Supreme Court Rules Submarine Pay Must Be Included in Pension Calculations for Naval Veterans: N.N. Godfred & Others vs. Union of India & Others (2018) INSC 623 (11 July 2018)

LEGAL ISSUE: Whether Submarine Pay should be included in the calculation of service pension for retired naval personnel.

CASE TYPE: Service Law/Pension

Case Name: N.N. Godfred & Others vs. Union of India & Others

Judgment Date: 11 July 2018

Date of the Judgment: 11 July 2018

Citation: (2018) INSC 623

Judges: S. Abdul Nazeer, J., Indu Malhotra, J.

Can a special pay given to naval officers for serving in submarines be excluded while calculating their pension? The Supreme Court of India recently addressed this question in a case concerning retired sailors of the Indian Navy. The court clarified that Submarine Pay, granted to sailors serving in the Submarine Arm, should be considered as part of their basic pay for pension calculation. The judgment was delivered by a two-judge bench comprising Justice S. Abdul Nazeer and Justice Indu Malhotra, with the opinion authored by Justice Indu Malhotra.

Case Background

The case involves three appellants who were sailors in the Indian Navy and served in the Submarine Arm. They retired on January 31, 1983. Initially, their training period was not included in the calculation of their qualifying service for pension. After a favorable ruling by the Delhi High Court, based on a prior Supreme Court decision, their pension was granted. However, it was calculated based on the pay of a Chief Petty Officer, without including the Submarine Pay they received for their service in the submarine arm. The appellants contended that Submarine Pay was part of their basic pay and should be included in their pension calculation. The respondents, however, argued that it was an allowance and therefore not includible for pension purposes. The Armed Forces Tribunal had earlier rejected the appellants’ claim, leading to the present appeal before the Supreme Court.

Timeline:

Course of Proceedings

The appellants initially filed Writ Petitions before the Delhi High Court, challenging the non-inclusion of Submarine Pay in their pension calculations. With the enactment of the Armed Forces Tribunal Act, 2007, these petitions were transferred to the Principal Bench of the Armed Forces Tribunal, New Delhi. The Tribunal, however, dismissed the application in a brief order, stating that submarine pay/allowance could not be counted for pension. This led to the appellants filing the present Civil Appeal before the Supreme Court.

Legal Framework

The Supreme Court examined the relevant provisions of the Navy (Pension) Regulations, 1964, specifically Section I of Chapter III, which outlines the framework for granting pensionary benefits to sailors in the Indian Navy. Regulation 84 states that service pension is based on the rank and the lowest group for which the sailor was paid during the last ten months of service. Regulation 86 specifies the rates of service pension for various ranks and groups. The court also considered the Navy Instruction No. 2/S/74 dated August 17, 1974, which defined “basic pay” and listed Submarine Pay and Submarine Allowance separately.

Relevant provisions include:

• Regulation 84 of the Navy (Pension) Regulations, 1964: “The service pension shall be assessed on the basis of the rank actually held by an individually continuously whether in a substantive or paid acting capacity and the lowest group for which he was paid during the last ten months of his service qualifying for pension.”
• Regulation 86 of the Navy (Pension) Regulations, 1964: Provides the rates of service pension for sailors based on their rank and group.

Arguments

Appellants’ Arguments:

• The appellants contended that Submarine Pay should be considered part of their basic pay for pension calculation. They argued that this pay was granted due to the dangerous nature of their work in submarines and the arduous conditions they faced.
• They highlighted that Submarine Pay was included in their Last Pay Drawn Certificate, indicating it was part of their pay, not an allowance. They contrasted this with sailors not in the Submarine Arm, who did not receive this additional pay.
• The appellants relied on Clause 3 of Appendix A of the Navy Instructions No. 2/S/74, arguing that they were entitled to higher rates of pay as they belonged to the group “Other than Group A”.
• They cited the cases of BALCO Captive Power Plant Mazdoor Sangh and another v. National Thermal Power Corporation and others [(2007) 14 SCC 234] and Paradeep Phosphates Limited v. State of Orissa & ors. [Civil Appeal Nos. 3997-3998 of 2018], arguing that service conditions cannot be altered to the detriment of employees.

Respondents’ Arguments:

• The respondents argued that Submarine Pay was an “allowance” and not part of basic pay, and therefore, should not be included in pension calculations.
• They referred to Appendix B of the Navy Instruction No. 2/S/74, which listed Submarine Pay as an allowance.
• They submitted that allowances, including Submarine Pay, were not considered reckonable emoluments for calculating service pension.
• They also stated that after the Fifth Pay Commission, special pays like Submarine Pay were re-designated as allowances.

Issues Framed by the Supreme Court

The primary issue framed by the Supreme Court was:

1. Whether Submarine Pay was to be included for computing the Service Pension of the appellants, who retired on 31.1.1983 in the rank of Chief Petty Officer and Chief Engine Room Artificer.

Treatment of the Issue by the Court

Authorities

The Court considered the following authorities:

• Letter No. PA/4102/NHO/504.S/D(PAY/SERVICES) dated May 31, 1967 of the Ministry of Defence – This letter stated that Submarine Pay was to be treated as “pay for all purposes.”
• Navy Instruction No. 2/S/74 dated August 17, 1974 – This instruction defined “basic pay” and listed Submarine Pay and Submarine Allowance separately.
• Navy (Pension) Regulations, 1964 – The Court referred to Regulations 84 and 86 to determine the basis for calculating service pension.
• BALCO Captive Power Plant Mazdoor Sangh and another v. National Thermal Power Corporation and others [(2007) 14 SCC 234] – Cited by the appellants to argue that service conditions cannot be altered to the detriment of employees.
• Paradeep Phosphates Limited v. State of Orissa & ors. [Civil Appeal Nos. 3997-3998 of 2018] – Cited by the appellants to argue that service conditions cannot be altered to the detriment of employees.

Judgment

How each authority was viewed by the Court:

• The Court relied on Letter No. PA/4102/NHO/504.S/D(PAY/SERVICES) dated May 31, 1967 stating that Submarine Pay was to be treated as “pay for all purposes” which would include computation of Service Pension.
• The Court interpreted Navy Instruction No. 2/S/74 dated August 17, 1974 to mean that Submarine Pay was not excluded from the computation of “pay” for the purpose of calculating Service Pension.
• The Court applied Regulations 84 and 86 of the Navy (Pension) Regulations, 1964 to determine the basis for calculating service pension.
• The Court noted the appellants’ reliance on BALCO Captive Power Plant Mazdoor Sangh and another v. National Thermal Power Corporation and others [(2007) 14 SCC 234] and Paradeep Phosphates Limited v. State of Orissa & ors. [Civil Appeal Nos. 3997-3998 of 2018] to argue against altering service conditions to the detriment of employees.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the fact that the Submarine Pay was explicitly considered as “pay for all purposes” in the initial instructions issued by the Ministry of Defence. The court also emphasized that the Navy Instruction No. 2/S/74, which was in force at the time of the appellants’ retirement, did not exclude Submarine Pay from the computation of “pay” for pension purposes. The court also noted the distinction between Submarine Pay and Submarine Allowance, which were separately listed in the Navy Instructions. The later instructions that re-designated Submarine Pay as an allowance were not applicable to the appellants, as these came into force after their retirement. The court emphasized the need to interpret the rules and instructions that were in force at the time of the appellants’ retirement.

The Court considered the argument that later instructions had re-designated Submarine Pay as an allowance, but rejected it because these instructions came into force after the appellants’ retirement. The court emphasized that the rules and instructions in force at the time of retirement should govern the computation of pension. The court also highlighted the distinction between Submarine Pay and Submarine Allowance, which were separately listed in the Navy Instructions, and stated that these terms were not interchangeable. The court’s reasoning was based on a careful interpretation of the relevant documents and a consideration of the specific circumstances of the appellants’ retirement.

The Supreme Court stated:

• “As per Letter No. PA/4102/NHO/504.S/D(PAY/SERVICES) dated May 31, 1967 Submarine Pay was to be treated as “pay for all purposes”, which would include computation of Service Pension.”
• “Clause 4(a) of Navy Instruction No. 2/S/74 defined the term “basic pay” to denote the pay actually drawn in the scale prescribed for the rank and group. The Last Pay Drawn Certificate of the appellants shows that Submarine Pay was actually being drawn as a separate head of “pay”.”
• “The submission of the respondents that Submarine Pay was excluded from the ambit of basic pay as per Special Navy Instruction No. 1/S/86, Special Navy Instruction No. 1/S/9W and Special Navy Instruction No. 1/S/08 cannot be accepted, since these notifications came into force subsequent to the date of superannuation of the appellants.”

Key Takeaways

• Submarine Pay is to be included in the calculation of service pension for naval personnel who retired before the implementation of the later instructions that re-designated it as an allowance.
• The definition of “pay” for pension purposes is determined by the rules and instructions in force at the time of retirement.
• Special pays designated for specific duties, like Submarine Pay, cannot be arbitrarily excluded from pension calculations unless there is a clear legal basis for doing so.
• The Supreme Court emphasized the importance of adhering to the principles of fairness and equity in matters of pension and retirement benefits.

Directions

The Supreme Court allowed the appeal and set aside the judgment and order passed by the Armed Forces Tribunal. The respondents were directed to recalculate the pension of the appellants by including Submarine Pay in their basic pay.

Development of Law

The ratio decidendi of this case is that for naval personnel who retired before the implementation of the later instructions, Submarine Pay is to be included in the calculation of service pension. This decision clarifies that the definition of “pay” for pension purposes is determined by the rules and instructions in force at the time of retirement. This case also emphasizes the importance of adhering to the principles of fairness and equity in matters of pension and retirement benefits. This judgment clarifies the position that special pays designated for specific duties, like Submarine Pay, cannot be arbitrarily excluded from pension calculations unless there is a clear legal basis for doing so.

Conclusion

The Supreme Court’s decision in N.N. Godfred & Others vs. Union of India & Others provides a significant clarification on the inclusion of Submarine Pay in the pension calculations of retired naval personnel. The court ruled that Submarine Pay, which was treated as “pay for all purposes” at the time of the appellants’ retirement, must be included in their pension calculations. This judgment underscores the principle that pension benefits should be determined by the rules and instructions in force at the time of retirement, and that special pays cannot be arbitrarily excluded from pension calculations. The decision ensures that the retired naval personnel receive their due pension benefits, taking into account the hazardous nature of their service in the submarine arm.

Category

Parent Category: Service Law
Child Categories: Pension, Indian Navy, Submarine Pay, Armed Forces Tribunal Act, 2007

Parent Category: Navy (Pension) Regulations, 1964
Child Categories: Regulation 84, Navy (Pension) Regulations, 1964, Regulation 86, Navy (Pension) Regulations, 1964

FAQ

Q: What was the main issue in the N.N. Godfred case?
A: The main issue was whether Submarine Pay, given to sailors in the Indian Navy, should be included when calculating their pension.

Q: What did the Supreme Court decide about Submarine Pay?
A: The Supreme Court decided that Submarine Pay should be included in the pension calculation for sailors who retired before certain later instructions came into effect.

Q: Why did the court rule in favor of the sailors?
A: The court found that the Submarine Pay was considered “pay for all purposes” at the time of their retirement and that the relevant instructions did not exclude it from pension calculations.

Q: What does this mean for other retired naval personnel?
A: This decision means that retired naval personnel who were receiving Submarine Pay and retired before the later instructions came into effect, are entitled to have that pay included in their pension calculations.

Q: What is the significance of this judgment?
A: This judgment ensures that retired naval personnel receive their due pension benefits, taking into account the hazardous nature of their service in the submarine arm. It also clarifies how pension benefits should be calculated based on the rules in force at the time of retirement.