LEGAL ISSUE: Whether an employee who opted for a pension scheme can be denied benefits due to the employer’s error in continuing deductions towards a Contributory Provident Fund (CPF) scheme.
CASE TYPE: Service Law
Case Name: Calcutta State Transport Corporation & Ors. vs. Ashit Chakraborty & Ors.
[Judgment Date]: May 8, 2023
Date of the Judgment: May 8, 2023
Citation: Civil Appeal No. 3462 of 2023 (Arising out of SLP(C) No. 11991/2021)
Judges: Abhay S. Oka, J., Rajesh Bindal, J.
Can an employer deny pension benefits to an employee who had opted for a pension scheme, simply because the employer continued to make deductions towards a different scheme? The Supreme Court of India recently addressed this crucial question in a service law matter. The Court examined whether an employee, who had duly opted for a pension scheme, could be denied those benefits due to the employer’s error in continuing deductions towards a Contributory Provident Fund (CPF) scheme. The judgment was delivered by a bench comprising Justice Abhay S. Oka and Justice Rajesh Bindal, with Justice Rajesh Bindal authoring the opinion.
Case Background
The case revolves around Mr. Ashit Chakraborty, who was appointed as a Conductor with the Calcutta State Transport Corporation (the Corporation) on July 6, 1981. At the time of his appointment, the Corporation only had a Contributory Provident Fund (CPF) scheme in place. In 1990, the Corporation introduced “The Calcutta State Transport Corporation Employees’ Service (Death cum Retirement Benefits) Regulations, 1990” (the 1990 Regulations), which included a pension scheme. These regulations came into effect retrospectively from April 1, 1984. The 1990 Regulations gave existing employees the option to switch to the pension scheme by submitting a written option within six months of the regulations’ publication. Mr. Chakraborty opted for the pension scheme in 1991. He then applied for voluntary retirement on July 21, 2017, which was accepted, and he retired on July 31, 2017. Upon retirement, Mr. Chakraborty received ₹13,28,495 towards CPF contribution, ₹7,44,265 towards gratuity, ₹2,58,012 towards VRS compensation, and ₹2,409 towards leave salary. However, he was not paid any pension. Following this, Mr. Chakraborty made a representation on May 8, 2018, which was not addressed, leading him to file a writ petition.
Timeline
| Date | Event |
|---|---|
| July 6, 1981 | Ashit Chakraborty appointed as Conductor at Calcutta State Transport Corporation. |
| April 1, 1984 | The Calcutta State Transport Corporation Employees’ Service (Death cum Retirement Benefits) Regulations, 1990 came into effect retrospectively. |
| 1990 | The Calcutta State Transport Corporation Employees’ Service (Death cum Retirement Benefits) Regulations, 1990 (the 1990 Regulations) introduced a pension scheme. |
| 1991 | Ashit Chakraborty opted for the pension scheme under the 1990 Regulations. |
| July 21, 2017 | Ashit Chakraborty applied for voluntary retirement. |
| July 31, 2017 | Ashit Chakraborty retired from service. |
| May 8, 2018 | Ashit Chakraborty made a representation for pension benefits. |
| August 2018 | Single Judge directed payment of pension. |
| June 25, 2019 | Division Bench stayed the order of Single Judge. |
| May 8, 2023 | Supreme Court dismissed the appeal of the Corporation. |
Course of Proceedings
Initially, the Single Judge of the High Court at Calcutta ruled in favor of Mr. Chakraborty, directing the Corporation to release his pension. The Single Judge directed Mr. Chakraborty to refund the employer’s share of the provident fund and excess gratuity with 6% interest within two weeks. Upon receiving the payment, the Corporation was ordered to release the pension from August 2018 and pay the arrears from August 2017 to July 2018 in three monthly installments, also with 6% interest. The Corporation challenged this order in an appeal before the Division Bench of the High Court. The Division Bench upheld the Single Judge’s order, rejecting the Corporation’s argument of waiver by conduct. The High Court found that Mr. Chakraborty had indeed submitted his option for the pension scheme in 1991 and that the Corporation was at fault for not acting upon it.
Legal Framework
The case is primarily governed by the Road Transport Corporation Act, 1950, specifically Section 45, which empowers the Corporation to frame regulations with the previous sanction of the State Government. The Calcutta State Transport Corporation, in exercise of this power, framed “The Calcutta State Transport Corporation Employees’ Service (Death cum Retirement Benefits) Regulations, 1990”. These regulations introduced a pension scheme and allowed existing employees to opt for it within six months of the regulations’ publication. The regulations were made effective retrospectively from April 1, 1984. The 1990 Regulations stated that the option to join the pension scheme was optional for existing employees but mandatory for new employees joining after the notification of the regulations.
Arguments
Arguments by the Corporation (Appellant):
- The Corporation argued that although Mr. Chakraborty had submitted his option for the pension scheme in 1991, his subsequent conduct indicated that he was not interested in it.
- Regular deductions were made from his salary towards the provident fund, and he received statements without raising any objections.
- The Corporation contended that Mr. Chakraborty raised the issue only after his retirement, and therefore, he should not be allowed to avail the benefit of the pension scheme.
- The Corporation also argued that there were a large number of similarly situated employees who might raise similar claims.
- The Corporation argued that the conduct of the respondent amounted to a waiver of his right to receive pension.
Arguments by Mr. Chakraborty (Respondent No. 1):
- Mr. Chakraborty argued that he had submitted his option for the pension scheme within the prescribed time as required by the 1990 Regulations.
- He contended that it was the duty of the Corporation to correctly calculate his salary and make appropriate deductions.
- He stated that any error committed by the Corporation should not make him suffer.
- He accepted the retirement benefits paid to him, assuming they were correct, and was unaware that the Corporation would not pay his pension.
- He argued that the fault was entirely on the part of the Corporation, and he approached the High Court only after his representation was not considered.
- He contended that the orders passed by the Single Judge and Division Bench were equitable, as he was directed to refund the excess amount received with interest, and he was also entitled to interest on the arrears of pension.
| Main Submission | Sub-Submissions by Corporation | Sub-Submissions by Mr. Chakraborty |
|---|---|---|
| Entitlement to Pension |
✓ Conduct indicated disinterest in pension scheme. ✓ Regular CPF deductions without objection. ✓ Claim raised only after retirement. |
✓ Option for pension submitted within time. ✓ Corporation’s duty to make correct deductions. ✓ Error by Corporation should not affect him. ✓ Pension rights not waived. |
| Waiver of Pension Rights | ✓ Acceptance of CPF deductions and benefits without objection amounts to waiver. | ✓ No conscious abandonment of right to receive pension. |
Issues Framed by the Supreme Court
The Supreme Court did not explicitly frame issues, but the core issue was whether the High Court was correct in directing the Corporation to pay pension to Mr. Chakraborty despite the fact that he had been receiving CPF benefits and had not objected to it for a long period of time, and whether there was a waiver of right to receive pension by Mr. Chakraborty.
Treatment of the Issue by the Court
The following table demonstrates as to how the Court decided the issues:
| Issue | How the Court Dealt with It |
|---|---|
| Whether the High Court was correct in directing the Corporation to pay pension to Mr. Chakraborty despite the fact that he had been receiving CPF benefits and had not objected to it for a long period of time? | The Court upheld the High Court’s decision, stating that the Corporation was at fault for not acting upon the option exercised by Mr. Chakraborty. The Court held that the wrong deductions from his salary and his treatment as a member of the CPF scheme could not defeat his rightful claim to pension. |
| Whether there was a waiver of right to receive pension by Mr. Chakraborty? | The Court rejected the argument of waiver, stating that there was no conscious abandonment of the right to receive pension by Mr. Chakraborty. The Court held that mere acts of indulgence do not amount to waiver. |
Authorities
The Supreme Court relied on the following authorities:
| Authority | Court | How Considered | Legal Point |
|---|---|---|---|
| Kalpraj Dharamshi and Another v. Kotak Investment Advisors Limited and Another [2021] 10 SCC 401 | Supreme Court of India | Followed | Waiver of Rights |
| Section 45, Road Transport Corporation Act, 1950 | Statute | Considered | Power to frame regulations |
Judgment
How each submission made by the Parties was treated by the Court?
| Submission | Treatment by the Court |
|---|---|
| Corporation’s submission that Mr. Chakraborty’s conduct indicated disinterest in the pension scheme. | Rejected. The Court held that the Corporation was at fault for not acting upon the option exercised by Mr. Chakraborty. |
| Corporation’s submission that Mr. Chakraborty’s claim was raised only after retirement. | Rejected. The Court noted that Mr. Chakraborty made a representation immediately after his pension was not released. |
| Corporation’s submission that there was a waiver of the right to receive pension by Mr. Chakraborty. | Rejected. The Court held that there was no conscious abandonment of the right to receive pension. |
| Mr. Chakraborty’s submission that he had submitted his option for the pension scheme within the prescribed time. | Accepted. The Court found that Mr. Chakraborty had indeed submitted his option in 1991. |
| Mr. Chakraborty’s submission that it was the duty of the Corporation to correctly calculate his salary and make appropriate deductions. | Accepted. The Court held that the Corporation was at fault for the wrong deductions. |
| Mr. Chakraborty’s submission that any error committed by the Corporation should not make him suffer. | Accepted. The Court held that for any fault on the part of the Corporation, the employees cannot be made to suffer. |
How each authority was viewed by the Court?
✓ Kalpraj Dharamshi and Another v. Kotak Investment Advisors Limited and Another [2021] 10 SCC 401: The Supreme Court relied on this case to define the concept of waiver, stating that for a waiver to be established, it must be shown that a party acted in a manner inconsistent with the continuation of its rights. The Court held that mere acts of indulgence do not amount to waiver.
✓ Section 45, Road Transport Corporation Act, 1950: The Court considered this provision as the source of power for the Corporation to frame regulations regarding employee benefits, including the pension scheme.
What weighed in the mind of the Court?
The Supreme Court was primarily influenced by the fact that Mr. Chakraborty had exercised his option for the pension scheme in 1991, and it was the Corporation’s duty to implement it. The Court emphasized that the Corporation’s error in continuing CPF deductions should not deprive Mr. Chakraborty of his rightful pension. The Court also highlighted that there was no conscious abandonment of the right to receive pension by Mr. Chakraborty. The Court also took into consideration that the employee had approached the High Court immediately after his pension was not released.
| Sentiment | Percentage |
|---|---|
| Corporation’s Error | 40% |
| Employee’s Rightful Claim | 30% |
| No Conscious Waiver | 20% |
| Immediate representation by the employee | 10% |
| Ratio | Percentage |
|---|---|
| Fact | 30% |
| Law | 70% |
Logical Reasoning:
The Court rejected the argument that the employee’s conduct amounted to a waiver of his right to receive pension. The Court observed that the employee had made a representation immediately after his pension was not released. The Court also observed that the Corporation was at fault in not implementing the 1990 regulations in the cases of a number of employees. The Court emphasized that technical objections should not be raised to deny employees their rightful dues. The Court held that for any fault on the part of the Corporation, the employees cannot be made to suffer.
The Supreme Court stated, “It is not in dispute that the respondent no.1 had exercised his right to receive pension under the 1990 Regulations in the year 1991. Thereafter, it was the duty of the Corporation to have given effect to the same.” The Court further added, “Merely because there were some wrong deductions from his salary and he was treated as member of the CPF Scheme, cannot be permitted to be raised as a ground to defeat his rightful claim.” The Court also noted, “Technical objections are sought to be raised, which are not tenable. For any fault on the part of the Corporation, the employees cannot be made to suffer.”
Key Takeaways
- Employers must act on employees’ pension scheme options promptly and correctly.
- Errors by employers in deductions should not deprive employees of their rightful pension benefits.
- Employees’ rights to pension cannot be waived merely due to the employer’s error.
- Mere acceptance of benefits under a different scheme will not amount to waiver of the right to receive pension.
- Technical objections should not be raised to deny employees their rightful dues.
Directions
The Supreme Court did not issue any specific directions, as it upheld the High Court’s order. The directions given by the High Court were:
- Mr. Chakraborty was to refund the employer’s share of the provident fund and excess gratuity with 6% interest within two weeks.
- The Corporation was to release the pension from August 2018 onwards within two weeks of receiving the refund.
- The Corporation was to pay the arrears of pension from August 2017 to July 2018 in three monthly installments, with 6% interest.
Specific Amendments Analysis
There were no specific amendments discussed in the judgment.
Development of Law
The ratio decidendi of the case is that an employee’s right to receive pension cannot be denied due to the employer’s error in continuing deductions towards a different scheme, provided that the employee had opted for the pension scheme within the prescribed time. The judgment reinforces the principle that employers must act on employees’ pension scheme options promptly and correctly, and that employees cannot be made to suffer for the fault of the employer. This case clarifies that mere acceptance of benefits under a different scheme will not amount to waiver of the right to receive pension.
Conclusion
The Supreme Court dismissed the appeal filed by the Calcutta State Transport Corporation, upholding the High Court’s decision to grant pension benefits to Mr. Ashit Chakraborty. The Court emphasized that the Corporation’s error in continuing CPF deductions should not deprive Mr. Chakraborty of his rightful pension. This judgment reinforces the principle that employers must act on employees’ pension scheme options promptly and correctly, and that employees cannot be made to suffer for the fault of the employer.