The rejected theory

THE Tamil Nadu government's basic contention in slashing the pensionary benefits of its employees has been that these entitlements have become "unsustainable" owing to the "financial crunch" that has been thrust on it largely by its predecessor government. On the same grounds, it has also justified its denial or reduction of numerous customary monetary benefits to its employees, such as festival advance, ex gratia payments, bonus and leave travel allowance.

In support of the "unsustainablility" theory, it was argued on behalf of the government before the Division Bench of the Madras High Court, which heard the petitions challenging the government orders (G.Os) on pension-related payments, that the expenditure on salaries and pension had increased manifold in volume in 2002-2003 compared to 1985-1986 and that it would have far-reaching effect on the fiscal policy of the State. The court was told that the total expenditure on pension and other retirement benefits as per the Revised Estimate of 2002-2003 was Rs.3,488.20 crores and as per the Budget Estimate of 2003-2004 Rs.4,211.59 crores, representing 16.86 per cent and 18.58 per cent respectively of the Total Revenue Receipts.

The government's contention did not go down well with the Bench at least in respect of the changes sought to be made in some of the provisions in the existing laws and rules governing pension and gratuity. For instance, it rejected the government's stand that its decision on encashment of leave as part of the retirement benefit was based on the scheme's "financial unsustainability". It said that the salary liability of the government was governed by the implementation of the Pay Commission recommendations.

The Bench observed: "The State cannot be expected to make a hue and cry once it decided to implement the Pay Commission recommendation... and (this) is not a special feature for the State of Tamil Nadu alone." The Judges said in strong terms: "Therefore, as held by the Honourable Supreme Court, to talk of heavy costs without reference to other circumstances is to present an entirely unfaithful picture and therefore such a contention put forth on behalf of the State cannot be countenanced to defeat certain accrued rights of the employees that too at the fag end of their career."

The Bench also did not approve of relating pension-related payments to the operation of market forces. While quashing G.O. 73, it was critical of the government's contention that the commutation value table had to be revised based on the modified 8 per cent discount rate "to align the table with the current market condition". The judgment said: "In the first place, the benefit payable to a pensioner cannot be equated to any other commercial transaction."