Can Pensioners Be Divided Into Arbitrary Categories To Deny Rightful Pension, SC Set To Give A Ruling

The Supreme Court bench of Justices Adarsh Kumar Goel and Uday Umesh Lalit, on August 1 concluded hearing the arguments and reserved its judgment in the case of United Bank of India v United Bank of India Retirees Welfare Association & Others.   This is an appeal against the Calcutta High Court’s Division Bench judgment, delivered on September 26 last year.

The case raises an interesting issue on whether an invidious classification can be made between employees, who retired before November 1, 2002 and those who retired later from the Bank, with respect to payment of dearness relief with their pension.

The employees of the Bank are governed by the United Bank of India (Employees) Pension Regulations, 1995, which are statutory in nature.   Under Clause 6 of these Regulations, dearness relief was granted to pensioners at rates which were determined from time to time in tune with the dearness relief formula in operation in the Reserve Bank of India.  The RBI issued a circular granting 100 per cent dearness relief to post November 2002 retirees, but no such relief was granted to the prior retirees.  The appellant bank adopted this circular, although the RBI extended the benefit of 100 per cent dearness relief to those who had retired pre-November 2002 as well, subsequently.

Both the Single Judge and the Division Bench of the High Court held that there was no intelligible difference between pre-November 2002 retirees and those who retired thereafter; the artificial classification between the retirees was discriminatory.

Before the High Court’s Division Bench, the appellant bank could not dispute the fact that there was no distinction between two sets of retired employees.  The appellant bank could not point out any justification for the same except that since it was decided and accepted by most of the banks in the country on the one hand, and the unions and association representing employees on the other, the retired employees could not question the same.

The Division Bench noted that the retired employees’ association is not a party to the Bipartite Settlement which resulted in the joint note, leading to the unjust classification. Therefore, the Bipartite Settlement cannot contain provisions which would be to the detriment of retired employees, it held.

The High Court division bench held that pension is not a bounty or a bonanza for an employee, without cavil.  “It is a measure of social welfare and is paid to a retired employee for his meritorious service with the employer.   Thus it would matter little if the employee retires on one day or the other.  Pension has to be paid at the same rate to all employees, depending of course on the length of service and the last drawn salary.  It is the property of an employee in terms of Article 300A.  An employee cannot be deprived of his rightful claim to pension except in accordance with law. The joint note issued by the bank, justifying the classification, cannot be construed as “law” as it cannot govern the pension payable to retirees who were not in service when it was issued”, the Division Bench held.

The Division Bench further reasoned that dearness relief is an amount paid tothe retirees to neutralise the astronomical rise in prices.  The object of paying dearness relief is the same, irrespective of the date on which the employee retires, it held.  The Division Bench, therefore, directed the appellant bank to comply with Regulation 6 of the Pension Regulations and pay pension to the pre-2002 retirees at the same rate as enjoyed by the post-2002 retirees, as has been paid to the retired employees of the RBI.

During the hearing in the Supreme Court, the appellant bank was represented by senior advocate, Dhruv Mehta, while the respondents including the Association were represented by senior advocates, V.K.Bali, Jitendra Sharma, A.S.Nambiar and V. Mohana.

The judgment of the Supreme Court is likely to throw further light on the principles of classification, for the purpose of extending pensionary benefits