Holding

The 2014 Government guidelines prevail over the IBA Clarification and HRMD Circular, and any re‑fixation of ex‑servicemen’s pay that ignores those guidelines and breaches natural justice is void.

Summary

The appellants, retired Indian Navy officers, were re‑employed by Punjab National Bank and initially received a basic pay higher than the ceiling prescribed in the Indian Banks Association (IBA) Clarification of 2018. The bank later re‑fixed their pay at a lower amount, citing the IBA Clarification and an HRMD Circular, which the appellants challenged as contrary to the 2014 Government guidelines on pay fixation for ex‑servicemen. The High Court first set aside the re‑fixation, but a Division Bench reversed that decision. The Supreme Court examined whether the IBA Clarification and HRMD Circular could override the 2014 guidelines, whether the bank’s re‑fixation complied with those guidelines, and the appropriate method of fixation and relief. It held that the 2014 guidelines, issued by the Government, have overriding effect and cannot be superseded by the IBA Clarification or HRMD Circular; the bank’s re‑fixation violated those guidelines and the principles of natural justice. Consequently, the re‑fixation order was quashed, the bank was directed to re‑fix pay in accordance with the 2014 guidelines, and any recovery or refund made during the pendency of the proceedings was set aside.

Issues considered

Whether the IBA Clarification and HRMD Circular can override the 2014 Government guidelines for pay fixation of ex‑servicemen during re‑employment.
Whether the re‑fixation of pay by the bank pursuant to the IBA Clarification is in consonance with the 2014 guidelines and whether the High Court was justified in confirming such re‑fixation.
If the re‑fixation is not justified, how the pay of ex‑servicemen should be fixed on re‑employment and what reliefs are appropriate.

Headnote

Issue for Consideration Issue arose as regards to whether Indian Banks Association Clarification and HRMD Circular can override the 2014 guidelines for the purpose of pay fixation of ex-servicemen during re-employment; whether re-fixation as done by the respondent-Bank pursuant to the IBA guidelines dated 17.02.2014 and whether the High Court was justified in confirming such re-fixation; and if not, in what manner can the fixation of pay of ex-servicemen may be made on their re-employment and what reliefs can be granted to the appellants-ex-servicemen. Headnotes† Service

Subjects

Re-fixation of pay of ex-servicemen on re-employmentPay-fixation of ex-servicemenGuidelines dated 17.02.2014Department of Financial Services (Welfare)Indian Banks Association Clarification (IBA Clarification)HRMD CircularPrinciples of natural justicePay reduction2014 guidelines prevail over the IBA clarification and HRMD circularRecovery and refund

Judgment

[2025] 7 S.C.R. 2148 : 2025 INSC 1033

Mukund K. Pai & Ors.
v.
Punjab National Bank & Ors.
(Civil Appeal No. 9918 of 2025)
30 July 2025
[J.K. Maheshwari and Vijay Bishnoi, JJ.]

Issue for Consideration
Issue arose as regards to whether Indian Banks Association
Clarification and HRMD Circular can override the 2014 guidelines for
the purpose of pay fixation of ex-servicemen during re-employment;
whether re-fixation as done by the respondent-Bank pursuant to
the IBA Clarification is in consonance with the guidelines dated
17.02.2014 and whether the High Court was justified in confirming
such re-fixation; and if not, in what manner can the fixation of pay
of ex-servicemen may be made on their re-employment and what
reliefs can be granted to the appellants-ex-servicemen.

Headnotes†
Service Law – Pay fixation – Pay fixation of ex-serviceman
re-employed in public sector bank – Post-retirement from
Indian Navy, the appellants took re-employment with the
respondent-bank – Subsequent to issuance of IBA Clarification,
the respondent-bank vide HRMD circular re-fixed the pay
of the appellants at an amount lower than what they were
re-employed at – Appellants filed writ petition – Single Judge
of the High Court quashed the order of re-fixation – Division
Bench set aside the order passed by the Single Judge –
Challenge to:
Held: IBA Clarification and the subsequent HRMD Circular do
not override the 2014 guidelines – Refixation done by the bank
ignoring 2014 guidelines in applying IBA clarification and the
HRMD circular to be quashed – Bank while re-fixing the pay had
violated the principles of natural justice and reduced the pay of
appellants without hearing them – IBA clarification and HRMD
circular are not in consonance with the 2014 guidelines for pay
fixation of ex-servicemen and for purpose of fixation of pay, the
2014 guidelines shall prevail over the IBA clarification and HRMD
[2025] 7 S.C.R. 2149

Mukund K. Pai & Ors. v. Punjab National Bank & Ors.

circular – Re-fixation applying IBA clarification and HRMD circular
by ignoring the 2014 guidelines not justified – By virtue of passing
order of re-fixation, the appellants have suffered civil consequences,
thus, without affording an opportunity, re-fixation so done, was in
violation of principle of natural justice hence, is set-aside – Bank
to apply the 2014 guidelines and re-fix the pay of the appellants
on the principles culled out – Recovery and refund, if any, shall
stand quashed – Refixation be made afresh – While fixing the pay,
in case, the pay of the appellants is reduced from initial fixation,
the bank shall observe the principle of natural justice – Guidelines
dated 17.02.2014 issued by Department of Financial Services
(Welfare) – Indian Banks Association, letter dated 17.05.2018 –
HRMD Circular No.413/2018 dated 22.06.2018. [Paras 24-26]
Service Law – Pay fixation of ex-serviceman re-employed
in public sector bank – Guidelines dated 17.02.2014 issued
by Department of Financial Services (Welfare) – cl.2.1,
2.1(ii), 2.1(iii) – Essentials for re-fixation of the pay of an
ex-serviceman on re-employment in the public sector bank –
Stated. [Para 19]

Case Law Cited
State Bank of India and Others v. K.P. Subbaiah [2003] Supp.
1 SCR 545 : (2003) 11 SCC 646; Bhagwan Shukla v. Union of
India and Others [1994] Supp. 2 SCR 419 : (1994) 6 SCC 154 –
referred to.

List of Keywords
Re-fixation of pay of ex-servicemen on re-employment; ‘Pay-fixation
of ex-servicemen’; Guidelines dated 17.02.2014; Department of
Financial Services (Welfare); Indian Banks Association Clarification
(IBA Clarification); HRMD Circular; Principles of natural justice;
Pay reduction; 2014 guidelines prevail over the IBA clarification
and HRMD circular; Recovery and refund.

Case Arising From
C I V I L A P P E L L AT E J U R I S D I C T I O N : C i v i l A p p e a l N o .
9918 of 2025
From the Judgment and Order dated 07.02.2020 of the High Court
of Kerala at Ernakulam in WA No. 2094 of 2019.
2150 [2025] 7 S.C.R.

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Appearances for Parties
Advs. for the Appellants:
Gautam Narayan, Sr. Adv., Liju V Stephen, James P. Thomas,
Mrs. Indu Susan Jacob, Ravi Sagar, Ms. Asmita Singh, Ms. Asmita
Singh.
Advs. for the Respondents:
Dhruv Mehta, Sr. Adv., Rajesh Kumar Gautam, Anant Gautam,
Deepanjal Choudhary, Ms. Likivi Jakhalu.

Judgment / Order of the Supreme Court

Order

1) Leave granted.
2) The instant appeal has been preferred by the ex-servicemen,
challenging the impugned order dated 07.02.20201, whereby the
writ appeal was allowed and the order dated 11.04.2019,2 allowing
the writ petition was set-aside.
3) The appellants after their retirement from Indian Navy, were re-
employed with the respondent-bank as Single Window Operator-A
(SWOA) in the Clerical Cadre. The discord between the parties
arose when the respondent-Bank re-fixed the pay of the appellants
at an amount lower than what they were re-employed at. This was
challenged before the Single Bench in the writ petition, which was
allowed, however in appeal, the judgment of the Single Bench was
set-aside by Division Bench. Hence, the present appeal.
4) The facts in brief are that, post-retirement from the Indian Navy, the
appellants were re-employed with the respondent-Bank in between
2015-2017. On re-employment, appellants nos. 1-4 were initially
allowed to draw a basic pay of Rs. 40,710/- and appellant No. 5 was
of Rs. 34,160/-. Subsequently, the Indian Banks Association, vide
letter dated 17.05.2018, (hereinafter, “IBA Clarification”), issued a
clarification regarding ‘pay-fixation of ex-servicemen’ advising that
maximum basic pay for ex-servicemen be fixed at Rs. 31,540/-. In this
view, the respondent-bank vide HRMD Circular No. 413/2018 dated

1 passed by Division Bench of Kerala High Court in W.A. No. 2094/2019.
2 passed by Single Bench in WP (C) No. 26946 of 2018.
[2025] 7 S.C.R. 2151

Mukund K. Pai & Ors. v. Punjab National Bank & Ors.

22.06.2018 (in short “HRMD circular”), directed that the pay-fixation
of all ex-servicemen/ex-commissioned officers be made accordingly.
Thereafter, vide letters dated 24.07.2018 and 25.07.2018, basic pay
of all the appellants was re-fixed at Rs. 31,540/-.
5) Being aggrieved, the appellants challenged the re-fixation before the
Single Bench of the High Court, inter-alia asking the following reliefs:
“a. To call for the records leading to Exhibit P21 to P25.
b. To issue a writ of Certiorari setting aside Exhibit P21
to P25.
c. To declare that Exhibit P20 is not applicable to Petitioners
for the purpose of fixing Petitioners pay.
d. To declare that Petitioner No. 1 to 5 are entitled and
eligible to the pay initially fixed by the 1st respondent as per
Exhibit P15, 16, 17, 18 and 19 respectively in consonance
with the Exhibit P1 and other relevant statutory provisions.
e. To issue a writ of Mandamus or any other appropriate
writ order or direction directing the 1st Respondent to refund
the amount deducted from the salary of Petitioner No.1 to
5 in furtherance of Exhibit P21 to P25 respectively.
AND
f. Pass such other orders as this Hon’ble Court may deem
fit to grant in the circumstances of the case.”
6) The assertion of the respondent-Bank is that the pay fixation of
appellant nos. 1 to 4 was inadvertently made at the 27th stage of
the cadre and that of appellant no. 5 at 22nd stage at the time of re-
employment. The pay scale beyond 20th stage is applicable only to
the employees who have reached stagnation. In compliance with the
HRMD circular, the pay of the appellant was re-fixed to the 20th stage
of the cadre with a basic pay of Rs. 31,540/-. Additionally, the basic
pay being drawn by the appellants at the time of re-employment was
exceeding the minimum of the scale of pay of the General Manager
in the respondent-Bank and was in contravention to Clause 2.1(iii)
of the guidelines3 dated 17.02.2014 (in short “2014 guidelines”)

3 Guidelines for fixation of pay of ex-servicemen/ex-ECOs/SSCOs, re-employed in Public Sector Banks
etc. on or after 01.01.2006 – guidelines, regarding.
2152 [2025] 7 S.C.R.

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issued by Department of Financial Services (Welfare). As such, it was
contended that the Bank was justified in their action of re-fixation.
7) Heard the learned counsels for the parties at length and perused the
material placed on record. It is not in dispute that 2014 guidelines
govern the re-fixation of pay of ex-servicemen on re-employment.
As such, learned Single Judge as well as Division Bench both have
interpreted those guidelines vis-à-vis the applicability of the IBA
Clarification and the HRMD circular in the present matter.
8) Learned Single Judge, considered the question whether last scale
of ex-servicemen need to be protected in re-employment and while
interpreting the 2014 guidelines, opined that the IBA Clarification
cannot override the 2014 guidelines. Learned Single Judge appraised
as under –
a) As held by Apex Court’s in ‘State Bank of India and Others Vs.
K. P. Subbaiah’4, the intention of the government was to ensure
that the ex-serviceman at the time of employment in the public
sector bank does not get an amount as pay lesser than what
he was drawing while in defence service.
b) The aggregate of re-employed pay and pension on re-
employment of ex-servicemen should not exceed the minimum
of the scale of pay of the General Manager in the Bank.
c) The instructions and clarifications issued by an Association like
IBA cannot supersede the orders/instructions/guidelines issued
by the Government of India, especially when it is by way of a
benevolent welfare measure.
With the above, the learned Single Judge allowed the Writ Petition
and by quashing the order of re-fixation, directed the Bank to disburse
the arrears of withheld salary within a period of two months.
9) On filing of the Writ Appeal, the Division Bench on re-appraisal of the
2014 guidelines, set-aside the order passed by the learned Single
Judge while noting as thus –
a) That the IBA guidelines cannot override the instructions of the
Government of India. A combined reading of Sub-clause (ii) &
(iii) of 2014 guidelines, makes it clear that during pay fixation

4 (2003) 11 SCC 646
[2025] 7 S.C.R. 2153

Mukund K. Pai & Ors. v. Punjab National Bank & Ors.

of ex-serviceman re-employed in public sector banks, his 1ast
pay drawn has to be protected, however such pay fixed, plus
the pension drawn should not exceed the minimum of the scale
of pay of the General Manager.
b) The pay of the appellants was fixed at the maximum of the
scale of the Clerical cadre, which is at Rs. 31,540/- with D.A.
of Rs. 14,382/-; which totals to Rs. 45,922/-. The Bank was
obliged to pay to the appellants the amount last drawn by them
at the time of their discharge from the Indian Navy, subject to
the limit of the pay on re-employment added to the pension,
which comes to Rs. 81,438/- [Rs. 45,922 + 35,516], which is
above the minimum of the time scale of pay applicable to the
General Manager, i.e., Rs. 76,520/-.
c) In such circumstances, the order passed by the learned Single
Judge was set-aside.
10) Learned counsel for the appellants has emphatically contended in
the lines of observations made by learned Single Judge and urged
that in light of provisions contained in 2014 guidelines, re-fixation
of their pay and the subsequent reduction in their salary is wholly
unjustified, therefore the judgment passed by the Division Bench
is liable to be set-aside. In support of this contention, reliance has
been placed on the judgment of this Court in K.P. Subbaiah (supra).
11) Per contra, Mr. Dhruv Mehta, learned senior counsel and Mr. Rajesh
Kumar Gautam, learned Advocate on Record for the respondent-
Bank, have submitted that the interpretation as made by the Division
Bench is in consonance with the spirit of the 2014 guidelines, rightly
accepting the fixation done by the Bank. The judgment of the learned
Single Bench has rightly been set-aside by the Division Bench, and
no interference is called for by this Court.
12) After considering the submissions of learned counsel for both the
parties, the following questions fall for our consideration:
(i) Whether in the facts of the present case, IBA Clarification
and HRMD Circular can override the 2014 guidelines for the
purpose of pay fixation of ex-servicemen during re-employment
of ex-servicemen?
(ii) Whether re-fixation as done by the respondent-Bank pursuant
to the IBA Clarification is in consonance with the guidelines
2154 [2025] 7 S.C.R.

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dated 17.02.2014 and whether the High Court was justified in
confirming such re-fixation by impugned judgment?
(iii) If not, in what manner can the fixation of pay of ex-servicemen
may be made on their re-employment? And what reliefs can
be granted to the appellants?
13) Since the questions as posed hereinabove for discussion are inter-
connected and primarily based on the contents of 2014 circular,
therefore, all the issues are being appreciated simultaneously.
14) It is to be noted here that as per the findings recorded by the learned
Single Judge in para 15 and confirmed by Division Bench in para 10
in the impugned judgment, it is clear that the IBA Clarification and
the subsequent HRMD Circular do not override the 2014 guidelines
and neither of the parties have disputed the said fact. During hearing,
the parties have conceded to the applicability of the 2014 guidelines
qua the lis and the finding on this issue does not require any re-look
or re-appreciation in detail except to acknowledge its conclusion.
15) In the facts, since the interpretation of the 2014 guidelines is in
question, therefore, the relevant portion of the said guidelines is
reproduced as thus:

“ xxx xxx xxx
Guidelines for Pay Fixation of ex-Servicemen/Ex-ECOs/
SSCOs Re-employed in Public Sector Banks on or after
01.01.2006.
Fixation of pay of ex-servicemen in Public Sector Banks
is governed by the guidelines/instructions issued by
the Government of India from time to time. Accordingly,
based on the Government Guidelines/instructions in force,
issued vide DoPT O.M. No. 3/19/2009 – Estt(pay II) dated
the 5th April, 2010 and clarification given vide O.M. No.
3/19/2009-Estt, (Pay-II) dated the 8th November, 2010,
fitment of pay of ex-servicemen/ex-ECOs/SSCOs, who
have been appointed in the Bank on or after 01.01.2006
is to be done as under:
2.1 Ex-Servicemen joining in workmen cadre:
Pay fixation of an ex-serviceman would be through
protection of pay plus DA drawn by him at the
[2025] 7 S.C.R. 2155

Mukund K. Pai & Ors. v. Punjab National Bank & Ors.

time of released from, Armed Forces. As per the
instructions issued by the Ministry of Defence vide
their letter No.1/69/2008/D(Pay/Service) dated the
24th July, 2009 and advised by DoPT vide OM No.
3/19/2009 – Estt. (Pay II) dated the 8th November,
2010, pre-retirement pay has been defined as under: -
(i) In respect of re-employment taking place on
or after 1.1.2006, pre-retirement pay for those
who retired after 1.1.2006, means the pay in the
pay band plus grade pay but inclusive of non-
practicing Allowance (NPA) if any, last drawn
before retirement.
(ii) In case of officer who retired before 1.1.2006 and
also those who retired after 1.1.2006 in the pre-
revised pay scales without opting for the revised
pay scales promulgated on or after 1.1.2006
the pay will be basic pay including stagnation
increment and Rank Pay plus Dearness Pay
and Dearness Allowance drawn at the time
of retirement. As such, the figure of pay plus
D.A. admissible in the Bank will be fixed with
reference to this protection i.e. pay as mentioned
above plus DA and relevant stage of the basic
pay in the re-employed scale will be determined
after deducting DA admissible in the Bank from
the figure protected. For the purpose of fixation
of pay on re-employment, the pay would mean
the basic pay plus the special allowance/special
pay as the case may be, attached to the re-
employed post (where applicable). As the MSP
has not been included in pre-retirement pay as
per the definition given by the Ministry of Defence
vide letter No.1/69/2008/D (Pay/Service) dated
24.07.2009, the protection of the component
of MSP in re-fixation of pay in Bank has been
excluded. Moreover, the ex-servicemen on
re-fixation of pay in Bank has been excluded.
Moreover, the ex-servicemen on re-employment
in the banks are allowed to draw entire pension
2156 [2025] 7 S.C.R.

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i.e., entire pension is ignored and not reduced
from the re-fixed pay. As such, they will get the
benefit of the component of Military Service
Pay (MSP), if any, in their pension from the
Government.
(iii) In addition to the pay so fixed, as aforesaid,
pension and other retirement benefits may be
allowed to be drawn. This will, however be
subject to limitation that the aggregate of re-
employed pay and pension on re-employment of
ex-servicemen would not exceed the minimum
of the scale of pay of the General Manager
in the Bank as per Ministry of Finance letter
No.F4/1/98-SCT(B) dated 02.09.1998.

xxx xxx xxx”
16) On perusal of aforementioned guidelines, it is clear that on
re-employment prior to or after 01.01.2006, the ex-servicemen in
Public Sector Banks are governed by the instructions issued by
the Government of India from time to time. By way of Government
guidelines/instructions issued vide DOPT O.M. No.3/19/2009-Estt.
(Pay II) dated 05.04.2010 and its clarification O.M. dated 08.11.2010,
fitment of pay of ex-servicemen/ex-ECOs/SSCOs who have been
appointed in the Bank prior to or after 01.01.2006 ought to be done
as per 2014 guidelines. As per Clause 2.1, it is clear that an ex-
serviceman would have protection of pay plus DA drawn at the time
of release of from the Armed Forces.
17) In the 2014 guidelines, pre-retirement pay has also been defined.
However, the present case relates to clause 2.1(ii), whereby officers
who retire either before or after 01.01.2006, their pay fixation ought
to be made as specified. The Government has clarified that the pay
plus DA admissible in Bank will be fixed in reference to the protection
of pay plus DA as mentioned, and relevant stage of the basic pay
in the re-employed scale will be determined after deducting DA
admissible in the Bank from the figure protected.
18) It has been further clarified that for the purpose of fixation of pay on
re-employment, the pay would mean basic pay plus special allowance/
special pay as the case may be, attached to the re-employed post.
On re-employment in the Bank, the ex-servicemen are also allowed
[2025] 7 S.C.R. 2157

Mukund K. Pai & Ors. v. Punjab National Bank & Ors.

to draw the entire pension. They are also entitled to get the benefit
of component of Military Service Pay (MSP), if any, in their pension
from the Government.
19) In the backdrop of the above and looking to the issue at hand, Clause
2.1(iii) also assumes relevance, whereby in case of ex-servicemen,
the pay as directed while fixing on re-employment and the pension
allowed to them would not exceed the minimum of the pay scale of
the General Manager in the Bank in terms of the guidelines issued
by the Ministry of Finance vide letter No.F4/1/98-SCT(B) dated
02.09.1998. In view of the foregoing, the three essentials can be
broadly carved out for re-fixation of the pay of an ex-serviceman on
re-employment in the public sector bank;
(i) They would be entitled to protection of pay plus DA drawn by
them at the time of release from Armed Forces; and would
further be entitled for entire pension and benefit of MSP, if
any, in their pension from the Government on re-employment;
(ii) During fixation of pay in re-employment, the pay would mean
Basic Pay plus Special Allowance/Special Pay, as the case
may be, to the re-employed post;
(iii) While fixing the pay of ex-servicemen, the pay protected plus
pension would not exceed the minimum of the scale of pay of
the General Manager in the Bank in terms of the guidelines
issued by the Ministry of Finance.
As such, the fixation of pay of the appellants ought to be made
applying the abovesaid three broad guidelines.
20) In the case at hand, the justification of re-fixation made by the Bank
is required to be appreciated in the light of three essentials as
summed up above. As per refixation letters dated 24.07.2018 and
25.07.2018, it is clear that the Bank has referred to pay fixation made
on the date of re-employment, and later referring the IBA clarification
and HRMD circular, reduced the pay of appellant nos. 1 to 4 from
Rs. 40,710/- to Rs. 31,540/- and of appellant no. 5 from Rs. 34,160/- to
Rs. 31,540/- respectively, citing that their pay deserves to be protected
only to the extent of 20th stage. Since the appellants’ pay were fixed
over and above the 20th stage of their cadre in re-employment at
27th stage (appellant nos. 1 to 4) and 22nd stage (appellant no. 5),
therefore, on the pretext of re-fixation, applying the guideline which
were not applicable, the re-fixation has been directed.
2158 [2025] 7 S.C.R.

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21) Learned Single Judge while appreciating the applicability of the
IBA clarification and the HRMD circular has recorded the finding
that 2014 guidelines have overriding effect and the Division Bench
has affirmed that finding. The bank has not assailed that finding
taking recourse as permissible. In addition, it is relevant to note that
2014 guidelines were issued by Department of Financial Services
(Welfare), Government of India. While discussing the issue in para
14 above, it is conceded on behalf of the bank that 2014 guidelines
would have an overriding effect qua the lis in hand. Looking to all
these aspects, in our view, refixation done by the bank ignoring
2014 guidelines in applying IBA clarification and the HRMD circular
deserves to be quashed.
22) The learned counsel for the appellants placed reliance on the
judgment of this Court in the case of K.P. Subbaiah (supra), wherein
the distinction of ‘pay’ and ‘pay scale’ and the distinction of ‘pay
fixation’ and ‘fixation of pay scale’ have been elaborated to indicate
the general principles and factors to be taken into consideration. In
our view, in the facts of the case, wherein re-fixation was in blatant
violation of the applicable 2014 guidelines while relying upon the
IBA clarification and HRMD circular, therefore, the reliance on the
said judgment is of no help to the appellants.
23) Be that as it may, by the order of re-fixation of pay the appellants’
pay were reduced in the wake of refixation. The deductions in the pay
scale recurring reductions of salary affects the civil consequences
to an ex-serviceman. This is urged that such refixation cannot
be directed without observance of the principle of natural justice.
In support thereto, reliance has been placed on the judgment of
this Court in the case of ‘Bhagwan Shukla Vs. Union of India and
Others’5, wherein while dealing with question of reduction of basic
pay of appellant, this Court held thus:
“3. We have heard learned counsel for the parties. That
the petitioner’s basic pay had been fixed since 1970 at
Rs 190 p.m. is not disputed. There is also no dispute that
the basic pay of the appellant was reduced to Rs 181 p.m.
from Rs 190 p.m. in 1991 retrospectively w.e.f. 18-12-
1970. The appellant has obviously been visited with civil

5 (1994) 6 SCC 154
[2025] 7 S.C.R. 2159

Mukund K. Pai & Ors. v. Punjab National Bank & Ors.

consequences but he had been granted no opportunity
to show cause against the reduction of his basic pay. He
was not even put on notice before his pay was reduced
by the department and the order came to be made behind
his back without following any procedure known to law.
There has, thus, been a flagrant violation of the principles
of natural justice and the appellant has been made to
suffer huge financial loss without being heard. Fair play
in action warrants that no such order which has the effect
of an employee suffering civil consequences should be
passed without putting the (sic employee) concerned to
notice and giving him a hearing in the matter. Since, that
was not done, the order (memorandum) dated 25-7-1991,
which was impugned before the Tribunal could not certainly
be sustained and the Central Administrative Tribunal fell in
error in dismissing the petition of the appellant. The order
of the Tribunal deserves to be set aside. We, accordingly,
accept this appeal and set aside the order of the Central
Administrative Tribunal dated 17-9-1993 as well as the
order (memorandum) impugned before the Tribunal dated
25-7-1991 reducing the basic pay of the appellant from
Rs 190 to Rs 181 w.e.f. 18-12-1970.”
24) After going through the facts of this case, it is not in dispute that the
order of re-fixation has been passed without affording an opportunity
to the appellants. Observance of the principles of natural justice in
cases of re-fixation of pay leading to financial loss is sine qua non.
Considering the aforesaid, we have no hesitation to hold that the
Bank while re-fixing the pay had violated the principles of natural
justice and reduced the pay of appellants without hearing them.
25) In view of the discussion made above, we answer question no. 1
that the IBA clarification and HRMD circular are not in consonance
with the 2014 guidelines for pay fixation of ex-servicemen and for
purpose of fixation of pay, the 2014 guidelines shall prevail over
the IBA clarification and HRMD circular. Similarly, question no. 2 is
answered that the re-fixation applying IBA clarification and HRMD
circular by ignoring the 2014 guidelines is not justified. We have
already held that that by virtue of passing order of re-fixation, the
appellants have suffered civil consequences, therefore, without
affording an opportunity, re-fixation so done, was in violation of
2160 [2025] 7 S.C.R.

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principle of natural justice hence, it is set-aside. In view of the above,
question no. 3 is also answered.
26) As per the discussion made, we further make it clear that the relief
prayed by the appellants in the writ petition in clauses (a) to (c)
deserves to be allowed in their favour. Simultaneously, in view of the
reliefs prayed in clauses (d) and (e), we direct the Bank to apply the
2014 guidelines and re-fix the pay of the appellants on the principles
broadly culled out and discussed hereinabove. We further direct that
the recovery and refund, if any, shall stand quashed and the refund
which has been made during the pendency of the writ petition/writ
appeal, or the present appeal also stands quashed. In view of the
above discussion refixation be made afresh. While fixing the pay, in
case, the pay of the appellants is reduced from initial fixation, the
bank shall observe the principle of natural justice.
27) Accordingly, in view of the above, the present appeal stands allowed
to the extent indicated above. Parties to bear their own cost. Pending
application, if any, shall stand disposed of.

Result of the case: Appeal allowed.

†
Headnotes prepared by: Nidhi Jain