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Narayanan v. Union Of India
Factual and Procedural Background
The petitioners are retired employees of the armed forces who, after retirement, were re-employed in various State Government establishments and public sector undertakings (including nationalised banks, National Cadet Corps and other State establishments). Upon retirement they received pension and a dearness-type allowance referred to as "relief on pension." After re-employment the petitioners continued to receive their pension and relief on pension while their re-employment pay was fixed after deducting the amount of pension.
The Central Government, concerned about the burden on the exchequer and the perceived double payment of cost-of-living relief to pensioners who were re-employed, issued a series of memoranda and circulars (identified in the opinion) which in substance suspended the payment of relief on pension to re-employed ex-servicemen. The petitioners filed writ petitions under Article 226 of the Constitution of India impugning the validity of those executive orders. The opinion before the court reviews these petitions and quashes the impugned orders.
Legal Issues Presented
- Whether the relief on pension (cost-of-living/dearness relief) is legally a part of the pension granted to retired armed forces personnel.
- If the relief on pension is part of pension, whether suspension of that relief by executive orders during re-employment amounts to an unlawful deprivation of property in contravention of Article 300-A and thus lacks statutory authority.
- Whether the Central Government's blanket suspension of relief on pension to all re-employed ex-servicemen is arbitrary given the differing circumstances of re-employed pensioners (this issue was framed by petitioners but not considered after the court's conclusions on the first two issues).
Arguments of the Parties
Petitioners' Arguments
- Pension is compensation or reward for past services and constitutes a proprietary right of the retired employee; relief on pension (a dearness-type allowance) is an integral part of that pension, intended to neutralise inflationary erosion.
- Because pension (including relief on pension) is a property right, executive deprivation of that relief without lawful authority is illegal.
- The Central Government's suspension order is a blanket measure that fails to account for varied circumstances among re-employed ex-servicemen (for example, those re-employed on merit, those with very low re-employment pay, and those on leave without pay), and is therefore arbitrary.
Respondent's Arguments
- Senior counsel for the Central Government, Sri Parameswaran, argued that pension is always a fixed sum and that the additive known as relief on pension, never having been absorbed into basic pension, is not a component of pension in its true character.
- It was also urged (in general terms) that modern legal thought disfavors judicial interference in matters that impose a financial burden on the State; however, the opinion notes that no supporting arguments or literature were produced to substantiate that assertion.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Ex-Risaldar Major Basheshar Singh v. Union of India (Punjab & Haryana High Court, Civil Writ Petition No. 8245 of 1991) | Considered whether relief on pension is part of pension; accepted that pension is compensation for past services and treated relief on pension as not forming part of pension. | The opinion acknowledges this High Court's conclusion and reviews it as part of preceding judicial approaches; the court nevertheless undertakes its own conceptual analysis and reaches a different conclusion on the nature of relief on pension. |
| National Ex-Servicemen Co-ordination Committee v. Union of India (Delhi High Court, Civil Writ Petition No. 1966 of 1992) | Addressed whether relief on pension is part of pension; the Delhi High Court accepted that pension is compensation for past services and treated relief on pension as distinct from pension. | The court notes the Delhi High Court's analysis and factors emphasised (absence of Pay Commission recommendation to absorb relief; relief treated as distinct) but proceeds to analyse the conceptual character of pension and concludes that relief on pension is an inseparable component. |
| S. Venkatesan v. Union of India (Madras High Court, Writ Appeals Nos. 89 and 134 of 1990 and Writ Petition No. 8805 of 1987) | Considered the character of relief on pension; held relief on pension was not part of pension. | The court records the Madras High Court's view as part of the precedent landscape and then undertakes its own reasoning, concluding that the relief on pension is part of the pension despite the earlier High Court conclusions. |
| D.S. Nakara v. Union of India [1983 — I L.L.N 289] | Held that once pension rules are framed, receipt of pension within those rules is a legal right; articulated objects of pension (reward for past service and protection from destitution) and standards for adequacy. | The court relies on Nakara for the proposition that pension is a legal right with specific objectives (to enable the pensioner to live free from want, with decency and nearly at pre-retirement standard), and uses this framework to interpret the nature of relief on pension as integral to achieving those objectives. |
| Deokinandan Prasad v. State of Bihar [(1971) 2 SCC 330 : A.I.R. 1971 S.C. 1409] | Established that pension is property for purposes of constitutional protection. | The court cites this authority to support the proposition that pension (and hence components forming part of pension) is property; this underpins the conclusion that suspension of relief on pension is a deprivation of property. |
| Wazir v. State of Himachal Pradesh [1955 (1) S.C.R 403] | Principle that the Executive cannot deprive a person of property without specific legal authority. | The court applies this principle to hold that, absent legislative sanction, the Executive's suspension of relief on pension is impermissible and unconstitutional. |
Court's Reasoning and Analysis
The court proceeds by first clarifying the concept and purpose of pension: pension is compensation for past services and is intended to secure a pensioner's ability to live with decency, independence and at a standard nearly equivalent to pre-retirement life. Cost-of-living adjustments (dearness relief) are mechanisms adopted to maintain the pension's intended value in the face of inflation.
The court reviews prior High Court decisions which had concluded that relief on pension was not part of pension, noting their emphasis on factors such as the absence of a Pay Commission recommendation to absorb relief, and that relief had been treated as a distinct element. Nevertheless, the court undertakes a conceptual analysis rather than relying solely on the external form in which pension and relief are expressed.
Key analytical steps:
- The court explains that pension is not merely an arithmetical fixed figure but the value of compensation for past services; to preserve that value, cost-of-living adjustments are an essential concomitant of pensionary benefits.
- Because relief on pension is the mechanism by which the State restores the pension's intended real value (illustrated by the court's example of restoring a pension from Rs. X-5 back to Rs. X), the court concludes that relief on pension is an inseparable component of pension.
- The court then treats pension (including its cost-of-living adjustments) as property protected by Article 300-A and the precedent in Deokinandan Prasad, and reiterates the Nakara principles that pension is a legal right once rules are framed.
- Applying the Wazir principle, the court finds that executive suspension of relief on pension without legislative authority is a deprivation of property without authority of law and is unconstitutional.
The court explicitly states it need not consider the petitioners' third point (the alleged arbitrariness of a blanket order) because its conclusions on the first two points decide the matter. The court also rejects the contention that delay should result in dismissal of the petitions, and notes that the Central Government's submission about judicial restraint in matters imposing financial burden was unsupported by authorities or literature.
Holding and Implications
Holding: The petitions are allowed; the executive orders suspending payment of relief on pension to re-employed ex-servicemen are illegal and are quashed.
Specific operative consequences ordered by the court:
- The various orders and memoranda of the Central Government and the circulars by the Controller, Defence Accounts (specifically identified in the opinion) suspending payment of relief on pension during re-employment are quashed.
- The respondents are directed to pay to the petitioners the amount of relief on pension as if the orders suspending/stopping payment during re-employment had never been made.
Implications:
- The direct effect is restoration of relief on pension payments to the petitioners and the quashing of the impugned executive orders. The opinion grounds this result on the conceptual character of pension as including cost-of-living relief and on constitutional protection against deprivation of property without authority of law.
- The opinion does not purport to set out broader administrative or legislative directions beyond quashing the orders and directing payments; it does not state that it is establishing a new rule beyond its application to the matters before it. No further systemic implications or directions for future executive policy (other than the quashing) are articulated in the text of the opinion.
1. The petitioners who are retired employees of the armed forces have been re-employed in establishments of the State Government and public sector undertakings. In these petitions under Art. 226 of the Constitution of India they impugn the validity of the orders of the Central Government by which the payment of relief on pension earned upon retirement from the armed forces, has been suspended during the period of re-employment.
In this judgment the petitioners shall be referred to as ex-servicemen or pensioners.
I The facts:
2. The facts fall in a narrow compass and are uncontroverted.
As is well known, employees in the armed forces retire at a relatively young age. The Central Government has a number of schemes designed to provide employment to ex-servicemen, by relaxation of age and qualifications and by preferential treatment. In pursuance of these schemes, the petitioners, upon their retirement, have been Page: 240re-employed in different public sector undertakings such as the nationalised banks, National Cadet Corps, establishments of the State Governments and so on. Upon their retirement from the armed forces the petitioners earned pension. They also receive an allowance known as “relief on pension” which is in the nature of dearness allowance paid to the serving employees. After their re-employment the petitioners continued to receive the pension earned by them together with the relief on the pension. They also receive salary plus the dearness allowance in their re-employment. The pay in the re-employed position was fixed after deducting the amount of pension. However, it is unnecessary to refer to the details like the ignorable amount of pension and the deductible amount of pension.
3. The Central Government has interest in all the public sector undertakings. It is concerned with the burden on the exchequer arising out of the payment of relief on pension, in addition to the dearness allowance paid to the re-employed ex-servicemen. Therefore, the Central Government considered that the ex-service men are paid relief against erosion of money value at two points. By a number of memoranda and circulars the Central Government issued instructions in regard to the payment and/or suspension of relief on pension. The memoranda No. F13(1)EV(A)/74, dated 6 April, 1974 and 27 August, 1974, the Memorandum No. F. 10(26)-B(TR)/76, dated 29 December, 1976, and the memorandum of the Ministry of Finance bearing No. M/23013/152/79.MP/VI/(Pt)/1118, dated 26 March, 1984, in substance, suspended the payment of relief on pension to the re-employed ex-service men.
Another memorandum of the Ministry of Personnel, Public Grievances and Pensions bearing No. 2/5/87-PIC dated 22 April, 1987 on the subject of “Grant of dearness Relief to Pensioners” is significant for its definition of pension and family pension. Broadly stated pension/family pension has been defined to mean “the basic pension/basic family pension as the case may be.”
The Controller, Defence Accounts, Allahabad, issued Circulars Nos. At/ORS/Tech/263-VI and AT/ORS/263-VII, dated respectively 23 January, 1989 and 15 March, 1989, directing that the payment of relief on pension be stopped forthwith except in those cases where the High Courts had issued orders of stay.
II Questions for consideration:
4. The following points were urged by learned counsel for the petitioners:
(i) Pension is the compensation or reward for past services. It is a proprietary right of a retired employee. The relief on pension is the amount added to the original pension to make up for the loss of its value due to inflation and erosion of the value of rupee. Relief on pension is, therefore, a part of pension.
(ii) Since pension is a right in property, its deprivation by the executive orders is illegal.
(iii) All ex-service men who have been re-employed are not alike in their circumstances. The ex-servicemen in re-employment represent diverse groups of employees each distinguished by special circumstances. There are employees who secured re-employment not because of the schemes prescribing concessions to ex-servicemen but on their own merit. There are those who are employed on such a low scale of pay that stoppage of relief on pension reduces their incomes to poverty levels. Again there are re-employed personnel on leave without pay for years and, therefore, not in receipt of any re-employment pay. The respondents have made a blanket order suspending payment of dearness relief, without regard to the circumstances of different classes of employees. The impugned orders are, therefore, arbitrary.
III The concept of pension:
5. The question whether the relief on pension is a part of pension has been considered by the Punjab and Haryana High Court in Ex-Risaldar Major case (Ex-Risaldar Major Basheshar Singh v. Union of India [Civil Writ Petition No. 8245 of 1991]), by the Delhi High Court in the case of National Ex-Servicemen Co-ordination Committee (National Ex-Servicemen Co-ordination Committee v. Union of India [Civil Writ Petition No. 1966 of 1992]) and by the Madras High Court in Page: 241S. Venkatesan v. Union of India [Writ Appeals Nos. 89 and 134 of 1990 and Writ Petition No. 8805 of 1987] and other writ petitions. All these cases accepted that pension is compensation for the past services. Upon analysis of the reports of the Central Pay Commissions, the Punjab and Haryana, Madras and Delhi High Courts emphasised certain aspects of the relief on pension. They highlighted the factors like:
(a) the absence of a recommendation by the Pay Commissions that the relief on pension should be absorbed in pension;
(b) that the relief on pension was always ‘considered’ as a distinct element of remuneration which may or may not be consolidated with the pension; and
(c) that the relief on pension was never ‘considered’ or ‘treated’ as part of the pension.
In view of this perception of the idea of pension they held that relief on pension is not a part of the pension.
5A. “Treating” dearness relief as part of the pension, involves an element of fiction. The reason is that if pension, in its true character includes the relief granted to restore the lost value of pension, “treating” the relief as distinct from pension does not alter the true conception of pension. The fictional “treatment” does not help in determining the concept, character or content of pension itself. While I propose to bear in mind these judgments and the report of the Fourth Pay Commission from which I have immensely benefited, I propose to attempt a conceptual analysis of pension. My endeavour is to understand, not the external form of the payment expressed as the basic pension plus the relief on pension, but to unravel what is the true character of the payment.
6. The Pension Act and the rules relating thereto do not throw light on the questions arising in this case. I have, therefore, not referred to them.
7. The concept of pension originated as compensation to retired employees including members of the armed forces or their dependents, for old age, death or disability. The basic idea is to provide a sense of security and independence to the retired employee, and to make the service efficient. Article 39(a) of the Constitution of India introduced the directive to the State to secure to its citizens “adequate means of livelihood.” If such citizen is an employee of the State, “it inheres in the concept of such a provision (pension) that it should be adequate” (Report of the Fourth Central Pay Commission, Part II “Pension”, Paras. 2.16 and 2.17). The object of pension is that even in retirement, the pensioner may live and maintain a standard of living considered reasonable by the society where he belongs. For this purpose costs of living adjustments to neutralise the increase in prices have to be made. This neutralisation of the erosion of the pensioner's buying capacity by payment of additional relief is a part of the concept of pension. The Fourth Pay Commission, aware that the concept of pension is not static, described the costs of living adjustments, which is another name for the relief on pension, as “a necessary concomitant of the very concept of pensionary benefits” (Report of the Fourth Central Pay Commission, Part II Pension, Paras. 2.16 and 2.17).
8. Having summarised the concept of pension, I will now state its legal character enunciated by the Supreme Court.
8A. Once rules in regard to pension are framed receipt of pension within the rules is a legal right. (D.S Nakara v. Union of India [1983 — I L.L.N 289]. Pension is a determined amount of money payable to an employee upon retirement or to a dependant upon the death of the employee in consideration of the past services. Pension has two objects. Firstly, it rewards the past service and secondly it is intended to save the employee from destitution in old age. It follows, therefore, that the pension is intended to ensure that the pensioner would—
(i) be able to live;
(ii) free from want, with decency, independence and self respect; and
(iii) at a standard nearly equal to his pre-retirement standard of living. (D.S Nakara v. Union of India (vide supra).
9. Again pension is property of the retired employee Deokinandan Prasad v. State of Bihar [(1971) 2 SCC 330 : A.I.R 1971 S.C 1409]. Consider the Page: 242concept of pension and its purpose enunciated by D.S Nakara v. Union of India [1983 — I L.L.N 289] (vide supra), and its legal character as property laid down in Deokinandan Prasad v. State of Bihar [(1971) 2 SCC 330 : A.I.R 1971 S.C 1409]. What emerges is the true picture of pension, as the amount intended to be adequate to enable the retired employee to live from want, with decency, independence and self respect and at a standard nearly equivalent to that at the preretirement level. It is reasonable to hold that the Central Government intended that the pensioner continues to receive pension with all its attributes declared in Nakara case D.S Nakara v. Union of India (vide supra).
IV Pension is the value of basic pension:
10. It follows that having decided to grant pension of a stated amount, with the object of enabling the ex-servicemen, to live free from want with decency, self respect, independence and at the preretirement standard, the Central Government did not countenance diminution of the value of this amount of pension.
11. As time passed by, the pensioner found that his money was not able to buy, as much as it did on the date of his retirement. Inflation eroded his capacity to buy the necessities within the amount of pension. The Union of India, aware of the need to keep the ex-servicemen living in dignity, stepped in by accepting the reports of the Pay Commissions and decided to make up for the lost value of the pension. The device adopted by the Central Government was to pay to the pensioners the dearness relief on pension, just as dearness allowance is paid to its employees. The amount of dearness relief, is an additive to the original pension. It has not been absorbed into the original pension to make the two sums into one whole fixed sum of money. The relief on pension is, by its very nature variable it increases or decreases with the cost of living. Therefore it is illogical to test the validity of the petitioners' submission on the consideration whether the relief on pension has been absorbed into the basic pension. The exaggerated emphasis on the separate existence of the number, representing the relief on pension is misleading. It ignores the fundamental fact that pension is not an arithmetical figure. Pension is the value of the reward or compensation for past services.
Sri Parameswaran, learned counsel for the Central Government, urged, with his characteristic tenacity, that pension is always a fixed sum and, therefore, the “additive” known as the amount of relief on pension never absorbed in basic pension, is not a component of pension. This argument is based on the traditional concept of pension when the amounts of pension were unalterable, because in those days the value of money was stable. In the current economy of the country the value of money is not stable. Therefore, it is not rational to expect that the amount of relief on pension together with the original pension could be expressed as an unalterable fixed constant sum. Pension is the value of the compensation for past services. It is realised through the mechanism of granting relief on pension. In this process of the cost of living adjustment, it is inevitable that the total sum received by the pensioner varies with the cost of living. The argument of Sri Parameswaran is not tenable.
12. To simplify the matter I propose to illustrate why relief on pension is the inseparable component of pension.
Aware of the bewildering rate at which the value of the rupee fell, eroding the capacity of the original amount, received by the pensioner, to provide a decent living, the Central Government stepped in to restore the amount of pension to its intended value. This cost of living adjustment may be illustrated thus:
The pension granted, say, in 1970 = Rs. X Suppose in 1975 the inflation reduced the amount of pension to = Rs. X-5 The Central Government added Rs. 5 to secure to the pensioners the intended value of Rs. X = Rs. (X-5) + 5=Rs. X
Therefore, the additional amount of Rs. 5 was granted for the purpose of continued receipt by the pensioner of the original value of Rs. X. Therefore, the pension is always the value of Rs. X. In the words of the Fourth Central Pay Commission, this adjustment by granting relief on Rs. 5 “is a necessary concomitant of the very concept of pensionary benefits.”
13. For the reasons stated in Paras. 5 and 11 above I hold that the amount of relief on pension is a part of the pension. Pension is composed of the basic pension plus the amount of relief on pension.
V Pension is property — its deprivation lacks authority of law:
14. Article 300-A of the Constitution of India lays down that no person shall be deprived of property save by authority of law. In the case of Deokinandan Prasad v. State of Bihar [(1971) 2 SCC 330 : A.I.R 1971 S.C 1409] (vide supra), pension has been held to be property. Deprivation of property may take place in various ways such as by destruction, confiscation or revocation of a proprietary right granted. In this case the payment of relief on pension stands “suspended” during the period of re-employment. The word “suspended” must be understood in the context of the denial of relief on pension during the period of re-employment. During the period of re-employment of the petitioners the payment of relief on pension has been completely stopped. This amount is not payable to the pensioner after termination of such employment. The loss is irretrievable. Therefore, the stoppage of payment of relief on pension is deprivation of pension.
15. The Executive Government cannot deprive a person of his property of any kind without specific legal authority Wazir v. State of Himachal Pradesh [1955 (1) S.C.R 403]. In this case there is no legislative sanction for depriving the petitioners of the relief on pension. Therefore the stoppage of relief on pension by the orders impugned in these petitions is unconstitutional.
VI Point No. (iii) not considered:
16. In view of my conclusions on point Nos. (i) and (ii) referred to in Para. 4 of this judgment, it is unnecessary to consider the point No. (iii).
VII Delay and other arguments:
It was urged that the stoppage of relief on pension commenced in 1975 and that the petitions filed in 1993 should be dismissed on the ground of delay. I do not consider that these petitions should be dismissed on this ground.
The payment of relief on pension involves a burden on the exchequer. Sri Parameswaran asserted that the modern legal thought does not favour judicial interference in cases involving financial burden of the State. It was willing to consider this modern thought. But nothing arguments or literature was brought forth to substantiate this assertion.
VII Order:
17. For the reasons stated in this judgment I allow all the original petitions and make the following order:
(i) The orders of the Central Government in its various departments suspending payment of relief on pension to the petitioners during the period of their re-employment after retiring from the armed forces of India, are illegal and are hereby quashed.
(ii) In particular the Memorandum No. F13(1) EV(A)/74, dated 6 April, 1974, Memorandum No. F13(1) EV(A)/74, dated 27 August, 1974 Memorandum No. F10(26) B(TR)/76, dated 29 December, 1976, Memorandum of the Ministry of Finance No. M/23013/152/79.MP/VI (Pt) 1118, dated 26 March, 1994 and the Circular No. At/Ors/Tech/263VI, dated 23 January, 1989, issued by the Controller, Defence Accounts, Allahabad, and the Circular No. At/ORS/263-VII, dated 15 March, 1989. issued by the Controller. Defence Accounts Allhabad, are also quashed.
(iii) The respondents to each of these petitions shall pay to the petitioners the amount of relief on pension as if the orders suspending/stopping the payment of relief on pension during the petitioners' re-employment were never made.
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