& Ors Vs. Union of India & Ors  INSC 467
(27 March 1996)
Sujata V. (J) Manohar Sujata V. (J) Ahmadi A.M. (Cj) Venkataswami K. (J) Mrs. Sujata
V. Manohar, J.
1996 AIR 1901 JT 1996 (4) 420 1996 SCALE (3)383
PETITION (CIVIL) NO. 437 OF 1993 Ex-servicemen LIC Employees Association and
Ors. V. Life Insurance Corporation of India & ors.
granted in S.L.P..(C) No.2158 of 1992.
appellants are the employees of the Life Insurance Corporation of India at Kozhikode. They are ex-servicemen who were re-employed by the Life
Insurance Corporation of India after their discharge from military
service. There is a gap of more than three years between their discharge from
military service and their appointment in the Life Insurance Corporation of India. The dispute raised in this appeal
relates to the fixation of salary of these ex-servicemen on their re-employment
in the Life Insurance Corporation of India. Along with this appeal. Writ Petition No. 437 of 1993 has also been
heard. This petition is filed by the Ex- servicemen Life Insurance Corporation
Employees Association and the issue raised in this petition is identical with
the issue raised in the appeal. The dispute relates to ex- servicemen who have
been appointed after a gap 'of three years or more from their discharge from
military service to the life insurance Corporation of India and pertains to
those who have been so appointed after 1.1.1988.
dispute pertains to the interpretation of instructions dated 2nd of June. 1989
issued by the Central Office of the Life Insurance Corporation of India
relating to re-employment of ex-servicemen in the Life Insurance Corporation
and their pay fixation. The relevant Paragraphs of these Instructions are set
3. Pay Fixation on Re-employment:
Basic Salary of a re-employed Ex-serviceman shall be fitted at the minimum of
the scale in which he is appointed. However, if the gross salary as per 'Y'
below at the minimum of the scale does not produce an amount equal to or more
than the last drawn gross salary as per 'X' below in the Defence Services. additional
increment/s as may be necessary, over minimum of the scale shall be allowed to
make up the difference and: thus:
protection to the last drawn gross salary.
If in exceptional cases, fitment, even at the ceiling of the entry grade does
not provide full protection, personal allowance shall be granted which may be
absorbed against future increase in emoluments.
'X' i.e. last drawn gross salary in the Defence Service at the time of release
shall be the aggregate of the following components:
as defined in sub-para 3(ix) of the Dept. of Personnel & Training O.M.No.
3/1 /85-East ( P II ) dated 31 .7.1986. Relevant extracts of the O.M. are given
in the Appendix 'A';
Additional Dearness Allowance;
City Compensatory Allowance;
Compensation in lieu of Quarters ( C . I. L . o . ) House Rent Allowance;
Ration Allowance .
'Y' i.e. gross salary in L.I.C. shall be the aggregate of the following
Basic salary in which the Ex- servicemen is re-employed;
House Rent Allowance:
City Compensatory Allowance:
Components of last drawn salary in the Defence Services ('X') including such
allowances as are indicated at (3.3) above are to be taken into account on the
basis of discharge certificate/Last Pay certificate of the individual
The component of pension will not be considered for pay fixation.
If the Ex-serviceman was reemployed within a period not exceeding 3 years from
the date of discharge from the Defence services 'X' (Last Drawn Salary in Defence
Services} to be compared shall be as drawn on the date of release of the
Ex-serviceman whereas the Y' (starting salary in L.I.C.) to be compared shall
be as on the date of re-employment in L.I.C.
If. however, he was re- employed more than three years after the date of
discharge from Defence Services 'Y' Salary to be compared shall also be as
obtaining on the date of discharge.
fitment may then be given in the revised scale, where necessary applicable at
the time of re-employment of the Ex-servicemen.
fitment is to be done nationally and actual benefit may be given from 1-1-1988 as shown in para 4 below.
basic salary determined on such comparison results in the same or lower than
the basic salary at which the employee was fitted on the date of re-employment
the existing salary fitment will continue without any change.
the basic salary determined on such comparison is higher than the basic salary
at which the employee was fitted on the date of re-employment incremental
difference that would emerge out of Such fitment would be added to individual's
basic pay as on 1-1- 1988 and arrears released accordingly from 1-1-1988 only.
FITMENT OF EX-SERVICEMEN APPOINTED ON OR AFTER 1-1-19988 Fitment in these cases
will be as per formula given in 3.1 above from 1-1-1988 or the date of
appointment in the industry whichever is later.
option-cum-consent letter in the enclosed format (Appendix 'B') should be
obtained from each existing Ex-serviceman employee opting fitment of salary as
per these instruction.
FITMENT OF SALARY OF NEW ENTRANTS:
of salary of all Ex- servicemen appointed in the industry henceforth shall be
governed by these instructions." The dispute relates to the application of
Paragraphs 3.7 and 3.8 to ex-servicemen who have been employed by the life
insurance Corporation after 1.1.1988. According to the life insurance
Corporation the benefit of pay fixation under Paragraphs 3.7 and 3.8 was given
only to ex-servicemen who were already employed by the life Insurance
Corporation prior to 1.1.1988. This benefit is not available to those
ex-servicemen who have been employed in Life Insurance Corporation after
resolve the dispute it is necessary to examine the scheme framed by the Life
Insurance Corporation on 2nd of June. 1989. for pay fixation which is in supersession
of earlier existing scheme. Paragraph 3 deals with fixation of pay on
re-employment of ex-servicemen in Life insurance Corporation. Since ex-servicemen
including released emergency commissioned officers. short service commissioned
officers and retrenched commissioned officers are relieved from military
service at a comparatively young age, certain facilities have been given to
them for re-employment in various Government and Public Sector Undertakings
including the Life insurance Corporation.
Paragraph 3.5 when the ex-serviceman is re- employed by the Life Insurance
Corporation he is normally fitted at the minimum of the scale for the post to
which he is appointed. However, if his last drawn gross salary in Defence
Service as specified in Paragraph 3.3 was more than the gross salary which he
will get in Life Insurance Corporation as specified in paragraph 3.4 his salary
to he paid in Life Insurance Corporation is adjusted so that he does not get
less than his last drawn pay in the Defence Services. This adjustment is done
as per Paragraph 3.1 adding to his minimum of the scale additional increments
as may be necessary to make up the difference so that his last drawn gross
salary is protected, This adjustment is made so as to protect the last drawn
salary of ex-servicemen in the case of all re-employed ex-servicemen whether
they were appointed prior to 1.1. 1988 or subsequent to 1.1.1988.
3.7, however, provides that if an ex- servicemen was re-employed within three
years from the date of his discharge from Defence Services then his last drawn
salary in the Defence Services will be compared to his starting salary on the
date of his re-employment in life Insurance Corporation so as to adjust the
salary first drawn by him on the date of re-employment to equal the last drawn
other words, he is governed by paragraphs 3.1 to 3.6. Paragraph 3.8 provides
that if an ex-servicemen was re- employed more than three years from the date
of his discharge from Defence Services his last drawn salary in Defence
Services shall be compared with his salary that he would have Been entitled to
in the Life Insurance Corporation had he been immediately re-employed. The
basic salary that he would have drawn in Life Insurance Corporation on the date
of his discharge is thus determined and on the basis of such a salary. the
salary which the ex- serviceman will get on the actual date of his
re-employment by Life Insurance Corporation is nationally worked out. The
figure so arrived at is the basic salary Which will be paid to the
ex-serviceman on his re-employment. Paragraph 3.8 also provides that if in the
interregnum any revision of pay scales takes place in Life Insurance
Corporation the ex- serviceman will get the benefit of such revision in respect
of the pay scale so nationally worked out. However, Paragraph 3.8 clearly
provides that such a fitment has to be made only nationally and any actual
benefit so arising will be given to the existing ex-servicemen only from
1.1.1988 as shown in Paragraph 4. Paragraph 4 sets out that any incremental
difference that would emerge out of such fitment would be added to the
ex-serviceman's basic pay as on 1.1.1988 and arrears would be released
accordingly from 1.1.1988 only.
perusal of Paragraph 3.8 and Paragraph 4 clearly brings out the fact that the
fitment under Paragraph 3.8 has to be done only in the case of ex-servicemen
who were employed prior to 1.1.1988. Paragraph 3.8 itself clearly provides that
the benefit will be given to an existing ex- serviceman. The existing
ex-serviceman. though employed prior to 1988 will get actual benefit only from
1.1.1988 and not for any date prior thereto. Such a provision would not have
been required had this concept of notional fitment under Paragraph 3.8 not been
made applicable only to existing ex-servicemen. Paragraph also says that the
incremental difference will be added to the individual's basic pay as on 1.1.
1988 and arrears will be released accordingly. The entire scheme of Paragraph
3.8 and Paragraph 4. therefore. deals with existing ex-servicemen or
ex-servicemen who had been employed prior to 1.1. 1988. The examples which have
been annexed to Paragraph 3.8 are also all examples of ex-servicemen who joined
Life Insurance Corporation prior to 1.1.1988. thus clearly bringing out the
intention to cover under Paragraph 3.8 existing ex- servicemen who had been in
the employment of Life Insurance Corporation prior to 1.1.1988 The example
which is appended to Paragraph 4 also deals with a case of an servicemen
employed long prior to 1.1.1988.
5 makes this position amply clear by setting out that ex-servicemen who are
appointed after 1.1.1988 shall be fitter from shall be fitted as per formula
given in Paragraph 3.1 above either from 1.1.1988 or the date of appointment
which ever is later. Paragraph 7 again clarifies this position by saying that
the fitment of salary of all ex-servicemen appointed in the industry henceforth
shall be governed by these instructions. The use of the past tense in referring
to the employment of ex-servicemen by Life Insurance Corporation in Paragraphs
3.7 and 3.8 is also indicative of the fact that it refers to ex-servicemen who
were employed in the Life Insurance Corporation prior to the coming into force
of the new scheme.
reason for giving the benefit of Paragraph 3.8 to ex-servicemen who were
employed by the Life Insurance Corporation prior to 1.1.1988 is referred to in
the counter- affidavit filed on behalf of respondents 1 and 2 in the writ
petition as also in the affidavit filed on behalf of the respondents in the
appeal. Normally, whenever a person is re-employed in Government service or
public service, when the process of fixation of his pay is undertaken, the
component of pension which is received by the employee from his earlier
employer is always deducted and adjusted in the salary which he gets on
re-employment. This was being done in the case of ex-servicemen re-employment
by Life Insurance Corporation prior prior at to the coming into operation of
the new scheme. The Life Insurance Corporation decided to treat its
ex-servicemen employees more liberally by providing under the new scheme in
Paragraph 3.6 that the component of pension will not be considered for pay
fixation. The appellants herein as also all ex-servicemen who have been
employed after 1.1.1988 have thus been allowed to retain their pension from Defence
Services. The pay which they are getting in Life Insurance Corporation on the
basis of the Formula fixed under Paragraph 3.1 is in addition to the pension
which they are vetting. This benefit. however. was apparently not available to
existing reemployed servicemen prior to 1.1.1988. As a result of negotiations which
took place between the Life Insurance Corporation and the employees. it was
decided to compensate the existing re- employed ex-servicemen who had lost the
benefit of service in Life Insurance Corporation for a period exceeding three
years after their discharge by giving them a notional fitment in the Life
Insurance Corporation pay scales in the manner set out in Paragraph 3.8. There
was no question of giving such a benefit to ex-servicemen employed after
learned counsel appearing for the ex- servicemen has emphasized the fact that
an option-cum- consent letter under Paragraph 6 was also taken from ex-
servicemen employed after 1.1.1988. This is disputed by the respondents. However.
Paragraph 6 itself quite clearly provides that the option-cumconsent letter has
to be obtained from each existing ex-serviceman employee opting fitment of
salary as per those instructions. It is. therefore. quite clear that the option
is to be exercised only by existing ex-servicemen employees of Life Insurance Corporation,
thus reinforcing the contention of the respondents that fitment as per
Paragraph 3.8 is not available to ex-servicemen re-employed in Life Insurance
Corporation after 1.1.1988. The respondents have admitted their mistake in
asking for such consent letter if they have done so. They have also admitted
that they made a mistake in granting to the three appellants before us the
benefit of Paragraph 3.8 although they were engaged after 1.1.1988.
have sought to correct this mistake by their letter of 16.1.1991 by
recalculating their salary from 1991. They are entitled to reduce the pay of
the appellants on the basis of the correct fitment to be given to the
appellants in the light of the instructions of 2nd of June, 1989. The High
Court was, therefore right in rejecting the contentions of the appellants. The
High Court has also directed that for recovery of excess amount so paid
reasonable instalments should be given to the appellants so that undue hardship
is not caused to them.
these circumstances. we see no reason to interfere with the findings given by
the Kerala High Court. The appeal and the petition are. therefore, dismissed. However.
there will be no order as to costs.