The Punjab State Cooperative Agricultural Development Bank Ltd. vs The Registrar,cooperative Societies and Others

Doctrines/Principles – Legitimate expectation vis-à-vis a vested/accrued right – Held: There is a distinction between the legitimate expectation and a vested/accrued right in favour of the employees – The rule which classifies such employee for promotional, seniority, age of retirement purposes operates on those who entered service before framing of the rules but it operates in futuro – In a sense, it governs the future right of seniority, promotion or age of retirement of those who are already in service. Service Law – Pension Scheme – Plea of financial distress taken by the appellant-Bank to justify the impugned amendment taking away the right accrued to the retired employee under the existing rule – Held: Not acceptable – Rule making authority was presumed to know repercussions of the particular piece of subordinate legislation and once the Bank took a conscious and introduced the pension scheme, it can be presumed that the competent authority was aware of the resources from where the funds are to be created for making payments to its retirees.

Dismissing the appeals, the Court

HELD: 1.1 An amendment having retrospective operation which has the effect of taking away the benefit already available to the employee under the existing rule indeed would divest the employee from his vested or accrued rights and that being so, it would be held to be violative of the rights guaranteed under Articles 14 and 16 of the Constitution. In the instant case, the Bank pension scheme was introduced from 1.04.1989 and options were called from the employees and those who had given their option became member of the pension scheme and accordingly pension was continuously paid to them without fail and only in the year 2010, when the Bank failed in discharging its obligations, respondent employees approached the High Court by filing the writ petitions. The Bank later on withdrawn the scheme of pension by deleting clause 15(ii) by an amendment dated 11.03.2014 which was introduced with effect from 1.04.1989 and the employees who availed the benefit of pension under the scheme, indeed their rights stood vested and accrued to them and any amendment to the contrary, which has been made with retrospective operation to take away the right accrued to the retired employee under the existing rule certainly is not only violative of Article 14 but also of Article 21 of the Constitution. [Paras 47, 48][314-H; 315-A-D]

1.2 There is a distinction between the legitimate expectation and a vested/accrued right in favour of the employees. The rule which classifies such employee for promotional, seniority, age of retirement purposes undoubtedly operates on those who entered service before framing of the rules but it operates in futuro. In a sense, it governs the future right of seniority, promotion or age of retirement of those who are already in service. For the sake of illustration, if a person while entering into service, has a legitimate expectation that as per the then existing scheme of rules, he may be considered for promotion after certain years of qualifying service or with the age of retirement which is being prescribed under the scheme of rules but at a later stage, if there is any amendment made either in the scheme of promotion or the age of superannuation, it may alter other conditions of service such scheme of rules operates in futuro. But at the same time, if the employee who had already been promoted or fixed in a particular pay scale, if that is being taken away by the impugned scheme of rules retrospectively, that certainly will take away the vested/accrued right of the incumbent which may not be permissible and may be violative of Article 14 and 16 of the Constitution. [Paras 49, 50][315-D-H]

1.3 With regard to the submission about the financial distress of the appellant Bank to justify the impugned amendment to say that it may not be possible to continue the grant of pension any more is concerned, suffice to say, that the rule making authority was presumed to know repercussions of the particular piece of subordinate legislation and once the Bank took a conscious decision after taking permission from the Government of Punjab and Registrar, Cooperative, introduced the pension scheme with effect from 1st April 1989, it can be presumed that the competent authority was aware of the resources from where the funds are to be created for making payments to its retirees and merely because at a later point of time, it was unable to hold financial resources at its command to its retirees, would not be justified to withdraw the scheme retrospectively detrimental to the interests of the employees who not only became member of the scheme but received their pension regularly at least upto the year 2010 until the dispute arose between the parties and entered into litigation. Non-availability of financial resources would not be a defence available to the appellant Bank in taking away the vested rights accrued to the employees that too when it is for their socio-economic security. It is an assurance that in their old age, their periodical payment towards pension shall remain assured. The pension which is being paid to them is not a bounty and it is for the appellant to divert the resources from where the funds can be made available to fulfil the rights of the employees in protecting the vested rights accrued in their favour. [Paras 54, 55][317-A-E]

Marathwada Gramin Bank Karamchari Sanghatana

and Another v. Management of Marathwada Gramin Bank and Others 2011 (9) SCC 620 : [2011] 11

SCR 269; State of Rajasthan Vs. A.N. Mathur and Others 2014 (13) SCC 531 : [2013] [11] SCR 240; State of Himachal Pradesh and Others Vs. Rajesh Chander Sood and Others 2016 (10) SCC 77 : [2016] 6 SCR 851 – held inapplicable.

1.4 So far as the submission made by the serving employees is concerned, they have no locus to question. At the same time, their apprehension as being projected to this Court is completely misplaced for the reason that employer/employees contribution is being provided under the employees pension scheme(EPS) of the Act 1952 which is made applicable to the serving employees and they are entitled to get pension in terms of the provisions of the Act 1952. So far as their complaint regarding payment of contribution is concerned, it is in no manner going to be adjusted for payment of pension to retirees/respondents, who are entitled to get their pension in terms of the pension scheme of which they are members and it is for the appellant Bank to reserve the resources and make payment to the retired employees seeking pension to the scheme in vogue when they became members and took benefits pursuant thereto. [Para 56][317-F-H]

1.5 The complaint of the employees that they are not being paid their pension since 2013, at the given time few employees have been given benefit of one time settlement as introduced by the Bank as an interim measure which was subject to their rights being preserved, in the pending litigation, taking grievance of the either party into consideration, the financial constraints of the Bank and the rights of the employees who are entitled to get pension under the bank pension scheme, so far as the arrears towards element of pension to which the retired employees are entitled for, the appellant Bank is at liberty to pay arrears towards pension upto 31st December, 2021 in 12 monthly installments in the next one year by the end of December, 2022 and those employees who have accepted payment under one time settlement at a given point of time, what is being paid to them is always open for adjustment against arrears of their due pension. Still if arrears remain outstanding, the same shall be paid in 12 monthly installments. At the same time, each of the employee who is member of the Bank Pension scheme must get pension to which he/she is entitled from the month of January 2022 as admissible under the law. [Para 57][318-A-D]

Chairman, Railway Board and Others Vs. C.R.

Rangadhamaiah and Others 1997 (6) SCC 623 : [1997]

3 Suppl. SCR 63 – followed.

UP. Raghavendra Acharya and Others Vs. State of Karnataka and Others 2006 (9) SCC 630 : [2006] 2 Suppl. SCR 582; Bank of Baroda and Another vs. G. Palani and Others 2018 SCC Online SC 3691 – relied on.