Supreme Court rules Commission Vendors entitled to 50% past service for pension: Union of India vs. Munshi Ram (2022)

Introduction

Date of the Judgment: 31 October 2022

Citation: [Not Available in Source]

Judges: M.R. Shah, J. and B.V. Nagarathna, J.

Can a group of railway employees be denied pension benefits that are granted to their counterparts in other zones, despite all being under the same employer? The Supreme Court of India recently addressed this question in a case concerning Commission Vendors who were later absorbed into regular railway service. The core issue was whether these employees were entitled to have 50% of their past service as Commission Vendors counted towards their pension benefits, a benefit already extended to similarly situated employees in other railway zones. The judgment was delivered by a two-judge bench comprising Justices M.R. Shah and B.V. Nagarathna, with the majority opinion authored by Justice M.R. Shah.

Case Background

Prior to 1955, catering services in Northern Railways were managed by private contractors. Subsequently, the railways started departmental catering and vending services, absorbing the staff of private contractors as Commission Vendors. These vendors were paid commissions based on sales, not regular salaries. In 1976, the Railway Board issued a memorandum suggesting that Commission Vendors should be absorbed as railway employees. Over the years, there have been several litigations regarding the absorption of these vendors. In 1983, the Supreme Court directed the progressive absorption of Commission Bearers/Vendors. Further directions were issued in 1987, emphasizing that the Railways should first absorb all registered Bearers and Vendors before hiring from any other source. Despite these directions, the absorption process was slow, leading to further legal challenges.

Timeline

Course of Proceedings

The Commission Vendors, after being absorbed into Group ‘C’ posts in 2015 following a High Court order, approached the Central Administrative Tribunal (CAT) seeking pensionary benefits. They argued that their total service before absorption should be considered for calculating their pension. The CAT initially dismissed their plea, stating that since their earlier plea for regularization was denied, their past service could not be counted for pension. However, another bench of the CAT later allowed a similar plea, following decisions from the Ernakulam bench which had granted pension benefits to similarly situated applicants. This led to conflicting decisions within the CAT. The High Court of Delhi then heard the matter, ultimately ruling in favor of the Commission Vendors, directing that 50% of their past service be counted for pensionary benefits. The Union of India (Northern Railway) appealed this decision to the Supreme Court.

Legal Framework

The case primarily revolves around the interpretation of the Railway Services (Pension) Rules, 1993, and the Indian Railway Establishment Manual, Vol. II, 1991 (IREM). Key provisions include:

• Rule 31 of the Railway Services (Pension) Rules, 1993: This rule deals with the counting of service paid from contingencies for pensionary benefits. It states that half of such service shall be considered for calculating pensionary benefits upon absorption into regular employment. The rule also includes a note that extends these provisions to casual labor paid from contingencies.
• Rule 14 of the Railway Services (Pension) Rules, 1993: This rule specifies periods that do not qualify as service for pensionary benefits. Specifically, Rule 14(v) excludes periods under a contract that does not specifically provide for pension benefits, and Rule 14(xiv) excludes service on contract basis, unless followed by confirmation.
• Rule 2005 of the Indian Railway Establishment Manual, Vol. II, 1991 (IREM): This rule outlines the entitlements and privileges of casual laborers who are treated as temporary after completing a certain period of continuous employment. It states that such laborers are eligible to count half the period of their service after attaining temporary status and before regular absorption as qualifying service for pensionary benefits.

The interplay between these rules, particularly whether Commission Vendors can be equated with casual laborers for pension benefits, is central to the dispute. The question also arose as to whether the contractual nature of the Commission Vendors’ initial employment bars them from receiving these benefits under Rule 14 of the 1993 Rules.

Arguments

Appellants (Union of India/Northern Railway) Arguments:

• The core issue is whether Commission Vendors absorbed into regular service are entitled to have 50% of their service as Commission Vendors counted as “qualifying service” for pension, similar to casual laborers.
• Commission Vendors were engaged on a purely contractual basis, with no master-servant relationship with the Railways. Their remuneration was solely commission-based, and they were not treated as railway servants.
• The terms of their contracts explicitly stated that they were not railway servants and were not entitled to any remuneration other than commissions.
• Casual laborers, on the other hand, have a different status. They are appointed through a formal process, have defined working hours, and are subject to disciplinary rules. They also receive daily wages and other benefits.
• Casual laborers are granted pension benefits under Rule 2005 of IREM and Rule 31 of the 1993 Rules, which allows for 50% of their service as casual laborers to be counted for pension. However, these rules do not apply to Commission Vendors.
• Rule 14(v) of the 1993 Rules excludes periods of service under a contract that does not provide for pension benefits, and Rule 14(xiv) excludes service on contract basis unless followed by confirmation. Since Commission Vendors were under contract with no pension benefits, their past service should not count.
• The Commission Vendors are seeking selective parity with casual laborers, as they insisted on being absorbed in Group ‘C’ posts, rather than Group ‘D’ posts.
• The judgments of the High Courts and Tribunals that have ruled against the Railways have not considered the fundamental differences between casual laborers and Commission Vendors, and have wrongly treated unequals as equals.
• The financial implications of granting pension benefits to Commission Vendors would be substantial.

Respondents (Commission Vendors) Arguments:

• The Railway Board is the employer, and all employees across different zones should be treated equally. There should be no discrimination between employees in different zones.
• The same arguments raised by the Railways have been rejected by various Tribunals, High Courts, and the Supreme Court in previous cases.
• Commission Vendors were recruited after completing required formalities and were promised absorption into permanent vacancies.
• The Railway Board had decided to give Commission Bearers/Vendors the status of Railway employees by absorbing them on permanent vacancies.
• The Supreme Court had directed that all vacancies of bearers/vendors be allocated for absorption of Commission Bearers/Vendors.
• The term “confirmation” in Rule 14(xiv) of the 1993 Rules should include absorption in Railway service. Rule 24 clarifies that if a person is initially engaged on a contract and subsequently appointed to the same or another post in a substantive capacity, the contractual period shall be treated like any other permanent service for pension benefits.
• The Kerala High Court and other High Courts have accepted that 50% of the service rendered on a contractual basis before absorption should be counted for pension.
• The Supreme Court in Union of India v. Rakesh Kumar held that casual workers are entitled to reckon 50% of their casual service before obtaining temporary status for pension.
• Denying the benefit of 50% of earlier service to Commission Vendors in the Northern Railway would be discriminatory and violate Articles 14 and 16 of the Constitution.
• The principle of stare decisis (precedent) should apply, as similar benefits have been granted to Commission Vendors in other zones.
• The argument of financial implications should not be a reason to deny equal treatment, as the government is obligated to loosen its purse when a decision has financial implications.
• The concept of negative equality does not apply in this case as there is a right to be absorbed on the vacant posts and the High Courts have granted relief on the basis of the provisions of the Rules, 1993, which has been confirmed by this Court.

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

1. Whether Commission Vendors who were absorbed into regular service are entitled to reckon 50% of the period of service as Commission Vendors, prior to their absorption, as qualifying service for grant of pensionary benefits, at par with the casual laborers whose services were regularized by virtue of Rule 2005 of the Indian Railway Establishment Manual, Vol. II, 1991 (IREM) r/w Rule 31 of the Railway Services (Pension) Rules, 1993.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

Cases:

• Saital Singh v. Union of India: This case involved a direction for the progressive absorption of Commission Bearers/Vendors.
• T.L Madhavan, General Secretary, AIRCS Workers Union v. Union of India [1988 Supp SCC 437]: This case reiterated the direction for the progressive absorption of Commission Bearers/Vendors and clarified their entitlement to salary from the date of absorption.
• Gurdas Ram & Others v. Union of India: The Delhi High Court ordered the absorption of eligible petitioners who had not crossed the age of 59 years in ‘Group C’ posts against vacant posts.
• Union of India v. Rakesh Kumar [(2017) 13 SCC 388]: This case dealt with the grant of pension to casual laborers who were granted temporary status and subsequently regularized. The Court held that casual workers are entitled to reckon 50% of their casual service before obtaining temporary status.
• Haryana State Electricity Board v. Gulshan Lal [(2009) 12 SCC 231]: This case was cited by the appellants to argue that unequals cannot be treated as equals.
• Uttar Pradesh Power Corporation Ltd. v. Ayodhya Prasad Mishra [(2008) 10 SCC 139]: This case was cited by the appellants to argue that unequals cannot be treated as equals.
• Union of India v. Muralidhara Menon [(2009) 9 SCC 304]: This case was cited by the appellants to argue that unequals cannot be treated as equals.
• Union of India v. M.V. Mohanan Nair [(2020) 5 SCC 421]: This case was cited by the appellants to argue that summary dismissals are not precedents.
• State of Odisha v. Anup Kumar Senapati [(2019) 19 SCC 626]: This case was cited by the appellants on the principle of negative equality.
• Waman Rao and Ors. Vs. Union of India and Ors. [(1981) 2 SCC 362]: This case was cited by the respondents on the doctrine of stare decisis.
• Narinder Singh and Ors. Vs. State of Punjab and Anr. [(2014) 6 SCC 466]: This case was cited by the respondents on the doctrine of stare decisis.
• All India Judges’ Association and Ors. Vs. Union of India and Ors. [(1993) 4 SCC 288]: This case was cited by the respondents on the financial implications.
• Ashoka Kumar Thakur Vs. Union of India and Others [(2008) 6 SCC 1]: This case was cited by the respondents on the financial implications.
• G.C. Ghosh and Ors. Vs. Union of India and Ors. [1991 Supp (2) SCC 497]: This case was cited by the respondents to argue that the present case is not one of negative equality.

Legal Provisions:

• Rule 31 of the Railway Services (Pension) Rules, 1993: This rule deals with the counting of service paid from contingencies for pensionary benefits.
• Rule 14 of the Railway Services (Pension) Rules, 1993: This rule specifies periods that do not qualify as service for pensionary benefits.
• Rule 2005 of the Indian Railway Establishment Manual, Vol. II, 1991 (IREM): This rule outlines the entitlements and privileges of casual laborers who are treated as temporary.

Judgment

The Supreme Court dismissed the appeals, ruling in favor of the Commission Vendors. The Court held that the Commission Vendors working in the Northern Railway are entitled to have 50% of their services rendered before regularization counted for pensionary benefits.

How each authority was viewed by the Court:

• The Court relied on T.L Madhavan, General Secretary, AIRCS Workers Union v. Union of India [1988 Supp SCC 437]* to emphasize the progressive absorption of Commission Bearers/Vendors.
• The Court relied on Union of India v. Rakesh Kumar [(2017) 13 SCC 388]* to support the argument that casual workers are entitled to 50% of their service for pension, drawing a parallel with the Commission Vendors.
• The Court distinguished the cases cited by the appellants, such as Haryana State Electricity Board v. Gulshan Lal [(2009) 12 SCC 231]*, stating that the principle of not treating unequals equally does not apply in the present context where similarly situated employees are being treated differently.
• The Court distinguished the case of State of Odisha v. Anup Kumar Senapati [(2019) 19 SCC 626]* on the principle of negative equality stating that it does not apply as there is a right to be absorbed on the vacant posts and the High Courts have granted relief on the basis of the provisions of the Rules, 1993, which has been confirmed by this Court.
• The Court applied the doctrine of stare decisis, citing Waman Rao and Ors. Vs. Union of India and Ors. [(1981) 2 SCC 362]* and Narinder Singh and Ors. Vs. State of Punjab and Anr. [(2014) 6 SCC 466]*, emphasizing that similar benefits have been granted in other zones.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle of equality and the doctrine of stare decisis. The Court emphasized that employees working under the same employer (Railway Board) should be treated equally, regardless of the zone they are working in. The Court also noted that similar benefits had already been granted to Commission Vendors in other zones, which should be applied to the Northern Railway as well. The Court rejected the argument of financial burden, stating that it cannot be a reason to deny equal treatment. The Court also dismissed the arguments based on negative equality, stating that it does not apply as there is a right to be absorbed on the vacant posts and the High Courts have granted relief on the basis of the provisions of the Rules, 1993, which has been confirmed by this Court. The Court’s reasoning focused on ensuring uniformity and fairness in the application of pension benefits across the Indian Railways.

Logical Reasoning:

The Court considered the alternative interpretations of the rules and the arguments of the appellants, but rejected them on the grounds of equality and fairness. The Court emphasized that the Commission Vendors, once absorbed into regular service, are entitled to the same pension benefits as their counterparts in other zones. This was not a case of negative equality, but of ensuring that all similarly situated employees are treated equally under the law.

The Court’s decision can be summarized as follows:

• Commission Vendors in the Northern Railway are entitled to have 50% of their services rendered prior to their regularization to be counted for pensionary benefits.
• Employees under the same employer (Railway Board) should be treated equally.
• The doctrine of stare decisis applies, as similar benefits have been granted in other zones.
• Financial burden is not a valid reason to deny equal treatment.
• Negative equality does not apply as there is a right to be absorbed on the vacant posts and the High Courts have granted relief on the basis of the provisions of the Rules, 1993, which has been confirmed by this Court.

“It cannot be disputed that employees working in different divisions/zones in the Railways are under the very same employer – Railway Board which is under the Ministry of Railways.”

“Therefore, the employees working under the same employer – Railway Board working in different Zones/Divisions are required to be treated similarly and equally and are entitled to similar benefits and are entitled to the same treatment.”

“The High Court has rightly held that the respondents are entitled to have 50% of the service rendered by them as Commission Vendors to be counted for the purpose of pensionary benefits.”