Supreme Court clarifies rules on withholding pension and gratuity during pending criminal cases: Dr. Hira Lal vs. State of Bihar (2020)

Date of the Judgment: February 18, 2020
Citation: (2020) INSC 137
Judges: Uday Umesh Lalit, J. and Indu Malhotra, J.

Can a state government withhold the pension and gratuity of a retired employee because of pending criminal proceedings? The Supreme Court of India recently addressed this critical question in a case involving Dr. Hira Lal and the State of Bihar. The court examined whether the state government could withhold these retirement benefits based on administrative circulars, or if statutory rules were necessary to do so. This case highlights the importance of statutory backing for any action that affects an individual’s right to property, including pension and gratuity.

The bench comprised Justice Uday Umesh Lalit and Justice Indu Malhotra, with the judgment authored by Justice Indu Malhotra.

Case Background

Dr. Hira Lal was appointed as a Touring Veterinary Officer (TVO) in Pawana, Bihar. While in service, he was implicated in the Fodder Scam and a charge sheet was filed against him on 21.11.2003 in RC Case No.48 A/1996. Subsequently, he was suspended on 31.05.2002 under the Civil Services (Classification, Control & Appeal) Rules, 1930. Dr. Hira Lal remained suspended until his superannuation on 31.03.2008. Upon retirement, the State Government sanctioned 90% of his provisional pension but withheld 10% of the pension, along with his entire gratuity, leave encashment, and General Provident Fund (GPF), citing the pending criminal proceedings.

Timeline:

Course of Proceedings

Dr. Hira Lal filed a Writ Petition before the Patna High Court, seeking the release of his full pension, gratuity, leave encashment, and GPF with interest. The High Court’s single judge dismissed the petition, stating that the claim for full pension and gratuity was not maintainable until the conclusion of the criminal proceedings. The court relied on the fact that the suspension order was not revoked before his superannuation, and on the government circulars and resolutions. An appeal (LPA) was also dismissed by a division bench of the High Court, which cited a previous judgment on the interpretation of the Bihar Pension Rules. The review petition was also dismissed, leading to the appeal before the Supreme Court.

Legal Framework

The case primarily revolves around the interpretation of the Bihar Pension Rules, 1950, specifically:

• Rule 27: States that “Pension includes a gratuity.”
• Rule 43(a): States that “Future good conduct is an implied condition of every grant of pension. The Provincial Government reserve to themselves the right of withholding or withdrawing a pension or any part of it, if the pensioner is convicted of serious crime or be guilty of grave misconduct. The decision of the Provincial Government on any question of withholding or withdrawing the whole or any part of a pension under this rule, shall be final and conclusive.”
• Rule 43(b): States that “The State Government further reserve to themselves the right of withholding or withdrawing a pension or any part of it, whether permanently or for a specified period, and the right of ordering the recovery from a pension of the whole or part of any pecuniary loss caused to Government if the pensioner is found in departmental or judicial proceeding to have been guilty of grave misconduct; or to have caused pecuniary loss to Government by misconduct or negligence, during his service including service rendered on re-employment after retirement”.
• Rule 43(c): States that “Where the departmental proceeding or judicial proceeding, in which the prosecution has been sanctioned against such servant, initiated during the service period of the government servant, is not concluded till the retirement of the government servant, the amount of provisional pension shall be less than the maximum admissible amount of pension but shall in no case be less than 90% (ninety percent).”

The court also considered the implications of Article 300A of the Constitution, which protects an individual’s right to property. The Bihar Pension Rules were enacted under Section 241 (2)(b) of the Government of India Act, 1935.

Arguments

Dr. Hira Lal’s Arguments:

• The Bihar Pension Rules, 1950, do not prohibit the payment of full pension and gratuity to a retired government servant against whom criminal proceedings are pending.
• Rule 43(b) of the Bihar Pension Rules is not applicable until the employee is found guilty of grave misconduct in a departmental or judicial proceeding, or has caused pecuniary loss to the Government.
• The Government Resolution dated 31.07.1980, being an executive instruction, has no force of law and cannot take away the right to receive a pension, which is a constitutional right under Article 300A of the Constitution.
• Relied on the judgment in State of Jharkhand and Ors. vs. Jitendra Kumar Srivastava and Ors. [(2013) 12 SCC 210], which held that Rule 43(b) does not permit withholding of pension and gratuity when departmental or judicial proceedings are pending.

State of Bihar’s Arguments:

• Circulars dated 22.08.1974 and 31.10.1974, along with Government Resolution dated 31.07.1980, allow for withholding of full pension and gratuity if a government servant retires while under suspension.
• These administrative instructions permit payment of only 90% of the provisional pension until the conclusion of departmental or judicial proceedings.
• No gratuity or death-cum-retirement gratuity is payable until the conclusion of the said proceedings and the issuance of final orders.

The innovativeness of the argument by Dr. Hira Lal was that he challenged the executive instructions as being in contravention of the statutory rules and the constitutional right to property.

Issues Framed by the Supreme Court

The main issue before the Supreme Court was:

1. Whether the State of Bihar was justified in withholding 10% pension and full gratuity of the Appellant under Circulars dated 22.08.1974 and 31.10.1974, and Government Resolution dated 31.07.1980, on the ground of pending criminal proceedings?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

• State of Jharkhand and Ors. vs. Jitendra Kumar Srivastava and Ors. [(2013) 12 SCC 210] – Supreme Court of India: This case held that Rule 43(b) of the Bihar Pension Rules does not allow for withholding of pension and gratuity when departmental or judicial proceedings are pending. It also established that pension is a form of property under Article 300A of the Constitution.
• Deokinandan Prasad v. State of Bihar [(1971) 2 SCC 330] – Supreme Court of India: This case established that the right to receive a pension is considered property under Article 31(1) of the Constitution, and the state cannot withhold it through an executive order.
• D.S. Nakara and Ors. v. Union of India [(1983) 1 SCC 305] – Supreme Court of India: This case reaffirmed that pension is not a bounty but a right earned by an employee through long and efficient service.
• State of West Bengal v. Haresh C. Banerjee and Ors. [(2006) 7 SCC 651] – Supreme Court of India: This case held that the right to receive pension is protected under Article 300A of the Constitution, even after the repeal of Article 31(1).
• Vijay Kumar Mishra v. State of Bihar [2017 (1) PLJR 575] – Patna High Court: This case was followed by the Division Bench of the Patna High Court in the impugned judgment.
• Arvind Kumar Singh v. State of Bihar & Ors. etc. etc. [2019 Lab IC 2937 (FB): (2018) 159 FLR 143] – Patna High Court: This Full Bench judgment overruled the judgment in Vijay Kumar Mishra.
• Rule 27 of the Bihar Pension Rules, 1950: Defines that pension includes gratuity.
• Rule 43 of the Bihar Pension Rules, 1950: Deals with the State’s power to withhold or withdraw pension under certain conditions.
• Article 300A of the Constitution of India: Protects an individual’s right to property.

Judgment

The Supreme Court held that the State of Bihar was not justified in withholding 10% of Dr. Hira Lal’s pension and full gratuity based on administrative circulars dated 22.08.1974 and 31.10.1974, and Government Resolution dated 31.07.1980. The Court emphasized that these were executive instructions without the force of law and could not override the statutory rules or the constitutional right to property. However, the Court acknowledged that the amendment to the Bihar Pension Rules on 19.07.2012, which introduced Rule 43(c), empowered the State to legally withhold 10% of the pension amount until the conclusion of the criminal proceedings.

How each authority was viewed by the Court?

• State of Jharkhand and Ors. vs. Jitendra Kumar Srivastava and Ors. [(2013) 12 SCC 210]* The court relied on this case to reiterate that pension cannot be withheld during the pendency of proceedings.
• Deokinandan Prasad v. State of Bihar [(1971) 2 SCC 330]* The court used this case to reaffirm that pension is a right to property and cannot be taken away by executive order.
• D.S. Nakara and Ors. v. Union of India [(1983) 1 SCC 305]* The court cited this case to emphasize that pension is earned by an employee and is not a bounty.
• State of West Bengal v. Haresh C. Banerjee and Ors. [(2006) 7 SCC 651]* The court relied on this case to reiterate that the right to pension is protected under Article 300A of the Constitution.
• Vijay Kumar Mishra v. State of Bihar [2017 (1) PLJR 575]* The court noted that this case was overruled by the Full Bench of the Patna High Court and therefore, not followed.
• Arvind Kumar Singh v. State of Bihar & Ors. etc. etc. [2019 Lab IC 2937 (FB): (2018) 159 FLR 143]* The court followed this case, which overruled Vijay Kumar Mishra.

The court directed the State to release 10% of the pension amount that was withheld from 31.03.2008 to 19.07.2012, and 90% of the gratuity within 12 weeks. The balance 10% of the gratuity and pension can be withheld subject to the outcome of the criminal proceedings.

What weighed in the mind of the Court?

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

• The constitutional right to property, which includes the right to receive a pension.
• The principle that executive instructions cannot override statutory rules and constitutional rights.
• The need for a statutory basis to withhold or withdraw pension and gratuity.
• The interpretation of Rule 43 of the Bihar Pension Rules, which was amended on 19.07.2012 to include Rule 43(c).
• The principle that pension is not a bounty but a right earned by an employee through long and efficient service.

The court’s reasoning was primarily based on the legal principles and statutory interpretation, with a lesser emphasis on the specific facts of the case.

“The antiquated notion of pension being a bounty, a gratuitous payment depending upon the sweet will or grace of the employer not claimable as a right and, therefore, no right to pension can be enforced through Court has been swept under the carpet by the decision of the Constitution Bench in Deoki Nandan Prasad v. State of Bihar and Ors”

“It hardly needs to be emphasized that the executive instructions are not having statutory character and, therefore, cannot be termed as “law” within the meaning of aforesaid Article 300A.”

“Pension and gratuity are not mere bounties, or given out of generosity by the employer. An employee earns these benefits by virtue of his long, continuous, faithful and un-blemished service.”

Key Takeaways

✓ State governments cannot withhold pension and gratuity based solely on executive instructions.

✓ Statutory rules are necessary to withhold pension and gratuity during pending criminal or departmental proceedings.

✓ Pension and gratuity are considered property rights protected under Article 300A of the Constitution.

✓ The amendment to the Bihar Pension Rules on 19.07.2012, which introduced Rule 43(c), now provides a statutory basis for withholding a portion of the pension during pending proceedings.

✓ This judgment reinforces the principle that pension is an earned right and not a bounty.

Directions

The Supreme Court directed the State of Bihar to:

• Release 10% of the pension amount withheld from 31.03.2008 to 19.07.2012 within 12 weeks.
• Release 90% of the gratuity payable to the Appellant within 12 weeks.
• The balance 10% of the gratuity and pension can be withheld subject to the outcome of the criminal proceedings.

Development of Law

The ratio decidendi of this case is that executive instructions cannot override statutory rules and constitutional rights, particularly the right to property, which includes pension and gratuity. The judgment clarifies that any withholding of pension and gratuity must have a statutory basis. This case also highlights the importance of the amendment to the Bihar Pension Rules on 19.07.2012, which introduced Rule 43(c), which now provides a statutory basis for withholding a portion of the pension during pending proceedings. The judgment overrules the earlier position taken by the Patna High Court in Vijay Kumar Mishra v. State of Bihar and reinforces the principle that pension is an earned right and not a bounty.

Conclusion

The Supreme Court’s judgment in Dr. Hira Lal vs. State of Bihar clarifies the legal position on withholding pension and gratuity during pending criminal proceedings. The Court held that the State of Bihar was not justified in withholding these benefits based on administrative circulars alone. The judgment underscores the importance of statutory rules and the constitutional right to property. While the amendment to the Bihar Pension Rules on 19.07.2012 allows for withholding a portion of the pension during pending proceedings, the court directed the release of the withheld pension and gratuity from the period prior to the amendment.

Category

Parent Category: Pension Law
Child Categories: Withholding of Pension, Gratuity, Bihar Pension Rules, Article 300A, Right to Property, Government Employees, Criminal Proceedings

Parent Category: Bihar Pension Rules, 1950
Child Category: Rule 43, Bihar Pension Rules, 1950

FAQ

Q: Can the government withhold my pension if I have a pending criminal case?
A: The government can only withhold your pension if there is a specific law or rule that allows it. Administrative orders alone are not sufficient.

Q: What is the significance of Article 300A in this context?
A: Article 300A of the Indian Constitution protects your right to property, which includes your pension and gratuity. This means the government cannot take away your pension without proper legal authority.

Q: What is the difference between executive instructions and statutory rules?
A: Executive instructions are orders issued by the government, but they do not have the force of law. Statutory rules are laws or rules made by the government under the powers given to them by a statute.

Q: What is the impact of this judgment on other government employees?
A: This judgment clarifies that state governments must follow statutory rules and cannot rely solely on administrative orders to withhold pension and gratuity. This protects the rights of government employees across India.

Q: What happens if there is an amendment in pension rules?
A: If there is an amendment in pension rules, the government can withhold pension as per the new amended rules.