Law, Judgments & Legal Insights.

Deputation Allowance Excluded from Pension Calculation for Retired Bank Officers: Bombay High Court

Mumbai: In a significant ruling affecting retired public sector bank employees who served on deputation, the Bombay High Court has held that the 15% deputation allowance drawn by an employee at the time of superannuation cannot be reckoned for the purpose of calculating their pension and retirement benefits.

A Division Bench of Justices Ravindra V. Ghuge and Ashwin D. Bhobe dismissed a batch of writ petitions filed by retired bank officers who had superannuated while on deputation as Chief Vigilance Officers (CVOs) with various 'Loanee Banks'. The court emphasized that pension calculation under the Bank (Employees') Pension Regulations, 1995 is based on the pay drawn in the 'Parent Bank', not including temporary allowances received during deputation.

The petitioners, including Usha Ravi , B. Uma Sankar , Shiv Narain Kaushik , and Laxminarayan Rath , had responded to advertisements issued by the Union of India inviting applications for CVO posts on deputation. They were sent on deputation from their respective parent banks (Lending Banks) to other banks (Borrowing/Loanee Banks) and continued in these roles until their superannuation. During their deputation, they received their pay from the Parent Bank plus a 15% deputation allowance, or alternatively, drew pay from the Loanee Bank along with perquisites. Provident Fund contributions were deducted even on this deputation allowance by the borrowing organizations.

The core grievance raised by the petitioners was that their pension should be fixed based on their last drawn salary, which included the 15% deputation allowance. They argued that since PF contributions were made on this allowance, a portion of which went into the pension account, it indicated an entitlement to a higher pension calculation.

Opposing the petitions, the respondent banks argued that the deputation was temporary, and the 15% allowance was payable only for the period of deputation. They contended that pension regulations specifically define "Average Emoluments" based on the pay drawn in the 'Parent Bank'.

The High Court, after hearing submissions and examining the relevant regulations, sided with the banks. The bench referred to the Bank of Baroda (Employees) Pension Regulations, 1995 (which are largely identical across public sector banks), specifically:

• Regulation 2(d): Defines "Average Emoluments" as the average of the pay drawn by an employee during the last ten months of his service in the Bank .
• Regulation 2(e): Defines "Bank" to mean the Parent Bank .
• Regulation 35(2): Stipulates that basic pension is 50% of the average emoluments.

The court observed that Regulation 25 clarifies that the period of deputation counts as qualifying service for pension, but this was not the dispute. The central issue was what constitutes the "pay" for calculating average emoluments when an employee superannuates on deputation.

The bench highlighted Clause 2(ii) of the deputation orders, which gave the petitioners the option to draw pay from the Parent Bank plus 15% allowance. It noted that this allowance was explicitly linked to the deputation period.

Addressing the argument regarding PF deductions on the allowance, the court stated that merely because PF deductions were made on the deputation allowance does not create a vested right for pension calculation. Citing EPFO V/s. Vivekananda Vidyamandir , the court noted that while universally paid emoluments can be part of basic pay, in this context, mistaken PF contributions by the Loanee Bank on a temporary deputation allowance do not override the specific pension regulations of the Parent Bank.

Crucially, the court referred to a clarificatory letter dated November 27, 1998, from the Ministry of Finance (Banking Division). This letter, referencing Rule 33 (Note 7) of the CCS Pension Rules, clarified that the substantive pay an officer would have drawn in the Parent Bank (but for deputation) should be taken for calculating average emoluments for pension, not the pay actually drawn in a higher scale in the Loanee organization. The court found this clarification consistent with the Bank Pension Regulations.

The judgment cited several precedents, including Bhagwan Dass and Others V/s. State of Punjab and Another , which held that officiating on a higher post without substantive promotion does not entitle an employee to pension based on the higher pay scale. It also referenced U.K. Walia V/s. Punjab National Bank and others , where the Punjab and Haryana High Court similarly denied enhanced pension based on a higher grade incentive received while on deputation, confirming that pension is calculated based on the salary the employee would have drawn in the Parent Bank.

The court reasoned that deputation is a consensual, temporary assignment, not a promotion. Attaining superannuation while on deputation due to "fortuitous circumstances" does not transform the deputation allowance into part of the substantive pay for pension purposes.

"We do not find that merely because the provident fund deductions were carried out even on the 15% deputation allowance, could change the law for enabling the Petitioners to claim pension on the basis of the last drawn salary inclusive of the deputation allowance," the court stated.

Consequently, the court found no error in the calculation of monthly pension by the Parent Banks. While dismissing the petitions, the court directed the Parent Banks to return any provident fund accumulations, including contributions made on the 15% deputation allowance, to the petitioners with statutory interest within 60 days.

The ruling clarifies that temporary allowances linked to deputation assignments, even if received until retirement, do not automatically become part of the pensionable emoluments under the Bank Pension Regulations, which anchor the calculation to the pay structure of the Parent Bank.