Supreme Court Denies Pension Benefits for Project Employees: Parmeshwar Nanda vs. State of Jharkhand (2020)

Introduction

Date of the Judgment: 7 February 2020

Citation: 2020 INSC 117

Judges: Hemant Gupta, J. and L. Nageswara Rao, J.

Can prior service in a government-sponsored project be considered for pension benefits when employees are later absorbed into regular government positions? The Supreme Court of India addressed this question in a case concerning employees of the Adult Education and Non-Formal Education Project in Jharkhand. The court ruled that such past service could not be counted for pension purposes, emphasizing the distinction between project-based employment and regular government service. This decision impacts numerous employees who transitioned from project roles to state government positions. The judgment was authored by Justice Hemant Gupta, with Justice L. Nageswara Rao concurring.

Case Background

The appellants were initially employed under the Adult Education and Non-Formal Education Project, a scheme co-sponsored by the Central Government and the State Government in the undivided State of Bihar. These appointments took place between 1978 and 1990. Some appellants worked as Adult Education Supervisors, while others held ministerial positions such as Stenographer, Clerk cum Accountant, Clerk cum Typist, Peon, and Drivers.

Following the bifurcation of Bihar, the services of these employees fell under the newly formed State of Jharkhand on 15th November, 2000. The Project was closed by the Government of India on 1st April, 2001. Consequently, the Government of Jharkhand declared these employees surplus, effective 16th May, 2001.

Subsequently, on 30th May, 2007, the Government of Jharkhand issued a notification for the absorption of these surplus employees into various state government departments, including Food, Public Distribution and Consumer Affairs, Finance, Social Welfare, Women and Child Development, and Urban Development. The notification stated that these absorptions were to be treated as new appointments, and prior service under the Project would not count towards seniority or pay protection.

The core of the dispute arose from the denial of pensionary benefits based on their past service in the project, as the notification stated that the absorbed employees would be treated as fresh appointees.

Timeline

Course of Proceedings

The matter reached the Full Bench of the High Court of Jharkhand due to conflicting opinions from two Division Benches in the cases of State of Jharkhand & Ors. v. Bhubneshwar Mahto and State of Jharkhand & Ors. v. Bimal Kumar Sinha.

The High Court was addressing a batch of 59 writ petitions filed by the employees. These petitions challenged Clauses 11 and 12 of the notification dated 30th May, 2007, which treated the absorption of surplus employees as new appointments, denying them the benefits of seniority and pay protection based on their past service.

The Full Bench categorized the writ petitions into three groups: (i) employees who retired after being declared surplus but before absorption; (ii) employees who retired after being absorbed; and (iii) employees who were working at the time of filing the petitions after being absorbed. The core issue in all these petitions was the denial of pensionary benefits and seniority based on their past services.

The High Court, in its impugned order, held that the services rendered by the appellants under the Project could not be counted for pensionary benefits. It emphasized that the project was not a regular establishment of the government, and the employees were not appointed to permanent and substantive posts.

Legal Framework

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

• Rule 31: Defines a “Permanent post” as one carrying a definite rate of pay and sanctioned without a time limit.
• Rule 38: Defines “Substantive pay” as the pay a government servant is entitled to on account of a post to which he has been appointed substantively.
• Rule 40: Defines “Temporary post” as a post carrying a definite rate of pay and sanctioned for a limited time.
• Rule 58: Specifies the conditions for service to qualify for pension:
  • The service must be under the Government.
  • The employment must be substantive and permanent.
  • The service must be paid by the Government.
• Rule 59: Allows the State Government to declare specific kinds of non-gazetted service as qualifying for pension, even if conditions (1) and (2) of Rule 58 are not met. It also permits the government to direct that service rendered by a government servant shall count for pension in individual cases.
• Rule 60: States that service does not qualify for pension unless the government regulates the appointment, duties, and pay of the government servant. It excludes employees of municipalities and grant-in-aid schools.
• Rule 61: States that service does not qualify unless the government servant holds substantively a post on a permanent establishment.
• Rule 74: Classifies service based on the source of payment, such as general revenues, local funds, or funds held in trust by the government.
• Rule 103: States that an interruption in service entails forfeiture of past service, except in specific cases, such as authorized leave, suspension followed by reinstatement, abolition of post, or transfer under government control.

The court also considered a Circular dated 12th August 1969, issued by the erstwhile State of Bihar. This circular stated that if the service of a temporary or officiating government servant, not confirmed in any post, is continuous and exceeds 15 years, it would be considered pensionable under Rule 59 of the Bihar Pension Rules.

Arguments

Appellants’ Arguments:

• The appellants argued that the Circular dated 12th August, 1969, issued by the erstwhile State of Bihar, should apply to them. This circular states that temporary government servants with more than 15 years of continuous service should be considered for pension under Rule 59 of the Bihar Pension Rules.
• They contended that the notification dated 30th May, 2007, only denied them seniority and pay protection, but not the benefit of their past service for pension.
• They relied on a previous order of the Supreme Court in State of Jharkhand & Ors. v. Asgar Ali & Ors., where the Court upheld the payment of arrears of salary to the employees from the date they were declared surplus until their absorption. They argued that since they received salary for this period, they should also be entitled to pension.
• They argued that Rule 59 of the Jharkhand Pension Rules allowed the government to declare specific kinds of service as pensionable, and their service under the project should be considered as such.

Respondents’ Arguments:

• The respondents argued that the Circular dated 12th August, 1969, was not applicable to the employees of the Project, as it was meant for temporary or officiating government servants, not for employees under a Central Government sponsored project.
• They contended that the employees appointed under the Project were not discharging duties as temporary or officiating Government servants, and therefore, the circular would not apply to them.
• They argued that the conditions stipulated in Rule 58 of the Jharkhand Pension Rules for pensionable service were not satisfied by the appellants. Specifically, they were not under the government, nor was their employment substantive and permanent.
• They asserted that the absorption of the employees was a fresh appointment, and the policy decision to deny seniority and pay protection was valid.

The core of the dispute revolved around whether the services rendered by the appellants under the Project could be considered as qualifying service for pension under the Jharkhand Pension Rules, especially in light of Rule 59 and the circular of 1969.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

1. Whether the services rendered by the appellants under the Adult Education and Non-Formal Education Project could be counted for the purpose of pensionary benefits after their absorption into the State Government of Jharkhand.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Cases:

• Dhyan Singh & Ors. v. State of Haryana & Ors. [ (2002) 10 SCC 656 ] – Supreme Court of India: This case dealt with employees under a similar project in Haryana. The Court held that employment under such schemes is not part of the formal cadre of the State Government and cannot be counted for pension or salary fixation after regular absorption.
• State of Bihar & Ors. v. Baliram Singh & Ors. [ (2018) 18 SCC 46 ] – Supreme Court of India: This case involved a similar project in Bihar. The Court held that if the appointment letter states that the appointment is a fresh one, then the past service cannot be counted for pension.
• State of Jharkhand & Ors. v. Asgar Ali & Ors. [Special Leave to Appeal (Civil) CC Nos. 10361-10364 of 2014] – Supreme Court of India: This case dealt with the payment of arrears of salary to the project employees. The Court upheld the direction of the High Court for payment of arrears but did not address the issue of pension.

Legal Provisions:

• Rule 31, Jharkhand Pension Rules: Defines a “Permanent post”.
• Rule 38, Jharkhand Pension Rules: Defines “Substantive pay”.
• Rule 40, Jharkhand Pension Rules: Defines “Temporary post”.
• Rule 58, Jharkhand Pension Rules: Specifies conditions for pensionable service.
• Rule 59, Jharkhand Pension Rules: Empowers the State Government to declare specific services as pensionable.
• Rule 60, Jharkhand Pension Rules: States that service does not qualify for pension unless the government regulates the appointment, duties, and pay of the government servant.
• Rule 61, Jharkhand Pension Rules: States that service does not qualify unless the government servant holds substantively a post on a permanent establishment.
• Rule 74, Jharkhand Pension Rules: Classifies service based on the source of payment.
• Rule 103, Jharkhand Pension Rules: States that an interruption in service entails forfeiture of past service, except in specific cases.

Circular:

• Circular dated 12th August, 1969 of the erstwhile State of Bihar: This circular stated that temporary government servants with more than 15 years of continuous service should be considered for pension under Rule 59 of the Bihar Pension Rules.

Judgment

How each authority was viewed by the Court?

• The Supreme Court followed Dhyan Singh & Ors. v. State of Haryana & Ors. [(2002) 10 SCC 656], stating that employment under specific schemes cannot be considered as part of the formal cadre of the State Government.
• The Court also followed the judgment in State of Bihar & Ors. v. Baliram Singh & Ors. [(2018) 18 SCC 46], which held that if the appointment is a fresh appointment, the past services would not be counted for pension.
• The Court distinguished State of Jharkhand & Ors. v. Asgar Ali & Ors.*, clarifying that the case was about arrears of salary and not pension benefits.

The Court analyzed the Jharkhand Pension Rules and found that the appellants did not satisfy the conditions for pensionable service under Rule 58. The Court specifically noted that the appellants’ service under the project was not under the government, nor was it substantive and permanent.

What weighed in the mind of the Court?

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

• Nature of Employment: The Court emphasized that the appellants were employed under a specific project, which was not a permanent establishment of the government. The project was funded by the Central Government for a specific purpose and period.
• Conditions for Pensionable Service: The Court found that the appellants did not meet the conditions laid down in Rule 58 of the Jharkhand Pension Rules for pensionable service. Specifically, their service was not under the government, nor was it substantive and permanent.
• Fresh Appointment: The Court noted that the notification dated 30th May, 2007, and the subsequent appointment letters clearly stated that the absorption of the appellants was to be considered as a fresh appointment. This meant that their past services could not be counted for pension.
• Non-Applicability of the Bihar Circular: The Court held that the circular dated 12th August, 1969, of the erstwhile State of Bihar was not applicable to the appellants. The circular was meant for temporary government servants, not for project employees.
• Lack of Specific Declaration: The Court pointed out that no specific declaration under Rule 59 of the Jharkhand Pension Rules was made to consider the services of the appellants under the project as pensionable.

Logical Reasoning:

The Court considered the arguments of the appellants but rejected them based on the interpretation of the Jharkhand Pension Rules and the facts of the case. The Court emphasized that the nature of the employment under the project was temporary and not equivalent to regular government service.

The Court’s decision was unanimous, with both Justices Hemant Gupta and L. Nageswara Rao concurring.

The court quoted from the judgment:

“The appellants were appointed under a specific Scheme i.e. the Project. Such project was not a permanent establishment of the Government as it was meant for a specific purpose funded by the Central Government for a specified period.”

“The appointment of the appellants under the Project is not a part of any cadre of the State Government. Therefore, the first condition of Rule 58 that the service rendered must be under the State Government is not satisfied by the appellants having been appointed under the Project.”

“The Circular dated 12th August, 1969 is not even remotely applicable to the employees appointed under the Project as the very nature of the appointment was for a specific purpose and not for an unlimited period of time.”

Key Takeaways

• Project-based employment does not automatically qualify for pension benefits when employees are later absorbed into regular government service.
• The conditions for pensionable service under the relevant pension rules must be met.
• The terms of absorption, as specified in the government notification and appointment letters, are critical. If the absorption is treated as a fresh appointment, past project service may not be counted for pension.
• A specific declaration by the government is required to make a particular kind of service pensionable if it does not meet the standard conditions.

Directions

No specific directions were given by the Supreme Court in this case. The Court dismissed the appeals, thereby upholding the decision of the Jharkhand High Court.

Specific Amendments Analysis

There was no specific amendment discussed in this judgment.

Development of Law

The ratio decidendi of this case is that services rendered under a specific project, which is not a permanent establishment of the Government, cannot be counted for pensionary benefits after absorption into regular government service if the absorption is considered as a fresh appointment. This decision reinforces the principle that project-based employment is distinct from regular government service and does not automatically qualify for pension benefits.

The judgment also clarifies that for services to be considered pensionable, they must satisfy the conditions laid down in the relevant pension rules, or there must be a specific declaration by the government under those rules. This is a reaffirmation of the existing legal position and does not represent a change in the law.

Conclusion

The Supreme Court dismissed the appeals, affirming the decision of the Jharkhand High Court. The Court held that the employees of the Adult Education and Non-Formal Education Project were not entitled to have their past project service counted for pension benefits after their absorption into the State Government of Jharkhand. The Court emphasized that the absorption was a fresh appointment, and the project employment did not meet the conditions for pensionable service under the Jharkhand Pension Rules.