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A.M. Ahmadi J.

1. In exercise of powers conferred by Clause (j) of Sub-section (2) of Section 58 of the Reserve Bank of India Act, 1934 (Act II of 1934) (hereinafter called 'the Act'), the Central Board of the Reserve Bank of India with the prior approval of the Central Government framed Regulations known as the Reserve Bank of India Pension Regulations, 1930 (hereinafter called 'the Regulations'). By the said Regulations brought into force with effect from 1st November, 1990 a pension scheme was introduced in substitution of the existing Contributory Provident Fund Scheme (hereinafter alluded to as the 'CPF Scheme'). The newly introduced pension scheme was made applicable to all employees entering Bank service on or after 1st November, 1990; for them the CPF scheme did not exist. The in-service employees i.e. those employees who were actually in service at the date of introduction of the scheme were given an option to opt out of the pension scheme and continue to be governed by the CPF scheme. The third category is of those who retired from Bank's service between 1st January, 1986 and 1st November 1990. Regulation 3(3) which deals with the applicability of the scheme to the said category of retired employees reads as under:

12. From what we have stated above it becomes clear that the demand of Bank employees for introduction of a pension scheme as a third retiral benefit as recommended by the Study Group in its report submitted in 1981 was rejected by the Central Government some time in 1982. Thereafter a fresh demand was made for the introduction of a pension scheme in substitution of the CPF scheme on the pattern of the pension scheme admissible to Central Government employees. This proposal met with the approval of the Central Government and accordingly the Bank introduced the Regulations incorporating the same. Under the Regulations new entrants joining on and after 1st November, 1990 automatically become governed by the pension scheme; for them the CPF scheme has no existence. Those employees who were in the employment of the Bank prior to 1st November, 1990 were given an option to switch over to the pension scheme subject to the conditions stated earlier. An option was also given to those employees who had retired between 1st January, 1986 and coming into force of the Regulations to come over to the pension scheme, provided they were witling to refund the employer's contribution under their CPF scheme with interest thereon and with further interest at 6 percent per annum from the date of receipt of the provident fund amount till the date of repayment. It will thus be seen that the pension scheme introduced under the Regulations is patterned on the pension scheme governing the Central Government employees which was brought into effect from 1st January, 1986 on the recommendations of the Fourth Central Pay Commission found in Chapter X of the report, vide paragraph 10.19 of that chapter. There is, however, no doubt that by fixing the cut-off date Bank employees who superannuated on or before 31st December, 1985 are denied the benefit of the pension scheme. The contention of the petitioners that both the groups, namely, those who retired on or before 31st December, 1985 and those who retired between 1st January, 198.6 and 31st October, 1990 belong to the same group of CPF retirees and yet the Regulations seek to divide them by placing an artificial cut-off date under Regulations 3(3) and 31 of the Regulations. It is, therefore, contended that this artificial division of a homogeneous group not based on any logic or rational and having no nexus to the object to be achieved clearly offends the equality clause contained in Article 14. There is no doubt that whenever any rule or regulation having statutory flavour is made by an authority which is a State within the meaning of Article 12 of the Constitution, the choice of the cut-off date which has necessarily to be introduced to effectuate such benefits is open to scrutiny by the court and must be supported tin the touch-stone of Article 14. If the choice of the date results in classification or division of members of a homogeneous group it would be open to the Court to insist that it be shown that the classification is based on an intelligible differentia and on rational consideration which bears a nexus to the purpose and object thereof. The differential treatment accorded to those who retired prior to the specified date and those who retired subsequent thereto must be justified on the touchstone of Article 14, for otherwise it would be offensive to the philosophy of equality enshrined in the Constitution. This is quite clear from the ratio of Nakara's judgment as the decision of this Court in B. Prabhakar Rao and Ors. v. State of Andhra Pradesh [1985] Supp. 2 SCR 573. We have, therefore, to consider the limited question whether the classification introduced by Clauses 3(3) and 31 of the Regulations is inconsistent with Article 14 of the Constitution as alleged by the petitioners.

13. The scheme introduced by the Regulations is a totally new one. It was not in existence prior to its introduction with effect from 1st November, 1990. The employees of the Reserve Bank who had retired prior to that date were admittedly governed by the CPF scheme. They had received the benefit of employer's contribution under that scheme and on superannuation the amount to their account was disbursed to them and they had put it to use also. There can, therefore, be no doubt that the retiral benefits admissible to them under the extant Rules of the Bank had been paid to them. That was the social security plan available to them at the date of their retirement. The Bank employees were, however, clamouring for a pension scheme, firstly on a restricted basis as a third retiral benefit and later in lieu of the CPF scheme. The Central Government had not approved of a pension scheme, as a third retiral benefit. After that proposal was spurned it appears that the employees of the Bank demanded a pension scheme on the pattern of the scheme available to Central Government employees in lieu of the CPF Scheme. This was approved by the Central Government and consequently it was introduced with effect from 1st November, 1990 under the Regulations. There can, therefore, be no doubt that if the CPF retirees were not admitted to this new scheme they could not make any grievance in that behalf. They had no right to claim coverage under the new pension scheme since they had already retired and had collected their retiral benefits from the employer. But the moot question is whether it was open to the employer to grant the benefit of the pension scheme to one group of CPF retirees who had retired from Bank service on or after 1st January, 1986 and deny the same to all those who had retired on or before 31st December, 1985. Is this division of CPF retirees discriminatory and violative of Article 14 of the Constitution?

14. Nakara's judgment has itself drawn a distinction between an existing scheme and a new scheme. Where an existing scheme is revised or liberalised all those who are governed by the said scheme must ordinarily receive the benefit of such revision or liberalisation and if the State desires to deny it to a group thereof, it must justify its action on the touchstone of Article 14 and must show that a certain group is denied the benefit of revision/liberalisation on sound reason and not entirely on the whim and caprice of the State. The underlying principle is that when the State decides to revise and liberalise an existing pension scheme with a view to augmenting the social security cover granted to pensioners, it cannot ordinarily grant the benefit to a section of the pensioners and deny the same to others by drawing an artificial cut-off line which cannot be justified on rational grounds and is wholly unconnected with the object intended to be achieved. But when an employer introduces an entirely new scheme which has no connection with the existing scheme, different considerations enter the decision making process. One such consideration may be the financial implications of the scheme and the extent of capacity of the employer to bear the burden. Keeping in view its capacity to absorb the financial burden that the scheme would throw, the employer would have to decide upon the extent of applicability of the scheme. That is why in Nakara's case this Court drew a distinction between continuance of an existing scheme in its liberalised form and introduction of a wholly new scheme; in the case of the former all the pensioners had a right to pension on uniform basis and any division which classified them into two groups by introducing a cutoff date would ordinarily violate the principle of equality in treatment unless there is strong rationale discernible for so doing and the same can be supported on the ground that it will subserve the object sought to be achieved. But in the case of a new scheme, in respect whereof the retired employees have no vested right, the employer can restrict the same to certain class of retirees, having regard to the fact-situation in which it came to be introduced, the extent of additional financial burden that it will throw, the capacity of the employer to bear the same, the feasibility of extending the scheme to all retirees regardless of the dates of their retirement, the availability of records of every retiree, etc. etc. It must be realised that in the case of an employee governed by the CPF scheme his relations with the employer come to an end on his retirement and receipt of the CPF amount but in the case of an employee governed under the pension scheme his relations with the employer merely undergo a change but do not snap altogether. That is the reason why this Court in Nakara's case drew a distinction between liberalisation of an existing benefit and introduction of a totally new scheme. In the case of pensioners it is necessary to revise the pension periodically as the continuous fall in the rupee value and the rise in prices of essential commodities necessitates an adjustment of the pension amount but that is not the case of employees governed under the CPF scheme, since they had received the lump sum payment which they were at liberty to invest in a manner that would yield optimum return which would take care of the inflationary trends. This distinction between those belonging to the pension scheme and those belonging to the CPF scheme has been rightly emphasised by this Court in Krishena's case (supra).