SC Upholds Classification of Pre- and Post-Nov 2002 Bank Retirees For Dearness Relief, Says Adopting Flat Rate Would Be Hazardous [Read Judgment]

The Supreme Court on Wednesday upheld the distinction between pre-November 2002 bank retirees and post-November 2002 retirees in payment of dearness relief as it said both the categories of retirees stand on different footing and the parameters which govern the computation of dearness relief are also on a different level, while also noting that any stepping up of benefit for a section of employees is bound to inflate the figure of Rs.1288 crores per annum which was set apart for the benefit of the employees vide a 2005 bipartite settlement.

A bench of Justice Adarsh Kumar Goel and Justice Uday Umesh Lalit said so while deciding the appeal filed by the United Bank of India and others against the Calcutta High Court judgment of September, 2016, whereby it was held that there was no justification for making a distinction between pre- and post-2002 retirees and the appellant (bank) must pay dearness relief to all pensioners at the same rate.

The apex court was in agreement with the decision of the Madras High Court in case titled AB Kasturirangan v. Canara Bank etc., which had been confirmed by the apex court by the time the instant appeal was filed, as it said, “In our considered view, the assessment made by the Division Bench of the Madras High Court was absolutely correct. The settlement has to be taken as a package deal and it would be impossible to hold certain parts good and acceptable while finding other parts to be bad. Moreover, the recitals D, E and F in the Bipartite settlement dated 02.06.2005…show that a package deal was entered into and Rs.1288 crores per annum towards all the benefits was set apart for the benefit of the employees. Any stepping up of benefit for a section of employees is bound to inflate the figure of Rs.1288 crores per annum though that by itself is not a ground that weighs with us. In our view both the categories of retirees, namely, pre November 2002 and post November, 2002 stand on different footing, the parameters which govern the computation of dearness relief are also on a different level”.

“…this is not a matter where a section of employees merely on account of date of retirement are being differentiated. If we adopt a flat rate of 0.24% as is being prayed for, the class of retirees who retired before 01.11.2002 will stand conferred better rate than those employees who retired after 01.11.2002. Nor can we apply a flat rate of 0.18% for them. Each class is governed by distinct and different parameters. These are all matters of policy making. The conferral of advantages of benefits on two different classes of retirees has a completely distinct formula and rates and it would not be possible to have a synthesis on any count or to put both the sets of retirees on any common parameters. Both classes are distinct and do not form a homogenous group. It would be extremely difficult and hazardous to adopt a flat rate as is sought to be projected,” the apex court held.

It is to be noted that a Memorandum of Settlement dated October 29, 1993 was entered into between the managements of 58 banks as represented by the Indian Banks’ Association on one hand and their workmen as represented by the All India Bank Employees’ Association on the other. This memorandum recited that the parties had agreed to introduce pension scheme in banks for the workmen/employees in lieu of employers’ contribution to the provident fund and that the pension scheme so agreed was to be broadly on Central Government/Reserve Bank of India pattern.

Paragraph 6 of the memorandum dealt with Dearness Allowance relief to the pensioners and it stipulated that, “Dearness relief to pensioners will be granted at such rates as may be determined from time to time in line with the Dearness Allowance formula in operation in Reserve Bank of India”.

On June 2, 2005, a bipartite settlement was arrived at between the managements of 50 banks, represented by the Indian Banks’ Association on one hand and their workmen, represented by the All India Bank Employees’ Association, National Federation of Bank Employees, Bank Employees’ Federation of India, Indian National Bank Employees’ Federation and National Association of Bank Workers on the other hand.

In case of employees who had retired during the period 01.04.1998 to 31.10.2002, dearness relief at the rate of 0.24% was awardable upto Rs.3550 of basic pension per month and thereafter the percentage for amounts in excess of Rs.3550 was successively at reduced rates. On the other hand, in case of employees who retired during the period 01.11.2002 to 30.04.2005, the percentage of 0.18% was without any such tapering formula.

The idea of tapering formula under the bipartite settlement dated 27.04.2010 was retained with respect to pre-November 2002 retirees, while the dearness relief to post-November 2002 retirees was to be at the flat rate of 0.18%.

 Around this time, the Reserve Bank of India, which initially was not giving full compensation against price rise on dearness relief to employees who retired prior to 01.11.2002, that is to say was also giving dearness relief on a tapering formula, started giving full compensation. 

Since the benefit of grant of full compensation against price rise on dearness relief as was extended by Reserve Bank of India, was not extended to the retirees of United Bank of India who had retired prior to 01.11.2002, the United Bank of India Retirees’ Welfare Association and others preferred a petition before the high court contending that though the Reserve Bank of India had started giving full compensation against price rise on dearness relief to retirees prior to 01.11.2002, the United Bank of India continued to make distinction in terms of dearness relief on the basis of dates of retirement of the pensioners and that such action on part of appellant was clearly opposed to para 6 of the settlement dated 29.10.1993. 

Holding the distinction between pre-November 2002 retirees and post-November 2002 retirees to be unreasonable, arbitrary and discriminatory, the division bench directed the appellant to pay the dearness relief to all pensioners at the same rate.

The bank came to the Supreme Court in appeal.

The bank contended that the view taken by division bench of Madras High Court was already affirmed by the apex  court by dismissing the appeal therefrom on 01.02.2017, that the retirees prior to 01.11.2002 could not claim same benefit/parity at par with those who retired after 01.11.2002; that the dearness allowance payable to the pensioners was linked to the pay and pre- retirees were being paid pension or dearness relief thereon as per service conditions applicable to them at the time of retirement.

The apex court while deciding the appeal noted that, “The reliance on the resolutions/circulars issued by Reserve Bank of India was also misplaced. It is true that the tapering formula was done away with by Reserve Bank of India but that by itself cannot entitle the retirees prior to 01.11.2002 either to be conferred the advantage at the same rate made applicable by Reserve Bank of India or at the flat rate of 0.24% as was sought to be projected”. 

“The tapering formula undoubtedly begins with 0.24% for the first segment of Rs.3550 of basic pension and then progressively steps down and finally reaches the level of 0.06% where the basic pension is in excess of Rs.6010. What is devised by way of such tapering formula is higher rate at the lower levels of segments so that larger number of peoples would get maximum advantage and the rate thereafter keeps stepping down. Neither can we apply the rate of 0.18% which will then cause great harm and damage to the retirees nor can we adopt a flat rate of 0.24% for the entire amount of basic pension. The benefit which is sought to be conferred by the tapering formula lies in the averaging which comes to near about the same quantum as is given to the post 01.11.2002 retirees,” it said.

The court also noted that no illustration had been placed on record to submit that even with 0.18% dearness allowance, those who retire after November 2002 walk away with substantially greater advantage as against pre-November 2002 retirees.