Taking away vested pension, promotion by retrospective amendment violates Articles 14, 16: Supreme Court

The Supreme Court on Tuesday held that if an amendment having retrospective operation has the effect of taking away the benefit already available to an employee under existing rules, it would be violative of the fundamental rights guaranteed under Articles 14 and 16 of the Constitution [The Punjab State Cooperative Agricultural Development Bank vs The Registrar, Cooperative Societies & ors]..A Bench of Justices Ajay Rastogi and Abhay S Oka said that such retrospective amendments would divest an employee of his vested or accrued rights and will not be permissible. "An amendment having retrospective operation which has the effect of taking away the benefit already available to the employee under the existing rule indeed would divest the employee from his vested or accrued rights and that being so, it would be held to be violative of the rights guaranteed under Articles 14 and 16 of the Constitution," the Court ruled..The judgment was delivered in a bunch of appeals against a Division Bench verdict of Punjab & Haryana High Court which had ruled in favour of the employees of a bank. In this case, the respondents were retired employees and members of the Punjab State Cooperative Agricultural Development Bank Limited, Chandigarh.They were earlier the members of the Employees Provident Fund Scheme under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 and were governed by the Punjab State Cooperative Agricultural Land Mortgage Banks Service (Common Cadre) Rules, 1978. They became members of the Bank Pension Scheme, which was introduced by the bank on April 1, 1989 upon the recommendation of the Punjab Pay Commission.The administrator of the appellant Bank by its resolution dated June 22, 1989 decided to implement the recommendations of the State government and as a consequence, the pension scheme for the employees and officers in the 1978 Rules was introduced with effect from April 1, 1989.Accordingly, the 1978 Rules were amended and Rule 15(ii) was introduced authorizing the Board of Directors to formulate pension scheme with the prior approval of the Registrar Cooperative Societies, Punjab. Pursuant to that, an amendment was made with an option that such of the employees who opt for the rules (pension scheme) shall be covered by these rules. At the given time, such employees who do not opt for these rules shall be governed by 1952 Act, it was stated.All the respondent employees were given the option to become members of the pension scheme on retirement from service way back in 1989, and they continued to derive the benefit of pension after they had opted for it. They continuously derived benefit until the year 2010 when the litigation started after the appellant bank stopped making payment of pension in terms of the bank pension scheme.Later on, the Bank took a decision by deleting Rule 15(ii) of pension scheme by an amendment dated March 11, 2014 and that became the cause of grievance of the employees leading to the present appeal.The question before the apex court was regarding the scope concept of vested or accrued rights of an employee and whether such vested or accrued rights can be divested with retrospective effect by the rule making authority. .The Court placed reliance on a slew of judgments in this regard to hold that such retrospective amendments would be hit by Article 14, 16 and 21 of the Constitution. The Court also drew a distinction between legitimate expectation and a vested/accrued right in favour of the employees."The rule which classifies such employee for promotional, seniority, age of retirement purposes undoubtedly operates on those who entered service before framing of the rules but it operates in futuro. In a sense, it governs the future right of seniority, promotion or age of retirement of those who are already in service," the judgment said..Thus, if an employee has already been promoted or fixed in a particular pay scale and the same is taken away retrospectively, that might not be permissible and will be violative of Articles 14 and 16, the Court made it clear."Any amendment which has been made with retrospective operation to take away the right accrued to the retired employee under the existing rule certainly is not only violative of Article 14 but also of Article 21 of the Constitution," the Court held..The Court also rejected the contention of the appellant bank that it did not have financial resources to pay pension. "Non-availability of financial resources would not be a defence available to the appellant Bank in taking away the vested rights accrued to the employees that too when it is for their socio-economic security," the Court said.Pension, the Court opined, is an assurance to the employees in their old age that there will be an assured periodical payment."The pension which is being paid to them is not a bounty and it is for the appellant to divert the resources from where the funds can be made available to fulfil the rights of the employees in protecting the vested rights accrued in their favour," the Court made it clear..Thus, it dismissed the appeal of the bank and directed it to pay arrears towards pensions upto 31 December, 2021, in twelve monthly instalments. The payment has to made in the next one year by the end of December 2022.For those employees who have accepted payment under a one-time settlement at a given point of time, the Court stated that the amount paid to them is always open for adjustment against arrears of their due pension. .[Read Judgment]