Supreme Court settles pension calculation for employees switching government jobs: State of Rajasthan vs. O.P. Gupta (2022) INSC 772 (19 September 2022)

LEGAL ISSUE: Whether prior service in a government entity should be counted for pension benefits when an employee resigns to join another government job.
CASE TYPE: Service Law – Pension Benefits.
Case Name: State of Rajasthan & Others vs. O.P. Gupta
[Judgment Date]: 19 September 2022

Date of the Judgment: 19 September 2022

Citation: (2022) INSC 772

Judges: Indira Banerjee, J. and J.K. Maheshwari, J.

Can an employee’s past service be counted for pension benefits when they resign from one government job to take up another? The Supreme Court recently addressed this issue, clarifying the rules for calculating pension benefits in such cases. The core issue was whether the service rendered by the respondent with the Rajasthan Agriculture Engineering Board and the Rajasthan State Agro Industry Corporation should be counted for pension purposes, despite his resignation to join another government department. The Supreme Court upheld the High Court’s decision that the past service should be counted. The judgment was delivered by a bench of Justices Indira Banerjee and J.K. Maheshwari.

Case Background

O.P. Gupta, the respondent, was initially appointed as an Assistant Charge Man in the Rajasthan Agriculture Engineering Board on 13th January 1967.

The Engineering Board was later merged with the Rajasthan State Agro Industry Corporation, and his services were transferred on 8th July 1970, with the same pay scale. He continued working there until 12th April 1977.

In 1976, he applied for the post of Assistant Director (Agro-Industries) through the Rajasthan Public Service Commission (RPSC).

He was appointed as Assistant Director (Agro-Industries) in the Department of Industries on 7th April 1977, and he joined on 16th April 1977.

He retired as Additional Director of Industries on 30th April 2003. However, when calculating his pension, the authorities did not include his service from 13th January 1967 to 12th April 1977.

Gupta made representations to the Department of Industries requesting that his prior service be counted for pension and retiral benefits, but the request was denied. Aggrieved, he filed a writ petition before the Rajasthan High Court.

Timeline

Course of Proceedings

The Single Judge of the Rajasthan High Court allowed the writ petition filed by O.P. Gupta on 5th May 2017, directing the state to count his prior service with the Rajasthan Agriculture Engineering Board and the Rajasthan State Agro Industry Corporation for pension benefits. The court also ordered the release of his pension and retiral benefits with 9% interest per annum within three months.

The State of Rajasthan filed an appeal against the Single Judge’s decision. The Division Bench of the High Court dismissed the appeal on 28th November 2019, upholding the Single Judge’s decision that the prior service should be counted for pension.

The High Court noted that the service of the respondent under the Rajasthan Agriculture Engineering Board was pensionable. It also relied on Rule 25(2) of the Rajasthan Civil Services (Pension) Rules, 1996, which states that resignation does not entail forfeiture of past service if it is to take up another appointment under the Government with proper permission.

Legal Framework

The core legal provision in this case is Rule 25 of the Rajasthan Civil Services (Pension) Rules, 1996, which deals with the forfeiture of service upon resignation.

Rule 25(1) of the Rajasthan Civil Services (Pension) Rules, 1996 states that:

“Resignation from a service or a post, entails forfeiture of past service.”

However, Rule 25(2) of the Rajasthan Civil Services (Pension) Rules, 1996 provides an exception:

“A resignation shall not entail forfeiture of past service if it has been submitted to take up, with proper permission, another appointment, whether temporary or permanent, under the Government where service qualifies.”

Rule 25(3) of the Rajasthan Civil Services (Pension) Rules, 1996 addresses interruptions in service:

“Interruption in service in a case falling under sub-rule (2), due to the two appointments being at different stations, not exceeding the joining time admissible under the rules of transfer, shall be covered by grant of leave of any kind due to the Government servant on the date of relief or by formal condonation to the extent to which the period is not covered by leave due to him.”

The Court also considered Articles 14 to 16 of the Constitution of India, which guarantee equality before the law and equal opportunity in public employment.

Arguments

The State of Rajasthan, represented by Dr. Manish Singhvi, argued that:

• The writ petition was filed by the Respondent after six years.
• The Respondent was appointed to a higher post in the Industry Department, making his past employment inconsequential.
• There was no proof of prior permission before resignation from Rajasthan State Agro Industry Corporation.
• Resignation necessarily leads to cessation from service and entails forfeiture of past service.

The State contended that the appointment was a fresh appointment for which past service was inconsequential. The State argued that in service jurisprudence, resignation necessarily leads to cessation from service and entails forfeiture of past service.

The Respondent, represented by Ms. Archana Pathak Dave, argued that:

• The High Court has rendered a just decision based on a purposive interpretation of Rule 25(2) of the Rules.
• The interpretation given by the High Court to Rule 25(2) of the Rules is a plausible interpretation.
• Article 136 of the Constitution of India does not create a regular forum of Appeal.
• The power under Article 136 of the Constitution of India was discretionary, this Court is not bound to set aside an order under Article 136, even if it was not in conformity with law.

The Respondent argued that since the power under Article 136 of the Constitution of India was discretionary, the Supreme Court is not bound to set aside an order under Article 136, even if it was not in conformity with law.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

✓ Whether the High Court was correct in holding that the service rendered by the respondent with the Rajasthan Agriculture Engineering Board and the Rajasthan State Agro Industry Corporation was liable to be counted while computing pension and other pensionary benefits.

Treatment of the Issue by the Court

Authorities

The Court considered Rule 25 of the Rajasthan Civil Services (Pension) Rules, 1996. The court interpreted Rule 25(2) to mean that a resignation to take up another government appointment with proper permission does not entail forfeiture of past service.

The Court also considered Articles 14 to 16 of the Constitution of India, which guarantee equality before the law and equal opportunity in public employment.

The court cited N. Suriyakala v. A. Mohandoss and Ors. [2007] 9 SCC 196, emphasizing that Article 136 of the Constitution of India does not create a regular forum of Appeal.

The court referred to Bengal Chemical and Pharmaceutical Works Ltd. v. Employees AIR 1959 SC 633, stating that the power under Article 136 of the Constitution of India was discretionary.

Judgment

The Supreme Court agreed with the High Court’s interpretation of Rule 25(2) of the Rajasthan Civil Services (Pension) Rules, 1996. The court held that the respondent’s resignation to take up another government job, after being selected through the RPSC, did not entail forfeiture of his past service.

The Court emphasized that the State cannot raise questions of prior permission after the appointment had been made through the RPSC and that it is to be presumed that prior permission had been taken unless the contrary could be established by the State.

The Supreme Court found no grounds to interfere with the High Court’s judgment and dismissed the Special Leave Petition.

The Court reiterated that when financial rules framed by the Government such as Pension Rules are capable of more interpretations than one, the Courts should lean towards that interpretation which goes in favour of the employee.

The Court noted that denial of pension is a continuing wrong and that the difficulties of a retired employee in approaching the court should be considered.

What weighed in the mind of the Court?

The Supreme Court was primarily influenced by the need to interpret pension rules in favor of the employee and the fact that O.P. Gupta was selected through the RPSC for a government job. The Court also considered the fact that denial of pension is a continuing wrong and that the difficulties of a retired employee in approaching the court should be considered. The Court also emphasised that arbitrariness violates the right to equality under Articles 14 to 16 of the Constitution of India.

The court’s reasoning was based on a purposive interpretation of Rule 25(2) of the Rajasthan Civil Services (Pension) Rules, 1996, and the principle that pension rules should be interpreted in favor of the employee.

The Court rejected the State’s argument that O.P. Gupta’s appointment was a fresh appointment and that there was no proof of prior permission. The Court held that it is to be presumed that prior permission had been taken unless the contrary could be established by the State.

The decision was based on the interpretation of Rule 25(2) and the principle that pension rules should be interpreted in favor of the employee.

The Court quoted from the judgment: “…The interpretation given by the High Court to Rule 25(2) of the Rules is a plausible interpretation.”

The Court also noted that “Denial of pension is a continuing wrong.”

The Court also stated that “It is settled law that when financial rules framed by the Government such as Pension Rules are capable of more interpretations than one, the Courts should lean towards that interpretation which goes in favour of the employee.”

There were no dissenting opinions in this case. Both Justices Indira Banerjee and J.K. Maheshwari concurred in the judgment.

The judgment clarifies that past service in a government entity will be counted for pension benefits if an employee resigns to take up another government job with proper permission.

Key Takeaways

• Past service in a government entity will be counted for pension if an employee resigns to take up another government job with proper permission.
• Pension rules should be interpreted in favor of the employee when multiple interpretations are possible.
• The State cannot raise questions of prior permission after the appointment has been made through the RPSC.
• Denial of pension is considered a continuing wrong.
• Courts should consider the difficulties faced by retired employees in approaching the court.

This judgment sets a precedent for similar cases involving pension calculations for employees who switch between government jobs. It ensures that employees are not unfairly deprived of their pension benefits due to technicalities.

Directions

The Supreme Court dismissed the Special Leave Petition filed by the State of Rajasthan, upholding the High Court decision. The State was directed to include the past service of the respondent for the purpose of pension calculation.

The State was directed to calculate the pension of the respondent by including his past service from 13th January 1967 to 12th April 1977.