Holding

The High Court was correct: the pro‑rata commuted portion is to be deducted from the basic pension to compute the restorable pension, while dearness relief and interim relief are payable on the full basic pension.

Summary

The appellants challenged a High Court judgment that interpreted Rule 37A of the Central Civil Services (Pension) Rules, 1972 regarding the calculation of restored pension for employees who had commuted a portion of their pension. The High Court had held that the pro‑rata commuted portion must be deducted from the basic pension to arrive at the restorable pension, but dearness relief and interim relief are payable on the full basic pension. The Supreme Court examined the relevant rules, the decision in P. V. Sundara Rajan v. Union of India, and the applicability of dearness relief provisions. It affirmed that the High Court’s construction was consistent with the statutory scheme and the earlier Supreme Court precedent. Consequently, the Court found no merit in the appeal and dismissed it, ordering no costs.

Issues considered

What is the correct method of calculating restoration of pension for employees covered by Rule 37A when a portion of pension has been commuted?
Whether the pro‑rata commuted portion must be deducted from the basic pension for the purpose of restoration?
Whether dearness relief and interim relief should be calculated on the full basic pension despite the commutation?
Whether the High Court erred by not considering the Office Memoranda and tables issued by the Department of Pension?

Legislation cited

Central Civil Services (Commutation of Pension) Rules, 1981
Central Civil Services (Pension) Rules, 1972s. Rule 37, s. Rule 37-A, s. Rule 55-A

Subjects

pension restorationcommuted pensiondearness reliefRule 37Rule 37-Acivil service pensionabsorptionSupreme Court

Judgment

A ACCOUNTANT GENERAL OF ORI SSA AND ANR )

R. RAMAMURTHY AND ANR.

NOVEMBER 29, 2006
B [ARIJIT PASAYAT AND S.H. KAPADIA, JJ.]

Service Law:

Central Civil Services (Pension) Rules, 1972:
c
rr. 37 and 37-A-Pension on absorption in· or under a Corporation
etc.-Restoration of commuted pension-Held, where an employee had
commuted I/3rd permissible pension, pro-rata commuted pension has to be
deducted ji·om the basic pension to arrive at restorable pension, but he will
D get dearness relief interim relief etc. on full basic pension.

Appellants filed the present appeal challenging the judgment of the High
Court in a writ petition involving the question, "what is the mode of calculating
of restoration of pension in respect of employees covered by Rule 37A of the
Central Civil Services (Pension) Rules, 1972"?
E
Dismissing the appeal, the Court

HELD: The High Court was right in holding that in a case where an
employee had commuted permissible pension, i.e. 113 and even where lesser
portion is commuted, the pro-rata commuted portion has to be deducted from
F the basic pension to arrive at restorable pension, but however, he will get
dearness relief, interim relief etc. on full basic pension. In view of the decision
in P. V. Sundara Rajan 's case*, there is no substance in the appeal.
(777-D, E; 780-F]
* P. V. Sundara Rajan v. Union of India (2000)4 SCC 469, relied on.

G CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5269 of2006.

From the Judgments and Orders dated 24.12.2003 and 12.4.2005 of the
High Court of Judicature, Andhra Pradesh at Hyderabad in W.P. (Civil) No.
8532/2003 and Review WPMP SR No. 78433/2004 in W.P. (Civil) No. 8532/2003
respectively.
H 776
ACCOUNTANT GENERAL OFORISSA v. R. RAMAMURTHY [PASAYA T, J.] 777

A. Sharan, A.S.G., Dr. Shyamlha Pappu, J.V. Suryanaryana, Asheesh A
Jain, Ms. Rekha Pandey and Mrs. Anil Katiyar, P. V. Sundarajan, Ms. Shipra
Ghose, Ms. Arundhati Mukherjee, R. Krishnaa Morthi, Goodwill Indeevar, S.
Udaya Kumar Sagar and Ms. Bina Madhavan (for M/s. Lawyer's Knit & Co.)
for the appearing parties.

The Judgment of the Court was delivered by B

ARIJIT PASAYAT, J. Leave granted.

Challenge in these appeals is to a judgment rendered by a Division
Bench of the Andhra Pradesh High Court in Writ Petition No.8532 of 2003.
The said writ petition had been filed by the appellants questioning correctness C
of the decision rendered by the Central Administrative Tribunal, Hyderabad
Bench (in short the 'CAT') in 0.A.No. 1345 of 200 l. The basic issue which
arose for consideration in the writ petition was "what is the mode of calculating
of restoration of pension in respect of employees covered by Rule 37A of
CCS (Pension) Rules, 1972 (in short the 'Rules'). According to the appellants, D
a conjoint reading of Rules 37 and 37 A as operated upto 31.3.1995 has not
been kept in view. The High Court modified the order of the CAT and held
that in a case where an employee had commuted minimum permissible pension
i.e. 1/3 and even where lesser portion is commuted, the pro rata commuted
portion has to be deducted from the basic pension to arrive at restorable
pension, but however, he will get dearness relief, interim relief etc. on full E
basic pension.

The High Court arrived at the aforesaid conclusion after considering
Rules 37 and 37A.

Challenge in these appeals is on the ground that the High Court was F
not correct in calculating the commuted amount of pension to be restorable
pension without taking into consideration the relevant pension rules and the
Office Memorandum No.4/59/97-P&PW(D) dated 14.7.1998, Office Memorandum
No.2/1187-PIC-1 dated 16.4.1987 and Office Memorandum No.45/86/97-
P&PW(A) Part II dated 27.10.1997.
G
According to the appellants, these Memoranda's laid down the tables
according to which the computation has to be arrived at as issued by the
Department of Pension.

Learned counsel for the respondents on the other hand supported the H
778 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.

A judgment in question.
Rules 37 and 37A read as follows:

"Rule 37: Pension on absorption in or under a corporation, company
or body:-
B (1) A Government servant who has been permitted to be absorbed in
a service or post in or under a Corporation or Company wholly or
substantially owned or controlled by the Central Government or a
State Government or in or und.er a Body controlled or financed by the
Central Government or a State Government shall be deemed to have
C retired from service from the date of such absorption and subject to
sub-rule (3) he shall be eligible to receive retirement benefits which he
may have elected, or deemed to have elected, and from such date as
may be determined, in accordance with the orders of the Central
Government applicable to him.

D EXPLANATION: Date of absorption shall be:

(i) in case of Government employee joins a Corporation or a company
or body on immediate absorption basis the date on which he actually
joins that corporation or company or body;

E (ii) in case a Government employee initially joins a corporation or
company or body on foreign service terms by retaining a lien under
the Government the date from which his unqualified resignation is
accepted by the Government.

(2) The provisions of sub-rule (I) shall also apply to Central
F Government servants who are permitted to be absorbed in joint sector
undertakings, wholly under the joint control of Cenral Government
and State Governments I Union Territory Administrations or under the
joint control of two or more State Government/Union Territory
Administration.

G (3) Where there is a pension scheme in a body controlled or financed
by the Central Government in which a Government servant is absorbed,
he shall be entitled to exercise option either to count the service
rendered under the Central Government in that body for pension or
to receive pro rata retirement benefits for the service rendered under
the Central Government in accordance with the orders issued by the
H
.. ACCOUNTANT GENERAL OF ORISSA r. R. RAMAMURTHY [PASAYAT,J.] 779
Central Government. A
EXPLANATION: Body means autonomous body or statutory body:-

RULE 37-A:- Payment of lump sum, amount to persons on absorption
in or under a Corporation, company or body:

(l) Where a Government servant referred to in Rule 37 elects the B
alternative of receiving the retirement gratuity and a lump sum amount
in lieu c:if pension he shall, in addition to the retirement gratuity be
granted:

(a) On an application made in this behalf, a lump sum amount not
exceeding the computed value of one-third of his pension as may be c
admissible to him in accordance with the provisions of the Civil
Pensions (Commutation) Rules [now Central Civil Services
(Commutation of Pension) Rules, 1981 ]; and

(b) terminal benefits equal to the commuted value of the balance
amount of pension left after commuting one-third of pension to be D
worked out with reference to the commutation tables obtaining on the
date from which the commuted value becomes payable subject to the
condition that the Government servant surrenders his right of drawing
two-thirds of his pension."

The respective stand have to be considered in the light of this Court's
E
decision in P. V. Sundara Rajan v. Union of India, (2000] 4 SCC 469. In para
11 it has been noted as follows:

"The dearness relief on pension has been granted to pensioners to
compensate them for the erosion in the value of money due to rise F
in the cost of living. It seems clear that the Government has pennitted
to the applicants dearness relief calculated only on one-third part of
the pension restored while in case of other pensioners, the dearness
relief is calculated on full pension including the commuted part of
pension. As already noticed, the applicants are to be treated on the
same footing as other Central Government employees insofar as the G
question of restoration of one-third of commuted pension is concerned
and are entitled to the benefits as given in Common Cause case [ 1987]
l SCC 142. In this respect, it would also be useful to notice that
"pension" as defined in Central Civil Services (Pension) Rules, I 972
does not include dearness relief. Rule 3( l )(o) reads as under:
H
780 SUPREME COURT REPORTS [2006) SUPP. 9 S.C.R.

A "3(l)(o) 'pension' includes gratuity except when the term pension
is used in contradistinction to gratuity, but does not include
dearness relief."

Further, in Paragraphs 12 and 13 it has been observed as follows:

B 12. We may also reproduce Rule 55-A:

"55-A Dearness relief on pension/ family pension.- (i) Relief against
price rise may be granted to the pensioners and family pensioners in
the form of dearness relief at such rates and subject to such conditions
as the Central Government may specify from time to time.
c (ii) If a pensioner is re-employed under the Central or State Government
or a corporation/company/body/bank under them in India or abroad
including permanent absorption in such corporation/company/body/
bank, he shall not be eligible to draw dearness relief on pension/family
pension during the period of such re-employment.
D (iii) Deleted"

I 3. The government instructions also show that the dearness relief is
granted to compensate the pensioners for erosion in the value of
money due to rise in the cost of living. Anyrhing which is not a part
of pension has to be paid in full insofar as those who have commuted
E one-third pension."

In view of what has been stated in the said case; more. particularly in
the quoted paragraphs, there is no substance in the appeals. which we
accordingly dismiss. No costs.
F RP. Appeal dismissed.