Supreme Court Denies Family Pension Under Old Rules for Employees Absorbed After 2005: State of Bihar vs. Rajmati Devi (20 May 2022)

Date of the Judgment: 20 May 2022
Citation: Civil Appeal Nos. 3900-3901 of 2022
Judges: M. R. Shah, J. and B.V. Nagarathna, J.
Can a government employee who was absorbed into service after the abolishment of the Old Pension Rules claim family pension under those rules? The Supreme Court of India addressed this question in a recent case concerning the State of Bihar. The court ruled that employees absorbed into government service after the implementation of the New Contributory Pension Scheme are not entitled to family pension under the old rules. The judgment was delivered by a two-judge bench comprising Justice M. R. Shah and Justice B.V. Nagarathna, with Justice M. R. Shah authoring the opinion.

Case Background

The husband of Respondent No. 1, Rajmati Devi, was initially employed as a peon at the Bihar Research Society, an autonomous body registered under the Societies Act. The Bihar Research Society was later taken over by the Government of Bihar through the Bihar Research Society (Taking Over) Act, 2007. The State of Bihar had abolished the Old Pension Rules, i.e., the Bihar Pension Rules, 1950, on 31.08.2005, and replaced them with the New Pension Scheme, the Bihar Government Servant Contributory Pension Scheme, 2005, effective from 01.09.2005. Under the New Pension Scheme, employees appointed after 31.08.2005 were not entitled to pension or family pension under the old rules.

The Bihar Research Society (Taking Over) Act, 2007, came into force on 02.03.2009. The employees of the society were taken into government service on 25.03.2014, with effect from 02.03.2009. A corrigendum was issued by the State of Bihar, amending the employment order, substituting the word “appointed” with “absorbed.” Clause 6 of the corrigendum stated that service prior to the date of acquisition would not be calculated as government service. The husband of Respondent No. 1 died on 23.03.2013, while in service. Respondent No. 1 filed a writ petition before the High Court, seeking family pension and other retiral benefits.

Timeline

Course of Proceedings

The learned Single Judge of the High Court allowed the writ petition filed by Respondent No. 1, directing the State to pay family pension from the date of her husband’s death, i.e., 23.03.2013. The State of Bihar appealed this decision via a Letters Patent Appeal before the Division Bench of the High Court. The Division Bench dismissed the appeal, upholding the decision of the learned Single Judge. The State of Bihar then filed the present appeals before the Supreme Court.

Legal Framework

The case revolves around the interpretation and application of the Bihar Pension Rules, 1950 (Old Pension Rules), and the Bihar Government Servant Contributory Pension Scheme, 2005 (New Pension Scheme). The Old Pension Rules provided for family pensions, while the New Pension Scheme, implemented w.e.f. 01.09.2005, did not provide for such benefits. The Bihar Research Society (Taking Over) Act, 2007, and subsequent government orders and corrigenda, also play a crucial role in determining the service conditions of the employees of the erstwhile Bihar Research Society.

Specifically, the following provisions are relevant:

• Bihar Pension Rules, 1950: These rules governed pension and family pension benefits for government employees before the introduction of the New Pension Scheme.
• Bihar Government Servant Contributory Pension Scheme, 2005: This scheme replaced the Old Pension Rules and did not provide for traditional pension or family pension benefits.
• Bihar Research Society (Taking Over) Act, 2007: This act provided for the taking over of the Bihar Research Society by the Government of Bihar.
• Clause 6 of the corrigendum: This clause clarified that prior service rendered by the concerned employee before absorption shall not be treated as government service.

Arguments

Appellant (State of Bihar) Arguments:

• The State argued that the Old Pension Rules were abolished on 01.09.2005 and replaced by the New Contributory Pension Scheme.
• The husband of Respondent No. 1 was absorbed into government service in 2014, with effect from 02.03.2009, after the Old Pension Rules had been abolished.
• The corrigendum dated 22.06.2015 clarified that the term of government service would be calculated only from the cut-off date of 02.03.2009, and prior service in the Bihar Research Society would not be counted as government service.
• Therefore, the husband of Respondent No. 1 was governed by the New Contributory Pension Scheme, which does not provide for family pensions.

Respondent (Rajmati Devi) Arguments:

• Respondent No. 1 argued that her husband was absorbed into government service w.e.f. 02.03.2009, as per Section 5 of the Act, 2007, and it was not a fresh appointment.
• Her husband’s services should be treated as continuous, and he died while in service.
• As per clause 7(1) of the family pension scheme, she is entitled to family pension upon the death of her husband while in service.
• The family pension scheme is a beneficial scheme, and both the learned Single Judge and the Division Bench of the High Court correctly held that she is entitled to the benefit of the family pension scheme.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was whether Respondent No. 1, the widow of a government employee who was absorbed into service after the abolishment of the Old Pension Rules, was entitled to family pension under those rules, or whether the New Contributory Pension Scheme would apply.

Treatment of the Issue by the Court

Authorities

The court considered the following authorities:

• Bihar Pension Rules, 1950: The court noted that these rules were applicable prior to 31.08.2005.
• Bihar Government Servant Contributory Pension Scheme, 2005: The court observed that this scheme was applicable to those appointed after 31.08.2005 and did not provide for family pension.
• Bihar Research Society (Taking Over) Act, 2007: The court considered this Act in relation to the absorption of the employees of the Bihar Research Society into government service.

Judgment

How each authority was viewed by the Court?

• The Bihar Pension Rules, 1950 were considered inapplicable as they were abolished before the husband of Respondent No. 1 was absorbed into government service.
• The Bihar Government Servant Contributory Pension Scheme, 2005 was deemed applicable as the husband of Respondent No. 1 was absorbed after its implementation.

What Weighed in the Mind of the Court?

The Supreme Court emphasized that the husband of Respondent No. 1 was absorbed into government service w.e.f. 02.03.2009, after the Old Pension Rules were abolished and the New Contributory Pension Scheme was in effect. The court also noted that the corrigendum issued by the State of Bihar clarified that prior service rendered by the employee before his absorption would not be treated as government service. These factors led the court to conclude that the husband of Respondent No. 1 was governed by the New Contributory Pension Scheme, which does not provide for family pension.

Logical Reasoning:

The court rejected the argument that the husband’s service should be treated as continuous for the purpose of pension benefits under the Old Pension Rules. The court emphasized that the relevant date for determining pension eligibility was the date of absorption into government service, which was after the implementation of the New Contributory Pension Scheme.

The court stated:

“Therefore, the husband of respondent No. 1 can be said to be a government servant and in government service w.e.f. 02.03.2009 only.”

“Therefore, the High Court has committed a grave error in directing the appellant to pay the family pension to respondent No. 1 applying the Old Pension Rules, which were applicable prior to 31.08.2005.”

“In that view of the matter, respondent No. 1 shall not be entitled to the family pension under the Old Pension Rules, which were not applicable at the time when the husband of respondent No. 1 came to be absorbed in the government service w.e.f. 02.03.2009.”

The Supreme Court overturned the High Court’s decision, holding that the respondent was not entitled to family pension under the Old Pension Rules. The court clarified that the New Contributory Pension Scheme applied to employees absorbed after 31.08.2005, and this scheme does not provide for traditional family pension benefits.

Key Takeaways

• Employees absorbed into government service after the implementation of the New Contributory Pension Scheme are not entitled to family pension under the Old Pension Rules.
• The date of absorption into government service is crucial in determining the applicable pension scheme.
• Prior service with an organization taken over by the government may not be counted as government service for pension purposes if the absorption occurs after the implementation of a new pension scheme.

Directions

The Supreme Court quashed and set aside the judgments and orders passed by the High Court, which had held that Respondent No. 1 was entitled to family pension under the Old Pension Rules. The Court held that the husband of Respondent No. 1 was governed by the New Pension Scheme.

Development of Law

The ratio decidendi of this case is that employees absorbed into government service after the implementation of the New Contributory Pension Scheme are not entitled to family pension under the Old Pension Rules. This clarifies the position of law regarding pension benefits for employees absorbed after a change in pension schemes.

Conclusion

The Supreme Court’s decision clarifies that employees absorbed into government service after the implementation of the New Contributory Pension Scheme are not entitled to family pension under the Old Pension Rules. The judgment emphasizes the importance of the date of absorption in determining the applicable pension scheme. The court allowed the appeals, setting aside the High Court’s judgments.

Category

Parent Category: Pension Law
Child Category: Family Pension
Child Category: New Contributory Pension Scheme
Child Category: Old Pension Rules
Parent Category: Bihar Pension Rules, 1950
Child Category: Applicability of Bihar Pension Rules, 1950
Parent Category: Bihar Government Servant Contributory Pension Scheme, 2005
Child Category: Applicability of Bihar Government Servant Contributory Pension Scheme, 2005

FAQ

Q: What did the Supreme Court decide in the State of Bihar vs. Rajmati Devi case?
A: The Supreme Court ruled that employees absorbed into government service after the implementation of the New Contributory Pension Scheme are not entitled to family pension under the Old Pension Rules.

Q: What is the New Contributory Pension Scheme?
A: The New Contributory Pension Scheme is a pension scheme implemented by the State of Bihar, which replaced the Old Pension Rules. It does not provide for traditional pension or family pension benefits.

Q: When did the New Contributory Pension Scheme come into effect?
A: The New Contributory Pension Scheme came into effect on 01.09.2005.

Q: What is the significance of the date of absorption in this case?
A: The date of absorption into government service is crucial because it determines which pension scheme applies to the employee. Employees absorbed after the implementation of the New Contributory Pension Scheme are governed by that scheme, not the Old Pension Rules.

Q: What does this ruling mean for other employees in similar situations?
A: This ruling means that if you were absorbed into government service after the implementation of the New Contributory Pension Scheme, you are likely not entitled to family pension under the Old Pension Rules. Your pension benefits would be governed by the New Contributory Pension Scheme.