Unilateral Reduction Of Pension Benefits Without Notice Violates Natural Justice; Patna HC Protects Retirees' Rights

Background

A batch of petitions were filed by retired non-teaching employees of L.N. Mithila University in Bihar. The petitioners, who had served in various capacities such as Office Assistants and Accountants, argued that they were denied the full benefits of the ACP scheme, despite being entitled to pay scales equivalent to those of State Government employees. While the petitioners received some benefits, they claimed the university later reduced their retirement entitlements without notice, adjusting their pensions downward in violation of established pay equity principles.

Under the ACP scheme, employees who lack promotional opportunities can receive pay upgrades at specific career milestones. Petitioners argued that the university, deviating from both Supreme Court and Patna High Court precedents, failed to honor this scheme fully, slashing pay entitlements and imposing recoveries on amounts already paid. Additionally, they sought interest on delayed insurance and dearness allowance payments, as established by precedents.

Arguments

Petitioners emphasized that university staff had long been treated as equivalent to their State Secretariat counterparts. They contended that the university had unlawfully disregarded these equivalences in pay scales and promotion rules. Citing the Supreme Court in State of Bihar v. Sunny Prakash, they argued that the university's decision to reduce ACP benefits contradicted established court rulings and deprived petitioners of their rightful dues. The petitioners also challenged the procedural deficiencies in the university's actions, asserting that no formal notice or opportunity for them to contest the pension recalculations was provided.

In response, the State's counsel defended the university's decision, asserting that the petitioners had received benefits under an outdated pay structure that allegedly exceeded entitlements. Citing State directives, the counsel argued that the university acted correctly in revising pension amounts to align with current policies. They further contended that university employees should be bound by statutes exclusive to educational institutions, differing from the statutes governing State Government staff.

Court's Reasoning

The court noted that the ACP scheme was specifically designed to provide equitable benefits to employees facing limited promotional avenues. Citing the ruling in Sunny Prakash, the court affirmed that the petitioners were entitled to receive benefits on par with State Government counterparts, highlighting that “equity in service terms cannot be selectively withdrawn for university employees.” In addressing procedural fairness, the court found the university's unilateral decision to reduce pensions without notice violated fundamental principles of natural justice. By not providing notice or a hearing, the university denied the petitioners any opportunity to contest or clarify their entitlements, which the court noted was a “manifest error undermining due process.” Referring to its previous rulings, the court emphasized that revisions of financial entitlements require adherence to procedural safeguards to avoid imposing arbitrary financial hardships on retirees.

Further, the court rejected the State's argument that unique statutory provisions for universities justified the reductions, affirming that State pay standards must apply uniformly across institutions. The court ordered the university to immediately restore petitioners' original pension entitlements, including the full ACP benefits due since their respective dates of retirement. Additionally, the court directed payment of interest on any delayed insurance and dearness allowances, as per previous judicial determinations.

Decided on: 18-10-2024

Citation: 2024 LiveLaw (Pat) 92

Counsel for the Petitioner: Mr. Hari Shankar Roy, Ms. Tanuja Kumari Mishra

Counsel for the Respondents: Mr. Hitesh Suman, Mr. Nadim Seraj

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