STATE OF PUNJAB AND ORS.versusAMAR NATH GOYAL AND ORS.

                     STATE OF PUNJAB AND ORS.                                   A
                                     V.

                   AMAR NATH GOYAL AND ORS.

                               AUGUST 11, 2005
                                                                                B
          [Y.K. SABHARWAL AND B.N. SRIKRISHNA, JJ.]

     Constitution ofIndia, I 950-Article 14--Central Government, by Official
Memoranda, directing that dearness allowance as linked to the average All
India Consumer Index would be treated as dearness pay for reckoning
emoluments for the purpose of death-cum-retirement gratuity for employees       C
who retired or died on or after I.4.I995-State Government extending the
benefit for its employees and adopting the same cut-off date as fixed by the
Central Government-Employees challenging the orders of the Governments
on the ground that the cut-off date fixed is discriminatory and violative of
Article I 4 of the Constitution of India-Correctness of-Held, the action of     D
the Governments fixing cut-off date for the benefit keeping in view financial
and economic implications cannot be treated att discriminatory or irrational
and violative of Article 14.

      On the recommendations of the Fifth Central Pay Commission in its
Interim Report, the Central Government, by Official Memoranda dated             E
14.7.1995, directed that dearness allowance as linked to the average All
India Consumer Index would be treated as dearness pay for reckoning
emoluments for the purpose of death-cum-retirement gratuity under the
Central Civil Services (Pension). Rules, 1972. The benefit was made
available to the employees, who retired or died on or after 1.4.1995. It        F
was directed that the ceiling on gratuity would stand enhanced to Rs.2.50
lacs.

     Following the Official Memoranda dated 14.7.1995, the State
Government issued orders dated 13.12.1996 notifying that dearness
allowance as admissible to the employees as on 1.7.1993 (linked to All          G
India Consumer Price level I201.66) would be treated as dearness pay for
reckoning emoluments for the purpose of death-cum-retirement gratuity
under the State Civil Services Rules and made available to the State
Government employees who retired or died on or after 1.4.1995. The
order also notified that the ceiling of maximum amount of death-cum-            H
                                     549
    550                  SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A   retirement gratuity was to be raised from Rs. 1 lac to Rs. 2.50 lacs with
    effect from 1.4.1995.

         A large number of Central Government and State Government
    employees, who had retired prior to 1.4.1995, applied for getting the
    additional benefits ofincreased quantum of death-cum-retirement gratuity
B   up to the increased limit of Rs. 2.5 lacs. their claims were rejected in some
    cases and in other cases, the CAT and High Courts took the view that the
    employees who had retired before 31.3.1995 were also eligible for the
    benefits. Special Leave Petitions were filed by afft:cted employees, Central
    and State Governments before this Court. Certain cases, which were
c   pending before the High Court, were transferred to this Court.

          The employees contended that the decision of the Central
    Government/State Governments to make available the increased quantum
    of gratuity (with revised ceiling) only to employees, who retired or died
    on of after 1.4.1995, is discriminatory and arbitrary and therefore violative
D
    of Article 14 of the Constitution of India; that all retirees/dead persons
    form a homogenous class and that discrimination or distinction between
    retirees/dead persons prior to 1.4.1995 and those who retired or died on
    or after 1.4.1995 had no rational basis;

E        The Central Government and State Governments contended that
    due to consequential financial burden, payments were restricted to the
    employees who had died or retired on or after 1.4.1995.

          Disposing of the appeals and the transfer cases, the Court
F
           HELD : Financial and economic implications are very relevant and
     germane for any policy decision touching the administration of the
     Government, at the Centre or at State level.1.4.1995 was the date suggested
     by the Fifth Central Pay Commission in its Interim Report. The Central
     Government took a conscious stand that the consequential financial burden
G    would be unbearable. It, therefore, chose to taper down the financial
     burden by making the benefits available only from 1.4.1995. It is trite
     that, the final recommendations of the Pay Commission were not ipso
    facto binding on the Government, as the Government had to accept and
     implement the recommendations of the Pay Commission consistent with
H    its financial position. This is precisely what the G.overnment did. Such an
                          STATE v. A.N. GOYAL                             551

  action on the part of the Government can neither be characterized as           A
· irrational nor as arbitrary so as to infringe Article 14 of the Constitution
  of India. [559-D-E; 560-A-C[

       D.S. Nakara v. Union of India, [1983] 1 SCC 305, distinguished.

       T.N. Electricity Board v. R. Veerasamy & Ors., [1999] 3 SCC 414;
                                                                                 B
 Union of India v. P.N. Menon & Ors., [1994] 4 SCC 68; Action Committee
 South Eastern Railway Pensioners v. Union of India, [1991] Supp. 2 SCC
 544; Krishena Kumar v. Union of India, [1990] 4 SCC 207; Indian Ex-
 Services League v. Union of India, [1991) 2 SCC 104; State Government
 Pensioner's Association v. State ofA.P., [1986) 3 SCC 501; All India Reserve    c
 Bank Retired Officers' Association v. Union of India, [1992) Supp. I SCC
 664; State o/Rajasthan & Anr. v. Amritlal Gandhi & Ors., AIR (1997) SC
 782; State ofPunjab & Ors. v. Boota Singh & Anr., [2000] 3 SCC 733; K.l.
 Rathee v. Union of India, [1997) 6 SCC 7; State of Punjab & Anr. v. J.l.
 Gupta & Ors., [2000] 3 SCC 736; Ramarao & Ors. v. All India Backward
                                                                                 D
 Class Bank Employees Welfare Association & Ors., [2004) 2 SCC 76; Union
 of India v. Bidhubhushan Malik & Ors., [1984] 3 SCC 95; All India Judges
 Asson. & Ors. v. Union of India, AIR (1993) SC 2493; M J. Sivani & Ors.
 v. State of Karnataka & Ors., [1995) 6 SCC 289; Chairman, Railway Board
 & Ors. v. C.R. Rangadhamaiah & Ors., [1997] 6 SCC 623 and Union ofIndia
 & Anr. v. Pratibha Bonnerjea & Anr., AIR (1996) SC 693, referred to.            E
       MC. Desai & Ors. v. Union of India, AIR (1988) All. 283, referred
 to.

       CIVIL APPELLATE JURISDICTION: Civil Appeal No. 129 of2003.
                                                                                 F
     From the Judgment and Order dated 3.5.2002 of the Punjab and
 Haryana High Court in C.W.P. No. 4995 of 1997.

                                     WITH

      C.A. Nos. 132, 133, 1838, 1847/2003, 902/2004, 1061, 4987,
                                                                                 G
 4988-5018, 4985-4986/2005 and T.C. (C) Nos. 58/2004 and 41 of
 2005.

     R. Mohan, Additional Solicitor General, P.N. Misra, Vivek Goyal,
 Gopal Prasad, Ms. Naresh Bakshi, H.M. Singh, Ms. Shabana saifi, Arun K.         H
    552                   SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A   Sinha, P.N. Puri, Ms. Sandhya Goswami, V.K. Verma, Shreekant N. Terdal,
    Ms. Sudha Gupta, Sudhanshu Choudhary, Naresh Kumar, Ashok K. Mahajan,
    Ms. Sarla Chandra, Adv. (NP), A. V. Palli, Ms. Rekha Palli, Yash Pal
    Dhingra, Rameshwar Prasad Goyal and Mahabir Singh (NP) for the appear-
    ing parties.
B
          The Judgment of the Court was delivered by

        SRIKRISHNA, J. : Delay condoned. Leave granted in the Special
    Leave Petitions.

C        This group of Special Leave Petitions and Transferred Cases raise the
    same issue oflaw, though the origin of the cases and the paths by which they
    found their way to this Court are different. A brief resume of the facts is called
    for.

D   Civil Appeal No. 129 of 2003:

          The respondents are employees of the Government of Punjab who
    retired during the period 31. 7 .1993 to 31.3 .1995. They sought the benefit of
    a circular dated· 13.12.1996 under which the State Government employees,
    who retired or died on or after 1.4.1995, were entitled to get retirement
E   gratuity/ death gratuity on the basis of addition of certain portion of the
    dearness pay to the basic pay. This benefit was refused to them. The
    respondents challenged the decision of the State Government declining them
    the aforesaid benefit by a group of writ petitions (numbered CWP No. 4995/
    97 and others) before the High Court of Punjab & Haryana. The High Court
F   partially allowed the writ petition and held that such of the State Government's
    employees, who had retired on or after l. 7.1993, were entitled to the higher
    amount of death gratuity and retirement gratuity consequent upon the merger
    of a portion of dearness allowance into the basic pay. The High Court,
    however, refused to grant this benefit to employees who had retired before
    l.7.1993.
G
         The High Court also directed the State Government and its officers to
    calculate the death/ retirement gratuity of the respondents who had retired
    on or after l.7.1993 in accordance with the notification dated 13.12.1996.
    The said judgment of the Division Bench of the Punjab & Haryana High
H   Court is challenged in this appeal.
                   STATE v. A.N. GOYAL [SRIKRISHNA, J.]                     553

    Civil Appeal No. 1061 of 2005:                                                  A
          The respondents, retired employees of the Education Department of the
    Government of Punjab, were superannuated during the period 31.7.1993 to
    31.3.1995. They also sought the benefits flowing from the order of the
    Government of Punjab dated 13.12.1996 and sought a higher quantum of
    death-cum-retirement gratuity. These benefits having been refused to them,      B
    they too moved the High Court of Punjab & Haryana by a Civil Writ Petition
    (CWP No. 17666/98). This writ petition was allowed by order dated 3.5.2002
    following the judgment in CWP No. 4995/97. Being aggrieved thereby, the
    State of Punjab is in appeal.

    Civil Appeals@ Special leave Petitions (Civil} Nos. 12071-12072 of 2004:        c
          The respondent-employees in this case retired on 28.2.1994 from Postal
    Department Service, H.P. Circle i.e. prior to the prescribed cut-off date of
    1.4.1995. He sought the higher amount of death-cum-retirement gratuity
    subject to the increased maximum limit under the Office Memorandum
    ("0.M.") dated 14.7.1995 issued by the Government of India. This O.M.           D
    directed that a certain percentage of dearness allowance was to be treated as
    part of basic pay for the purpose of calculating the death gratuity and
    retirement gratuity in respect of the Central Government employees who
    retired after 1.4.1995. However, the Central Government rejected his claim
    on the ground that he had retired prior to 1.4.1995. The employee then moved
                                                                                    E
    the Central Administrative Tribunal ("CAT") (Chandigarh Bench) by his
    Original Applications. The CAT directed that the benefit of O.M. dated
    14.7.1995 be extended to the employee concerned, on the undertaking that,
    if the connected matters pending at the time in the Bombay High Court were
    to be adversely decided against him, he would refund the monies with
    interest.                                                                       F
          The Union of India moved the High Court of Himachal Pradesh by writ
    petition CWP No. 462/03, which was dismissed on the ground that a similar
    matter was pending before the Bombay High Court against a decision of the
    Full Bench of the CAT (Mumbai Bench), and that the decision given by the
    Bombay High Court would decide the rights and contentions of the parties.       G
    The Union of India's Civil Review No. 32/03 was also dismissed on



-   11.09.2003. Aggrieved thereby, the Union of India is in appeal.

         Civil Appeal No. 132 of 2003 :

         The respondents in this case were employees of the Punjab Government       H
    554                  SUPREME COURT REPORTS (2005] SUPP. 2 S.C.R.

A   who retired from service of Municipal Committee, Malerkotla on attaining
    the age of superannuation. They retired on different dates, but between
    31.l 0. 1993 and 28.2. 1994. They were paid gratuity in accordance with the
    then applicable rules. The respondents demanded gratuity in accordance with
    the orders of the Government of Punjab. This would have given them the
B   benefit of increased quantum of death gratuity and retirement gratuity
    pursuant to the merger of certain percentage of the dearness allowance with
    the basic pay. This benefit having been refused to them, they moved the
    Punjab & Haryana High Court by their writ petition CWP No. 942/99. This
    writ petition was also allowed by a common judgment dated 3.5.2002
    rendered by the Punjab & Haryana High Court in CWP No. 4995/97. Being
C   aggrieved thereby, the appellant-Municipal Committee is before this Court.

    Civil Appeal No. 133 of 2003:

          The appellants in this case retired from the Education Department of
    the Government of Punjab upon attaining the age of superannuation on
D   various dates before I. 7 .1993. They claimed the benefit of increased amount
    of retirement-cum-death gratuity consequent upon the merger of a portion of
    dearness allowance with the basic pay as indicated in the instructions of the
    State Government dated 13.12.1996, made effective in the case of Government
    employees who retired or died on or after 1.4.1995. Their claims were
    rejected by the State Government. The employees moved the High Court of
E   Punjab & Haryana by their writ petition CWP No. 15212/98, which was
    disposed of following the common judgment rendered by the High Court in
    CWP No. 4995/97. The High Court rejected the claims of this group of
    employees who had retired prior to I. 7.1993. Hence, this appeal by the
    aggrieved employees.
F
    Civil Appeal No. 1838 of 2003:

          The First Respondent in this case was an employee of the Punjab State
    Electricity Board, who retired before the prescribed cut-off date of 1.04.1995.
    His claim for increased amount of death-cum-retirement gratuity was similarly
G   rejected by the Punjab State Electricity Board. His writ petition CWP No.
    12260/98 was allowed following the common judgment in CWP No. 4995/
    97. The Punjab State Electricity Board is here in appeal.

    Civil Appeal No. 1847 of 2003:

H         The first respondent was an employee of the Punjab State Electricity
                    STATE v. A.N. GOYAL [SRIKRISHNA, J.]                        555

     Board who retired between l.7.1993 and 31.3.1995. His claim for increased          A
     amount of death-cum-retirement gratuity was similarly rejected by the
     Electricity Board. His writ petition CWP No. 12957/98 before the High Court
     of Punjab & Haryana was decided by. the common judgment in CWP No.
     4995/97. Hence, this appeal by the Punjab State Electricity Board.
                                                                                        B
     Civil Appeal @ Special Leave Petition No. 2947 of 2003:

          This appeal is against the judgment in CWP No. 552/99 decided by the
     common judgment of the High Court of Punjab & Haryana in CWP No. 4995/
     97. The High Court of Punjab & Haryana took the view that Government
     employees retiring on or after 1.7.1993, but before the cut off date of 1.4.1995   C
     would also be entitled to the gratuity calculated in accordance with the
     provisions of the Government of Punjab order dated 13.12.1996. The
     respondent in this case is an employee of the Punjab State Electricity Board
     who had retired during the aforesaid period. Being aggrieved by the High
     Court's judgment, the Punjab State Electricity Board is before this Court by       D
     way of this appeal.

     T C. No. 58104:

           The respondents in this case are all employees of the Central Government
     in the Postal Department in the Maharashtra Circle who had retired between         E
     1.7.1993 and 31.3.1995. They claimed the benefit of the Central Government
     order dated 27.9.1993 read with order dated 14.7.1995, seeking higher
     benefits of death-cum-retirement gratuity pursuant to the merger of a portion
     of the dearness allowance with basic pay and the consequential raising of the
     ceiling on the death cum retirement gratuity amount. Their claims were             F
     refused by the Central Government. They filed Original Applications before
     the CAT (Mumbai Bench). The issue as to the validity of the decision of the
     Central Government in fixing the cut-off date of 1.4.1995 was referred to the
     Full Bench of the CAT. The CAT by its order dated 21.9.2001 held that there


..
     was no nexus or rational consideration in fixing the aforesaid date of 1.4.1995
     for availability of the benefit and allowed the Original Applications. Being       G
     aggrieved thereby, the Union oflndia preferred Writ Petition No. 884/2002,
     which was pending before a Division Bench of the Bombay High Court.
     Since the identical issue was being agitated before this Court, by the order
     dated 27.7.2004, this writ petition was ordered to be transferred to this Court
     to be heard along with the connected matters.                                      H
    556                  SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A   Civil Appeals @ Special Leave Petitions (C) Nos. 6855-6886 of 2003:

         The respondents are retired employees of the Government of Punjab
    who retired on or after 1.7.1993, but before the cut-off date of 1.4.1995. By
    the common judgment rendered in CWP No. 4995/97, the High Court held
B   that they were entitled to death-cum-retirement gratuity calculated in
    accordance with the provisions of the Government of Punjab Order dated
    13.12.1996. Aggrieved thereby, the State of Punjab is before this Court.

    Civil Appeal No. 902 of 2004:

C         The respondents in this appeal were employees of the Government of
    Punjab who retired from various departments/ institutions of the Government
    of Punjab before the prescribed cut-off date. When their claim for enhanced
    death-cum-retirement gratuity was rejected by the Government, they filed
    CWP No. 15032/98. By the common judgment rendered in CWP No. 4995/
D   97, the High Court of Punjab & Haryana held that they were entitled to the
    benefit of gratuity calculated in accordance with the provisions of the
    Government of Punjab order dated 13.12.1996. Being aggrieved thereby, the
    State of Punjab is in appeal.

    TC No. 41 of 2005:
E
          The petitioner in this case retired on l 0.11.1994 as a Judge of the
    Bombay High Court, Aurangabad Bench. He claimed gratuity in accordance
    with O.M. dated 14. 7 .1995 issued by the Government of India, but contended
    that the cut-off date of 1.4.1995 was arbitrary and was liable to be struck
p   down. His claim for the benefit of death-cum-retirement gratuity under the
    O.M. dated 14. 7.1995 with higher ceiling was refused. He moved the
    Bombay High Court by a writ petition No. 129/97, which has been transferred
    to this Court by order dated 27.7.2004 made in Civil Appeal No. 129/03, to
    be heard along with this group of connected matters.

G   The Office Memoranda:

          By O.M. dated 27.9.1993, the Ministry offinance, Government oflndia
    directed that the dearness allowance payable to the Central Government
    employees with effect from l. 7.1993 would stand modified as declared
H   therein at varying rates linked to the basic pay. By another O.M. dated
                  STATE v. A.N. GOY AL [SRIKRISHNA, J.]                   557

19.10.1993, the Government of India notified that for Central Government          A
employees who retired or died on or after 16.9.1993, a portion of the dearness
allowance as linked to Average Consumer Price Index of 729.91 obtaining
as on 1.3.1988 (i.e. 20% of basic pay) would be treated as dearness pay. This
would count only for reckoning emoluments for the purpose of retirement
gratuity and death gratuity under the Central Civil Services (Pension) Rules,     8
1972 and for no other purpose. The said orders came into effect from
16.9.1993. It was directed that the death-cum-retirement gratuity of persons
who have already died or retired on or after 16.9.1993 should be recalculated
on the basis of the said orders and arrears, if any, be paid.

      By O.M. dated 14.7.1995, the Central Government directed that, as           C
recommended by the Fifth Central Pay Commission in its Interim Report,
dearness allowance as Jinked to the average All India Consumer Price Index
("AICPl") 1201.66 would be treated as dearness pay for reckoning emoluments
for the purpose of death gratuity and retirement gratuity under the Central
Civil Services (Pension) Rules, 1972. Further, it was directed that the ceiling   D
on gratuity would stand enhanced to Rs. 2.50 lacs. The said O.M. indicated
different percentages of dearness allov1ance, depending upon the basic pay
drawn, to be added to pay for calculating gratuity.

      Following the aforesaid 0.M. issued by the Central Government, the
Government of Punjab in the Department of Finance issued orders dated             E
13.12.1996, wherein it was notified that the Governor of Punjab was pleased
to decide that dearness allowance as admissible to the employees as on
1.7.1993 (linked to All India Consumer Price level 1201.66) would be treated
as dearness pay for reckoning emoluments for the purpose of retirement
gratuity and death gratuity under the Punjab Civil Services Rules-Volume II.      F
This was in respect of "Punjab Government employees who retire or whose
death occurs on or after 1.4.1995". The said order indicated the varying
percentages of dearness allowance to be added to the pay for calculating
gratuity at different pay slabs. The order also notified that the ceiling of
maximum amount of retirement gratuity and death gratuity was to be raised
from Rs. I lac to Rs. 2.50 lacs with effect from 1.4.1995.                        G

The Litigation:

      A large number of employees, both of the Central Government as well
as the State Governments of Punjab and Himachal Pradesh, who had retired          H
    558                     SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A   prior to 1.4.1995, applied for getting the additional benefits of increased
    quantum of death-cum-retirement gratuity up to the increased limit of Rs. 2.5
    lacs. Their claims were rejected in some cases and in other cases, the CAT
    and the High Court took the view that such of the employees who had retired
    between 1.7.1993 and 31.3.1995 were also eligible for the aforesaid benefits.
B         Thus, the employees whose cases were wholly rejected or partly
    rejected and partly granted, as well as the Union of India and the State
    Governments are in appeal before us.

    Contentions:
c        The thrust of the arguments by the learned counsel on behalf of the
    employees has been on the alleged v:olation of Article 14 of the Constitution.
    They contend that the decision of the Central Government/ State Governments
    to make available the increased quantum of gratuity (with revised ceiling)
    only to employees, who retired or died on or after l .4.1995, is discriminatory
D   and arbitrary. They also contend that all retirees/dead persons form a
    homogeneous class and any discrimination or distinction between retirees/
    dead persons prior to 1.4.1995 and those who retired/died on or after 1.4.1995
    had no rational basis, nor was intended to serve any purpose. Heavy reliance
    was placed on the judgment of this Court in D.S. Nakara v. Union of India'
E   ("D.S. Nakara"). We are afraid that the refrain of D. S. Nakara (supra) has
    been played too often to retain its initial charm, which has been worn thin
    by subsequent dicta.

          The learned counsel for the Union of India and the State· Governments
    contended that, though it is a fact that certain percentage of dearness
F   allowance was to be merged with the basic pay with effect from I. 7 .1993
    (linked to the All-India Consumer Price level 1201.66) and that the
    said dearness allowance admissible to the employees on l. 7.1993 was to be
    treated as dearness pay for reckoning emoluments for the purpose of death
    gratuity and retirement gratuity, financial constraints impelled the
    Governments, both at the Centre and the State, to restrict
G
    such payments only to the employees who had died or retired on or after
    1.4.1995.

          The learned counsel for the Union of India made available the

H   I.    [1983] I s.c.c. 305.
                    STATE v. A.N. GOYAL (SRIKRISHNA, J.]                        559

    Government's file from which it is seen that the Government took a conscious        A
    decision that the benefit of the increase in the quantum of gratuity, pursuant
    to the merged portion of the dearness allowance and the revised ceiling shall
    be made available from l.4. l 995, which was the date recommended in the
    Interim Report of the Fifth Central Pay Commission. The Government
    noticed that the consequential financial burden would be very heavy. Hence,         B
    the Central Government decided that these benefits would be made available
    only from 1.4.1995. The State Governments followed suit.

          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     C
    upon merger of a portion of dearness allowance into dearness pay reckonable
    for the purpose of calculating gratuity, was irrational or arbitrary.

          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       D
    only to employees, who retire or die on or after l.4.1995, after calculating
    the financial implications thereon, was either irrational or arbitrary. Financial
    and economic implications are very relevant and germane for any policy
    decision touching the ad1ninistration of the Government, at the Centre or at
    the State level.
                                                                                        E
          Even by 0.M. dated l 9. I0.1993, all that happened was that a portion
    of the dearness allowance linked to average Consumer Price Index of729.91
    obtaining as on 1.3.1988 (i.e. 20% of the basic pay) was treated as dearness
    pay. This would count only for reckoning the em!'luments for the purpose
    of calculating retirement-cum-death gratuity under the applicable rules and         F
    for no other purpose. This change was brought into effect from 16.9.1993.

          Even at that time, interestingly, the benefits were not made admissible
    from l.3.1988, i.e. the date of the Average Consumer Price Index of729.91,
    but from a much further date i.e. 16.9. I 993. The Central Government adopted
    the same policy while issuing the O.M. dated 14.'l.1995. Although, dearness         G
    allowance linked to the All India Average Consumer Price Index 1201.66 (as
'   on 1.7.1993), was treated as reckonable part of dearness allowance for the
    purpose of calculating the death-cum-retirement gratuity, the benefit was
    actually made available to the employees who retired or died on or after
    1.4.1995. Similarly, the increase in the ceiling of gratuity was a mere             H
    560                     SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A   consequential step, which was also made applicable from 1.4.1995. As we
    have already noticed, 1.4.1995 was the date suggested by the Fifth Central
    Pay Commission ("Pay Commission") in its Interim Report. The Central
    Government took a conscious stand that the consequential financial burden
    would be unbearable. It, therefore, chose to taper down the financial burden
B   by making the benefits available only from 1.4.1995. It is trite that, the final
    recommendations of the Pay Commission were not ipso facto binding on the
    Government, as the Government had to accept and implement the
    recommendations of the Pay Commission consistent with its financial
    position. This is precisely what the Government did. Such an action on the
    part of the Government can neither be characterized as irrational, nor as
c   arbitrary so as to infringe Article 14 of the Constitution.

          D.S. Nakara (supra), which is the mainstay of the case of the employees,
    arose under special circumstances, quite different from the present case. It       .-
    was a case of revision ofpensionary benefits and classifications of pensioners
D   into two groups by drawing a cut-off line and granting the revised pensionary
    benefits to employees retiring on or after the cut-off date. The criterion made
    applicable was "being in service and retiring subsequent to the specified
    date". This Court held that for being eligible for liberalised pension scheme,
    application of such a criterion is violative of Article 14 of the Constitution,
    as it was both arbitrary and discriminatory in nature. The reason given by
E   the Court was that the employees who retired prio1 to a specified date, and
    those who retired thereafter formed one class of pensioners. The attempt to
    classify them into separate classes/ groups for the purpose of pensionary
    benefits was notfounded on any intelligible differentia, which had a rational
    nexus with the object sought to be achieved. However, it must be noted that
F   even in cases of pension, subsequent judgments of this Court have considerably
    watered down the rigid view taken in D.S. Nakara (supra) as we shall see
    later in T. N Electricity Board v. R. Veerasamy and Ors. 2 ("Veerasamy").
    In any event, this is not a case of a continuing benefit like pension; it is a
    one-time benefit like gratuity.

G        In Union of India v. P.N. Menon and Ors.,3 while implementing the
    recommendations of the Third Pay Commission with regard to dearness pay
    linked to average index level 272, which was to be counted as emoluments

    2.    [1999] 3 s.c.c. 414.
H   3.    [t994J 4 s.c.c. 68.
                  STATE v. A.N. GOYAL [SRIKRISHNA, J.]                      561

for pension and gratuity under Central Civil Services (Pension) Rules, 1972,        A
the Central Government had fixed a certain cut-off date and directed that only
officers retiring on or after the specified date were entitled to the benefits of
the dearness pay being counted for the purpose of retirement benefits. This
was challenged as arbitrary and violative of Article 14 of the Constitution.
This Court turned down the challenge and observed:                                  B

         "Not only in matters of revising the pensionary benefits, but even
         in respect of revision of scales of pay, a cut-off date on some rational
         or reasonable basis, has to be fixed for extending the benefits. This
         can be illustrated. The Government decides to revise the pay scale
         of its employees and fixes the I st day of January of the next year        C
         for implementing the same or the I st day of January of the last year.
         In either case, a big section of its employees are bound to miss the
         said revision of the scale of pay, having superannuated before that
         date. An employee, who has retired on 3 !st December of the year
         in question, will miss that pay scale only by a day, which may affect      D
         his pensionary benefits throughout his life. No scheme can be held
         to be foolproof, so as to cover and keep in view all persons who
         were at one time in active service. As such the concern of the court
         should only be, while examining any such grievance, to S('e, as to
         whether a particular date for extending a particular benefit or
         scheme, has been fixed, on objective and rational considerations.'"'       E

      In Action Committee South Eastern Railway Pensioners v. Union of
India,' it was held that, on merger of a part of dearness allowance as dearness
pay on average price index level at 272 with reference to different pay ranges,
fixing a cut-off date in such a manner was not arbitrary and the principle          F
enunciated in D.S. Nakara (supra) was not applicable. In this connection, the
ratios in Krishena Kumar v. Union of India', Indian Ex-Services league v.
Union of India', State Government Pensioners' Association v. State of A.P. 8
and All India Reserve Bank Retired Officers' Association v. Union of India'

4.   Ibid at pp. 75-76 (para 14).                                                   G
5.   [1991] Supp. 2 S.C.C. 544.
6.   [1990] 4 S.C.C. 207.
7.   [1991] 2   s.c.c. 104.
&.   \\9&6] 3 s.c.c. 501
9.   [1992] Supp. I S.C.C. 664.                                                     H
    562                      SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A   are apt. In all these cases, the prescription of a cut-off date for implementation
    of such benefits was held not to be arbitrary, irrational or violative of Article
    14 of the Constitution.

         The importance of considering financial implications, while providing
B   benefits for employees, has been noted by this Court in numerous judgments
    including in the following two cases. In State of Rajasthan and Anr. v.
    Amritlal Gandhi & Ors. 10 this Court went so as far as to note that:

              " ... Financial impact of making the Regulations retrospective can be
              the sole consideration while fixing a cut-off date. In our opinion, it
c             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" 11

           More recently, in Veerasamy(supra), this Court observed that, financial
D   constraints could be a valid ground for introducing a cut-off date while
    implementing a pension scheme on a revised basis. 12 In that case, the pension
    scheme applied differently to persons who had retired from service before
    1. 7 .1986, and those who were in employment on the said date. It was held
    that they could not be treated alike as they did not belong to one class and
    they formed separate classes.
E
          In State of Punjab and Ors. v. Boota Singh and Anr., 13 ("Boota Singh")
    after considering several judgments of this Court in D.S. Nakara (supra) to
    K.L. Rathee v. Union of India, 14 it was held that D.S. Nakara (supra) should
    not be interpreted to mean that the emoluments of persons who retired after
F   a notified date holding the same status, must be treated to be the same. 15

          In State of Punjab and Anr. v. J. L. Gupta and Ors., 16 where one of us


    10. A.LR. (1997) S.C. 782.
    11. Ibid. at p. 784 (para 17) (emphasis supplied)
G
    12. [1999) 3 S.C.C. 414 at p. 421 (para 15).
    13. 120001 3 s.c.c. 733.
    14. [1997) 6 s.c.c. 7.
    15. [2000] 3 S.C.C. 733 at p. 735 (para 8).

H   16. [2000) 3 s.c.c. 736.
                   STATE v. A.N. GOY AL [SRIKRISHNA, J.]                   563

was on the Bench (Sabharwal, J.), the views expressed in Boo/a Singh (supra)       A
were reiterated, and it was held that for the grant of additional benefit, which
had financial implications, the prescription of a specific future date for
conferment of additional benefit, could not be considered arbitrary. 17

      In Ramrao and Ors. v. All India Backward Class Bank Employees                B
Welfare Association and Ors., 18 a Division Bench of this Court said, even for
the purpose of effecting promotion, the fixing of a cut-off date was neither
arbitrary, unreasonable nor did it offend Article 14 of the Constitution.
Moreover, the Court held that possible hardship to be endured by a person
as a result did not make cut-off dates violative of Article 14. 19
                                                                                   c
      In the instant case before us, the cut-off date has been fixed as l.4.1995
on a very valid ground, namely, that of financial constraints. Consequently,
we reject the contention that the fixing of the cut-off date was arbitrary,
irrational or had no rational basis or that it offends Article 14.
                                                                                   D
      The learned counsel for the employees have referred to Union of India
v. Bidhubhushan Malik and Ors., 20 All India Judges Asson. & Ors. v. Union
of lndia,' 1 MC. Desai & Ors. v. Union of Jndia. 22 MJ Sivani and Ors. v.
State of Karnataka and Ors., 23 Chairman, Railway Board & Ors. v. C.R.
Rangadhamaiah & Ors. 24 and Union of India and Anr. v. Pratibha Bonnerjea
and Anr. 25 Having perused these judgments, we find that the issue urged           E
before us, which has been considered in the several judgments that we have
referred to in detail, has not been adverted to. In our view, these judgments
are of no assistance in resolving the issue before us.

       In the result, we set aside the common judgment and order of the High       F
17.   Ibid. at p. 737 (para 4).
18.   [2004] 2 s.c.c. 76.
19.   Ibid. at p. 88 (para 33).
20. [1984] 3 s.c.c. 95.
                                                                                   G
1.1. A.l.R. (1993) S.C. 2493.
22.   A.l.R. (1988) All. 283.
23.   [1995] 6 s.c.c. 289.

24. [1997] 6 s.c.c. 623.
25.   A.1.R. (1996) S.C. 693.
                                                                                   H
    564                   SUPREME COURT REPORTS [2005) SUPP. 2 S.C.R.

A   Court of Punjab & Haryana in CWP No. 4995/97 and in connected matters
    decided thereby, in so far as they purport to grant the revised death-cum-
    retirement gratuity to government employees who died or retired before the
    prescribed cut-off date of l.4.1995. We also set aside judgment and orders
    of the High Court ofHimachal Pradesh in CWP No. 462/03 (dated 24.6.2003)
B   and in Civil Review No. 32/2003 (dated 11.9.2003).

         We further allow Civil Appeal Nos. 129/03, 132/03, 1838/03, 1847/03,
    902/04, 1061/05 Civil Appeals @ SLP (C) Nos. 12071-12072/04, Civil
    Appeal@ SLP (C) No. 2947/03, Civil Appeals@ SLP (C) Nos. 6855-~886/
    03 and T.C. No. 58104 (and set aside the order dated 21.9.2001 of the CAT
c   (Mumbai Bench) in O.A. Nos. 542/97, 942/97 and 943/97) and dismiss Civil
    Appeal Nos. 133/03 and T.C. No. 41/05.

           In the circumstances of the case, there shall be no order as to costs.

    B.S.                                   Appeal and Transfer cases dismissed.
D