Entitlement to Pension Benefits Following Removal: The New Rule from UCO Bank v. Vijay Kumar Handa (2025 INSC 442)

I. Introduction

The Supreme Court of India’s decision in UCO BANK v. VIJAY KUMAR HANDA (2025 INSC 442) addresses an important question regarding the availability of pension to bank employees who have been removed from service following a disciplinary proceeding. The case centers on the interplay between the Bipartite Settlement provisions and the 1995 Pension Regulations, ultimately confirming that a bank employee who has been removed from service under Clause 6(b) of the Bipartite Settlement—and who otherwise meets the eligibility requirements—may still receive pension benefits. Below is a comprehensive commentary that explores the background, the points of contention, the legal precedents, and the overall impact this Judgment will have on similar future situations.

In this matter, UCO Bank (the “Bank”) appealed against the direction to grant pension benefits to its former employee, Mr. Vijay Kumar Handa (“Respondent”), after he was removed from service as a penalty for gross misconduct. Despite the Bank’s argument that removal from service disentitles a dismissed employee from receiving pension under the Pension Regulations, the Supreme Court upheld the High Court’s decision favoring the Respondent’s claim.

II. Summary of the Judgment

The Supreme Court dismissed the Bank’s appeal and affirmed the High Court’s ruling that the Respondent is entitled to superannuation benefits (including pension). This conclusion is grounded in:

The appellate authority’s initial modification of the disciplinary penalty from “dismissal” to “removal with entitlement to terminal benefits.”
The Supreme Court’s earlier ruling in Bank of Baroda v. S.K. Kool, which clarifies that employees removed from service under Clause 6(b) of the Bipartite Settlement may still qualify for pension, provided they meet minimum eligibility.
The fact that UCO Bank did not challenge the appellate authority’s order granting terminal benefits, including pension, before the High Court; the only (later) challenge was to the Labor Court award that had drastically altered the penalty. Thus, the appellate authority’s order became final and binding.

The Supreme Court acknowledged the binding nature of S.K. Kool and aimed to harmonize the relevant provisions of the 1995 Pension Regulations with Clause 6(b) of the Bipartite Settlement, rejecting a strict interpretation that would automatically bar pension for every removal from service.

III. Analysis

A. Precedents Cited

Bank of Baroda v. S.K. Kool (2014) 2 SCC 715
This landmark judgment interpreted Clause 6(b) of the Bipartite Settlement, clarifying that, if a bank employee is removed from service (as opposed to outright dismissal) and such removal expressly carries superannuation benefits, these benefits include pension if the employee is otherwise eligible under the relevant Pension Regulations.
Hardial Singh v. Bank of Baroda (2021)
This High Court decision, relied upon in the lower forums, further confirmed that removal under Clause 6(b) is not an absolute bar to pension, provided an employee meets the eligibility threshold.
UCO Bank (Employees’) Pension Regulations, 1995 – Regulation 22
Regulation 22 typically provides that an employee who resigns or is dismissed/removed would forfeit past service. However, in S.K. Kool and the present Judgment, the Supreme Court reconciled Regulation 22 with Clause 6(b) of the Bipartite Settlement, confirming that the latter can override forfeiture if the employee is otherwise eligible and the penalty specifically contemplates granting superannuation benefits.

These precedents played a pivotal role in guiding the Court’s analysis. They illustrate the gradual evolution of jurisprudence around employees’ pension rights, especially in disciplinary matters involving dismissal or removal.

B. Legal Reasoning

The Supreme Court’s reasoning turned on interpreting two central documents:

Bipartite Settlement and Clause 6(b): This provision allows a disciplinary authority to remove an employee from service whilst preserving “superannuation benefits” (i.e., pension and/or provident fund and gratuity) without disqualifying the individual from future employment. By choosing removal (instead of dismissal), the ultimate penalty did not wholly sever the Respondent’s connection to the Bank in terms of pension interests.
Pension Regulations, 1995—Regulation 22: Although this clause states that removal from service forfeits the employee’s past service, the Court found that, in scenarios governed by Clause 6(b), Regulation 22 cannot be read to categorically defeat an employee’s express right to superannuation benefits. The Court adopted a harmonious construction: an employee removed under Clause 6(b), having completed the minimum service period for pension, is entitled to pension unless specifically disqualified.

Furthermore, the Supreme Court emphasized that the Bank could not challenge the pension entitlement in hindsight, after the appellate authority’s order had already become final. Above all, if Clause 6(b) were interpreted as rendering an employee perpetually ineligible for pension, it would render the words of that Clause meaningless or “a dead letter.” The Court was guided by the principle that legislative (or in this case, contractual) provisions must be read to give meaning to every part, unless no other construction is possible.

C. Impact

The Judgment signals a critical precedent for banks and employees alike. Its effects include:

Reinforcing protection of pension rights: Employees who face disciplinary action but ultimately receive “removal” as a penalty under Clause 6(b) and fulfill the necessary service period for pension can still receive superannuation benefits. This has significant bearing on the bank sector, which often relies on Bipartite Settlements to structure disciplinary procedures and benefits.
Promoting consistency in disciplinary sanctions: The decision clarifies that the penalty of “removal” is not automatically tantamount to forfeiture of all benefits, avoiding confusion for employers about how to handle post-removal benefits and ensuring that employees who meet eligibility receive what is due.
Providing clarity for Industrial Dispute Tribunals and Courts: Future disputes regarding pension claims for removed employees can reference this binding precedent to accelerate final resolution.

IV. Complex Concepts Simplified

Several important legal concepts appear in this Judgment. Below is a plain-language explanation of some of these:

Dismissal vs. Removal: Both are forms of termination arising from misconduct, but removal under Clause 6(b) allows an individual to preserve superannuation benefits such as pension, provided he or she meets the required service conditions. Dismissal is typically a harsher penalty where no benefits are preserved.
Clause 6(b) of the Bipartite Settlement: This provision was introduced to offer a middle ground between lesser penalties (e.g., suspension, demotion) and outright dismissal, enabling the employee to retain accrued superannuation benefits.
Section 11A of the Industrial Disputes Act, 1947: This section grants labor courts the power to modify the punishment if they consider that the management-imposed penalty is unduly harsh or disproportionate to the misconduct. In this case, the labor court’s modification (which was ultimately set aside) was overshadowed by the appellate authority’s unchallenged order imposing “removal with terminal benefits.”
Regulation 22 (Pension Regulations, 1995): This regulation addresses forfeiture of service upon removal or dismissal. The Supreme Court clarified it should be harmonized with the Bipartite Settlement so that, where removal includes a clause preserving superannuation benefits, such benefits are not extinguished.

V. Conclusion

The Judgment in UCO BANK v. VIJAY KUMAR HANDA (2025 INSC 442) firmly cements the principle that, under Clause 6(b) of the Bipartite Settlement, removal from service does not automatically dissolve an employee’s right to a pension—so long as the individual has completed the requisite qualifying years of service. This standpoint harmonizes the relevant Pension Regulations with the Settlement’s express language on superannuation benefits. In deciding thus, the Supreme Court builds upon its earlier decision in Bank of Baroda v. S.K. Kool, ensuring that the spirit and text of Clause 6(b) remain operational and meaningful.

Key takeaways include:

Qualified Entitlement: “Removal” in bank disciplinary proceedings can maintain pension rights for employees who meet all eligibility requirements.
Binding Nature of Appellate Orders: Once a penalty imposing “removal with benefits” is final, banks cannot later deny pension if the employee meets the statutory or regulatory conditions.
Harmonious Interpretation: Courts and tribunals must read Bipartite Settlements and internal banking regulations in a way that gives effect to all provisions without rendering any obsolete.

Overall, this ruling emphasizes fairness and consistency in the banking sector’s disciplinary framework, striking a judicious balance between penalizing misconduct and honoring legitimate earned benefits.