Holding

The retrospective operation of the Office Memorandum is not prejudicial as it provides an option to retain earlier benefits, and therefore the Tribunal’s order striking it down is set aside.

Summary

The respondents, Audit Officers on deputation, retired after 1 January 1986 but before the Office Memorandum of 14 April 1987 came into force. The Memorandum, issued to implement the Fourth Pay Commission recommendations, retrospectively redefined "emoluments" for pension calculation as basic pay excluding special pay such as deputation allowance. Consequently, their pension was to be computed without the deputation allowance. They challenged this retrospective change as arbitrary and violative of Articles 14 and 16 of the Constitution, and the Central Administrative Tribunal struck down the Memorandum. The Union appealed, arguing that the Memorandum formed part of a comprehensive package of pay‑scale and pension reforms and that it expressly gave retirees between 1 January 1986 and 30 June 1987 a choice to retain old benefits, thereby averting any prejudice. The Supreme Court held that the retrospective operation was not prejudicial because the option to retain earlier benefits prevented any actual disadvantage, and therefore set aside the Tribunal’s order. The appeal was allowed, upholding the Office Memorandum.

Issues considered

Whether the retrospective application of the Office Memorandum dated 14 April 1987, which excluded deputation allowance from pension calculations, violates Articles 14 and 16 of the Constitution.
Whether the provision in the Memorandum granting retirees the option to retain old pay scales and pension formula prevents any prejudice and validates the retrospective amendment.

Legislation cited

Central Civil Services (Pension) Rules, 1972s. Rule 33, s. Rule 9(21)
Constitution of Indias. Art 14, s. Art 16
Fundamental Ruless. Rule 9(21)

Subjects

service lawpensionretrospective amendmentdeputation allowanceequalityconstitutional lawCentral Administrative Tribunalpay commission

Judgment

•
A UNION OF INDIA AND ORS.
v.
L.V. VISH}VANATHAN ETC.
-
NOVEMBER 11, 1997

B [SUJATA V. MANOHAR AND M. JAGANNADHA RAO, JJ.]

Service law :

Central Civil Services (Pension) Rules 1972/Fundamenta/' Rule-
C Rule33/Rule 9 (21) Office Memorandum dated. 14.4.1987-Retirement
Benefits_:Audit Officers-On deputation-Retired from service-Pension
calculated on the basis of basic pay excluding deputation allowance-
Retrospective effect given to the memorandum-Struck down by Tribunal-
-
Held, The Tribunal erred in striking down the office memorandum dated
D 14.4. 1987, No prejudice is caused by the retrospective operation of office
memorandum-Order of tribunal set aside.

·The respondents were Audit Officers who were on deputation to the
Secretariat before their ~eti,relnent. Both the respondents opted for retaining
their pay in the parent office plus a deputation allowance. At the time of their
E retirement, under Rule 33 of the Central Service (Pension) Rules 1972,
emoluments for the purpose of calculation of pension were defined to mean
pay as defined, in Fundamental Rule 9(21). Deputation allowance treated as
special pay was included for the purpose of calculation of Pension. After the
Fourth Pay Commission, by Office memorandum dt. 14.4.1987 modification
in the pension rules was made. As per the modification only sub-clause (i)
F of Fundamental Rule 9 (21) would constitute basic pay excluding sub-clause
(ii) & (iii). Therefore, under 9(2l)(a~(l) the basic pay would be calculated by
excluding deputation allowance. The modifications were given retrospective
effect from 1.1.1986. The respondents challenged the retrospective
modification of the pension rules before the Tribunal. The Tribunal struck
G down the retrospective operation of office memorandum dt. 14.4.1987.
Hence the present appeal.
I

The contention of the appellant-Union of lndJa was that the changes ·
consequent upon the Fourth Pay Commission Report have to be taken as a
package and they cannot reject a part of that package which was
H 112

r
U.0.1. v. L.V. V!SHWANATHAN 113
·\ disadvantageous to them. It was further contended that options were given to A
respondents either to r_etain their revised pay scales and the old benefits or
to opt for their new pay scales and get benefits as per the new scheme. Thus
if the retrospective operation of the Memorandum causes any prejudice, the
employee can reject it and retain his old benefits.

The contention of the respondent-employees was that by a retrospective B
amendment in the pension rules, their right to include deputation allowance
as a part of their emoluments has been taken away. They contended that such
retrospective operation of the pension rules must be set aside as arbitrary
and violative of Art. 14 and 16 of Constitution of India.

Allowing the appeal, this Court c
HELD : 1.1. The retrospective operation of Office Memorandum cannot

- be considered as prejudicial as it has made an express provision to prevent
any actual prejudice to the employees. The judgment of the Central
Administrative Tribuna~ in so far as it strikes down the retrospective operation
of Office Memorandum of 14.4.1987 is, therefore, set aside. 1118-B-D] D
1.2. There is Ii clear nexus between the upward revision in the pay
scales and the new formula for calculating pension. Both are given
retrospective effect from 1.1.1986. The Office Memorandum which changes
the formula for pensfo·n also provides that those who retired after 1.1.1986
but before the issuance of the office Memorandum would have the option to E
get their pension determined under·the then existing rules on the basis of
emoluments they were then getting. The effect is that (1) those who retired
prior to 1.l.1986 got old emoluments and Pension as per the old formula (2)
those whd retire after 30.6. 1987 get new pay scales and pension as per new
form.;ila and (3) those who retire between 1.1.1986 and 30.6.1987 have the
option to choose to be with either those in (1) or t~ose in (2) w·hichever is F
more advantageous to them. (117-F-G)

1.3. The respondents want that those who retire between 1.1.1986 and
30.6.1987 should have the new pay scales and also the more liberal old
' .
formula for calculating pension as applied to the new pay scales. If this is
accepted, those who retire between I.l.1986!lnd 30.6.1987 will get higher G
pension than all those who have.retired before 1.1.1986 as also those who
retire after 30.6.1987. ·'fhere is no' justification for conferring such higher
benefits only on a small group that retired between l.1.1986 and 30.6.1987.
(113-G; 114-A-BI

Chairman, Railway Board & Ors. v. C.R. Rangadhamaiah & Ors., JT H
114 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A (1997) 7 SC 180, held inapplicable.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3343 of 1990
Etc.

From the Judgment and Order dated 28.8.89 of the Central Administrative
B Tribunal, Hyderabad in 0.A. No. 31 of 1989.

N.N. Goswami and Ms. Kanupriya Mittal, for C.V. Subba Rao for the
Appellants.

M.S. Balaganesan and Mohd. Tahir Siddiqui for the Respondents in
C C.A. No. 8851/94.

The Judgment of the Court was delivered by

MRS. SUJAT A V. MANOHAR, J. The respondents in both these
appeals retired as Audit Officers from the Office of the Accountant General,
D Andhra Pradesh, after more than 30 years of service. The respondents, some
time prior to their retirement, had been sent on deputation to the Andhra
Pradesh Secretariat and they continued to be on deputation till the date of
their retirement. Each person when he is sent on deputation has an option
either to opt for the pay in the parent office plus a deputation allowance or
E to opt for the scale of pay in the deputation post. Both the respondents had
opted for retaining their pay in the parent office plus a deputation allowance.
The respondent in Civil Appeal No. 3343of1990 (L.V. Vishwanathan) retired
on 31.1.1987 while the respondent in Civil Appeal No. 8851 of 1994 (M.S.
Sabhesan) retired on 31.5 .1986. Atthe time of their retirement, under Rule 33
of the Central Services Pension Rules which are applicable to the respondents,
F emoluments for the purpose of calculation of pension were defined to mean
pay as defined in Fundamental Rule 9(21 ). Fundamental Rule 9 (21) is as
follows :-

"9 (21) : (a) Pay means the amount drawn monthly by a Government
servant as-
G
(i) the pay, other than special pay or pay granted in view of his
personal qualifications, which has beeil sanctioned for a post held
·by him substantively or in an officiating capacity, or to which .he
is entitled by reason of his position in a cadre; and

H (ii) overseas pay, special pay and personal pay; and
U.0.1. v. L. V. V!SHWANATHAN [SU.TATA V. MANOHAR, .T.] 115

(iii) any other emoluments which may be specially classed as pay A
by the President.

"
It is an admitted position that the Government of India treated deputation
allowance as special pay. Emoluments, therefore, at the time of the retirement B
of the respondents included deputation allowance for the purpose of calculation
of pension .

. After the Fourth Central Pay Commission Report, Government orders
were issued in June 1986 revising the pay scales with effect from 1" of
January, I 986. Thereafter, under aii Office Memorandum dated 14'h of April,
1.987 issued by the Government of India, Ministry of Personnel, Public C
Grievances and Pensions, there was a revision in the provisions regulating,
inter alia, pension. In the opening part of the Office Memorandum it is stated
that "In pursuance of the Government decisions on the recommendations of
the Fourth Central Pay Commission; the President is pleased to introduce the
following modifications in the rules regulating pension, death-cum-retirement
gratuity and family pension under the CCS (Pension) Rules, 1972." The D
modifications were applied retrospectively from 1" of January, 19_86 so as to
coincide with the revision in the pay scales. As per the modifications, the term
'emoluments' for the purposes of calculating various retirement benefits
including pension, was re-defined to mean basic pay as defined in Fundamental
Rule 9(21 )(a)(i) which the Government servant was receiving immediately E
before his retirement. Similarly, the term 'average emoluments' was to be
determined with reference to the emoluments drawn by a Government servant
. during the last ten months of his service.
As a result of this modification only sub-clause (i) of Fundamental Rule
9(2l)(a) would constitute basic pay, excluding sub-clauses (ii) and (iii).
Therefore, since special pay is excluded from sub-clause (i), the basic pay F
would have to be calculated by excluding deputation allowance. In
consequence, Rule 33 of the C.C.S. Pension Rules was amended in 1988 with
retrospective effect from 1.1.1986. Previously, Rule 33 of CCS Pension Rules
defined "emolu1nents" as follows :

"The expression 'Emoluments' means pay as defined in Rule 9 (21) of G
the Fundamental Rules (including Dearness Pay as determined by the
order of the Government issued from time to time) which a Government
servant was receiving immediately before his retirement or on the date
of his death."

The amended Rule 33 (with retrospective effect from 1.1.1986) is as follows: H
116 SUPREME COURT REPORTS [1997) SUPP. 5 S.C.R.

A "Emoluments; The expression 'emoluments' means basic pay as
defined i.n Rule 9(21 )(a) (i)- of the Fundamental Rules which a
Government servant was receiving immediately before his retirement
or on the date of his death; and will also include non-practising
allowance ·granted to medical officer in liea of private practice."

B In the same Office Memorandum, clause I0.1 makes a provision for
those who retire between 1.1.1986 and 30.6.1987. These persons have an
option to retain their pre-revised scales of pay and have their pension
calculated under the rules in force prior to the Office Memorandum of 14.4.1987.
In other words, they have the option to retain pre-revised scales of pay and
C the pre-revised formula for calculation of pension. The other option is for
them to accept the new scales of pay from 1.1.1986 but their pension will be
under the amended Pension Rules i.e. ·without taking into account the
deputation allowance. This was expressly provided in the Office Memorandum
to prevent any actual prejudice iltthe form of lesser pension being given on
account of retrospective operation of the new pension formula.
D
The Office Memorandum of 14.4.1987 was modified on 81h of December,
1987 on account of many representations which were received. As per the
modification, in cases where ten months' average has to be calculated on
either side of the date I. LI 986, the emoluments as per Fundamental Rule
9(21 )(a)(i) will be calculated only for the period falling after 1.1.1986. Once
E again, retrospectivity was curtailed to prevent any actual prejudice.

· Since the Office Memorandum was given retrospective operation from
l .1.1986, the respondents who had-retired after l .1.1986 but before 14.4.1987,
were affected by this Office Memorandum. They opted for revised pay scales.
Hence, for the purpose of calculation of pension, only the basic pay as
F revised excluding deputation allowance was taken into account for determining
pension.

The respondents contend that by a retrospective amendment in the
pension rules, their right to include deputation allowance as a part of their
G emoluments has been taken away. They contend that such retrospective
operation of the pension rules must be set aside as arbitrary and violative of
Articles 14 and 16. This contention has been upheld by the Central
Administrative Tribunal, Hyderabad Bench: Hence the Union of India has
filed the present appeals.

H It is contended. by the appellants that the changes consequent upon the
U.0.1. v. L.V. VISHWANATHAN [SUJATA V. MANOHAR. J.) IJ7

Fourth Central Pay .Commission Report have to be taken as a package. By A
accepting the revised pay scales with retrospective effect from 1.1.1986 the
Central Government Employees got benefits in pay, pension and gratuity from
1.1.1986. When they take these benefits retrospectively from 1.1.1986, they
cannot reject a part of that package which is "disadvantageous" to them. In
fact, the actual pension which the respondents got is much more than what B
they would have got had they opted for the old rules prevailing when the old
pay scales were in force. In the Office Memorandum of 14.4.1987 there is a
specific provision for people like the respondents who have retired after
l .1.1986 but before 30th of June, 1987 (i.e. the period prior to the Office
Memorandum) giving them an option either to retain their old pay scales and
the old benefits which they were getting or to opt for their new pay scales C
and get benefits as per the new scheme. So that in those cases where the
retrospective operation of the "package" causes any prejudice, the employee
can reject it and retain his old benefits.

A Constitution Bench of this Court has recently, in the case of Chairman,
Railway Board & Ors. v. C.R. Rangadhamaiah & Ors., JT (1997) 7 SC 180, D
considered a situation where a retrospective effect was given to a reduced
percentage of running allowance being taken into account for determining
average emoluments for pension of railway employees. The Constitution
Bench has held that pension would have to be calculated on the basis on
which it was required to be calculated on the date when the person retired. E
A more restrictive formula for calculation of pension was held as arbitrary and
violative of Articles 14 and 16 to the extent that it was made applicable with
retrospective effect. In the present case, however, there is a clear nexus
between the upward revision in the pay scales and the new formula for
calculating pension. Both are given with retrospective effect from 1.1.1986.
The Office Memorandum which changes the formula for pension also provides F
that those who retired after 1.1. 1986 but before the issuance of the Office
Memorandum would haye the option to get their pension determined. under
.. the then existing rules on the basis ofemoluments they were then getting .
• The effect is that ( 1) thos·e who retired prior to 1.1.1986 got old emoluments
and pension as per the old formula (2) those who retire after 30.6.1987 get new G
· pay scales and pension as per new formula and (3) those who retire between
1.1.1986 and 30.6.1987 have the option to _choose to be with either those in
(I) or those in (2) whichever is more advantageous to the~.

The respondents want to carve out a fourth category. Those who retire
between 1.1.1986 and 30:6.1987 should have the new pay scales and also the H
118 SUPREME COURT REPORTS [1997) SUPP. 5 S.C.R.

A more liberal old formula for calculating pension as applied to the new pay
scales. If this is accepted, those who retire between 1.1.1986 and 30.6.1987 will
get higher pension than all those who have retired before 1.1.1986 as also all
those who retire after 30.6.1987. There is no justification for conferring such
higher benefits only on ll small group that retired between 1.1.1986 and
30.6.1987. The Office Memorandum, therefore, rightly gives them the choice, ·
B to obviate any prejudice to this small group. The retrospective operation of
Office Memorandum, therefore, cannot be considered as prejudicial to this
small group as it has made an express provision to prevent any actual
prejudice to this group. The ratio of the decision of this Court in Chairmqn;
Railway Board v. Rangadhamaiah (supra) does not, therefore, apply in the
C facts and circumstances of the present case.

The judgment of the Central Administrative Tribunal, in so far as it
strikes down the retrospective operation of Office Memorandum of 14.4.1987
is, therefore, set aside and the appeals are allowed. There will, however, be
no order as. to costs.
D
S.V.K.I. Appeals allowed.

-