Supreme Court Rules Special Pay Counts Towards Pension for Scientists in DRDO, DAE, and DOS (2019)

Introduction

Date of the Judgment: 03 January 2019

Citation: (2019) INSC 1

Judges: Ashok Bhushan, J., L. Nageswara Rao, J.

Is “special pay” truly special, or is it just another form of compensation? The Supreme Court of India recently tackled this question in a case concerning scientists from the Defence Research and Development Organisation (DRDO), Department of Atomic Energy (DAE), and Department of Space (DOS). The core issue was whether a special pay granted to these scientists should be included when calculating their pension benefits. This judgment clarifies the definition of “pay” under the Fundamental Rules and its impact on pension calculations.

The Supreme Court bench, comprising Justices Ashok Bhushan and L. Nageswara Rao, delivered a unanimous judgment. Justice Ashok Bhushan authored the opinion.

Case Background

The case involves scientists from DRDO, DAE, and DOS who were granted a special pay of ₹2,000 per month effective from January 1, 1996, and ₹4,000 per month from January 1, 2006. This special pay was sanctioned in lieu of a separate higher pay scale after a peer review. The scientists contended that this special pay should be considered part of their pay for pension calculation purposes. The Union of India, however, argued that “special pay” is excluded from the definition of “pay” under Fundamental Rule 9(21)(a)(i) and, therefore, should not be included in pension calculations.

The scientists, including Dr. O.P. Nijhawan, had approached the Central Administrative Tribunal (CAT) seeking the inclusion of their special pay for pension benefits. The CAT ruled in their favor, a decision upheld by the High Court. The Union of India then appealed to the Supreme Court.

Timeline

Legal Framework

The core of the dispute revolves around the interpretation of “pay” under the Fundamental Rules and the Central Civil Services (Pension) Rules, 1972.

Fundamental Rule 9(21)(a)(i) defines “pay” as:

“the pay, other than special pay or pay granted in view of his personal qualifications, which has been sanctioned for a post held by him substantively or in an officiating capacity or to which he is entitled by reason of his position in a cadre.”

This definition explicitly excludes “special pay” from the ambit of “pay.”

Fundamental Rule 9(25) defines “special pay” as:

“an addition, of the nature of pay, to the emoluments of a post or of a Government servant, granted in consideration of – (a) the specially arduous nature of the duties; or (b) a specific addition to the work or responsibility.”

Rule 33 of the Central Civil Services (Pension) Rules, 1972 defines “emoluments” as:

“basic pay as defined in Rule 9 (21) (a) (i) of the Fundamental Rules which a Government servant was receiving immediately before his retirement or on the date of his death.”

The key issue is whether the special pay granted to the scientists falls under the exclusion of “special pay” in Fundamental Rule 9(21)(a)(i) or if it should be considered part of basic pay for pension calculations.

Arguments

Arguments of the Union of India (Appellants):

• The definition of “pay” in Fundamental Rule 9(21)(a)(i) clearly excludes “special pay.”

• The special pay of ₹2,000 and ₹4,000 cannot be included in the definition of “pay” and should be excluded from emoluments under Rule 33 of the 1972 Rules.

• Previous dismissals of Special Leave Petitions (SLPs) by the Supreme Court do not alter the legal position, as the question of law was expressly left open.

• The fact that some similarly situated scientists have received the benefit does not preclude the Court from deciding the legal question.

• The Seventh Central Pay Commission has discontinued the special pay to scientists, which was notified on July 1, 2017.

Arguments of the Scientists (Respondents):

• The special pay of ₹2,000 was granted in lieu of a separate higher pay scale, not as a special pay under Fundamental Rule 9(25).

• The special pay was not for arduous duties or additional responsibilities but to compensate for a pay scale anomaly.

• The special pay should be included for pensionary benefits, as similarly situated scientists have already received this benefit.

• Excluding the special pay would deprive the scientists of their rightful pension earned through their service.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether the appellants are precluded from questioning the judgments of the Central Administrative Tribunals/High Courts due to earlier dismissals of SLPs.
2. Whether the Union of India is estopped from questioning the decisions due to implementing orders including special pay in pension calculations.
3. Whether the special pay of ₹2,000 or ₹4,000 should be included in the definition of “pay” under Rule 9(21)(a)(i) for pensionary benefits.

Treatment of the Issue by the Court

Authorities

The Court considered the following authorities and legal provisions:

Legal Provisions:

• Fundamental Rule 9(21)(a)(i): Definition of “pay”, excluding special pay.
• Fundamental Rule 9(25): Definition of “special pay”.
• Rule 33 of the Central Civil Services (Pension) Rules, 1972: Definition of “emoluments” for pension calculations.

Cases:

• Col. B.J. Akkara (Retd.) vs. Government of India and Others, (2006) 11 SCC 709: This case was cited to support the argument that the government is not barred from challenging decisions even if similar issues were previously decided.
• State of Maharashtra v. Digambar, (1995) 4 SCC 683: This case was cited to support the argument that the non-filing of appeals in some similar matters does not bar the state from filing appeals in other similar matters.

Authority Consideration Table

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Court interpreted Fundamental Rule 9(21)(a)(i) and Fundamental Rule 9(25) to determine the true nature of the special pay. The court held that the special pay was not the kind of special pay that is excluded from the definition of pay under Fundamental Rule 9(21)(a)(i).
• The Court relied on Col. B.J. Akkara (Retd.) vs. Government of India and Others, (2006) 11 SCC 709 and State of Maharashtra v. Digambar, (1995) 4 SCC 683 to hold that the Union of India was not precluded from raising the issue of law, despite previous orders and implementations.

The Supreme Court held that the special pay of ₹2,000 (from 01.01.1996) and ₹4,000 (from 01.01.2006) granted to scientists was not a “special pay” as defined under Fundamental Rule 9(25). Instead, it was a measure to rectify a pay anomaly arising from the merger of pay scales. The Court reasoned that the special pay was granted in lieu of a separate higher pay scale, not due to the arduous nature of duties or additional responsibilities.

The Court stated:

“The order does not indicate that it has been granted to the Scientists due to specially arduous nature of the duties; or specific nature/ work of the respondents.”

The Court further clarified:

“If the genesis of sanction dated 13.02.1999 is taken to its true import, it is clear that the said sanction or extension of benefit does not fit in the definition of special pay as contained in Fundamental Rule 9(25), rather it was to redeem the pay structure anomaly.”

Therefore, the Court concluded that the special pay should be included in the definition of “pay” under Fundamental Rule 9(21)(a)(i) for the purpose of calculating pension benefits. The Court upheld the decisions of the Central Administrative Tribunals and High Courts.

The Court also stated:

“Thus, the addition as granted by office memorandum dated 03.02.1999 also does not fit in the special pay, which is excluded from the definition of pay given under Rule 9(21)(a)(i). Thus, addition of benefit of Rs.2,000/- w.e.f. 01.01.1996 styled as special pay has to be included in the definition of pay given under Rule 9(21)(a)(i) looking to the true nature and character of the benefit, which was extended to Scientists on the basis of peer review.”

What weighed in the mind of the Court?

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

• Nature of the Special Pay: The Court emphasized that the special pay was not granted for arduous duties or additional responsibilities, but to rectify a pay anomaly.
• Interpretation of Rules: The Court interpreted Fundamental Rule 9(25) narrowly, concluding that the special pay did not fall within its definition.
• Purpose of the Pay: The Court recognized that the special pay was essentially a part of the pay structure to compensate for the merger of pay scales.
• Equity and Fairness: The Court noted that excluding this pay from pension would be unfair to the scientists, who had earned it through their service.

Sentiment Analysis of Reasons Given by the Supreme Court:

Fact:Law Ratio Table:

Logical Reasoning:

Key Takeaways

• Definition of Special Pay: The judgment clarifies that not all payments labeled as “special pay” are excluded from the definition of “pay” for pension calculations. The true nature and purpose of the payment must be considered.
• Impact on Pension: This ruling ensures that scientists who received the special pay will have it included in their pension calculations, increasing their pension benefits.
• Precedent for Similar Cases: This judgment sets a precedent for similar cases where special pay is granted in lieu of a higher pay scale, potentially affecting other government employees.
• Interpretation of Rules: The Court emphasized a purposive interpretation of the rules, looking beyond the literal wording to the intent behind the payment.

Directions

The Supreme Court did not issue any specific directions other than upholding the decisions of the Central Administrative Tribunals and High Courts, which directed the inclusion of the special pay for pensionary benefits.

Specific Amendments Analysis

There was no specific amendment analysis in the judgment.

Development of Law

The ratio decidendi of this case is that the term “special pay” as used in Fundamental Rule 9(21)(a)(i) should be interpreted in light of the definition of “special pay” in Fundamental Rule 9(25). If a payment is labeled as “special pay” but does not meet the criteria of Rule 9(25), it should be included in the definition of “pay” for pensionary benefits. This case clarifies that the true nature and purpose of the payment should be considered, rather than merely relying on the label given to it.

This judgment clarifies the interpretation of “pay” and “special pay” under the Fundamental Rules and their impact on pension calculations. It emphasizes the importance of looking beyond the literal wording of a rule to its intent and purpose. This case also reinforces that the principle of equity and fairness should be considered in interpreting rules related to pension and retirement benefits.

Conclusion

In conclusion, the Supreme Court dismissed the appeals filed by the Union of India, affirming that the special pay granted to scientists in DRDO, DAE, and DOS should be included in the calculation of their pension benefits. The Court held that the special pay was not a “special pay” as defined under Fundamental Rule 9(25) but rather a measure to rectify a pay anomaly. This judgment ensures that the scientists receive their rightful pension benefits, setting a precedent for similar cases involving the interpretation of “pay” and “special pay” under the Fundamental Rules.