State of H.P. & Ors. Vs Rajesh Chander Sood etc. etc. [September 28, 2016]
2016 Latest Caselaw 703 SC

State of Himachal Pradesh & Ors. Vs. Rajesh Chander Sood etc. etc.

[Civil Appeal Nos.9750-9819 of 2016 arising from SLP(C) Nos. 10864-10933 of 2014]

Jagdish Singh Khehar, J.

1. The State of Himachal Pradesh came to be created, with effect from 25.1.1971. Consequent upon the creation of the State of Himachal Pradesh, employees engaged by the corporate sector, on their retirement, were being paid provident fund, under the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the Provident Fund Act). The Central Government framed the Employees' Provident Funds Scheme, 1995, whereby, it replaced the earlier statutory schemes, framed under the Provident Fund Act. This scheme was adopted for the corporate sector employees, engaged in the State of Himachal Pradesh.

2. In order to extend better retiral benefits to these employees, the Himachal Pradesh Government framed another scheme on 29.10.1999 - the Himachal Pradesh Corporate Sector Employees Pension (Family Pension, Commutation of Pension and Gratuity) Scheme, 1999. In the present judgment, the instant scheme will be referred to as 'the 1999 Scheme'. A perusal of 'the 1999 Scheme' reveals that its application extended to employees of some of the corporate bodies (- specified in Annexure-I, appended to 'the 1999 Scheme') in Himachal Pradesh. There were in all 20 corporate entities, named in Annexure-I. These corporate bodies functioned as independent entities, under the Departments of Industries, Welfare, Horticulture, Forest, Food and Supplies, Tourism, Town and Country Planning, Housing and General Administration.

3. Paragraph 2 of 'the 1999 Scheme', provided for the zone of application of the said Scheme. It expressly provided, that the same would apply to only such of the employees, "who opted for the benefit under the scheme". It is necessary to expressly notice, that paragraph 2 of 'the 1999 Scheme' required, that the above option would be exercised by the employees in writing, in the format provided for the same. This option, was required to be submitted within 30 days of the notification of the scheme - by 27.11.1999. It was also provided in paragraph 2, that such of the employees who failed to exercise any option, within the period provided for, for whatever reason, would be deemed to have exercised their option, to be regulated by 'the 1999 Scheme'.

It is therefore apparent, that it was imperative for all concerned employees, to express their option, to be governed by the Employees Provident Funds Scheme, 1995, in case the concerned employees, desired to avoid 'the 1999 Scheme'. In case of the exercise of such option, the concerned employee would continue to be governed by the Employees Provident Funds Scheme, 1995. Failing which, every employee, whether he opted for 'the 1999 Scheme', or chose not to make any option, would be regulated by 'the 1999 Scheme', with effect from the day the scheme was made operational - 1.4.1999.

4. It is also essential to indicate, that only those employees who had been appointed on regular basis, in corporate bodies, to which 'the 1999 Scheme' was applicable, could avail of the benefits of 'the 1999 Scheme'. In other words, employees engaged "...on part time basis, daily wage basis, piece-meal rate basis, casual and contract basis..." were not entitled to opt for 'the 1999 Scheme'.

5. Paragraph 4 of 'the 1999 Scheme' further provided, that those regular employees, who were entitled to the benefits postulated by 'the 1999 Scheme', would automatically forfeit their claim, to the employer's contribution in their provident fund account (including interest thereon), under the prevailing Employees Provident Funds Scheme, 1995, to the Government. The forfeited amount, would include the amount due and payable, under the Employees Provident Funds Scheme, 1995, up to 31.3.1999. The forfeited amount in consonance with paragraph 5 of 'the 1999 Scheme', was to be transferred to a corpus fund, to be administered and managed by the Government of Himachal Pradesh. The aforesaid corpus fund, was to be treated as the pension fund, for payment of pension under 'the 1999 Scheme'.

6. It is of utmost relevance to mention, that paragraph 4 of 'the 1999 Scheme' provided as under:-

"4. Regulation of Claim to Pension:- Any claim to pension shall be regulated by the provision of this scheme in force at the time when an employee retires or is retired or dies or is discharged as the case may be subject to the following:-

(a) The existing employees of the Corporation as on 1.4.99 shall have the option either to elect the pension scheme or to continue under existing Provident Fund scheme.

(b) The existing employees who opt for Pension Scheme shall automatically forfeit their claim to employer's share of CPF including interest thereon to the State Government as well as other claims under CPF Schemes by whatsoever name called in respect of all past accumulations upto 31.3.1999.

The amount of their subscriptions to the fund alongwith interest (excluding employer's share and interest thereon) shall be transferred to GPF account to be allotted and maintained by the concerned Corporate Sector Organisation as per Rules adopted by them".

It is apparent from the above extract, that even though 'the 1999 Scheme' was to take effect from 1.4.1999 (- under paragraph 1(3) of 'the 1999 Scheme'), a claim for pension by an employee governed by the above scheme, would arise only at the time of the employee's retirement, on attaining the age of superannuation, or when he was retired from service by the employer, or in case of his death in harness. This is how, the appellant-State views the above provision (detailed submissions, are being noticed separately).

7. It is not disputed, that regular employees of corporate bodies, to whom 'the 1999 Scheme' was applicable, had opted in writing (or were deemed to have opted) to be governed by 'the 1999 Scheme', or alternatively, had been engaged on regular basis after the induction of 'the 1999 Scheme' but before 'the 1999 Scheme' was repealed (- on 2.12.2004).

8. While adjudicating upon the controversy, it is important to point out, that for the implementation of 'the 1999 Scheme', permission was sought from the Regional Provident Fund Commissioner, Shimla, for the transfer of the accumulated provident fund corpus, to the proposed pension fund under 'the 1999 Scheme'.

It is also relevant to notice, that the Regional Provident Fund Commissioner, through a communication dated 23.2.2000, declined to accord the above permission, because 'the 1999 Scheme' included only regular employees. Part time, daily wage, piece rate, casual and contract employees, were not covered by 'the 1999 Scheme'. According to the Regional Provident Fund Commissioner, there was no provision under the Provident Fund Act, to exclude a part of the employees, from the purview of the Provident Fund Act. The Regional Provident Fund Commissioner was of the view, that permission sought by the State Government could be accorded, only if all employees of the concerned corporate bodies, were to be regulated by the substituting scheme (- 'the 1999 Scheme').

The Regional Provident Fund Commissioner accordingly, through his communication dated 23.2.2000, advised the concerned corporate bodies, to continue to comply with the provisions of the Provident Fund Act, in respect of all their employees. The above communication of the Regional Provident Fund Commissioner, was superseded by another, dated 11.9.2001, addressed by the Additional Central Provident Fund Commissioner (Pension), to the Secretary to the Government of India (with copy to the Regional Provident Fund Commissioner, Himachal Pradesh).

It was pointed out, that a perusal of the aforesaid communication would reveal, that out of the concerned corporate bodies, almost all were fully owned by the State or the Central Government, and the share capital of the general public in the remaining, was less than one per cent. It was therefore, that the concerned corporate bodies were found to be eligible for the exemption, and were accordingly exempted from the applicability of the Provident Fund Act. It is apparent, that the communication dated 11.9.2001 clarified, that as the corporate bodies fell within the ambit of Section 16(1)(b) of the Provident Fund Act, it would not be applicable to the concerned establishments in the State of Himachal Pradesh, with effect from 1.4.1999.

9. The above communication dated 11.9.2001, came to be endorsed by the Union Minister of Labour, on 17.9.2001. The observations recorded in the order of the Union Minister are extracted hereunder: "I have had the matter examined. It has been, noted from the Notification of the State Government dated 29.10.1999 that all regular employees of these undertakings are entitled to pension, commutation of pension, gratuity as applicable to the State Govt. Employees of Himachal Pradesh.

In such circumstances the EPF & MP Act, 1952 shall not apply. The Pension would be discharged by the Himachal Pradesh Government in terms of Section 16(1)(b). These establishments would be out of the purview of the Act from the date the Notification has come into force." In view of the factual position narrated herein above, the provisions of the Provident Fund Act were not in any way an obstacle, to the operation of 'the 1999 Scheme'. As such, 'the 1999 Scheme' became operational, with effect from 1.4.1999. At the instant juncture, it would suffice to record, that 'the 1999 Scheme' remained operational till it was repealed, by a notification date 2.12.2004.

10. After the implementation of 'the 1999 Scheme', a high level committee was constituted by the Finance Department of the State Government, on 21.1.2003. The said committee was comprised of four managing directors of state public sector undertakings and corporations. The high level committee was entrusted with the task of examining, the financial viability of 'the 1999 Scheme'. The committee submitted its report on 15.11.2003. Briefly stated, the high level committee arrived at the conclusion, that the pension scheme for regular employees of corporate bodies, given effect to under 'the 1999 Scheme', would not be financially viable on a self- sustaining basis.

One of the observations recorded in the report of the high level committee was, with reference to the Himachal Road Transport Corporation. It was pointed out, that the pension fund cash flow chart (year-wise) revealed, that in case new appointments were not made against retirees, it would have extremely grave financial consequences, inasmuch as, after the year 2009-10, the income by way of income tax, as well as, the contribution to the pension fund would continue to reduce, whereas pension payment expenditure, would continue to increase.

It was expected, that by the year 2015-16, the balance amount left with the Himachal Road Transport Corporation Pension Fund, would be reduced to approximately Rs.10.82 crores, whereas the pension liability of the retired employees of the Himachal Road Transport Corporation, for the said year, would be approximately Rs.14.56 crores. Accordingly, it was inferred, that from the year 2015-16 onwards, it would not be possible to make payments, towards the recurring pension liability. The report also determined the viability of the scheme, with reference to the Himachal Road Transport Corporation, even if the staff strength is kept at the same level, as was then prevalent (- in 2003).

The instant analysis resulted in the deduction, that the pension contribution would be slightly more, as against the available pension fund of Rs.10.82 crores. In case the staff strength was maintained at the same level, the pension fund balance would be Rs.15.76 crores. Keeping in mind, the approximate pension liability of Rs.14.56 crores for the year 2015-16, it was inferred, that the financial liability towards pension for the following year, i.e., 2016-17 would not be met, out of the pension fund. It was therefore infrerred, that the payment of pension to regular employees of the concerned corporate bodies, could not be paid and sustained, out of the pension fund contemplated under 'the 1999 Scheme'.

Accordingly, the high powered committee recorded its conclusions as under: "In view of the above "the committee" is of the view that the pension scheme for Corporate Sector employees based on contribution by the State Government will not be viable on a self sustaining basis mainly due to the following reasons:-

i). Uncertainty in the rate of interest regime.

ii). Declining recruitment in the Corporate Sector would deplete the size of the corpus to be created and it would be difficult to honour liabilities accruing after 10-12 years.

iii). The pension plan envisages payment of pension to Corporate Sector employees as is being paid to the Government employees. Government employees at present are entitled to pension @ 50% of the basic pay last drawn with linkage to ADA. This return does not appear to be possible from the pension fund proposed to be created for corporate sector employees."

At the instant juncture, it would also be necessary to mention that, as is apparent from the submissions advanced on behalf of the State Government, three factors primarily weighed with it for reconsidering the continuation of 'the 1999 Scheme'. Firstly, uncertainty in the rate of interest regime; secondly, decline in recruitment in the corporate sector; and thirdly, on account of the fact that the respondent-employees would be entitled to pension at the rate of 50% of the basic pay last drawn, with linkage to an additional dearness allowance. And as such, it was not possible for the pension fund, to cater to the payment towards pension, under 'the 1999 Scheme'.

It would also be relevant to mention, that besides the above three reasons depicted in the committee's report, the Cabinet Memorandum dated 12.10.2004, expressly took into consideration the poor financial health of the concerned corporations, and the current financial health of the State Government. Both the above factors also indicated, that it was not possible for the State Government to take upon itself, the financial burden of 'the 1999 Scheme'.

And, there were also more pressing alternative claims. It was submitted, that as on 31.3.2014, the cumulative losses of Government owned corporations, stood at Rs.2,819.86 crores. The aforesaid Cabinet Memorandum was appended to the special leave petition, as Annexure P-4. The Cabinet in its meeting held on 29.11.2004, also approved, that the Government would be supportive of efforts by individual Government owned corporations, for setting up their own pensionary scheme(s).

11. After considering the report of the high level committee, the State Government took a decision on 29.11.2004 to repeal 'the 1999 Scheme'. While repealing 'the 1999 Scheme', it was decided, that regular employees who had retired from corporate bodies, during the period of the subsistence of 'the 1999 Scheme' from 1999 to 2004, would not be affected. For the implementation of the decision of the State Government dated 29.11.2004, a notification dated 2.12.2004 was issued, repealing 'the 1999 Scheme'.

A number of employees who had been deprived of the benefit of 'the 1999 Scheme' by the notification dated 2.12.2004, challenged the repeal notification, by filing a number of writ petitions, before the High Court of Himachal Pradesh, at Shimla (hereinafter referred to as the High Court). By the impugned common order dated 19.12.2013, the High Court allowed all the writ petitions. The final determination of the High Court, is apparent from the following conclusions recorded by it:

"78. There is no merit in the contention of learned Advocate General that the scheme could not be implemented due to financial crunch. The State was aware of the financial implication at the time of issuance of notification dated 29.10.1999. It is the sovereign responsibility of the State to garner revenue to make welfare measures, including payment of pensionery/retiral benefits.

79. It cannot be gathered from the plain language that either expressly or by implication notification dated 2.12.2004 would apply retrospectively.

80. Accordingly, in view of the analysis and discussion made hereinabove, all the writ petitions are allowed. The cut-off date 2.12.2004 is declared ultra vires. Notification dated 2.12.2004 is read down to save it from unconstitutionality, irrationality, arbitrariness or unreasonableness by including the petitioners and similarly situated employees also, who had become members of the scheme notified on 29.10.1999 and have retired after 2.12.2004 and those employees who were already in service when the pension scheme was notified on 29.10.1999 and had become members of that scheme and shall retire hereinafter, for the purpose of pensionery benefits after applying the principles of severability.

The Regional Provident Fund Commissioner, Shimla is directed to transfer the entire amount of the CPF to a corpus fund to be administered and maintained by the Government of Himachal Pradesh in the Finance Department including upto date interest, within a period of two weeks. Thereafter, the Pension Sanctioning Authority is directed to sanction the pension/gratuity/commutation of pension after proper scrutiny of the cases forwarded by the concerned Public Sector Undertaking and issue pension payment order to Pension Disbursing Authority strictly as per para 6 of the scheme notified on 29.10.1999 with interest @ 9% per annum, within a period of 12 weeks from today."

12. Dissatisfied with the judgment rendered by the High Court, dated 19.12.2013, the State of Himachal Pradesh has approached this Court, challenging the common impugned judgment dated 19.12.2003.

13. Leave granted.

14. The first contention advanced at the hands of Mr. P.P. Rao, learned senior counsel for the appellants, was premised on the proposition, that the State Government which had promulgated 'the 1999 Scheme', was well within its rights to repeal the same, for good and sufficient reasons. It was submitted, that it stands established on the record of this case, that 'the 1999 Scheme' was not financially viable, inasmuch as, it could not be characterized as a self-sustaining scheme. It was asserted, that the determination of the State Government to scrap 'the 1999 Scheme', on the basis that the Scheme was not financially viable, was legal and bonafide. In order to canvass the instant proposition, learned counsel, relied on State of Punjab v. Amar Nath Goyal, (2005) 6 SCC 754, and invited the Court's attention, to the following observations recorded therein:

"25. The only question, which is relevant and needs consideration, is whether the decision of the Central and State Governments to restrict the revision of the quantum of gratuity as well as the increased ceiling of gratuity consequent upon merger of a portion of dearness allowance into dearness pay reckonable for the purpose of calculating gratuity, was irrational or arbitrary.

26. It is difficult to accede to the argument on behalf of the employees that a decision of the Central Government/State Governments to limit the benefits only to employees, who retire or die on or after 1.4.1995, after calculating the financial implications thereon, was either irrational or arbitrary. Financial and economic implications are very relevant and germane for any policy decision touching the administration of the Government, at the Centre or at the State level." On the same proposition, reliance was also placed on A.K. Bindal v. Union of India, 2003 (5) SCC 163, and our attention was drawn to the following observations recorded therein:

"13. The change in policy effected by these memorandums was that the Government would not provide any budgetary support for the wage increase and the undertakings themselves will have to generate the resources to meet the additional expenditure, which will be incurred on account of increase in wages. So far as sick enterprises which were registered with BIFR are concerned, it was directed that the revision in pay scale and other benefits would be allowed only if it was actually decided to revive the industrial unit. The question which arises for consideration is whether the employees of public sector enterprises have any legal right to claim that though the industrial undertakings or the companies in which they are working did not have the financial capacity to grant revision in pay scale, yet the Government should give financial support to meet the additional expenditure incurred in that regard.

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17. The legal position is that identity of the government company remains distinct from the Government. The government company is not identified with the Union but has been placed under a special system of control and conferred certain privileges by virtue of the provisions contained in Sections 619 and 620 of the Companies Act. Merely because the entire shareholding is owned by the Central Government will not make the incorporated company as Central Government. It is also equally well settled that the employees of the government company are not civil servants and so are not entitled to the protection afforded by Article 311 of the Constitution (Pyare Lal Sharma v. Managing Director, (1989) 3 SCC 448).

Since employees of government companies are not government servants, they have absolutely no legal right to claim that government should pay their salary or that the addition expenditure incurred on account of revision of their pay scale should be met by the government. Being employees of the companies it is the responsibility of the companies to pay them salary and if the company is sustaining losses continuously over a period and does not have the financial capacity to revise or enhance the pay scale, the petitioners cannot claim any legal right to ask for a direction to the Central Government to meet the additional expenditure which may be incurred on account of revision of pay scales.

It appears that prior to issuance of the office memorandum dated 12-4-1993 the Government had been providing the necessary funds for the management of public sector enterprises which had been incurring losses. After the change in economic policy introduced in early nineties, Government took a decision that the public sector undertakings will have to generate their own resources to meet the additional expenditure incurred on account of increase in wages and that the government will not provide any funds for the same.

Such of the public sector enterprises (government companies) which had become sick and had been referred to BIFR, were obviously running on huge losses and did not have their own resources to meet the financial liability which would have been incurred by revision of pay scales. By the office memorandum dated 19- 7-1995 the Government merely reiterated its earlier stand and issued a caution that till a decision was taken to revive the undertakings, no revision in pay scale should be allowed. We, therefore, do not find any infirmity, legal or constitutional in the two office memorandums which have been challenged in the writ petitions.

18. We are unable to accept the contention of Shri Venkataramani that on account of non-revision of pay scales of the petitioners in the year 1992, there has been any violation of their fundamental rights guaranteed under Article 21 of the Constitution. Article 21 provides that no person shall be deprived of his life or personal liberty except according to procedure established by law. The scope and content of this article has been expanded by judicial decisions. Right to life enshrined in this article means something more than survival or animal existence.

It would include the right to live with human dignity. Payment of a very small subsistence allowance to an employee under suspension which would be wholly insufficient to sustain his living, was held to be violative of Article 21 of the Constitution in State of Maharashtra v. Chandrabhan Tale, (1983) 3 SCC 387. Similarly, unfair conditions of labour in People's Union for Democratic Rights v. Union of India, (1982) 3 SCC 235. It has been held to embrace within its field the right to livelihood by means which are not illegal, immoral or opposed to public policy in Olga Tellis v. Bombay Municipal Corpn., (1985) 3 SCC 545.

But to hold that mere non-revision of pay scale would also amount to a violation of the fundamental right guaranteed under Article 21 would be stretching it too far and cannot be countenanced. Even under the industrial law, the view is that the workmen should get a minimum wage or a fair wage but not that their wages must be revised and enhanced periodically. It is true that on account of inflation there has been a general price rise but by that fact alone it is not possible to draw an inference that the salary currently being paid to them is wholly inadequate to lead a life with human dignity. What should be the salary structure to lead a "life with human dignity" is a difficult exercise and cannot be measured in absolute terms.....

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22. In South Malabar Gramin Bank v. Coordination Committee of S.M.G.B Employees' Union and S.M.G.B Officers' Federation, (2001) 4 SCC 101, relied upon by the learned counsel for the petitioners, the Central Government had referred the dispute regarding the pay structure of the employees of the Bank to the Chairman of the National Industrial Tribunal headed by a former Chief Justice of a High Court. The Tribunal after consideration of the material placed before it held that the officers and employees of the Regional Rural Banks will be entitled to claim parity with the officers and other employees of the sponsor banks in the matter of pay scale, allowances and other benefits.

The employees of nationalised commercial banks were getting their pay scales on the basis of the 5th bipartite settlement and by implementation of the award of the National Industrial Tribunal, the employees of the Regional Rural Banks were also given the benefits of the same settlement. Subsequently, the pay structures of the employees of the nationalised commercial banks were further revised by the 6th and 7th bipartite settlements but the same was not done for the employees of the Regional Rural Banks who then filed writ petitions. It was contended on behalf of the Union of India and also the Banks that financial condition of the Regional Rural Banks was not such that they may give their employees the pay structure of the employees of the nationalised commercial banks.

It was in these circumstances that this Court observed that the decision of the National Industrial Tribunal in the form of an award having been implemented by the Central Government, it would not be permissible for the employer bank or the Union of India to take such a plea in the proceedings before the Court. The other case namely All India Regional Rural Bank Officers Federation v. Govt. of India, (2002) 3 SCC 554, arose out of interlocutory applications and contempt petitions which were filed for implementation of the direction issued in the earlier case, namely, South Malabar Gramin Bank.

Any observation in these two cases to the effect that the financial capacity of the employer cannot be held to be a germane consideration for determination of the wage structure of the employees must, therefore, be confined to the facts of the aforesaid case and cannot be held to be of general application in all situations. In Associate Banks Officers' Assn. v. State Bank of India, (1998) 1 SCC 428, it was observed that many ingredients go into the shaping of the wage structure of any organisation which may have been shaped by negotiated settlements with employees' unions or through industrial adjudication or with the help of expert committees. The economic capability of the employer also plays a crucial part in it; as also its capacity to expand business or earn more profits.

It was also held that a simplistic approach, granting higher remuneration to workers in one organisation because another organisation had granted them, may lead to undesirable results and the application of the doctrine would be fraught with danger and may seriously affect the efficiency and at times, even the functioning of the organisation. Therefore, it appears to be the consistent view of this Court that the economic viability or the financial capacity of the employer is an important factor which cannot be ignored while fixing the wage structure, otherwise the unit itself may not be able to function and may have to close down which will inevitably have disastrous consequences for the employees themselves.

The material on record clearly shows that both FCI and HFC had been suffering heavy losses for the last many years and the Government had been giving a considerable amount for meeting the expenses of the organisations. In such a situation, the employees cannot legitimately claim that their pay scales should necessarily be revised and enhanced even though the organisations in which they are working are making continuous losses and are deeply in the red." Last of all, learned counsel drew our attention to Officers & Supervisors of I.D.P.L. v. Chairman & M.D., I.D.P.L., (2003) 6 SCC 490, and reference was made to the following;

"7. In the above background, the question which arises for consideration is whether the employees of public sector enterprises have any legal right to claim revision of wages that though the industrial undertakings or the companies in which they are working did not have the financial capacity to grant revision in pay-scale, yet the Government should give financial support to meet the additional expenditure incurred in that regard.

8. We have carefully gone through the pleadings, the Annexures filed by both sides and the orders passed by the BIFR and the judgments cited by the counsel appearing on either side. Learned counsel for the contesting respondent drew our attention to a recent judgment of this Court in A.K. Bindal and Anr. v. Union of India, (2003) 5 SCC 163, in support of her contention. We have perused the said judgment. In our opinion, since the employees of Government companies are not Government servants, they have absolutely no legal right to claim that the Government should pay their salary or that the additional expenditure incurred on account of revision of their pay-scales should be met by the Government.

Being employees of the companies, it is the responsibility of the companies to pay them salary and if the company is sustaining losses continuously over a period and does not have the financial capacity to revise or enhance the pay-scale, the petitioners, in our view, cannot claim any legal right to ask for a direction to the Central Government to meet the additional expenditure which may be incurred on account of revision of pay-scales. We are unable to countenance the submission made by Mr. Sanghi that economic viability of the industrial unit or the financial capacity of the employer cannot be taken into consideration in the matter of revision of pay-scales of the employees."

15. Based on the conclusions drawn in the above judgments, it was the contention of learned counsel, that the decision of the State Government to repeal 'the 1999 Scheme', on the basis of the report of the high powered committee, dated 28.10.2003, cannot be faulted. It was submitted, that the determination rendered by the High Court, was in clear disregard to the decisions in the cited cases. It was accordingly urged, that the option exercised by the State Government, on the basis of legitimate material and consideration, could not be interfered with, as the same constituted a legal and valid basis, for the discontinuation of 'the 1999 Scheme'.

16. In order to support the State Government's claim, it was also the contention of learned counsel, that the State Government has an inherent right to review its policy decisions, and as long as the decisions of the State Government are based on bonafide consideration, the same cannot be assailed in law. In order to support the instant contention, learned counsel placed reliance on BALCO Employees' Union v. Union of India, (2002) 2 SCC 333, and invited our attention to the following observations, expressed therein:

"45. In Narmada Bachao Andolan v. Union of India, (2000) 10 SCC 664, there was a challenge to the validity of the establishment of a large dam. It was held by the majority at p. 762 as follows: (SCC para 229) "229. It is now well settled that the courts, in the exercise of their jurisdiction, will not transgress into the field of policy decision. Whether to have an infrastructural project or not and what is the type of project to be undertaken and how it has to be executed, are part of policy- making process and the courts are ill-equipped to adjudicate on a policy decision so undertaken. The court, no doubt, has a duty to see that in the undertaking of a decision, no law is violated and people's fundamental rights are not transgressed upon except to the extent permissible under the Constitution."

46. It is evident from the above that it is neither within the domain of the courts nor the scope of the judicial review to embark upon an enquiry as to whether a particular public policy is wise or whether better public policy can be evolved. Nor are our courts inclined to strike down a policy at the behest of a petitioner merely because it has been urged that a different policy would have been fairer or wiser or more scientific or more logical.

47. Process of disinvestment is a policy decision involving complex economic factors. The courts have consistently refrained from interfering with economic decisions as it has been recognised that economic expediencies lack adjudicative disposition and unless the economic decision, based on economic expediencies, is demonstrated to be so violative of constitutional or legal limits on power or so abhorrent to reason, that the Courts would decline to interfere. In matters relating to economic issues, the Government has, while taking a decision, right to "trial and error" as long as both trial and error are bona fide and within limits of authority.

There is no case made out by the petitioner that the decision to disinvest in BALCO is in any way capricious, arbitrary, illegal or uninformed. Even though the workers may have interest in the manner in which the Company is conducting its business, inasmuch as its policy decision may have an impact on the workers' rights, nevertheless it is an incidence of service for an employee to accept a decision of the employer which has been honestly taken and which is not contrary to law. Even a government servant, having the protection of not only Articles 14 and 16 of the Constitution but also of Article 311, has no absolute right to remain in service.

For example, apart from cases of disciplinary action, the services of government servants can be terminated if posts are abolished. If such employee cannot make a grievance based on Part III of the Constitution or Article 311 then it cannot stand to reason that like the petitioners, non-government employees working in a company which by reason of judicial pronouncement may be regarded as a State for the purpose of Part III of the Constitution, can claim a superior or a better right than a government servant and impugn it's change of status. In taking of a policy decision in economic matters at length, the principles of natural justice have no role to play. While it is expected of a responsible employer to take all aspects into consideration including welfare of the labour before taking any policy decision that, by itself, will not entitle the employees to demand a right of hearing or consultation prior to the taking of the decision."

17. Learned counsel submitted, that the respondent-employees could not claim a vested right, with reference to the provisions of 'the 1999 Scheme'. In this behalf, it was submitted, that neither the principle of estoppel, nor that of promissory estoppel, could be invoked by the employees, so as to claim a right to be governed by 'the 1999 Scheme'. For canvassing that the principle of estoppel could not be invoked by the employees, learned counsel placed reliance on M. Ramanatha Pillai v. State of Kerala, (1973) 2 SCC 650, and invited the Court's attention to the following:

"36. The abolition of post may have the consequence of termination of service of a government servant. Such termination is not dismissal or removal within the meaning of Article 311 of the Constitution. The opportunity of showing cause against the proposed penalty of dismissal or removal does not therefore arise in the case of abolition of post. The abolition of post is not a personal penalty against the government servant.

The abolition of post is an executive policy decision. Whether after abolition of the post the Government servant who was holding the post would be offered any employment under the State would therefore be a matter of policy decision of the Government because the abolition of post does not confer on the person holding the abolished post any right to hold the post." Reliance was also placed on Excise Commissioner, U.P., Allahabad v. Ram Kumar, (1976) 3 SCC 540, and reference was made to the following observations recorded therein:

"Appeals Nos. 399 to 404 of 1975 which raise another point as well viz. the validity of the appellants' demand from the respondents in respect of sales tax at the rate of ten paise per rupee on the retail sales of country spirit made by the latter with effect from April 2, 1969 stand on a slightly different footing. Section 3-A and 4 of the U.P. Sales Tax Act, 1948 clearly authorise the State Government to impose sales tax. The fact that sales of country liquor had been exempted from sales tax vide Notification No. ST-1149/X-802(33)-51 dated April 6, 1959 could not operate as an estoppel against the State Government and preclude it from subjecting the sales to tax if it felt impelled to do so in the interest of the Revenues of the State which are required for execution of the plans designed to meet the ever increasing pressing needs of the developing society.

It is now well settled by a catena of decisions that there can be no question of estoppel against the Government in the exercise of its legislative, sovereign or executive powers." To demonstrate that the principle of promissory estoppel could not be invoked by the respondent-employees, reference was also made to Union of India v. Godfrey Philips India Ltd., (1985) 4 SCC 369, wherein it has been held as under:

"13. Of course we must make it clear, and that is also laid down in Motilal Sugar Mills case, (1979) 2 SCC 409, that there can be no promissory estoppel against the Legislature in the exercise of its legislative functions nor can the Government or public authority be debarred by promissory estoppel from enforcing a statutory prohibition. It is equally true that promissory estoppel cannot be used to compel the Government or a public authority to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make.

We may also point out that the doctrine of promissory estoppel being an equitable doctrine, it must yield when the equity so requires; if it can be shown by the Government or public authority that having regard to the facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or representation made by it, the Court would not raise an equity in favour of the person to whom the promise or representation is made and enforce the promise or representation against the Government or public authority.

The doctrine of promissory estoppel would be displaced in such a case, because on the facts, equity would not require that the Government or public authority should be held bound by the promise or representation made by it. This aspect has been dealt with fully in Motilal Sugar Mills case and we find ourselves wholly in agreement with what has been said in that decision on this point."

18. In order to support the contention, that the respondent-employees had no vested right under 'the 1999 Scheme', reliance was placed on paragraph 4 of 'the 1999 Scheme' (already extracted above). It was the pointed assertion of learned counsel, based on paragraph 4 of 'the 1999 Scheme', that a claim towards pension could be raised by an employee under 'the 1999 Scheme' only "...when an employee retires or is retired or dies or is discharged as the case may be ...".

It was submitted, that only such of the employees who could avail the benefit of pension, were protected from the effect of the repeal notification dated 2.12.2004. It was submitted, that such of the employees who had opted for 'the 1999 Scheme', but were not occasioned with the effect of the contingencies contemplated under paragraph 4 of 'the 1999 Scheme', were not entitled to claim a vested right. It was urged, that a vested right can only be established, when all the incidents which would entitle an employee to draw pensionary rights, under 'the 1999 Scheme', stood satisfied. It was pointed out, that only on the happening of one of the events depicted in paragraph 4, a vested right would emerge.

It was the unequivocal submission of learned counsel for the appellants, that none of the respondent-employees in the present controversy, can claim a vested right under 'the 1999 Scheme', as neither of them had retired on attaining the age of superannuation (after putting in the postulated qualifying service), or had been retired by the employer, or had died in harness, or had been discharged from service. It was therefore asserted, that the challenge raised at the hands of the respondents, to the notification dated 2.12.2004, was legally unacceptable. In this behalf, learned counsel invited our attention to Commissioner of Income-tax, Kerala and Coimbatore v. L.W. Russel, (1964) 7 SCR 569, wherefrom our attention was drawn to the following:

"Before we attempt to construe the scope of s. 7(1) of the Act it will be convenient at the outset to notice the provisions of the scheme, for the scope of the respondent's right in the amounts representing the employer's contributions thereunder depends upon it. The trust deed and the rules dated July 27, 1934, embody the superannuation scheme. The scheme is described as the English and Scottish Joint Co-operative Wholesale Society Limited Overseas European Employees' Superannuation Scheme, hereinafter called the Scheme. It is established for the benefit of the male European members of the Society's staff employed in India, Ceylon and Africa by means of deferred annuities. The Society itself is appointed thereunder as the first trustee.

The trustees shall act as agents for and on behalf of the Society and the members respectively; they shall effect or cause to be effected such policy or policies as may be necessary to carry out the scheme and shall collect and arrange for the payment of the moneys payable under such policy or policies and shall hold such moneys as trustees for and on behalf of the person or persons entitled thereto under the rules of the Scheme.

The object of the Scheme is to provide for pensions by means of deferred annuities for the members upon retirement from employment on attaining certain age under the conditions mentioned therein, namely, every European employee of the Society shall be required as a condition of employment to apply to become a member of the Scheme from the date of his engagement by the Society and no member shall be entitled to relinquish his membership except on the termination of his employment with Society;

the pension payable to a member shall be provided by means of a policy securing a deferred annuity upon the life of such member to be effected by the Trustees as agents for and on behalf of the Society and the members respectively with the Co-operative Insurance Society Limited securing the payment to the Trustees of an annuity equivalent to the pension to which such member shall be entitled under the Scheme and the Rules;

the insurers shall agree that the Trustees shall be entitled to surrender such deferred annuity and that, on such deferred annuity being so surrendered, the insurers will pay to the Trustees the total amount of the premiums paid in respect thereof together with compound interest thereon;

all moneys received by the Trustees from the insurers shall be held by them as Trustees for and on behalf of the person or persons entitled thereto under the Rules of the Scheme;

any policy or policies issued by the insurers in connection with the Scheme shall be deposited with the Trustees; the Society shall contribute one-third of the premium from time to time payable in respect of the policy securing the deferred annuity in respect of each member as therein before provided and the member shall contribute the remaining two-thirds;

the age at which a member shall normally retire from the service of the Society shall be the age of 55 years and on retirement at such age a member shall be entitled to receive a pension of the amount specified in Rule 6; a member may also, after following the prescribed procedure, commute the pension to which he is entitled for a payment in cash in accordance with the fourth column of the Table in the Appendix annexed to the Rules;

if a member shall leave or be dismissed from the service of the Society for any reason whatsoever or shall die while in the service of the Society there shall be paid to him or his legal personal representatives the total amount of the portions of the premiums paid by such member and if he shall die whilst in the service of the Society there shall be paid to him or his legal personal representatives the total amount of the portions of the premiums paid by such member and if he shall die whilst in the service of the Society or shall leave or be dismissed from the service of the Society on account of permanent breakdown in health (as to the bona fides of which the Trustees shall be satisfied) such further proportion (if any) of the total amount of the portions of the premiums paid by the Society in respect of that member shall be payable in accordance with Table C in the Appendix to the Rules;

if the total amount of the portions of the premiums in respect of such member paid by the Society together with interest thereon as aforesaid shall not be paid by the Trustees to him or his legal personal representatives under sub-s. (1) of r. 15 then such proportion or the whole, as the case may be, of the Society's portion of such premiums and interest thereon as aforesaid as shall not be paid by the Trustees to such member or his legal personal representatives as aforesaid shall be paid by the Trustees to the Society; the rules may be altered, amended or rescinded and new rules may be made in accordance with the provisions of the Trust Deed but not otherwise. We have given the relevant part of the Scheme and the Rules.

The gist of the Scheme may be stated thus: The object of the Scheme is to provide for pensions to its employees. It is achieved by creating a trust. The Trustees appointed thereunder are the agents of the employer as well as of the employees and hold the moneys received from the employer, the employee and the insurer in trust for and on behalf of the person or persons entitled thereto under the rules of the Scheme. The Trustees are enjoined to take out policies of insurance securing a deferred annuity upon the life of each member, and funds are provided by contributions from the employer as well as from the employees.

The Trustees realise the annuities and pay the pensions to the employees. Under certain contingencies mentioned above, an employee would be entitled to the pension only after superannuation. If the employee leave the service of the Society or is dismissed from service or dies in the service of the Society, he will be entitled only to get back the total amount of the portion of the premium paid by him, though the trustees in their discretion under certain circumstances may give him a proportion of the premiums paid by the Society.

The entire amount representing the contributions made by the Society or part thereof, as the case may be, will then have to be paid by the Trustees to the Society. Under the scheme the employee has not acquired any vested right in the contributions made by the Society. Such a right vests in him only when he attains the age of superannuation.

Till that date that amount vests in the Trustees to be administered in accordance with the rules; that is to say, in case the employee ceases to be a member of the Society by death or otherwise, the amount contributed by the employer with interest thereon, subject to the discretionary power exercisable by the trustees, become payable to the Society. If he reaches the age of superannuation, the said contributions irrevocably become fixed as part of the funds yielding the pension. To put it in other words, till a member attains the age of superannuation the employer's share of the contributions towards the premiums does not vest in the employee.

At best he has a contingent right therein. In one contingency the said amount becomes payable to the employer and in another contingency, to the employee." For the same proposition, learned counsel, placed reliance on Krishena Kumar v. Union of India, (1990) 4 SCC 207, and drew our attention to the following:

"32. In Nakara, (1983) 1 SCC 305, it was never held that both the pension retirees and the P.F. 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 C.P.F. 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. 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 retirees must also equally be applicable to P.F. retirees. This being the legal position the rights of each individual P.F. retiree finally crystallized on his retirement whereafter no continuing obligation remained, while on the other hand, as regards Pension retirees, the obligation continued till their death....." Based on the legal position declared by this Court in the above judgments, it was urged, that in the absence of any vested right, a challenge to the notification dated 2.12.2004, was neither sustainable nor maintainable in law.

19. It would be relevant to notice, that 'the 1999 Scheme' became operational with effect from 1.4.1999. It remained operational till the issuance of notification dated 2.12.2004. While repealing 'the 1999 Scheme', the notification dated 2.12.2004, did not deprive such of the employees who had retired during subsistence of the Scheme, of the benefits that had accrued to them, under 'the 1999 Scheme'. Only such of the employees who were to retire on or after 2.12.2004, were disentitled to the benefits under the Scheme.

It was the submission of learned counsel for the appellants, that the choice of the cut-off date - 2.12.2004 in the present controversy, is a permissible incident in law. It was pointed out, that the instant proposition has been repeatedly examined by this Court, wherein cut-off dates have been upheld; sometimes even where the cut-off date had been made applicable retrospectively. For the instant proposition, learned counsel placed reliance on Union of India v. P.N. Menon, (1994) 4 SCC 68, and invited the Court's attention to the following observations:

"8. Whenever the Government or an authority, which can be held to be a State within the meaning of Article 12 of the Constitution, frames a scheme for persons who have superannuated from service, due to many constraints, it is not always possible to extend the same benefits to one and all, irrespective of the dates of superannuation. As such any revised scheme in respect of post-retirement benefits, if implemented with a cut-off date, which can be held to be reasonable and rational in the light of Article 14 of the Constitution, need not be held to be invalid. It shall not amount to "picking out a date from the hat", as was said by this Court in the case of D.R. Nim v. Union of India, AIR 1967 SC 1301, in connection with fixation of seniority.

Whenever a revision takes place, a cut-off date becomes imperative, because the benefit has to be allowed within the financial resources available with the Government." Reliance was also placed on State of West Bengal v. Ratan Behari Dey, (1993) 4 SCC 62, and our attention was drawn to the following conclusions: "7. In our opinion, the principle of Nakara, (1983) 1 SCC 305, has no application to the facts of this case. The precise principle enunciated in Nakara (supra) has been duly explained in Krishena Kumar, (1990) 4 SCC 207, by a coordinate Bench. For reasons to be assigned hereinafter, it cannot be said that prescribing April 1, 1977 as the date from which the new Regulations were to come into force is either arbitrary or discriminatory.

Now, it is open to the State or to the Corporation, as the case may be, to change the conditions of service unilaterally. Terminal benefits as well as pensionary benefits constitute conditions of service. The employer has the undoubted power to revise the salaries and/or the pay-scales as also terminal benefits/pensionary benefits. The power to specify a date from which the revision of pay scales or terminal benefits/pensionary benefits, as the case may be, shall take effect is a concomitant of the said power.

So long as such date is specified in a reasonable manner, i.e., without bringing about a discrimination between similarly situated persons, no interference is called for by the court in that behalf. It appears that in the Calcutta Corporation, a pension scheme was in force prior to 1914. Later, that scheme appears to have been given up and the Provident Fund Scheme introduced under the Provident Fund Scheme, a certain amount was deducted from the salary of the employees every month and credited to the Fund.

An equal amount was contributed by the employer which too was credited to the Fund. The total amount to the credit of the employee in the Fund was paid to him on the date of his retirement. The employees, however, were demanding the introduction of a pension scheme. The demand fell on receptive years in the year 1977... maybe because in that-year the Left Front Government came to power in that State, as suggested by the writ petitioners. The State Government appointed a Commission to examine the said demand and to recommend the necessary measures in that behalf. The three members constituting the Commission differed with each other in certain particulars.

The Government examined their recommendations and accepted them with certain modifications in the year 1981. After processing the matter through relevant departments, the Regulations were issued and published in the year 1982. In the above circumstances, the State Government thought that it would be appropriate to give effect to the said Regulations on and from April 1, 1977 i.e., the first day of the financial year in which the Pay Commission was appointed by the Government - a fact which could not have been unknown to the Corporation employees.

We cannot say that the Government acted unreasonably in specifying the said date. It may also be said that, that was the year in which the Left Front came into power in that State, but does not detract from the validity of the aforesaid reasons assigned by the State in its counter-affidavit filed before the Division Bench of the High Court.

We are not in agreement with the opinion expressed by the High Court that the reasons assigned by the State Government are neither relevant nor acceptable. 8. In this context, it may be remembered that the power of the State to specify a date with effect from which, the Regulations framed, or amended, as the case may be, shall come into force is unquestioned. A date can be specified both prospectively as well as retrospectively. The only question is whether the prescription of the date is unreasonable or discriminatory. Since we have found that the prescription of the date in this case is neither arbitrary nor unreasonable, the complaint of discrimination must fail.

9. Now coming to the argument of Sri P.P. Rao that the Regulations bring about an unreasonable classification between similarly placed employees, we must say that we are not impressed by it. It is not submitted that the Corporation had no power to give retrospective effect to the Regulations. It was within the power of the Corporation to enforce the Regulations either prospectively or with retrospective effect from such date as they might specify. Of course, as repeatedly held by this Court, in such cases the State cannot, as the expression goes, pick a date out of its hat. It has to prescribe the date in a reasonable manner, having regard to all the relevant facts and circumstances.

Once this is done, question of discrimination does not arise. Reference in this behalf may also be had to the decision of this Court in Sushma Sharma v. State of Rajasthan, 1985 Supp. SCC 45, a decision of the Division Bench comprising E.S. Venkataramiah and Sabyasachi Mukharji, JJ." It was pointed out, that the determination rendered in the above two judgments has been reiterated by this Court in State of Rajasthan v. Amrit Lal Gandhi, (1997) 2 SCC 342. Last of all, learned counsel invited the Court's attention to R.R. Verma v. Union of India, (1980) 3 SCC 402, wherefrom reliance was placed on the following:-

"5. The last point raised by Shri Garg was that the Central Government had no power to review its earlier orders as the rules do not vest the government with any such power. Shri Garg relied on certain decisions of this Court in support of his submission: Patel Narshi Thakershi v. Pradyumansinghji Arjunsinghji, (1971) 3 SCC 844; D.N. Roy v. State of Bihar, (1970) 3 SCC 119, and State of Assam v. J.N. Roy Biswas, (1976) 1 SCC 234. All the cases cited by Shri Garg are cases where the government was exercising quasi-judicial power vested in them by statute. We do not think that the principle that the power to review must be conferred by statute either specifically or by necessary implication is applicable to decisions purely of an administrative nature.

To extend the principle to pure administrative decisions would indeed lead to untoward and startling results. Surely, any government must be free to alter its policy or its decision in administrative matters. If they are to carry on their daily administration they cannot be hidebound by the rules and restrictions of judicial procedure though of course they are bound to obey all statutory requirements and also observe the principles of natural justice where rights of parties may be affected. Here again, we emphasise that if administrative decisions are reviewed, the decisions taken after review are subject to judicial review on all grounds on which an administrative decision may be questioned in a court. We see no force in this submission of the learned counsel. The appeal is, therefore, dismissed."

20. Mr. R. Venkataramni, learned senior counsel, supplemented the submissions advanced by Mr. P.P. Rao. In his opening statement, he endorsed the submissions advanced by Mr. P.P. Rao, and accordingly, adopted the same.

21. In addition, it was contended, that 'the 1999 Scheme' was introduced for the first time on 29.10.1999, with retrospective effect - from 1.4.1999. It was asserted, that through 'the 1999 Scheme', it was proposed to supplement the post-retiral financial benefits of employees, engaged in corporate bodies, in the State of Himachal Pradesh. It was urged, that employees of corporate bodies, were hitherto before, recipients of Contributory Provident

Fund (CPF), as the sole post-retiral financial benefit. It was submitted, that 'the 1999 Scheme', required employees of corporations to switch over from the CPF scheme, by exercising their option. And, such of the employees who did not exercise any option (under the provisions of 'the 1999 Scheme'), were also deemed to have exercised their option for the said scheme, on the expiry of the period specified. It was highlighted, that the grant of pension under 'the 1999 Scheme', was based on the operation of the scheme. Stated differently, the contention was, that the right to receive pension emerged from 'the 1999 Scheme', and not from the option exercised by an employee, under the said scheme.

22. Insofar as the operation of 'the 1999 Scheme' is concerned, it was submitted, that the employer's contribution to the CPF account of the employee (including interest which had accrued thereon) upto 31.3.1999, was transferred to the State Government, so as to constitute the corpus fund, to be administered and maintained by the Finance Department of the State Government, which would make 'the 1999 Scheme', self-financing. The above submission, was drawn from a collective reading of paragraphs 4(b) and 5 of 'the 1999 Scheme'.

It was further contended, that an employee's own contribution to the CPF, i.e. the subscription amount contributed by the employee to his own CPF account, was to be retained in his GPF account. The instant employee's contribution, was to be disbursed to him, at the time of his retirement, as GPF. As such, it was pointed out, that the contributions made by the employees, from out of their own funds,