VRS Employees Cannot Claim Parity With Others Who Retired On Achieving Age Of Superannuation: Supreme Court

The Supreme Court has held that employees who retired under the Voluntary Retirement Scheme (VRS) cannot claim parity with others who retired upon achieving the age of superannuation for the purposes of pay revision.   

Factual Matrix leading to the Civil Appeal

What was up for challenge before the bench of Justices Aniruddha Bose and S. Ravindra Bhat in this civil appeal was a decision of the Bombay High Court (Nagpur bench) wherein the Maharashtra State Financial Corporation Ex-Employees Association had challenged the decision dated 29.03.2010 taken by the State of Maharashtra on ground of it being discriminatory and arbitrary. 

The decision denied the benefit of revision of pay scales, as recommended by the Fifth Pay Commission, to the employees of the Maharashtra State Financial Corporation (MSFC) who had retired or died during the period of 01.01.2006 to 29.03.2010. That decision of the State made the revision of pay scale as a result of the Report of the Fifth Pay Commission applicable to 115 employees of MSFC who were working as on 29.03.2010. The revision, however, was given effect from 01.01.2006. 

Impugned Order 

By the impugned order, the High Court rejected the contentions raised by the Appellant association and accepted the submissions of MSFC and the State, that financial considerations were of importance in regard to grant or denial of monetary benefits.

Appellant's contentions

Mr. Jay Salva advancing his arguments on behalf of the Appellant Association broadly made the following four-point submissions: 

1. That the Appellants were in continuous service, and had even received the benefit of interim revision, pending finalisation of pay scales pursuant to the Pay Commission Report.

2. That those in employment on and after 29.03.2010, and those who continued in service after 01.01.2006 but retired before 29.03.2010, belonged to the same category. The only difference between those who were in service after the latter date, was that they had longer period of service.

3. That the crucial date for grant of pay revision, was the date from which it was given effect to, i.e., 01.01.2006. As all the appellants were in service as on that date, the denial of pay revision, which was concededly for the period they had worked, amounted to not only hostile discrimination, but also withholding of pay revision benefits, legitimately and rightfully theirs.  

4. That the total liability of the MSFC is not more than ₹32 crores, in respect of past employees, including those who had retired, sought VRS, or had died before the pay revision was made effective.

Contentions of MSFC and the State 

Advocate Sachin Patil appearing for the Respondents broadly made the following four-point submissions: 

1. That MSFC is an autonomous corporation established under the State Financial Corporation Act. It is not bound to follow the terms and conditions applicable to Maharashtra Government employees. In fact, it has to independently generate its income from its own resources to meet any additional burden or expenditure due to increased pay or increase in wages for its employees. 

2. That under Section 39 of the State Financial Corporations Act, 1951 MSFC has to seek guidance and directives of the State Government in policy matters but it is not bound by the decision of the State to implement the decisions of the Fourth, Fifth and Sixth Pay Commissions for its employees. 

3. That the employees of the Corporation cannot claim, as a matter of right, any benefit of pay revision without MSFC’s ability to bear the burden of such pay increase.

4. That the fixation of cut-off date is a policy matter, especially in respect of revision of salaries, allowances, and the other benefits to employees of a State Corporation. These depend on various considerations, including financial constraints and the number of employees involved. 

Analysis and Judgment

While holding that revision of pay involves a larger public interest, the bench observed, "That on whether, and what should be the extent of pay revision, are undoubtedly matters falling within the domain of executive policy making".

While specifying that the court could not examine the fixation of cut-off date for the grant of benefits, the bench observed, "what is within the domain of the court, is to examine the impact of such fixation and whether it results in discrimination." 

The bench further observed, "In the present case, too, there is no denial that the employees who retired prior to 29.03.2010 discharged the same duties as in the case of those who did thereafter. The quality and content of responsibilities assigned to them were the same. The respondents’ decision not to grant arrears prior to 01.01.2006 cannot be found fault with; however, not to grant any revision to those who were not in service when the order implementing the pay revision was issued and confining it to those, in employment is clearly discriminatory." 

"...there is no distinction between those who retired (or died in service) before 29.03.2010 and those who continued in service - and were given the pay revision. Those who worked during the period 01.01.2006 to 29.03.2010 and those who continued thereafter, fell in the same class, and a further distinction could not be made," the bench added. 

The court further held the exclusion of the retired employees, who retired between 01.01.2006 and 29.03.2010 on achieving their date of superannuation, as violative of Article 14 of the Constitution of India.

However, the court then laid down an exception. It observed, "However...employees who secured VRS benefits and left the service of MSFC voluntarily during this period, stand on a different footing. They cannot claim parity with those who worked continuously, discharged their functions, and thereafter superannuated. VRS employees chose to opt and leave the service of the corporation; they found the VRS offer beneficial to them...For the above reasons, it is held that VRS employees cannot claim parity with others who retired upon achieving the age of superannuation. Likewise, those who ceased to be in employment, for the reason of termination, or their dismissal, etc., would not be entitled to the benefit of pay revision."

Holding thus, the bench allowed the appeal to the extent that those who retired from the services of MSFC between 01.01.2006 to 29.03.2010, and the legal heirs/representatives of those who died during that period, are entitled to arrears based on pay revision, accepted by the Corporation.

Case Title: MAHARASHTRA STATE FINANCIAL CORPORATION EX-EMPLOYEES ASSOCIATION & ORS. VERSUS STATE OF MAHARASHTRA & ORS. CIVIL APPEAL NO(S). 778 OF 2023 [@ SPECIAL LEAVE PETITION (CIVIL) NOS.1902 OF 2019]

Citation:  2023 LiveLaw (SC) 81

For Petitioner(s) Mr. Nitin S. Tambwekar, Adv. Mr. Seshatalpa Sai Bandaru, AOR

For Respondent(s) Mr. Santosh Paul, Sr. Adv. Mr. Sriharsh N. Bundela, Adv. Mr. Akshay Kumar, Adv. Mr. Maithreya Shetty, Adv. Mr. M. J. Paul, AOR Mr. Sachin Patil, Adv. Mr. Siddharth Dharmadhikari, Adv. Mr. Aaditya Aniruddha Pande, AOR Mr. Bharat Bagla, Adv. Ms. Kirti Dadheech, Adv. Mr. Geo Joseph, Adv. Mr. Risvi Muhammed, Adv. Mr. Durgesh Gupta, Adv. 

Service Law - VRS employees cannot claim parity with others who retired upon achieving the age of superannuation - They cannot claim parity with those who worked continuously, discharged their functions, and thereafter superannuated. VRS employees chose to opt and leave the service of the corporation; they found the VRS offer beneficial to them-Para 39

Service Law - Pay revision is a matters falling within the domain of executive policy making-What is within the domain of the court, is to examine the impact of such fixation and whether it results in discrimination - Para 27

Read the Judgment Here