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The letter further said:

A proposal to treat the additional increments as part of 'Pay' as defined under FR 9(21) for all purposes like DA, HRA, Pension etc. except for pay fixation, is being taken up with Ministry of Finance. Further instructions in this regard will be issued after obtaining the approval of the Ministry of Finance.

In regard to Special Pay, the letter said as follows:

(I).............

(ii) The pay is in lieu of a separate higher pay scale.

Therefore, it will be counted as pay for the purpose of pay fixation on promotion, to the next higher grade, if drawn for three years in terms of the Ministry of Finance OM No.6(1) E-III/B(65) dt.25.2.65.

A proposal to treat the special pay as part of "Pay" as defined under FR 9(21) for all purposes is being taken up separately with the Ministry of Finance.

Further instructions in this regard will be issued after obtaining the approval of Ministry of Finance.

As per Rule 33 of CCS (Pension Rules) 1972, the expression 'emoluments' means basic pay as defined in Rule 9(21)(a)(i) of Fundamental Rules, which a government servant was receiving immediately before his retirement and will also include non- practicing allowance granted to medical officer in lieu of private practice and stagnation increment. Therefore, it is evident from the definition of emoluments that the two increments granted to Scientists 'C' to 'F' do not form part of emoluments for pensionary benefits .The extract of FR 9 (21)(a)(a)(i) has been marked as Annexure-R/4. Notwithstanding the above position, a proposal was sent to Department of Expenditure, Ministry of Finance for inclusion of these two increments as part of pay for purpose of DA, HRA, pension etc. The Government did not agree to the proposal. Even the merger of special pay granted to Scientists 'G' in lieu of higher pay scale has not been concurred (by the Department of Expenditure, Ministry of Finance .The Rule position is that allowances, incentives and special pay which are granted for specific reasons to a particular individual, class or group are not to be treated as part of pay. The matters of policy governing the service conditions of employees lie in the exclusive domain of the Government and the Courts do not interfere with such policy matters unless these are arbitrary or discriminatory - this position has been upheld by the Apex Court in its various judgments. But it appears in this case that the Presidential order had an objective in mind, i.e. a special benefit to be granted to a group of people in lieu of a special scale of pay. The Presidential order must be understood in this open perspective. It is to be noted that Scientists forum adherent classification and therefore it was found suitable to have a structure of pay slightly better for the purpose of attracting better minds to its fold. The correspondence, except at the last stage seems to be indicative that a separate pay structure was in the thought process and this was only an interregnum arrangement. The applicant thus claims an estoppel against this denial and is illuminative of the various views and hues of discussion in this regard.

12. It is seen that vide letter dated 03.02.1999 of the Department of Defence Research & Development, Ministry of Defence, Government of India, the Scientists 'C' to 'F' in the DRDO were granted with effect from Jan 01, 1996 (i) Special Pay of Rs.2,000 p.m in the pay scale of Rs.10,400 - 22,400, in lieu of a separate higher pay scale, after peer review, (ii) 2 additional increments to Scientists (Recruitees/Promotees) in the pay-scales of Rs.10,000 - 15,200, Rs.12,000 - 16,500, Rs.14,300 - 18,300, Rs.16,400 - 20,000] after their normal pay fixation, and (iii) from financial year 1998-99 onwards, (iii) Professional Update Allowance of Rs.5000 per annum to all Scientists. This OM /letter had the concurrence of integrated Finance. It was clarified vide letter dated 14/15.05.2009 that while the additional increments for Scientists 'C' to 'F' were to be treated separately and not to be merged with the basic pay fixed under the normal rules and that a proposal to treat the additional increments as part of 'Pay' as defined under FR 9(21) for all purposes like DA, HRA, Pension etc. except for pay fixation, was being taken up with Ministry of Finance, in regard to Special Pay, the letter said that in as much as the special pay granted was in lieu of a separate higher pay scale, it would be counted as pay for the purpose of pay fixation on promotion, to the next higher grade, if drawn for three years in terms of the Ministry of Finance OM No.6(1) E-III/B(65) dt.25.2.65 and that a proposal to treat the special pay as part of "Pay" as defined under FR 9(21) for all purposes was being taken up separately with the Ministry of Finance, GOI vide Note dated 15/18.09.2000 was that the two additional increments to Scientists/Engineers up to the level of Rs.16400 - 20400 were to be termed as a separate element as done by the DRDO and therefore it might not be possible to agree to these increments being counted as pay for Rs.2000 was given as an incentive personal to the Scientists/Engineers in the scale of Rs.18,400 - 22,400 as on 01.01.1996, it would be difficult for the Department of Expenditure, Ministry of Finance to treat this as pay for all purposes because based on the 5th CPC recommendations, all Special Pay have been converted to Special Allowance and any deviation would generate demand from all other categories where Special Allowance has been granted. Incidentally, DOP&T made certain alternative suggestions but the same were not found suitable for dealing with the specific proposals made by the Ministry of Defence and would have needed fresh proposals, its examination and also Cabinet's approval"