Supreme Court clarifies rules on interest for delayed Commuted Value of Pension (CVP) in BSNL Employee Case: Chief General Manager Gujarat Telecom Circle vs. Manilal Ambalal Patel (2019)

Date of the Judgment: March 8, 2019
Citation: (2019) INSC 186
Judges: Ashok Bhushan, J., K.M. Joseph, J.
Can a government employee claim interest on delayed payment of Commuted Value of Pension (CVP)? The Supreme Court of India addressed this question in a case involving a Bharat Sanchar Nigam Limited (BSNL) employee. The core issue was whether the employee was entitled to interest on the delayed payment of his CVP, especially when there was a delay due to pending vigilance proceedings. The Supreme Court, in this judgment, clarified the circumstances under which interest on CVP can be claimed, interpreting the Central Civil Services (Commutation of Pension) Rules, 1981 and the Central Civil Services (Pension) Rules, 1972. The judgment was authored by Justice K.M. Joseph, with Justice Ashok Bhushan concurring.

Case Background

The first respondent, Mr. Manilal Ambalal Patel (referred to as “the applicant”), retired from BSNL on July 31, 2008. Initially, he was granted a provisional pension due to a pending vigilance inquiry. Although the Anti-Corruption Bureau (ACB) had registered a case against him, the investigating officer found no evidence and submitted an A-summary report. However, the Principal District Sessions Judge refused to accept this report. The State of Gujarat challenged this order, and on March 30, 2012, the High Court allowed the revision application, permitting the investigating officer to file the A-summary report. Following this, the applicant requested interest on his delayed pensionary benefits, including the DCRG (Death-cum-Retirement Gratuity) and CVP (Commuted Value of Pension). This request was rejected, leading him to approach the Central Administrative Tribunal.

Timeline

Course of Proceedings

The Central Administrative Tribunal (CAT) quashed the order that had withheld the applicant’s DCRG and CVP, directing the appellants to pay interest on the delayed payments from August 1, 2008, until the date of payment. The Tribunal reasoned that since there were no criminal proceedings against the applicant on August 1, 2008, he was entitled to these benefits. The High Court, in a writ petition filed by the appellants, upheld the Tribunal’s order, stating that the A-summary report related back to a date before the applicant’s retirement, thus implying no pending proceedings at the time of his retirement.

Legal Framework

The judgment primarily revolves around the interpretation of the Central Civil Services (Commutation of Pension) Rules, 1981 (referred to as “Commutation Rules”) and the Central Civil Services (Pension) Rules, 1972 (referred to as “Pension Rules”). Key provisions include:

• Rule 4 of the Commutation Rules: This rule restricts the commutation of pension for government servants against whom departmental or judicial proceedings have been instituted before retirement, or for pensioners against whom such proceedings are instituted after retirement. It specifically mentions that such individuals are not eligible to commute a percentage of their provisional pension authorized under Rule 69 of the Pension Rules during the pendency of such proceedings.
• Rule 9 of the Pension Rules: This rule deals with the withholding or withdrawal of pensions. Sub-rule (6)(a) defines when departmental proceedings are deemed to be instituted, i.e., on the date the statement of charges is issued or the date of suspension. Sub-rule (6)(b) defines when judicial proceedings are deemed to be instituted, i.e., when a complaint or police report is made, and the Magistrate takes cognizance.
• Rule 64 of the Pension Rules: This rule allows for the sanctioning of provisional pension when there is no departmental or judicial proceeding.
• Rule 69 of the Pension Rules: This rule provides for the sanctioning of provisional pension when there is a departmental or judicial proceeding against the government servant.
• Rule 12 of the Commutation Rules: This rule specifies the categories of individuals eligible to apply for commutation of a percentage of their pension without medical examination.
• Rule 13 of the Commutation Rules: This rule outlines the procedure for applying for commutation of pension. It differentiates between applications made within one year of retirement and those made before retirement for superannuation pension.
• Rule 6 of the Commutation Rules: This rule specifies when the commutation of pension becomes absolute.

The Court also considered the nature of pension as a legal right and not a bounty, and the fact that CVP is a part of the pension paid in a lump sum.

Arguments

The appellants argued that the applicant was not entitled to interest because judicial proceedings were pending against him until 2012, disqualifying him from receiving CVP under Rule 4 of the Commutation Rules. They contended that the District and Sessions Judge’s initial refusal to accept the A-summary report meant that a judicial proceeding was pending on August 1, 2008, when the applicant retired. The appellants also argued that the applicant’s commutation application was within one year as per Rule 13(1), and CVP is an advance payment of pension, not a right. They further stated that the applicant received provisional pension, and ordering interest would amount to double benefit. Finally, they argued that departmental proceedings were pending due to the applicant’s suspension, disqualifying him from commutation.

The Additional Solicitor General (ASG) supported the appellants’ arguments, adding that the applicant had received provisional pension and that adjustments would have to be made to calculate the CVP. The ASG also argued that departmental proceedings were pending due to the applicant’s suspension, citing Rule 9 of the Pension Rules.

The respondent did not appear before the court.

Issues Framed by the Supreme Court

The Supreme Court considered the following key issues:

1. Whether the applicant was entitled to be paid interest for the period immediately after retirement until the date on which the CVP was actually paid to him.
2. The nature of CVP and whether there is a legal right to receive it.
3. Whether there is any provision for interest on delayed CVP payments.
4. Whether the applicant’s suspension constituted a departmental proceeding under Rule 9(6) of the Pension Rules.
5. Whether a judicial proceeding was pending at the time of the applicant’s retirement.
6. The effect of the applicant’s failure to apply for CVP under Rule 13(3) of the Commutation Rules.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court held that the applicant was not entitled to interest on the delayed payment of his CVP from the date of his retirement. The Court reasoned that:

The Court also considered how the authorities were viewed:

• Central Civil Services (Commutation of Pension) Rules, 1981: The Court interpreted these rules strictly, emphasizing that the applicant’s provisional pension under Rule 69 barred him from commuting it under Rule 4. The Court also noted that the applicant had not applied under Rule 13(3).
• Central Civil Services (Pension) Rules, 1972: The Court used these rules to define departmental and judicial proceedings, clarifying that the applicant’s suspension and the criminal revision did not qualify as such at the time of his retirement.
• S.K. Dua Vs. State of Haryana and another, (2008) 3 SCC 44: The Court reiterated the principle from this case that interest can be claimed on delayed retirement benefits based on Articles 14, 19, and 21 of the Constitution, but found it not applicable in this case due to the applicant’s failure to apply under Rule 13(3).

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• The applicant’s failure to apply for commutation of pension under Rule 13(3) of the Commutation Rules, which allows for application before retirement for CVP from the day following retirement.
• The fact that the applicant was granted provisional pension under Rule 69 of the Pension Rules, which, under Rule 4 of the Commutation Rules, prohibits the commutation of such provisional pension during the pendency of proceedings.
• The absence of a specific provision in the Commutation Rules for interest on delayed CVP payments.
• The Court’s view that the criminal revision petition was not a criminal proceeding under Rule 9 of the Pension Rules and that the suspension was revoked well before the applicant’s retirement.
• The applicant’s acceptance of the provisional pension without challenging the order dated 04.08.2008.

The Court’s reasoning was primarily based on a strict interpretation of the legal rules and the applicant’s failure to follow the correct procedure. The Court emphasized that the applicant’s failure to apply under Rule 13(3) was a critical factor in denying him interest on the delayed CVP payment. The emphasis on law is much higher than the facts of the case.

The Court considered the arguments that the applicant was entitled to interest because there were no departmental or judicial proceedings pending at the time of his retirement. However, the Court ultimately rejected this argument, emphasizing that the applicant’s failure to follow the correct procedure under the Commutation Rules was the primary reason for denying interest.

The Supreme Court did not find any arbitrariness in the actions of the authorities. The Court noted that the authorities had a reason to believe that there was a proceeding against the applicant.

The Court also considered the argument that the applicant’s suspension constituted a departmental proceeding, but rejected it, noting that the suspension was revoked years before his retirement.

The Court emphasized that CVP is linked to pension, which is a legal right, and the rules provide for its payment upon application. However, the Court also made it clear that the rules must be followed strictly to claim interest on delayed payments.

The Court also clarified that even though there is no explicit provision for interest on delayed CVP payments in the rules, interest can be claimed based on Articles 14, 19, and 21 of the Constitution. However, this was not applicable in this case because the applicant did not apply under Rule 13(3).

The Court quoted from the judgment:

“Therefore, in a case where Rule 13(3) applies and the Government servant who is due to retire on superannuation applies for getting CVP along with pension papers, prior to the date of his retirement as provided and he actually retires on superannuation and his application is within time, the CVP must be paid immediately after the retirement.”

“It does not lie in the mouth of Government which is excepted to act as a model employer to sit over the papers and delay the sanctioning or the payment of the CVP.”

“The Tribunal and the High Court have completely overlooked the conspectus of the Rules.”

Key Takeaways

The key takeaways from this judgment are:

• Government employees must strictly adhere to the procedures outlined in the Central Civil Services (Commutation of Pension) Rules, 1981, to claim CVP and interest on delayed payments.
• To claim CVP immediately after retirement, employees retiring on superannuation must apply under Rule 13(3) of the Commutation Rules before their retirement.
• Provisional pension sanctioned under Rule 69 of the Pension Rules cannot be commuted during the pendency of departmental or judicial proceedings.
• While there is no explicit provision for interest on delayed CVP payments, interest can be claimed based on Articles 14, 19, and 21 of the Constitution, but this is contingent on following the correct procedures.
• Suspension must be in effect at the time of retirement to constitute a departmental proceeding under Rule 9(6) of the Pension Rules.
• A criminal revision petition challenging the acceptance of an A-summary report does not constitute a criminal proceeding under Rule 9 of the Pension Rules.

Directions

The Supreme Court set aside the impugned order of the High Court and the order of the Tribunal, which had directed the payment of interest on the CVP.

Development of Law

The ratio decidendi of this case is that a government employee cannot claim interest on the delayed payment of CVP from the date of retirement if they have not applied for commutation under Rule 13(3) of the Commutation Rules before retirement and if they have been granted provisional pension under Rule 69 of the Pension Rules. The judgment clarifies the importance of adhering strictly to the procedural requirements of the pension rules. This case does not change any previous positions of law but provides a clear interpretation of the existing rules.

Conclusion

The Supreme Court’s judgment in Chief General Manager Gujarat Telecom Circle vs. Manilal Ambalal Patel clarifies the conditions under which a government employee can claim interest on the delayed payment of Commuted Value of Pension (CVP). The Court emphasized the importance of following the procedural requirements of the Central Civil Services (Commutation of Pension) Rules, 1981, and the Central Civil Services (Pension) Rules, 1972. The Court held that the applicant was not entitled to interest on the delayed CVP payment as he had failed to apply under Rule 13(3) of the Commutation Rules before his retirement and was receiving provisional pension under Rule 69. The judgment underscores the need for government employees to be diligent in following the correct procedures to ensure timely receipt of their pension benefits.