1. Introduction of employee pension scheme — subsequent retrospective deletion of pension rules — dispute over vested rights and entitlement to pension. (Para 4 , 7 , 8 , 9 , 10 , 11 , 12 , 14 , 39 , 40 , 41 )
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2022 Supreme(SC) 108
SUPREME COURT OF INDIA
AJAY RASTOGI, ABHAY S. OKA, JJ.
The Punjab State Cooperative Agricultural Development Bank Ltd. - Appellant
Versus
The Registrar, Cooperative Societies And Others - Respondents
Civil Appeal No(S). 297-313 of 2022, (Arising out of SLP(Civil) No(s). 1931, 1932, 1934-1937, 1939-1945, 1949, 1859, 12864, 12822 of 2020)
Decided on : 11-01-2022
Important Points
An amendment with retrospective operation that takes away a benefit already available to the employee under the existing rule violates the rights guaranteed under Articles 14 and 16 of the Constitution.
Subject
Employment Law - Pension Rights
Act Referred
CONSTITUTION OF INDIA: Art.226, Art.14, Art.21, Art.309, Art.16
EMPLOYEES PROVIDENT FUND AND MISCELLANEOUS PROVISIONS ACT: S.7(a), S.14(b)
EMPLOYEES PROVIDENT FUND SCHEME ACT: S.5, S.6, S.6(a)
PUNJAB CIVIL SERVICES RULES: R.2.44
PUNJAB CO-OPERATIVE SOCIETIES ACT: S.84(a)(2)
EMPLOYEES PROVIDENT FUND AND MISCELLANEOUS PROVISIONS ACT: S.7(a), S.14(b)
EMPLOYEES PROVIDENT FUND SCHEME ACT: S.5, S.6, S.6(a)
PUNJAB CIVIL SERVICES RULES: R.2.44
PUNJAB CO-OPERATIVE SOCIETIES ACT: S.84(a)(2)
Headnote
Pension Scheme - Employees' Rights - Retrospective Amendment
Fact of the Case:
The case involved the Punjab State Cooperative Agricultural Development Bank Ltd. and its employees, who were covered under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (Act 1952) prior to 1989. The bank introduced a pension scheme from April 1, 1989, and employees who opted for the scheme received pension until 2010. The bank later discontinued the scheme and deleted the relevant rule in 2014, leading to litigation.
Finding of the Court:
The court found that the employees had a vested and accrued right to the pension scheme, and the retrospective amendment to discontinue the scheme violated their rights under Articles 14 and 21 of the Constitution. The court also noted the financial distress of the bank but held that it could not be a defense for taking away the vested rights of the employees.
Issues: The main issue was whether the retrospective amendment to discontinue the pension scheme violated the employees' vested and accrued rights.
Ratio Decidendi: The court held that an amendment with retrospective operation, which takes away a benefit already available to the employee under the existing rule, violates the rights guaranteed under Articles 14 and 16 of the Constitution. The court also observed that non-availability of financial resources cannot justify taking away vested rights accrued to the employees, especially in matters of socioeconomic security.
Final Decision: The court dismissed the appeals and directed the bank to pay arrears towards pension in 12 monthly installments and ensure that each employee entitled to pension receives it from January 2022 as admissible under the law.
Legal Category Hierarchy
Table of Contents
2. Retrospective withdrawal of pension scheme — claim of vested rights versus plea of financial unviability and avoidance of double pension payments. (Para 22 , 23 , 24 , 26 , 27 , 28 , 29 , 31 , 32 , 35 , 36 , 37 )
3. Pension as socio-economic security — distinction between legitimate expectation and vested rights — financial distress not justifying retrospective deprivation of accrued benefits. (Para 42 , 47 , 48 , 49 , 50 , 54 , 55 , 56 )
4. Retrospective amendments taking away benefits already available under existing rules divest vested or accrued rights, violating Articles 14 and 16 of the Constitution. (Para 43 , 44 , 45 , 46 , 47 )
5. Appeals dismissed — direction to pay pension arrears in installments and resume monthly pension payments. (Para 57 , 59 )
6. What is the distinction between a legitimate expectation and a vested or accrued right in service jurisprudence?
A legitimate expectation relates to future rights, such as promotion or retirement age, which can be altered by prospective rules. A vested or accrued right is a benefit already granted or availed of, which cannot be taken away retrospectively without violating constitutional guarantees. (Para 44 , 49 , 50 )
7. Can a rule-making authority retrospectively withdraw a pension benefit already available to retired employees?
No. Amendments with retrospective operation that take away benefits already available to employees under existing rules are considered arbitrary, discriminatory, and violative of Articles 14 and 16 of the Constitution. (Para 44 , 47 , 48 )
8. Does the financial unviability of an employer justify the retrospective withdrawal of a vested pension scheme?
No. Non-availability of financial resources is not a valid defense for taking away vested rights. Pension is viewed as a means of socio-economic security in old age, not a bounty, and the employer must secure resources to fulfill these rights. (Para 54 , 55 )
JUDGMENT :
Rastogi, J.
1. Leave granted.
2. Civil Appeals @ SLP(Civil) Nos. 1940-1941 of 2020 and the cognate appeals arise from the self-same common judgment dated 29th July, 2019 and 4th October, 2019 passed by the Division Bench of the High Court of Punjab and Haryana at Chandigarh.
3. The facts have been noticed by this Court from Civil Appeals @ SLP(Civil) Nos.1940-1941 of 2020.
4. The appellant in the present batch of appeals, is the Punjab State Cooperative Agricultural Development Bank Ltd. (hereinafter referred to as ‘the Bank’), a registered cooperative society and connected Civil Appeal @ Special Leave Petition (Civil) No.12864 of 2020 has been preferred by the serving employees of the bank who also claim to be aggrieved by the selfsame impugned judgment in the proceedings. At the same time, the respondents are the original writ petitioners who are the retired employees and the service conditions of the employees are governed by the Punjab State Cooperative Agricultural Land Mortgage Banks Service (Common Cadre) Rules, 1978(hereinafter being referred to as the “Rules 1978”) and became members of the Bank Pension Scheme, which was introduced w.e.f. 1st April, 1989.
5. The appellant Bank is a registered cooperative society which was earlier known as “Punjab State Cooperative Land Mortgage Bank Ltd.” The principal object of the Bank is to provide long term loans to the farming community and to protect them from the clutches of money lenders. The main funding of the appellant Bank is by way of loans from National Bank for Agriculture and Rural Development(NABARD) as per the norms laid down. The appellant Bank has two tier structure comprising of “Punjab State Cooperative Agricultural Development Bank Ltd.” at Apex level(SADB) and the “Primary Agricultural Development Banks”(PADB) at the grass root level. These two banks ensure timely delivery of credit to the farmers, who are its members and directly benefitted with various schemes which provide long term and short-term loans to them.
6. Prior to 1989, the employees of the appellant Bank were covered under the Employees Provident Fund and Miscellaneous Provisions Act, 1952(hereinafter being referred to as the “Act 1952”). The scheme was being duly adhered to and necessary contributions were regularly paid by employees and the employer Bank.
7. The Department of Finance, Government of Punjab, vide its letter dated 22nd September 1988, pursuant to recommendations of the Punjab Pay Commission to bring the employees serving in various Public Sector Undertakings and State aided institutions under purview of the State Pension Rules, solicited the views/comments of the concerned organisations to inter alia communicate the additional financial burden involved in each case and whether the organisation/organisations could bear the additional liability out of their own resources. These recommendations were placed before the Administrator of the Bank who vide Resolution dated 22nd June 1989 decided to implement the recommendations of the State Government and as a consequence thereof, the pension scheme of the employees and Officers in the common cadre was introduced w.e.f. 1st April, 1989.
8. Resolution No.24 passed by the Administrator of the appellant Bank dated 22nd June, 1989 is reproduced as under:
| Item No. | Agenda | Decision |
| 1 (i) | To consider to amend Common Cadre Rules for introducing Pension Scheme. | 1 (i) Resolved that the existing Common Cadre Rule No. 15 be numbered as 15(i) and a new rule 15(ii) be incorporated as under: 15(ii) The Board of Directors may formulate Pension Rule with the approval of RCS Punjab. |
| (ii) | To consider to introduce Pension Scheme for the employees/officers in the Common Cadre of the Punjab State Cooperative Agricultural Development Bank | (ii) (a) Resolved that the Pension Scheme for the employees/officers in the Common Cadre of the Punjab State Cooperative Agricultural Development Bank be introduced |
