Supreme Court strikes down Manipur government’s classification of pensioners based on retirement date

The Supreme Court has struck down a memorandum issued by Manipur government classifying pensioners into two classes based on retirement date for the purpose of giving more financial benefits to one group than the other..A Bench of Justices MR Shah and AS Bopanna held that such classification which was based solely on the ground of financial constraint of the State cannot stand the test of Article 14 as it places similarly situated persons unequally..Facts.The State of Manipur adopted the Central Civil Services (Pension) Rules, 1972, as amended from time to time. As per Rule 49 of the Central Civil Services Rules, 1972, for a government employee retired in accordance with the provisions of the rules after completing qualifying service of not less than 30 years, the amount of pension shall be calculated at 50 percent of the average emoluments subject to a maximum of Rs. 4500 per month..Considering the increase in the cost of living, the Government of Manipur decided to increase the quantum of pension as well as the pay of the employees. It issued an office memorandum on April 21, 1999 revising the quantum of pension. However, it provided that those Manipur Government employees who retired on or after January 1, 1996 shall be entitled to the revised pension at a higher percentage and those who retired before January 1, 1996 shall be entitled to pension at a lower percentage..Feeling aggrieved by office memorandum providing two different revised pensions, the appellant, All Manipur Pensioners Association approached a Single Judge of the High Court of Manipur by way of Writ Petition..The Single judge allowed the petition and struck down the classification. Aggrieved, the State of Manipur appealed to the Division Bench..Division Bench of the High Court allowed the appeal and quashed and set aside the judgment and order passed by the Single Judge by observing that classification is permissible and cut-off date can be pressed into service depending on financial resources of the State..The Division Bench held that the cut-off date fixed by the State government for payment of revised pension to pre1996 retirees and post1996 retirees cannot be termed to be unreasonable or irrational in the light of Article 14 of the Constitution of India..This led to the appeal in Supreme Court..Arguments.Senior Advocate R Balasubramanian appearing for the appellant Association submitted that creation of two classes of pensioners is contrary to a catena of decisions of the Supreme Court including DS Nakara v. Union of India..He contended that the only justification by the State of Manipur to create two classes for the purposes of payment of revision in pension, viz., those who retired before 1996 and those who retired after 1996 was financial constraint. That has no nexus with the object and purpose of revision in pension. It was submitted therefore that such a classification is absolutely arbitrary and violative of Articles 14 and 16 of the Constitution..It was his argument that all the pensioners form only one class as a whole and therefore they cannot be classified into two groups for the purpose of giving more financial benefits to one group than the other. State’s financial difficulty/constraint cannot be a ground to discriminate and/or create two classes who as such belong to one class only, he argued..Senior Advocate Sanjay Hegde appearing for the State of Manipur relied on some of the observations made by this Court in the case of Kallakkurichi Taluk Retired Officials Association, Tamil Nadu and others v. State of Tamil Nadu, [(2013) 2 SCC 77] in support of his submission that financial constraint can be a valid ground to grant the benefit of revised pension to some of the pensioners..He also argued that the decision in DS Nakara which was heavily relied upon by the appellants has limited application and there is no scope for enlarging the ambit of that decision to cover all schemes made by the retirees or a demand for an identical amount of pension irrespective of the date of retirement..Judgment.The Court proceeded to state the question before it as follows:.“The short question which is posed for consideration before this Court is, whether in the facts and circumstances of the case, the decision of this Court in the case of D.S. Nakara (supra) shall be applicable or not, and in the facts and circumstances of the case and solely on the ground of financial constraint, the State Government would be justified in creating two classes of pensioners, viz., pre1996 retirees and post1996 retirees for the purpose of payment of revised pension and whether such a classification is arbitrary, unreasonable and violative of Article 14 of the Constitution of India or not?”.The Court at the outset noted that the decision in DS Nakara had held that the above classification of pensioners is irrational and arbitrary and falls foul of Article 14. The Court also noted that the judgments relied upon by the State shall not be applicable in the instant case..On merits too, the Court stated that there is no valid justification to create two classes, viz., one who retired before 1996 and another who retired after 1996, for the purpose of grant of revised pension. Such a classification has no nexus with the object and purpose of grant of benefit of revised pension..All the pensioners form one class who are entitled to pension as per the pension rules. Article 14 of the Constitution of India ensures equality before law and equal protection of laws..The Court also examined the concept of valid classification which is permitted by Article 16. A classification to be valid must necessarily satisfy two tests, the Court said. Firstly, the distinguishing rationale has to be based on a just objective and secondly, the choice of differentiating one set of persons from another must have a reasonable nexus to the objective sought to be achieved..In the present case, the classification in question has no reasonable nexus to the objective sought to be achieved while revising the pension. The object of revising the pension was due to the increase in the cost of living..Increase in the cost of living would affect all the pensioners irrespective of whether they have retired before 1996 or after 1996. Thus, all the pensioners form a single class and by making a classification based on a cut-off date, equals are treated as unequals..Therefore, such a classification for the purpose of grant of revised pension is unreasonable, arbitrary, discriminatory and violative of Article 14 of the Constitution of India, the Court concluded..[Read Judgment]