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Accountant General Of Orissa And Another v. R. Ramamurthy And Another
Factual and Procedural Background
The appellants, former Central Government employees who had been absorbed into public sector bodies and were therefore governed by Rule 37-A of the Central Civil Services (Pension) Rules, 1972, challenged an order of the Central Administrative Tribunal (CAT), Hyderabad Bench, through Writ Petition No. 8532 of 2003 before the Andhra Pradesh High Court. The CAT had ruled on the manner in which the commuted portion of pension should be restored for such employees. The High Court modified the CAT’s order, holding that when an employee commutes the minimum permissible pension (one-third) or any lesser portion, the commuted amount must be deducted pro rata from the basic pension for purposes of restoration, while dearness relief and similar allowances should be calculated on the full basic pension.
Dissatisfied, the appellants filed the present civil appeals in the Supreme Court, arguing that the High Court had ignored the relevant pension rules and three Office Memoranda governing actuarial tables for commutation calculations.
Legal Issues Presented
- Whether the High Court erred in determining the method for calculating the restorable portion of pension for employees covered by Rule 37-A of the CCS (Pension) Rules, 1972.
- Whether the High Court failed to consider the applicable Office Memoranda prescribing actuarial tables and thereby miscalculated the commuted amount to be restored.
Arguments of the Parties
Appellants' Arguments
- The High Court misapplied Rules 37 and 37-A by not giving a “conjoint reading” of those provisions as they existed up to 31-3-1995.
- It ignored Office Memorandum No. 4/59/97-P&PW(D) dated 14-7-1998, O.M. No. 2/1/87-PIC-1 dated 16-4-1987 and O.M. No. 45/86/97-P&PW(A) Part II dated 27-10-1997, which lay down binding commutation tables issued by the Department of Pension & Pensioners’ Welfare.
Respondents' Arguments
- The High Court’s interpretation of the rules was correct and consistent with existing jurisprudence on restoration of commuted pension and dearness relief.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| P.V. Sundara Rajan v. Union of India, (2000) 4 SCC 469 | Employees who have commuted one-third of their pension are entitled to dearness relief on the full pension (including the commuted portion) once restoration occurs. | The Court relied extensively on paragraphs 11-13, treating the appellants “on the same footing as other Central Government employees” regarding restoration and dearness relief, and used this precedent to reject the appellants’ challenge. |
| Common Cause v. Union of India, (1987) 1 SCC 142; (1987) 2 ATC 100 | Affirmed the entitlement of pensioners to restoration of commuted pension and dearness relief. | Referenced within P.V. Sundara Rajan; served as foundational authority for equal treatment of pensioners in restoration matters. |
Court's Reasoning and Analysis
The Supreme Court, per Pasayat J., framed the dispute around the interaction of Rules 37 and 37-A with the Office Memoranda cited by the appellants. The Court observed that the issue had already been settled in P.V. Sundara Rajan, which expressly held that:
- Dearness relief is meant to offset inflation and is payable on the full pension once the commuted portion is restored.
- The statutory definition of “pension” in Rule 3(1)(o) of the CCS (Pension) Rules excludes dearness relief, reinforcing that dearness relief is an independent entitlement.
- Government instructions and Rule 55-A confirm that dearness relief must be paid in full even where one-third of the pension has been commuted.
Applying these principles, the Court concluded that the High Court’s approach—deducting the commuted portion pro rata for restoration but granting dearness relief on the full basic pension—was consistent with the governing rules and prior Supreme Court authority. The Office Memoranda invoked by the appellants did not alter the fundamental rule position elucidated in P.V. Sundara Rajan.
Holding and Implications
The appeals are dismissed; the High Court’s judgment is affirmed and no order as to costs is made.
Direct Effect: The appellants will continue to receive dearness relief and allied benefits on the full basic pension, while the commuted portion will be deducted pro rata for purposes of restoration in line with the High Court’s ruling.
Broader Implications: The decision re-affirms, without creating new precedent, that P.V. Sundara Rajan remains the controlling authority on restoration of commuted pension and the calculation of dearness relief for employees absorbed under Rule 37-A.
Arijit Pasayat, J.— Leave granted.
2. Challenge in these appeals is to the judgment rendered by a Division Bench of the Andhra Pradesh High Court in Writ Petition No. 8532 of 2003. The said writ petition had been filed by the appellants questioning correctness of the decision rendered by the Central Administrative Tribunal, Hyderabad Bench (in short “CAT”) in OA No. 1345 of 2001. The basic issue which arose for consideration in the writ petition was what is the mode of calculating of restoration of pension in respect of employees covered by Rule 37-A of the CCS (Pension) Rules, 1972 (in short “the Rules”). According to the appellants, a conjoint reading of Rules 37 and 37-A as operated up to 31-3-1995 has not been kept in view. The High Court modified the order of CAT and held that in a case where an employee had commuted minimum permissible pension i.e 1/3rd and even where lesser portion is commuted, the pro rata commuted portion has to be deducted from the basic pension to arrive at restorable pension, but however, he will get dearness relief, interim relief, etc. on full basic pension.
3. The High Court arrived at the aforesaid conclusion after considering Rules 37 and 37-A.
4. Challenge in these appeals is on the ground that the High Court was not correct in calculating the commuted amount of pension to be restorable pension without taking into consideration the relevant pension rules and Office Memorandum No. 4/59/97-P&PW(D) dated 14-7-1998, Office Memorandum No. 2/1/87-PIC-1 dated 16-4-1987 and Office Memorandum No. 45/86/97-P&PW(A), Part II dated 27-10-1997.
5. According to the appellants, these memoranda laid down the tables according to which the computation has to be arrived at as issued by the Department of Pension.
6. Learned counsel for the respondents on the other hand supported the judgment in question.
7. Rules 37 and 37-A read as follows:
“37. Pension on absorption in or under a corporation, company or body.—(1) A government servant who has been permitted to be absorbed in a service or post in or under a corporation or company wholly or substantially owned or controlled by the Central Government or a State Government or in or under a body controlled or financed by the Central Government or a State Government shall be deemed to have retired from service from the date of such absorption and subject to sub-rule (3) he shall be eligible to receive retirement benefits which he may have elected, or deemed to have elected, and from such date as may be determined, in accordance with the orders of the Central Government applicable to him.
Explanation.—Date of absorption shall be:
(i) in case a government employee joins a corporation or a company or body on immediate absorption basis the date on which he actually joins that corporation or company or body;
(ii) in case a government employee initially joins a corporation or company or body on foreign service terms by retaining a lien under the Government the date from which his unqualified resignation is accepted by the Government.
(2) The provisions of sub-rule (1) shall also apply to Central Government servants who are permitted to be absorbed in joint sector undertakings, wholly under the joint control of the Central Government and the State Governments/Union Territory Administrations or under the joint control of two or more State Governments/Union Territory Administrations.
(3) Where there is a pension scheme in a body controlled or financed by the Central Government in which a government servant is absorbed, he shall be entitled to exercise option either to count the service rendered under the Central Government in that body for pension or to receive pro rata retirement benefits for the service rendered under the Central Government in accordance with the orders issued by the Central Government.
Explanation.—Body means autonomous body or statutory body.
37-A. Payment of lump sum amount to persons on absorption in or under a corporation, company or body.—(1) Where a government servant referred to in Rule 37 elects the alternative of receiving the retirement gratuity and a lump sum amount in lieu of pension, he shall, in addition to the retirement gratuity be granted—
(a) on an application made in this behalf, a lump sum amount not exceeding the commuted value of one-third of his pension as may be admissible to him in accordance with the provisions of the Civil Pensions (Commutation) Rules [now Central Civil Services (Commutation of Pension) Rules, 1981]; and
(b) terminal benefits equal to the commuted value of the balance amount of pension left after commuting one-third of pension to be worked out with reference to the commutation tables obtaining on the date from which the commuted value becomes payable subject to the condition that the government servant surrenders his right of drawing two-third of his pension.”
8. The respective stand has to be considered in the light of this Court's decision in P.V Sundara Rajan v. Union of India (2000) 4 SCC 469. In para 11 it has been noted as follows:
“11. The dearness relief on pension has been granted to pensioners to compensate them for the erosion in the value of money due to rise in the cost of living. It seems clear that the Government has permitted to the applicants dearness relief calculated only on one-third part of the pension restored while in case of other pensioners, the dearness relief is calculated on full pension including the commuted part of pension. As already noticed, the applicants are to be treated on the same footing as other Central Government employees insofar as the question of restoration of one-third of commuted pension is concerned and are entitled to the benefits as given in Common Cause case (1987) 1 SCC 142, (1987) 2 ATC 100. In this respect, it would also be useful to notice that ‘pension’ as defined in the Central Civil Services (Pension) Rules, 1972 does not include dearness relief. Rule 3(1)(o) reads as under:
‘3. (1)(o) ‘pension’ includes gratuity except when the term pension is used in contradistinction to gratuity, but does not include dearness relief;' ”
Further, in paras 12 and 13 it has been observed as follows:
12. We may also reproduce Rule 55-A:
“55-A. Dearness relief on pension/family pension.—(i) Relief against price rise may be granted to the pensioners and family pensioners in the form of dearness relief at such rates and subject to such conditions as the Central Government may specify from time to time.
(ii) If a pensioner is re-employed under the Central or State Government or a corporation/company/body/bank under them in India or abroad including permanent absorption in such corporation/company/body/bank, he shall not be eligible to draw dearness relief on pension/family pension during the period of such re-employment.
(iii) Deleted'
13. The government instructions also show that the dearness relief is granted to compensate the pensioners for erosion in the value of money due to rise in the cost of living. Anything which is not a part of pension has to be paid in full insofar as those who have commuted one-third pension.”
9. In view of what has been stated in the said case, more particularly in the quoted paragraphs, there is no substance in the appeals which we accordingly dismiss. No costs.
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