Holding

The notional revision of pay does not confer a right to gratuity; retirees are not entitled to gratuity but are eligible for commutation of a portion of the revised pension.

Summary

The State of Andhra Pradesh issued a Pay Revision Committee recommendation and Government Order No. 114 (1999) that revised pay scales would be notionally effective from 1 July 1998 with monetary benefits payable from 1 April 1999. Employees who retired between 1 July 1998 and 31 March 1999 claimed pension, gratuity and leave encashment. The Administrative Tribunal held they were not entitled to gratuity and only to a portion of revised pension commutation; the High Court reversed this, granting gratuity. On appeal, the Supreme Court held that the legal fiction of a notional pay revision does not create a right to gratuity, which is governed by the A.P. Revised Pension Rules, 1980, and that Rule 4 of the GO expressly barred any monetary benefit before 1 April 1999. Consequently, the retirees were not entitled to gratuity but were eligible for pension commutation under the 1944 Commutation Rules. The Court allowed the State’s appeal, set aside the High Court judgment and restored the Tribunal’s order.

Issues considered

The extent to which paragraph 9 of GO No. 114 creates a legal right to gratuity for retirees between 1 July 1998 and 31 March 1999.
Whether the notionally revised pay scale from 1 July 1998 entitles such retirees to gratuity calculated on that scale.
Interpretation of the legal fiction created by the revised pay scale and the limitation imposed by Rule 4 of GO No. 114.
Whether the State may limit benefits based on financial implications without violating Article 14.
Whether the retirees are eligible for pension commutation under Rule 3(d) and (e) of the A.P. Civil Pension (Commutation) Rules, 1944.

Legislation cited

Constitution of Indias. Article 309
Fundamental Ruless. Rule 9(2l)(a)(i)

Subjects

legal fictionpay revisiongratuitypension commutationArticle 309financial implicationretirement benefitsstatutory interpretation

Judgment

STA TE OF ANDHRA PRADESH AND ANR. A
v.
A.P. PENSIONERS ASSOCIATION AND ORS.

NOVEMBER 11, 2005

[B.P. SINGH AND S.B. SINHA, JJ.] B

Constitution of India, 195~Article 309 provis~A.P. Revised Scales
of Pay Rules, 1999-Rules 3, 4, 5 and 9-A.P. Civil Pension Commutation
Rules, 1944-Rule 3(d) and (e)-Revision in pay scale-Notionally from
1. 7.1998 with financial benefits from 1. 4.1999-Government Order for payment C
of pension and terminal benefits-Employees retiring between 1.7.1998 to
1.4.1999 claiming pensiona1y benefits including commutation of pension,
gratuity and leave encashment-Held: Legal fiction is to be construed in
such a manner so as to enable a person for whose benefit such legal fiction
has been created, to obtain all consequences flowing therefrom-Employees D
became entitled to enhanced pay from 1. 7.1998 but only notionally for the
purpose of calculation of such recurring liability of the State which became
payable with effect from 1.4.1999-State did not intend to grant any benefit
towards gratuity in relation. to those employees who retired in between
1.7.1998 and 31.3.1999-0rder of Tribuna/.holding employees eligible for E
commutation of portion of revised pension upheld and that of High Court
granting gratuity set aside.

Appellant-State constituted a Pay Revision Committee (PRC) which
recommended revised scale of pay notionally from 1. 7.1998 with financial
benefits from 1.4.1999 for its employees:Thereafter State issued Government F
order GO(P) No.114 which specified the procedure for implementing the
recommendations of PRC on pension and other terminal benefits. The
employees who retired between 1.7.1988 and 1.4.1999 filed application for
payment of pensionary benefits including commutation of pension, gratuity
and leave encashment in terms of the Government Order. Tribunal held that
the employees were not entitled to gratuity and leave encashment based on G
their notional pay fixed in revised scale of pay; and also enhanced gratuity
and percentage of commuted pension but were only eligible for commutation
of portion of revised pension in terms of Rule 3(d) and (e) of A.P. Civil Pension
Commutation Rules, 1944. Both State and employees filed Writ Petition. High
223 H
224 SUPREME COURT REPORTS (2005J SUPP. 5 S.C.R.

A Court dismissed the Writ Petition filed by the State but allowed the writ
petition filed by the employees. Hence the present appeal.

Appellant-State contended that paragraph 9 of GO No. 114 did not confer
a legal right on the employees but merely provided background facts; that it
was clear from Rule 4 of the GO that no monetary benefit prior to 1.4.1999
B accrued or was to be paid; that the terminal benefits did not include gratuity;
and that financial implication is the relevant criteria.

Respondent - association of pensioners contended that the Rules read
as a whole clearly point out that the same had come into force with effect
from 1.7.1998 wherefor a legal fiction has been created and in that view,
C although the monetary benefit was to be paid with effect from 1.4.1999, the
entitlement to the scale of pay for all purposes including that of computation
of the amount of gratuify as also commutation of pension, cannot be denied.

Allowing the appeals, the Court
D HELD I.I. The provisions of the Notification are to be read as a whole.
The intention of the State in issuing the Notification although may have to be
gathered in the backdrop of the facts stated in the preamble portion thereof,
indisputably the legal right of the respondent- employees, if any, must be
found out from the Notification portion itself. (233-C)
E
1.2. The first part of GO No. 114 which is in the nature of preamble or
statement of background facts cannot be treated to be a part of the Rules
framed and notified in terms of proviso to Article 309 of the Constitution.
Paragraph 16 of GO, in no uncertain terms states that separate orders were
being issued in regard to.recommendations of PRC on pension and other
F terminal benefits. Only because clauses 9 and t6 of GO speak ofpensionary
benefits and/ or other terminal benefits, the same, would not mean that they
embraced within their fold all benefits which under different provisions of a
statute or even different statutes could come within the preview thereof. The
Notification read as a whole does not suggest that the State thereby intended
G to pay before 1.4.1999 retirement gratuity reckoned on the basis of the revised
scale of pay as recommended by PRC. The statutory rule in. the GO does not
speak for payment of gratuity. 1233-A-BI

2.1. Pension and gratuity connote two different things. In given
situations, they may be payable under different statutes. The matter relating
H to payment of pension and gratuity is governed by the A.P. Revised Pension
STATE OF ANDHRA PRADESH v. A.P. PENSIONERS ASSON. 225
Rules, 1980. Rule 31 of the said rules defines "emoluments" to mean 'pay' A
which a Government servant had been receiving immediately before his
retirement or on the date of his death. Rule 46 provides for retirement gratuity.
Computation of retirement gratuity payable to a Government servant is
required to be done on the basis of the formula laid down under the Rule 46.
For the purpose of computation either I/4th or 3/16th of the emolument for B
each completed six monthly period of service, is to be taken into consideration,
which were payable either immediately before the date of retirement or the
date of death. [233-E-F)

2.2. In view of the GO No. 114, on 1.4.1999 those employees who retired
between the period 1.7.1998 and 1.4.1999 would have received the actual C
benefit calculated in terms of the said Rule. It cannot be said that they became
entitled to enhanced pay and, therefore, to enhanced gratuity from 1.7.1998.
They became entitled thereto but only notionally for the purpose of calculation
of such recurring liability of the State which became payable with effect from
1.4.1999. (234-C, D]
D
2.3. The legal fiction undoubtedly is to be construed in such a manner
so as to enable a person, for whose benefit such legal fiction has been created,
to obtain all consequences flowing therefrom. A notional revision of pay was
to be considered as if the same took effect from 1. 7.1998, but the rule went
further and stated that actual monetary benefit thereof shall be given with
effect from 1.4.1999. Therefore, the Rule not only creates a legal fiction but E
also provides the limitations in operation thereof. If the effect of the legal
fiction is extended in the manner suggested by the respondent clause (4) of
the rule will become otiose.. All the consequences ordinarily flowing from a
rule would be given effect to if the Rule otherwise does not limit the operation
thereof. If the rule itself provides a limitation on its operation, the F
consequences flowing from the legal fiction have to be understood in the light
of the limitations prescribed. (235-A, B, CJ

Gurupad Khandappa Magdum v. Hirabai Khandappa Magdum and Ors.,
(1978) 3 SCR 761, distinguished.

2.4. The financial implication is a relevant criterion for the State G
Government to determine as to what benefits can be granted pursuant to or in
furtherance of the recommendations made by the PRC. PRC said that while
revision of pay shall take effect from 1.7.1998, the monetary benefit would be
payable only from 1.4.1999. If monetary benefit was payable only from 1.4.1999,
all rights to get the benefits computed on the: basis of the revised scale of pay H
226 SUPREME COURT REPORTS [2005] SUPP. 5 S.C.R.

A would only be for the purpose of payment of pay with effect from 1.4.1999 or
payment of the recurring amount of pension with effect from that date.
Furthermore, clause (4) does not make any exception so far as payment of
actual monetary benefit is concerned for the purpose of payment of gratuity
or otherwise. Had that been so, the rule would have stated expressly. On the
B other hand, GO No. 157 fixed the maximum limit of gratuity under Rule 46
of the A.P. Revised Pension Rules with effect from 1.4.1999 .only. Therefore,
the intention of the State was not to grant any benefit towards payment of
gratuity even in relation to those employees who had retired in between
1.7.1998 and 31.3.1999. However, the order of Tribunal that the employees
are eligible for commutation of portion of revised pension in terms of Rule
C 3(d) of A.P. Civil Pension (Commutation) Rules, 1944 is upheld.
[236-H; 237; A, 8, C, DJ

State Government Pensioners' Association and Ors. v. State of Andhra
Pradesh, [1986) 3 SCC 501; Union of India v. All India Services Pensioners'
Association and Anr., (1988) 2 SCC 580; State of U.P. v. U.P. University
D Colleges Pensioners' Association (1994) 2 SCC 729; State of Punjab and
Ors. v. Boota Singh and Anr., [20001 3 SCC 733; State of Punjab and Ors. v.
Amar Nath Goyal and Ors. (2005) 6 SCC 754 and D.S. Nakara and Ors. v.
Union of India, (1983) 1 SCC 305, referred to.

E CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 6704-6780 of
2005.

From the Judgment and Ordei: dated I 0.9.2003 of ,the Andhra Pradesh
High Coµrt in W.P. Nos. 20755, 24080/2002, 2427, 2485, 2586, 2712, 2486, 6536,
3035, 3851, 3865, 3876, 3891, 3924, 3932, 3988, 4073,.4082, 4167, 4555, 5197,
F 5252, 530512003, 2408112002, 3617, 1135812003, 2115812002, 2014, 2096, 2108,
2380/2003,25197/2002, 14000, 14001,5354,8487,8360,5250,3075,2614,2714,
2995,3645,4436,3634,3153,3652,3676,3736,2776,3146,3552,3553,3237,
5650,3206,5640,6928,8407,6537/2003, 12447/2001, 14556, 15109, 15110, 15212,
15225, 15257, 15531, 15532, 15547, 15582, 16532, 16533, 16534, 16539, 16556/
2003 and 23504 of2002.
G
H.S. Guru Raja Rao, P.P. Rao, P. Vinay Kumar, Mrs. D. Bharathi Reddy
and Ms. Sneha Bhaskaran for the Appellants.

Uday Um.esh Lalit, Kailash Vasudev and A.K. Ganguly, R. Santhana
Krishnan, A. V. V.S. Bhujanga Rao, .Vijaya Kumar, Ms. K. Radha Rani, D. Mahesh
H Babu, C.B.N Babu, Bimal Roy Jad, C.S.N. Mohan Rao and C.M. Angad for
STATEOFANDHRAPRADESHv. A.P. PENSIONERSASSON. [SINHA,J.] 227

the Respondents. A
The Judgment of the Court was delivered by

. _
S.B. SINHt\, J. Leave grant~d .

These appeals are directed against a judgmeot~md order dated 10.09.2003 B
passed by the High Court of Judicature of Andhra Pradesh whereby and
whereunder the common judgment and order of the A.P. Administrative Tribunal
dated 14.6.2002 rejecting the original applications filed by the Respondents
herein was set aside.
-<;

The Respondent-Association is an association of the pensioners. The c
interveners, Shri K. Nagabhushanam & Ors., Shri A. Sudhakar & Ors. and
K.Appana & Ors., are also the retired employees of the State of Andhra
Pradesh.

The fact of the matter is as under:-
D
The State of A.P. constituted a Pay Revision Commission (for short
"PRC") for the purpose of considering the question of revision of scale of
pay of the employees working with it as also merger of D.A., etc. On or about
21.7.1999, PRC recommended revised scale of pay notionally from l.7.1998
with financial benefits from 1.4.1999. The Chief Minister of the State held a
• meeting with the representatives of the employees on 24. 7.1999 wherein it was E
agreed:

"The cash benefit of the Revised Pay Scales will be allowed with the
salary for the month of July, 1999 payable in August, 1999. The arrears
of emoluments arising from the Revised Pay Scales for then months
F
of April, May and June, 1999 will be credited to the General Provident
Fund Accounts of the employees."

The State of Andhra Pradesh thereafter issued a Government Order
dated 11.8.1999 being No. GO (P) No. 114 in terms whereof inter alia the mode
and manner for implementing the recommendations of the PRC on pension G
and other terminal benefits were specified. The said government order is in
"'. two parts. The first part containing paragraphs 1 to 23 consists of the
background facts and the decision of the State to implement the
recommendations of the PRC. Clauses 9 and 16, which are relevant for the
])Urpose of this case, read as under:
..._
/
H
228 SUPREME COURT REPORTS 12005] SUPP. 5 S.C.R.

A "9. Persons who retired between 1-7-1998 and 31-3-1999 shall also be
eligible for the Revised Pay Scales, 1999. The notional pay fixed in the
Revised Pay Scales, 1999 in accordance with these orders, shall in
such cases count towards pensionary benefits."

"16. Separate orders are also being issued in regard to the
B recornmendationVOf the Pay Revision Commission on Pension and
other terminal benefits."

The second part of the said governme~t order contains the draft
notification containing the rules made in terms of the proviso to Article 309
of the Constitution of India called "The A.P. Revised Scales of Pay Rules,
C 1999". The said rules in tenns of Rule 1(2) would be deemed to have come
into force with effect from 1st July, 1998. They were to be applied to all
government employees whether temporary, regular or pennanent appointed
before 1st July, 1998. Rule 3 of the Rules provides for the revised pay scales,
sub-rule (1) whereof reads as under:
D "(I) Except as otherwise provided in sub-rule-2, the existing scales of
pay specified in column (2) of Schedule - I shall be revised as specified
in the corresponding entry in column (4) of the said Schedule."

Sub-rule (2) of the said Rule contains an exception to sub-rule (I) which
E reads as under:-

"(2) Where, in the case of any post on an existing scale of pay
•
specified in column (2) of Schedule-I, a revised scale of pay other
than the revised scale of pay specified in the corresponding entry in
column (4) of that Schedule is specified in column (4) of Schedule-II,
the revised scale of pay so specified in column (4) of Schedule-II shall
F
apply."

Rule 4 in no uncertain terms states that no government employee shall
be entitled to any monetary benefit for any period prior to 1.4.1999.

G Rule 5 Jays down the principles for exercise of optior in tenns whereof
a government employee should opt for the new scale of pay either from 1st
July, 1998 or from the date on which he earns the next increment in the existing
scale of pay but not beyond 30th June, 1999. He could also opt for remaining
in the existing scale. Sub-rules (6) and (7) specifically lay down the modes of
exercising option as regards an employee who retired on or after 1st July,
H 1998. Such option could also be exercised by the legal representative of a
STATE OF ANDHRA PRADESH v. A.P. PENSIONERS ASSON. [SINHA, J.] 229

government employee who died while in service on or after the said date. Sub- A
rule (I) of Rule 9 contains a non-obstante clause saying that no rules made
under the proviso to Article 309 of the Constitution of India shall, insofar as
it is inconsistent with any of the provisions of these rules, have any effect.

The State also issued said GO(P) No. 156 on 16.9.1999 wherein it was
categorically stated that the revised consolidated pension shall come into B
force with effect from I. 7 .1998 with monetary benefits payable from 1.4.1999.
Paragraph 5 of the said GO reads as under:

"5. The employee retired between 01-07-1998 and 1-4-1999 are eligible
to revision of their pay in the Revised Pay Scales, 1999 notionally as
per the orders issued in G.O. 7th read above. As such, the pensions C
of these employees may be revised notionally as per the revised pay
in Revised Pay Scales, 1999 and monetary benefit should be allowed
from 01-04-1999. No difference on Retirement Gratuity and Commutation
shall be allowed in the pension notionally fixed as above."

Yet again, anothernotification was issued on 16.9.1999 being GOM No.
r>
157 in tenns whereof maximum limit ofretirement gratuity under Rule 46 of the
A.P. Revised Pension Rules, 1980 was raised from 1, 75,000/- to Rs. 2,50,000,
paragraph 3 whereof reads as under:-

"These orders will come into force from 1-4-1999 and shall apply to E
• all Government Servants who retire or whose death,taken place on or
after that date. The arrears due to issue to these orders to the employees
retired after 1-4-1999 shall be paid as per para 4.4 of the Government
order fifth read above."
• GOMNo. 158 was issued on 16.9.1999 enhancing the limit of commutation F
of pension under A.P. Civil Pensions (Commutation) Rules, 1944 to 40% of
the pension sanctioned to the pensioners with effect from 1.4.1999. Such
enhancement is applicable only in relation t0 the persons who retired or died
on or after 1.4.1999. On or about 23.12.1999, GOM No. 206 was issued in tenns
whereof paragraph 9 of the First Part of the GO(P) No. 114 dated l l.8.1999
was clarified to the following effect: G
"Persons who retired between 1-7-1998 and 31-3-1999 shall also be
eligible for the Revised Pay Scales, 1999. The notional pay fixed in the
Revised Pay Scales, 1999 in accordance with these orders shall, in
such cases count towards pension notionally and the monetary benefit H
230 SUPREME COURT REPORTS (2005) SUPP. 5 S.C.R.

A· · 'of the revised pension shall be allowed with effect from l-4-1999."
A large number of original· applications were filed before the State
Administrative Tribunal by the employees who had retired between the period
l. 7.1998 and L4. I 999 praying for payment of pensionary benefits including
commutation, pension, gratuity and encashment of leave in terms of paragraph
B 9 of GO No. 114..

In terms of its common judgment and order dated 14.6.2002, the Tribunal
opined that the applicants were riot· entitled to gratuity and encashment of
earned leave based on their notional pay fixed in the revised scale of pay.
They were also not held to be entitled· to enhanced gratuity and enhanced
C percentage of commutation in terms of GO Ms NOs. 157 and 158 but were only
eligible for commutation. of portion of revised pension in terms of Rules 3(d)
and(e) of A.P. Civil Pension Commutation Rules, 1944. ·

Both the State of Andhra Pradesh as also the Original Applicants
n· preferred writ petitions before the High Court being aggrieved by and
dissatisfied therewith. By reason of the impugned judgment dated 10.9.2003
the High Court dismissed the writ petition filed by the State whereas the writ
petitions filed by the employees were allowed. Aggrieved the State is before ·
us.

E Mr. P.P. Rao and Mr. H.S. Guru Raja Rao, learned senior counsel
appearing on behalfoofi the. State of Andhra Pradesh, submitted that the
reasonings of the High Court that the Government acted contrary to the
agreement with the unions, and that paragraph 9 of GO No. 114 conferred a

.F
legal right on the employees, cannot be sustained.

Drawing our attention to the minutes of the meeting held between the
Chief Minister of the State of Andhra Pradesh, It was submitted that from a
-
perusal ofclause (4) thereof it would be evident that the same relate to the
persons who would be continuing in service even after t .4. t 999 and, not in·
regard to the persons _who had ~etired and drawn their retiral benefits prior
G thereto. As regard the second reasoning of the High Court Mr. Rao would
contend that paragraph 9 of the said GO which is not a part of the statutory
rule has been completely misconstrued ina5much as the same merely provides
background facts. Drawing our attention to paragraph 16 of the said GO, it
was contended that as separate orders were to be. issued in regard to the
recommendations of the PRC on pension and other terminal benefits, the
H provisions of the said notification only could be taken into consideration for
STATE OF ANDHRA PRADESH v. A.P. PENSIONERS ASSON. [SINHA, J.] 231

the purpose of detennining the legal right of the employees. Tenninal benefits, A
Mr. Rao submitted, does not include gratuity.

Drawing our attention to the second part of the said GO No. 114, Mr.
Rao urged that perusal of Rule 4· thereof would make the position absolutely
clear that no monetary benefit prior to 1.4.1999 accrued or was to be paid. It
was further submitted that the government in exercise of its power conferred B
upon it under the proviso to Article 309 of the Constitution of India can
unilaterally alter the terms and conditions of service. The High Court, it was
submitted, failed to notice the grave financial implication in the matter.

Mr. Uday Umesh Lalit, learned senior counsel appearing on behalf of
the Respondents, on the other hand, supported the judgment of the High C
Court contending that it is not a case where 1.4.1999 was fixed as a cut-off
date for the purpose of grant of tenninal benefits in tenns of the rules. The
rules, it was urged, read as a whole would clearly point out that the same had
come into force with effect from I. 7 .1998 wherefor a legal fiction has been
created and in that view of the matter, although the monetary benefit was to D
be paid with effect from 1.4.1999, the entitlement to the scale of pay for all
purposes including that of computation of the amount of gratuity as also
commutation of pension, etc. cannot be denied. Other GOMs Nos. 156, 157,
158 and 206 issued after GO No. 114, having not been issued under the'
Proviso to Article 309 of the Constitution of India, whereas GO NO. 114
having been so issued, the same could not whittle down the effect of a E
statutory rule. In any event, the said GOMs have been declared ultra vires
by the Tribunal which finding has not been set aside by the High Court.

As the rules contemplate increase in pay with effect from l.7.1998, the
same should be applied for all intent and purport and must be given effect F
to in its true letter and spirit. If the benefit of the higher pay scale as also
other benefits contemplated thereby are to be computed with effect from
l. 7 .1998, only because the actual payment in tenns of money is deferred, the
same would not take away the right that had accrued thereover, having regard
to the fact that the pay is a condition of service.
G
Before adverting to the rival contentions of the parties, we may notice
... the findings of the Tribunal and the High Court respectively .
/

Findings of the Tribunal are as under:
(a) Paragraph Nos. 1 to 23 of GO No. 114 dated 11.8.1999 do not have H
232 SUPREME COURT REPORTS [2005] SUPP. 5 S.C.R.

A any statutory force.
(b) Rule 4 of the Statutory Rule does not confer any legal right upon
the employees who retired between I .7.1998 and 1.4.1999 to any
monetary benefit, and in that view of the matter on their
superannuation, they having not drawn their pay in the revised
B pay scales, were not entitled therefor in terms thereof.
(c) As regards paragraph 9 of GO No. 114, the Tribunal opined that
the same being an executive order, the original applicants did not
become entitled to get the amount of gratuity fixed on notional
pay contrary to statutory rules.
C (d) Paragraph 5 of GO No. 156 is not violative of Articles 14 and 16
of the Constitution of India.
(e) ·It was noted that the legality or validity of Rule 4 of GO No. 114
fixing the cut-off date of l .4. l 999 was not questioned. Such cut-
off date in any view of the matter is valid having been fixed upon
D taking into consideration the financial implications therefor having
regard to the fact that the financial year commenced from l .4.1999.
(f) Gratuity cannot be a part of pension as conceptually they are
different.

E The High Court, on the other hand, set aside the aforementioned
findings holding that

(i) the Government acted contrary to the agreement arrived at by
and between itself and with the unions; and
(it) paragraph 9 of the GO No. 114 had conferred a right on the
F employees which could not be taken away by issuing another
GO. The High Court, however, did not advert to the other
contentions raised on behalf of the State.

It has not been disputed before us that GO No. 114 is in two parts.
Paragraphs I to 23 only state the factual backdrop leading to issuance of the
G notifications. It is also not in dispute that the statutory rule embedded in GO
No. 114 does not speak of gratuity. It has further not been disputed before
us that the minutes of meeting dated 24.7.1999, held by the Chief Minister of
the State with the representatives of the employees, do not contain any
agreement as· opined by the High Court.

H
STATE OF ANDHRA PRADESH v. A.P. PENSIONERS AS SON. [SINHA . .I.] 233

GO No. 114 being in two parts, the first part which is in the nature of A
preamble or statement of background facts cannot be treated to be a part of
the rules framed and notified in terms of proviso to Article 309 of the
Constitution of India. Paragraph 16 of the GO, as has been noticed hereinbefore,
in no uncertain terms states that separate orders were being issued in regard
to recommendations of PRC on pension and other terminal benefits. Only
because clauses 9 and 16 of the said GO speak of pensionary benefits and/ B
or other terminal benefits, the same, in our opinion, would not mean that they
embraced within their fold all benefits which under different provisions of a
statute or even different statutes could come within the preview thereof.

~
For the aforementioned purpose, the provisions of the notification are
to be read as a whole. The intention of the State in issuing the aforementioned
c
notification although may have to be gathered in the backdrop of the facts
stated in the preamble portion thereof, indisputably the legal right of the
Respondents, if any, must be found out from the notification portion itself.
The notification read as a whole does not suggest that the State of Andhra
Pradesh thereby intended to pay before 1.4.1999 retirement gratuity reckoned D
on the basis of the revised scale of pay as recommended by the PRC.

Mr. Lalit may be right in his submissions that the revised scale of pay
notionally was fixed from I. 7.1998, but, concededly, cash benefit therefor was
payable from 1.4.1999. Pension and gratuity connote two different things. In
given situations, they may be payable under different statutes. Admittedly, E
the matter relating to payment of pension and gratuity is governed by the A.P.
Revised Pension Rules, 1980. Rule 31 of the said rules defines "emoluments"
to mean 'pay' as defined in Rule 9(2l)(a)(i) of the Fundamental Rules, which
a Government servant had been receiving immediately before his retirement
or on the date of his death. Rule 46 provides for retirement gratuity, clause F
(I )(a)(A) whereof reads as u·nder:

"46. Retirement Gratuity : - (l)(a) A Government servant, who has
completed five years' qualifying service and has become eligible for
service gratuity or pension under Rule 45~ shall on his retirement, be
granted as retirement gratuity, - G
.... (A) In case he draws pay in the Revised Scales of Pay, 1993, a sum
equal to -

(i) l/4th of emoluments for each completed six monthly period of
service, subject to a maximum of fifteen times the emoluments or
H
234 SUPREME COURT REPORTS [2005] SUPP. 5 S.C.R.

A rupees sixty five thousand, whichever is less; or

(ii) 3/I6th of emoluments for each completed six monthly period of
service, subject to a maximum of 12.375 times the emoluments or
Rupees one lakh, whichever is less;

B in accordance with the. choice exercised by him in his behalf;"

Computation of retirement gratuity payable to a Government servant is,
therefore, required to be done on the basis of the fomtula laid down therein.
A bare perusal of the aforementioned rule clearly shows that for the purpose
of computation either l/4th of the emolument for each completed six monthly
C period of service, or 3/I6th of emoluments for each completed six monthly
period of service, is to be taken into consideration. Such emoluments
necessarily were payable either immediately before the date of retirement or
the date of death. On l.4.I999, in view of the clear expressions contained in
the aforementioned GO No. I I4, those employees who retired between the
period I. 7. I998 and I .4.1999 would have received the actual benefit calculated
D in terms of the said rule. The submission of Mr. Lal it to the effect that they
became entitled to enhanced pay and, therefore, to enhanced gratuity from
I. 7.1998 is not wholly correct. They became entitled thereto but only notionally
for the purpose of calculation of such recurring liability of the State which
became payable with effect from I .4.1999. The High Court has heavily relied
E upon the purported legal fiction created in the said rule to the effect that the
same would come into force with effect from l.7.I998. The legal fiction
undoubtedly is to be construed in such a manner so as to enable a person,
for whose benefit such legal fiction has been created, to obtain all
consequences flowing therefrom.

F In Gurupad Khandappa Magdum v. Hirabai Khandappa Magdum and
Ors., (I978] 3 SCR 76I, whereupon Mr. Lalit placed strong reliance, the court
was concerned with the share of the deceased in the coparcenary property
in terms of Section 6 of the Hindu Succession Act, I956. In terms of the said
provision a legal fiction was created for the purpose of reckoning the share
of the deceased which would have been allotted to him if a partition of the
G property had taken place immediately before his death. Plaintiff therein had
I/6th interest in the share. Applying the principles laid down in the explanation
appended to Section 6 of the Hindu Succession Act, it was held that the
plaintiff was also entitled to I/6th share from I/4th share of the coparcenary
property, i.e;, to say l/24th. As on the date of partition, the. plaintiff was to
H have an independent I/4th share, the Court held that the plaintiffs share
STATE OF ANDHRAPRADESH v. A.P. PENSIONERSASSON. [SINHA,J.] 235

would be l/4th + l/24th in the property. A
The case at hand indeed poses a different problem. Although like
Gurupad Khandappa Magdum (supra) a notional revision of pay was to be
considered as ifthe same took effect from l.7.1998, but the rule went furthet
and stated that actual monetary benefit thereof shall be given with effect from
1.4.1999. the rule, therefore, not only creates a legal fiction but also provides B
the limitations in operation thereof. If the effect of the legal fiction is extended
·in the manner suggested by Mr. Lalit, clause (4) of the rule will become otiose.
In other words, all the consequences ordinarily flowing from a rule would be
given effect to ifthe rule otherwise does not limit the operation thereof. If the
rule itself provides a limitation on its operation, the consequences flowing C
from the legal fiction have to be understood in the light of the limitations
prescribed. Thus, it is not possible to construe the legal fiction as simply as
suggested by Mr. Lalit.

Furthermore, in construing the rule, this Court cannot lose sight of the
fact that the same did not provide for payment of gratuity. D
in' State Government Pensioners' Association and Ors. v. State of
Andhra Pradesh, [1986] 3 SCC 501, this Court accepted that.when the revised
scheme became operative from 1st April, 1978, non-payment of gratuity under
the Revised Pension Rules, 1980 was not payable to those pensioners who
retired prior thereto stating that at the time of retirement they were governed . E
by the then existing rules and their gratuity was calculated on that basis. The
Court rejected the contention that the same was ultra vires Article 14 of the
Constitution of India.

In Union of India v. All India Services Pensioners' Association and
Anr., [ 1988] 2 sec 580, the law is stated in the following terms: .F

"8. From the foregoing it is clear that this Court has made a distinction
between the pension payable on retirement and the gratuity payable
on retirement. While pension is payable periodically as long as the
pensioner is alive, gratuity is ordinarily paid only once on retirement" G
In State of U.P. v. U.P. University Colleges Pensioners' Association,
[1994] 2 SCC 729, this Court held that gratuity, in absence of any express
pr,ovision in a statute, cannot be treated to be a part of pension.

In State of Punjab and Ors. v. Boota Singh and Anr., [2000) 3 SCC 733, H
236 SUPREME COURT REPORTS [2005) SUPP. 5 S.C.R.

A it was stated:
"7. On merits we find that the retirement benefits which are claimed
by the respondent are benefits which are conferred by subsequent
orders/ notifications. Therefore, persons who retired after the coming
into force of these notifications and order are governed by different
B rules of retirement than those who retired under the old rules and were
governed by the old rules. The two categories of persons, who retired
were governed by two different sets of rules. They cannot, therefore,
be equated. Further, granting of additional benefits has financial
implications also. Hence, specifying the date for the conferment of
C such additional benefits cannot be considered as arbitrary."

In State ofPunjab and Ors. v. Amar Nath Goyal and Ors., [2005] 6 SCC
754, upon consideration of a large number of decisions, this Court opined that
the decision of a State to limit the benefits only to employees who retire or
died on or after a particular date upon calculating the financial implications
D · thereof was neither irational nor arbitrary. It was observed:
"28 .... .lt is trite that, the final recommendations of the Pay Commission
were not ipso facto binding on the Government, as the Government
had to accept and implement the recommendations of the Pay
Commission consistent with its financial position. This is precisely
E what the Government did. Such an action on the part of the Government
can neither be characterised as irrational, nor as arbitrary so as to
infringe Article 14 of the Constitution."

Mr. Lalit placed strong reliance on D.S. Nakara and Ors. v. Union of
India, [ 1983] I SCC 305 for the proposition that the financial implication for
F implementation of the recommendations of PRC has not much relevance.
Therein, the Constitution Bench came to the conclusion that the increased
liability upon the said judgment is not too high to be unbearable or such as
would have detracted the Government from covering the old pensioners
under the scheme.

G The decisions of this Court which have been noticed in Amar Nath
Goyal (supra) categorically point out that financial implication is one of the .
relevant considerations for the State to deny certain benefits to a class of
employees who retire on or before· a particular date.

It is, therefore, beyond any shadow of doubt that the financial implication
H
STATE OF ANDHRA PRADESH v. A.P. PENSIONERS ASSON. [SINHA, J.] 237

is a relevant criterion for the State Government to determine as to what A
. benefits can be granted pursuant to or in furtherance of the recommendations
made by the PRC. The PRC also said that while revision of pay shall take
effect from 1.7.1998, the monetary benefit would be payable only from 1.4.1999.
If monetary benefit was payable only from 1.4.1999, all rights to get the
benefits computed on the basis of the revised scale of pay would only be for B
the purpose of payment of pay with effect from l .4.1999 or payment of the
recurring amount of pension with effect from that date.

Clause (4) does not make any exception so far as payment of actual
monetary benefit is concerned for the purpose of payment of gratuity or
otherwise. Had that been so, the rule would have stated expressly. On the C
other hand, GO No. 157 dated 16.9.1999 fixed the maximum limit of gratuity
under rule 46 of the A.P. Revised Pension Rules with effect from 1.4.1999 only.

We, therefore, are of the opinion that the intention of the State was not
to grant any benefit towards payment of gratuity even in relation to those
employees who had retired in between 1. 7.1998 and 31.3.1999. D
For the reasons aforementioned, the judgment and order of the High
Court cannot be sustained. We, however, agree with the Tribunal that the
employees are eligible for computation of portion of revised pension in terms
of Rule 3 of A.P. Civil Pensions (Commutation) Rules, 1944. The appeal are
allowed. The impugned judgment of the High Court is set aside and as of the E
Tribunal is restored. No costs.

NJ. Appeals allowed.