Supreme Court settles pension eligibility for resigned employees in service matters: Life Insurance Corporation of India vs. Shree Lal Meena (2019)

Date of the Judgment: March 15, 2019
Citation: 2019 INSC 224
Judges: Ranjan Gogoi, CJI, Sanjay Kishan Kaul, J., K.M. Joseph, J.
Can employees who resigned before a pension scheme was officially implemented, but after the date from which the scheme was made retrospectively applicable, claim pension benefits? The Supreme Court of India addressed this complex question in a batch of appeals concerning employees of the Life Insurance Corporation of India, United India Insurance Company Limited, and Andhra Bank. The core issue revolved around whether the act of resignation, as opposed to retirement, would qualify employees for pension benefits under schemes introduced with retrospective effect. This judgment clarifies the distinction between resignation and retirement in the context of pension eligibility. The bench was composed of 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, the respondent in the lead appeal, was an employee of the Life Insurance Corporation of India (LIC). After serving for more than 20 years, he expressed his intent 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, requesting immediate effect and waiver of the mandatory three-month notice period. LIC accepted his resignation on 11.1.1991, effective from 14.7.1990, waiving the notice period. At the time of his resignation, only a Contributory Provident Fund Scheme was applicable to him. The Life Insurance Corporation of India (Employees) Pension Rules, 1995, were later introduced on 28.6.1995, with retrospective effect from 1.11.1993. These rules applied to employees who were in service on or after 1.1.1986, but had retired before 1.11.1993, provided they met other conditions. Shree Lal Meena, having resigned before the effective date of the pension scheme, was denied pension benefits by the LIC.

Timeline

Course of Proceedings

The Rajasthan High Court’s Single Judge ruled in favor of Shree Lal Meena, stating that his resignation was effectively a voluntary retirement due to the lack of a formal voluntary retirement scheme at the time. The court relied on the judgment in JK Cotton Spinning & Weaving Mills Co. Ltd., Kanpur v. State of U.P. to support this view. The LIC appealed to the Division Bench of the High Court, which upheld the Single Judge’s decision, rejecting LIC’s reliance on Reserve Bank of India & Anr. v. Cecil Dennis Solomon & Anr. and J.M. Singh v. Life Insurance Corporation of India & Ors.. Subsequently, the LIC filed an appeal before the Supreme Court, leading to the reference to a larger bench due to conflicting judicial views.

Legal Framework

The case hinges on the interpretation of the Life Insurance Corporation of India (Employees) Pension Rules, 1995. Key provisions include:

• Rule 2(j) defines “employee” but specifically excludes those who retired before the commencement of the rules and were drawing a pension under the Staff Regulations. The rule states:
  “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. The rule states:
  “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 states that resignation results in forfeiture of past service and disqualifies an employee from pension benefits. The rule states:
  “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 outlines the conditions for “Pension on voluntary retirement,” requiring 20 years of qualifying service and a 90-day notice period.

These rules are part of the Life Insurance Corporation of India (Employees) Pension Rules, 1995. The interplay of these rules determines the eligibility of an employee for pension benefits, especially in cases of resignation versus retirement.

Arguments

Arguments on behalf of Shree Lal Meena (Respondent):

• Shree Lal Meena argued that his resignation should be considered as voluntary retirement since he had intended to retire voluntarily but was compelled to resign due to the absence of a voluntary retirement scheme at the time.
• He relied on the judgment in JK Cotton Spinning & Weaving Mills Co. Ltd., Kanpur v. State of U.P., which equated voluntary resignation with voluntary retirement in a different context, to support his claim.
• It was contended that he had the requisite years of service to be entitled to pensionary benefits if the scheme had existed at the time of his resignation.

Arguments on behalf of LIC (Appellant):

• The LIC argued that the Pension Rules clearly distinguish between resignation and retirement. Resignation leads to forfeiture of past service and pension benefits, as per Rule 23 of the Pension Rules.
• They contended that the retrospective application of the Pension Rules only applies to employees who were in service on or after 1.11.1993, or those who had retired between 1.1.1986 and 1.11.1993, and that Shree Lal Meena did not fall under either category.
• The LIC relied on Reserve Bank of India & Anr. v. Cecil Dennis Solomon & Anr., which held that resignation and voluntary retirement are distinct concepts with different consequences.

The innovativeness of the argument by Shree Lal Meena was in attempting to equate his resignation with voluntary retirement, leveraging the absence of a formal voluntary retirement scheme at the time of his resignation. This was a novel approach to try and fit his case within the ambit of the retrospective pension scheme.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court addressed the following issue:

1. Whether employees who resigned from service after the date from which the pension schemes were made applicable retrospectively, but before the date on which the schemes were notified, are entitled to the benefit of the pension schemes.

The court also dealt with the sub-issue of whether resignation could be equated with retirement for the purpose of pension benefits.

Treatment of the Issue by the Court

Authorities

Cases Considered by the Court:

• JK Cotton Spinning & Weaving Mills Co. Ltd., Kanpur v. State of U.P., AIR 1990 SC 1808, Supreme Court of India: The High Court relied on this case to equate resignation with retirement, but the Supreme Court clarified it was in a different context of retrenchment.
• Reserve Bank of India & Anr. v. Cecil Dennis Solomon & Anr., (2004) 9 SCC 461, Supreme Court of India: The Supreme Court relied on this case to distinguish between resignation and retirement, stating that voluntary retirement is a statutory condition of service, while resignation is a unilateral determination of the employer-employee relationship.
• UCO Bank & Ors. v. Sanwar Mal, (2004) 4 SCC 412, Supreme Court of India: The court cited this case to highlight that pension schemes are self-supporting and that resignation leads to disqualification from pension benefits.
• M.R. Prabhakar & Ors. v. Canara Bank & Ors., (2012) 9 SCC 671, Supreme Court of India: The court referred to this case to further support the distinction between resignation and voluntary retirement.
• J.M. Singh v. Life Insurance Corporation of India & Ors., CWP No.10157/1996 decided on 8.1.2010, Punjab & Haryana High Court: The High Court had repelled the plea of the LIC based on this case.
• Sheel Kumar Jain v. New India Assurance Company Limited, (2011) 12 SCC 197, Supreme Court of India: The court discussed this case to clarify the difference between resignation and retirement, noting that the judgment in that case was based on the specific definition of retirement in the relevant rules.
• Sudhir Chandra Sarkar v. Tata Iron and Steel Co. Ltd. & Ors., (1984) 3 SCC 369, Supreme Court of India: The court discussed this case to highlight that the definition of ‘retirement’ was expansive in that case, which was not the case in the present matter.
• Shashikala Devi v. Central Bank of India, (2014) 16 SCC 260, Supreme Court of India: The Court mentioned that there were observations on the principle of public sectors being model employers and provisions of pension being beneficial legislations.
• Asger Ibrahim Amin v. Life Insurance Corporation of India, (2016) 13 SCC 797, Supreme Court of India: The Court mentioned that there were observations on the principle of public sectors being model employers and provisions of pension being beneficial legislations.

Legal Provisions Considered by the Court:

• Regulation 18 of the Life Insurance Corporation of India (Staff) Regulations, 1960: This regulation deals with the notice period for employees leaving service, which was waived in the case of Shree Lal Meena.
• Regulation 76 of the Life Insurance Corporation of India (Staff) Regulations, 1960: This regulation pertains to the Contributory Provident Fund Scheme, which was applicable to Shree Lal Meena at the time of his resignation.
• Section 2(s) read with Section 6N of the Uttar Pradesh Industrial Disputes Act, 1947: These provisions were discussed in the context of the JK Cotton Spinning & Weaving Mills Co. Ltd. case, where the definition of ‘retrenchment’ excluded voluntary retirement.
• Rule 3(1)(a) of the Life Insurance Corporation of India (Employees) Pension Rules, 1995: This rule defines the applicability of the pension scheme to employees who retired between 1.1.1986 and 1.11.1993.
• Rule 2(j), 2(s), 23 and 31 of the Life Insurance Corporation of India (Employees) Pension Rules, 1995: These rules define “employee,” “retirement,” forfeiture of service upon resignation, and “pension on voluntary retirement,” respectively.
• Clause 4(4A) of the General Insurance (Termination, Superannuation and Retirement of Officers and Development Staff) Scheme, 1976: This clause introduced the concept of Voluntary Retirement Scheme on 1.11.1996, with retrospective effect from 1.11.1993.
• Clause 22 of the General Insurance (Employees’) Pension Scheme, 1995: This clause provides for forfeiture of service in case of resignation.
• Andhra Bank Officers’ Service Regulations, 1982: These were the existing service rules that governed the employees of Andhra Bank before the introduction of the Pension Regulations.
• Andhra Bank (Employees) Pension Regulations, 1995: These regulations were introduced later and were made applicable to employees who ‘retired’ on or after 01.01.1986 but before 01.11.1993.

Authorities Considered Table

Judgment

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

How each authority was viewed by the Court?

• The Court clarified that the judgment in JK Cotton Spinning & Weaving Mills Co. Ltd., Kanpur v. State of U.P. [AIR 1990 SC 1808]* was in the context of retrenchment and did not equate resignation with retirement for pension purposes.
• The Court followed the principle laid down in Reserve Bank of India & Anr. v. Cecil Dennis Solomon & Anr. [(2004) 9 SCC 461]* to hold that voluntary retirement is a concept read into a condition of service, created by a statutory provision, whereas resignation is a unilateral determination of the employer-employee relationship.
• The Court relied on UCO Bank & Ors. v. Sanwar Mal [(2004) 4 SCC 412]* to reiterate that pension schemes are self-supporting and that resignation leads to disqualification from pension benefits.
• The Court referred to M.R. Prabhakar & Ors. v. Canara Bank & Ors. [(2012) 9 SCC 671]* to further support the distinction between resignation and voluntary retirement.
• The Court discussed Sheel Kumar Jain v. New India Assurance Company Limited [(2011) 12 SCC 197]* to clarify that the judgment in that case was based on the specific definition of retirement in the relevant rules, which was not the case in the present matter.
• The Court discussed Sudhir Chandra Sarkar v. Tata Iron and Steel Co. Ltd. & Ors. [(1984) 3 SCC 369]* to highlight that the definition of ‘retirement’ was expansive in that case, which was not the case in the present matter.

What weighed in the mind of the Court?

The Court’s decision was primarily influenced by the clear distinction between resignation and retirement as defined in the Pension Rules. The Court emphasized that the rules explicitly state that resignation leads to forfeiture of past service and pension benefits. The retrospective application of the pension rules was interpreted strictly, applying only to employees who were in service on or after 1.11.1993, or those who had retired between 1.1.1986 and 1.11.1993, and not to those who had resigned.

The Court also highlighted the self-financing nature of pension schemes, noting that they are based on contributions from members and that extending benefits to those who have resigned would disrupt the financial structure of the schemes.

Sentiment Analysis Table

Fact:Law Ratio

The court’s reasoning was heavily based on the legal interpretation of the pension rules and the distinction between resignation and retirement, which accounts for the higher percentage of legal considerations. The factual aspects of the case, such as the circumstances of the resignation, were considered but were not decisive in the court’s final decision.

Logical Reasoning

The Court considered alternative interpretations, such as equating resignation with voluntary retirement, but rejected them based on the explicit language of the rules and the established principles of service jurisprudence. The Court emphasized that statutory provisions must be given their clear meaning, and there was no ambiguity in the Pension Rules to warrant a different interpretation.

The Court’s decision was based on the following reasons:

• The Pension Rules clearly distinguish between resignation and retirement.
• Rule 23 of the Pension Rules explicitly states that resignation entails forfeiture of past service and pension benefits.
• The retrospective application of the Pension Rules is limited to specific categories of employees and does not include those who have resigned.
• The self-financing nature of pension schemes requires strict adherence to eligibility criteria.
• Resignation is a unilateral act by an employee to terminate the employer-employee relationship, while voluntary retirement is a condition of service created by statutory provision.

The Court did not have any majority or minority opinions as it was a unanimous decision.

The Court’s analysis was based on a strict interpretation of the legal provisions and a clear understanding of the differences between resignation and retirement in service jurisprudence. The application of these principles to the facts of the case led to the conclusion that the employees who had resigned were not eligible for pension benefits under the retrospective pension schemes.

The potential implications for future cases are that the distinction between resignation and retirement will be strictly upheld in matters of pension eligibility. The courts are likely to adhere to the specific language of pension rules and not allow for interpretations that equate resignation with retirement unless explicitly provided for in the rules.

The judgment reinforces the principle that statutory provisions must be given their clear meaning, and there is no room for importing interpretations that are not supported by the plain language of the law. The judgment also clarifies that pension schemes, being self-financing, must adhere strictly to their eligibility criteria.

The judgment did not introduce any new doctrines or legal principles but rather reaffirmed the existing principles of service jurisprudence and statutory interpretation.

The Court analyzed arguments for and against equating resignation with retirement, ultimately rejecting the argument that resignation should be treated as voluntary retirement in the absence of a formal scheme. The Court emphasized that the rules must be interpreted as they are written and that the intention of the employee cannot override the explicit provisions of the rules.

“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, whereby an employee cannot be a bonded labour.”

Key Takeaways

Key takeaways from the judgment:

• Resignation vs. Retirement: The Supreme Court clearly distinguished between resignation and retirement, emphasizing that resignation is a unilateral act by an employee to terminate the employer-employee relationship, while retirement is a condition of service governed by specific rules.
• Pension Eligibility: Employees who resign from service are generally not eligible for pension benefits unless the pension rules specifically provide for such eligibility. Resignation typically leads to forfeiture of past service and pension benefits.
• Retrospective Application: The retrospective application of pension schemes is limited to specific categories of employees and does not automatically extend to those who have resigned before the scheme’s implementation date.
• Strict Interpretation: Pension rules must be interpreted strictly according to their plain language, and courts should not import interpretations that are not supported by the explicit wording of the rules.
• Self-Financing Schemes: Pension schemes are self-financing and must adhere strictly to their eligibility criteria to maintain their financial viability.
• No Equivalence: Resignation cannot be equated with voluntary retirement for the purpose of pension benefits unless the rules explicitly provide for such equivalence.
• Clear Rules: The importance of clear and unambiguous pension rules is underscored by this judgment. Ambiguity can lead to litigation and uncertainty, and thus, it is essential that pension rules clearly define the terms of eligibility and the consequences of different forms of termination of service.

This judgment serves as a significant precedent for cases involving pension eligibility for employees who have resigned, emphasizing the need for clear and unambiguous rules and the distinction between resignation and retirement.