Supreme Court Upholds Exclusion of Unpaid Leave for Pension Eligibility in VRS Cases: Delhi Transport Corporation vs. Balwan Singh & Ors. (26 February 2019)

Date of the Judgment: 26 February 2019

Citation: Civil Appeal No.7159 of 2014

Judges: S.A. Bobde, J., Sanjay Kishan Kaul, J., Deepak Gupta, J. (Majority Opinion by Sanjay Kishan Kaul, J.)

Can an employee’s period of unauthorized absence, for which they received no salary, be excluded when calculating their qualifying service for pension? The Supreme Court of India addressed this question in a case involving ex-employees of the Delhi Transport Corporation (DTC) who had opted for the Voluntary Retirement Scheme (VRS). The core issue was whether the period of unauthorized absence should be counted towards the qualifying service required for pension eligibility. This judgment, delivered by a three-judge bench, clarifies the interpretation of the Central Civil Services (Pension) Rules, 1972, particularly Rule 21, in the context of VRS.

Case Background

The respondents, former employees of the Delhi Transport Corporation (DTC), had availed of the Voluntary Retirement Scheme (VRS). However, their pension benefits were denied because the DTC excluded periods of their unauthorized absence, for which they were not paid. This exclusion resulted in their total qualifying service falling short of the required 10 years for pension eligibility. The employees argued that this exclusion was unjust, especially since they were allowed to opt for VRS after completing 10 years of service. The DTC, on the other hand, relied on the Central Civil Services (Pension) Rules, 1972, to justify the exclusion.

The dispute arose because the DTC initially had an Employees Contributory Provident Fund Scheme. On 27.11.1992, the DTC announced a pension scheme, effective from 3.8.1981, that was similar to the Central Government’s pension scheme. This scheme allowed existing employees to switch from the Provident Fund Scheme to the Pension Scheme, provided they refunded the employer’s share of the Provident Fund. The VRS was introduced on 3.3.1993, requiring employees to have completed 10 years of service or 40 years of age to be eligible. The VRS also included pensionary benefits as per the 1992 Office Order.

Timeline

Course of Proceedings

The Delhi High Court had initially ruled in favor of the employees. However, the Supreme Court, in D.T.C. v. Lillu Ram, upheld the exclusion of unauthorized absence from qualifying service, thereby denying pension benefits to employees who did not complete 10 years of qualifying service. A two-judge bench of the Supreme Court disagreed with the view taken in Lillu Ram, leading to the matter being referred to a larger bench. The disagreement was based on several points, including whether leave without pay should be treated as unauthorized absence, the non-consideration of relevant rules, and the lack of notice to employees regarding the impact of unauthorized absence on their pension.

Legal Framework

The case primarily revolves around the interpretation of the Central Civil Services (Pension) Rules, 1972. Key provisions include:

• Rule 3(1)(q) of the Pension Rules: Defines “qualifying service” as “service rendered while on duty or otherwise which shall be taken into account for the purpose of pensions and gratuities admissible under these rules.”
• Rule 21 of the Pension Rules: Specifies that “all leave during service for which leave salary is payable [and all extraordinary leave granted on medical certificate] shall count as qualifying service.” It also includes a proviso for extraordinary leave under specific circumstances.
• Rule 49(1) of the Pension Rules: States that “In the case of a Government servant retiring in accordance with the provisions of these rules before completing qualifying service of ten years, the amount of service gratuity shall be calculated at the rate of half month’s emoluments for every completed six monthly period of qualifying service.”
• Rule 27 of the Pension Rules: Deals with the effect of interruption in service, stating that an interruption entails forfeiture of past service, except under certain conditions.
• Rule 28 of the Pension Rules: Addresses the condonation of interruption in service.
• FR 17-A of the Fundamental Rules: Deals with unauthorized absence.
• SR 200 of the Supplementary Rules: Requires every period of suspension and other interruption of service to be noted in the service book.

The court also considered Government of India decisions and orders related to the maintenance of service records and the treatment of extraordinary leave.

Arguments

Arguments of the Appellant (Delhi Transport Corporation):

• The appellant argued that Rule 21 of the Pension Rules is clear: only leave for which salary is paid counts towards qualifying service. The rule explicitly states that “all leave during service for which leave salary is payable shall count as qualifying service.”
• The appellant contended that Rules 27 & 28 of the Pension Rules, dealing with interruption in service, are not applicable here, as there was no forfeiture of past service.
• The appellant stated that the Government of India’s decisions and orders, while important for record-keeping, cannot override the explicit provisions of the Pension Rules.
• The appellant distinguished the qualifying period for VRS from the qualifying service for pension, arguing that the two are not interchangeable.

Arguments of the Respondents (Ex-Employees):

• The respondents argued that if leave without pay was sanctioned, it should not be treated as unauthorized absence.
• They contended that the relevant rules, such as Rules 27 & 28 of the Pension Rules and FR 17-A of the Fundamental Rules, were not properly considered in Lillu Ram.
• The respondents emphasized that no notice was given to them that their absence would be treated as unauthorized and would not count towards qualifying service.
• They argued that since the VRS is permissible only after 10 years of service, it is unjust to deny them pension benefits, especially without prior notice.
• The respondents relied on Government of India’s decision dated 28.2.1976, which states that all spells of extraordinary leave not covered by specific entries in the service record should be deemed as qualifying service.
• They also referred to SR 200 of the Supplementary Rules and the Government of India Order dated 24.6.1966, which emphasize the importance of noting interruptions in service in the service book.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

1. Whether the period of unauthorized absence, for which no salary is paid, can be excluded while calculating qualifying service for pension under the Central Civil Services (Pension) Rules, 1972.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

How each authority was viewed by the Court?

• The Supreme Court, while arriving at the same conclusion as in D.T.C. v. Lillu Ram [(2017) 11 SCC 407], clarified that its reasoning was different from that view.
• The Court relied on Rule 3(1)(q) of the Central Civil Services (Pension) Rules, 1972 to define qualifying service, but clarified that this must be within the rules.
• The Court heavily relied on Rule 21 of the Central Civil Services (Pension) Rules, 1972, emphasizing that only leave for which salary is payable counts as qualifying service.
• The Court referred to Rule 49(1) of the Central Civil Services (Pension) Rules, 1972, to highlight that pension is only admissible after completing a qualifying service of ten years.
• The Court clarified that Rule 27 of the Central Civil Services (Pension) Rules, 1972, deals with interruption of service and is not applicable in the present case.
• The Court clarified that Rule 28 of the Central Civil Services (Pension) Rules, 1972, deals with the condonation of interruption of service and is not applicable in the present case.
• The Court noted that FR 17-A of the Fundamental Rules deals with unauthorized absence but is not applicable in the present case.
• The Court acknowledged the Government of India decision M.F., O.M. No.F.11 (3)-E. V (A)/76 dated 28.2.1976 regarding entries in service records but stated that it cannot supersede the rules.
• The Court noted SR 200 of the Supplementary Rules regarding the recording of interruptions in service but stated that it cannot override the rules.
• The Court acknowledged the Government of India Order No. M.F., O.M. No.F.18 (7)-E. V (B)/65-Part-V dated 24.6.1966 regarding the maintenance of service books but stated that it cannot override the rules.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the literal interpretation of Rule 21 of the Central Civil Services (Pension) Rules, 1972. The Court emphasized that the rule is clear and unambiguous, stating that only leave for which salary is payable can be counted towards qualifying service for pension. The Court also took into consideration the fact that the respondents were initially governed by the Employees Contributory Provident Fund Scheme and the Pension Scheme was introduced much later. The Court also highlighted that the qualifying period for the VRS and pension eligibility are distinct and cannot be interchanged.

The court’s reasoning was based on a strict interpretation of the legal provisions. The court did not find any ambiguity in the rules and decided against any interpretation that would go against the literal meaning of the rules. The court also rejected the argument that the employees should have been given notice about the effect of unauthorized absence on their pension, stating that the employees are expected to be aware of the rules.

The court considered the argument that the employees may not have availed of the VRS had they known that their pension would be affected. However, the court held that this cannot override the clear provisions of the rules. The court also noted that the respondents were initially governed by the Employees Contributory Provident Fund Scheme, and the Pension Scheme was introduced much later. The court clarified that the qualifying period for the VRS and pension eligibility are distinct and cannot be interchanged.

The court’s decision is based on the principle that when the words of a statute are clear and unambiguous, there cannot be a recourse to any principle of interpretation other than the rule of literal construction. The court also emphasized that the rules have to be followed strictly, and the court cannot add or subtract from the rules.

“In our view, the only aspect which is required to be considered is the requirement of the specific rule of the Pension Rules, which provides for admissibility of pension.”

“Rule 21 is quite clear in its terms, i.e., “all leave during service for which leave salary is payable” would count.”

“The qualifying period for the VRS would have to be governed by that Scheme and cannot ipso facto be imported into the entitlement of pension, contrary to the plain wordings of the Pension Rules.”

Key Takeaways

• Periods of unauthorized absence for which no salary is paid will not be counted towards qualifying service for pension under the Central Civil Services (Pension) Rules, 1972.
• The qualifying period for the Voluntary Retirement Scheme (VRS) is distinct from the qualifying service for pension.
• Employees are expected to be aware of the applicable pension rules, and no separate notice regarding the impact of unauthorized absence on pension is required.
• Government decisions and orders related to service records cannot override the explicit provisions of the pension rules.

Directions

The Supreme Court directed that if any payments have been made to the respondents, especially in view of the interim order dated 23.7.2014, the appellant-Corporation will not claim any refund of such amount already paid.

Development of Law

The ratio decidendi of the case is that the qualifying service for pension under the Central Civil Services (Pension) Rules, 1972, specifically Rule 21, requires that only periods for which leave salary is payable can be counted. This judgment reinforces the literal interpretation of pension rules and clarifies the distinction between qualifying service for VRS and pension. While the result is the same as in Lillu Ram, the reasoning of this judgment is slightly different. This judgment clarifies that the rules have to be followed strictly and no interpretations can be made that go against the literal meaning of the rules.

Conclusion

The Supreme Court allowed the appeal filed by the Delhi Transport Corporation, setting aside the impugned order. The Court held that the ex-employees were not entitled to pension benefits as they did not meet the qualifying service criteria due to the exclusion of periods of unauthorized absence for which they were not paid. The Court emphasized that the Central Civil Services (Pension) Rules, 1972, specifically Rule 21, are clear and unambiguous, and only leave for which salary is paid can be counted towards qualifying service for pension. This judgment clarifies the interpretation of the pension rules in the context of VRS and reinforces the principle that the rules have to be followed strictly.