Kumar & Anr Vs. Union of India & Ors  INSC 202
(13 July 1990)
K.N. (J) Saikia, K.N. (J) Mukharji, Sabyasachi (Cj) Ray, B.C. (J) Kania, M.H. Agrawal, S.C. (J)
1990 AIR 1782 1990 SCR (3) 352 1990 SCC (4) 207 JT 1990 (3) 173 1990 SCALE
INFO : RF 1991 SC 672 (19) RF 1991 SC1182 (14,21) F 1991 SC1743 (2,4) RF 1991
SC1818 (5) RF 1992 SC 767 (7,10)
of India, 1950: Article 141--Policy of
courts is to stand by precedent and not disturb settled point.
Services: Railway Board Circular dated May 8, 1987-Change over of railway employees from SRPF
(Contributo- ry Scheme) to Pension Scheme--12th option--Exercise of Para
3.1--Whether constitutionally valid.
petitioners are retired railway employees who were covered by the Railway
Contributory Provident Fund Scheme.
Provident Fund Scheme was replaced in the year 1957 by the Pension Scheme. The
employees who entered Railway serv- ice on or after 1.4.1957 were automatically
covered by the Pension Scheme instead of the Provident Fund Scheme. The
employees who were already in service on 1.4.1957 were given an option either
to retain the Provident Fund benefits or to switch over to the pensionary
benefits. The petitioners had opted for Contributory Provident Fund Scheme.
petitioners' case is that till 1.4.1957 or even sometime thereafter, the pensionary
benefits and the alter- native Contributory Provident Fund benefits were
considered to be more or less equally beneficial; at the time when the option
was given to choose between pension and Provident Fund, the employees had no
idea that in future improvements would be made to either of them; and that as a
result of the decision of the Railways to implement the judgment of this Court
in D.S. Nakara v. Union of India,  2 SCR 165, and to extend the liberalised
pension benefits even to those railway employees who had retired long before
the liberali- sations of pension were introduced, the pension retirees derived
manifold benefits while P.F. retirees' benefits remained stagnant.
main legal contention of the petitioners is that the Railways had issued twelve
notifications giving option to certain Provident Fund retirees after the
respective cut-off dates, to opt for the Pension Scheme 353 even after their
retirement, but the same options were not given to other similarly situated
Provident Fund retirees beyond the respective cut-off dates, which was discriminato-
ry and hence violative of Art. 14 of the Constitution. It is further contended
that the notifications specifying cut-off dates were arbitrary and un-related
to the objects sought to be achieved by giving of the option, and therefore violative
of Article 14 and also of the principle laid down in Naka- ra's case. According
to counsel, the principle is that pension retirees could not be divided by such
arbitrary cut-off dates for the purpose of giving benefits to some and not to
other similarly situated employees. It is submitted that by analogy the
principle is equally applicable to the Provident Fund retirees as a class.
these grounds, it is prayed that applying the law laid down in Nakara's case
this Court should simply strike down or read down paragraph 3.1 of the 12th
option dated 8.5.1987. That paragraph said that all Contributory Provi- dent
Fund beneficiaries who were in service on 1.1.86 and who were still in service
on the date of the order would be deemed to have come over to the pension
scheme. It is sub- mitted that once this limiting requirement is removed all
the Contributory Provident Fund beneficiaries shall be eligible and will be
deemed to have come over to the pension scheme. As the basis for striking or
reading down paragraph
Nakara's ratio, it is urged that all the Railway employees both in service and
pensioners constitute one family and must be treated as one class, and
Government's obligation to look after the retired Railway employees both under
the pension scheme and the provident fund scheme being the same, they could not
be treated differently, and any differential treatment will be discriminatory
and violative of Article 14 of the Constitution of India. In Nakara's case the
date arbitrarily chosen was struck down and, as a re- sult, the revised formula
for computing pension was made applicable to all the retired pensioners.
behalf of the respondents it was contended that the options were meant to give
the Provident Fund retirees after the specified dates option to switch over to
Pension Scheme and that each specified date had nexus with the reason for
granting the particular option. It is further submitted that the petitioners'
basic assumption is erroneous inasmuch as Nakara's case did not hold that
whenever there was a liber- alisation of pension, aH other pension retirees and
Provi- dent Fund retirees must be given the option, and that the older system
of pension or Provident Fund was always insuf- ficient.
the writ petitions and the Special Leave Petition, this Court, 354
(1) The doctrine of precedent, that is, being bound by a previous decision, is
limited to the decision itself and as to what is necessarily involved in it. It
does not mean that this Court is bound by the various reasons given in support
of it, especially when they contain "propo- sitions wider than the case
itself required." [374A-B]
The enunciation of the reason or principle upon which a question before a court
has been decided is alone binding as a precedent. The ratio decidendi is the underly-
ing principle, namely, the general reasons or the general grounds upon which
the decision is based on the test or abstract from the specific peculiarities
of the particular case which gives rise to the decision. [382A; 374D]
Caledonian Railway Co. v. Walker's
Trustees, and Quin v. Leathern,  A.C. 495 (502), referred to.
Apart from Article 141 of the Constitution the policy of courts is to stand by
precedent and not to disturb settled point. When court has once laid down a
principle of law as applicable to certain state of facts, it will adhere to
that principle, and apply it to all future cases where facts are substantially
the same. [381F-G]
In Nakara's case it was never required to be decid- ed that all the retirees
formed a class and no further classification was permissible. At the same time
it was never held in that case that both the pension retirees and the Provident
Fund retirees formed a homogeneous class and that any further classification
among them could be viola- tive of Article 14. On the other hand, the Court had
clearly observed that it was not dealing with the problem of a
The Railway Contributory Provident Fund is by defi- nition a fund. Besides, the
Government's obligation towards an employee under Contributory Provident Fund
Scheme to give the matching contribution begins as soon as his account is
opened and ends with his retirement when his rights qua the Government in
respect of the Provident Fund is finally crystalized, and thereafter no
statutory obligation contin- ues. Whether there still remained a moral
obligation is a different matter. On the other hand, under the Pension Scheme
the Government's obligation does not begin until the employee retires when only
it begins and it continues till the death of the employee. Thus, on the
retirement of an employee Government's legal obligation under the Provident
Fund account ends while under the Pension Scheme it begins.
the provident fund retirees could not be treated at par with the living 355
pensioners. There was, therefore, no discrimination, and the question of
striking down or reading down clause 3.1 of the 12th option does not arise.
[380H; 381A-B; 382F] Union of India v. Ghansham Das & Ors., S.L.P. No. 5973
of 1988 and Union of India v. Bidhubhushan Malik,  3 SCC 95, distinguished.
The rules governing the Provident Fund and its contribution are entirely
different from the rules governing pension. It would not, therefore, be
reasonable to argue that what is applicable to the pension retirees must also
equally be applicable to Provident Fund retirees. [381C]
imaginary definition of obligation to include all the Government retirees in a
class was not decided and could not form the basis for any classification for
the purpose of this case. Nakara cannot, therefore, be an authority for this
case. [381E] D.S. Nakara v. Union of India,  2 SCC 165, explained.
The argument is that the State's obligation towards pension retirees is the
same as that towards Provident Fund retirees. That may be morally so. But that
was not the ratio decidendi of Nakara. Legislation has not said so. To say so
legally would amount to legislation by enlarging the circum- ference of the
obligation and converting a moral obligation into a legal obligation. [380C-D]
The statements made on behalf of the respondents to the effect that cut-off
dates had nexus with the reason for granting the particular option, has been
substantiated by facts. The cut-off dates were not arbitrarily chosen but had
nexus with the purpose for which the option was given. [382B-D]
That the Pension Scheme and the Provident Fund Scheme are structurally
different is also the view of the Central Pay Commissions, and hence ex-gratia
benefits have been recommended, which may be suitably increased. [383E]
APPELLATE JURISDICTION: Special Leave Petition (Civil) No. 8461 of 1986.
the Judgment and Order dated 31.3.1986 of the Central Administrative Tribunal, New Delhi, in Original Appln. No. 40 of 1986.
356 AND Writ Petition Nos. 1285, 1575/86, 352,361 & 1165 of 1989.
Article 32 of the Constitution of India).
in Person in SLP 8461 of 1986 and W.P. No. 1285 of 1986.
Bhushan, Mrs. Swaran Mahajan, Ms. Anuradha Maha- jan, Mrs. Rekha Pandey, Jayant
Bhushan, Badri Das Sharma, C.V. Francis, Ramesh Babu, Ms. Santosh Paul and G. Prakash,
for the Petitioners in W.P. No. 1575 of 1986, 352,361 and 1165 of 1989.
Additional Solicitor General, R.B. Datar, Mukul Mudgal, C.V. Subba Rao, B.D.
Sharma, R.B. Mishra, B.K. Prasad and A.M. Khanwilkar for the Respondents.
for the Intervener.
Judgment of the Court was delivered by K.N. SAIKIA, J. This analogous cluster
of five writ petitions and one special leave petition involves a common
question of law. The petitioner in Writ Petition No. 352 of 1989 is the
President of the All India Retired Railwaymen (P.F. Terms) Association and the
petition has been filed in a representative capacity on behalf of all the
members of the Association who retired with Provident Fund benefits.
Petition No. 361 of 1989 has been filed by three indi- vidual retired Railway
employees who also retired with Provident Fund benefits. The petitioner in Writ
Petition No. 1285 of 1986 retired as Block Inspector of Northern Railway on
7.1.1968, a non-pensionable post. All the petitioners except petitioner No. 5
in W.P. No. 1575 of 1986 retired from Railway service high posts. Petitioner
No. 1 retired as Additional Member, Railway Board on 5.11.1960 with Provident
Fund benefits. Petitioner No. 2 was Member, Railway Board and similarly retired
on 1.3. 1968 opting for Provident Fund Scheme as at that time the maximum
monthly pension was Rs.675 only. Petitioner No. 3 similarly retired as General
Manager on 5.12.1960. Petitioner No. 4 retired as Member (Staff) Railway Board
and Ex-officio Secretary to the Gov- ernment of India on 30.6.1977 opting for the Provident Fund Scheme.
Petitioner No. 5 also retired on 19.6.1972 opting for the Provident Fund
Scheme. Petitioner No. 6 retired on 28.8.1962 as Director 357 Health, Railway
Board opting for Provident Fund Scheme.
No. 7 similarly retired on 17.2.1968 as Director, Railway Board. Petitioner No.
8 retired as General Manager, Indian Railways on 15.10.1966 with the
Contributory Provi- dent Fund Scheme. The petitioners in Writ Petition No. 1165
of 1989are also similarly retired persons. The petitioner in Special Leave
Petition (Civil) No. 8461 of 1986 retired as Assistant Auditor, with Provident
Fund benefits. His claim to switch over to pension after retirement was
rejected. The petitioners are thus retired railway employees who were covered
by or had opted for the Railway Contributory Provi- dent Fund Scheme. It is the
petitioners' case that before 1957 the only scheme for retirement benefits in
the Railways was the Provident Fund Scheme wherein each employee had to
contribute till retirement a portion of his annual income towards the Provident
Fund and the Railways as the employer would make a matching contribution
thereto. This provident Fund Scheme was replaced in the year 1957 by the
Pension Scheme whereunder the Railways would give posterior to his retirement
certain monthly pension to each retired employee instead of making prior
contribution to his Provident Fund.
stated that the employees who entered Railway service on or after 1.4.1957 were
automatically covered by the Pension Scheme instead of the Provident Fund
Scheme. In so far as the employees who were already in service on 1.4.1957,
they were given an option either to retain the Provident Fund benefits or to
switch over to the pensionary benefits on condition that the matching Railway
contribution already made to their Provident Fund accounts would revert to the
Railway on exercise of the option.
the petitioners' case that till 1.4.1957 or even sometime thereafter, the pensionary
benefits and the alter- native Contributory Provident Fund benefits were
considered to be more or less equally beneficial, wherefore, employees opted
for either of them. That the benefits of the two were evenly balanced was
evidenced by the Railway Board circular dated 17.9.1960 which gave an option to
the employees cov- ered by the Provident Fund Scheme to switch over to pension
scheme and vice versa.
Bhushan, the learned counsel for the petitioners in Writ Petition Nos. 352 and
361 of 1989, submits that between 1957 and 1987 the pensionary benefits of
Railway employees were enhanced on several occasions by different ways such as
altering the formula for computing the pension, by including dearness allowance
in the pay for computing pension, by removal of the ceiling on pension, and by
intro- 358 ducing or liberalising the Family Pension Scheme etc. The Railway,
it is urged, had expressed no intention of extend- ing the benefits of this liberalised
pension to those em- ployees who had already retired. At the time when the
option was given to choose between pension and Provident Fund, the employees
had no idea that in future improvements would be made to either of them.
However, it is stated, this Court in D.S. Nakara and Ors. v. Union of India,
 2 SCR 165 held that the benefit of any liberalisation in computation of
pension would also have to be extended to those employees who had already
retired as they were similarly situated with those who were yet to retire. It
is submitted, that even though Nakara's case related to Central Government
employ- ees, the Railways also implemented the Judgment and extended the liberalised
pension benefits even to those employees who had retired long before the liberalisations
concerned were introduced. The decision to implement Nakara's Judgment to
Railway employees is admittedly contained in G.O. No. FI (3)-EV/83 dated
22.10.1983. This has, according to the learned counsel, given rise to the
"strange situation" namely, that while two alternative benefits of
provident fund and pension were more or less equal at the time when the
petitioners were to make their choice, the pensions have thereafter been liberalised
manifold to the benefit of the pension retirees, whereas no similar benefits
have been extended to those who retired opting for Provident Fund, hereinafter
called 'the P.F. retirees'. It is asserted that due to successive liberalisations
of pensions, the pension retirees derived manifold benefits while the P.F.
retirees' benefits remained stagnant. It is submitted that had the petitioners,
all of whom are P.F. retirees, known that pensionary benefits might
subsequently be so increased, they would no doubt have opted for pension
instead of Provident FUnd, The following twelve notifications given such
options are referred to:
Date of Notification Cut-off date chosen
23.07.74 01..01.73 359
23.08.79 31.03.79 7 01.09.80 23.02.80
08.05.87 01.01.86 It may be noted that in case of each option the cut-off date
was anterior to the respective dates of. announcement, and as a result,
employees who retired after the cut-off date (specified date) and before the
notification date were also made eligible for exercising the option despite the
fact that they already retired in the meantime. From the above, the 'main legal
point' that arises, submits Mr.
Bhushan, is that the Railways issued the above noti- fication giving option to
certain P.F. retirees after the respective cut-off dates to opt for the Pension
Scheme even after their retirement, but the same options were not given to
other similarly situated P.F. retirees beyond the respec- tive cut-off dates.
This, it is submitted, is clearly dis- criminatory and violative of Art. 14 of
the Constitution and deserves to be struck down.
contended by the petitioners that each of the above notifications including the
last one, dated 8.5. 1987 had given a fresh option to some of the P.F. retirees
while denying that option to other P.F. retirees who were identi- cally placed
but were separated from the rest by the arbi- trary cut-off date. Each of the
notifications specified a date and provided that the P.F. retirees who retired
on or after that date would have fresh option of switching over to the pensionary
benefits even though they had already re- tired, and also had already drawn the
entire Provident Fund benefits due to them. It is also contended that the speci-
fied dates in these notifications having formed the basis of the discrimination
between similarly placed P.F. retirees those were arbitrary and un-related to
the objects sought to be achieved by giving of the option and were clearly
viola- tive of Art. 14 and also of the principle laid down in Nakara's case,
which according to counsel, is that pension retirees could not be divided by
such arbitrary cut-off 360 dates for the purpose of giving benefitS' to some
and not to other similarly situated employees; and that by analogy the rule is
equally applicable to the Provident Fund retirees as a class.
Sibal, the learned Additional Solicitor Gener- al refuting the argument submits
that each of the options was meant to give the P.F. retirees after the
specified dates option to switch over to Pension Scheme and that each specified
date had nexus with the reason for granting the particular option. He relies on
the following statements to substantiate his submission.
SHOWING PENSION OPTIONS GIVEN TO RAILWAY EMPLOYEES ------------------------------------------------------------
S1. No. Option Granted Option Reasons for Rly. Board's validity granting letter
No. period option date
------------------------------------------------------------ 1 2 3 4 5
Option F(E) 50/RTI/6 1.4.57 to 31.3.58 Intro- dated 16.11.57 (For those duction
in service on system 1.4.1957 on Rai- lways Extensions F(P) 58.PN-1/6 Extended upto
dated 7.3.58 30.6.56 F(P)58.PN-1/6 Extended upto dated 19.6.58 31.12.58 F(P)58.PN-1/6
Extended upto dated 24.12.58 31.3.59 F(P)58.PN-1/6 Extended upto dated 28.3.59
Option PC-60/RB/2/2 1.7.59 to 15.12.60 Revi- dated 17.9.60 (For those in sion
service on of Pay Struc- ture (2 nd Pay Commiss- ion re- commenda- tion) 361
Extensions PC-60/RB-2/2 Extended upto dated 7.4.61 30.6.61 PC/60/RB-2/2
Extended upto dated 2.11.61 31.12.61
Option F(P)62.PN-1/2 1.9.62 to 31.3.63 Consequ- dated 26.10.62 (For those in ent
upon service on 1.9.62 decision to count officiati- ng pay for pensionary
Option F(P)63.PN/1/ 1.1.64 to 16.7.66 Introduc- 40 dated 17.1.64 tion of family
Option F(P)65.PN1/41 31.12.65 to In pursuance dated 3.3.66 30.6.66 of decision
(for those to liberalise in service on the family 31.12.65 pension Scheme by
Extending it to employ- ess who die wh- ile in service.
Option F(E) III.68.PN-1.5.68 to 31.12.68 In pursu 1/2 dated 13.9.88 (for those
in ance of service on decision 1.5.68 to change the defi- nition of
for the purpose of pensionary benifits.
Extensions F(E)III.68PN- Extended upto 1/2 dated 31.1.69 31.3.69
Option F(E)III.71.PN 15.7.72 to As a result of 1/3 dated 15.7.72 21.10.72 demandes
from (for those orgnised in service labour.
VIII Option PC-III.73.PN/3 1.1.73 to 22.1.75 Consequet dated 23.7.74 (for those
to acceptance in service III Pay Commis- on 1.1.73) sions' Recommen- dations.
PC-III.73.PN/3 Extended upto Extended becau- dated 18.1.75 & 30.6.76 &
se by schedule for 25.6.75 31.12.75 vsrious categories PC-III, 73.PN/3 Extended
upto were being Pt I 30.6.76 Finalised.
16.12.75 PC-III.73 PN/3 Extended upto Pt.I 31.12.76 dated 30.6.76 PC-III 73
PN/3 Extended upto Pt.I 30.6.76 dated 3.1.77 PC-III 73 PN/3 Extended upto Pt.I
31.12.77 dated 12.7.77 PC-III 73 PN/3 Extended upto Pt.I 30.6.78 dated 17.4.78
PC-III 73 PN/3 Option Exercised Pt.I upto 31.12.78 be dated 20.5.78 considered
as valid PC-III.78 PN/3 (staff who were in Pt.I service as on 1.1.73 &
dated 27.12.78 retired/died/quited service during the period from 1.1.73 to
Option F(E) III. 79. PN 31.3.79 to On account - 1/4 22.2.80 of liberalisa-
dated 23.8.79 (For those in tion of pen- service on sion formula 1.4.79) and introduc-
tion of slab system.
F(E) III. 79. PN Extended upto -1/4 dated 1.9.80 22.2.81
Option F(E) III 82. 31.8.82 to 28.2.830n account PN 1/7 (For those in of part
of DA dated 4.10.82 service on treated as 31.8.82) pay.
F(E)III 82. PN Extended upto 1/7 dated 13.5.83 31.8.83 % made applicable from
31.1.82 under letter No. F(E) III 82 PN 1/7 dated 9.11.82
Option F(E) III 85. 31.3.85 to Consequent PN 1/5 17.12.85 upon DA/ dated
18.6.85 (For those inADA upto service on average price 31.3.85 ) index at point
568 treated as pay for retire- ment benefits.
XII Option PC-IV/87/13/ 1.1.86 to 30.9.87 All CPFbene- 881 ficiaries who dated
8.5.87 (for those in were in service service on on 1.1.86 and 1.1.86) who are
still in service will be deemed to 364 have come over to pen- sion Scheme
unless they specifically opt out pension scheme and desire to retain the CPF
OF PENSION SCHEME OF RAILWAYS AND SUBSEQUENT PENSION OPTION (i) Introduction of
Pension Scheme Pension Scheme was introduced on the Railways on 16.11.57 and
was applicable to the following:
all Railway servants who enter service on and after 16.11.57 and (b) To all
non-pensionable Railway servants who were in service on 1.4.57 or join Railway
Service between 1.4.57 and 16.11.57 and opt for the Pension Scheme.
scheme was made applicable from 1.4.57 because the financial year commences
from April each year. This option was extended 4 times from time to time and
was valid upto 28.3.59. The extensions were given because there were repre- sentations
for its extension so that the staff could get time to weigh the merits of the
Schemes before they take decision.
Pension option dated 17.9. 1960 Orders were issued on 2.8.1960 notifying Railway
Serv- ices (Authorised Pay) Rules, 1960. Under this notification new pay scales
were introduced for Railway Servants. These new pay scales were effective from
1st July, 1959.
option was granted on 17.9.60 to Railway employees who were in service on
1.7.59 to come over to the pension scheme. The last 365 date for exercising the
option was 15.12.60. This was ex- tended upto 31.12.60 to enable the concerned
employees to come to a considered decision whether to retain the P.F. or opt
for the pension scheme.
Pension Option dated 26.10.62 A decision was taken on 26.10.62 to count the officiat-
ing pay for the purpose of retirement benefits in case of those who were in
service on 1.9.62. Accordingly, a fresh option was given to staff to come over
to pension scheme on 26.10.62. This option remained open till 31.3.63.
Pension Option dated 17. 1. 1964 As a result of introduction of Family Pension
Scheme 1964, which came into force on 1.1.1964 orders were issued on 17.1.64 to
the effect that all Railway employees who were in service could opt for pension
scheme within a period of 6 months. This option was extended upto 16.9.64.
Pension Option dated 3.3.66 Family Pension Scheme was further liberalised for em-
ployees who die while in service. In view of this improve- ment in Pension
Scheme, pension option under Railway Board's orders dated 3.3.66 was given to
employees who were in service on 31.12.65. Since the liberalisation in Family
Pension Scheme came into effect from 1st January, 1966, the option was open for employees
who were in service on 31.12.65 and was open upto 30.6.1966.
Pension Option dated 13.9.68 The definition of 'Pay' for pensionary benefits
was changed from 1.5.68, through Board's orders dated 13.9.68.
view of this, a further option was given on 13.9.68 to Railway employees who
were in service on and after 1.5.68 to opt for the Pension Scheme. This option
was open upto 31.12.68. This was further extended upto 31.3.69.
Pension Option dt. 15.7. 72 On representation from the recognised labour
federations that many employees had not clearly understood the liberali- sation
introduced in the pension scheme, a fresh option was allowed on 15.7.72 to all
serving employees. This was open till 21.10.72.
(viii) Pension Option dated 23.7. 74 This option was based on similar orders
issued by Minis- try of Finance. The rationale behind this option was that the
recommendations of the 3rd Pay Commission became effec- tive from 1.1.73 but
pay structure of all employees who were in service on 1.1.73 got altered
through orders issued piecemeal from time to time. There were liberalisations
in the pension scheme also in the form of increase in the amount of gratuity as
also introduction of the concept of Dearness Relief made available to the
pensioners. This option was made available to all employees who were in service
on 1.1.73. Employees who had retired earlier did not get affected in any way by
the recommendations of the 3rd Pay Commission and were accordingly not given
this option to come over to Pension Scheme. This option was available upto
22.1.75, a period of 6 months.
option given vide letter of 23.7.74 was extended from time to time till
31.12.78. The reason why this exten- sion had to be allowed was that the
revised pay scales recommended by the Pay Commission for many of the categories
could not be finalised and notified. Till such time, the revised pay scale
admissible to each category was made known, it was impossible for the concerned
staff to assess the benefit admissible for opting for the revised scale as also
for the pension option. The pension option had there- fore to be extended from
time to time in this manner.
letters authorising extension of the date of option were not very clearly
worded with the result that the pen- sion option during the periods of
extension was granted, even to those who had retired before such extension
became admissible but who were in service on 1.1.73. The clarifica- tion was
accordingly issued to all the Railways stating that the subsequent orders
extending the date of option were applicable to serving employees only, but the
cases already decided otherwise may be treated as closed and need not be opened
subsequently represented by the organised labour that the options actually
exercised upto 31.12.78 should be treated valid even though such cases may not
have been decided by that date. This was agreed to and orders issued
Pension Option dated 23.8. 79 A liberalised formula and slab-system for calculation
of pension 367 effective from 31.3.79 was notified by Railway Board on 1.6.79.
Accordingly, orders were issued on 23.8.79 allowing pension option to those
Railway employees who were in serv- ice on 31.3.79. This option was initially
open till 22.2.80 but was extended subsequently to enable wider participation upto
Pension Option dated 4. 10.82 Orders were issued by Board on 30.4.82 ordering
that a portion of Dearness Allowance will be treated as pay for retirement
benefits w.e.f. 31.1.82. Accordingly a fresh option was allowed on 4.10.82
which could be exercised by Railway employees who were in service on 31.1.82.
This option was available upto 31.8.83.
Pension Option dated 18.6.85 Orders were issued by Railway Board on 17.5.85
merging Dearness Allowance to the price index upto 568 with pay for the purpose
of retirement benefits and raising the ceiling of DCRG from 36,000 to 50,000 w.e.f.
31.3.85. Accordingly, another option was granted to the Railway employees who
were in service on 31.3.85. This option was available for a period of 6 months
i.e. upto 17.12.1985.
Pension Option dated 8.5.87 Consequent upon acceptance of the recommendations
of the 4th Pay Commission the revised pay scales were notified on 19.9.86 and
14.3.87, effective from 1.1.1986. Accordingly another pension option was given
to the Railway employees who were in service on 1.1.86 vide orders of 8.5.87.
Under these orders those who did not specifically opt out of pension scheme by
17.12.87 would he automatically deemed to have opted for the pension scheme.
now examine these options. The Railway Board's letter No. F(E) 50-RTI/6 dated
November 16, 1967 introduced the pension scheme for railway servants. It said
that the President had been pleased to decide that the pension rules, as liberalised
vide Railway Board's Memo No. E-48 OPC-208 dated 8.7.1950 as amended or
clarified from time to time should apply "(a) to all railway servants who
entered serv- ice on or after issue of that letter and (b) to all non- pensionable
railway servants who were in service on 1.4.57 or have joined railway service
between that date and the date of issue of the order." The Railway
servants referred to in para (b) were required 368 to exercise an unconditional
and unambiguous option on the prescribed form on or before 31.3.1958 electing
for the pensionary benefits or retaining their existing retirement benefits
under the State Railway Provident Fund Rules. It further said that any such
employee from whom an option form prescribed for the employee's option was not
received within the above time limit or whose option was incomplete or
conditional or ambiguous shall be deemed to have opted for the pensionary
benefits and if any such employee had died by that date or on or after 1.4.57
without exercising option for the pensionary scheme, his dues would be paid on
the provident fund system. The period of validity of this option was first
extended upto 30.6.58, 31.12.58, 31.3.59 and lastly upto 30.9.59. There could,
therefore, be no doubt that those who did not opt for the pension scheme had
ample opportunity to choose between the two.
second option was given by the Board's letter No. PC-60/ RB/2/2 dated 17.9.60
to elect the retirement benefits under the Provident Fund Rules or the Pension
Rules. All Railway servants who were in non-pensionable service on 15.11.57
prior to the introduction of the pension scheme on the Railways and who were
still in service including (IPR) on 1.7.59 were granted this option to have
their retirement benefits regulated by the State Railway Provident Fund Rules
or the Railway Pension Rules. Every eligible railway servant was given the
option to change over from P.F. benefits to pensionary benefits or vice versa.
It clearly said that Railway servants who did not exercise the option would
continue to be eligible for the P.F. benefits or pensionary benefits as the
case might be for which he was already eligible.
option was subject to the special conditions stated therein. Where the Railway
servants opted for pensionary benefits, the part of the Government contribution
together with interest thereon and/or special contribution to the Railway
servants' P.F. account had already been paid, the excess of the amount over the
gratuity due under the Pension Rules should be refunded to the Government. It
clearly said that: "the option once exercised shall, however, be final and
irrevocable irrespective of the decision taken on that issue." If a
Railway servant opted for P.F. benefits and if the payment of pensionary
benefits had already commenced, further payment would be stopped and his P.F.
account would be reconstructed as if he had never opted for pensionary
benefits. The period of validity of option was extended upto 30.6.61, and then upto
31.12.61. This letter clearly indi- cated the reason for giving this option as
"under the re- vised pay structure introduced from 1.7.59, the bulk or
whole of the D.A. previously payable 369 have been absorbed into pay and a
number of changes are also being made in the rules regarding retirement
benefits." In pursuance of the 3rd Pay Commission Report, Govern- ment
decided to give opportunity to opt for liberalised Railway Pension Rules
including benefits of Family Pension Scheme, 1964, to Railway employees, who
had retained the contributory P.F. Rules and who were in service on 31.3.1979
and retired on or after that date provided they gave in writing their option
within six months. Employees who had retired under the said State Railway P.F.
(Contributory) Rules, their option would be valid if they refunded the entire
Government contribution and the excess, if any, of special contribution to P.F.
received by them over D.C.R.G.
them under Pension Rules. In case of deceased employ- ees request could be made
for option by valid nominee and in the absence. of him by legal guardian.
Thereafter a number of representations were made and the Government extended
the time for giving option for adopting Pension Scheme in place of contributory
result of treatment of a portion of ADA
as pay for purpose of retirement benefits and consequently enhancement in pensionary
benefits, the date for giving option was further extended by 28.2.1983 only for
these employees who were in service on 31.8.1982 and who quitted/retired on or
after that date. The date of option was further extended from time to time.
in view the treatment of entire DA upto the price index line of 568 as pay for
retirement benefit with effect from 31.3.85, removal of ceiling limit of Rs.
1500 on pension and raising of ceiling of DCRG from Rs.36,000 to Rs.50,000 the
date of option for employees who were in service on 31.3.85 and onwards and
still governed by S.R.P.F. (Contributory) Rules, was further extended upto
17.12.1985 provided the amount of death-cum-retirement gratuity and the excess,
if any, of special contribution over the D .C.R.G., was refunded.
12th option was as under.
of India/Bharat Sarkar Ministry of Railways/Rail Mantralaya (Railway Board)
Machine No. PC-IV/87/13/881 No. PC-IV/87/Imp. PW 1 370 The General Managers,
RBBIS. No. 116/87 All Indian Railways, New Delhi, dated 8th May, 1987 Production Units etc.
Change over of Railway employees from the SRPF (Contributory Scheme) to Pension
Scheme'Implementation of the recommendation of the IV Central Pay
Railway employees who are covered by the SRPF (Contributory Scheme) CPF Scheme
have been given repeated options in the past to come over the Pension Scheme. Howev-
er, some Railway employees still continue under the CPF Scheme. The Fourth
Central Pay Commission has now recommend- ed that all CPF beneficiaries in
service on January 1, 1986, should be deemed to have come over to the Pension
Scheme on that date, unless they specifically opt out to continue under the GPF
After careful consideration the President is pleased to decide that the said
recommendation shall be accepted and implemented in the manner hereinafter
All CPF beneficiaries, who were in service on 1.1.86 and who are still in
service on the date of issue of these orders, will be deemed to have come over
to the Pension Scheme. ? 3.2. The employees of the category mentioned above
will, however, have an option to continue under the CPF Scheme, if they so
desire. The option will have to be exercised and conveyed to the concerned Head
of Office by 30.9.87, in the form enclosed, if the employees wish to continue
under the GPF Scheme. 1f no option is received by the Head of Office by the
above date the employees will be deemed to have come over to the Pension
The CPF beneficiaries, ,who were in service on 1.1.1986, but have since retired
and in whose cases retire- ment benefits have also been paid under the CPF Scheme,
will have an option to 'have their retirement benefits calculated under the
Pension Scheme provided they refund 371 to the Government the Government
contribution to the Con- tributory Provident Fund and the interest thereon,
drawn by them at the time of settlement of the CPF Account. Such option shall
be exercised latest by 30.9. 1987.
CPF beneficiaries, who were in service on 1.1.1986 but were since retired, and
in whose cases the CPF Account has not already been paid, will be allowed
retirement benefits as if they were borne on pensionable establishments, unless
they specifically opt, by 30.9.87, to have their retirement benefits settled
under the CPF Scheme.
Cases of CPF beneficiaries, who were in service on 1.1.86, but have since died,
either before retirement or after retirement, will be settled in accordance
with para 3.3. or 3.4 above, as the case may be. Options in such cases will be
exercised, latest by 30.9.87, by the widow/widower and, in the absence of
widow/widower, by the eldest surviv- ing member of the family, who would have
otherwise been eligible to family pension under the Family Pension Scheme, if
such Scheme were applicable.
The option, once exercised, shall be final.
4 . 2
In the case of employees referred to above who come over or are deemed to have
come over to the Pension Scheme, the Government's contribution to the CPF
together with the interest thereon, credited to the CPF Account of the employee,
will be resumed by the Government.
contribution to Provident Fund if already paid in these cases, will be adjusted
against the death/ retirement Gratuity, payable under these orders. The
employee's contri- bution, together with the interest thereon at his credit in
the CPF account, will be transferred to the CRPF (Non-Con- tributory) Account,
to be allotted to him, on his coming over to the Pension Scheme.
proposal to grant ex-gratia payment to the benefici- aries, who retired prior
to 1.1.1986 and to the 372 families of CPF beneficiaries who died prior to
1.1.1986, on the basis of the recommendations of the Fourth Central Pay
Commission, is separately under consideration of the Govern- ment. The said ex-gratia
payment, if and when sanctioned, will not be admissible to the employees or
their families who opt to continue under the CPF Scheme from 1.1.1986 onward.
Executive Director, Pay Commission Railway Board." The learned Additional
Solicitor General stated that each option was given for stated reasons related
to the options. On each occasion time was given not only to the persons in
service on the date of the Railway Board's letter but also to persons who were
in service till the stated anterior date but had retired in the meantime. The
period of validity of option was extended in all the options except Nos. 3rd,
4th, 5th and 7th. We find the statements to have been substantiated by facts.
The cut-off dates were not arbitrarily chosen but had nexus with the purpose
for which the option was given.
Bhushan however submits that applying the law laid down in Nakara's case this
Court should simply strike down or read down paragraph 8.1 of the above 12th
option dated 8.5. 1987. That paragraph said that aH C.P.F. benefi- ciaries who
were in service on 1.1.86 and who were still in service on the date of issue of
the order would be deemed to have come over to the pension scheme. It is
submitted that once this limiting requirement is removed all the C.P.F.
shall be eligible and will be deemed to have come over to the pension scheme.
basis or justification for striking or reading down paragraph 3.1 on Nakara's
ratio, it is urged that all the Railway employees numbering about 22 lakhs
comprising 16,22,000 in service and about 6 lakhs pensioners constitute one
family and must be treated as one class as the Govern- ment's obligation to
look after the retired Railway employ- ees both under the pension scheme and
the provident fund scheme being the same, they could not be treated different- ly.
Any differential treatment will be discriminatory and violative of Article 14
of the Constitution of India. In Nalcara's case the date arbitrarily 373 chosen
was struck down and as a result the revised formula for computing pension was
made applicable to all the retired pensioners. The same principle, it is urged,
has to be extended to the provident fund retires also otherwise there would be
discrimination. It is stated that though at the time of choosing between
provident fund and pension scheme both the alternative appeared to be more or
less equal and the retired provident funders took their lump sum yet subse- quently
stage by stage the pensioners benefits were in- creased in such ways and to
such extent that it became more and more discriminatory against the provident funders
old and new. It was because of this discrimination that aucces- sive options
were given by the Railway Board for the provi- dent funders to become
pensioners. Hence the submission that this limitation must go, and all the
provident funders must be deemed to have become pensioners subject to the
condition that the Government contribution received by them along with interest
thereon is refunded or adjusted. Obviously this gives no importance to the
condition in the notifications that option once exercised shall be final and
binding and to the fact that in each option a cut-off date was there relat- ed
to the purpose of giving that option:
the entire case of the petitioners is sought to be based on the decision in Nakara's
case. Mr. Kapil Sibal submits that the petitioners' basic assumption is
erroneous inasmuch as Nakara's case did not hold that when- ever there was a liberalisation
of pension all other pension retirees and P.F. retirees must be given option
and that the older system of pension or Provident Fund was always insuf- ficient.
According to counsel the only question decided in Nakara can be gathered from
the following paragraph of the report at page 172:
pensioners entitled to receive superannuation or retir- ing pension under
Central Civil Services (Pension) Rules, 1972 (' 1972 Rules' for short) form a
class as a whole? Is the date of retirement a relevant consideration for eligi-
bility when a revised formula for computation of pension is ushered in and made
effective from a specified date? Would differential treatment to pensioners
related to the date of retirement qua the revised formula for computation of
pen- sion attract Article 14 of the Constitution and the element of
discrimination liable to be declared unconstitutional as being violative of
Art. 14?" The basic question of law that has to be decided, therefore, is
what was the ratio decidendi in Nakara's case and how far that would 374 be
applicable to the case of the P.F. retirees.
doctrine of precedent, that is being bound by a previous decision, is limited
to the decision itself and as to what is necessarily involved in it. It does not
mean that this Court is bound by the various reasons given in support of it,
especially when they contain "propositions wider than the case itself
required." This was what Lord Selborne said in Caledonian Railway Co. v.
Walker's Trustees and Lord Halsbury in Quinn v. Leathem,  A.C. 495,
(502). Sir Frederick Pollock has also said: "Judicial authority belongs
not to the exact words used in this or that judgment, nor even to all the
reasons given, but only to the principles accepted and applied as necessary
grounds of the decision." In other words, the enunciation of the reason or
princi- ple upon which a question before a court has been decided is along
binding as a precedent. The ratio decidendi is the underlying principle,
namely, the general reasons or the general grounds upon which the decision is
based on the test or abstract from the specific peculiarities of the particu- lar
case which gives rise to the decision. The ratio deci- dendi has to be
ascertained by an analysis of the facts of the case and the process of
reasoning involving the major premise consisting of a pre-existing rule of law,
either statutory or judge-made, and a minor premise consisting of the material
facts of the case under immediate considera- tion. If it is not clear, it is
not the duty of the court to spell it out with difficulty in order to be bound
by it. In the words of Halsbury, 4th Edn., Vol. 26, para 573:
concrete decision alone is binding between the parties to it but it is the
abstract ratio decidendi, as ascertained on a consideration of the judgment in
relation to the sub- ject matter of the decision, which alone has the force of
law and which when it is clear it is not part of a tribu- nal's duty to spell
out with difficulty a ratio decidendi in order to bound by it, and it is always
dangerous to take one or two observations out of a long judgment and treat them
as if they gave the ratio decidendi of the case. If more rea- sons than one are
given by a tribunal for its judgment, all are taken as forming the ratio decidendi."
The question then is, has the court said in Nakara that what was applicable to
pensioners vis-a-vis liberalisation of pension was to be equally applicable to
P.F. retirees? In Nakara's case petitioners 1 and 375 2 were retired pensioners
of the Central Government, the first being a civil servant and the second being
a member of the service personnel of the Armed Forces. The third peti- tioner
was a society registered under the Societies Regis- tration Act, 1860, formed
to ventilate the legitimate public problems and was espousing the cause of the
pensioners all over the country. The first petitioner retired in 1972 and on
computation, his pension worked out at Rs.675 per month and with dearness
allowance he was drawing monthly pension of Rs.935. The second petitioner
retired at or about that time and at the relevant time was in receipt of a
pension plus dearness relief of Rs .981.
Union of India had been revising and liberalising the pension rules from time
to time. The Central Government servants on retirement from service were
entitled to receive pension under the Central Civil Services (Pension) Rules,
1972. Successive Central Pay Commissions recommended en- hancement of pension
in different ways. The first Central Pay Commission (1946-47) recommended
raising of the retire- ment age to 58 years and the scale of pension to 1/80 of
the emoluments of each year of service subject to a limit 35/80 with a ceiling
of Rs.8,000 per year for 35 years of service.
Second Central Pay Commission (1957-58) did not recom- mend any increase in the
non-contributory retirement bene- fits. The Administrative Reforms Commissioner
(ARC) 1956 took note of the fact that the cost of living had shot up and
correspondingly the possibility of savings had gone down and accordingly
recommended that the quantum of pension may be raised to 3/6 of the emoluments
of the last three years of service from existing 3/8 and the ceiling to be
raised from Rs.675 per month to Rs. 1,000 per month. Before the Government
acted upon it, the Third Central Pay Commission did not examine the question of
relief to pensioners because of its terms and recommended no change in the
pension formu- la except that the existing ceiling to be raised from Rs.675 to Rs.
1,000 per month and the maximum gratuity should be raised from Rs.24,000 to
On May 25, 1979, Government of India, Ministry of
Finance, issued Office Memorandum No. F-19(3)-EV-79 whereby the formula for
computation of pension was liberalised but made it applicable. to Government
servants who were in service on March 31, 1979 and retired from service on or after that date. The formula
introduced a slab system for computation of pension which was applicable to
employees governed by the 1972 rules retiring on or after the speci- fied date.
The pension for the service personnel which would include Army, Navy and Air
Force staff was governed by the relevant regulations. By 376 the Memorandum of
the Ministry of Defence bearing No. B/40725/ AG/PS4-C/1816/AD
(Pension)/Services dated September 28, 1979, the liberalised pension formula
introduced for the government servants governed by the 1972 rules was extended
to the armed forces personnel subject to the limitations set out in the
memorandum with a condition that the new rules of pension would be effective
from April 1, 1979 and may be applicable to all service officers who become/
became non- effective on or after that date. This liberalised 'pension formula
was to be applicable prospectively to those who retired on or after March 31,
1979 in case of government servants governed by 1972 rules and in respect of defence
personnel those who became/become non-effective on or after April 1, 1979.
Consequently those who retired prior to -the specified date would not be
entitled to the benefits of the liberalised pension formula.
above facts the petitioners' therein contended that this Court would consider
the raison d'etre for payment of pension, namely, whether it was paid for past satisfacto-
ry service rendered, and to avoid destitution in old age as well as a social
welfare or socioeconomic justice measure, the differential treatment for those
who retired prior to a certain date and those retiring subsequently, the choice
of the date being wholly arbitrary would amount to discrimina- tion and violative
of Art. 14; and whether the classifica- tion based on fortuitous circumstance
of retirement before or subsequent to a date, fixing of which was not shown to
be related to any rational principle, would be equally viola- tive of Art. 14.
It was contended that pensioners of the Central Government formed a class for
the purpose of pen- sionary benefits and there could not be mini-classification
within the class designated as pensioners.
Court considered the nature and purposes of pension in the context of a welfare
State and found that though unquestionably pension was linked to length of
service and the last pay drawn which did not imply the pay on the last day of
retirement but average emoluments of 36 months serv- ice which under the liberalised
scheme was reduced to aver- age emoluments of 10 months preceding the date
which was expected to be higher than that of the higher average emolu- ments of
36 months, coupled with the slab system for compu- tation amounted to liberalisation
of pension in different ways. If the pensioners who retired prior to the
specified date had to earn pension on the average emoluments of 36 months'
salary just preceding the date of retirement, natu- rally the average would be
lower and they would be doubly hit because the slab system newly introduced was
not avail- able to them 377 while the ceiling was at a lower level and thus
they would suffer "triple jeopardy, viz., lower average emoluments,
absence of slab system and lower ceiling." This Court, therefore, wanted
to know what was the purpose in prescrib- ing the specified date vertically
dividing the pensioners between those who retired prior to the specified date
and those who retired subsequent to that date and why was the pension scheme liberalised.
Receiving no satisfactory reply the Court observed:
the impugned memoranda do not spell out the raison d'etre for liberalising the
pension formula. In the affida- vit in opposition by Shri S.N. Mathut, it has
been stated that the liberalisation of pension of retiring Government servants
was decided by the Government in view of the per- sistent demand of the Central
Government employees repre- sented in the scheme of Joint Consultative
Machinery. This would clearly imply that the pre-liberalised pension scheme did
not provide adequate protection in old age and that a further liberalisation
was necessary as a measure of econom- ic security. When Government favorably
responded to the demand it thereby ipso facto conceded that there was a larger
available national cake part of which could be uti- lised for providing higher
security to erstwhile government servants who would retire. The Government also
took note of the fact that Continuous upward movement of the cost of living
index as a sequel of inflationary inputs and dimin- ishing purchasing power of
rupee necessitated upward revi- sion of pension. If this be the underlying
intendment of liberalisation of pension scheme, can any one be bold enough to
assert that it was good enough only for those who would retire subsequent to
the specified date but those who had already retired did not suffer the pangs
of rising prices and falling purchasing power of the rupee?" The Court
then proceeded to examine whether there was any rationale behind the eligibility
qualification and finding no rationale concluded:
this division which classified pensioners into two classes is not based on any
rational principle and if the rational principle is the one of dividing
pensioners with a view to giving something more to persons otherwise equally
placed, it would be discriminatory." 378 The Court accordingly concluded
that the division was thus arbitrary and unprincipled and therefore the classifi-
cation did not stand the test of Art. 14. It was also arbi- trary as the Court
did not find a single acceptable or persuasive reason for this division and
this arbitrary action violated the guarantee of Art. 14. The Court observed
that the pension scheme including the liberalised scheme to the Government
employees was non-contributory in' character.
payment of pension was a statutory liability undertaken by the Government and
whatever became due and payable was 2budgeted for. The Court specifically
could have appreciated this line of reasoning where there is a contributory
scheme and a pension fund from which alone pension is disbursed. That being not
the case, there is no question of pensioners dividing the pension fund which,
if more persons are admitted to the scheme, would pro rata affect the share.
Therefore, there is no question of dividing the pension fund. Pension is a
liability incurred and has to be provided for in the budget." The Court
from the impugned memoranda the event of being in serv- ice and retiring
subsequent to specified date is served, all pensioners would be governed by the
liberalised pension scheme. The pension will have to be recomputed in
accordance with the provisions of the liberalised pension scheme as salaries
were required to be recomputed in accordance with the recommendation of the
Third Pay Commission but becoming operative from the specified date. It does
therefore appear that the reading down of impugned memoranda by severing the
objectionable portion would not render the liberalised pension scheme vague,
unenforceable or unworkable." The Court in Nakara was not satisfied with
the explana- tion that the legislation had defined the class with clarity and
precision and it would not be the function of this Court to enlarge the class.
The Court held in paragraph 65 of the report:
the expanding horizons of socio-economic justice, the Socialist Republic and
welfare State which we endeavour to set up and largely influenced by the fact
that 379 the old men who retired when emoluments were comparatively low and are
exposed to vagaries of continuously rising prices, the falling value of the
rupee consequent upon inflationary inputs, we are satisfied that by introducing
an arbitrary eligibility criterion: 'being in service and retiring subsequent
to the specified date' for being eligi- ble for the liberalised pension scheme
and thereby dividing a homogeneous class, the classification being not based on
any discernible rational principle and having been found wholly unrelated to
the objects sought to be achieved by grant of liberalised pension and the
eligibility criteria devised being thoroughly arbitrary, we are of the view
that the eligibility for liberalised pension scheme of 'being in service on the
specified date and retiring subsequent to that date' in impugned memoranda, Exs.
P-1 and P-2, violates Article 14 and is unconstitutional and is struck down.
Both the memoranda shall be enforced and implemented as read down as under:
other words, Ex. P-1, the words: 'that in respect of the government servants
who were in service on March 31, 1979 and retiring from service on or after
that date'; and in Ex. P-2, the words: 'the new rates of pension are effective
from April 1, 1979 and will be applicable to all
service officers who became/become non-effective on or after that date';
unconstitutional and are struck down with this specifi- cation that the date
mentioned therein will be relevant as being one from which the liberalised
pension scheme becomes operative to all pensioners governed by 1972 Rules irrespec-
tive of the date of retirement. Omitting the unconstitution- al part it is
declared that all pensioners governed by the 1972 Rules and Army Pension
Regulations shall be entitled to pension as computed under the liberalised
pension scheme from the specified date, irrespective of the date of retire- ment.
Arrears of pension prior to the specified date as per fresh computation is not
admissible." Thus the Court treated the pension retirees only as a
homogeneous class. The P.F. retirees were not in mind. The Court also clearly
observed that while so reading down it was not dealing with any fund 380 and
there was no question of the same cake being divided amongst larger number of
the pensioners than would have been under the notification with respect to the
the pensioners governed by the 1972 Rules were treated as a class because
payment of pension was a continuing obligation on the part of the State till
the death of each of the pensioners and, unlike the case of Contributory Provident
Fund, there was no question of a fund in libera- lising pension.
argument of Mr. Shanti Bhushan is that the State's obligation towards pension
retirees is the same as that towards P.F. retirees. That may be morally so. But
that was not the ratio decidendi of Nakara. Legislation has not said so. To say
so legally would amount to legislation by enlarg- ing the circumference of the
obligation and converting a moral obligation into a legal obligation. It
reminds us of the distinction between law and morality and limits which
separate morals from legislation. Bentham in his Theory of Legislation, Chapter
XII, page 60 said:
in general is the art of directing the actions of men in such a way as to
produce the greatest possible sum of good. Legislation ought to have precisely
the same object.
although these two arts, or rather sciences, have the same end, they differ
greatly in extent. All actions, wheth- er public or private, fall under the
jurisdiction of morals.
a guide which leads the individual, as it were, by the hand through all the
details of his life, all his relations with his fellows. Legislation cannot do
this; and, if it could, it ought not to exercise a continual interference and
dictation over the conduct of men. Morality commands each individual to do all
that is advantageous to the community, his own personal advantage included. But
there are many acts useful to the community which legislation ought not to
command. There are also many injurious actions which it ought not to forbid,
although morality does so. In a word legislation has the same centre with
morals, but it has not the same circumference." In Nakara it was never
held that both the pension reti- rees and the P.F. retirees formed a
homogeneous class and that any further classification among them would be
viola- tive of Art. 14. On the other hand the Court clearly ob- served that it
was not dealing with the problem of a "fund".
Railway Contributory Provident Fund is by 381 definition a fund. Besides, the Government's
obligation towards an employee under C.P.F. Scheme to give the matching
contribution begins as soon as his account is opened and ends with his
retirement when his rights qua the Government in respect of the Provident Fund
is finally crystallized and thereafter no statutory obligation continues.
Whether there still remained a moral obligation is a different matter. On the
other hand under the Pension Scheme the Government's obligation does not begin
until the employee retires when only it begins and it continues till the death
of the em- ployee. Thus, on the retirement of an employee Government's legal
obligation under the Provident Fund account ends while under the Pension Scheme
it begins. The rules governing the Provident Fund and its contribution are
entirely different from the rules governing pension. It would not, therefore,
be reasonable to argue that what is applicable to the pen- sion retirees must
also equally be applicable to P.F. reti- rees. This being the legal position
the rights of each individual P.F. retiree finally crystallized on his retire- ment
whereafter no continuing obligation remained while on the other hand, as
regards Pension retirees, the obligation continued till their death. The
continuing obligation of the State in respect of pension retirees is adversely
affected by fall in rupee value and rising prices which, considering the corpus
already received by the P.F. retirees they would not be so adversely affected
ipso facto. It cannot, there- fore, be said that it was the ratio decidendi in Nakara
that the State's obligation towards its P.F. retirees must be the same as that
towards the pension retirees An imaginary definition of obligation to include
all the Government retirees in a class was 'not decided and could not form the
basis for any classification for the purpose of this case.
cannot, therefore, be an authority for this case.
et non guieta movere. To adhere to prece- dent and not to unsettle things which
are settled. But it applies to litigated facts and necessarily decided ques- tions.
Apart from Art. 141 of the Constitution of India, the policy of courts is to
stand by precedent and not to disturb settled point. When court has once laid
down a principle of law as applicable to certain state of facts, it will adhere
to that principle, and apply it to all future cases where facts are
substantially the same. A deliberate and solemn decision of court made after
argument on question of law fairly arising in the case, and necessary to its determina-
tion, is an authority, or binding precedent in the same court, or in other
courts of equal or lower rank in subse- quent cases where the very point is
again in controversy unless there are occasions when departure is rendered neces-
sary to vindicate plain, obvious principles of law and remedy continued
injustice. It should be invariably applied 382 and should not ordinarily be
departed from where decision is of long standing and rights have been acquired
under it, unless considerations of public policy demand it. But in Nakara it
was never required to be decided that all the retirees formed a class and no
further classification was permissible.
next argument of the petitioners is that the option given to the P.F. employees
to switch over to the pension scheme with effect from a specified cut-off date
is bad as violative of Art. 14 of the Constitution for the same rea- sons for
which in Nakara the notification were read down. We have extracted the 12th
option letter. This argument is fallacious in view of the fact that while in
case of pension retirees who are alive the Government has a continuing
obligation and if one is affected by dearness the others may also be similarly
affected. In case of P.F. retirees each one's rights having finally crystallized
on the date of retirement and receipt of P.F. benefits and there being no
continuing obligation thereafter they could not be treated at par with the
living pensioners. How the corpus after retirement of a P.F. retiree was
affected or benefitted by prices and interest rise was not kept any track of by
the Railways. It appears in each of the cases of option the specified date bore
a definite nexus to the objects sought to be achieved by giving of the option.
Option once exer- cised was told to have been final. Options were exercisable
vice versa. It is clarified by Mr. Kapil Sibal that the specified date has been
fixed in relation to the reason for giving the option and only the employees
who retired after the specified date and before and after the date of notifi- cation
were made eligible. This submission appears to have been substantiated by what
has been stated by the successive Pay Commissions. It would also appear that
corresponding concomitant benefits were also granted to the Provident Fund
holders. There was, therefore, no discrimination and the question of striking
down or reading down clause 3.1 of the 12th Option does not arise.
would also appear that most of the petitioners before their filing these
petitions had more than one opportunities to switch over to the Pension Scheme
which they did not exercise. Some again opted for P.F. Scheme from the Pension
Bhushan then submits that the same relief as is being canvassed by the
petitioners herein has been upheld by this Hon'ble Court by dismissing the SLP
No. 5973/88 of the Government in the case of Union of India v. Ghansham Das and
Ors. against the Judgment of the Central Administrative Tribunal, Bombay. The
Tribunal 383 had held the same notifications as were impugned herein to be
discriminatory and had directed that a flesh option be given to all P.F.
retirees subject to refund of the Govern- ment contribution to Provident Fund
received by adjusting it against their pensionary rights. Similarly, it is
submitted, in a Rajasthan case, both the single Judge and the Division Bench
have held that all the retirees would have to be given a flesh option as the
notifications giving the option only to some retirees are clearly
discriminatory. This view has, it is urged, again been upheld by this Hon'ble
Court by dismissing the Special Leave Petition No. 7192/87 of the Government by
order dated 11.8.87.
have perused the judgments. The Central Administra- tive Tribunal in
Transferred Application No. 27/87 was dealing with the case of the petitioners'
right to revise options during the period from 1.4.69 to 14.7.72 as both the
petitioners retired during that period. The tribunal ob- served that no
explanation was given to it nor could it find any such explanation. In State of
Rajasthan v. Retired C.P.F. Holder Association, Jodhpur, the erstwhile
employees of erstwhile Princely State of Jodhpur who after becoming Government
servants opted Contributory Provident Fund wanted to be given option to switch
over to Pension Scheme, were directed to be allowed to do so by the Rajasthan
High Court relying on Nakara which was also followed in Union of India v. Bidhubhushan
Malik,  3 SCC 95, subject matter of which was High Court Judges' pension
and as such both are distinguishable on facts.
the Pension Scheme and the P.F. Scheme are struc- turally different is also the
view of the Central Pay Com- missions and hence ex gratia benefits have been
recommended, which may be suitably increased.
report of the Third Central Pay Commission 1973, Vol. 4 at page 49, dealing
with State Railway Provident Fund it was said:
Both gazetted and non-gazetted Railway employees with a service of not less
than 15 years who are governed by the State Railway Provident Fund Scheme are
at present allowed a special contribution at the rate of 1/4th of a month's pay
for each completed 6 monthly period of service but not exceeding 15 months' pay
or Rs.35,000, whichever is less. We have been informed by the Railway Board
that for such em- ployees the Government contribution and the special contri- bution
to the Provident Fund 384 together constitute the retirement benefits which in
other civil departments are given in the shape of pension and
death-cum-retirement gratuity. Accordingly, when pensionery benefits to the
other civil employees were im- proved in 1956 and 1957, the maximum of the
special contri- bution to the provident fund for the Railway employees was also
increased from Rs.25,000 to Rs.35,000. We have not examined whether and to what
extent any further increase in this contribution should be made consequent upon
the en- hancement of the maximum pension and gratuity being recom- mended by us
for pensionable employees. The Government may decide the same as they deem
fit." In the Report of the Fourth Central Pay Commission, in Chapter 9 the
Commission has discussed the State Railway Provident Fund Scheme including
Contributory Provident Fund Scheme. In para 9.1 of the report, the Commission
said that the employees who joined railways prior to November 16, 1957 and did
not opt for the pension scheme were also covered under the C.P.F. Scheme known
as State Railways Provident Fund Scheme (SRPF). About 50,000 employees were
stated to be covered under the C.P.F. Scheme of which the majority were in the
railways. The number of employees who retired under the CPF and SRPF schemes were
1.20 lakhs. Under the CPF scheme every employee was required to subscribe a
minimum of 8-1/3 per cent of his reckonable emoluments to be credited to the
fund. The Government makes a matching contribution.
the contributions earned interest at a rate specified by the Government from
time to time. On retirement, employ- ees governed under the scheme was paid his
contribution, the contribution made by the Government and the interest earned
on the total amount.
9.3 of the Report it was stated:
SRPF scheme in the railways was replaced by the pension scheme as applicable to
other Central Government employees, in November, 1957 and those employees who
were in service on April
1, 1957 and were
governed by the scheme were given an option to come under the pension scheme.
Whenever changes occurred in the pension structure for the Central Government
employees an option was given to railway employees still covered by the scheme.
Such options have been given on eleven occasions in the 385 past and the last
such option was valid upto December, 1985." Comparing the advantage and
disadvantage of the schemes the Commission said:
pension scheme has been improved, enlarged and lib- eralised from time to time,
there has been no similar im- provement in the CPF scheme, excepting through
improvement of rates of interest which were modified from 7 per cent on 1974 to
9 per cent in 1983-84, to 10 per cent in 1984-85 and to 12 per cent in 1985-86.
While those governed by the pension scheme are entitled to receive dearness
relief sanctioned from time to time to compensate for increase in the cost of
living, those under the CPF scheme were not entitled to such relief. The
employees governed by the CPF scheme are also not entitled to the family
pension available to those governed by the pension scheme. The matching gov- ernment
contribution in the case of CPF employees is paid for the full period of
service the restriction of 33 years for those governed by pension scheme does
not apply in their case. Those who have retired under the CPF scheme have a
corpus yielding regular return. In the case of railway employees, special
contribution to PF is paid at the time of retirement equivalent to half a
month's salary for each completed year of service subject to a maximum of 16
months' salary or Rs.60,000 whichever is less. The amount of special
contribution has been raised from time to time as and when the limit on
death-cum-retirement gratuity was changed." In para 9.5 of the Report as
to ex gratia alternative it is stated:
the pension scheme was introduced on the railways m' 1957, those who retired
earlier did not have an opportunity to opt for pension. It was, therefore,
decided to give some ex gratia payment to them in consideration of the fact
that the retirement benefits were lower than what they would have received if
they had retired under the pension scheme. Since this applied mainly to the low
paid employees, the ex gratia payment ranging from Rs. 15 to Rs.22.50 per mensem
was sanctioned to those drawing pay upto Rs.500 per month. They were also given
relief on a 386 graded scale subsequently. The amount of ex gratia payment
together with the relief now ranges from Rs. 170 to Rs. 283 per mensem."
In para 9.6, the Commission said that the P.F. and pension schemes are
structurally different. Accordingly alternative ex gratia reliefs were
have received a number of suggestions from individuals, associations and other organisations
in respect of the CPF scheme. It has been stated that the objective of both the
schemes, viz., pension scheme and the CPF scheme being the same, there should
not be differences in the matter of retirement benefits between the pensioners
and the benefici- aries of the CPF. It has been urged that the liberalisation
in the pension scheme needs to be appropriately extended to the beneficiaries
under the CPF scheme. Since the schemes are structurally different, equality of
benefits under the two schemes is not feasible. We are, however, of the view
that the CPF beneficiaries who have retired on low scales of pay deserve some
measure of relief. We according recommend that all the CPF beneficiaries who
have retired prior to March 31, 1985 with a basic pay upto Rs.500 per mensem
may be given an ex gratia payment of Rs.300 per mensem which will be in
addition to the benefits already received by them under the CPF scheme. The ex gratia
payments and the period- ic increases already received by those who retired on
pay upto Rs.500 may be so adjusted that the total ex gratia amount is not less
than Rs.300. We further recommend that ex gratia amount of Rs.300 per mensem
may be reviewed as and when dearness relief is sanctioned to pensioners."
"9.7. Railways have suggested grant of ex gratia payment to the widows and
dependent children of deceased employees covered by CPF scheme at 50 per cent
of the rate for ex gratia payment. We agree and recommend accordingly for those
getting pay upto Rs.500 per mensem. The eligibility of widow and minor children
for the purposes of this relief may be same as laid down under the pension
rules." "9.8. In so far as the CPF beneficiaries still in service on
387 January 1, 1986 are concerned, we recommend that they should be deemed to
have come over to the pension scheme on that date unless they specifically opt
out to continue under the CPF scheme. The CPF beneficiaries who decide to
continue to remain under that scheme should not be eligible on retire- ment for
ex gratia payment recommended by us for the CPF retirees. Government may,
however, extend the benefit of DCRG to CPF beneficiaries in other departments
on the same lines as in railways." "9.9. Government may also consider
the feasibility of giving an option to all other CPF retirees who are not
covered under paragraph 9.6 above to come over to the pension scheme with
effect from January 1, 1986 subject to their refunding to government the entire
amount of government contribution inclusive of interest thereon credited to their
Provident Fund account at the time of their retirement." We have no doubt
about the above recommendations receiv- ing due consideration by the Union of
India. The 12th Option already given has to be viewed in this context.
next question debated is that of financial implica- tions. It is submitted that
given the fact that the budget for the year 1990-91 for disbursement of pension
is Rs.900 crores (as per page 11 of the Budget of the Railway Revenue and
Expenditure of the Central Government for 1990-91), the additional liability
which would arise by giving relief to the Petitioners would be insignificant in
comparison. Ac- cording to the petitioners as per their affidavit dated
15.9.88, the additional liability would come to Rs. 18 crores per annum and this
figure would steadily decrease as the number of P.F. retirees diminishes every
year due to the fact that this question arises only with respect to very old
retirees, and a substantial number of them pass away every year.
Government in its affidavit dated 21.9.88 has stated that the additional
liability as far as the Railway employ- ees are concerned, would be Rs.50 crores
a year. This is based on the assumption that there are 79,000 surviving P.F.
Apart from the fact that this number of 79,000 was based on calculations made
in 1988, and would be greatly reduced by this time, the petitioners submit that
the actual number of survivors would only be about 38,000. Thus, the actual
burden would be less than half. Further, even assum- ing that the figure 388 of
79,000 put forth by the Government is correct, the aver- age annual expenditure
per retiree for pension calculated by the Government is incorrect as the
calculation includes the non-recurring arrear payments for the year 1987-88.
Taking the correct figures of total pension outlay and total number of
beneficiaries the per capita pension expenditure per annum works out to
Rs.4521. Multiplying this by 79,000 (assuming the figures of the Railways to be
correct) the annual expenditure comes to Rs.35.71 crores. This compared to the
current budget of pensions of Rs.900 crores, is quite insignificant and can be
easily awarded by this Court as was done in Nakara, it is urged.
submitted in the alternative that if this Court feels that a positive direction
cannot be made to the Gov- ernment in this regard, it is prayed that at least
an option should no given to the respondents either to withdraw the benefit of
switching over to pension from every one or to give it to the petitioners as
well, so that the discrimina- tion must go.
not inclined to accept either of these submis- sions. The P.F. retirees and
pension retirees having not belonged to a class, there is no discrimination. In
the matter of expenditure includable in the Annual Financial Statement, this
Court has to be loath to pass any order to give any direction, because of the
division of functions between the three co-equal organs of the Government under
the question of feasibility of converting all living P.F. retirees to Pension
retirees was debated from the point of view of records and adjustments. Because
of the view we have taken in the matter, we do not consider it necessary to
express any opinion.
C.V. Francis in W.P. No. 1165 of 1989 argued the case more or less adopting the
arguments of Mr. Shanti Bhushan. Mrs. Swaran Mahajan, in W.P. No. 1575 of 1986,
submitted that the rule as to commuted portion of the pen- sion reviving after
15 years should be applied to P.F. retirees so that the corpus of Provident
Fund dues received more than 15 years ago should be treated as committed por- tion
of pension and be allowed to revive for adjustments against pension. In the
view we have taken in this case it is not necessary to express any opinion on
Mr. R.B. Datar for the respondent in W.P. No. 1575 of 1986 and W.P. No. 352 of
1989 more or less adopted the arguments of the learned Additional Solicitor
result, all the Writ Petitions and the Special Leave Petition are dismissed,
but the petitioners being retirees, we make no order as to costs.