Supreme Court Clarifies Pension Rights of Employees Absorbed into Rajasthan Dairy Federations (28 April 2023)

Introduction

Date of the Judgment: 28 April 2023

Citation: 2023 INSC 449

Judges: M.R. Shah, J., C.T. Ravikumar, J.

Can an employee who initially worked for the State Government and was subsequently absorbed into a separate entity claim pension benefits from the State Government? The Supreme Court of India recently addressed this question in a case involving employees who moved from the Rajasthan State Government to the Rajasthan Cooperative Dairy Federations. The core issue was whether these employees, after being absorbed into the Dairy Federations, could still claim pensionary benefits from the State Government, based on their initial employment. The Supreme Court bench, comprising Justices M.R. Shah and C.T. Ravikumar, delivered the judgment.

Case Background

The respondents were initially appointed in the Animal Husbandry Department of the Rajasthan State Government in 1971 as either Animal Husbandry Extension Officers or Veterinary Assistant Surgeons. Between 1976 and 1978, they were selected and joined the Rajasthan Cooperative Dairy Federations. According to the prevailing government orders and rules, these employees maintained a lien with their parent department, the State Government. Their names appeared on the seniority list of the Dairy Federations, and they received promotions in 1983 or 1989. They retired as employees of the Dairy Federations between 1999 and 2003, receiving all retirement benefits from the Dairy Federations.

After a period of six to nine years post-retirement from the Dairy Federations, the respondents filed writ petitions before the High Court. They claimed pensionary benefits from the State Government, arguing that their lien with the State continued until their permanent absorption into the Dairy Federations. The High Court’s Single Judge Bench ruled in their favor. However, it is crucial to note that the respondents’ liens with the State Government were officially terminated in 1988 or 1993, effective from their respective dates of permanent absorption into the Dairy Federations.

The State of Rajasthan appealed the Single Judge’s decision to a Division Bench of the High Court, which upheld the Single Judge’s ruling, leading to the current appeals before the Supreme Court.

Timeline

Arguments

The State of Rajasthan argued that the respondents were selected through a proper process between 1976 and 1978 by the Dairy Federations and were permanently absorbed as employees of the Dairy Federations. They continued to work there until retirement and received all retirement benefits from the Dairy Federations. The State contended that according to the Government Order (G.O.) dated 30.01.1976, the respondents’ lien with the State Government was maintained for two years or until their confirmation in the Dairy Federations, whichever was earlier. Therefore, once they were confirmed in the Dairy Federations, they no longer had a lien with the State Government.

The State further argued that under Rule 18(2) of the Rajasthan Service Rules, 1951, the respondents’ lien with the State Government was terminated when they acquired a lien on a permanent post outside the cadre, i.e., with the Dairy Federations. The State cited the case of State of Rajasthan and Anr. Vs. S.N. Tiwari and Ors., (2009) 4 SCC 700, to support its argument that a person cannot hold two substantive posts simultaneously. Therefore, the respondents were not entitled to pensionary benefits from the State Government after their absorption into the Dairy Federations.

The respondents argued that they were initially sent on deputation to the Dairy Federations and thus, their lien with the State Government continued. They contended that they did not lose their lien until their date of absorption. They were initially appointed by the Rajasthan Government and confirmed in government service before being relieved to join the Dairy Federations.

The respondents argued that the guidelines in the letter dated 30.01.1976 could not supersede the Rajasthan Service Rules, 1951, particularly Rules 15 and 18, which govern lien. They contended that a government servant’s lien cannot be terminated even with consent if it leaves them without a lien. They argued that their lien with the government continued until they were absorbed into the Dairy Federations and, thus, they were entitled to pension benefits from the State Government. They also argued that Rule 158, which relates to local bodies, did not apply to them as they were confirmed government servants.

Submissions of Parties

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issue that the court addressed was:

1. Whether the employees, who were initially appointed in the Animal Husbandry Department of the State of Rajasthan and subsequently absorbed in the Rajasthan State Dairy Development Corporation Ltd. / Milk Unions, were entitled to pensionary benefits from the State Government.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court overturned the High Court’s decision, ruling that the employees were not entitled to pensionary benefits from the State Government.

State of Rajasthan and Anr. Vs. S.N. Tiwari and Ors., (2009) 4 SCC 700*: The Court relied on this case to reinforce the principle that a person cannot hold two substantive posts simultaneously. This was used to support the argument that upon absorption into the Dairy Federations, the employees lost their lien with the State Government.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the fact that the employees had willingly applied for and accepted positions in the Dairy Federations, knowing that their previous service would be a matter to be settled between them and the State Government. The court also emphasized that the employees were clearly informed that their appointment in the Dairy Federation was a fresh appointment. The court noted that the employees were aware of the condition of maintaining lien only for two years, or till their confirmation in the Dairy Federation, whichever is earlier, as per the G.O. dated 30.01.1976. The court also relied on Rule 18 of the Rajasthan Service Rules, 1951, which states that a government servant’s lien is terminated when they acquire a lien on a permanent post outside their cadre.

The court’s reasoning was also influenced by the principle that a person cannot hold two substantive posts simultaneously. The court emphasized that the employees had received all retirement benefits from the Dairy Federations and that their claim for pension benefits from the State Government was an afterthought, filed six to nine years after their retirement from the Dairy Federations.

Logical Reasoning

Key Takeaways

• Employees who are absorbed into a new entity after initially working for the State Government, may not be entitled to pensionary benefits from the State Government if their lien with the State Government is terminated upon absorption.
• Government Orders and Service Rules play a crucial role in determining the lien and pensionary benefits of government employees.
• Acceptance of terms and conditions of employment is binding on the employees.
• A person cannot hold two substantive posts simultaneously.
• Delay in claiming benefits may weaken the case of the claimant.

Directions

The Supreme Court directed that the respondents were not entitled to pensionary benefits from the State Government, overturning the High Court’s judgment.

Development of Law

The ratio decidendi of this case is that when a government employee is absorbed into a new entity and their lien with the government is terminated as per the applicable rules and orders, they are not entitled to pensionary benefits from the government. This case reinforces the principle that a person cannot hold two substantive posts simultaneously and that the acceptance of employment terms is binding. This judgment clarifies the application of Rule 18 of the Rajasthan Service Rules, 1951, regarding the termination of lien upon acquiring a permanent post outside the cadre.

Conclusion

The Supreme Court’s judgment in this case clarifies that employees who initially worked for the Rajasthan State Government and were subsequently absorbed into the Rajasthan Cooperative Dairy Federations are not entitled to pensionary benefits from the State Government. This decision was based on the fact that the employees’ lien with the State Government was terminated upon their absorption into the Dairy Federations, as per the existing rules and government orders.