INDIAN EX SERVICEMEN MOVEMENT & ORS. v. UNION OF INDIA & ORS.

A Government to revise the pension every five years cannot be held to violate the precepts underlying Article 14.

38Copy pinpoint38. The policy choices which have been made by the Union Government must also be understood in the context that the estimated budget allocation for defence pensions is Rs 1,33,825 crores representing B 28.39 per cent of the total defence budget estimateof Rs 4,71,378 crores for 2020-2021. This does not include budget on salaries which is of the order of 34.89 per cent of the total defence budget estimates for 2020-

2021. Salaries and pensions thus account for nearly 63 per cent of the total defence budget estimates for 2020-2021. In making policy choices, the Union Government is entitled to take into account priorities towards modernization of the armed forces and to modulate the grant of financial benefits so as to sub-serve and balance distinct priorities.

39Copy pinpoint39. In the decision of this Court in Nakara (supra), the Constitution Bench was deciding on the issue of whether the date of retirement would be a relevant consideration for determining the application of a revised formula for the computation of pension. The liberalised pension scheme was made applicable prospectively to those employees who retired on or after March 31, 1979 in the case of government servants covered by the 1972 Rules and in respect of defence personnel, those who became non-effective on or after April 1, 1979. Consequently, those who retired prior to the date were not entitled to the benefits of the liberalised pension scheme. It was held that payment of pension constitutes a compensation for the service rendered in the past and as a measure of social welfare for providing socio-economic justice to those who have rendered service to the State. The Court noted that earlier,the measure of pension was related to the average emoluments during a period of thirty-six months prior to retirement. By a liberalized scheme, the period was reduced to an average of ten months preceding the date of retirement coupled with the above aspects.A slab system for computation was introduced and the ceiling was raised. This Court held that there was no justification for arbitrarily selecting the criteria for eligibility for the grant of benefits under the scheme based on the date of retirement. Hence, this Court held that all pensioners formed a homogeneous class and where an existing scheme of pension was liberalized, a distinction could not be made on the basis of a specified cut-off date. At the same time, it must also be noted that the decision in Nakara (supra) noted that “the financial implication in such matters has some relevance.” This Court struck down H

INDIAN EX SERVICEMEN MOVEMENT & ORS. v. UNION OF 933 INDIA & ORS. [DR. DHANANJAYA Y CHANDRACHUD, J.]

the portion of the Memoranda by which the benefit of the liberalised pension scheme was only confined to persons retiring on or after the specified date which resulted in the benefit being extended to all retirees, irrespective of the date of retirement. It was observed as follows: “63. The financial implication in such matters has some relevance. However in this connection, we want to steer clear of a misconception. There is no pension fund as it is found either in contributory pension schemes administered in foreign countries or as in insurance-linked pensions. Non-contributory pensions under 1972 Rules is a State obligation. It is an item of expenditure voted year to year depending upon the number of pensioners and the estimated expenditure. Now when the liberalised pension scheme was introduced, we would justifiably assume that the government servants would retire from the next day of the coming into operation of the scheme and the burden will have to be computed as imposed by the liberalised scheme. Further Government has been granting since nearly a decade temporary increases from time to time to pensioners. Therefore, the difference will be marginal. Further, let it not be forgotten that the old pensioners are on the way out and their number is fast decreasing. While examining the financial implication, this Court is only concerned with the additional liability that may be imposed by bringing in pensioners who retired prior to April 1, 1979 within the fold of liberalised pension scheme but effective subsequent to the specified date. That it is a dwindling number is indisputable. And again the large bulk comprises pensioners from lower echelons of service such as Peons, L.D.C., U.D.C., Assistant etc. In a chart submitted to us, the Union F of India has worked out the pension to the pensioners who have retired prior to the specified date and the comparative advantage, if they are brought within the purview of the liberalised pension scheme. The difference up to the level of Assistant or even Section Officer is marginal keeping in view that the old pensioners are getting temporary G increases. Amongst the higher officers, there will be some difference because the ceiling is raised and that would introduce the difference. It is however necessary to refer to one figure relied upon by respondents. It was said that if pensioners who retired prior to March 31, 1979 are brought within the purview H

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A of the liberalised pension scheme, Rs 233 crores would be required for fresh commutation. The apparent fallacy in the submission is that if the benefit of commutation is already availed of, it cannot and need not be reopened. And availability of other benefits is hardly a relevant factor because pension is admissible to all retirees. The figures submitted are thus neither frightening nor the liability is supposed to be staggering which would deflect us from going to the logical and of constitutional mandate. Even according to the most liberal estimate, the average yearly increase is worked out to be Rs 51 crores but that assumes that every pensioner has survived till date and will continue to survive. Therefore, we are satisfied that the increase liability consequent upon this judgment is not too high to be unbearable or such as would have detracted the Government from covering the old pensioners under the Scheme.” D (emphasis supplied)

40Copy pinpoint40. As opposed to the factual matrix in Nakara (supra), where the liberalised pension scheme was not made applicable to employees who had retired prior to the cut-off date, in this case the OROP principle is applicable to all retired army personnel, irrespective of the date of retirement. The cut-off date is only prescribed for determining the base salary used for computing the pension. While for those who retired on or after 2014, the last drawn salary is used for computing the pension; for those who retired prior to 2014, the average of the salary drawn in 2013 is used.This policy only seeks to protect those who retired before 2014 since the last drawn salary of the prior retirees might be too low and incomparable to the pay of the 2014 retirees. Moreover, if the maximum salary drawn is to be used as the basevalue instead of taking the average salary, an additional outlay of Rs 1,45,339.34 crores would be incurred. The executive is therefore, well within its limits to prescribe a policy keeping in view the financial implications.

41Copy pinpoint41. In Krishena Kumar (supra), a Constitution Bench of this Court decided on the issue of whether the prescription of a cut-off date for the eligibility to a pension scheme was arbitrary and violative of Article 14. Before 1957, the only scheme for retirement benefits in the Railways was the Provident Fund Scheme. This scheme was replaced H in 1957 by the Pension Scheme. All the employees who served in the

INDIAN EX SERVICEMEN MOVEMENT & ORS. v. UNION OF 935 INDIA & ORS. [DR. DHANANJAYA Y CHANDRACHUD, J.]

Railways on or after 1 April 1957 were automatically covered by the A Pension Scheme. Those who were in service before 1 April 1957 were given the option to switch over to the Pensionary Benefits. It was the contention of the appellants that till 1 April 1957, there was no difference between the benefits receivable under the provident fund scheme and the pension scheme. However, it was contended that between 1957 and B 1987, the pensionary benefits were increased by various methods while the benefits under the provident fund scheme were not enhanced. Dismissing the petitions, this Court held that neither the prescription of a cut-off date nor the creation of two classes of retirees (pensioners and provident fund holders) was contrary to the decision of the Constitution Bench in Nakara (supra). It was observed thus: C “32. In Nakara [(1983) 1 SCC 305 : 1983 SCC (L&S) 145 : (1983) 2 SCR 165] it was never held that both the pension retirees and the PF retirees formed a homogeneous class and that any further classification among them would be violative of Article 14. On the other hand the court clearly observed that it was not dealing with the problem of a “fund”. The Railway Contributory Provident Fund is by definition a fund. Besides, the government’s obligation towards an employee under CPF Scheme to give the matching contribution begins as soon as his account is opened and ends with his retirement when his rights qua the government in respect of the Provident Fund is finally crystallized and thereafter no statutory obligation continues. Whether there still remained a moral obligation is a different matter. On the other hand under the Pension Scheme the government’s obligation does not begin until the employee retires when only it begins and it continues till the death of the employee. F Thus, on the retirement of an employee government’s legal obligation under the Provident Fund account ends while under the Pension Scheme it begins. The rules governing the Provident Fund and its contribution are entirely different from the rules governing pension. It would not, therefore, be reasonable to argue that what is applicable to the pension G retirees must also equally be applicable to PF retirees. This being the legal position the rights of each individual PF retiree finally crystallized on his retirement whereafter no continuing obligation remained while, on the other hand, as regard Pension retirees, the obligation continued till their death. The continuing H

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A obligation of the State in respect of pension retirees is adversely affected by fall in rupee value and rising prices which, considering the corpus already received by the PF retirees they would not be so adversely affected ipso facto. It cannot, therefore, be said that it was the ratio decidendi in Nakara [(1983) 1 SCC 305 : 1983 SCC (L&S) 145 : (1983) 2 SCR 165] that the State’s B obligation towards its PF retirees must be the same as that towards the pension retirees. An imaginary definition of obligation to include all the government retirees in a class was not decided and could not form the basis for any classification for the purpose of this case. Nakara [(1983) C 1 SCC 305 : 1983 SCC (L&S) 145 : (1983) 2 SCR 165] cannot, therefore, be an authority for this case.

34. The next argument of the petitioners is that the option given to the PF employees to switch over to the pension scheme with effect from a specified cut-off date is bad as violative of Article D 14 of the Constitution for the same reasons for which in Nakara [(1983) 1 SCC 305 : 1983 SCC (L&S) 145 : (1983) 2 SCR 165] the notification were read down. We have extracted the 12th option letter. This argument is fallacious in view of the fact that while in case of pension retirees who are alive the government has a continuing obligation and if one is affected by dearness the others may also be similarly affected. In case of PF retirees each one’s rights having finally crystallized on the date of retirement and receipt of PF benefits and there being no continuing obligation thereafter they could not be treated at par with the living pensioners. How the corpus after retirement of a PF retiree was affected or benefitted by prices and interest rise was not kept any tack of by the Railways. It appears in each of the cases of option the specified date bore a definite nexus to the objects sought to be achieved by giving of the option. Option once exercised was told to have been final. Options were exercisable vice versa.” G (emphasis supplied)

42Copy pinpoint42. In Indian Ex-Services League (supra),it was contended that in view of the decision in Nakara (supra), all retirees who held the same rank irrespective of the date of retirement must receive the same amount of pension. This Court observed that there was nothing in Nakara H (supra) that backed the claim of the appellants that the same pension

INDIAN EX SERVICEMEN MOVEMENT & ORS. v. UNION OF 937 INDIA & ORS. [DR. DHANANJAYA Y CHANDRACHUD, J.]

must be given to all retirees of the same rank. The Court observed that it was held in Nakara (supra) that only the same formula for calculation of pension was to be used and nowhere was the emoluments of the retirees revised. The ratio decidendi in Nakara (supra) was explained in the following words: “12. The liberalised pension scheme in the context of which the decision was rendered in Nakara [(1983) 1 SCC 305 : 1983 SCC (L&S) 145 : (1983) 2 SCR 165] provided for computation of pension according to a more liberal formula under which “average emoluments” were determined with reference to the last ten months’ salary instead of 36 months’ salary provided earlier yielding a higher average, coupled with a slab system and raising the ceiling limit for pension. This Court held that where the mode of computation of pension is liberalised from a specified date, its benefit must be given not merely to retirees subsequent to that date but also to earlier existing retirees irrespective of their date of retirement even though the earlier retirees would not be entitled to any arrears prior to the specified date on the basis of the revised computation made according to the liberalised formula. For the purpose of such a scheme all existing retirees irrespective of the date of their retirement, were held to constitute one class, any further division within that class being impermissible. According to that decision, the pension of all earlier retirees was to be recomputed as on the specified date in accordance with the liberalised formula of computation on the basis of the average emoluments of each retiree payable on his date of retirement. For this purpose there was no revision of the emoluments of the earlier retirees under the scheme. It F was clearly stated that ‘if the pensioners form a class, their computation cannot be by different formula affording unequal treatment solely on the ground that some retired earlier and some retired later’. This according to us is the decision in Nakara [(1983) 1 SCC 305 : 1983 SCC (L&S) 145 : (1983) 2 SCR 165] and no more.” G

(emphasis supplied) It was observed that the effect of the judgment in Nakara (supra) was that the same computation according to the liberalised formula must be applicable to pre and post 1 April 1979 retirees and that the H

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A decision cannot be construed to mean that the same amount of pension must be receivable.

43Copy pinpoint43. In KL Rathee v. Union of India18, the decision in Nakara (supra) was explained in the following terms : “6. Nakara case dealt with the manner of calculation of pension on the basis of average emoluments of a retired government employee. Prior to the liberalisation of the formula for computation of pension made by the memorandum dated 25-5-1979, average emoluments of the last thirty months of service of the employee provided that basis for calculation of pension. The 1970 service of the employee provided that average emoluments must be calculated on the basis of the emoluments received by a government servant during the last ten months of the service. That apart, a new slab system for computation of pension was introduced and the ceiling on pension was raised […].

D 7. It is to be seen that the judgment did not strike down the definition of “emoluments”. It merely held that if pension was to be calculated on the basis of the last ten months’ emoluments of a government servant, after 1-4-1979, there is no reason why those who retired before 1-4-1979 should get pension calculated on the basis of average of last thirty-six months’ emoluments. In other words, the rule of computation must be the same. The Court did not hold that those who have retired before 1-4-1979 must be treated as having the same emoluments as those who retired on or after 1-4-1979 for the purpose of calculation of pension. Therefore, on the strength of Nakara case, the petitioner is not entitled to ask for computation of pension with reference to emoluments which he never got.”

44Copy pinpoint44. In Col. B.J Akkara (Retd.) v. Government of India19, this Court summarised the principles relating to pension. Justice RV Raveendran writing for a two-Judge bench observed: G “20. The principles relating to pension relevant to the issue are well settled. They are: (a) In regard to pensioners forming a class, computation of pension cannot be by different formula thereby applying an unequal 18 1991 2 SCC 104 19 H (2006) 11 SCC 709

INDIAN EX SERVICEMEN MOVEMENT & ORS. v. UNION OF 939 INDIA & ORS. [DR. DHANANJAYA Y CHANDRACHUD, J.]

treatment solely on the ground that some retired earlier and some retired later. If the retiree is eligible for pension at the time of his retirement and the relevant pension scheme is subsequently amended, he would become eligible to get enhanced pension as per the new formula of computation of pension from the date when the amendment takes effect. In such a situation, the additional benefit under the amendment, made available to the same class of pensioners cannot be denied to him on the ground that he had retired prior to the date on which the aforesaid additional benefit was conferred. (b) But all retirees retiring with a particular rank do not form a single class for all purposes. Where the reckonable emoluments as on the date of retirement (for the purpose of computation of pension) are different in respect of two groups of pensioners, who retired with the same rank, the group getting lesser pension cannot contend that their pension should be identical with or equal to the pension received by the group whose reckonable emolument was higher. In other words, pensioners who retire with the same rank need not be given identical pension, where their average reckonable emoluments at the time of their retirement were different, in view of the difference in pay, or in view of different pay scales being in force. E […] One set cannot claim the benefit extended to the other set on the ground that they are similarly situated. Though they retired with the same rank, they are not of the “same class” or “homogeneous group”. The employer can validly fix a cut-off date for introducing F any new pension/retirement scheme or for discontinuance of any existing scheme. What is discriminatory is introduction of a benefit retrospectively (or prospectively) fixing a cut-off date arbitrarily thereby dividing a single homogeneous class of pensioners into two groups and subjecting them to different treatment.” G (emphasis supplied)

45Copy pinpoint45. The decision in SPS Vains (supra) has been relied upon by the petitioners. The issue in that case was whether the officers of the rank of Major General, who had retired prior to 1 January 1996, could be given the benefit of the provisions of the revised pay scale, though H

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A according to the policy only those who retired after the said cut-off date would be entitled to such benefit. The rank of Brigadier is a feeder post for the promotional rank of Major General. A Major General always drew a higher pension than the pension payable to the officers holding the rank of a Brigadier, as on the basis of the recommendation of the Fourth Pay Commission, the pension was calculated on the basis of the salary drawn during the last ten months prior to retirement. An anomaly arose with the acceptance of the recommendation of the Fifth Pay Commission which created a situation in which a Brigadier began drawing more pension and family pension than the Major General. The Government increased the pension of Major Generals who had retired prior to 1996 so that they do not receive lesser pension than the officers of the rank of Brigadier. The disparity which was noted in that case is evident from the following extract of the judgment: “23. From the submissions made, the dispute appears to be confined only to the question whether officers of the rank of Major General D in the army and of equivalent rank in the two other wings of the Defence forces, who had retired prior to 1.1.1996 have been validly excluded from the benefit of the revision of pay scales in keeping with the recommendations of the fifth Central Pay Commission by virtue of the Special Army Instruction 2/S/1998.” This Court held that such a disparity in the pension payable to two groups of officers occupying the same rank of Major General based on those retiring before or after 1 January 1996 violated Article 14. It was in this backdrop that this Court directed that the pay of all pensioners in the rank of Major General and its equivalent rank in the other two wings of the Defence services should be notionally fixed at the rate given to the similar officers of the same rank after the revision of pay scales with effect from 1 January 1996, and thereafter to compute the pensionary benefits with prospective effect from the date of the writ petition. The decision in SPS Vains (supra) thus involved a completely different factual situation. The rank of Brigadier was a feeder post for the rank of Major General. An anomaly had arisen as a result of which the pay and pension of Brigadier were higher than of the Major Generals. By increasing the pension of Major General, distinction was made between those who had retired before and after 1 January 1996. This was held to be violative of Article 14. 46.The canvass which is sought to be traversed in these proceedings under Article 32 of the Constitution trenches upon a domain

INDIAN EX SERVICEMEN MOVEMENT & ORS. v. UNION OF 941 INDIA & ORS. [DR. DHANANJAYA Y CHANDRACHUD, J.]

which is reserved for executive policy. We must remember that adjudication cannot serve as a substitute for policy. Lon Fuller described public policy issues that come up in adjudication as “polycentric problems”, that is, theyraise questions that have a “multiplicity of variable and interlocking factors, decisions on each one of which presupposes a decision on all others”. Such matters, according to Fuller, are more suitably addressed by elected representatives since they involve negotiations, trade-offs and a consensus-driven decision-making process. Fuller argues that adjudication is more appropriate for questions that result in “either- or” answers.20 Most questions of policy involve complex considerations of not only technical and economic factors but also require balancing competing interests for which democratic reconciliation rather than adjudication is the best remedy. Further, an increased reliance on judges to solve matters of pure policy diminishes the role of other political organs in resolving contested issues of social and political policy, which require a democratic dialogue. This is not to say that this Court will shy away from setting aside policies that impinge on constitutional rights. Rather it is to provide a clear-eyed role of the function that a court serves in a democracy. The OROP policy may only be challenged on the ground that it is manifestly arbitrary or capricious. In this regard, we now evaluate the policy which has been adopted by the Union Government.

47Copy pinpoint47. The policy of OROP adopted by the Union Government stipulates thus: E

(i) The benefits will be effective from 1 July 2014; (ii) Pensions of past pensioners would be refixed on the basis of the pension of retirees of calendar year 2013; (iii) Pension for all pensioners would be protected; and F (iv) In future, the pension would be refixed after every five years.

48Copy pinpoint48. The principles governing pensions and cut-off dates can be summarised as follows: G (i) All pensioners who hold the same rank may not for all purposes form a homogenous class. For example, amongst Sepoys differences do exist in view of the MACP and ACP 20 Fuller, L. L., & Winston, K. I. (1978). The Forms and Limits of Adjudication. Harvard Law Review, 92(2), 353–409. H

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A schemes. Certain Sepoys receive the pay of the higher ranked personnel; (ii) The benefit of a new element in a pensionary scheme can be prospectively applied. However, the scheme cannot bifurcate a homogenous group based on a cut-off date; B (iii) The judgment of the Constitution Bench in Nakara (supra) cannot be interpreted to read the one rank one pension rule into it. It was only held that the same principle of computation of pensions must be applied uniformly to a homogenous class; and C (iv) It is not a legal mandate that pensioners who held the same rank must be given the same amount of pension. The varying benefits that may be applicable to certain personnel which would also impact the pension payable need not be equalised with the rest of the personnel.

49Copy pinpoint49. Applying the above principles to the facts of the case, we find no constitutional infirmity in the OROP principle as defined by the communication dated 7 November 2015 for the following reasons: (i) The definition of OROP is uniformly applicable to all the pensioners irrespective of the date of retirement. It is not the case of the petitioners that the pension is reviewed ‘automatically’ to a class of the pensioners and ‘periodically’ to another class of the pensioners; (ii) The cut-off date is used only for the purpose of determining the base salary for the calculation of pension. While for those who retired after 2014, the last drawn salary is used to calculate pension, for those who retired prior to 2013, the average salary drawn in 2013 is used. Since the uniform application of the last drawn salary for the purpose of calculating pension would put the prior retirees at a disadvantage, the Union Government has taken a policy decision to enhance the base salary for the calculation of pension. Undoubtedly, the Union Government had a range of policy choices including taking the minimum, the maximum or the mean or average. The Union government decided to adopt the average. Persons below the average H

INDIAN EX SERVICEMEN MOVEMENT & ORS. v. UNION OF 943 INDIA & ORS. [DR. DHANANJAYA Y CHANDRACHUD, J.]

were brought up to the average mark while those drawing above the average were protected. Such a decision lies within the ambit of policy choices; (iii) While no legal or constitutional mandate of OROP can be read into the decisionsin Nakara (supra) and SPS Vains (supra), varying pension payable to officers of the same rank retiring before and after 1 July 2014 either due to MACP or the different base salary used for the calculation of pension cannot be held arbitrary; and (iv) Since the OROP definition is not arbitrary, it is not necessary for us to undertake the exercise of determining if the financial implications of the scheme is negligible or enormous.

50Copy pinpoint50. In terms of the communication dated 7 November 2015, the benefit of OROP was to be effected from 1 July 2014. Para 3 (v) of the communication states that “in future, the pension would be re-fixed every five years”. Such an exercise has remained to be carried out after the expiry of five years possibly because of the pendency of the present proceedings.

51Copy pinpoint51. We accordingly order and direct that in terms of the communication dated 7 November 2015, a re-fixation exercise shall be carried out from 1 July 2019, upon the expiry of five years. Arrears payable to all eligible pensioners of the armed forces shall be computed and paid over accordingly within a period of three months.

52Copy pinpoint52. The petition is disposed of in the above terms.

53Copy pinpoint53. Pending application(s), if any, shall stand disposed of. F

Nidhi Jain Writ petition disposed of. (Assisted by : Shubhanshu Das, LCRA)