Holding

Petitioners are entitled to restoration of the one‑third commuted pension as per Common Cause, and paragraph 4 of the Office Memorandum dated 5 March 1987 is quashed.

Summary

The Government absorbed central civil servants into public enterprises and offered them retirement benefits, including the option to commute one‑third of their pension or, in some cases, the entire pension. Petitioners who had commuted the full pension were denied the restoration of the one‑third commuted portion under an Office Memorandum dated 5 March 1987, which claimed they ceased to be Central Government pensioners. Relying on the Supreme Court’s decision in Common Cause v. Union of India (1987), the petitioners argued that the denial violated Articles 14 and 16 of the Constitution and the provisions of Rules 37 and 37‑A of the Central Civil Services (Pension) Rules, 1972. The Court held that the petitioners are entitled to the same restoration benefit as in Common Cause, quashed paragraph 4 of the Office Memorandum, and directed that the one‑third commuted pension be restored. The writ petitions were allowed.

Issues considered

Whether a government servant who has commuted his entire pension ceases to be a Central Government pensioner for purposes of pension benefits.
Whether the denial of restoration of the one‑third commuted pension violates Articles 14 and 16 of the Constitution.
Whether the decision in Common Cause v. Union of India is applicable to the present petitioners.
Interpretation of Rule 37 and Rule 37‑A of the Central Civil Services (Pension) Rules, 1972 with respect to pension commutation and restoration.

Legislation cited

Central Civil Services (Pension) Rules, 1972s. Rule 37, s. Rule 37-A
Constitution of Indias. Article 14, s. Article 16

Subjects

pension commutationrestoration of pensioncentral government employeespublic enterprisesequalityArticles 14 and 16service lawOffice Memorandumabsorption

Judgment

A WELFARE ASSOCIATION OF ABSORBED CENTRAL
GOVERNMENT EMPLOYEES IN PUBLIC ENTERPRISES
AND ORS. ETC.
v.
UNION OF INDIA AND ANR.
B DECEMBER 15, 1995

[KULDIP SINGH, S. SAGHIR AHMAD AND
K. VENKATASWAMI, JJ.]

C Service Law:

Central Civil Services (Pension) Rules, 1972 : Rules 37, 37-A-O.M.
No. 3412/86P & PW dated 5.3.1987-Paragraph 4-Pension-Commutation
of-Government officials allowed to retire and get absorbed in public
enterprises-One-third commuted value restored-But restoration not allowed
D in case of government pensioners who had commuted their entire pension -
Held : they are also entitled to such benefits.

Constitution of India, 1950 : Articles 14, 16-Rule 37- A-0.M. No.
3412186 P & PW dated 5.3.1987-Para 4-Pensiott-Restoration of-Govt.
E pensioners absorbed in public enterprises-Allowed to commute entire pen-
sion-Not allowed benefits of restoration-Held violative of

When the government of India decided to start public undertak-
ings/enterprises in the core sector or industries, it sent some or its officers
to the public undertakings on deputation. Since it was felt that services of
F officers having sufficient experience and skill were necessry for the public
enterprises, the Government devised measures to induct those officers
willing to continue in public enterprises. Those officers were allowed to be
absorbed in public undertakings/enterprises. The Government also offered
to deem their retirement as retirement in 'public interest', and such
absorbed/retired Gvoernment servants were offence retiral benefits. They
G were also offered the usual facility of communting one-third of their
original pension and also an additional facility of commuting the balance
two-third pension i.e. to commute the full pension. This facility created
three categories of persons : (1) Persons who were not commuting their
pension and, therfore, drawing full monthly pension; (2) Persons who were
H commuting one-third of the pension and to drawing the balance as monthly
748
WELFARE ASSN. OF ABSORBED CENTRAL GOVT. F.MPLOYEES v. U.01. 749

pension; (3) Persons who were commuting full pension and their pension A
deemed to have been reduced to nil.

The persons in the first category continued to derive all benefits and
get all the interim relief, liberalisation and other reliefs as had been given
by the Government to the pensioners. Persons in the second category are
denied these benelits to the extent of one-third commutation. Persons in B
the third category are totally denied of all the aforesaid benefits.

The second category of the retired Government servants who got
one-third of the pension commuted moved this Court for restoration of
a
their one-third pension by filing writ petition under Article 32 of the c
Constitution, contending that their claim for restoration of one-third
pension commuted gets adjusted by about 10 or 12 years and, therefore,
the Government should be directed to restore the commuted portion of
one-third pension.

When the matter was heard, this Court gave a suggestion to the D
Government to look into the matter. The Government accepted the sugges-
tion and came forward with a new formula which would be extended w.e.f.
1.4.1986. However, this Court thought it would be equitable that the benefit
agreed should be extended in respect of commuted portion, from 1.4.1985
and ordered accordingly. Common Cause, Registered Society v. Union of
India, (1987) 1 SCR 497. E
While implementing the judgment In 'Common Casue', the Govern-
ment denied the benefit to the petitioners by inserting paragraph 4 in the
impugned O.M. dated 5.3.1987 on the ground that they ceased to be
Central Government pensioners since they have commuted their entire
pension. F

In these writ petitions under Article 32 the petitioners prayed that
the relief as was allowed in 'Common Cause' should be extended to them
also.
G
Allowing the Writ Petitions, this Court

HELD : 1.1. The petitioners are entiiled to the benefits as given by
this Court in 'Common Cause' so far as it relates to restoration of
one-third of the commutation pension. Cousequeutly the impugned para-
graph 4 of the Office memo dated 5.3.1987 is quashed. [758-B) H
750 SUPREME COURT REPORTS [1995] SUPP. 6 S.C.R.
'•I
A 1.2. There is a clear cut distinction in Rule 37 A of the C.C.S.
(Pension) Rules, 1972, that one-third of the portion of pension to be
commuted without any condition and two-third of pension to be received
as terminal benefit with condition attached to it. Therefore, the commuta-
tion of one-third pension stands on a similar footing with no difference.
So far as the balance of two-third pension is concerned the petitioners have
B
received the commuted value on condition of their surrendering their right
of drawing two-thirds of the pension. This was not the case with the
petitioners in Common Cause'. That being the position the denial of benefit
given to the petitioners in 'Common Cause', to the present petitioners is
violative of Articles 14 and 16 of the Constitution. The reasoning for
C restoring one-third commuted pension in the case of the writ petitioners
in 'Common Cause' equally applies to the present petitioners as well.
[755-H, 756·A-C]
Common Cause, Registered Society&. Ors. v. Union of India, [1987) 1
SCR 497, relied on.
D
2. Tite plea of the Central Government that the petitioners on com-
muting their pension in full ceased to be Central Government pensioners
cannot be accpeted as no statute or Rule is quoted in support thereof. In
fact in view of the counter affidavit filed by the Government it does not
justify its stand. Therefore, denial of restoration of one-third commuted
E pension is not justified. [756-E, 757-D)

Welfare Association of Absorbed Central Government Employees in
Public Enterprises v. Union of India, [1991) 2 SCC 265, referred to.

3. However, after the expiry of 15 years the pensioners who have opted
F for one-third commutation become entitled to restoration of pension on the
ground that the lump sum amount paid had got adjusted before the said
period as was held in 'Conunon Cause', there is no good reason for not
applying the same to the petitioners who have commuted their one-third
portion of the pension under Rule 37 '!f the C.C.S. (Pension) Rules 1972,
G without any commitment of this portion of commutation. May be the
respondent realising the fallacy had withdrawn the scheme of permitting
commutation of full pension, by O.M. No. 4/42/91-P & PW(D) dated
31.3.1995. [757-E-F)

Common Cause, Registered Society & Ors. v. Union of India, [1987) 1
H SCR 497, referred to.
wELFAREASSN, OF ABSORBED CENTRALoovr. EMPLOYEES\.'. U.0.1. [K. VENKATAS\VAMI,J.] 751

CIVIL ORIGINAL JURISDICTION : Writ Petition (C) No. 11855 A
of 1985 Etc.

(Under Article 32 of the Constitution of India.)

C.S. Vaidyanathan, Rama Jois, K.R. Nambiar, K.V. Viswanathan,
KV. Mohan, Shiv Kumar, Mrs. Ima Chari and S.N. Bhat for the Appel- B
!ants.

KN. Shukla, Ms. Indu Goswarny for Mrs. Anil Katiyar for the
Respondents.

The Judgment of the Court was delivered by c
K VE:NKATASWAMI, J. These two writ petitions are filed under
Article 32 of the Constitution of India. At the time of argument learned
counsel appearing in these writ petitions confined their relief to the res-
toration of one-third portion of the fully commuted pension as per the
decision of this Court in Common Cause, Registered Society & Ors. v. Union D
of india, (1987) i SCR 497, and consequently to quash para 4 of O.M.
3412/86. P & PW issued by government of India Department of Pension
and Pensioner's Welfare dated 5.3.1987.

Brief facts leading to filing of these two writ petitions are as follows:- E
The members of the petitioner's welfare association in W.P. (C) No.
11855/85 and the individual petitioners in W.P. (C) No. 567/85 were
Centrtal Govt. Servants. Government of India some years ago decided to
start public undertakings/enterprises in the core sector of industries. To
start with the Government of India, sent some of their officers to the public F
undertakings, on deputation. As it was felt that services of the officers
having sufficient experience and skill were necessary for the public
enterprises, the Government devised measures to induct those willing
officers to continue in the public enterprises. Such officers were allowed
to be absorbed in those public underakings/enterprises. The Government G
offered to deem their retirement as retirement in 'public interest'. Conse-
quent to their deemed retirement, such absorbed/retired Government ser-
vants were offered retiral benefits. These persons were also offered the
usual facility of commuting one-third of their original pension under Civil
Pensions (Commutation) Rules and were also offered additional facility of
commuting the balance two-thirds pension also i.e. to commute the full H
752 SUPREME COURT REPORTS [1995] SUPP. 6 S.C.R.

A Pension. This facility therefore creates three categories of these persons
(1) the persons who have not commuted their pension and therefore draw
full monthly pension from the Government; (2) the persons who have
commuted one-third of the pension and therefore will draw a sliced
monthly pension, reduced to the extent of commuted amount, (3) the
persons who have commuted the full pension and who will not be given
B
any monthly pension by deeming monthly pension to have been reduced to
nil. The persons falling in the first category continue to derive all the
benefits of being Government Pensioner and get all the Interim Relief,
liberalisation and/or whatever reliefs are given by the Government to the
petitioners. But the persons in the second category are denied these
C benefits to the extent of "one-third commutation". The third category are
the worst hit and are totally denied of all these benefits.

Th~ above-mentioned second category of the retired Government
servants namely, those who got one-third pension commuted moved this
D Court for restoration of thier one-third pension by filing a writ petition
under Article 32 of the Constitution of India, (Vide "Common Cause" v.
Union of India, [1987] 1 SCR 497. The contention put forward in support
of thier claim for restoration of the one-third pension was that the lump
sum amount paid gets adjusted by about 10 or 12 years and therefore, the
Government must be directed to restore the commuted portion of one-
E third pension. It was also contended that lately there has been a substantial
improvement in the life expectancy of the people in India and therefore,
there was no justification for denying the restoration of the· commuted
one-third portion of pension which gets adjusted after a period of 10 or 12
years. When that matter came up before this court, a suggestion was made
F to the Government to give a new look to the matter. The respondent
Government accepting that suggestion came forward with a new formula
and after perusing the same this Court in Common Cause v. Union of India,
[1987] 1 SCR 497 held as follows :-

"As the position now stands, when a pensioner commutes any part
G of his pension upto the authorised limit, his pension is reduced for
the remaining part of his life by deducting the commuted portion
from the monthly pension.

The petitioner have contended that the commuted portion out of
H the pension is ordinarily recovered within about 12 years and,
WELFARE ASSN. OF ABSORBED CENTRAL GOVT. EMPLOYEESv. u.o.r. [K. VENKATASWAMLJ.] 753

therefore there is no justification for fixing the period at 15 years. A
Commutation brings about certain advantages. The commuting
pensioner gets lump sum amount which ordinarily he would have
received in course of a spread over period subject to his continuing
to live. Thus two advantages are certainly forthcoming out of
commutation - (i) availability of a lump sum amount and (2) the B
risk factor. Again many of the State Governments have already
formulated schemes accepting the 15 year rule. In this background,
we do not think we would be justified in disturbing the 15 year
formula so far as civilian pensioners are concerned.

The age of superannuation used to be 55 untill it was raised to 58. C
It is not necessary to refer to .the age of the commuting pensioner
when the benefit would be restored. It is sufficient to indicate that
o.: •he expiry of fifteen years from the period of retirement such
restoration would take place.

The respondent-Government has agreed that this benefit should D
be extended with effect from 1.4.86. The writ application were filed
in 1983. The matter was placed on board for hearing in February,
1984. The Union Government took some time for responding to
the suggestion of the Court and that is how the disposal was initially
delayed. Thereafter, the hearing of the matter has again been E
delayed on account of pressing business in the Court. In these
circumstances, we think it just arid equitable that the benefit agreed
to be extended in respect of the commuted portion of the pension
should be effective from 1.4.85 so far as the civilian employees are
Concerned."
F
The same was made applicable to the defence personnel as well in
the same judgment.

The respondent while giving effect to the above judgment denied the
same benefit to the petitioners by inserting para 4 in the impugned O.M. G
dated 5.3.1987 which reads as follows :-

"Central Government employees who got themselves absorbed
under Central Public Sector Undertakings/autonomous bodies and
have received/or opted to receive commuted value for 1/3rd of
pension as well as terminal benefits equal to the commuted value H
754 SUPREME COURT REPORTS (1995) SUPP. 6 S.C.R.

A of the balance amount of pension left after commuting 1/3rd of
pension are not entitled to any benefit under these orders as they
have ceased to be Central Government pensioners."

The petitioners in these petitions prayed that the same relief be given
to them. As a matter of fact, in this ·case as well the respondent was
B directed to consider the case of the petitioners in the light of the judgment
in 'Common Cause' case. Unfortunately, the Government did not come
forward with favourable reply. Hence this decision on merits.

To appreciate the claim of the petitioners, it is necessary to set out
C two relevant rules in the C.C.S. Pension) Rules 1972. Rule 37 and 37A read
as follows :-

Rule 37 : Pension on absorption in or under a corporation, com-
pany or body :

(1) A Government servant who has been permitted to be ab-
D
sorbed in a service or post in or under a Corporation or
Company wholly or substantially owned or controlled by the
Central Government or a State Government or in or under a
Body controlled or financed by the Central governmnet or a
State Government, shall be deemed to ~ah retired from
E service from the date of such absorption and subject to
sub-rule (3) he shall be eligible to receive retirement benefits
which he may be elected, or deemed to have elected, and
from such date as may be determined, in accordance with the
orders of the Central Government applicable to him.
F
&planation : Date of absorption shall be :-

(i) in a case a Government employee joins a Corporation or a
company or body on immediate absorption basis, the date on
which he actually joins that corporation or company or body;
G
(ii) in case a Government employee initially joins a corporation
or company or body on foreign service terms by retaining a
lien under the Government the date from which his un-
qualified resignation is accepted by the Government.

H (2) The provisions of sub-rule (1) shall aslo apply to Central
WELFARE ASSN. OF ABSORBED CENTRALGOVf. EMPLOYEESv. U.0.1.{K. VENKATASWAMl,J.J 755

Government servants who are permitted to be absorbed in joint A
sector undertakings, wholly under the joint control of Central
Government and State Government/Union Territory Administra-
tion or under the joint control of two or more State Govern-
ments!Union Territory Administrations.

(3) Where there is a pension scheme in a body controlled or B
financed by the Central Government in which a Government
servant is absorbed, he shall be entitled to exercise option either ·
to count the service rendered under the Central Government in
that body for pension or to receive pro rate retirement benefits for
the service rendered under the Central Government in accordance C
with the orders issued by the Central Government.

Expl.:~ation : Body means autonomous body or statutory body.

Rule 37-A : Payment of lump sum amount to person on ab-
sorption in or under a Corporation, company or D
body.

(1) Where a Government servant referred lo in Rule 37 elects the
alternative of receiving the (retirement gratuity) and a lump sum
amount in lieu of pension he shall in addition to the (retirement
gratuity) he granted :- E
(a) on an application made in this behalf, a lump sum amount
not exceeding the commuted value of one-third of his pension
as may be admissible to him in accordance with the provisions
of the Civil Pensions (Commutation) Rules, and
F
(b) terminal benefits equal to the commuted value of the balance
amount of pension left after commuting one-third of pension
to be worked out \vith reference to the commutation tables
obtaining on the date from which the commuted value be-
comes payable subject to the condition that the Government G
servant surrenders his right of drawaing two-thirds of his
pension."

From the above extracts, it will be seen that a clear-cut distinction is
made in Rule 37-A itself between one-third portion of pension to be
commuted without any condition attached and two- third portion of pen- H
756 SUPREME COURT REPORTS [1995] SUPP. 6 S.C.R.

A sion to be received as terminal benefits with condition attached with it. It
follows that so far as commutation of one-third of the pension is concerned,
the petitioners herein as well as petitioners in 'Common Cause' case stand
on similar footing with no difference. So far as the balance of two-third
pension is concerned, the petitioners herein have received the commuted
B value (terminal benefits) on condition of their surrendering of their right
of drawing two-thirds of their pension. This was not the case with the
petitioners in 'Common Cause' case. That being the position the denial of
benefit given to 'Common Cause' petitioners to the present petitioners
violates Articles 14 & 16 of the Constitution. The reasoning for restoring
one-third commuted pension in the case of 'Common Cause' petitioners
C equally applies to the restoration of one-third commuted pension in the
case of these petitioners as well.

No doubt the Government while declining to consider the case of
petitioners favourably took into account a decision of this court in Welfare
D Association of Absorbed Central Government Employees in Public
Enterprises v. Union of India, reported in [1991] 2 SCC 265, holding that
the petitioners in 'Common Cause' case stand on a different footing than
that of the petitioners in the present case. In that judgment Rule 37-A was
not brought to the notice of the Court. Another reason given by the
Government was that the petitioners on commuting their pension in full
E cease to be Central Government pensioners. Thi.; :~ :.,., brnad a contention
to be accepted as no statute or rule is quoted in support of this contention.
This stand taken by the Government does not appeal to be correct in view
of their own counter-affidavit filed in this case. In para 8 at page 14 of the
counter-affidavit it has been stated as follows :-
F
"It would be seen from (b) above that the two-third terminal
benefits received by the absorbees is nothing but pension. Thus,
the absorbees who have opted for lump sum payment have not
only commuted one-third of their pension but also the remaining
portion of two-third pension which is termed as "terminal benefits".
G The absorbees have in fact commuted the entire pension and not
one-third of pension. 1'

It would be seen from (b) above, two-third terminal benefits received
by the absorbees is nothing but pension. Further as per the condition
H imposed in the absorption order, the family pension when not provided in
WELFARE ASSN. OF ABSORBED CENTRALGOvr. EMPLOYEESv. U.O.L [K. VENKATASWAMI,J.] 757

the public undertakings in which the retired Government servants were A
absorbed, the payment of family pension is continued by the Government.
The relevant condition reads as follows :-

(ii) As regards entitlement to family pension, the condition im-
posed reads ·
B
"On his permanent absorption in the Company his family will be
eligible for family pension subject to the provisions of Rule 54 of
CCS (Pension) Rules, 1972 and any other orders issued by the
GoYernment of India from time to time provided that he is not
covered by any other family pension scheme applicable to the C
Company Staff'.

This was also the condition incorporated in respect of persons who
had opted for one-third commutation."

This also indicates that the stand of the Government is not correct. D
Therefore, the denial of restoration of one-third commuted pension is not
justified.

If after the expiry of 15 years, the pensioners who have opted for
one-third commutation, becomes entitled to restoration of pension on the
ground .that the lump sum amount paid had got adjusted before the said E
period as held in 'Common Cause' case, there is no good reason for not
applying the same to the petitioners who have commuted their one-third
portion of the pension under rule 37'A of the Pension Rules 1972 without
any commitment for this portion of commutation. Presumably the respon-
dent realising the fallacy have withdrawn the scheme of permitting com-
mutation of full pension by O.M. No. 4/42/91- P&PW(D) dated 31.3.1995. F
Para 3 of the Office Memorandum reads as follows :

"3. The proposal to review the existing terms and conditions of
absorption had been under consideration of the Govt. for quite
sometime past. The President is now pleased to ...... (sic) that the G
existing terms and conditions of absorption shall stand partially
modifed to the extent indicated below :•

(a) The existing facility of receiving capitalisation value
equivalent to 100% commutation of pension on absorption
shall stand witdrawn; H
758 SUPREME COURT REPORTS [1995] SUPP. 6 S.C.R.

A (b) Tile existing facility to draw pro-rata monthly pension from
the date of absorption (with option to commute 1/3rd pension
wherever admissible shall continue to exist."

This means this issue will not arise in future.

B For the foregoing reason, we hold that the petitioners are entitled to
the benefits as given by this Court in 'Common Cause' case so far as it
related to restoration of one-third of the commuted pension. Consequently,
the impugned para 4 of Office Memorandum dated 5.3.1987 is quashed.
The writ petitions are accordingly allowed to the extent indicated above.
No costs.
c
G.N. Petitions allowed.

•