Supreme Court Upholds Pension Fixation Based on Last Drawn Pay: State of Kerala vs. Anie Lukose (2022)

Introduction

Date of the Judgment: 1 February 2022

Citation: 2022 INSC 85

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

Can a government employee’s pension be reduced because they took leave without pay shortly before retiring? The Supreme Court of India recently addressed this issue in a case concerning a retired lecturer from Kerala. The core question was whether the calculation of pension should be based on the last pay drawn, even if the employee was on leave without allowances during part of the 10-month period before retirement. The Supreme Court upheld the High Court’s decision, affirming that the pension should be calculated based on what the employee would have earned had they not been on leave. The judgment was delivered by a bench comprising Justice Indira Banerjee and Justice J.K. Maheshwari.

Case Background

The respondent, Anie Lukose, retired as a selection grade lecturer on 31 July 2006, after availing voluntary retirement. Her initial basic pension was fixed at Rs. 8907 per month in the pre-revised scale. However, due to an error in the verification report, her basic pension was wrongly recorded as Rs. 7138 per month. Subsequently, upon revision of pay scales effective from 1 January 2006, her pension was enhanced to Rs. 11,127. This incorrect fixation led to the first round of litigation.

In the first round of litigation, the High Court of Kerala, vide its judgment dated 28 February 2013, found the fixation of pension at Rs. 7138 to be erroneous and directed that her actual pension of Rs. 8907 (pre-revised) should have been considered during the revision of pay and pension effective from 1 January 2006. This judgment was not challenged and became final. Consequently, Anie Lukose filed another writ petition (WP(C) No. 2573 of 2016) seeking the fixation of her pension at Rs. 8907 in the pre-revised scale and Rs. 19,333 as per the revised pay and pension.

The learned Single Judge of the High Court noted that Anie Lukose’s last pay drawn was Rs. 46,400, and her pension in the revised scale was correctly fixed at Rs. 19,333, considering her qualifying service. The High Court found that the Accountant General had correctly prepared the pension papers. The State of Kerala then filed a Writ Appeal, which was dismissed by the Division Bench, leading to the current appeal before the Supreme Court.

Timeline

Course of Proceedings

The High Court of Kerala in the first round of litigation (W.P. (C) No. 30847 of 2012) had already determined that the initial fixation of the respondent’s pension at Rs. 7138 was incorrect and that her pension should have been fixed at Rs. 8907 (pre-revised). This judgment was not challenged and became final.

Subsequently, the respondent filed W.P. (C) No. 2573 of 2016, seeking implementation of the earlier order and fixation of her pension at Rs. 8907 in the pre-revised scale and Rs. 19,333 as per the revised scale. The learned Single Judge allowed the writ petition, noting that the respondent’s last pay drawn was Rs. 46,400 and that her pension in the revised scale was correctly fixed at Rs. 19,333.

The State of Kerala filed a Writ Appeal, which was dismissed by the Division Bench of the High Court, affirming the Single Judge’s order. The Division Bench held that the Accountant General had correctly prepared the pension papers, fixing the pension at Rs. 19,334 in the revised scale. The State of Kerala then appealed to the Supreme Court.

Legal Framework

The case revolves around the interpretation of rules related to pension calculation for employees who retired after 1 January 2006, particularly those who drew pay in the pre-revised scale during part of the 10-month period before retirement. The relevant provisions include:

• Clause 63 of Annexure P-18 of the Kerala Service Rules: This clause specifies how average emoluments are to be calculated for pension purposes. Note 1 to this clause clarifies that if an employee was absent from duty on leave with or without allowances, their emoluments for calculating the average would be taken as what they would have been had they not been absent.
• Government Circular G.O.(P) No. 211/2011/Fin dated 7 May 2011: Clause 2(2) of this circular stated that for computing the 10 months’ emoluments for average emoluments, the pay in the pre-revised scale should be notionally enhanced by adding Dearness Allowance (DA) at 74%.
• Government Circular G.O.(P) No. 230/2012/Fin dated 19 April 2012: This circular modified the previous one, stating that the pay in the pre-revised scale should be notionally enhanced to the initial pay drawn in the revised scale, effective from 1 January 2006.

The core issue is how to calculate the average emoluments for pension when an employee has been on leave without allowances during the 10-month period before retirement. The rules and circulars aim to ensure that employees who have taken leave are not penalized in their pension calculations.

Arguments

Arguments by the Appellant (State of Kerala):

• The State argued that according to Circular G.O.(P) No. 230/2012/Fin. dated 19.04.2012, the average emoluments for pension calculation should be based on the 10 months’ emoluments.
• The State contended that since the respondent had rejoined duty after a two-year leave without allowances, her average emoluments should be calculated based on the pay she actually drew during the 10 months before retirement, which would be lower.
• The State relied on Clause 63 of Annexure P-18 of the Kerala Service Rules, arguing that the average emoluments should be calculated based on the actual pay drawn during the 10 months before retirement.

Arguments by the Respondent (Anie Lukose):

• The respondent argued that the Accountant General had correctly fixed her pension based on the pre-revised and revised scales of pay, following the circulars and the earlier order of the High Court.
• The respondent contended that the circulars and rules specify that if an employee was on leave without allowances, their emoluments should be calculated as if they were not on leave.
• The respondent argued that her pension was correctly fixed at Rs. 19,334 in the revised scale, considering her last pay drawn and qualifying service.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame specific issues but the core issue was:

• Whether the High Court was correct in upholding the pension fixation of the respondent based on her last drawn pay, despite her being on leave without allowances for part of the 10-month period before retirement.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

• Clause 63 of Annexure P-18 of the Kerala Service Rules: This clause defines how average emoluments are calculated for pension purposes and clarifies that if an employee was on leave, their emoluments would be calculated as if they were not on leave.
• Government Circular G.O.(P) No. 211/2011/Fin dated 7 May 2011: This circular initially provided for a notional enhancement of pay in the pre-revised scale by adding DA at 74%.
• Government Circular G.O.(P) No. 230/2012/Fin dated 19 April 2012: This circular modified the previous one, stating that pay in the pre-revised scale should be notionally enhanced to the initial pay drawn in the revised scale.

Judgment

How each authority was viewed by the Court?

• The Court relied on Clause 63 of Annexure P-18 of the Kerala Service Rules to clarify that the emoluments should be calculated as if the employee was not on leave.
• The Court considered Government Circular G.O.(P) No. 211/2011/Fin as the original provision for calculating average emoluments and Government Circular G.O.(P) No. 230/2012/Fin as the modified provision, emphasizing the notional enhancement to the revised scale.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle of ensuring that employees who have taken leave, particularly leave without allowances, are not penalized in their pension calculations. The Court emphasized the intent behind the rules and circulars, which is to provide a fair and just pension based on what the employee would have earned had they not been on leave. The Court also gave weight to the fact that the Accountant General had correctly applied these rules in calculating the respondent’s pension.

The Court’s reasoning was based on a logical interpretation of the rules and circulars, ensuring that the pension calculation was fair and consistent with the intent of the regulations.

The Court considered the alternative interpretation that the average emoluments should be based on the actual pay drawn during the 10 months before retirement, but rejected it. The Court emphasized that such an interpretation would penalize employees for taking leave, which was not the intent of the rules. The final decision was reached by applying the correct interpretation of the rules and circulars, ensuring a fair and just pension for the respondent.

The Supreme Court stated, “Therefore, it is clear that part of 10 months would not mean the past 10 months and if the employee had remained on leave without allowances, even their calculation as per the last pay drawn had rightly been made by the office of Accountant General…” The Court also noted, “For computing 10 months’ emoluments for the purpose of average emoluments in respect of an employee, who retired from service on or after 1.1.2006 and who during part 10 months draws pay in the pre-revised scale, their pay in the pre-revised scale may be enhanced notionally to the initial pay drawn in the revised scale, which came into force w.e.f. 1.1.2006.” The Court concluded, “In view of the foregoing discussion, we do not find any error in the order impugned, warranting interference in this appeal.”

Key Takeaways

• Pension calculations for government employees who have taken leave without allowances will not be adversely affected.
• The average emoluments for pension will be calculated as if the employee was not on leave, ensuring a fair and just pension.
• The judgment clarifies the interpretation of the Kerala Service Rules and relevant government circulars, providing clarity on pension calculations.
• Government employees can be assured that their pension will be calculated based on their last drawn pay, even if they have taken leave without allowances.

Directions

The Supreme Court did not give any specific directions but upheld the High Court’s order, which had directed the State to fix the respondent’s pension at Rs. 19,334 in the revised scale.

Specific Amendments Analysis

There is no specific amendment discussed in the judgment.

Development of Law

The ratio decidendi of this case is that for calculating the pension of an employee who has taken leave without allowances, the emoluments should be calculated as if the employee was not on leave. This clarifies the interpretation of Clause 63 of Annexure P-18 of the Kerala Service Rules and the relevant government circulars. This judgment reinforces the principle that employees should not be penalized for taking leave, thereby ensuring a fair and just pension calculation.

Conclusion

The Supreme Court dismissed the appeal filed by the State of Kerala, upholding the High Court’s decision to fix the respondent’s pension based on her last drawn pay, even though she had been on leave without allowances. The Court clarified that the rules and circulars intend to ensure that employees are not penalized for taking leave and that the average emoluments should be calculated as if the employee was not on leave. This judgment provides clarity on pension calculations for government employees who have taken leave without allowances, ensuring a fair and just pension.