescribe the date in a reasonable manner, having regard to
all the relevant facts and circumstances. Once this is done, question
of discrimination does not arise. Reference in this behalf may also
be had to the decision of this Court in Sushma Sharma v. State of
E
Rajasthan, 1985 Supp. SCC 45, a decision of the Division Bench
comprising E.S. Venkataramiah and Sabyasachi Mukharji, JJ."
It was pointed out, that the determination rendered in the above
two judgments has been reiterated by this Court in State of Rajasthan v.
Amrit Lal Gandhi, ( 1997) 2 SCC 342. Last of all, learned counsel invited
F the Comt's attention to R.R. Verma v. Union of India, (1980) 3 SCC
402, wherefrom reliance was placed on the following:-
"5. The last point raised by Shri Garg was that the Central
Government had no power to review its earlier orders as the rules
do not vest the government with any such power. Shri Garg relied
G on certain decisions of this Court in support of his submission:
Patel Narshi Thakershi v. Pradyumansinghji Arjunsinghji, ( 1971)
3 SCC 844; D.N. Roy v. State of Bihar, (f970) 3 SCC 119, and
State of Assam v. J.N. Roy Biswas, (1976) I SCC 234. All the
cases cited by Shri Garg are cases where the government was
H exercising quasi-judicial power vested in them by statute. We do
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 889
[JAGDISH SINGH KHEHAR, J.]

not think that the principle that the power to review must be A
conferred by statute either specifically or by necessary implication
is applicable to decisions purely of an administrative nature. To
extend the principle to pure administrative decisions would indeed
lead to untoward and start Iing results. Surely, any government
must be free to alter its policy or its decision in administrative
8
matters. If they are to carry on their daily administration they
cannot be hidebound by the rules and restrictions of judicial
procedure though of course they are bound to obey all statutory
requirements and also observe the principles of natural justice
where rights of parties may be affected. Here again, we emphasise
that if administrative decisions are reviewed, the decisions taken c
after review are subject to judicial review on all grounds on which
an administrative decision may be questioned in a court. We see
~ 110 force in this submission of the learned counsel. The appeal is,
therefore, dismissed."
20. Mr. R. Venkataramni, learned senior counsel, supplemented D
the submissions advanced by Mr. P.P. Rao. In his opening statement, he
endorsed the submissions advanced by Mr. P.P. Rao, and accordingly,
adopted the same.
21. In addition, it was contended, that 'the 1999 Scheme' was
introduced for the first time on 29.10.1999, with retrospective effect - E
from 1.4.1999. It was asserted, that through 'the 1999 Scheme', it was
proposed to supplement the post-retiral financial benefits of employees,
engaged in corporate bodies, in the State ofHimachal Pradesh. It was
urged, that employees of corporate bodies, were hitherto before,
recipients of Contributory Provident Fund (CPF), as the sole post-retiral
financial benefit. It was submitted, that 'the 1999 Scheme', required F
employees of corporations to switch over from the CPF scheme, by
exercising their option. And, such of the employees who did not exercise
any option (under the provisions of'the 1999 Scheme'), were also deemed
to have exercised their option for the said scheme, on the expiry of the
period specified. It was highlighted, that the grant of pension under 'the G
1999 Scheme', was based on the operation of the scheme. Stated
differently, the contention was, that the right to receive pension emerged
from 'the 1999 Scheme', and not from the option exercised by an
employee, under the said scheme.
22. Insofar as the operation of'the I 999 Scheme' is concerned, it H
890 SUPREME COURT REPORTS [2016] 6 S.C.R.

A was submitted, that the employer's contribution to the CPF account of
the employee (including interest which had accrued thereon) upto
31.3.1999, was transferred to the State Government, so as to constitute
the corpus fund, to be administered and maintained by the Finance
Department of the State G<wernment, which would make 'the 1999
Scheme', self-financing. The above submission, .was drawn from a
B
collective reading of paragraphs 4(b) and 5 of 'the 1999 Scheme'. It
was further contended, that an employee's own contribution to the CPF,
i.e. the subscription amount contributed by the employee to his own
CPF account, was to be retained in his GPF account. The instant
employee's contribution, was to be disbursed to him, at the time of his
c retirement, as GPF. As such, it was pointed out, that the contributions
made by the employees, from out of their own funds, were unaffected
by 'the 1999 Scheme'.
23. It was therefore high Iighted by learned counsel, that the present
controversy has nothing to do with an employee's contribution, but was
D limited to the right of an employee to claim pension under 'the 1999
Scheme'. It was urged, that the exercise of an option to switch over
from the CPF scheme, to 'the 1999 Scheme', did not result in a vested
right, to earn pension. To support the instant contention, it was pointed
out, that one of the pre-conditions for earning pension, is to have rendered
the minimum stipulated qualifying service. It was submitted, that there
E were various other similar conditions, on satisfaction whereof alone, an
employee (despite his having exercised an option, to switch over to 'the
1999 Scheme'), would be entitled to pensionary benefits, after his
retirement. It was, therefore asserted, that the crystalisation of the right
for a legitimate claim for pension, would accrue on satisfaction of all the
F postulated conditions, and till the fulfillment of all the conditions, the mere
exercise ofoption, to switch over to 'the 1999 Scheme', would not result
in vesting a right in the respondent-employees, to receive pension.
24. In order to effectively project the assertion canvassed by him,
the learned counsel highlighted, that the exercise of option by the
G employees who were engaged in corporations in the State of Himachal
Pradesh, did not result in the employees having in any manner, altered
their position to their disadvantage. It was averred, that' the employees
did not forego any pre-existing better or higher benefit, while exercising
their option to switch over to 'the 1999 Scheme'. Bas.:d cumulatively
on the factual position projected above, it was urged, that it was not
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 891
[JAGDISH SINGH KHEHAR, J.)

open to the employees of corporations in the State ofHimachal Pradesh, A
to call into question, the repeal of 'the 1999 Scheme', through the
impugned notification dated 2.12.2004.
25. In order to canvass· the above proposition, that rights which
were contingent upon the occurrence of an event, could not be described
as vested rights, reliance was placed on Howrah Municipal Corporation B
v. Ganges Rope Co. Ltd., (2004) 1 sec 663, and the following
observations recorded therein:-
"37. The argument advanced on the basis of so-called creation
of vested right forobtainingsanction on the basis of the Building
Rules (unamended) as they were on the date of submission of the c
application and the order of the High Court fixing a period for
,decision of the same, is misconceived. The word "vest" is normally
used where an immediate fixed right in presentor future enjoyment
in respect of a property is created. With the long usage the said
word "vest" has also acquired a meaning as "an absolute or
indefeasible right" [see K.J. Aiyer's Judicial Dictionary (A D
Complete Law Lexicon), 13th Edn.]. The context in which the
respondent Company claims a vested right for sanction and which
has been accepted by the Division Bench of the High Court, is
not a right in relation to "ownership or possession of any property"
for which the expression "vest" is generally used. What we can E
' understand from the claim of a "vested right" set up by the
respondent Company is that on the basis of the Building Rules, as
applicable to their case on the date of making an application for
sanction and the fixed period allotted by the Court for its
consideration, it had a "legitimate" or"settled expectation" to obtain
the sanction. In our considered opinion, such "settled expectation'', F
if any, did not create any vested rightfo obtain sanction. True it is,
that the respondent Company which can have no control over the
manner of processing of application for sanction by the Corporation
cannot be blamed for delay but during pendency of its application
for sanction, if the State Government, in exercise of its rule-making G
power, amended the Building Rules and imposed restrictions on
the heights ofbuildings on GT. Road and other wards, such "settled
expectation" has been rendered impossible of fulfillment due to
change in law. The claim based on the alleged "vested right" or
"settled expectation" cannot be set up against statutory provisions
H
892 SUPREME COURT REPORTS [2016] 6 S.C.R.

A which were brought into force by the State Government by
amending the Building Rules and not by the Corporation against
whom such "vested right" or"settled expectation" is being sought
to be enforced. The "vested right" or "settled expectation" has
been nullified not only by the Corporation but also by the State by
amending the Building Rules. Besides this, such a "settled
B
expectation" or the so-called "vested right" cannot be
countenanced against public interest and convenience which are
sought to be served by amendment of the Building Rules and the
resolution of the Corporation issued thereupon."
Based on the conclusions drawn in the cited judgment, it was
c submitted, that a 'legitimate' or a ->settled expectation', suggesting the
possibility of drawing pension after retirement, could not be treated as a
vested right. It was submitted, that the respondent-employees were not
justified in raising a claim based on the assumption, thatthey had a vested
right, or 'settled expectation', under 'the 1999 Scheme', particularly in
D the light of the fact, that 'the 1999 Scheme' had been partly nullified, by
the notification dated 2.12.2004.
26. It was also the assertion of learned counsel, that the repeal
notification dated 2.12.2004, had the consequence of termination/
cessation of benefits, as would emerge from the analogy of the principles
E expressed in Section 6 of the General Clauses Act. It was further
submitted, that the requirement of dealing with rights and liabilities insofar
as the present controversy is concerned, is clearly based on a valid
classification. It was urged, that truly and factually, there was no
classification whatsoever, inasmuch as, the benefits under 'the 1999
Scheme' were extended to a miniscule section of the employees, and
F excluded uni formally an overwhelming majority of employees. Learned
counsel questioned the veracity of the conclusion drawn by the High
Court, by reading down the repeal notification dated 2.12.2004, for the
reason, that the same would deprive pensionary rights to those employees,
who had opted for 'the 1999 Scheme', and had retired after 2.12.2004,
G as also, the employees who were already in service when 'the 1999
Scheme' was notified on 29. I 0.1999, and had become members of that
scheme, and were due to retire after 2.12.2004. It was pointed out, that
the above determination at the hands of the High Com1, would have the
effect of 'the 1999 Scheme' remaining in place, till such time as
employees engaged in corporations upto 2.12.2004 eventually retired on
H
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 893
[JAGDISH SINGH KHEHAR, J.]

attaining the age of superannuation. In the above view of the matter, it A
was asserted, that in the manner the legality of the issue has been
determined by the High Court, 'the 1999 Scheme' which was repealed
on 2.12.2004, would actually and factually continue to be·operational,
for a further period of approximately 20 years, by which time alone,
employees engaged prior to the notification dated 2.12.2004, would retire
B
from service.
27. It was also the contention of learned counsel, that the
confinement of the pensionary benefits under 'the 1999 Scheme', to
such of the employees, who had retired from the concerned corporations,
between 1.4.1999 and 2.12.2004, could not be invalidated because the
right to receive pension stood crystalised and vested in them in terms of
c
paragraph 4 of 'the 1999 Scheme'. It was submitted, that a statutory
classification cannot be set aside, when there is overwhelmingjustification,
demonstrating a valid basis, therefor. The repeal of'the 1999 Scheme'
was based on financial constraints, which .had not been legitimately
repudiated. Insofar as the instant aspect of the matter is concerned, D
learned counsel, in the first instance, placed reliance on State ofRajasthan
v. Amrit Lal Gandhi (supra), and our attention was invited to the following
observations recorded therein:-
" 16. Applying the ratio of the aforesaid decisions to the present
case, we find no justification for the High Court having substituted E
the date of 1-1-1986 in lieu of 1-1-1990. It is evident that for
introducing a pension scheme, which eny_isaged financial
implications, approval of the Rajasthan Government was required.
In the letter of 16-4-1991, written to the Vice-Chancellors of
different universities ofRajasthan, it was stated as follows:
F
"As per the direction in regard to the aforesaid subject, the
State Government has decided to introduce Pension Scheme
in the Universities of the State w.e.f. 1-1-1990. In this regard
the State Legislature has passed University Pension Rules
and General Provident Fund Rules. Therefore, by enclosing
a copy of University Pension Regulations and General G
Provident Fund Regulations with this letter, it is requested
that by obtaining approval of the competent body or Syndicate
of the University, these Regulations be implemented in the
University together and necessary information regarding
implementation be intimated." H
894 SUPREME COURT REPORTS [2016] 6 S.C.R.

A 17. The Syndicate and Senate of the University, when they had
forwarded their recommendations in 1986, did not contain a specific
date with effect from which the pension scheme was to be made
applicable. Their recommendations were subject to approval. The
approval was granted by the Government, after the State
Legislature had passed the University Pension Rules and General
B
Provident Fund Rules. The Government had stated in its affidavit
before the High Court that the justification of the cut-off date of
1-1-1990 was "wholly economic". It cannot be said that the paying
capacity is not a relevant or valid consideration while fixing the
cut-off date. The University could, in 1991, validly frame Pension
c Regulations to be made applicable prospectively. It, however, chose
to give them limited retrospectivity so as to cover a larger number
of employees by taking into account the financial impact of giving
retrospective operation to the Pension Regulations. It was decided
that employees retiring on or after I-1~1990 would be able to
exercise the option of getting either pension or provident fund.
D
Financial impact of making the Regulations retrospective can be
the sole consideration while fixing a cut-off date. In our opinion, it
cannot be said that this cut-off date was fixed arbitrarily or without
any reason. The High Court was clearly in error in allowing the
writ petitions and substituting the date of 1-1-1986 for 1-1-1990."
E For the same proposition, reliance was also placed in Union of
India v. R. Sarangapani, (2000) 4 SCC 335, and our attention was drawn
to the following observations recorded therein:-
" I I. One more aspect which we want to emphasise is that the
applicants who were appointed to the technical posts and the other
F persons who were appointed to the non-technical posts are not on
the same footing. The nature of their jobs was different, the
qualifications for appointment were different and the training period
was to be longer for the technical staff. It was obviously necessary
that those who were to occupy the technical posts should have a
G longer period of training than those who were to occupy the non-
technical posts. The training period for the former was one year
while the training period for the latter was only three months.
Naturally, the non-technical personnel could therefore be appointed
earlier to the technical personnel even if both groups were selected
at the same selection. Therefore, in view of the nature of the
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 895
[JAGDISH SINGH KHEHAR, J.]

qualifications and nature of the posts and functions and duties, no A
equality in the dates of accrual of the increments could ever have
been claimed by the technical personnel comparing themselves to
the non-technical persons, by invoking Article 14.
12. If, however, the Government thought it fit to bring some sort
of equalisation in the matter of commencement of their increments, · B
it was obviously by way of a sheer concession and was not as a
matter of right nor was it to avoid any violation of any principles
of equality under Article 14. In fact, the very official memorandum
of the Government dated 22-1 0-1990 stated that under the
Fundamental Rule 26 read with Rule 9(6)(a)(i) it was only in
c,!!_ses of probationers and apprentices where such appointments
c
were followed by a confirmation that the said period of probation
or apprenticeship would be counted for the purpose of scale of
pay attached to'the posts. This principle would "not" as per the
Rules be applicable to the training period. However, during the
meetings of the National Council (JCM) it was represented that D
where the training period was long, as in the case of technical
personnel, the disparity would become perpetual. Therefore, it is
obvious that the concession was not based on Article 14 nor was
it on the basis ofany rule but was clearly based only upon the fact
that the training period of technical personnel was longer and the
disparity would continue per:petually if these groups were selected E
at the same time. Therefore, Government considered initially to
bring their increment on par with effect from 1-1-1990 and later
on it felt that the grievance could be rectified with effect from 1-
1-1986 as mentioned above, the date of commencement of the
recommendations of the Fourth Pay Commission. It is, therefore, F
clear that the Government decided to extend the benefit in the
abovesaid manner, even though parties had no right to the same
either under Article 14 or under the Rules and the date was mainly
based on the financial burden. It was open to the Government to
decide, having regard to the budgetary provision, as to what extent
it could go and whether it could fix a cut-off date which was co- G
terminus with the commencement of the recommendation of the
Fourth Pay Commission, namely, 1-1-1986. On the peculiar facts
of this case the said date was perfectly valid because the only
consideration was the financial burden of the State and not any
H
896 SUPREME COURT REPORTS [2016] 6 S.C.R.

A principle of equality."
28. In order to canvass the. proposition noticed hereinabove, learned
counsel also placed reliance on, 'A Treatise on the Constitutional
Limitations', authored by Thomas M. Cooley (Indian Reprint of 2005,
Hindustan Law Book Company, Calcutta), and invited our attention to
B following observations recorded in Chapter XI, bearing the heading -
Of The Protection To Property By 'The Law Of The Land':-
"The chief restriction is that vested rights must not be disturbed;
but in its application as a shield of protection, the term "vested
rights" is not used in any narrow or technical sense. as importing
c a power of legal control merely, but rather as implying a vested
interest which it is equitable the government should recognize,
and of which the ind_ividual cannot be deprived without injustice.
And before proceeding further, it may be well to consider. in the
light of the reported cases, what is a vested right in the constitutional
D sense, that we may the better judge how far the general laws of
the State may be changed. and how far special provisions may be
made without coming under condemnation. Every man holds all
he possesses, and looks forward to all he hopes for, through the
aid and protection of the laws; but as changes of circumstances
and of public opinion, as well as other reasons of public policy, are
E all the time calling for changes in the laws, and these changes
must more or less affect the value and stability of private
possessions, and strengthen or destroy well-founded hopes; and
as the power to make very many of them must be conceded, it is
apparent that many rights, privileges~ and exemptions which usually
F pertain to ownership under a particular state of the law, and many
reasonable expectations, cannot be regarded as vested rights in
any legal sense. In many cases the courts. in the exercise of their
ordinary jurisdiction, cause the property vested in one person to
be transferred to another, either through a statutory power. or by
the force of their judgments or decrees, or by compulsory
G conveyances. If in these cases the court has jurisdiction, they
proceed in accordance with the law of the land, and the right of
one man is divested by way of enforcing a higher and better right
in another. Of these cases we do not propose to speak: as
constitutional questions cannot well arise in regard to them, unless
H they be attended by circumstances of irregularity which are
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 897
[JAGDISH SINGH KHEHAK, J.]

supposed to take them out of the operation of the general rule. A
All vested rights are held subject to the laws for the enforcement
of public duties and private contracts, and for the punishment of
wrongs; and if they become divested through the operation of
these laws, it is only by way of enforcing the ob Iigations of justice
and good order. What we desire to arrive at now, is the meaning
8
of the term "vested rights''. when employed by way of indicating ,
the interests of which one cannot be deprived by the mere force
oflegislative enactment, or by any other than the recognized modes
of transferring title against the consent of the owner, to which we
have alluded."
Based on the submissions recorded hereinabove, it was sought to
c
be concluded, that the respondent-employees had no vested right to claim
pension under 'the 1999 Scheme', and that, it was not open to them to
assail the partial repeal of 'the 1999 Scheme', vide notification dated
2.12.2004.
29. In the process ofrepudiating the submissions advanced at the D
hands of the appellants, Mr. Guru Krishna Kumar, learned senior counsel
representing the respondent-employees, drew our attention to certain
factual aspects of the matter, which according to him, needed to be kept
in mind, while determining the veracity of the challenge raised by the
State Government. It was pointed out, that all the respondent-employees, E
were already in the employment of corporate bodies, in the State of
Himachal Pradesh, on the date 'the 1999 Scheme' was introduced- on
1.4.1999. Learned counsel asserted, that it was not disputed at the
behest of the State Government, that all the respondent-employees were
entitled to benefits under 'the 1999 Scheme', either on account of having
exercised their option to be governed by 'the 1999 Scheme', or by virtue F
of the deeming provision expressed in paragraph 2(2) of 'the 1999
Scheme'. It was asserted, that all the employees who came to be
governed by 'the 1999 Scheme', constituted a homogenous class.
Inasmuch as, the employees whose right to claim pension under 'the
1999 Scheme' has not been disturbed, despite the repeal notification G
dated 2.12.2004, and those whose right to draw pension has been taken
away, cannot be distinguished in any manner, except on the basis of the
cut-off date, expressed in the repeal notification, dated 2.12.2004. It
was contended, that merely because some of the employees had retired
prior to 2.12.2004, and the respondent-employees had retired after
H
898 SUPREME COURT REPORTS [2016] 6 S.C.R.

A 2.12.2004, cannot be accepted as a legitimate basis, to treat them
differentially. It was asserted, that the mandate of paragraph 1(2) of
'the 1999 Scheme' extended pensionary benefits to employees engaged
in corporate bodies, in the State of Himachal Pradesh, in accordance
with the provisions laid down urider the Central Civil Services (Pension)
Rules, 1972, and the Central Civil Services (Commutation of Pension)
B
Rules, 1981 " ... as amended and adopted by the Himachal Pradesh
Government for the State Government employees, save as otherwise
provided in this scheme". In the above view of the matter, it was asserted
on behalf of the respondent-employees, that the division of a homogenous
class, so as to deprive one set of employees benefits, which still remained
c extended to another set of employees, was clearly unsustainable in law.
It was pointed out with some emphasis, that the High Court had taken
conscious notice of the fact, that 'the 1999 Scheme' was introduced by
the State Government, after due deliberation by all concerned stake
holders, and upon approval by the Chief Minister and his Cabinet. In the
factual background highlighted hereinabove, it was urged, that denial of
D
pensionary benefits to one set of employees, out of a homogenous class,
was arbitrary and discriminatory, and as such, violative of the principles
enshrined in Articles 14 and 16 of the Constitution of India. Based on
the above factual background, it was urged, that the High Court was
fully justified in reading down the repeal notification dated 2.12.2004, so
E as to extend the benefit of 'the 1999 Scheme' to all employees who
either opted for, or were otherwise entitled to pensionary rights, under
'the 1999 Scheme'.
30. Learned counsel forthe respondent-employees, contested the
submission advanced by learned counsel for the appellants, that
F subscription to 'the 1999 Scheme' by employees engaged in corporations
in the State of Himachal Pradesh, did not create a vested right in them.
It was submitted, that a mere subscription to 'the 1999 Scheme', by
exercising their option to be governed by the same, created a vested
right in the respondent-employees. In this behalf it was pointed out, that
retirement on attaining the age of the superannuation, was relevant, only
G for the purpose of the accrual ofa cause ofaction, for raising a claim for
pension (under 'the 1999 Scheme'). Learned counsel, while
acknowledging, that a right to claim pension would arise only when the
concerned employee attained the age of superannuation, yet submitted,
that the moment a contribution earlier payable to the employees as CPF
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 899
[JAGDISH SINGH KHEHAR, J.]

on their retirement, was diverted to the corpus fund maintained by the · A
Finance Department of the State Government, the same created a
contingent right in each one of them (under 'the 1999 Scheme') to claim
pension. It was therefore submitted, that there was no.justification in
the contention advanced on behalf of the appellants, that the action of
the respondent-employees in opting for 'the 1999 Scheme', did not alter
B
their position adversely, with reference to their erstwhile vested right
(under the Employees Provident Funds Scheme, I 995). In order to
support his submission, that a vested right accrued to the respondent-
employees, when they subscribed to 'the I 999 Scheme', learned counsel
placed reliance on U.P. Raghavendra Acharya v. Sta~e of Karnataka,
(2006) 9 sec 630, and drew our attention to the following observations c
recorded therein:-
"3. It is not in dispute that the revised scales of pay as
recommended by the Pay Revision Committee became applicable
to the appellants with effect from 1-1-I 986. It is also not in dispute
that the UGC scales of pay were applicable to them. The D
Government ofKarnataka, by a letter dated 17- I 2-1993, directed
that the matter relating to the fixation of pension on the basis of
UGC pay scales would be governed by Rule 296 of the Karnataka
Civil Services Rules (hereinafter referred to as "the Rules"),·
providing for computation ofemoluments for the purpose of pension
and gratuity of a government servant. In the said letter it was E
stated:
"The term 'emoluments' has been defined and redefined from
time to time whenever pension has been revised by executive
orders. The term emoluments for purpose of pensionary
benefits as defined in GO dated I 7-8-1987 includes among F
other things the last pay drawn. It is, therefore, clarified that
the pay drawn by' the teachers of degree colleges in respect
of whom UGC scales have been extended by GO No. ED
88 UNI 88 dated 30-3-1990 w.e.f. 1-1-1986 and who have
opted to UGC scales of pay, the last pay drawn by them in G
UGC scales of pay among other things may be treated as
emoluments for purpose of pensionary benefits under GO
No. FD 20 SRS 87 (I) dated 17-8-1987."
*** *** ***
H
900 SUPREME COURT REPORTS [2016] 6 S.C.R.

A 9. However, para 27-A was inserted thereto in respect ofrevision
of pensionary benefits, which is to the fo IIowing effect:
"27-A. Revision ofpensionary benefits.-{i) UGC scales as
revised from 1-1-1996 have been linked to the index level of
1510 points inasmuch as the revised pay scale structure
B includes the DA admissible as on 1-1-1996 to the extent of
138% of basic pay. As on 1-1-1996 the pensionary benefits
under the State Government had not been revised. The
revised pay scales of the State Government employees came
into force from 1-4-1998 by merging the DA as on 1-1-1996.
The pensionary benefits were also simultaneously revised
c w.e.f. 1-4-1998. Therefore, the revised pay drawn in the
UGC pay scales for the period from 1-1-1996 up to 3 1-3-
1998 shall not be taken as emoluments for the purpose of
pensionary benefits. Accordingly,-
( a) In respect of teachers drawing UGC pay scales who
D have retired during the period from 1-1-1996 to 31-3-1998,
they shall be eligible for the benefit of the fixation of pay and
arrears under the revised UGC scales of pay only. There
shall not be any change in their pensionary benefits with
reference to the revised UGC pay and the retirement benefits
E already sanctioned in the pre-revised UGC pay scales will
not undergo any modifications. However, they shall be entitled
to the benefit of fixation of revised pension/family pension
as contemplated in GO No. FD (Spl.) 2 PET 99 dated 15-2-
1999 only w.e.f. 1-4-1998. Para 6 of GO No. FD (Spl.) 2
PET 99 dated 15-2-1999 stands modified to this extent.
F
(b) In respect of teachers drawing UGC pay scales and
who have issued on or after 1-4-1998, the pay drawn in the
revised UGC pay scales shall be counted for the purpose of
pensionary benefits and the orders revising the pensionary
benefits vide GO No. FD (Spl.) 2 PET 99 dated 15-2-1999
G shall be made applicable."
*** *** ***
23. The stand of the State of Kamataka that the pensionary benefits
had been conferred on the appellants w.e.f. 1-4-1998 on the premise
that the benefit of the revision of scales ofoay to its own employees
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 901
[JAGDISH SINGH KHEHAR, J.]

had been conferred from 1-1-1998. in our opinion, is wholly A
misconceived. Firstly, because the employees of the State of
Karnataka and the appellants. in the matter of grant of benefit of
revised scales of pay, do not stand on the same footing as revised
scales of pay had been made applicable to their cases from a
different date. Secondly, the appellants had been given the benefit
B
of the revised scales ofoay w.e.f; 1-1-1996. It is now well settled
that a notification can be issued by the State accepting the
recommendations of the Pay Revision Committee with
retrospective effect as it was beneficent to the employees. Once
such a retrospective effect is given to the recommendations of
the Pay Revision Committee. the employees concerned despite c
their reaching the age of superannuation in between the said dates
and/or the date of issuance of the notification would be deemed
to be getting the said scales of pay as on 1-1-I 996. By reason of
such notification. as the appellants had been deprived of a vested
right. they could not have been deprived therefrom and that too
D
by reason of executive instructions.
*** *** ***
25. Pension, as is well known, is not a bounty. It is treated to be
a deferred salary. It is akin to right of property. It is correlated
and has a nexus with the salary payable to the employees as on E
the date of retirement.

*** *** ***
28. The impugned orders furthermore are opposed to the basic
principles oflaw inasmuch as by reason of executive instructions
an employee cannot be deprived of a vested or accrued right. F
Such a right to draw pension to the extent of 50% of the
emoluments. computed in terms of the rules w.e.f. I-1-1996, vested
in the appellants in terms of government notification read with
Rule 296 of the Rules."
Based on the above judgment, it was pointed out, that the right to G
draw revised pension under the Karnataka Civil Service Rules, was
held to be vested in the concerned employees, from the date of revision
of the pay-scales. It was pointed out, that while calculating pensionary
benefits, it was imperative for the employer to take into consideration,
the actual pay drawn by the employees, at the time of their retirement.
H
902 SUPREME COURT REPORTS [2016) 6 S.C.R.

A Accordingly it was held, that the action ofthe State Government in granting
revised pay-scales with retrospective effect (with effect from l. l .1996),
but extending the benefit of revised pay for calculating pension, only
with effect from 31.3 .1998, was not sustainable in law. Inasmuch as,
employees who had retired between 1.1.1996 and 3 1.3 .1998 would be
prejudicially affected. On the same proposition, learned counsel placed
B
reliance on D.S. Nakara v. Union oflndia, (1983) 1SCC305, and invited
'our attention to the followi~g observations made therein:-
"20. The antequated notion of pension being a bounty, a gratuitous
payment depending upon the sweet will or grace of the employer
not claimable as a right and, therefore, no right to pension can be
c enforced through Court has been swept under the carpet by the
decision of the Constitution Bench in Deokinandan Prasad v. State
ofBihar, (1971) 2 SCC 330. wherein this Court authoritatively
ruled that pension is a right and the payment of it does not depend
upon the discretion of the Government but is governed by the
D rules and a government servant coming within those rules is entitled
to claim pension. It was further held that the grant of pension
does not depend upon anyone's discretion. It is only for the pur:pose
of guantifying the amount having regard to service and other allied
matters that it may be necessary for the authority to pass an order
to that effect but the right to receive pension flows to the officer
E not because of any such order but by virtue of the rules. This
view was reaffinµed in State of Punjab v. Iqbal Singh, (1976) 2
sec l".
Reference was also made to Chairman, Railway Board v. C.R.
Rangadhamaiah, ( 1997) 6 sec 623' where from our attention was drawn
F to the following observations:-
"24. In many of these decisions the expressions "vested rights"
or "a.ccrued rights" have been used while striking down the
impugned provisions which had been given retrospective operation
so as to have an adverse effect in the matter of promotion, seniority.
G substantive appointment, etc., of the employees. The said
expressions have been used in the context of a right flowing under
the relevant rule which was sought to be altered with effect from
an anterior date and thereby taking away the benefits available
under the rule in force at that time. It has been held that such an
H amendment having retrospective operation which has the effect
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 903
[JAGDISH SINGH KHEHAR, J.]

of taking away a benefit already available to the employee under A
the existing rule is arbitrary. discriminatory and violative of the
rights guaranteed under Articles 14 and 16 of the Constitution.
We are unable to hold that these decisions are not in consonance
with the decisions in Roshan Lal Tandon, AIR 1967 SC 1889, B.S.
Yadav, AIR 1969 SC 118, and Raman Lal Keshav Lal Soni, (1983)
B
2 sec 33.
25. In these cases we are concerned with the pension payable to
the employees after their retirement. The respondents were no
longer in service on the date of issuance of the impugned
notifications. The amendments in the rules are not restricted in
their application in futuro. The amendments apply to employees c
who had already retired and were no longer in service on the date
the impugned notifications were issued.
26.In Deokinandan Prasad v. State ofBihar, (1971) 2 SCC 330,
decided by a_Constitution Bench it has been laid down: (SCC p.
343, para31) D

"31. ... pension is not to be treated as a bounty payable on
the sweet will and pleasure of the Government and that the
right to superannuation pension including its amount is
a valuable right vesting in a government servant." [p.
152] E

(emphasis supplied)
In that case the right to receive pension was treated as property
under Articles 31 (I) and 19( 1)( t) of the Constitution.
27. In D.S. Nakara v. Union ofindia, (1983) 1 SCC 305, this F
Court, after taking note of the decision in Deokinandan Prasad
(supra), has said: (SCC p. 323, paras 28 and 29)
"28. Pension to civil employees of the Government and the
defence personnel as administered in India appears to be a
compensation for service rendered in the past. However, as G
held in Dodge v. Board of Education, 302 US 74, 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
serves the purpose of helping the recipient meet the expenses
ofliving.
H
904 SUPREME COURT REPORTS [2016] 6 S.C.R.

A ***
29 .... Thus the pension payable to a government employee
is earned by rendering long and efficient service and
therefore can be said to be a deferred portion of the
compensation or for service rendered."
B *** *** ***
30. The respondents in these cases are employees who had retired
after 1-1-1973 and before 5-12-1988. As per Rule 2301 of the
Indian Railway Establishment Code they are entitled to have their
pension computed in accordance with Rule 2544 as it stood at the
c time of their retirement. At that time the said rule prescribed that
running allowance limited to a maximum of 75% of the other
emoluments should be taken into account for the purpose of
calculation of average emoluments for computation of pension
and other retiral benefits. The said right of the respondent-
D employees to have their pension computed on the basis of their
average emoluments being thus calculated is being taken away
by the amendments introduced in Rule 2544 by the impugned
notifications dated 5-12-1988 inasmuch as the maximum limit has
been reduced from 75% to 45% for the period from 1-1-1973 to
31-3-1979 and to 55% from 1-4-1979 onwards. As a result the
E amount of pension payable to the respondents in accordance with
the rules which were in force at the time of their retirement has
been reduced.
31. In Salabuddin Mohamed Yun us v. State of A.P., ( 1984) Supp
sec 399, the appellant was employed in the service of the former
F Indian State of Hyderabad prior to coming into force of the
Constitution oflndia. On coming into force of the Constitution the
appellant continued in the service of that State till he retired from
service on 21-1-1956. The appellant claimed that he was entitled
to be paid the salary of a High Court Judge from 1-10-194 7 and
G also claimed that he was entitled to receive pension ofRs.1000 a
month in the Government oflndia currency, being the maximum
pension admissible under the rules. The said claim of the appellant
was negatived by the Government. He filed a writ petition in the
High Court of Andhra Pradesh. During the pendency of the said
writ petition the relevant rule was amended by notification dated
H
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 905
[JAGDISH SINGH KHEHAR, J.]

3-2-1971 with retrospective effect from 1-10-1954 and the A
expression "Rs.1000 a month" in clause (b) of sub-rule (I) of
Rule 299 was substituted by the expression "Rs.857.15 a month".
This amendment was made in exercise of the power conferred
by the proviso to Article 309 read with Article 313 of the
Constitution. The said amendment was struck down by this Court
B
as invalid and inoperative on the ground that it was violative of
Articles 31 (1) and I 9(1 )(t) of the Constitution: Relying upon the
decision in Deokinandan Prasad (supra), it was held: (SCC p. 406,
para 6)
"6 .... The fundamental right to receive pension according
to the rules in force on the date of his retirement accrued to
c
the appellant when he retired from service. By making a
retrospective amendment to the said Rule 299(J)(b) more
than fifteen years after that right had accrued to him. what
was done was to take away.theappellant's right to receive
pension according to the rules in force on the date of his D
retirement or in any event to curtail and abridge that right.
To that extent. the said amendment was void."
32. It is no doubt true that on 5- I 2- I 988 when the impugned
notifications were issued, the rights guaranteed under Articles 31 (I)
and 19(J)(t) were not available since the said provisions in the E
Constitution stood omitted with effect from 20-6- I 979 by virtue
of the Constitution (Forty-fourth Amendment) Act, 1978. But
Notifications Nos. GSR I 143 (E) and GSR I 144 (E) have been
made operative with effect from I- 1-1973 and 1-4-1979
respectively on which dates the rights guaranteed under Articles
3 J(J) and I 9(1 )(0 were available. Both the notifications insofar F
as they have been given retrospective operation are. therefore.
violative of the rights then guaranteed under Articles I 9( I) and
3 I (I) of the Constitution.
33. Apart from being violative of the rights then available under
Articles 3 !(!) and I 9(1)(0, the impugned amendments. insofar G
as they have been given retrospective operation. are also violative
of the rights guaranteed under Articles 14 and 16 of the Constitution
on the ground that they are unreasonable and arbitrary since the
said amendments in Rule 2544 have the effect of reducing the
amount of pension that had become payable to employees who H
906 SUPREME COURT REPORTS [2016] 6 S.C.R.

A had already retired from service on the date of issuance of the
impugned notifications, as per the provisions contained in Rule
2544 that were in force at the time of their retirement."
Based on the above cited judgments, it was submitted, that the
determination rendered by the High Court in the impugned judgment,
B · that the respondent-employees acquired a vested right, the moment they
had subscribed to 'the 1999 Scheme', was unexceptionable.
31. Learned counsel for the respondent-employees also contested
the submission advanced on behalf of the appellants, that the right to
receive pension accrues to an employee, on the date on which he attains
c the age of superannuation, and not earlier. On the instant aspect of the
matter it was submitted, that even though pension can formally be claimed
by an employee only on his retirement, the seeds for a claim to pension
are sown, and the foundation for receipt of pension is laid, the very
moment from which an employee commences to render qualifying
service. It was submitted, that based on having acquired a minimum
D qualifying service postulated under the rules, an employee's claim
eventually crystalises for entitlement to pension, on attaining the age of
superannuation. It was contended, that since past service rendered by
• an employee, constitutes the basis for grant of pension, every day of
service rendered by an employee, has to be taken into consideration, for
E computing pension. It was accordingly urged, that every day of service
rendered by an employee, furthers the right in the employee to earn and
receive pension. For the aforesaid reasons, according to learned counsel,
pension has always been considered as deferred-wages for services
rendered. It was asserted, that with effect from the date of
commencement of qualifying service, the concerned employee is treated
F to have an inherent vested right, for a claim to pension. In order to
substantiate the instant contention, learned counsel placed reliance on
the D.S. Nakara case (supra), and invited our attention to the following
observations recorded therein:-
"46. By our approach, are we making the scheme retroactive?
G The answer is emphatically in the negative. Take a government
servant who retired on April 1, 1979. He would be governed by
the liberalised pension scheme. By that time he had put iil gualifring
service of35 years. His length of service is a, relevant factor for
computation of pension. Has the Government made it retroactive,
H 35 years backward compared to the case of a Government servant
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 907
[JAGDISH SINGH KHEHAR, J.]

who retired on 30th March, 1979? Concept of qualifying service A
takes note oflength of service. and pension quantum is correlated
to qualifying service. Is it retroactive for 35 years for one and not
retroactive for a person who retired two days earlier? It must be
remembered that pension is relatable to qualifying service. It has
correlation to the average emoluments and the length of service.
B
Any liberalisation would pro tanto be retroactive in the narrow
sense of the term. Otherwise it is always prospective. A statute is
not properly called a retroactive statute because a part of the
requisites for its action is drawn from a time antecedent to its
passing; (see Craies on Statute Law, sixth edition, p. 387). Assuming
the Government had not prescribed the specified date and thereby c
provided that those retiring pre and post the specified date would
all be governed by the liberalised pension scheme, undoubtedly, it
would be both prospective and retroactive. Only the pension will
have to be recomputed in the light of the formula enacted in the
liberalised pension scheme and effective from the date the revised
D
scheme comes into force. And beware that it is not a new scheme,
it is only a revision of existing scheme. It is not a new retiral
benefit. It is an upward revision of an existing benefit. If it was a
wholly new concept, a new retiral benefit. one could have
appreciated an argument that those who had already retired could
not expect it. It could have been urged that it is an incentive to E
attract the fresh recruits. Pension is a reward for past service. It
is undoubtedly a condition of service but not an incentive to attract
· new entrants because if it was to be available to new entrants
only, it would be prospective at such distance of thirty-five years
since its introduction. But it covers all those in service who entered
F
thirty-five years back. Pension is thus not an incentive but a reward
for past service. And a revision of an existing benefit stands on a
different footingthan a new retiral benefit. And even in case of
new retiral benefit of gratuity under the Payment of Gratuity Act,
1972 past service was taken into consideration. Recall at this stage
the method adopted when pay-scales are revised. Revised pay- G
scales are introduced from a certain date. All existing employees
are brought on to the revised scales by adopting a theory of fitments
and increments for past service. In other words, benefit of revised
scale is not limited to those who enter service subsequent to the
date fixed for introducing revised scales but the benefit is extended
H
908 SUPREME COURT REPORTS [2016) 6 S.C.R.

A to all those in service prior to that date. This is just and fair. Now
if pension as we view it. is some kind of retirement wages for
past service, can it be denied to those who retired earlier, revised
retirement benefits being available to future retirees only.
Therefore, there is no substance in the contention that the court
by its approach wou Id be making the scheme retroactive, because
B
it is implicit in theory of wages."
Based on the observations extracted above, it was submitted, that
it was not open to the State to contend, that a vested right would be
created under 'the 1999 Scheme', only on the date of retirement. Since
pension has been recognized as deferred-wages for past services,
c payable on retirement, according to learned counsel, the moment an
employee is enrolled on the pension scheme, his right to claim pension,
must be deemed to have materialized.
32. Relying on certain paragraphs of'the 1999 Scheme' (referred
to above), it was submitted, that the appellants have erroneously treated
D the date of retirement, as the date on which the right to pension accrued
to the employees. In this behalf it was pointed out, that the cause of
action to receive pension would accrue to an employee on the date of
his retirement. However, the right to receive pension crysta1ises, at the
end of every successive day, and at the end of every successive month,
E and at the end of every successive year. It was pointed out, that it
crystalises and further crystalises, giving rise to an eventual claim for
pension. It was accordingly pointed out, that the date of retirement had
been legally perceived, as the date on which the cause of action arose to
an employee to claim pension. Accordingly it was submitted, that the
date ofretirement was relevant only for the limited purpose of determining
F the cause of action, to receive pension. For this, learned counsel place
reliance on Asger Ibrahim Amin v. Life Insurance Corporation oflndia,
(2015) 10 SCALE 639, and invited our attention to the following
observations:-
"3. On 8.8.1995, that is post the promulgation by the Respondent
G of the Pension Rules, the Appellant enquired from the Respondent
whether he was entitled to pension under the Pension Rules, which
has been understood by the Respondent as a representation for
pension; the Respondent replied that the request of the Appellant
cannot be acceded to. The Appellant took the matter no further
H but has averred that in 2000, prompted by news in a Daily and
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 909
[JAGDISH SINGH KHEHAR, J.]

Judgments of a High Court and a Tribunal, he requested the A
Respondent to reconsider his case for pension. This request has
remained unanswered. It was in 2011 that he sent a legal notice
to the Respondent, in response to which the Respondent reiterated
its stand that the Appellant, having resigned from service, was not
eligible to claim pension under the Pension Rules. Eventually, the
8
Appellant filed a Special Civil Application on 29.3.2012 before
the High Court, which was dismissed by the Single Judge vide
Judgment dated 5.10.2012. The LPA of the Appellant also got
dismissed on the grounds of the delay of almost 14 years, as also
on merits vide Judgment dated 1.3.2013, against which the
Appellant has approached this Court. c
4. As regards the issue of delay in matters pertaining to claims of
pension, it has already been opined by this Court in Union oflndia
v. Tarsem Singh, (2008) 8 SCC 648, that in cases of continuing or
successive wrongs, delay and !aches or limitation will not thwart
the claim so long as the claim, if allowed, does not have any adverse D
repercussions on the settled third-party rights. This Court held:
"7. To summarise, normally, a belated service related claim
will be rejected on the ground of delay and !aches (where
remedy is sought by filing a writ petition) or limitation (where
remedy is sought by an application to the Administrative E
Tribunal). One of the exceptions to the said rule is cases
relating to a continuing wrong. Where a service related claim
is based on a continuing wrong. relief can be granted even if
there is a long delay in seeking remedy. with reference to
the date on which the continuing wrong commenced, if such
continuing wrong creates a continuing source of injury. But F
there is an exception to the exception. If the grievance is in
respect of any order or administrative decision which related
to or affected several others also, and ifthe reopening of the
issue would affect the settled rights of third parties, then the
claim will not be entertained. For example, if the issue relates G
to payment or refixation of pay or pension, relief may be
granted in spite of delay as it does not affect the rights of
third parties. But if the claim involved issues relating to
seniority or promotion. etc .. affecting others. delay would
render the claim stale and doctrine oflaches/limitation will
H
910 SUPREME COURT REPORTS [2016) 6 S.C.R.

A be applied. Insofar as the consequential relief ofrecovery of
arrears for a past period is concerned, the principles relating
to recurring/successive wrongs will apply.As a consequence,
the High Courts will restrict the consequential relief relating
to arrears normally to a period of three years prior to the
date of filing of the writ petition."
B
We respectfully concur with these observations which
if extrapolated or applied to the factual matrix of the present case
would have the effect of restricting the claim for pension, if
otherwise sustainable in law, to three years previous to when it
was raised in a judicial forum. Such claims recur month to month
c and would not stand extinguished on the application of the laws of
prescription. merely because the legal remedy pertaining to the
time barred part of it has become unavailable. This is too well
entrenched in our jurisprudence, foreclosing ai:iy fresh
consideration.
D Reliance was also placed on the decision of this Court in State of
Madhya Pradesh v. Yogendra Shrivastava, (2010) 12 SCC 538,
wherefrom learned counsel emphasized on the following observations:-
"17. The appellants contended that the claims were therefore
barred by limitation. It was pointed out that the respondents were
E paid NPA at a fixed rate as stipulated in the appointment orders
and NPA was increased only when it was revised by the
government orders from time to time; that the respondents
accepted such NPA without protest; and that therefore, they cannot,
after periods varying from 5 to I 5 years, challenge the fixation of
F NPA or contend that they are entitled to NPA at a higher rate,
that is 25% of their pay.
18. We cannot agree. Where the issue relates to payment or
fixation of salary or any allowance. the challenge is not barred by
limitation or the doctrine oflaches, as the denial of benefit occurs
G every month when the salary is paid. thereby giving rise to a fresh
cause of action, based on continuing wrong. Though the lesser
payment may be a consequence of the error that was committed
at the time of appointment, the claim for a higher allowance in
accordance with the Rules (prospectively from the date of
application) cannot be rejected merely because it arises from a
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 911
[JAGDISH SINGH KHEHAR, J.]

wrong fixation made several years prior to the claim for correct A
payment. But in respect of grant of consequential relief of recovery
of arrears for the past period, the principle relating to recurring
and successive wrongs would apply. Therefore the consequential
relief of payment of arrears will have to be restricted to a period
.of three years prior to the date of the original application.
B
[See: M.R. Gupta v. Union oflndia, 1995 (5) SCC 628, and Union
of India v. Tarsem Singh, 2008 (8) SCC 648]".
It was, therefore, the contention of learned counsel for the
respondents, that the foundation to claim pension, accrued in the
employees of all corporate bodies in the State of Himachal Pradesh
(including all the respondent-employees herein), the very moment they c
came to be enrolled in 'the 1999 Scheme'. It was submitted, that all
existing employees who had opted for pension or were deemed to have
opted for pension, had vested in themselves the rjght to pension when
they would retire from service. All employees who came to be engaged
by corporations in the State, from 1.4.1999 up to 1.12.2004, were likewise D
vested with the right to receive pension, because of the fact, that at the
very inception of their employment, they became members of 'the 1999
Scheme', and the period of service rendered by them would likewise
constitute qualifying service, for pension. It was therefore submitted,
that there was a clear distinction between two contingencies, firstly, the
date on which a claim for pension can be stated to have vested in the E
employee, and the date on which the employee earns a right to receive
pension. Insofar as the former is concerned, it was submitted, that the
moment qualifying service commences to add up, a vested right to receive
pension is created. For the latter, having rendered the postulated qualifying
service (on the date of superannuation), gives rise to a cause of action to F
receive pension. It is this fine distinction which according to learned
counsel, needs to be examined and has been overlooked during the course
of the submissions advanced on behalf of the appellant-State.
-=--~-

33. Insofar as the issue of financial unviability of 'the 1999
Scheme' is concerned, it was submitted on behalf of the respondent- G
employees, that the State Government was estopped in law, from raising
such a plea. In this behalf it was pointed out, that the Law Department
and the Finance Department of the State Government, had advised,
against the retrospective withdrawal of'the 1999 Scheme'. If the advice
had been accepted, according to learned counsel, persons similarly situated,
H
912 SUPREME COURT REPORTS [2016] 6 S.C.R.

A as the private respondents, would have remained entitled to receive
pension under 'the 1999 Scheme'. Additionally it was contended, that in
identical circumstances, the State Government had repealed the provisions
of the Central Civil Services (Pension) Rules, I 972, as were applicable
to State Government employees, through a similar notification, dated
I 5.5.2003. It was highlighted, that the aforesaid repeal notification, was
B
given a prospective effect, inasmuch as, employees similarly situated as
the respondent-employees herein, who had not retired on the date of the
repeal notification, were allowed to be governed by the Central Civil
Services (Pension) Rules, I972. At the cost of clarification, it was pointed
out, that the repeal notification dated 15.5.2003, had the effect of not
c depriving pensionary rights to any of the existing employees. Based on
the above contentions, it was submitted, that the action of the State
Government, in depriving the respondent-employees of their pensionary
rights, must be treated as based on an arbitrary exercise of power, and
as such, was liable to be considered as violative of Article 14 of the
Constitution of India.
D
34. It was also the contention oflearned counsel for the respondent-
employees, that pension was akin to the right of property, postulated
under article 300A ofthe Constitution. For the instant proposition, learned
counsel placed reliance on the decision rendered in State of Jharkhand
v. Jitendra Kumar Srivastava, (20 I3) 12 SCC 2 I0, and invited our attention
E to the following observations recorded therein:-
".8. It is an accepted position that gratuity and pension are not
bounties. An employee earns these benefits by dint of his long,
continuous, faithful and un-blemished service. Conceptually it is
so lucidly described in D.S. Nakara and Ors. v. Union of India,
F (1983) 1 SCC 305, by D.A. Desai, J., who spoke for the Bench,
in his inimitable style, in the following words: (SCC pp. 319-20,
paras I 8-20)
"I 8. The approach of the Respondents raises a vital and
none too easy of answer, question as to why pension is paid.
G And why was it required to be liberalised? Is the employer,
which expression will include even the State, bound to pay
pension? Is there any obligation on the employer to provide
for the erstwhile employee even after the contract of
employment has come to an end and the employee has
H ceased to render service?
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 913
[JAGDISH SINGH KHEHAR, J.]

19. What is a pension? What are the goals of pension? What A
public interest or purpose, if any, it seeks to serve? If it does
seek to serve some public purpose, is it thwarted by such
artificial division of retirement pre and post a certain date?
We need seek answer to these and incidental questions so
as to render just justice between parties to this petition.
B
20. The antiquated notion of pension being a bounty a
gratuitous payment depending upon the sweet will or grace
of the employer not claimable as a right and, therefore, no
right to pension can be enforced through Court has been
swept under the carpet by the decision of the Constitution
Bench in Deoki Nandan Prasad v. State of Bihar and Ors.,
c
( 1971) 2 SCC 330, wherein this Court authoritatively ruled
that pension is a right and the payment ofit does not depend
upon the discretion of the Government but is governed by
the rules and a Government servant comin_g within those rules
is entitled to claim pension. It was further held that the grant D
of pension does not depend upon anyone's discretion. It is
only for the purpose of quantifying the amount having regard
to service and other allied maters that it may be necessary
for the authority to pass an order to that effect but the right
to receive pension flows to the officer not because of any
such order but by virtue of the rules. This view was reaffirmed E
in State of Punjab andAnr. v. Iqbal Singh, (1976) 2 SCC l ".
It is thus hard earned benefit which accrues to an employee and
is in the nature of "property". This right to property cannot be
taken away without the due process of law as per the provisions
of Article 300A of the Constitution oflndia. F

xxx xxx xxx
13. A reading of Rule 43(b) makes it abundantly clear that even
after the conclusion of the departmental inquiry, it is permissible
for the Government to withhold pension etc. only when a finding G
is recorded either in departmental inquiry or judicial proceedings
that the employee had committed grave misconduct in the
discharge of his duty while in his office. There is no provision in
the rules for withholding of the pension/gratuity when such
departmental proceedings or judicial proceedings are still pending.
H
914 SUPREME COURT REPORTS [2016] 6 S.C.R.

A 14. The right to receive pension was recognized as a right to
property by the Constitution Bench jl.,ldgment of this Court in
Deokinandan Prasad v. State of Bihar, (1971) 2 SCC 330, as is
apparent from the following discussion: (SCC pp. 342-43, paras
27-33)
B "27. The last question to be considered, is, whether the right
to receive pension by a Government servant is property, so
as to attract Articles 19(1 )(f) and 31 (1) of the Constitution.
This question falls to be decided in order to consider whether
the writ petition is maintainable under Article 32. To this
aspect, we have already adverted to earlier and we now
c proceed to consider the same.
28. According to the Petitioner the right to receive pension
is property and the Respondents by an executive order dated
12-6-1968 have wrongfully withheld his pension. That order
affects his fundamental rights under Articles 19(1 )(t) and
D 31 (I) of the Constitution. The Respondents, as we have
already indicated, do not dispute the right of the Petitioner to
get pension, but for the order passed on 5-8-1996. There is
only a bald avennent in the counter-affidavit that no question
of any fundamental right arises for consideration. Mr. Jha,
E learned Counsel for the Respondents, was not prepared to
take up the position that the right to receive pension cannot
be considered to be property under any circumstances.
According to him, in this case, no order has been passed by
the State granting pension. We understood the learned
Counsel t<;> urge that ifthe State had passed an order granting
F pension and later on resiles from that order, the latter order
may be considered to affect the Petitioner's right regarding
property so as to attract Articles 19(1)(f) and 31(1) of the
Constitution.
29. We are not inclined to acceptthe contention of the learned
G Counse 1for the Respondents. By a reference to the material
provisions in the Pension Rules, we have already indicated
that the grant of pension does not depend upon an order
being passed by the authorities to that effect. It may be that
for the purposes of quantifying the amount having regard to
H the period of service and other allied matters, it may be
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 915
[JAGDISH SINGH KHEHAR, J.]

necessary for the authorities to pass an order to that effect, A
but the right to receive pension flows to an officer not because
of the said order but by virtue of the rules. The rules, we
have already pointed out, clearly recognise the right of persons
like the petitioners to receive pension under the circumstances
mentioned therein.
B
xxx xxx
xxx
33. Having due regard to the above decisions, we are of the
opinion that the right of the Petitioner to receive pension is
property under Article 31(1) and by a mere executive order c
the State had no power to withhold the same. Similarly, the
said claim is also property under Article I 9( I l(f) and it is not
saved by clause (5) of Article 19. Therefore, it follows that
the order dated 12-6-1968, denying the petitioner right to
receive pension affects the fundamental right of the petitioner
under Articles 19( I )(t) and 31 (I) of the Constitution, and as D
such the writ petition under Article 32 is maintainable. It may
be that under the Pension Act (23 of I 871) there is a bar
against a civil court entertaining any suit relating to the matters
mentioned therein. That does not stand in the way of writ of
mandamus being issued to the State to properly consider the E
claim of the petitioner for payment of pension according to
law."
I 6. The fact remains that there is an imprimatur to the legal principle
that the right to receive pension is recognized as a right in
"property". Article 300-A of the Constitution of India reads as F
under:
"300-A. Persons not to be deprived of property save by
authority oflaw.- No person shall be deprived of his property
save by authority of law."
Once we proceed on that premise, the answer to the question G
posed by us in the beginning of this judgment becomes too obvious.
A person cannot be deprived of th is pension without the authority
oflaw, which is the Constitutional mandate enshrined in Article 300-
A of the Constitution. It follows that attempt of the Appellant to
take away a part of pension or gratuity or even leave encashment
H
916 SUPREME COURT REPORTS [2016] 6 S.C.R.

A without any statutory provision and under the umbrage of
administrative instruction cannot be countenanced."
For the same proposition, reliance was placed on the decision of
this Court in the U.P. Raghavendra Acharya case (supra).
Learned counsel while seeking to adopt the conclusions drawn by
B this Court in the above case asserted, that the subscription to the
pensionary scheme by itself, would create a vested right in the
respondent-employees, to draw pension under 'the 1999 Scheme'.
35. At this juncture, learned counsel for the respondent-employees
also placed reliance on the U.P. Raghavendra Acharya case (supra),
c and invited the Court's attention to the following:-
"19. The fact that the appellants herein were treated to be on a
par with the holders of similar posts in government colleges is
neither denied nor disputed. The appellants indisputably are
governed by the UGC scales of pay. They are entitled to the
D pensionary benefits also. They had been given the benefits of the
revision of scales of pay by the I Q•h Pay Revision Committee
w.e.f. 1-1-1986. The pensionary benefits payable to them on
attaining the age of superannuation or death were also stated to
be on a par with the employees of the State Government. The
State of Karnataka, as noticed hereinbefore, for all intent and
E purport, has treated the teachers of the government aided colleges
and the regional engineering colleges on the one hand and the
teachers of the colleges run by the State itself on the other hand
on a par. Even the financial rules were made applicable to them in
terms of the notifications, applying the rule of incorporation by
F reference. Although Rule 296 of the Rules per se may not be
applicable so far as the appellants are concerned, it now stands
admitted that the provisions thereof have been applied to the case
of the appellants also forthe purpose of computation of pensionary
benefits. Therefore there cannot be any doubt whatsoever that
the term "Emoluments" as contained in Rule 296 of the Rules
G would also apply to the case of the appellants. Rule 296 of the
Rules reads as under:
"296. In respect of retirement or death while in service of
government servants on or after first day of July, 1993, the
term 'emoluments' for the purpose of this Chapter means,
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 917
[JAGDISH SINGH KHEHAR, J.]

the basic pay drawn by the government servant in the scale A
of pay applicable to the post on the date of retirement or
death and includes the following, but does not include pay
and allowance drawn from a source other than the
Consolidated Fund of the State,-
xxx xxx xxx B
Note:- (a) Basic pay means the pay drawn in ·the time-scale
of pay applicable to the post immediately before retirement
or death."
xxx xxx xxx
22. The State while implementing the new scheme for payment c
of grant of pensionary benefits to its employees, may deny the
same to a class of retired employees who were governed by a
different set of rules. The extension of the benefits can also be
denied to a class of employees ifthe same is permissible in law.
The case of the appellants, however, stands absolutely on a
different footing. They had been enjoying the benefit of the revised D
scales of pay. Recommendations have been made by the Central
Government as also the University Grants Commission to the State
of Karnataka to extend the benefits of the Pay Revision
Committee in their favour. The pay in their case had been revised
in 1986 whereas the pay of the employees of the State of E
Karnataka was revised in 1993. The benefits of the
recommendations of the Pay Revision Committee w.e.f. 1-1-1996,
thus, could not have been denied to the appellants.
23. The stand of the State of Kamataka that the pensionary
benefits had been conferred on the appellants w.e.f. 1-4-1998 on F
the premise that the benefit of the revision of scales of pay to its
own employees had been conferred from 1-1-1998, in our opinion,
is wholly misconceived. Firstly, because the employees of the State
of Karnataka and the appellants, in the matter of grant of benefit
of revised scales of pay, do not stand on the same footing as
revised scales of pay had been made applicable to their cases G
from a different date. Secondly, the appellant~ had been given the
benefit of the revised scales of pay w.e.f. 1-1-1996. It is now well
settled that a notification can be issued by the State accepting the
recommendations of the Pay Revision Committee with
retrospective effect as it was beneficent to the employees. Once H
918 SUPREME COURT REPORTS [2016] 6 S.C.R.

A such a retrospective effect is given to the recommendations of
the Pay Revision Committee, the employees concerned despite
their reaching the age of superannuation in between the said dates
and/or the date of issuance of the notification would be deemed
to be getting the said scales of pay as on 1-1-1996. By reason of
such notification, as the appellants had been derived of a vested
B
right, they could not have been deprived therefrom and that too
by reason of executive instructions.
24. The contention of the State that the matter relating to the
grant of pensionary benefits vis-a-vis the revision in the scales of
pay stands on different footing, thus, must be rejected.
c
25. Pension, as is well known, is not a bounty. It is treated to be a
deferred salary. It is akin to right of property. It is co-related and
has a nexus with the salary payable to the employees as on the
date of retirement.

D 26. These appeals involve the question of revision of pay and
consequent revision in pension and not the grant of pension for
the first time. Only the modality of computing the quantum of
pension was required to be determined in tenns of the notification
issued by the State of Karnataka. For the said purpose, Rule 296
of the Rules was made applicable. Once this rule became
E applicable, indisputably the computation of pensionary benefits
was required to be carried out in terms thereof. The Pension Rules
envisage that pension should be calculated only on the basis of
the emoluments last drawn. No order. therefore, could be issued
which would be contrary to or inconsistent therewith. Such
F emoluments were to be reckoned only in tenns of the statutory
rules. If the State had taken a conscious decision to extend the
, benefit of the UGC pay scales w.e.f. 1-1-1996, to the appellants,
al lowing them to draw their pay and allowances in terms thereof,
~~fail to see any reas911 as to why the pensionary benefits would
not be extended to them from the said date.
G
xxx xxx xxx
28. The impugned order furthermore is opposed to the basic
principles of law inasmuch as by reason of executive instructions
an employee cannot be deprived of a vested or accrued right.
Such a riglat to draw pension to the extent of 50% of the
H
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 919
[JAGDJSH SINGH KHEHAR, J.]

emoluments, computed in terms ofthe rules, w.e.f. 1-1-1996, vested A
in the appellants in terms of government notification read with
Rule 296 of the Rules."
36. It was also the contention ofleamed counsel for the respondent-
empbyees, that the present controversy needs to be examined from the
perspective, that the respondent-employees did not make any endeavour B
to claim pension as a matter of parity with Government employees, in
the State of Himachal Pradesh. It was submitted, that legally such a
claim would not be sustainable, because civil servants in the State of
Himachal Pradesh, and employees of Government owned corporations
in the State, can not be considered as entitled to the same monetary
benefits. It was however pointed out, that insofar as the present c
controversy is concerned, the State ofHimachal Pradesh at its own, had
granted parity to employees of Government owned corporations on the
subject of pension, with Government employees in the State. Examined
in the above context, according to learned counsel, it is apparent that the
right of employees of Government owned corporations, in the State of D
Himachal Pradesh, on the issue of pension, stood conceded in their favour,
on tl>e basis of 'the 1999 Scheme'. It was in the above view of the
matter, that learned counsel for the respondent-employees asserted, that
the revocation of a benefit which the State Government conceded to
employees of Government owned corporations, was per se arbitrary,
and as such, not sustainable in law. E

37. Learned counsel for the respondent-employees raised a plea
of discrimination as well. It was submitted, that through the repeal
notification dated 2.12.2004, 'the 1999 Scheme' was sought to be
withdrawn for one set of employees, and was sought to be retained for
another set of employees. In this behalf it was submitted, that the action F
of the State Government in fixing the date of retirement, as a cut-off
date for withdrawing or sustaining pensionary benefits, is clearly
unacceptable in law. In this behalf it was pointed out, that this Court on
a number of occasions held, that the date of retirement, cannot be a
valicf'criterion for classification. It was submitted, that the fortuitous G
circumstance (date) of retirement, by a day earlier or a day later (than
the cut-off date), would result in discriminatory consequences, for persons
who constitute a homogenous class. It was contended, that whilst 'the
1999 Scheme' was in operation, all employees of State owned
corporations who had opted for the same, constituted a homogenous
H
920 SUPREME COURT REPORTS (2016] 6 S.C.R.

A class, and there could be no division to segregate such a homogenous
class, so as to extend pensionary benefits to one set of employees, and
to revoke the same, for another. In order to support the above contention,
learned counsel for the respondents placed reliance on the D.S. Nakara
case (supra) and drew our attention to the following observations
recorded therein:-
B
"42. If it appears to be undisputable, as it does to us that the
pensioners for the purpose of pension benefits form a class, would
its upward revision permit a homogeneous class to be divided by
arbitrarily fixing an eligibility criteria unrelated to purpose of
revision, and would such classification be founded on some rational
c principle? The classification has to be based, as is well settled, on
some rational principle and the rational principle must have nexus
to the objects sought to be achieved. We have set out the objects
underlying the payment of pension. If the State considered it
necessary to liberalise the pension scheme, we find no rational
D principle behind it for granting these benefits only to those who
retired subsequent to that date simultaneously denying the same
to those who retired prior to that date. If the liberalisation was
considered necessary for augmenting social security in old age to
government servants then those who retired earlier cannot be
worst off than those who retire later. Therefore, this division which
E classified pensioners into two classes is not based on any rational
principle and ifthe rational principle is the one of dividing pensioners
with a view to giving something more to persons otherwise equally
placed, it would be discriminatory. To illustrate, take two persons,
one retired just a day prior and another a day just succeeding the
F specified date. Both were in the same pay bracket, the average
emolument was the same and both had put in equal number of
years of service. How does a fortuitous circumstance of retiring
a day earlier or a day later will permit totally unequal treatment in
the matter of pension? One retiring a day earlier wi II have to be
subject to ceiling of Rs.8100 p.a. And average emolument to be
G worked out on 36 months' salary while the other will have a ceiling
of Rs.12,000 p.a. and average emolument wi II be computed on
the basis of last ten months' average. The artificial division stares
into face and is unrelated to any principle and whatever principle,
ifthere be any, has absolutely no nexus to the objects sought to be
H
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 921
[JAGDISH SINGH KHEHAR, J.]

achieved by liberalising the pension scheme. In fact this arbitrary A
division has not only no nexus to the liberalised pension scheme
but it is counter productive and runs counter to the whole gamut
of pension scheme. The equal treatment guaranteed in Article 14 is
wholly violated inasmuch as the pension rules being statutory in
character, since the specified date, the rules accord differential
B
and discriminatory treatment to equals in the matter of commutation
of pension. A 48 hours' difference in matter ofretirement would
have a traumatic effect. Division is thus both arbitrary and
unprincipled. Therefore the classification does not stand the test
of Article 14."
On the same proposition, reliance was placed on Union oflndia v. c
SPS Vains (Retd.), (2008) 9 SCC 125, and the Court's attention was
invited to the following observations:-
"28. The question regarding creation of different classes within
the same cadre on the basis of the doctrine of intelligible differentia
having nexus with the object to be achieved, has fallen for D
consideration at various intervals for the High Courts as well as
this Court, over the years. The said question was taken up by a
Constitution Bench in the case of D.S. Nakara v. Union oflndia,
(1983) 1 SCC 305, where in no uncertain terms throughout the
judgment it has been repeatedly observed that the date of E
retirement of an employee cannot form a valid criterion for
classification, for ifthat is the criterion those who retired by the
end of the month will form a class by themselves. In the context
of that case, which is similar to that of the instant case, it was held
that Article 14 of the Constitution had been wholly violated,
inasmuch as, the Pension Rules being statutory in character, the F
amended Rules, specifying a cut-off date resulted in differential
and discriminatory treatment of equals in the matter of commutation
of pension. It was further observed that it would have a traumatic
effect on those who retired just before that date. The division
which classified pensioners into two classes was held to be artificial G
and arbitrary and not based on any rational principle and whatever
principle, if there was any, had not only no nexus to the objects
sought to be achieved by amending the Pension Rules, but was
counterproductive and ran counter to the very object of the pension
schen;ie. It was ultimately held that the classification did not satisfy
H
922 SUPREME COURT REPORTS [2016] 6 S.C.R.

A the test ofArticle 14 of the Constitution.
29. The Constitution Bench (in D.S. Nakara (supra)), has
discussed in detail the objects of granting pension and we need
not, therefore, dilate any further on the said subject, but the decision
in the aforesaid case has been consistently referred to in various
B subsequent judgments of this Court, to which we need not refer.
In fact, all the relevant judgments delivered on the subject prior to
the decision of the Constitution Bench have been considered and
dealt with in detail in the aforesaid case. The directions ultimately
given by the Constitution Bench in the said case in order to resolve
the dispute which had arisen, is ofrelevance to resolve the dispute
c in this case also.
30. However, before we give such directions we must also observe
that the submissions advanced on behalf of the Union of India
cannot be accepted in view of the decision in D.S. Nakara's case
(supra). The object sought to be achieved was not to create a
D class within a class, but to ensure that the benefits of pension
were made available to all persons of the same class equally. To
hold otherwise would cause violence to the provisions of Article
14 of the Constitution. It could not also have been the intention of
the authorities to equate the pension payable to officers of two
E different ranks by resorting to the step up principle envisaged in
the fundamental rules in a manner where the other officers
belonging to the same cadre would be receiving a higher pension."
38. It was therefore asserted on behalf of the respondent-
employees, that the concept of a cut-off date cannot be adopted, in case
F of a repeal of a pension scheme prospectively. In this behalf it was
submitted, that it could not be forgotten, that consequent upon the
respondent-employees having been enrolled in 'the 1999 Scheme', they
had been deprived of the employer's share of provident fund (and the
interest which had accrued, thereon). The same ought to be treated as
consideration, which passed from the respondent-employees to the State
G Government, consequent upon their enrollment into 'the 1999 Scheme'.
On account of having foregone the employer's contribution which was
a pre-requisite for enrollment in 'the 1999 Scheme', it was submitted,
that the respondent-employees must be deemed to have contributed by
way of consideration, to earn the benefit which would accrue to them,
H under 'the 1999 Scheme'. Keeping the above legal proposition in mind,
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 923
[JAGDISH SJNGH KHEHAR, J.]

it was pointed out, that the action of the State Government in depriving A
the respondent-employees of pensionary benefits, while allowing the same
to such of the employees, who had retired on or before 2.12.2004, was
discriminatory and unsustainable in law. It was also the contention of
learned counsel for the respondent-employees, that the only situation
where a claim for pension under 'the 1999 Scheme' could have been
B
legaliy denied, is when a succeeding pension scheme introduced by the
employer, postulated better retiral benefits.
39. Reliance was also placed on Pepsu Road Transport
Corporation, Patiala v. Mangal Singh, (2011) 11 SCC 702, wherein it has
been held as under:-
c
"48. The concept of"pension" has also been considered in Corpus
Juris Secundum, Vol. 70, at p. 423 as thus:
"A pension is a periodical allowance of money granted by
the government in consideration or recognition of meritorious
past services, or of loss or injury sustained in the public D
service. A pension is mainly designed to assist the pensioner
in providing for his daily wants, and it presupposes the
continued life of the recipient."
Based on the above, it was the contention oflearned counsel, that
the State Governments' inference, based on the report of the Committee, E
dated 15.11.2003, that 'the 1999 Scheme' was not viable, was clearly
unacceptable. In this behalf, learned counsel invited the Court's attention
to the following observations, recorded in the said report:-
"14. After determining the magnitude of inflows and outflows, the
sustainability of the corpus has been analysed assuming average F
interest income from corpus investment at various levels ofinterest
over a period of I 0 years. The highest rate of interest has been
assumed to be 6.5% and the lowest 5.5%. In each scenario, the
net surplus available for ploughing back into the pension fund starts
declining from the 6th year onwards. This is essentially due to the
fact that with dwindling fresh recruitments, the pension liabilities G
will continue to increase over the years, but the inflows would
decline due to reduced contributions. Details of the calculations
are as under:-
5.5% Annexure-F
H
924 SUPREME COURT REPORTS [2016] 6 S.C.R.

A 5.75% Annexure-F-1
6.00% Annexure-F-Il
6.25% Annexure-F-111
6.50% Annexure-F-IV"
B It was submitted, that there was no legitimate basis for recording
such a conclusion.
40. It was also the contention oflearned counsel, that the judgment
rendered by the High Court, rightly negated the financial impact of 'the
1999 Scheme', because in terms of the conclusions drawn in the judgment,
c the same would not be applicable to future employees. And the deficiency
in the financial resources was accordingly fastened on the State
Government. On the issue in hand, it was submitted, that a number of
employees, who became members of 'the 1999 Scheme', and would
retire after 2.12.2004 (i.e. the cut-off date, determined under the repeal
D notification, dated 2.12.2004) is a definite number. In this behalf it was
pointed out, that if the employees, who became members of 'the 1999
Scheme', are to be taken into consideration, there would be 6,730
employees, who would draw pension on their retirement. It was
accordingly submitted, that there would be no further increase in the
liability under 'the 1999 Scheme'. In order to demonstrate that the
E available funds accumulated on account of the employee's contribution
to the EPF/CPF concerned, were sufficient to meet the liability, to
administer the pension scheme, it was submitted, that the same has
increased from 56 crores in 2003 to 253 crores in 2015. It was pointed
out, that the aforesaid figures emerged, despite the withdrawal of provident
F fund amounts, by a number of employees. It was, therefore submitted,
that payment of pensionary benefits to 6, 730 employees, was well within
the financial reach of the State Government, and that, the decision of the
State Government to issue the repeal notification, on the ground that
'the 1999 Scheme' was not financially viable, was not acceptable.
41. It was also the contention oflearned counsel for the respondent-
G
employees, that all the State owned corporations were fully controlled
by the Government. All shares in the corporations were held by the
State Government. The management of all the corporations, was also
under the direct control and supervision of the Government. Accordingly
it was submitted, that the ultimate authority in determining the conditions
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 925
[JAGDISH SINGH KHEHAR, J.]

of service of the concerned corporations, was vested with the A
Government. In this behalf, reliance was placed on Articles 51 and 52
of Articles of Association of the Himachal Pradesh State Forest
Development Corporation Limited. It was highlighted that similar Articles
ofAssociation governed the other corporations, as well. It was therefore
submitted, that the State Government, had no business, to withdraw itself,
B
from its responsibility and commitment.
42. It was, therefore submitted, that the Government has
consistently been extending the benefit of similar conditions of service,
to employees of Government owned corporations, as are available to
Government employees in the State. The Government having taken a
conscious decision to extend pensionary benefits to all employees of
c
Government owned corporations, under 'the 1999 Scheme', is clearly
precluded from withdrawing the same, specially on account of the fact,
that the corporations under consideration, are instrumentalities of the
State in terms of Article 12 of the Constitution oflndia. According to
learned counsel, 'the 1999 Scheme' was liable to be treated as a welfare D
measure, extended by the State Government to all employees, and
therefore, it should not shirk its responsibility, to fulfill any financial
deficiency therein, out of the Government treasury. In the above view
of the matter it was submitted, that the impugned judgment rendered by
the High Court, deserved no interference. ·
E
43. It was also asserted, that even if it was assumed, that the
report of the committee, dated 15.11.2003, with reference to the status
of the corpus fund, is correct, still the same is liable to be rejected because
the committee had sought views of 17 corporations/boards covered by
'the 1999 Scheme', however, it received views of 7 corporations only,
namely, Himachal Pradesh Agro Industries Corporation, Himachal F
Pradesh Tourism Development Corporation, Himachal Pradesh State
Industrial Development Corporation. Himachal Pradesh Horticultural
Produce Marketing and Processing Corporation Ltd., Himachal Pradesh
Housing Board, 1-limachal Pradesh State Forest Development
Corporation Ltd., and Himachal Pradesh SC & ST Development G
Corporation. The above corporations had expressed the opinion, that a
unified trust for pension with financial support of the State Government,
could salvage the financial position, to enable the corpus fund to cater to
payment of pension to employees under 'the 1999 Scheme'. It was
therefore the contention of learned counsel for the respondents, that
H
926 SUPREME COURT REPORTS [2016] 6 S.C.R.

A credence should not be given to the proposition propounded at the hands
of the State Government, that 'the 1999 Scheme' was not financially
viable.
44. In order to controvert the submissions advanced at the hands
ofleamed counsel for the respondent-employees, Mr. P.P. Rao, learned
B senior counsel emphatically pointed out, that all the judgments relied
upon by the respondents were inapplicable to the present controversy.
It was submitted, that the judgments relied upon, did not deal with the
rights of serving employees. It was pointed out, that a clear enunciation
in this behalf was recorded by this Court, that the prayers raised at the
hands of the respondent-employees, could only relate to superannuated
c personnel. For the above, learned counsel invited our attention to the
Chairman, Railway Board case (supra), wherefrom the following
observations were relied upon:-
"20. It can, therefore, be said that a rule which operates in futuro
so as to govern future rights of those already in service cannot be
D assailed on the ground of retroactivity as being violative of
Articles 14 and 16 of the Constitution, but a rule which seeks to
reverse from an anterior date a benefit which has been granted
or availed of, e.g., promotion or pay scale, can be assailed as
being violative of Articles 14 and 16 of the Constitution to the
E extent it operates retrospectively.
xxx xxx xxx
25. In these cases we are concerned with the pension payable to
the employees after their retirement. The respondents were no
longer in service on the date of issuance of the impugned
F notifications. The amendments in the rules are not restricted in
their application in futuro. The amendments applv to employees
who had already retired and were no longer in service on the date
the impugned notifications were issued.
xxx xxx xxx
G
30. The respondents in these cases are employees who had retired
after 1-1-1973 and before 5-12-1988. As per Rule 2301 of the
Indian Railway Establishment Code they are entitled to have their
pension computed in accordance with Rule 2544 as it stood at the
time of their retirement. At that time the said rule prescribed that
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 927
[JAGDISH SINGH KHEHAR, J.]

Running Allowance limited to a maximum of 75% of the other A
emoluments should be taken into account for the purpose of
calculation of average emoluments for computation of pension
and other retiral benefits. The said right of the respondent-
employees to have their pension computed on the basis of their
average emoluments being thus calculated is being taken away
B
by the amendments introduced in Rule 2544 by the impugned
notifications dated 5-12-1988 inasmuch as the maximum limit has
been reduced from 75% to 45% for the period from 1-1-1973 to
31-3-1979 and to 55% from 1-4-1979 onwards. As a result the
amount of pension payable to the respondents in accordance with
the rules which were in force at the time of their retirement has c
been reduced.
xxx xxx xxx
33. Apart from being violative of the rights then available under
Articles 31 (I) and 19( I )(f), the impugned amendments, insofar as
they have been given retrospective operation, are also violative of D
the rights guaranteed under Articles 14 and 16 of the Constitution
on the ground that they are unreasonable and arbitrary since the
said amendments in Rule 2544 have the effect of reducing the
amount of pension that had become payable to employees who
had already retired from service on the date of issuance of the E
impugned notifications, as per the provisions contained in Rule
2544 that were in force at the time of their retirement.
34. The learned Additional Solicitor General has, however,
submitted that the impugned amendments cannot be regarded as
arbitrary for the reason that by the reduction of the maximum F
limit in respect of Running Allowance from 75% to 45% for the
period 1-1-1973 to 31-3-1974 and to 55% from 1-4-1979 onwards,
the total amount of pension payable to the employees has not
been reduced. The submission of the learned Additional Solicitor
General is that since the pay scales had been revised under the
1973 Rules with effect from 1-1-1973, the maximum limit of 45% G
or 55% of the Running Allowance will have to be calculated on
the basis of the revised pay scales while earlier the maximum
limit of 75% of Running Allowance was being calculated on the
basis of unrevised pay scales and, therefore, it cannot be said that
there has been any reduction in the amount of pension payable to H
928 SUPREME COURT REPORTS [2016] 6 S.C.R.

A the respondents as a result of the impugned amendments in Rule
2544 and it cannot be said that their rights have been prejudicially
affected in any manner. We are unable to agree. As indicated
earlier, Rule 2301 of the Indian Railway Establishment Code
prescribes in express terms that a pensionable railway servant's
claim to pension is regulated by the rules in force at the time
B
when he resigns or is discharged from the service of Government.
The respondents who retired after 1-1-1973 but before 5-12-1988
were, therefore, entitled to have their pension computed on the
basis of Rule 2544 as it stood on the date of their retirement.
Under Rule 2544, as it stood prior to amendment by the impugned
c notifications, pension was required to be computed by taking into
account the revised pay scales as per the 1973 Rules and the
average emoluments were required to be calculated on the basis
of the maximum limit of Run11ing Allowance at 75% of the other
emoluments. including the pay as per the revised pay scales under
the 1973 Rules. Merely because the respondents were not paid
D
their pension on that basis in view of the orders of the Railway
Board dated 21-1-1974, 22-3-1976 and 23-6-1976, would not mean
that the pension payable to them was not required to be computed
ir. accordance with Rule 2544 as it stood on the date of their
retirement. Once it is held that pension payable to such employees
E had to be computed in accordance with Rule 2544 as it stood on
the date of their retirement, it is obvious that as a result of the
amendments which have been introduced in Rule 2544 by the
impugned notifications dated 5-12-1988 the pension that would be
payable would be less than the amount that would have been
p:;yable as per Rule 2544 as it stood on the date of retirement.
F
The Full Bench of the Tribunal has, in our opinion, rightly taken
the view that the amendments that were made in Rule 2544 by
the impugned notifications dated 5-12-1988, to the extent the said
amendments have been given retrospective effect so as to reduce
the maximum limit from 75% to 45% in respect of the period
G from 1-1-1973 to 31-3-1979 and reduce it to 55% in respect of
the period from 1-4-1979, are unreasonable and arbitrary and are
violative of the rights guaranteed under Articles 14 and 16 of the
Constitution."
For the same proposition, reliance was placed on the U .P.
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 929
[JAGDISH SINGH KHEHAR, J.]

Raghavendra Acharya case (supra), wherefrom our attention was A
drawn to the following observations:-
"2. The appellants in these appeals are retired teachers of the
University and Private Aided Colleges (to whom UGC scales of
pay were applicable). They have retired during the period 1.1.1996
to 31.3.1998. So far as the teachers of the University or Privates B
.Aided Colleges are concerned, indisputably, they were being paid
the same salary as was being paid to the teachers of the
Government colleges. The appellants in Civil Appeal No. 1391/
2006, have retired from the Karnataka Regional Engineering
College, Surathkal, Karnataka, which was established by the
Government of India at the request of the Government of
c
Karnataka. It is a Centrally aided institution as envisaged under
Entry 64 of List 1 of the Seventh Schedule to the Constitution of
India. So far as the said institution is concerned, its expenditure
used to be borne by the Government of India and the State of
Karnataka. It, however, has been notified by the Government of D
India as a Deemed University with effect from 26.6.2002.
xxx xxx xxx
31. The appellants had retired from service. The State therefore
could not have amended the statutory rules adversely affecting
their pension with retrospective effect." E

45. A different projection was sought to be made by Mr. R.
Venkataramani, learned senior counsel, who also represented the
appellants. Learned counsel, placed reliance on State ofAssam v. Barak
Upatyaka D.U. Karmachari Sanstha, (2009) 5 SCC 694, and drew our
attention to the following:- F
"2. By that order the Division Bench upheld the order dated
23.12.1999 of the learned Single Judge in Civil Rule No. 2996/
1995 allowing the respondent's writ petition and directing the state
government to sanction financial assistance by way of grant-in-
aid to Cachar and Karimganj District Milk Producers' Cooperative G
Union Limited ("CAMUL", for short) so as to enable CAMUL to
make regular payment of monthly salaries, allowances as also the
arrears to its employees. ·
xxx xx.x xxx
H
930 SUPREME COURT REPORTS [2016] 6 S.C.R.

A 4. It is contended that the State Government had all-pervasive
control over the affairs and management of CAM UL and
therefore it should be treated as a department of the Government
of Assam, though registered as a co-operative society by lifting
the corporate veil. It was further contended that State Government
was responsible and Iiable to pay the salaries and emoluments of
B
the employees ofCAMUL and it was not justified in withholding
the grant amount.
5. The respondent Union therefore sought a direction to the State
Government to release the arrears of pay and allowances of
employees ofCAMUL with effect from December 1994 and for
c a direction to continue to pay the salary and allowances to the
employees ofCAMUL, every month in future. In addition to the
state government (Respondent 1) and its officers (Respondents 2
to 4), the Union of India (Respondent 5) and CAMUL and its
Managing Director (Respondents 6 and 7) were impleaded as
D parties to the writ petition.
6. The State Government opposed the petition. It inter-
alia contended that the grant-in-aid was extended for helping
CAMUL in its different development activities; that under a
Centrally sponsored scheme, between 1981 to I986, the eannarked
E amount was released on 50:50 basis by the Central and State
Government with 70% loan component and 30% as grant
component; that though the loan component was not repaid by
CAMUL, the State Government continued the grant-in-aid for
p11rposes of development activities; that the State Government
had also provided Rs.43.60 lakhs for developing the milk-
F p1 ocessing infrastructure of CAMUL; that despite such assistance,
CAMUL became defunct and stopped all its activities and
thereafter the Silchar Town Milk Supply Project was being run by
the State's Dairy Development Department itself; that at no time,
the State Government made any commitment or agreed to bear
G the salaries of employees ofCAMUL or any other similar societies;
that CAMUL had to generate its own funds and resources to pay
the salaries of its staff; and that as there was no relationship of
employer and employee between the State Government and the
employees ofCAMUL, it was not responsible to bear or pay any
amount towards the salaries of the employees ofCAMUL.
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 931
[JAGDISH SINGH KHEHAR, J.]

7. The learned Single Judge allowed the writ petition. He held A
that the State Government through its Veterinary Department
undertook the Integrated Cattle Development Projects (ICDP) in
various districts of Assam; and as a part of the said project, an
ICDP block was created at Ghungoor, Silchar in Cachar district;
that 32 cooperative societies of Milk Producers were established
B
and CAMUL was formed as an Apex Body of those co-operative
societies; that the Dairy Development Department of the State
Government had been providing grant-in-aid earmarked in the
State budget every year to CAMUL; that the State Government
failed to offer any explanation or reason for stopping the grant-in-
aid from 1994: that the Dairy Development Project at Silchar c
was purely a State Government scheme and as that Project has
not been discontinued and as there was no decision to bar CAM UL
from receiving grant-in-aid which was being granted from 1982-
. 83 till 1994, the State Government could not deny the grant-in-aid
amount. Consequently. the learned Single Judge directed release
of the grand-in-aid for paying monthly salaries and allowances
D
along with arrears to the employees.
xxx xxx xxx
10. CAMUL indisputably is a co-operative society registered under
the provisions of the Assam Cooperative Societies Act, 1949. E
Section 85 of the said Act provides that every registered society
shall be deemed to be a body corporate by the name under which
it is registered, with perpetual succession and a common seal, and
with power to hold property, to enter into contracts, institute and
defend suits and other legal proceedings and to do all things
necessary for the purposes for which it was con.;tituted. F
11. Therefore, CAMUL. even if it was "State" for purposes of
Article 12, was an independent juristic entity and could not have
been identified with or treated as the State Government. In the
view we have taken, it is not necessary in this case to examine
whether CAMUL was "State" for purposes of Article 12. G

xxx xxx xxx
14. The respondent has not been able to show any right in the
employees of CAMUL against the State Government. or any
obligation on the part of the State Government with reference to
932 SUPREME COURT REPORTS [2016] 6 S.C.R.

A the salaries/emoluments of employees of CAM UL either under
any statute or contract or otherwise.
15. The learned Counsel for the respondent contended that the
same issue arose for consideration in Kapila Hingorani (I) v. State
of Bihar, (2003) 6 SCC 1 (for short "Kapila Hingorani (I)") and
B the issue has been answered in their favour. Reference is invited
to the following question, which was set down as one of the
questions arising for consideration in that case: (SCC p.17, para
20)
"2. Whether having regard to the admitted position that the
c government companies or corporations referred to
hereinbefore are "State" within the meaning of Article 12 of
the Constitution oflndia, the State ofBihar having deep and
pervasive control over the affairs thereof, can be held to be
liable to render all assistance to the said companies so as to
fulfill its own and/or the corporations' obligations to comply
D with the citizens' rights under Articles 21 and 23 of the
Constitution oflndia?"
16. Reference is also invited to the following observations of this
Court in considering the said questiOn (Kapila Hingorani (I), SCC,
pp. 20-21, paras 30-31 & 33-34):
E
"30. The government companies/public sector undertakings
being 'State' would be constitutionally liable to respect life
and liberty of all persons in terms of Article 21 of the
Constitution oflndia. They, therefore, must do so in cases of
their own employees. The Government of the State of Bihar
F for all intent and purport is the sole shareholder. Although in
law, its liability towards the debtors of the company may be
confined to the shares held by it but having regard to the
deep and pervasive control it exercises over the government
companies; in the matter of enforcement of human rights
and/or rights of the citizen to life and liberty, the State has
G
also an additional duty to see that the rights of employees of
such corporations are not infringed.
31. The right to exercise deep and pervasive control would
in its turn make the Government ofBihar liable to see that
the life and liberty clause in respect of the employees is fully
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 933
[JAGDISH SINGH KHEHAR, J.]

safeguarded. The Government of the State of Bihar, thus, A
had a constitutional obligation to protect the life and liberty
of the employees of the government-owned companies/
corporations who are the citizens oflndia. It had an additional
liability having regard to its right of extensive supervision
over the affairs of the company.
B
xxx xxx xxx
33. The State having regard to its right of supervision and/
or deep and pervasive control, cannot be permitted to say
that it did not know the actual state of affairs of the State
Government undertakings and/or it was kept in the dark that c
the salaries of their employees had not been paid for years
leading to starvation death and/or commission of suicide by
a large number of employees. Concept of accountability
arises out of the power conferred on an authority.
34. The State may not be liable in relation to the day-to-day D
functioning of the companies, but its liability would arise on
its failure to perform the constitutional duties and functions
by the public sector undertakings, as in relation thereto lie
the State's constitutional obligations. The State acts in a
fiduciary capacity. The failure on the part of the State in a
case of this nature must also be viewed from the angle that E
the statutory authorities have failed and/or neglected to
enforce the social-welfare legislations enacted in this behalf
e.g. the Payment of Wages Act, the Minimum Wages Act
etc. Such welfare activities as adumbrated in part IV of the
Constitution oflndia indisputably would cast a duty upon the F
State being a welfare State and its statutory authorities to do
all things which they are statutorily obligated to perform.
Reference is invited to the fact that this Court directed the
Bihar government to release Rs. 50 crores and deposit it
with the High Court for disbursing salaries of employees of G
government corporations/companies. The contention of
respondent is that the direction of the High Court, is in
consonance with the said view.
17. The learned Counsel for the respondent also relied upon the
following observations in Kapila Hingorani (II) v. State ofBihar,
H
934 SUPREME COURT REPORTS [2016] 6 S.C.R.

A (2005) 2 SCC 262 (for short "Kapila Hingorani (II)): (SCC p.
268, paras 26-27)
"26. We, therefore, do not appreciate the stand taken by the
State of Bihar now that it does not have any constitutional
obligation towards a section of citizens viz. the employees of
8 the public sector undertakings who have not been paid salaries
for years.
27. We also do not appreciate the submissions made on behalf
of the State of Bihar that the directions issued were only
one-time direction. In Clause 4 of the directions, it was clearly
stated that the State for the present shall deposit a sum of
c Rs. 50 crores before the High Court for disbursement of
salaries to the employees of the corporations. Furthermore,
the matter had been directed to be placed again after six
months."
This Court also issued further interim directions to the State of
D B!har to deposit a further sum of Rs.SO crores and the State of
Jharkhand to deposit a sum of Rs.25 crores to meet the arrears of
salaries of public sector undertakings.
18. We have carefully examined the said two decisions. The two
decisions are interim orders made in a writ petition under
E Article 32 of the Constitution. The said orders have not finally
decided the issues/questions raised, nor laid down by any principle
or' law. The observations extracted above as also other
observations and directions are purely tentative as will be evident
from the following observations in Kapila Hingorani (I): (SCC pp.
34-35, paras 74 & 76)
F
"74. We, however hasten to add that we do not intend to lay
down a law, as at present advised, that the State id directly or
vicariously Iiable to pay salaries/remunerations of the
employees of the public sector undertakings or the government
companies in all situations. We, as explained hereinbefore,
G only say thatthe State cannot escape its liability when a human
rights problem of such magnitude involving the starvation
deaths and/or suicide by the employees has taken place by
reason of non-payment of salary to the employees of public
sector undertakings for such a long time ....
H xxx xxx xxx
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 935
[JAGDJSH SINGH KHEHAR, J.]

76. This order shall be subject to any order that may be passed A
subsequently or finally."
xxx xxx xxx
19. The position is further made clear in Kapila Hingorani (II) as
under: (SCC p. 270, para 37) ·
B
"37. We make it clear that we have not issued the
aforementioned directions to the States ofBihar and Jharkhand
on the premise that they are bound to pay the salaries of the
employees of the public sector undertakings but on the ground
that the employees have a human right as also a fundamental
right under Article 21 which the States are bound to protect.
c
The directions, which have been issued by this Court on
9.5.2003 as also which are being issued herein, are in
furtherance of the human and fundamental rights of the
employees concerned and not by way of an enforcement of
their legal right to an;ears of salaries. The amount of salary D
payable to the employees or workmen concerned would
undoubtedly be adjudicated upon in the proper proceedings.
However, these directions are issued which are necessary
for their survival."
20. It is thus clear that directions were not based on legal right of E
the employees. but were made to meet a human right problem
involving starvation deaths and suicides. But in the case on hand,
relief is claimed and granted by proceeding on the basis that the
employees of corporations/bodies answering the definition of
"State" have a legal right to get their salaries from the State
F
Government. In fact Kapila Hingorani (I) and Kapila Hingorani
(JI) specifically negative such a right."

46. We shall now endeavour to consider the various legal
parameters on the basis whereof, learned counsel for the rival parties
have premised their respective submissions. G
47. First and foremost, it is essential for us to determine whether
or not a vested right came to be created in the employees of the corporate
bodies, when they came to be governed by 'the 1999 Scheme'. The
submission at the hands oflearned counsel for the appellant-State was,
H
936 SUPREME COURT REPORTS [2016] 6 S.C.R.

A that no such vested right was created, by the time the repeal notification
was issw~d on 2.12.2004. The contention oflearned counsel representing
the State was, that under paragraph 4 of 'the 1999 Scheme', a right to
draw pension would emerge, only when a concerned employee attained
the age of superannuation, subject to the condition that he had rendered
the postulated qualifying service. It was submitted, that prior to the
B
fulfillment of the aforesaid condition, no employee under 'the 1999
Scheme', could be considered as being possessed of a vested right, to
receive_ oension.

48. Having given our thoughtful consideration to the aforesaid
submission, we are of the view, that such of the employees who had
c exercised their option to be governed by 'the 1999 Scheme', came to be
regulated by the said scheme, immediately on their having submitted
their option. In addition to the above, all such employees who did not
exercise any option (whether to be governed, by the Employees'
Provident Funds Scheme, 1995, or by 'the 1999 Scheme'), would
D automatically be deemed to have opted for 'the 1999 Scheme'. All new
entrants would naturally be governed by 'the 1999 Scheme'. All those
who had moved from the provident fund scheme to the pension scheme,
would be deemed to have consciously, foregone all their rights under the
Employees' Provident Funds Scheme, 1995. It is of significance, that all
the concerned employees by moving to 'the 1999 Scheme', accepted,
E
that the employer's contribution to their provident fund account (and the
accrued interest thereon, upto 31.3.1999), should be transferred to the
corpus, out of which their pensionary claims, under 'the 1999 Scheme'
would be met. It is therefore not possible for us to accept, that the
concerned employees would be governed by 'the 1999 Scheme' only
F from the date on which they a~ained the age of superannuation, and that
too - subject to the condition that they fulfilled the prescribed qualifying
service, entitling them to claim pension. Every fresh entrant has the
statutory protection under the Provident Fund Act. All fresh entrants
after the introduction of 'the 1999 Scheme', were extended the benefits
of 'the 1999 Scheme', because of the exemption granted by competent
G
authority under the Provident Fund Act. They too, therefore possessed
similar rights as the optees.
49. With effect from 1.4.1999, the employees who had opted for
'the 1999 Scheme' (or, who were deemed to have opted for the same)
were no longer governed by the provisions of the Provident Fund Act
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 937
[JAGDISH SINGH KHEHAR, J.]

(under which they had statutory protection, for the payment of provident A
fund). Consequent upon an exemption having been granted to the
concerned corporate bodies by the competent authority under the
Provident Fund Act, the Employees Provident Funds Scheme, 1995, was
replaced, by 'the 1999 Scheme'. All direct entrants after 1.4.1999, were
also entitled to the rights and privileges of 'the 1999 Scheme'. We are
B
therefore of the considered view, that the submissions advanced on behalf
of the State of Himachal Pradesh premised on the assertion, that no
vested right accrued to the employees of the concerned corporate bodies,
on the date when 'the I 999 Scheme' became operational (with effect
from 1.4.1999), or to the direct entrants who entered service thereafter,
cannot be accepted. In this behalf it would also be relevant to emphasize, c
that as soon as the concerned employees came to be governed by 'the
1999 Scheme', a contingent right came to be vested in them. -The said
contingent right created a right in the employees to claim pension, at the
time of their retirement. Undoubtedly, the aforesaid contingent right
would crystalise only upon the fulfillment of the postulated conditions,
D
expressed on behalfof the appellants (on having rendered, the postulated
qualifying service). However, once such a contingent right was created,
every employee in whom the said right was created, could not be
prevented or forestalled, from fulfilling the postulated conditions, to claim
pension. Any action pre-empting the right to pension, emerging out of
the conscious option exercised by the employees, to be governed by 'the E
1999 Scheme' (or to the direct entrants after the introduction of 'the
1999 Scheme'), most definitely did vest a right in the respondent-
employees.
50. We are also of the view, that there is merit in the contention
advanced on behalf of the respondent-employees, inasmuch as, the seeds F
of the right to receive pension, emerge from the very day, an employee
enters a pensionable service. From that very date, the employee
commences to accumulate qualifying service. His claim for pension
would obviously crystalise, when he acquires the minimum prescribed
qualifying service, and also, does not suffer a disqualification, disentitling
him to a claim for pension. G

51. In the above view of the matter, it is not possible for us to
accept, that the rights of the concerned employees under 'the 1999
Scheme', can be stated to get vested, only on the date when a concerned
employee would attain the age of superannuation, and satisfy all the pre-
H
938 SUPREME COURT REPORTS [2016] 6 S.C.R.

A requisites for a claim towards pension. We are also persuaded to accept
the contention advanced on behalf of the respondent-employees, that
the cause of action to raise a claim for pension, would arise on the date
when a concerned employee actually retires from service. Any employee
governed by a pension scheme, enrolls to earn qualifying service,
immediately on his enrolment into the pensionable service. Every such
B
employee must be deemed to have commenced to invest in his evt:-ntual
claim for pension, from the very day he enters service. More so, in the
present controversy, by having expressly chosen to forego his rights,
under th;: Employees' Provident Funds Scheme, I995.
52. We shall deal with the issue, whether or not such a contingent
c right, as was vested in the respondent-employees on their having opted
for 'the 1999 Scheme' (or in the fresh entrants, on their very appointment),
was binding and irrevocable, at a later stage of our consideration.
53. The second most important issue which deserves to be
addressed by us, in the facts and circumstances of the present case is,
D whether or not the State Government was justified in postulating a cut-
off date, by which some of the employees governed by 'the 1999 Scheme'
(those who had retired prior to 2.12.2004) were entitled to draw pension
under 'the 1999 Scheme', whereas others, who had not retired by the
time the repeal notification was issued on 2.12.2004, were deprived of
E such benefits. In this behalf, the contention of the learned counsel for
the respondent-employees was, that all those who had opted (or deemed
to have opted) for 'the 1999 Scheme', and all the new entrants after the
introduction of'the 1999 Scheme', constituted a homogenous class, and
it was impermissible for the State Government, to have treated them
differently. It was submitted, that the aforesaid classificatioP was
F invidioys, inasmuch as, there was no reasonable basis for such
classification, nor was there any discernable object, for bifurcating the
homoge'lous class of pensioners. It was submitted, that whilst those
who had retired on the date of the repeal notification, would be entitled
to pensionary benefits, those who retired on the following day, would be
G deprived of the same. Learned counsel for the rival parties have, relied
on a series of judgments in support of the respective propositions
canvassed by them. We have extracted the same, while recording their
submissions.
54. Having given our thoughtful consideration to the issue
H canvassed, and having gone through the judgments cited, we are of the
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 939
[JAGDISH SINGH KHEHAR, J.]

considered view, that this Court has repeatedly upheld a cut-off date, for A
extending better and higher pensionary benefits, based on the financial
health of the employer. A cut-off date can therefore legitimately be
prescribed for extending pensionary benefits, if the funds available cannot
assuage the liability, to all the existing pensioners. We are therefore
satisfied to conclude, that it is well within the authority of the State
B
Government, in exercise ofits administrative powers (which it exercised,
by issuing the impugned repeal notification dated 2.12.2004) to fix a cut-
off date, for continuing the right to receive pension in some, and depriving
some others of the same. This right was unquestionably exercised by
the State Government, as determined by this Court, in the R.R. Verma
case (supra), wherein this Court held, that the Government was vested c
with the inherent power to review. And that the Government was free
to alter its earlier administrative decisions and policy. Surely, this is
what the State Government has done in the present controversy. But
this Court in the above mentioned judgment, placed a rider on the exercise
of such power by the Government. In that, the exercise of such power,
D
should be in consonance with all legal and statutory obligations.
55. It is equally true, that the power of administrative review can
only be exercised, for a good and valid justification. Such justification
besides being founded on reasonable consideration, should also not be
violative of any legal right - statutory or constitutional, vested in the
E
affected employees. Insofar as the permissibility of the administrative
action taken, in issuing the impugned repeal notification dated 2. I 2.2004
is concerned, whether the said power was exercised by the State
Government for good and valid reasons, and/or whether the same violated
any statutory or constitutional right vested in the respondent-employees,
shall be examined by us in the succeeding paragraphs. F
56. In order to demonstrate, that the repeal notification dated
2. 12.2004, was impermissible in law, reliance was placed on the U.P.
RaghavendraAcharya case (supra). We are of the view, that the above
judgment does not have any bearing on the facts and circumstances of
this case. In the above judgment, the primary contention which weighed G
with this Court, in rejecting the contention advanced by the State
Government was, that through an executive determination (by a letter,
dated 17. I 2.1993), the State Government had breached a statutory rule,
regulating the fixation of pension (Rule 296, of the Karnataka Civil
Services Rules). The above position is not available in the present case,
H
940 SUPREME COURT REPORTS [2016) 6 S.C.R.

A inasmuch as, no contention has been advanced at the behest of the
respondent-employees, that the action taken by the State Government
(in issuing the repeal notification, dated 2.12.2004), violated any legal
obligation or statutory right. So also, the judgment relied upon on behalf
of the respondent-employees in the D.S. Nakara case (supra), wherein
the employees' claim for pension, was based on existing rules. And
B
even so, in the Chairman, Railway Board case (supra), wherein it was
held, that vested rights under the rules, could not be taken away. It
would also be relevant to mention, that in the last judgment referred to
above, it was observed, that the employees who had retired from service,
had been deprived of their pensionary rights, as the amended rule was
c not prospective, but was retrospective. In the instant case, the repeal
notification does not adversely affect those employees who had retired
prior to 2.12.2004, before the said notification was issued. The above
referred judgment is also, therefore inapplicable to the present
controversy. The conclusion recorded hereinabove, also emerges on a
perusal of paragraphs 31 and 33 of the above judgment. It is therefore
D
apparent, that the validity of the impugned notification cannot be assailed
on the basis of the judgments cited above. We shall now deal with the
legal submissions advanced on behalf of the respondent-employees, in
their attempt to invalidate the repeal notification, dated 2.12.2004.
57. The first legal contention advanced on behalf of the respondent-
E employees was based on the principle of estoppel/promissory estoppel.
It was the assertion of learned counsel, that the respondent-employees
had altered their position to their detriment, on their having opted (or
deemd to have opted) to be governed by 't.he 1999 Scheme'. In order to
highlight the above assertion it was submitted, that the entire employer's
F contribution towards provident fund (alongwith, the accumulated interest
thereon), was foregone by the respondent-employees. The said amount
unquestionably belonged to the respondent-employees, and their right
over the same was protected under the Provident Fund Act. It was
submitted, that the aforesaid option was exercised by the respondent-
employees, only when the offer to extend pensionary benefits, was
G voluntarily made to the employees by the State Government. It was
contended, that the promise to pay pensionary benefits, which was
containtid in the offer of the State Government, could not be unilaterally
revoked, under the principle of estoppel/promissory estoppel. It was
submitted, that the instant action of the State Government (taken by
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 941
[JAGDISH SINGH KHEHAR, J.]

way ofissuing the repeal notification, dated 2.12.2004), would seriously A
impair the financial benefits which had accrued to the respondent-
employees, under 'the 1999 Scheme'. It was pointed out, that all that
the respondent-employees had gained, by foregoing the employer's
contribution (and the accrued interest, thereon), has been lost, consequent
upon the issuance of the impugned notification, dated 2.12.2004.
B
58. We are of the considered view, that the principle of estoppel/
promissory estoppel cannot be invoked at the hands of the respondent-
empbyees, in the facts and circumstances of this case. It is not as ifthe
rights which had accrued to the respondent-employees under the
Employees' Provident Funds Scheme, 1995 (under which the respondent-
employees were governed, prior to their being governed by 'the 1999 c
Scheme') have in any manner been altered to their disadvantage. All
that was taken away, and given up by the respondent-employees by
way of foregoing the employer's contribution upto 31.3.1999 (including,
the accrued interest thereon), by way of transfer to the corpus fund,
was re~t_ored to the respondent-employees. All the respondent- D
employees, who have been deprived of their pensionary claims by the
repeal notification dated 2.12.2004, would be entitled to all the rights
which had accrued to them, under the Employees' Provident Funds
Scheme, 1995. It is therefore, not possible for us to accept, that the
respondentcemployees can be stated to have been made to irretrievably
alter their position, to their detriment. Furthennore, all the corporate E
bodies (with which the respondent-employees, are engaged) are
independent juristic entities, as held in State ofAssam v. Barak Upatyaka
D.U. Kannachari Sanstha (supra). The mere fact, that the corporate
bodies under reference, are fully controlled by the State Government,
and the State Government is the ultimate authority to detennine their F
conditions of service, under their Articles of Association, is
inconsequential. Undoubtedly, the respondent-employees are not
Government employees. The State Government, as a welfare measure,
had ventured to honestly extend some post-retiral benefits to employees
of such independent legal entities, on the mistaken belief, arising out of a
miscalculation, that the same can be catered to, out of available resources. G
This measure was adopted by the State Government, not in its capacity
as the employer of the respondent-employees, but as a welfare measure.
Whe:i it became apparent, that the welfare measure extended by the
State Government, could not be sustained as originally understood, the
H
942 SUPREME COURT REPORTS [2016] 6 S.C.R.

A same was sought to be withdrawn. We are of the view that the principle
invoked on behalf of the respondent-employees, cannot be applied in the
facts of the present case, specially, in view of the decision in Mis.
Bhagwati Vanaspati Traders v. Senior Superintendent of Post Offices,
Meerut, AIR 2015 SC 901, wherein this Court held as under:-
8 "The first contention advanced at the hands of the learned counsel
for the appellant was based on the decision rendered by this Court
in Tata Iron & Steel Co. Ltd. v. Union of India & Ors., (2001) 2
sec 41, wherefrom learned counsel invited our attention tO the
following observations:-
c "20. Estoppel by conduct in modern times stands elucidated
with the decisions of the English Courts in Pickard v. Sears, 1837
6 Ad. & El. 469, and its gradual elaboration until placement of
its true principles by the Privy Council in the case of Sarat
Chunder Dey v. Go pal Chunder Laha, ( 1891-92) 19 IA
203, whereas earlier Lord Esher in the case of Seton Laing··
D ' Co. v. Lafone, 1887 19 Q.8.D. 68, evolved three basic elements
of the doctrine ofEstoppel to wit:
"Firstly, where a man makes a fraudulent misrepresentation
and another man acts upon it to its true detriment: Secondly,
another may be where a man_ makes a false statement
E negligently though without fraud and another person acts upon
it: And thirdly, there may be circumstances under which,
where a misrepresentation is made without fraud and without
negligence, there may be an Estoppel."
Lord Shand, however, was pleased to add one further element
F to the effect that there may be statements made, which have
induced other party to do that from which otherwise he would
have abstained and which cannot properly be characterized as
misrepresentation. In this context, reference may be made to
the decisions of the High Court of Australia in the case of
G Craine v. Colonial Mutual Fire Insurance Co. Ltd., 1920 28
C.L.R. 305. Dixon, J. in his judgment in Grundt v. The Great
Boulder Pty. Gold Mines Pty. Ltd., 1938 59 C.L.R. 641, stated
that,;
"In measuring the detriment, or demonstrating its existence,
one does not compare the position of the representee, before
H
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 943
[JAGDISH SINGH KHEHAR, J.]

and after acting upon the representation, upon the assumption A
that the representation is to be regarded as true, the question
of estoppel does not arise. It is onlv when the representor
wished to disavow the assumption contained in his
representation that an estoppel arises, and the question of
detriment is considered. accordingly, in the light ofthe position
B
which the representee would be in if the representor were
allowed to disavow the truth of the representation."
(In this context see Spencer Bower and Turner: Estoppel by
Representation, 3rd Ed.). Lord Denning also in the case of
Central Newbury Car Auctions Ltd. v. Unity Finance Ltd., 1956
(3)All ER 905, appears to have subscribed to the view of Lord c
Dixon, J. pertaining to the test of'detriment' to the effect as to
whether it appears unjust or unequitable that the representator
should now be allowed to resile from his representation, having
regard to what the representee has done or refrained from ·
doing in reliance on the representation, in short, the party D
asserting the estoppel must have been induced to act to his
detriment. So )orig as the assumption is adhered to, the party
who altered the situation upon the faith of it cannot complain.
His complaint is that when afterwards the other party makes a
different state of affairs, the basis of an assertion of right against
him then, if it is allowed, his own original change of position E
will operate as a detriment, (vide Grundts: High Court of
Australia (supra)).
21. Phipson on Evidence (Fourteenth Edn.) has the following
to state as regards estoppels by conduct.
F
"Estoppels by conduct, or, as they are still sometimes called,
estoppels by matter in pais, were anciently acts of notoriety
not less solemn and formal than the execution of a deed,
such as livery of seisin, entry, acceptance of an estate and
the like, and whether a party had or had not concurred in an
act of this sort was deemed a matter which there could be G
no difficulty in ascertaining, and then the legal consequences
followed (Lyon v. Reed, (1844) 13 M & W 285 (at p. 309).
The doctrine has, however, in modern times, been extended
so as to embrace practically any act or statement by a party
which it would be unconscionable to petmit him to deny. The H
944 SUPREME COURT REPORTS [2016] 6 S.C.R.

A rule has been authoritatively stated as follows: 'Where one
by his words or conduct willfully causes another to believe
the existence of a certain state of things and induces him to
act on that belief so as to alter this own previous position, the
former is concluded from averring against the latter a dif-!'erent
state of things as existing at the same time.' (Pickard v. Sears
B
(supra)). And whatever a man's real intention may be, he is
deemed to act willfully 'if he so conducts himself that a
reasonable man would take the representation to be true and
believe that it was meant that he should act upon it.'
(Freeman v. Cooke, 1848 (2) Exch. 654: at p. 663).
c Where the conduct is negligent or consists wholly of omission,
there must be a duty to the person misled (Mercantile Bank
v. Central Bank, 1938 AC 287 at p. 304, and National
Westminster Bank v. Barclays Bank International, 1975 Q.B.
654 ). This principle sits oddly with the rest of the law of
D estoppel, but it appears to have been reaffirmed, at least by
implication, by the House of Lords comparatively recently
(Moorgate Mercantile Co. Ltd. v. Twitchings, (1977) AC
890). The explanation is no doubt that this aspect of estoppel
is properly to be considered a part of the law relating to
negligent representations, rather than estoppel properly so-
E called. If two people with the same source of information
assert the same truth or agree to assert the same falsehood
at the same time, neither can be estopped as against the
other from asserting differently at another time (Square v.
Square, 1935 P. 120)."
F 22. A bare perusal of the same would go to show that the
issue of an estoppel by conduct can only be said to be available
in the event of there being a precise and unambiguous
representation and on that score a further question arises as to
whether there was any unequivocal assurance prompting the
G assured to alter his position or status. The contextual facts
however, depict otherwise. Annexure 2 to the application form
for benefit of price protection contains an undertaking to the
following effect:-
" We hereby undertake to refund to EEPC Rs ... the amount
H . paid to us in full or part thereof against our application for
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 945
[JAGDISH SINGH KHEHAR, J.)

price protection. In terms of our application dated against A
exports made during ... In case any particular declaration/
certificate furnished by us against our above referred to
claims are found to be incorrect or any excess payment is
determine to have been made due to oversight/wrong
calculation etc. at any time. We also undertake to refund the
B
amount within 10 days of receipt of the notice asking for the
refund, failing which the amount erroneously paid or paid in
excess shall be recovered from or adjusted against any other
claim for export benefits by EEPC or by the licensing
authorities of CCI & C."
and it is on this score it may be noted that in the event of there c
being a specific undertaking to refund for any
amount erroneously paid or paid in excess (emphasis supplied),
question of there being any estoppel in our view would not
arise. In this context correspondence exchanged between the
parties are rather significant. In particular letter dated D
30.11.1990 from the Assistant Development Commissioner for
Iron & Steel and the reply thereto dated 8.3.1991 which
unmistakably record the factum ofnon-payment of JPC price."
It is apparent from the factual position narrated above, that the
original action of the State Government was bonafide, and for the welfare E
of the respondent-employees. The State Government cannot be accused
of having misrepresented to the respondent-employees in any manner.
The provisions of 'the 1999 Scheme', clearly bring out, that the pension
scheme would be self-financing, and would be administered from the
corpus fund created out of the employer's contribution to their CPF
account (alongwith the accrued interest thereon). When the above F
foundational basis for introducing the pension scheme, was found to be
an incorrect determination/calculation, the same was withdrawn. In the
above view of the matter, it would not be possible to infer, that the State
Government, induced the respondent-employees, to move to 'the 1999
Scheme'. Accordingly, it would not be possible to apply the principle of G
estoppel/promissory estoppel, to the facts of the present case.
59. We are also of the view, that the principle of estoppel/
promissory estoppel, is not applicable in a situation, where the original
position, which the individual enjoyed before altering his position (by
opting, or deemingly opting- for being governed by 'the 1999 Scheme') H
946 SUPREME COURT REPORTS [2016] 6 S.C.R.

A can be restored. For the instant proposition, reference may be made to
the judgment in Pratima Chowdhury v; Kalpana Mukherjee, (2014) 4
sec 196, wherein it was held as under:-
" We shall, however, endeavour to deal with the· principle of
estoppel, so as to figure whether, the rule contained in Section 115
B of the Indian Evidence Act could have been invoked, in the facts
and circumstances of the present case. Section 115 of the Indian
Evidence Act is being extracted hereinabove:-
" 115. Estoppel.- When one person has, by his declaration, act
or omission, intentionally caused or permitted another
c person to believe a thing to be true and to act upon such
belief, neither he nor his representative shall be allowed,
in any suit or proceeding between himself and such person
or his representative, to deny the truth of that thing.
Illustration
D A intentionally and falsely leads B to believe that certain
land belongs to A, and thereby induces B to buy and pay for
it. The land afterwards becomes the property of A, and A
seeks to set aside the sale on the ground that, at the time of
the sale, he had no title. He must not be allowed to prove his
E want of title."
It needs to be understood, that the rule of estoppel is a doctrine
based on fairness. It postulates, the exclusion of, the truth
of the matter. All, for the sake of fairness. A perusal of the
above provision reveals four salient pre conditions before
F invoking the rule of estoppel. Firstly, one party should make
a factual representation to the other party. Secondly, the
other party should accept and rely upon the aforesaid factual
representation. Thirdly, having relied on the aforesaid factual
representation, the second party should alter his position.
Fourthly, the instant altering of position, should be such, that
G it would be iniquitous to require him to revert back to the
original position. Therefore. the doctrine of estoppel would
apply only when, based on a representation bv the first party,
the second party alters his position, in such manner. that it
would be unfair to restore the initial position.''
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 947
[JAGDISH SINGH KHEHAR, J.]

Since there is no dispute, that the original position (the rights enjoyed A
by the respondent-employees, under the Employees Provident Fund
Scheme, 1995) available before 'the 1999 Scheme' was given effect to,
has actually been restored, we are of the considered view, that the
principle sought to be invoked on behalf of the respondent-employees,
cannot augur in a favourable determination for them, because it is not
B
possible to conclude, that it would be unfair to restore them to their
original position. In fact, in view of the financial incapacity to continue
'the 1999 Scheme', the only fair action would be to restore the employees,
to th.i Employees Provident Funds Scheme, 1995. This has actually
been done by the State Government.· It is therefore not possible in law,
to apply the principle of estoppel/promissory estoppel, to the facts of the c
present controversy.
60. Moving to the next contention. A serious dispute has been
raised before us, in respect of the financial viability of'the 1999 Scheme'.
Insofar as the appellant-State is concerned, it was asserted on its behalf,
that a high level committee, was constituted by the Finance Department D
of th"' State Government, on 21.1.2003. The said committee comprised
of managing directors, of the concerned public sector undertakings and
corporations. The task of the high level committee was, to examine the
financial viability of 'the 1999 Scheme'. The said committee submitted
a report dated 28.10.2003, returning a finding, that 'the 1999 Scheme'
was not financially viable, and would not be self-sustaining. It is therefore, E
that a tentative decision was taken by the State Government, to withdraw
'the 1999 Scheme'.
61. To determine the modalities for withdrawing 'the 1999
Scheme', on the basis ofthe above report, the matter was jointly examined
by the Finance Department and the Law Department of the State F
Government, wherein, in consonance with the advice tendered by the
Law Department it was decided, that 'the 1999 Scheme' should not be
withdrawn retrospectively. Based on the advice of the Law Department,
it was finally decided, that those who had commenced to draw pensionary
benefits under 'the 1999 Scheme', would not be deprived of the same. G
And that, 'the 1999 Scheme' should be withdrawn prospectively, for
those whose right to receive pensionary benefits had not arisell, as they
had not yet retired from service. In the above view of the matter, it was
contwded on behalf of the State Government, that the action of the
State Government, in issuing the repeal notification dated 2. I2.2004, was
H
948 SUPREME COURT REPORTS [2016] 6 S.C.R.

A certainly not an arbitrary exercise of the power of administrative review.
It was submitted, that the same was based on two factors. Firstly, the
financial unviability of the scheme. And secondly, those who had already
commenced to draw pensionary benefits under 'the 1999 Scheme', were
not to be affected. It was therefore pointed out, that the classification
made by the State Government was reasonable and justifiable in law,
B
and it also had a nexus to the object sought to be achieved.
62. It is in the above scenario, that the legality andjusticiability of
'the 1999 Scheme', will have to be examined. The submission advanced
at the behest of the respondent-employees was, that it was not permissible
for the State Government to advance any such plea, because the State
c Governnent must be deemed to have examined the financial viability of
the scheme, before 'the 1999 Scheme' was given effect to. And that, it
does not lie in the mouth of the State Government, after giving effect to
'the 1999 Scheme', to assert that 'the 1999 Scheme' was not financially
viable. It was insisted, that even if data pertaining to the financial viability
•
D of the scheme, as was sought to be relied upon was correct, financial
deficiencies if any, could be catered to by the State Government, from
the vast financial resources available to it. And further, that 'the 1999
Scheme' in terms of the determination rendered by the High Court, even
if permitted to be repealed, should not impact the rights of the respondent-
employees, towards pensionary benefits.
E
63. We have given our thoughtful consideration to the above
contention. It is not possible for us to accept the instant contention,
advanced on behalf of the respondent-employees. The calculations
projected at the behest of the State Government, to demonstrate tht:
financial unviability of the scheme, have not been disputed. The same
F have been detailed in paragraph I0 above. The basis thereof, projected
by the high level committee, admittedly constitutes the rationale for issuing·
the repeal notification dated 4.12.2004. We are of the view, that the
consideration at the hands of the State Government was conscious and
pointed. And was supported by facts and figures. It is apparent, that
G out of 17 corporations/boards who were invited to express their views
on the issue, only 7 had actually done so. It is not the case of the
respondent~employees, that any one of those who had expressed their
views, contested the fact, that the pension scheme was not self-financing.
Those who expressed their views, affirmed that the pension scheme
could be salvaged only with Government support. Those who did not
H
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 949·
[JAGDISH SINGH KHEHAR, J.]

express their views, obviously had no comments to offer. The position A
projected by the State Government, therefore, cannot be considered to
have been effectively rebutted. Certain facts and figures, have indeed
been projected, on behalf of the respondent-employees. These have
been recorded by us in paragraphs 39 and 40. Financial calculations can
not be made casually, on a generalized basis. In the absence of any
8
authenticity, and that too with reference to all the 20 corporate entities
specified in Schedule I of 'the 1999 Scheme', the projections made on
behalf of the respondent-employees, cannot be accepted, as constituting
a legitimate basis, for a favourable legal determination. Since the
respondent-employees have not been able to demonstrate, that the
foundational basis for withdrawing 'the 1999 Scheme', was not premised· c
on any arbitrary consideration, or alternatively, was not founded on any
irrelevant consideration, it is not possible for us to accept the contention,
that ~he withdrawal of 'the 1999 Scheme', was not based on due
consideration, or that, it was irrational or arbitrary or unreasonable. We
are a!so satisfied, that the action of the State Government, in allowing
D
those who had already started earning pensionary benefits under 'the
1999 Scheme', was based on a legitimate classification, acceptable in
law. In the above view of the matter, tile action of the State Government
cannot be described as arbitrary, and as such, violative of Article 14 of
the Constitution oflndia. We are also satisfied in concluding, that the
understanding ofthe State Government (which had resulted in introducing E
'the 1999 Scheme') on being found to be based on an incorrect calculation,
with reference to the viability of the corpus fund (to operate 'the 1999
Scheme'), had to be administratively reviewed. And that, the State
Government's determination in exercising its power of review, was well
founded.
F
64. It is also not possible for us to accept, that any Court has the
jurisdiction to fasten a monetary liability on the State Government, as is
the natural consequence, of the impugned ordef passed by the High
Court, unless it emerges from the rights and liabilities canvassed in the
lis itself. Budgetary allocations, are a matter of policy decisions. The
State Government while promoting 'the 1999 Scheme', felt that the same G
would be self-financing. The State Government, never intended to
allocate financial resources out of State funds, to run the pension scheme.
The State Government, in the instant view of the matter, could not have
been burdened with the liability, which it never contemplated, in the first
H
950 SUPREME COURT REPORTS [2016] 6 S.C.R.

A place. Moreover, it is the case of the respondent-employees themselves,
that a similar pension scheme, floated for civil servants in the State of
Himachal Pradesh, has also been withdrawn. The State Government
has demonstrated its incapacity, to provide the required financial
resources. We are therefore of the view, that the High Court should not
(-as it could not) have transferred the financial liability to run 'the 1999
B
Scheme', to the State Government. Similar suggestions made by the
concerned corporate bodies, cannot constitute a basis for fastening the
residuary liability on the Government.
65. The action of the State Government, in revoking 'the 1999
Scheme' vide notification dated 2.12.2004, was also assailed as being
c discrimbatory. And as such, violative of Article 16 of the Constitution of
India. In this behalf, the submission advanced on behalf of the
respondent-employees was, that the State Government extended similar
benefits to Government employees under the Central Civil Services
(Pension) Rules, 1972. The said pensionary benefits extended to
D Government servants, were also sought to be withdrawn. It was however
pointed out, that while withdrawing the pensionary benefits from the
Governr.tent employees, the State Government had taken a decision to
protect all existing employees, who had entered into Government service,
till the revocation of the pension scheme. It was submitted, that the
High Court had, by the impugned order, similarly protected only the existing
E employees, who were in service, as on the date of issuance of the repeal
notification, dated 2.12.2004. It was contended, that the State
Government's action, in not treating the employees of corporate bodies,
goveme1 by 'the 1999 Scheme', similarly as it had treated employees in
Government service, was clearly discriminatory. It was submitted, that
F two sets' of employees similarly situated, were treated differently. It
was pointed out, that whilst protection was extended to one set of
employees, similar benefits were denied to the other set of employees.
66. We have given our thoughtful consideration of the plea of
discrimination, advanced at the behest of the respondent-employees. It
G is not possible for us to accept, that the employees of corporate bodies,
can demand as of right, to be similarly treated as Government employees.
Whilst it can be stated that Government employees of the State of
Himachal Pradesh are civil servants, the same is not true for employees
of corporate bodies. Corporate bodies are independent entities, and
their employees cannot claim parity with employees of the State
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 951
[JAGDISH SINGH KHEHAR, J.]

Government. The State Government has a master-servant relationship A
with the civil servants of the State, whilst it has no such direct or indirect
nexus with the employees of corporate bodies. The State Government
may legitimately choose to extend different rights in terms of pay-scales
and retiral benefits to civil servants. It may disagree, to extend the same
benefits to employees of corporate bodies. The State Government would
B
be well within its right, to deny similar benefits to employees of corporate
bodies, which are financially unviable, or iftheir activities have resulted
in financial losses. It is common knowledge, that when pay-scales are
periodically reviewed for civi I servants, they do not automatically become
applicable to employees of corporate bodies, which are wholly financed
by the Government. And similarly, not even to employees of Government c
companies. Likewise, there cannot be parity with Government
employees, in respect of allowances. So also, of retiral benefits. The
claim for parity with Government employees is therefore wholly
misconceived. rt is, therefore, not possible for us to accept the contention
advanced on behalf of the respondent-employees, that the action of the
D
State Government was discriminatory.
67. Another reason for us to conclude, that the action of the State
Government was not discriminatory is, that despite having revoked 'the
1999 Scheme' through the notification dated 2.12.2004, the State
Government had permitted such of the Government owned corporations
in the State of Himachal Pradesh, which were not suffering any losses, E
to promote their own pension schemes, and to extend pensionary benefits
to their employees, on an individual basis, in the same/similar fashion as
had been attempted by the State Government, through 'the 1999 Scheme'.
In the instant view of the matter also, we are of the opinion, that the
action of the State Government cannot be assailed, on the ground of F
discrimination.
68. We shall now consider, whether the State Government which
had introduced 'the 1999 Scheme', had the right to repeal the same. In
answering the above issue, it needs to be consciously kept in mind, that
the employees of corporate bodies, who were extended the benefits of G
'the 1999 Scheme', as already noticed above, were not employees of
the State Government. 'The 1999 Scheme' was, therefore, just a welfare
scheme introduced by the State Government, with the object of
ameliorating the final)cial condition of employees, who had rendered
valuable service in State owned corporations. In order to logically
H
952 SUPREME COURT REPORTS [2016] 6 S.C.R.

A appreciate the query posed, we may illustratively take into consideration
a situation, wherein an organization similar to the one in which the
respondent-employees were engaged, suffered such financial losses, as
would make the sustenance of the organization itself, unviable. Can the
employees of such an organization, raise a claim in law, that the corporate
body be not wound up, despite its financial unworkability? Just because,
B
the resultant effect would be, that they would lose their jobs. The answer
to the above query, has to be in the negative. The sustenance of the
organization itself, is of paramount importance. The claim of employees,
who have been engaged by the organization, to run the activities of the
organization, is of secondary importance. If an organization does not
c remain financially viable, the same cannot be required to remain
functional, only for the reason that its employees, are not adversely
impacted. When and how a decision to wind up an organization is to be
taken, is a policy decision. The decision to wind up a corporation may
be based on several factors, including the nature of activities rendered
by it. In a given organization, sometimes small losses may be sufficient
D
to order its closure, as its activities may have no vital bearing on the·
residents of the State. Where, an organization is raised to support
activities on which a large number of people in the State are dependent,
the same may have to be sustained, despite the fact that there are
substantial losses. The situations are unlimited. Each situation has to be
E regulated administratively, in terms of the policy of the State Government.
Whether a corporate body can no longer be sustained, because its
activities are no longer workable, practicable, useable, or effective, either
for the State itself, or for the welfare of the residents of the State, is for
the State Government to decide. Similarly, when and how much, is to be ·
paid as wages (or allowances)to employees ofan organization, is also a
F
policy decision. So also, post-retiral benefits. All these issues fall in the
realm of executive determination. No Court has any role therein. For
the reasons recorded hereinabove, in our considered view, the conditions
of service including wages, allowances and post-retiral_ benefits of
employees of corporate bodies, will necessarily have to be determined
G administratively, on the basis ofrelevant factors. Financial viability, is
an important factor, in such consideration. In the facts and circumstances
of the present case, it is not possible for us to accept, the contention
advanced on behalf of the respondent-employees, that the State
Government should provide financial support for sustaining 'the 1999
Scheme', at least for such of the employees, who were engaged on or
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 953
[JAGDISH SINGH KHEHAR, J.]

before the date of issuance of the repeal notification (-4.12.2004). We A
would like to conclude the instant submission by recording, that the
respondent-employees have not been able to make out a case, that the
notification dated 2.12.2004, repealing 'the 1999 Scheme', was in any
manner, capricious, arbitrary, illegal or uninformed, and as such, we would
further conclude, that the respondent-employees cannot be considered
8
as being entitled, to any relief, through judicial process.
69. Having recorded our aforesaid conclusion, it is not necessary
for us to examine the submissions advanced at the hands of the
respondent-employees, that the action of the State Government, in issuing
the repeal notification dated 2.12.2004, would violate Article 21 of the
Constitution oflndia. All the same, since the contention was raised, we
c
consider it just and appropriate, to examine and deal with the same. The
contention advanced on behalf of the respondent-employees was, that
the fundamental rights enshrined in the Constitution, do not extend to
merely, providing for survival or animal existence. Article 21, it was
pointed out, has been interpreted by this Court, as extending the right to D
life and liberty- as the right to live, with human dignity. It was submitted,
that 'the 1999 Scheme', which allowed better post-retiral benefits to the
respondent-employees, was an extension of such a benefit. 'The 1999
Scheme', it was submitted, would have resulted in ameliorating the
conditions of the respondent-employees, after their retirement. The
submission advanced on behalf ofthe respondent-employees is seemingly E
attractive, but is not acceptable as a proposition oflaw. A welfare scheme,
may or may not aim at providing, the very basic rights to sustain human
dignity. In situations where a scheme targets to alleviate basic human
rights, the same may possibly constitute an irreversible position, as
withdrawal of the same, would violate Article 21 of the Constitution. F
Not so, otherwise. Herein, the Employees' Provident Funds Scheme,
1995, sponsored under the Provident Fund Act, is in place. The same
was sought to be replaced, by 'the 1999 Scheme'. 'The 1999 Scheme'
was an effort at the behest of the State Government, to provide still
better retiral benefits. 'The 1999 Scheme' was not a measure, aimed at
providing basic human rights. Therefore, 'the 1999 Scheme' can not be G
treated as irreversible. The same would not violate Article 21 of the
Constitution, on its being withdrawn. It is not in dispute, that after the
repeal notification dated 2.12.2004, the erstwhile Employees' Provident
Funds Scheme, 1995, has been restored to such of the employees, who
H
954 SUPREME COURT REPORTS [2016] 6 S.C.R.

A were impacted by the said repeal notification. We are of the view, that
the repealing of 'the 1999 Scheme', in the facts and circumstances of
this case, cannot be deemed to have in any manner, violated the right of
the respondent-employees, under Article 21 of the Constitution oflndia.
70. It is also not possible to accept, the contention advanced on
B behalf of the respondent-employees, based on Article 300A of the
Constitution oflndia. We have deliberated hereinabove, the nature of
the right created by 'the 1999 Scheme'. We have examined all the legal
submissions advanced on behalf of the respondent-employees. We have
arrived at the conclusion, that action of the State Government, was well
within its authority. We have also held the same to be based on due
c consideration. We have therefore, rejected the assertion made on behalf
of the respondent-employees, that the impugned notification dated
2.12.2004, was unconstitutional, irrational, arbitrary or unreasonable. It
is accordingly not possible for us to accept, the challenge raised by the
respondent-employees, that they had been deprived of their right to
D pensionary benefits, without the authority in law. We are therefore of
the view, that the claim raised on behalf of the respondent-employees,
by placing reliance on Article 300A of the Constitution of India, is
misconceived.
71. Our determination, with reference to all the issues canvassed
E above, would also answer the question left open in paragraph 52 above.
Namely, whether or not the contingent right, as was vested in the
respondent-employees, was binding or irrevocable. We may now sum
up the position determined by us, in the foregoing paragraphs. It is no
doubt true that we have concluded, that 'the 1999 Scheme', created a
contingent right in the respondent-employees. The respondent-employees
F comprise of all those employees of corporate bodies, who had opted for
'the 1999 Scheme', immediately on its having been introduced; all those,
who were deemed to have opted for 'the 1999 Scheme' by not having
exercised any option; and all those who were appointed after the
introduction of'the 1999 Scheme'. The first issue that arises is, whether
G any express right or obligation existed, between the respondent-employees
and the State Government. One can understand, such a claim arising
out of an obligation between an employer and his employees, where
there is a quid pro quo-a trade off based on a relationship (as between,
an employer and employee). We have however concluded, that there .
was no such relationship between the State Government, and the
H
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 955
[JAGDISH SINGH KHEHAR, J.]

respondent-employees. All the corporate bodies in which the respondent- A
employees were/are engaged, are independent juristic entities. It is
therefore apparent, that the claim raised by the respondent-employees,
is not based on any right or obligation between the parties. We have
also examined the submissions advanced by learned counsel premised
on various constitutional provisions (-Articles 14, 16, 21 and 300A ofthe
8
Constitution oflndia), but have found, that no right can be stated to have
been violated, thereunder. We have also examined the other legal
submissions, advanced on behalf of the respondent-employees, and have
found the same, as unjustified. The issue whether administrative review
was permissible, after 'the 1999 Scheme' had become operational, has
been answered in the affirmative. And finally, we have concluded, that c
the exercise of such power, while issuing the repeal notification, was
based on due consideration. We therefore hereby uphold, the legality
and constitutionality of the notification dated 2.12.2004.
72. For the reasons recorded hereinabove, the present appeals
stand allowed. The impugned order dated 19.12.2013 passed by the D
High Court is accordingly, set aside.

Note: The emphases supplied in all the quotations in the instant
judgment, are ours.
E

Nidhi Jain Appeals allowed.