Restoration and relief

The Madras High Court restores some of the terminal benefits that the Tamil Nadu government denied to its employees through a series of orders in March.

in Chennai

A SIGNIFICANT judgment of the Madras High Court, delivered on October 23, came as a big relief and morale-booster to government servants and teachers of State-funded educational institutions in Tamil Nadu, numbering over a million, whose strike in July was suppressed ruthlessly by the Jayalalithaa government with summary dismissals and mass arrests. The relief came in the form of a partial restoration of some of the terminal benefits they were deprived of by the government through a series of orders in March. In fact, it was the resentment against these orders that propelled the near-total strike, which paralysed administration for over three weeks and unsettled the career, albeit temporarily, of a substantial number of employees, who are yet to be reinstated (Frontline, August 29).Disposing of a batch of writ petitions challenging the government orders (G.Os), the Division Bench comprising Justices P.K. Misra and F.M. Ibrahim Kalifulla struck down G.O. 72 and G.O. 73, both issued on March 19 along with three other orders, all applicable to those who retire on and after April 1, 2003. While G.O. 72 reduced from 330 days to 300 days the maximum leave that a government servant is entitled to encash at the time of retirement, G.O. 73 increased the discount rate on the commuted portion of the pension from the existing 4 per cent to 8 per cent.

Two other orders, G.O. 71 and G.O. 74, were, however, upheld by the court. While one of these orders raised the qualifying service period to become eligible for full pension to 33 years from the existing 30, the other restricted the maximum limit for commutation to 33.33 per cent of the pension against the existing 40 per cent. G.O. 75, the last of the series, modified ruthlessly the mode of payment of gratuity to the disadvantage of the employees, by providing for paying only half of the amount in cash and the rest in savings certificates, although the Rules followed until then stipulated that full gratuity be paid in cash. This G.O. was, however, withdrawn by the government in June, at some early stage of the hearing. (These five orders were soon followed by two more orders, G.O. 26 and G.O. 30, to make consequential amendments to the Fundamental Rules pursuant to G.O. 72. The Tamil Nadu Electricity Board (TNEB), in a follow-up action, issued on March 31 four proceedings that amended its own rules relating to pension in tune with the March 19 G.Os, barring the one related to leave encashment.)

Senior Advocate K. Chandru told Frontline that the two orders quashed by the court and the gratuity-related order, which the government could not push through thanks to an earlier court stay on a petition from the E.B. employees, were the most important of the March 19 G.Os, in terms of monetary implications for the retiring employees. The Division Bench was critical of the government's stand that the discount rate on commuted pension was based on "the current market condition". It did not accept the government's contention that its orders relating to the terminal benefits of the employees were issued owing to "financial unsustainability".

EMPLOYEES of the State government and the TNEB challenged the validity of the orders. While the Madras High Court Staff Association and the TNEB Engineers Sangam filed writ petitions in the court praying for declaring the order null and void, the Tamil Nadu Secretariat Officers Association moved the State Administrative Tribunal for relief.

Justice K.P. Sivasubramaniam, who heard the petition of the E.B. engineers, on April 30 held that a prima facie case had been made out against the March 31 proceedings of the Board in relation to its employees' pension and gratuity, which were only a follow-up to the G.Os, and stayed the operation of the proceedings, pending disposal of the writ petition. Before granting the stay, the Judge explained how the G.Os violated the E.B. regulations. As for the gratuity-related G.O. 75, he referred to Rule 9 of both the Central and State rules, which mandates that "the amount shall be paid in cash or by demand draft or a bank cheque, only if the payee desires". He also remarked that the Payment of Gratuity Act, 1972 provided for the recovery of the amount, if not paid by the employer, as arrears of land revenue. (The government withdrew G.O. 75 within weeks of the stay order.) He referred the petition to the Division Bench, which had already before it a batch of petitions from, among others, the Madras High Court Staff Association and the Tamil Nadu Government College Teachers Mandram challenging the G.Os. The petitions preferred by the Tamil Nadu Secretariat Officers' Association before the State Administrative Tribunal were also taken to the Division Bench.

THE Bench heard arguments on the petitions at several sittings since July 24 and passed orders on October 23. The writ petitions sought a declaration that the G.Os in question were unconstitutional and ultra vires of Articles 14 (equality before law), 16 (equality of opportunity in matters of public employment) and 309 (tenure of office of persons serving the Union or a State) of the Constitution.

Upholding G.O. 74 as "perfectly justified", the Bench said the order did not call for interference for the reason that the rule relating to the maximum extent of commutation available, as it existed even prior to the issuance of the said G.O., was only 33.33 per cent. Although the government had in 1998 permitted through an order commutation up to 40 per cent, the order, significantly, did not contemplate any consequent amendment to the rules for the purpose.

As for G.O. 71, which sought to enhance the maximum eligible period of service for claiming full pension to 33 years from the prevailing 30, the Bench observed that this period was raised from 30 years to 33 only in 1979 when the retirement age was raised from 55 to 58 years as a matter of state policy and it remained at the raised level until it was brought down to 30 again in 1996. The Bench held that the State government now sought the enhancement "only with a view to restoring its original prevailing policy of enhancing it at a time when the age of retirement came to be increased from 55 years to 58 years". The order therefore "does not suffer from any arbitrariness'' warranting the court to "interfere" with it. The Bench also held that the provision in the G.O. that the pension be based on the average of the last 10 months' salary did not call for any interference by the court "either on grounds of arbitrariness or irrationality".

Quashing G.O. 72, which related to leave encashment, the Bench observed that this order had a direct impact on the monetary aspect of terminal benefits payable to retirees after April 1, 2003, coupled with their accrued right, unlike the other three G.Os.

The Bench said that leave encashment was a benefit, which got accrued by virtue of the government servant refraining from availing himself/herself of the leave benefit. Introduction of the G.O. had deprived the employees of leave and the benefit of surrender value of such accumulated leave. "This is not only against the legitimate expectations of the employees, but resulted in depriving the employee of the benefit of accumulated leave which obviously he has accumulated on the representation that at the time of retirement, he would be entitled to encash 330 days of accumulated leave," the Bench said. It held that the G.O. "suffers from vices of arbitrariness and is also discriminatory, hit by Article 14 of the Constitution", and quashed it along with the G.Os based on it.

While dealing with G.O. 73, the Bench made a pointed reference to the statement in the order that in order to align the commutation table with "current market condition", the government proposed to revise the commutation value table based on an implicit discount rate of commutation of 8 per cent. The Judges said: "In the first place, the benefit payable to a pensioner cannot be equated to any other commercial transaction." They found the doubling of the discount rate "highly arbitrary and irrational". They held that the G.O. was "violative of constitutional protection under Article 14 of the Constitution, which should not be countenanced in a welfare State", and set aside the order.

Union leaders see the Division Bench's quashing of the two orders as a significant gain for the employees inasmuch as it has protected a substantial part of their terminal benefits and justified the reasonableness of their demands in this regard. They said that the government servants and teachers, who had to go on strike mainly to press their demands for the restoration of their lost benefits, were vindicated by the verdict. In their perception, with the setting aside of the two controversial orders, the government's oft-repeated contention that it could deny or curtail even legitimately accrued payments to its employees, on grounds of financial crunch, had been demolished.