Supreme Court settles pension eligibility for resigned employees in insurance and banking sector: Senior Divisional Manager, LIC vs. Shree Lal Meena (2019)

Date of the Judgment: 15 March 2019
Citation: (2019) INSC 228
Judges: Ranjan Gogoi, CJI, Sanjay Kishan Kaul, J., K.M. Joseph, J.
Can employees who resigned from service before the introduction of a pension scheme, but after the date from which the scheme was made retrospectively applicable, claim pension benefits? The Supreme Court of India addressed this crucial question in a batch of appeals involving employees from the Life Insurance Corporation of India (LIC), United India Insurance Company Limited, and Andhra Bank. The core issue revolved around whether resignation could be equated with retirement for the purpose of pension eligibility when pension schemes were introduced with retrospective effect. The judgment was delivered by a three-judge bench comprising Chief Justice Ranjan Gogoi, Justice Sanjay Kishan Kaul, and Justice K.M. Joseph, with the majority opinion authored by Justice Sanjay Kishan Kaul.

Case Background

Shree Lal Meena, an employee of LIC, had served for over 20 years when he expressed his intention to seek voluntary retirement due to health concerns in letters dated 15.6.1990 and 18.6.1990. However, there was no provision for voluntary retirement at the time. Subsequently, he submitted his resignation on 14.7.1990, which was accepted by LIC effective the same date, waiving the mandatory notice period. At the time, the only applicable scheme was the Contributory Provident Fund Scheme.

The Life Insurance Corporation of India (Employees) Pension Rules, 1995, were introduced on 28.6.1995, but were made retrospectively effective from 1.11.1993. These rules applied to employees who were in service on or after 1.1.1986, and who had retired before 1.11.1993, subject to certain conditions. Shree Lal Meena, having resigned on 14.7.1990, was denied pension benefits. He argued that his resignation was essentially a request for voluntary retirement, given the lack of a formal voluntary retirement scheme at the time. His request was rejected by LIC on 6.4.1996, leading him to file a writ petition before the Rajasthan High Court in 1997.

Timeline:

Legal Framework

The Supreme Court examined the Life Insurance Corporation of India (Employees) Pension Rules, 1995, specifically:

• Rule 2(j): Defines “employee,” excluding those who retired before the commencement of the rules and are drawing pensions under the Staff Regulations.
  
  “2. Definitions – In these rules, unless the context otherwise requires –
  (j) “employee” means any person employed in the service of the Corporation on full-time work on permanent basis and who opts and is governed by these rules but does not include an employee retired before the commencement of these rules and who is drawing pension from the Pension Fund of the Oriental Government Security Life Assurance Company Limited in accordance with sub-regulation (2) of regulation 76 of the Life Insurance Corporation of India (Staff) Regulations, 1960, made under the Act;”
• Rule 2(s): Defines “retirement” as retirement under the Staff Regulations or voluntary retirement under the Pension Rules.
  
  “2. Definitions – In these rules, unless the context otherwise requires –
  (s) “retirement” means,-
  (i) retirement in accordance with the provisions contained in sub-regulation (1) or sub-regulation (2) or sub-regulation (3) of regulation 19 of the Life Insurance Corporation of India (Staff) Regulations, 1960 and rule 14 of the Life Insurance Corporation of India Class III and Class IV Employees (Revision of Terms and Conditions of Service) Rules, 1985 made under the Act;
  (ii) voluntary retirement in accordance with the provisions contained in rule 31 of these rules;”
• Rule 23: Specifies that resignation entails forfeiture of past service and disqualifies an employee from pensionary benefits.
  
  “23. Forfeiture of service – Resignation or dismissal or removal or termination or compulsory retirement of an employee from the service of the Corporation shall entail forfeiture of his entire past service and consequently shall not qualify for pensionary benefits.”
• Rule 31: Deals with pension on voluntary retirement, which is admissible on completion of 20 years of qualifying service with a 90-day notice.

Arguments

Arguments by the Appellant (LIC):

• The LIC argued that the Pension Rules, which came into force on 1.11.1993, should apply only to employees in service on or after that date.
• They contended that the respondent, Shree Lal Meena, had resigned and was not in service on the date the Pension Rules came into effect, therefore, he was not eligible for pension benefits.
• LIC emphasized that Rule 23 of the Pension Rules clearly states that resignation entails forfeiture of past service and pensionary benefits.
• The appellant argued that the High Court had incorrectly interpreted the judgment in JK Cotton Spinning & Weaving Mills Co. Ltd., Kanpur v. State of U.P., stating that the case was about retrenchment and not pension benefits.
• The appellant relied on the judgment in Reserve Bank of India & Anr. v. Cecil Dennis Solomon & Anr., which differentiated between resignation and voluntary retirement, stating that resignation is a unilateral act by the employee to leave service, while voluntary retirement is a condition of service created by a statutory provision.

Arguments by the Respondent (Shree Lal Meena):

• Shree Lal Meena argued that his resignation was essentially a request for voluntary retirement, given the lack of a formal voluntary retirement scheme at the time.
• He contended that he had completed the requisite years of service and should be entitled to pension benefits, as per the retrospective application of the Pension Rules.
• The respondent relied on the judgment in JK Cotton Spinning & Weaving Mills Co. Ltd., Kanpur v. State of U.P., to argue that his resignation should be treated as voluntary retirement.
• He argued that the absence of a voluntary retirement scheme at the time of his resignation should not deprive him of the benefits of the subsequent pension scheme.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issue that the court addressed was:

1. Whether employees who resigned from service before the introduction of a pension scheme, but after the date from which the scheme was made retrospectively applicable, are entitled to pension benefits under the said scheme.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

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

How each authority was viewed by the Court?

• JK Cotton Spinning & Weaving Mills Co. Ltd., Kanpur v. State of U.P. [AIR 1990 SC 1808]: The Court clarified that this case was about retrenchment and not pension benefits and that the High Court had incorrectly interpreted this judgment.
• Reserve Bank of India & Anr. v. Cecil Dennis Solomon & Anr. [(2004) 9 SCC 461]: The Court relied on this judgment to distinguish between resignation and voluntary retirement, emphasizing that resignation is a unilateral act while voluntary retirement is a condition of service.
• UCO Bank & Ors. v. Sanwar Mal [(2004) 4 SCC 412]: The Court cited this case to support the view that a pension scheme is a self-supporting scheme with specific rules for eligibility and that resignation leads to forfeiture of service.
• M.R. Prabhakar & Ors. v. Canara Bank & Ors. [(2012) 9 SCC 671]: The Court noted that this case dealt with a similar scheme and upheld the distinction between voluntary retirement and resignation.
• Sheel Kumar Jain v. New India Assurance Company Limited [(2011) 12 SCC 197]: The court noted that this case gave benefit to certain employees but did not apply to the facts of the present case.
• Sudhir Chandra Sarkar v. Tata Iron and Steel Co. Ltd. & Ors. [(1984) 3 SCC 369]: The court distinguished this case, stating that the definition of ‘retirement’ in that case was expansive and all-inclusive, unlike the definition in the present case.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the clear distinction between “resignation” and “retirement” as defined in service jurisprudence and the specific rules of the pension schemes. The Court emphasized the importance of adhering to the explicit terms of the Pension Rules, particularly the forfeiture of service upon resignation. The Court also highlighted that the pension schemes are self-financing, contributory in nature, and are not meant to be expanded beyond their intended scope.

Fact:Law Ratio

The court’s reasoning was heavily based on legal interpretations and precedents, with a relatively smaller emphasis on the specific factual aspects of the case.

The Court considered the argument that Shree Lal Meena’s resignation was akin to a request for voluntary retirement but rejected it based on the clear distinction between the two concepts in service law. The Court emphasized that statutory provisions must be given their clear meaning and that there was no ambiguity in the Pension Rules to warrant a different interpretation. The Court also rejected the argument that the absence of a voluntary retirement scheme at the time of the employee’s resignation should entitle him to pension benefits, as the pension scheme was specifically designed for those who retired, not resigned.

The Court’s decision was unanimous, with all three judges concurring on the judgment.

“It is trite to say that statutory provisions must be given their clear meaning unless there is ambiguity in the wordings.”

“When different expressions are used in the same Rules, in different contexts then all of them cannot be given the same meaning.”

“Voluntary retirement is a concept read into a condition of service, which has to be created by a statutory provision, while resignation is the unilateral determination of an employer-employee relationship.”

Key Takeaways

• Resignation vs. Retirement: The judgment firmly establishes the distinction between resignation and retirement in service jurisprudence. Resignation is a unilateral act by an employee to leave service, while retirement is a condition of service, either through superannuation or voluntary retirement under a specific scheme.
• Forfeiture of Service: Resignation leads to forfeiture of past service and disqualifies an employee from pensionary benefits, as per the specific rules of the pension schemes.
• Retrospective Application: The retrospective application of a pension scheme does not automatically extend to those who had resigned before the scheme’s implementation date.
• Importance of Statutory Provisions: Statutory provisions must be given their clear meaning unless there is ambiguity in the wordings.
• Self-Financing Schemes: Pension schemes are often self-financing and contributory, and their scope cannot be expanded beyond their intended contours.

Potential Future Impact: This judgment clarifies the legal position on pension eligibility for employees who have resigned, and it will likely be relied upon in future cases involving similar issues. It reinforces the importance of adhering to the specific terms and conditions of pension schemes and the distinction between resignation and retirement.

Directions

The Supreme Court clarified that while the appeal of the LIC was allowed, the amounts already paid to the respondent in C.A. No. 14739 of 2015 under the interim directions dated 26.11.2015 would not be claimed back.

Development of Law

Ratio Decidendi: The core legal principle established by this judgment is that resignation and retirement are distinct concepts in service law, and resignation entails forfeiture of past service, thus disqualifying an employee from pension benefits under a scheme that is not specifically meant for those who have resigned. The retrospective application of a pension scheme does not automatically extend to those who had resigned before the scheme’s implementation date.

Change in Previous Positions of Law: This judgment clarifies the interpretation of previous judgments, particularly JK Cotton Spinning & Weaving Mills Co. Ltd., Kanpur v. State of U.P., by stating that it was about retrenchment and not pension benefits. It also reinforces the principles laid down in Reserve Bank of India & Anr. v. Cecil Dennis Solomon & Anr., highlighting the distinction between resignation and voluntary retirement.

Conclusion

The Supreme Court’s judgment in Senior Divisional Manager, Life Insurance Corporation of India & Ors. vs. Shree Lal Meena settles the issue of pension eligibility for employees who resigned before the implementation of retrospective pension schemes. The Court held that resignation leads to forfeiture of past service and disqualifies an employee from pension benefits under such schemes. The judgment reinforces the distinction between resignation and retirement, emphasizing that statutory provisions must be given their clear meaning. The Court allowed the appeal of the LIC, while dismissing the appeals of the other employees.

Category

Parent Category: Service Law

Child Categories:

• Pension Benefits
• Resignation
• Retirement
• Retrospective Application
• Life Insurance Corporation of India
• Andhra Bank
• United India Insurance Company Limited
• Employee Rights
• Service Rules
• Pension Regulations

Parent Category: Life Insurance Corporation of India (Employees) Pension Rules, 1995

Child Categories:

• Rule 2(j), Life Insurance Corporation of India (Employees) Pension Rules, 1995
• Rule 2(s), Life Insurance Corporation of India (Employees) Pension Rules, 1995
• Rule 23, Life Insurance Corporation of India (Employees) Pension Rules, 1995
• Rule 31, Life Insurance Corporation of India (Employees) Pension Rules, 1995

FAQ

Q: Can I claim pension if I resigned before the pension scheme was introduced?
A: No, if you resigned before the pension scheme was introduced, you are generally not eligible for pension benefits under that scheme, even if the scheme is made retrospectively applicable. Resignation leads to forfeiture of past service.

Q: What is the difference between resignation and retirement?
A: Resignation is a unilateral act by an employee to leave service, while retirement is a condition of service, either through superannuation or voluntary retirement under a specific scheme.

Q: Does the retrospective application of a pension scheme mean everyone gets the benefit?
A: No, the retrospective application of a pension scheme does not automatically extend to those who had resigned before the scheme’s implementation date.

Q: What happens to my past service if I resign?
A: If you resign, your past service is generally forfeited, and you may not be eligible for pensionary benefits.

Q: What should I do if I am considering leaving my job and want to secure pension benefits?
A: If you are considering leaving your job, it is important to understand the rules of your pension scheme. If a voluntary retirement scheme is available, that is a better option than resigning.