Kerala High Court
K.S.R.T.C. vs Varghese on 24 March, 2004
Equivalent citations: 2004(3)KLT542
Author: J.B. Koshy
Bench: J.B. Koshy, K. Thankappan
JUDGMENT J.B. Koshy, J.
1. Whether Kerala State Road Transport Corporation (K.S.R.T.C.) is bound to pay revised pension and pensionary benefits to its retired employees as per the Government Service Rules (K.S.R.) on par with pensioners of Government service without fixing a different cut off date is the question that is to be considered in these appeals. Earlier, this Court answered the above question in the affirmative. In appeal, the matter was remanded as according to the Honourable Supreme Court, this Court had considered only the entitlement of the pensionary benefits and not regarding the legality of fixing a different cut off date. Apex Court also noticed that reliefs claimed in the Writ Appeals were not identical. There are two classes of employees in all the Writ Appeals: (1) erstwhile Government employees who were transferred and absorbed by the Corporation and (2) employees who were appointed after the formation of the Corporation. The Apex Court also held that this Court has not considered the question whether application of K.S. Rs. mentioned in the notification dated 22nd March, 1965 was by incorporation or by reference and the effect of letter dated 5th May, 1984. The Judgment of the Honourable Supreme Court remanding the matter is reported in K.S.R.T.C. v. Varghese (2003 (2) KLT 706 (SC)).
2. Kerala State Road Transport Corporation (K.S.R.T.C.) (hereinafter referred to as 'the Corporation') was formed on 1st April, 1965. All the employees of the State Transport Department were absorbed by the Corporation. All the assets of the State Government in the State Transport undertaking were transferred to the Corporation. Service conditions of ex-employees of the State Transport Department absorbed by the Corporation were protected as per Notification No. 4936/T.C. 4/65/P.W., dated 22nd March, 1965 under Sub-section (1) of Section 34 of the Road Transport Corporation Act, 1950 (hereinafter referred to as 'the Act'). Paragraphs 11 and 12 of the notification reads as follows:
"11. The Corporation shall guarantee continued employment to all such personnel as are transferred for service under the Corporation, under the same terms and conditions of service as were applicable to them under Government immediately before such transfer.
12. The Corporation shall pay to the employees so transferred their pension, gratuity and provident fund according to the relevant rules, notifications and orders of Government in force and applicable to them immediately before such transfer as and when such benefits accrue."
Another order was also passed by the Government, G.O. (Ms.) No. 75/P.W., dated 22nd March, 1965. In that order it is stated as follows at paragraph 2:
"Since the State Transport Undertaking is being transferred to the Corporation as above-mentioned, the Government Transport Department will cease to exist with effect from 1st April, 1965 and the various posts under that Department will stand abolished with effect from that date. Corresponding posts will however be deemed to have been created under the Corporation with effect from 1st April, 1965 itself and the personnel employed in the existing State Transport Department immediately prior to 1st April, 1965 will be accommodated in these posts under the Corporation protecting the service benefits to which they were entitled under the relevant rules applicable to them in Government service immediately prior to 1st April, 1965 in the manner and subject to the conditions detailed below."
Thereafter, Clauses 11 and 12 of the earlier notification were incorporated in this G.O. No option was given to continue in the Department. The option given under Sub-clause (viii) is to go out from the service after getting retiral benefits. On the basis of the above, those who were absorbed from Government Department were being paid pension on their retirement as provided under Part III of the Kerala Service Rules. Subsequent revision of pension and dearness reliefs as granted to pensioners of Government service were also given to this class of pensioners on equal footing without any difference till 1992.
3. By order dated 5th May, 1984, the employees employed by the Corporation who have opted for pension were also granted pension at the same rate and conditions on par with the ex-employees of State Transport Department. Government authorised the Corporation to pay pension to the employees as per Kerala Service Rules. All revision effected by the Government in dearness relief were also given to pensionable employees of the Corporation without any difference and the Corporation was strictly observing the provisions of Part III of K.S.Rs. in the matter of pension. No separate regulations were framed by the K.S.R.T.C. for giving pension. But, after 1st January, 1992, whenever Government revised pension and dearness relief, it was not given to the retired employees of the Corporation immediately, but, different cut off dates were given for effecting revision: For example, dearness relief granted to State Government pensioners with effect from 1st January, 1992 was granted to the pensioners of the Corporation only from 1st July, 1992. When the Government has revised dearness allowance with effect from 1st January, 1994, even though the Corporation granted revision, it was only with a cut off date starting from 1st November, 1996. Argument of the retired employees is that they are entitled to revised pensionary benefits on par with the Government employees from the respective dates and cut off date fixed by the Corporation is not correct. Learned Counsel for the Corporation submitted that they are not disputing the entitlement of revising pensionary benefits to its employees; but, they are entitled to fix a separate cut off date. Therefore, we need not look into the entitlement of the revised pensionary benefits to the pensioners; but, only the correctness of fixation of the cut off date by the Corporation in the backdrop of orders passed under Section 34 and adoption of K.S.R. by the Corporation in the matter of payment of pension without framing regulations. Effect of the orders passed under Section 34 of the Act on 22nd March, 1965 with regard to the employees transferred from the erstwhile Transport Department, effect of the order dated 5th May, 1984 with regard to the employees directly appointed by the Corporation, ambit of Government letter dated 24th September, 1992 and similar letters issued in subsequent pension revisions etc. have to be reconsidered in the light of the Apex Court judgment.
4. Before going into the merits of the case, we may also refer to the statutory provisions contained in the Road Transport Corporation Act (hereinafter referred to as 'the Act'). Section 34 of the Act reads as follows:
"34. Direction by the State Government.-
(1) The State Government may, after consultation with a Corporation established by such Government, give to the Corporation general instructions to be followed by the Corporation, and such instructions may include directions relating to the recruitment, conditions of service and training of its employees, wages to be paid to the employees, reserves to be maintained by it and disposal of its profits or stocks.
(2) In the exercise of its powers and performance of its duties under this Act, the Corporation shall not depart from any general instructions issued under Sub-section (1) except with the previous permission of the State Government."
It is well-settled law that until regulations are made with the previous sanction of the State Government, the directions given under Section 34 in respect of conditions of service have got force of law. (See General Manager, Mysore State Road Transport Corporation v. Devraj Urs (AIR 1976 SC 1027)).
5. Section 14(3) of the Act reads as follows:
"14. Officers and servants of the Corporation.--
** ** ** ** (3) The conditions of appointment and service and the scales of pay of the officers and employees of a Corporation shall--
(a) as respects the Managing Director, the Chief Accounts Officer and the Financial Adviser, or, as the case may be, the Chief Accounts Officer-cum-Financial Adviser, be such, as may be prescribed, and
(b) as respects the other officers and employees, be such, as may, subject to the provisions of Section 34, be determined by regulations made under this Act."
Section 45(2)(c) reads as follows:
"45. Power to make regulations.--
(2) In particular, and without prejudice to the generality of the foregoing power, such regulations may provide for all or any of the following matters, namely:
** ** ** **
(c) the conditions of appointment and service and the scales of pay of officers and other employees of the Corporation other than the Managing Director, the Chief Accounts Officer and the Financial Adviser or, as the case may be, the Chief Accounts Officer-cum-Financial Adviser;"
In Mysore State Road Transport Corporation v. Gopinath Gundachar Char (AIR 1968 SC 464), the Supreme Court held that conjoint effect of Sections 14(3)(b), 34 and 45(2)(c) is that appointment of officials and servants and their conditions of service must conform to the directions given by the State Government under Section 34 and regulations framed under Section 45(2)(c), No regulations are framed by the Corporation with regard to the payment of pensionary benefits.
6. Now, we will consider the question whether employees who were originally appointed in the State Transport Department and whose services were transferred to the Corporation are entitled to revised pensionary benefits without a cut off date. In view of Section 34 directions issued on 22nd March, 1965 (relevant provisions are quoted in paragraph 2 of this judgment), it is mandatory on the part of the Corporation to pay pension to the erstwhile employees according to the relevant rules, notifications and orders of Government in force and applicable to them immediately before such transfer as and when such benefits accrue. Employees of the State Government Transport Service were entitled to get pension on the retirement as provided in Part III of K.S.Rs. That was protected by Government Orders issued under Section 34 of the Act. Part III of the Kerala Service Rules deals with general rules of pension, namely, how pension is payable, when pension can be denied, minimum service required for pension, conditions for grant of pension, when pension can be granted, pay and allowances that should be reckoned for calculation of pension, percentage of pension to the monthly emoluments, , calculation of dearness reliefs, when pensionary benefits shall be made, etc. So, the above service rules regarding payment of pension as Part III of the Kerala Service Rules are applicable to the erstwhile Government Employees. Their conditions of service were fully protected. Therefore, their conditions of service cannot be reduced or made less favourable on transfer of their service. They are placed on par with the Government employees with regard to payment of pension. Promise given by the Government when the Corporation was incorporated and employees of the Transport Department were transferred to the Corporation cannot be withdrawn also as has been held by the Apex Court in Bhim Singh and Ors. v. State of Haryana and Ors. ((1981) 2 SCC 673). Directions under Section 34 are binding on the Corporation and it has force of law. Further, Kerala Service Rules is applied by reference. It is not the case of the Corporation that they will be entitled to pension calculated on the basis of the amount they were entitled at the time when they joined the service of the Corporation without regard to the service rendered after transfer. Notification dated 22nd March, 1965 is issued in exercise of the powers conferred under Sub-section (1) of Section 34 of the Act. Clause 17(b) of the above notification reads as follows:
"(b) Except as provided under instruction 17(a) above, no employee transferred for service under the Corporation shall be eligible for any retirement benefits immediately on transfer of his services to the Corporation merely by reason of the cessation of his services under Government as provided under instruction (10) above."
Clauses 15 and 16 of the above notification further read as follows:
"15. The Corporation shall count the past services under Government of employees transferred together with their services under the Corporation for purposes of promotion, leave, pension and such other benefits. The vacation of their offices under Government as provided under instruction (10) above will not amount to an interruption of the .service of the employees for (he above purposes.
16. A Government servant, whose services are lent to the Corporation shall continue to enjoy all the concessions he is eligible for under the State Rules on a scale not less favourable than those which he would have enjoyed, had he been continuing in the service of Government."
All these provisions read together would show that the erstwhile Government employees would continue to get pension on par with the Government servants. Corporation can give any farther advantage or further benefits. But, the benefits as per the Government Rules cannot be denied to them to their disadvantage. From 1964 to 1992, revised pensions were given to such pensioners on par with retired Government employees without any discrimination or without making a separate cut off date.
7. We also note that in 1992, 1996 etc. when revisions were effected, Government wrote to the Corporation to give the above benefits to transferred Government employees also. For example, when pensioners of the Government were granted revised pensionary benefits, by letter dated 3rd January, 1996 Government informed the Managing Director of the Corporation as follows:
"I am to invite your attention to the reference cited and to request you to implement the 5th Pay Commission recommendations to pensioners of K.S.R.T.C. as and when the financial resources of the Corporation permits, As regards the pensioners transferred from former Transport Department, the Finance Department has agreed to bear the proportionate cost by Government."
As already noticed, as a matter of fact, erstwhile Government employees were given benefits of pensionary revisions on par with the Government employees from the dates they were given revision of pensionary benefits and dearness allowance. It is true that the Corporation was formed in 1965 and pensioners who have transferred from the Transport Department are few now and virtually on extinction. Even when Corporation was allowed to defer the actual payment, With regard to the transferred employees, Government took a different stand as can be seen from the letter dated 3rd January, 1996 and similar letters issued whenever revisions were effected. But, they are entitled to revised pensionary benefits and dearness reliefs on par with the Government employees without a separate cut off date. With regard to imposition of cut off date and application of the provisions of the K.S.R. by reference, we will consider in detail while considering the payment of pensionary benefits for the employees who are appointed by the Corporation.
8. Unlike the employees transferred from the Government Department to the Corporation along with its assets, no pension was payable as per the conditions of service to the employees directly appointed by the Corporation till 1st April, 1984. They were only entitled to contributory provident fund scheme. Pension was introduced with effect from 1st April, 1984. Letter dated 27th March, 1984 issued in this regard by the Secretary to the Government to the Chairman and Managing Director of the Corporation is as follows:
"In continuation of the letter cited above, I am directed to convey the Government decision authorising the K.S.R.T.C. to pay pension to its employees as per K.S.R's. and introduce G.P.F. instead of contributory provident fund with effect from 1st April, 1984.
The K.S.R.T.C. will obtain written undertakings from each employee to refund the Management share of contribution to G.P.F. as well as to the family pension fund hitherto made in consultation with the Regional Provident Fund Commissioner."
That was accepted and the Corporation issued an order on 5th May, 1984. Since exhibits are numbered differently in different writ petitions, we are quoting the above order of the Corporation dated 5th May, 1984:
"Government have vide letter No. 26700/A1/82/TF and P, dated 27th March, 1984 authorised the Corporation to pay pension to its employees as per Kerala Service Rules and introduce the General Provident Fund instead of Contributory Provident Fund with effect from 1st April, 1984. The Corporation is, therefore, pleased to order that all Corporation employees who retire after 1st April, 1984 will be paid pension. All officers will forward the pension papers of the concerned employees who retired on 30th April, 1984 so as to reach this office before 15th May, 1984. A written undertaking from the employees that they are prepared to forego/refund the Management's share of the Section T.P.F. as well as the Family Pension Fund hitherto made will also be obtained and forwarded along with the pension papers.
The accounts section will take steps to admit all employees who are members of the S.T.P.F. to the G.P.F. immediately. The closure of the S.T.P.F. accountsof those who retired after 1st April, 1984 will be done only after obtaining the above undertaking and admitting them to the G.P.F. after due consultation with the Regional Provident Fund Commissioner."
So, what is authorised by the Government is to pay pension to the employees as per the K.S.Rs. Not a particular provision was incorporated as such and, therefore, the provisions of the K.S.Rs. were adopted by reference. In view of the above, pension is payable to the employees employed directly by the Corporation and they are also entitled to the benefit of pensions and pensionary benefits as per K.S.Rs. from 1st April, 1984.
9. A reading of order of the Corporation dated 5th May, 1984 read with Government direction dated 27th March, 1984 shows that the provisions in the K.S.Rs. were incorporated by mere reference. If it is not adopted by reference generally, there is no rule at all for paying pension in the Corporation. Admittedly, no regulations were framed for payment of pension. The Corporation has adopted Part III of K.S.Rs. by reference by citation. While remanding the matter, Honourable Supreme Court observed as follows with regard to incorporation of Statutes by reference:
"29. One of the issues which needed consideration was indication of K.S.R., Part III on the question of paying pension in Corporation's order dated 5th May, 1984. A distinction has been made between a mere reference or citation of one statute into another and incorporation. A statute may instead of referring to a particular previous statute or to any specific provision therein refer to the law on the subject generally. In such cases, a reference is construed to mean that the law is as it reads thereafter, including amendments subsequent to the time of adoption, as was noted by Sutherland in Statutory Construction Vol. 2, 3rd Edn., P. 550 and supplement (1956, P. 119).
30. The legislation by referable incorporation falls into two categories. That is (i) where a statute by specific reference incorporates the provisions of another statute as at the time of adoption and (ii) where a statute incorporates by general reference. The law concerning a particular subject has a genus. In former case, the subsequent amendments made in the referred statute cannot automatically be read into the adopting statute. But in the second category it may be presumed that the legislative intent was to include all the subsequent amendments also made from time to time in the generic law on the subject adopted by the general reference."
On the facts of these cases, what is referred in the order passed in 1965 and 1984 is not a particular provision of Part III, K.S.Rs.; but, law on the subject in general. It is merely referred to or cited. In such cases, the reference is construed to mean that the law is as it reads thereafter including amendments subsequent to the time of adoption. Effect of similar reference of earlier Act in subsequent Act was considered by the Apex Court in the following cases: Western Coalfields Ltd. v. Special Area Development Authority, Korba and Anr. (AIR 1982 SC 697) and Spt. Land Acquisition Officer, City Improvement Trust Board, Mysore v. P. Govindan (AIR 1976 SC 2517). Section 37(2) of the Foreign Exchange Regulation Act, 1973 prescribes that the provisions of the Code of Criminal Procedure relating to searches, shall, so far as may be, apply to searches under Section 37. Apex Court held in Ujagar Prints v. Union of India and Ors. (AIR 1989 SC 516) that what is meant is that those provisions may be generally followed to the extent possible and so, the argument that then existing provisions of the Code of Criminal Procedure were incorporated by pen and ink in Section 37(1) cannot be accepted. In this connection, we also refer to the Judgment of the Supreme Court in State of Kerala v. Attesee (Agro Industrial Trading Corporation) (AIR 1989 SC 222). Since the provisions of Part HI of K.S.Rs. were incorporated by mere reference in the matter of payment of pension, we are of the view that a separate cut off date cannot be imposed to the employees appointed by the Corporation for revising the pensionary benefits and dearness reliefs to the pensioners.
10. It is well-settled law that in the absence of any legal compulsion when a pension scheme is framed or wage revision or a wage formula is settled, the Corporation or the establishment is entitled to look into various aspects like financial ability, industry-cum-region practice and various other aspects. [See Union of India v. P.N. Menon (AIR 1994 SC 2221) and State of Rajasthan and Anr. v. Amrilal Gandhi and Ors. ((1997) 2 SCC 342)). Even when wage revision or pension scheme is framed by Wage Boards, Industrial Tribunals, etc. financial capacity of the employer is one of the essential criteria to be looked into. It is also well-settled law that while preparing pension scheme or a scheme for revision of the pensionary benefits or wages, authorities are entitled to fix a cut off date in the absence of any law or. rule to the contrary. In this case Government effected pensionary revision from a cut off date. Question is whether a different cut off date can be fixed by the Corporation on the facts of this case. We have seen that conditions of the erstwhile Government employees were protected at the time of transfer in view of the orders constituting the Corporation as well as orders passed in 1965 under Section 34 of the Act. No conditions disadvantageous to them can be fixed. Of course, favourable conditions can be given by the Corporation if it chooses so. Since the order dated 5th May, 1984 granting pension incorporating the K.S.Rs. by general reference, the employees directly appointed by the Corporation are also entitled to pension on par with the Government employees. The order issued in 1984 was as per the directions issued under Section 34 of the Act which are binding on the Corporation. Further, order issued by the Corporation in 1984 is unambiguous that it gives pension to its employees as per K.S.Rs. without any direction fixing a cut off date. Learned Counsel for the Corporation submits that they are not questioning the entitlement of revised pension or dearness relief. But, it can put a cut off date in view of the directions of the Government dated 24th September, 1992, 16th June, 1995, 3rd January, 1996, etc. notwithstanding the order passed under Section 34 on 22nd March, 1965 and the order dated 5th May, 1984.
11. Now, we are quoting the letter of the Government dated 24th September, 1992 (Ext.P1 in O.P. No. l 194 of 1994):
"Referring to the above, I am directed to inform you that since the financial position of K.S.R.T.C. is not sound this may be deferred for better times."
Admittedly, this is not a Section 34 direction as contended by the Counsel for the Corporation. It is a letter given in reply to the letter of the Corporation. As we have seen that notifications and orders issued earlier under Section 34 which were issued as orders or notifications signed by the Secretary to Government by order of the Government. This is not such an order. The above letter is not authorising the K.S.R.T.C. to pay the revised pensionary benefits fixing a separate cut off date. It only says that payment can be deferred for sometime due to financial constraints. In other words, when financial position improves, the entire amount as revised can be paid and it is not a direction under Section 34 authorising the Corporation to put a cut off date. Similar are the letters issued subsequently also when further wage revisions were given in reply to the letters written by the Corporation or by the employees. Government only stated that payment will be deferred for the time being. Government did not say that different cut off dates shall be fixed. So, in view of the directions issued under Section 34 of the Act which has force of law and in view of the adoption of K.S.Rs. by general reference, we are of the opinion that employees appointed by the Corporation are also entitled to pension and revised pension on par with the Government employees without fixing a separate cut off date.
12. We may now refer to some of the decisions cited. In Grid Corporation of Orissa and Ors. v. Rasananda Das (AIR 2003 SC 4599) the Hon'ble Apex Court held that it is not proper to fix two types of scales of pay and the State Government is also bound to protect the service conditions of the absorbed employees and the State Government is not precluded from improving them or granting better pay scales. In Bhim Singh and Ors. v. State of Haryana and Ors. ((1981) 2 SCC 673) a three-member Bench of the Apex Court held that Government employees moving over to the new department because of certain inducements held out by the Government, cannot go back. In this case, when the employees of the State Government were transferred, they ,were promised that their service conditions will not be adversely affected as can be seen from various provisions quoted above. So, they cannot be put in a disadvantageous situation. The learned Counsel for the Corporation relied on the decision of the Supreme Court in T.N. Electricity Board v. R. Veerasamy and Ors. ((1999) 3 SCC 414) wherein it was held that when cut off date was prescribed for payment of pension due to financial constraints, it was upheld by the Supreme Court. But, in that case, cut off date was fixed on the basis of Central Government Notification. Here, there is no such notification and no directions were issued by the State Government under Section 34 of the Act to fix a separate cut off date by the Corporation. Not even regulations were framed by the Corporation. Corporation can frame regulation fixing cut off date regarding payment of pension with regard to future revision of pension or pensionary benefits.
In the above circumstances, we are of the opinion that in the absence of specific regulation framed, all the retired employees of the Corporation (transferred employees from Government service as well as employees appointed by the Corporation) and superannuated after 1st April, 1984 are entitled to revised pensionary benefits and dearness relief on par with the Government employees from the respective dates they are entitled without fixing separate cut off dates. Question posed is answered in the affirmative. No other issues were argued before us by both sides.
The Writ Appeals filed by the employees are allowed and Writ Appeals filed by the Corporation are dismissed.