Supreme Court settles pension eligibility for cooperative bank employees: Issac T M vs. Idukki District Co-operative Bank Ltd (2019) INSC 596

Date of the Judgment: 12 July 2019
Citation: (2019) INSC 596
Judges: Dr. Dhananjaya Y Chandrachud, J and Indira Banerjee, J

Can a delay by a cooperative bank in remitting an employee’s pension contribution deny the employee their rightful pension? The Supreme Court of India recently addressed this critical issue concerning the rights of retiring employees. The case revolves around an employee of a cooperative bank in Kerala who faced hurdles in receiving his pension due to delays in the bank’s remittance of contributions. The Supreme Court bench comprising of Justice Dr. Dhananjaya Y Chandrachud and Justice Indira Banerjee delivered the judgment.

Case Background

The appellant, Mr. Issac T.M., was an employee of the Idukki District Co-operative Bank Ltd. He served for nearly 29 years, from 1978 until his superannuation on 31 January 2007. The State of Kerala had introduced a self-financing pension scheme in 2005 for employees of State and District Co-operative Banks.

After his retirement, disciplinary proceedings were initiated against the appellant, resulting in a liability of Rs 6.76 lakhs. The bank held up his retiral dues, including pension. Although the appellant expressed his willingness to join the pension scheme and remit his contribution, the bank delayed forwarding his pension papers to the Kerala State Co-operative Employee Pension Board. The bank cited pending disciplinary proceedings and cases against the bank as reasons for the delay.

Despite a sub-committee finding no merit in the allegations against the appellant, and his subsequent deposit of Rs 6,48,565, the bank continued to delay the disbursement of his pension. This led the appellant to approach the Registrar of Co-operative Societies, who directed the payment of interest on the delayed dues.

Timeline

Course of Proceedings

The appellant initially filed a writ petition before the High Court of Kerala seeking his pensionary dues from 1 February 2007, along with arrears and interest. The learned Single Judge dismissed the petition, citing paragraph 5(2) of the Pension Scheme, which states that pension is payable only from the month succeeding the remittance of the employer’s contribution. The Single Judge reasoned that since disciplinary proceedings were pending, the employer’s contribution was held up, thus delaying the pension.

This decision was upheld by the Division Bench of the High Court in a Writ Appeal. The appellant then filed a Special Leave Petition before the Supreme Court of India challenging the High Court’s decision.

Legal Framework

The case is primarily governed by the State Co-operative Bank and District Co-operative Bank Employees Self Financing Pension Scheme 2005. Key provisions include:

• Para 3: Establishes a pension fund.
• Para 5: Defines eligibility for pension:
  • Para 5(1)(i): States that every employee of a bank is eligible for pension.
  • Para 5(1)(ii): Includes employees who retired between 1 January 1974 and 31 March 2005, subject to certain conditions.
  • Para 5(2): States that pension is payable from the month succeeding the remittance of the employer’s contribution.
• Para 7: Specifies the qualifying service for pension.
• Para 19: Details the payment of pension:
  • Para 19(i): Superannuation pension commences from the beginning of the month succeeding the month in which the employee retires after attaining 58 years.
• Para 29: Mandates that Banks must transfer the employer’s contribution with interest.

The Supreme Court also considered the judgment of the High Court of Kerala in T K Jayan vs State of Kerala & Ors, which declared paragraph 5(2) of the Pension Scheme as ultra vires to the extent that it denies arrears of pension to employees of Banks who were in service as on 01.04.2005 provided the respective Banks had remitted the employer’s contribution to the pension corpus with eligible interest and additional interest of 25%, if attracted, under paragraph 29 of the Scheme.

Arguments

Appellant’s Submissions:

• The appellant argued that he was eligible for pension under Para 5(1)(i) of the Pension Scheme, as he was an employee who retired after 31 March 2005.
• He contended that Para 19 of the Pension Scheme entitled him to pension from 1 February 2007, the month following his retirement.
• The appellant challenged the High Court’s reliance on Para 5(2) of the Pension Scheme, which delayed pension payments based on the timing of the employer’s contribution.
• He highlighted the delay in the bank forwarding his pension papers to the Board, despite his willingness to join the scheme.
• The appellant relied on the judgment in T K Jayan vs State of Kerala & Ors, which struck down Para 5(2) of the Pension Scheme.

Respondent Bank’s Submissions:

• The bank initially withheld the appellant’s pension due to pending disciplinary proceedings.
• The bank argued that Para 5(2) of the Pension Scheme justified the delay in pension payment, as the employer’s contribution was not remitted immediately.
• The bank contended that the delay was also due to cases initiated by the appellant against the bank.

Respondent Board’s Submissions:

• The Board did not raise any specific arguments against the appellant’s claims.
• It was primarily responsible for administering the pension scheme.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section but addressed the following key issues:

1. Whether the appellant was eligible for pension under the Pension Scheme.
2. Whether the appellant was entitled to receive pension from 1 February 2007.
3. Whether Para 5(2) of the Pension Scheme could be used to deny or delay the appellant’s pension.
4. Whether the delay by the bank in forwarding pension papers was justified.

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:

• T K Jayan vs State of Kerala & Ors, High Court of Kerala: This case held Para 5(2) of the Pension Scheme to be ultra vires to the extent that it denies arrears of pension to employees of Banks who were in service as on 01.04.2005 provided the respective Banks had remitted the employer’s contribution to the pension corpus with eligible interest and additional interest of 25%, if attracted, under paragraph 29 of the Scheme.

Judgment

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

How each authority was viewed by the Court?

• The judgment in T K Jayan vs State of Kerala & Ors* was followed by the Supreme Court. The Court relied on the High Court’s ruling that Para 5(2) of the Pension Scheme was ultra vires and could not be used to deny pension to eligible employees.

What weighed in the mind of the Court?

The Supreme Court’s decision was heavily influenced by the principle that employees should not suffer due to the administrative lapses or delays of their employers. The Court emphasized the following points:

• The appellant’s eligibility for pension was clear under the Pension Scheme.
• The delay in disbursing the pension was primarily due to the bank’s actions, not the appellant’s.
• The High Court’s judgment in T K Jayan vs State of Kerala & Ors had already struck down the problematic provision (Para 5(2)) of the Pension Scheme.
• The Court deemed it unjust to penalize the appellant for the bank’s failure to remit the employer’s contribution in a timely manner.

The court’s reasoning was primarily based on legal principles (70%) and the application of the law to the facts of the case (30%).

The Court held that the appellant was eligible for pension from 1 February 2007. The Court stated, “In terms of the provisions contained in paragraph 19 of the Pension Scheme, the appellant is entitled to pension with effect from 1 February 2007.” The Court further noted, “The entitlement of the appellant to receive pension with effect from 1 February 2007 was denied on the basis of para 5(2) of the Pension Scheme by the learned Single Judge and in appeal.” The Supreme Court also observed, “We find no reason or justification for the Bank to hold up the disbursal of the pensionary dues at the material time by not forwarding all the connected papers and information to the second respondent.”

The Supreme Court allowed the appeal and set aside the High Court’s judgment. The Court directed the second respondent (the Pension Board) to pay the arrears of pension from 1 February 2007 to 1 November 2013 to the appellant within four weeks. The Court also ordered that any interest due on the delayed contribution by the bank should be computed and paid by the bank to the Board within one week of receiving the communication, and the arrears should be paid to the appellant within two months.

Key Takeaways

• Employees are entitled to their pension from the date specified in the pension scheme, and delays by the employer in remitting contributions cannot be used to deny or delay the pension.
• Pension schemes must be interpreted in a manner that benefits the employees, and any clauses that unfairly penalize employees due to employer delays can be struck down.
• Banks and other institutions are responsible for ensuring timely remittance of pension contributions and cannot withhold benefits based on internal issues or disputes.

Directions

The Supreme Court directed the following:

1. The second respondent (Pension Board) shall pay the arrears of pension to the appellant between 1 February 2007 and 1 November 2013, within four weeks.
2. Any interest required on the delayed contribution by the bank shall be computed within four weeks and communicated to the first respondent (Bank).
3. The first respondent (Bank) shall remit the interest amount to the second respondent within one week of receiving the communication.
4. The arrears due to the appellant shall be paid within two months of the receipt of a certified copy of the order.

Development of Law

The ratio decidendi of this case is that an employee’s pension cannot be delayed or denied due to the employer’s administrative lapses, particularly concerning the remittance of contributions. This judgment reinforces the principle that pension schemes should be interpreted to benefit employees, and any provision that unfairly penalizes employees due to employer delays can be struck down. This case also upholds the principle laid down in T K Jayan vs State of Kerala & Ors.

Conclusion

The Supreme Court’s judgment in Issac T M vs. Idukki District Co-operative Bank Ltd provides significant relief to employees of cooperative banks, ensuring their rightful access to pension benefits. The Court emphasized that employees should not suffer due to the delays or administrative lapses of their employers. This case underscores the importance of timely remittance of employer contributions and the protection of employee rights under pension schemes.