# CHAIRMAN, RAILWAY BOARD AND ORS v. C.R. RANGADHAMAIAH AND ORS. ETC. ETC

- **Citation:** [1997] Supp. 3 S.C.R. 63
- **Court:** Supreme Court of India
- **Decided:** 1997-07-25
- **Case number:** Civil Appeal Nos. 4174-82 of 1995
- **Bench:** J.S. Verma, M.M. Punchhi, S.C. Agrawal, B Dr. As. Anand, S.P. Bharucha
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/chairman-railway-board-and-ors-v-c-r-rangadhamaiah-and-ors-etc-etc-15786
- **Pages:** 24

## Headnote

Service Law:
India11 Railway Establishmellf Code-Rule 2544--Computatio11 of pen- c
sion-Railway Employees retired betwee11 1. 1. 73 and 5.12.88-Notifications
amended Rule reducing percentage limit of nm11i11g allowance while calculating average emolume11ts-Retrospective operatio1t-Adversely affecti11g
employees who stood retired ther1-Held, not pe1111issible-E11titled to pensio11
on the basis of rules prevalant at the time of retirement.
D
Rule 157-Notifications and orders reducing pe11sion of previously
:::..
retired employees-Whether Executive Instructio11s or Statutory Rules-Held,
not a pure question of law, cannot be decided in absence of relevant
f acts-Notificatio11 proceeds on the basis that previous orders were Executive
Instructions-Se1vice Rules goveming future rights-Held, challe11ge not perE
missible on ground of retrospectivity or violation of A11icles 14 & 16 of
Constitution-Rules reversing benefits given, from an ante1ior dat~eld,
assailable as violative of A11icles 14 & 16 of the Constitutio11 to the extent of
",
retrospectivity.
Appointment-Nature, i11 case of Government employee-Held, F
govemed by statutory mies a11d not contract--,..[Jnilateral alteration in service
co11ditions by employer pennissible.
Constitution of India :
Articles 19(1) (f) & 31(1)-Retrospective reduction in pe11sion by G
Pnotificatio1t-Articles 19(1) (f) & 31(1) were not in existence (as suspended)
on date of 11otification but existed when it came into effect retrospectively-Held, violative of Articles 19(1), 31(1), 14 & 16.
Words and Phrases-''Acciued Right" and "Vested Right"-Meaning of H
63
64
SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.
A
The respondents were employees of the Railway Administration who
had retired after 1.1.73 but before 5.1.88. Their pension was to be computed
in accordance with Rule 2544 of the Indian Railway Establishment Code,
which at that time prescribed that the running allowance be limited to a
maximum of 75% of the other emoluments taken into account while calB culating average emoluments.
The pay scales of railway employees were revised w.e.f. 1.1.73 under
the Railway Services (Revised Pay) Rules 1973, but the Railway Board had
intimated through a letter that the existing percentage limit of running
allowance would continue to remain the same, although it was under
C revision. This was later on reduced to 45% retrospectively, w.e.f. 1.4.76 by
letters dated 22.4.76 and 23.6.76, which were quashed by the Tribunal and
the said judgment was never challenged.
Later on, the impugned notifications dated 5.12.88 reduced the maximum limit of 75% to 45% retrospectively from the period between 1.1.73
D to 31.3.79 and to 55% from the period, 1.4.79 onwards. These notifications
were challenged before the CAT and the same were quashed. The Full
Bench of the Tribunal again affirmed this judgment in order to put at rest
various conflicting views and decisions of its various benches on similar
issues ..
E
Aggrieved the appellants appealed to this Court contending that the
previous orders were not in the nature of executive instructions, but were
statutory rules made by the Railway Board; that the relationship between
the Government and its servants is not like an ordi~ary contract of service,
but is something in nature of status and, therefore, the employee bas no
F vested right in regard to the terms of service; that the rules made in
exercise of power under Article 309 of the Constitution of India have the
same effect as that of a legislative act and.can operate prospectively as well
as retrospectively; and that the impugned amendments cannot be regarded
as arbitrary, as due to the reduction in the percentage there bas been no
G reduction in the total amount of pension payable.
Dismissing the appeal, the Court
HELD: 1. The plea that the previous orders dated 22.3.76 and 23.6.76
were not in the nature of executive instructions, but were statutory rules
H has been raised for the first time in this Court. The question wheth

## Text

_Characters 0–39,554 of 53,078. This is a partial read: ask again with offset=39554 for what follows._

CHAIRMAN, RAILWAY BOARD AND ORS.
A
v.
C.R. RANGADHAMAIAH AND ORS. ETC. ETC.
-
JULY 25, 1997
[J.S. VERMA, C.J., M.M. PUNCHHI, S.C. AGRAWAL,
B
DR. AS. ANAND AND S.P. BHARUCHA, JJ.]
Service Law:
India11 Railway Establishmellf Code-Rule 2544--Computatio11 of pen- c
sion-Railway Employees retired betwee11 1. 1. 73 and 5.12.88-Notifications
amended Rule reducing percentage limit of nm11i11g allowance while calculating average emolume11ts-Retrospective operatio1t-Adversely affecti11g
employees who stood retired ther1-Held, not pe1111issible-E11titled to pensio11
on the basis of rules prevalant at the time of retirement.
D
Rule 157-Notifications and orders reducing pe11sion of previously
:::..
retired employees-Whether Executive Instructio11s or Statutory Rules-Held,
not a pure question of law, cannot be decided in absence of relevant
f acts-Notificatio11 proceeds on the basis that previous orders were Executive
Instructions-Se1vice Rules goveming future rights-Held, challe11ge not perE
missible on ground of retrospectivity or violation of A11icles 14 & 16 of
Constitution-Rules reversing benefits given, from an ante1ior dat~eld,
assailable as violative of A11icles 14 & 16 of the Constitutio11 to the extent of
",
retrospectivity.
Appointment-Nature, i11 case of Government employee-Held, F
govemed by statutory mies a11d not contract--,..[Jnilateral alteration in service
co11ditions by employer pennissible.
Constitution of India :
Articles 19(1) (f) & 31(1)-Retrospective reduction in pe11sion by G
Pnotificatio1t-Articles 19(1) (f) & 31(1) were not in existence (as suspended)
on date of 11otification but existed when it came into effect retrospectively-Held, violative of Articles 19(1), 31(1), 14 & 16.
Words and Phrases-''Acciued Right" and "Vested Right"-Meaning of H
63
64
SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.
A
The respondents were employees of the Railway Administration who
had retired after 1.1.73 but before 5.1.88. Their pension was to be computed
in accordance with Rule 2544 of the Indian Railway Establishment Code,
which at that time prescribed that the running allowance be limited to a
maximum of 75% of the other emoluments taken into account while calB culating average emoluments.
The pay scales of railway employees were revised w.e.f. 1.1.73 under
the Railway Services (Revised Pay) Rules 1973, but the Railway Board had
intimated through a letter that the existing percentage limit of running
allowance would continue to remain the same, although it was under
C revision. This was later on reduced to 45% retrospectively, w.e.f. 1.4.76 by
letters dated 22.4.76 and 23.6.76, which were quashed by the Tribunal and
the said judgment was never challenged.
Later on, the impugned notifications dated 5.12.88 reduced the maximum limit of 75% to 45% retrospectively from the period between 1.1.73
D to 31.3.79 and to 55% from the period, 1.4.79 onwards. These notifications
were challenged before the CAT and the same were quashed. The Full
Bench of the Tribunal again affirmed this judgment in order to put at rest
various conflicting views and decisions of its various benches on similar
issues ..
E
Aggrieved the appellants appealed to this Court contending that the
previous orders were not in the nature of executive instructions, but were
statutory rules made by the Railway Board; that the relationship between
the Government and its servants is not like an ordi~ary contract of service,
but is something in nature of status and, therefore, the employee bas no
F vested right in regard to the terms of service; that the rules made in
exercise of power under Article 309 of the Constitution of India have the
same effect as that of a legislative act and.can operate prospectively as well
as retrospectively; and that the impugned amendments cannot be regarded
as arbitrary, as due to the reduction in the percentage there bas been no
G reduction in the total amount of pension payable.
Dismissing the appeal, the Court
HELD: 1. The plea that the previous orders dated 22.3.76 and 23.6.76
were not in the nature of executive instructions, but were statutory rules
H has been raised for the first time in this Court. The question whether these
CHAIRMAN,RAILWAYBOARD v. C.R.RANGADHAMAIAH
65
•
orders were issued under exercise of power under Rule 157 of the Indian A
.....
Railway Establishment Code, is not a pure question of law. It cannot be
decided in the absence of relevant facts. Moreover the impugned notifica-
-
tion dated 5.12.88 proceeds on the basis that the previous orders were in
the nature of executive instructions. [76-G-H]
-,
B
2. It is true that once a person joins service under the Government
the relationship between him and the Government is in the nature of status
rather than contractual and the terms of his service while he is in employment are governed by statute or statutory rules, which may be unilaterally
altered without the consent of the employees. [78-C]
Roshan Lal Tandon v. Union of India, [1968] 1 SCR 185; State of c
,
Jammu & Kashmir v. Triloki Nath Khosa, [1974] 1 SCR 779 and B.S. Vadera
v. Union of India, [1968] 3 SCR 575, relied on.
3. The president, in exercise of his power under the proviso to Article
309 of the Constitution, can make rules which may have prospective or D
retrospective operation; the said rules may be open to challenge on the
ground of violation of the provisions of the Constitution, including the
Fundamental Rights contained .in Part III. (79-B]
B.S. Vadera v. Union of India, [1968] 3 SCR 575, referred to.
E
4. A rule which operates in futμro so as to govern future rights of
those already in service cannot be assailed on the ground ofretrospectively
as being violative of Articles 14 and 16 of the Constitution, but a rule which
seeks to reverse from an anterior date a benefit which has been granted or
availed e.g., promotion or pay scale, can be assailed as being violative of F
Articles 14 and 16 of the Constitution to the extent it operates retrospectively. (80-A-B]
B.S. Yadav & Ors. etc. v. State of Haryana & Ors. Etc., [1981) 1 SCR
1024; State of Gujarat &Anr. v.Raman Lal Keshv Lal Soni & Ors., [1983] 2
SCR 287, followed.
G
.p
Ex.Capt. KC Arora & Anr. v. State of Haryana & Ors, [1984] 3 SCR
623; T.R. Kapur & Ors. v. State of Haryana & Ors., [1987] 1 SCR 584; P.D.
Aggarwal & Ors. v. State of U.P. & Ors., [1987] 3 SCR 427; KR. Narayanan
& Ors. v. State of Karnataka & Ors., [1994]-Supp. 1 SCC 44; Union of India
& Ors. v. Tushar Ranjan Mohanty & Ors., [1994] 5 SCC 450 and K H
66
SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.
A Ravindranath Pai & Anr. v. State of Kamataka and Anr., [1995) 2 SCC 246,
relied on.
5. The expressions "vested rights" or "accrued rights"have been used
-.
in the context of a right flowing under the relevant rule which was sought
to be altered with effect from an anterior date and thereby taking away the
B benefits available under the rule in force at that time. Such an amendment
to the existing rule is arbitrary, discriminatory and violative of the rights
guaranteed under Articles 14 and 16 of the Constitution. [81·D·F)
6. It is true that when the impugned notifications were issued, the
c
rights guaranteed under Articles 31 (1) and 19(1)(1) of the Constitution
were not available since they stood omitted. But the notifications have been
made operative retrospectively, from dates on which these rights were
available. Therefore, they are violative of the rights then gnaranteed under
Articles 19(1) and 31(1) of the Constitution. They are also violative of the
rights guaranteed under Articles 14 and 16 of the Constitution on the
D ground that they are unreasonable and arbitrary since the said amend·
ments have the effect of reducing the amount of pension that had becom~
payable to the retired employees. [84-C-F]
Deokinandan Prasad v. State of Bihar & Ors., [1971) Supp. SCR 634;
D.S. Nakara & Ors. v. Union of India, [1983).2 SCR 165; Indian Ex-Services
E League & Ors. Etc. v. Union of India and Ors. Etc., [1991) 1 SCR 158 and
Salabuddin Mohamed Yunus v. State of Andhra Pradesh, [1985) 1SCR930.
7, The respondents who had retired after 1.1. 73 but before 5.12.88
were entitled to have their pension computed on the basis of Rule 2544 as
F
it stood on the date of their retirement. [85,C-D]
8. The Full Bench of the Tribunal has rightly taken the view that the
impugned notifications amending Rule 2544 are unreasonable and ar·
bitrary and are violative of the rights gnaranteed under Articles 14 and 16
of the Constitution. [85·G·H; 86-A)
G
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 4174-82
of 1995 Etc. Etc.
·<s
From the Judgment and Order dated 16.12.93 of the Central Administrative Tribunal, Bangalore in Original Application Nos. 395-403 of
H 1991.
CHAIRMAN, RAILWAY BOARD v. C.R.RANGADHAMAIAH [S.C.AGRAWAL,J.)
67
K.N. Bhat, Additional Solicitor General, N.N. Goswami, M.N. Krish- A
namani, T.L.V. Iyer, AB. Rohtagi, A.S. Nambiar, A.K. Srivastava, S.
Wasim A. Qadri, Ms. Indra Sawhney, Ms. Kanu Priya Mittal, Ms. Anubha
Jain, K. C. Kaushik, Naresh Kumar, Rajiv Nanda, A.K. Sharma, C.V.S.
Rao, B.K. Prasad, Ms. Indu Goswami, Shail K. Diwivedi, G. Prakash, M.T.
George, Ms. Malini Poduval, Ms. Baby Krishnan, J.P. Goel, J.M. Khanna,
Ms. Shafali Khanna, K.V. Vishwanathan, K.V. Venkataraman, A. MariarB
putham, P.K. Manohar, S.R. Bhat, Ms. Kiran Bhardwaj, C.L. Sahu, B.V.
Deepak, Dilip Pillai, Mukul Mudgal, (D. Prakash Reddy) for Ms. D.
Bharathi Reddy, Shree Pal Singh, S. Srinivasan M.A. Chinnaswamy, R.C.
Gubrele, M.K.D. Namboodiri and Shakeel Ahmed Syed for the appearing
parties.
c
The Judgment of the Court was delivered by
S.C. AGRAWAL, J. These appeals and special leave petitions filed
by the Union of India and the Railway Administration involve the question
regarding validity of the notifications Nos. G.S.R. 1143(E) and G.S.R. 1144 D
(E) dated December 5, 1988 issued in exercise of the power conferred on
the President of India under the Proviso to Article 309 of the Constitution
whereby Rule 2544 of the Indian Railway Establishment Code, Volume II
(Fifth reprint) has been amended with retrospective effect. By notification
No. G.S.R. 1143 (E) the said rule was amended. with effect from January E
1, 1973 and by notification No. G.S.R. 1144(E) the amendment was made
with effect from April 1, 1979.
In Railways there are certain employees such as Drivers, Guards,
Shunters, etc, who are connected with the movement of trains and are
categorised as "running staff'. In addition to the pay the running staff F
entitled to payment of Running Allowance. Under the relevant rules computation of pension after retirement is made on the basis of average
emoluments and a part of the Running Allowance is included in average
emoluments. Provision in this regard is contained in clause (g) of Rule 2544
of the Indian Railway Establishment Code. Prior to its amendment by the G
impugned notifications Rule 2544 provided as follows :
"Rule 2544 (C.S.R. 486) - Emoluments and Average Emoluments :
The term "Emoluments", used in these Rules, means the emoluments which the Officer was receiving immed;ately before the
retirement and includes :
H
68
A
B
c
D
E
F
G
H
SUPREME COURT REPORTS (1997] SUPP. 3 S.C.R.
(a) pay other than that drawn in tenure post;
(b) Personal allowance, which is granted (i) in lieu of loss of
substantive pay in respect of a permanent post other than a tenure
post, or (ii) with the specific sanction of the Government of India,
for any other personal consideration.
Note : Personal pay granted in lieu of loss of substantive pay in respect
of a permanent post other than a tenure post shall be treated as
personal allowance for the purpose of this article. Personal pay
granted on any other personal considerations shall not be treated as
personal allowance unless otherwise directed by the President.
( c) fees or commission if they are the authorised emoluments
of an appointment, and are
in addition to pay. In this case
"Emoluments" means the average earnings for the last six months
of service;
( d) acting allowance of an Officer without a substantive appointment if the acting service counts under Rule 2409 (c.s.r. 371),
and allowances drawn by an Officer appointed provisionally substantively or appointed substantively pro tempore or in an officiating capacity to an office which is substantively vacant and on which
no officer has a lien or to an Office temporarily vacant in consequence of the absence of the permanent incumbent on leave
without allowances or on transfer to foreign service;
(e) deputation (duty) allowancf-s;
(f) duty allowances (special pay); and
(g) (i) For the purpose of calculation of average emoluments :
Actual amount of running allowances drawn by the Railway servant
during the month limited to a maximum of 75% of the other
emoluments reckoned in terms of (a) to (f) above.
(ii) For the purpose of gratuity and/or death-cum-retirement
gratuity : The monthly average of running allowance drawn during
the three hundred and sixty five days of running duty immediately
preceding the date of quitting service liirited to 75% of the
monthly average of the other emoluments reckoned in terms of
items (a) to (f) above drawn during the same period.
-·
--
CHAIRMAN, RAILWAY BOARD v. C.RRANGADHAMAIAH (S.C.AGRAWAL,J.)
69
Note : In the case of an Officer with a substantive appointment A
who officiates in another appointment or holds a temporary appointment, "Emoluments" means :
(a} the emoluments which would be taken into account under
this Rule in respect of the appointment in which he officiates or
of the temporary appointments, as the case may be, or
B
(b) the emoluments which would have been taken into account
under this Rule had he remained in this substantive appointment
whichever are more favourable to him."
On the basis of the recommendations of the Third Pay Commission c
the pay scales of the staff in the railways were revised by the Railway
Services (Revised Pay) Rules, 1973 (hereinafter referred to as 'the 1973
Rules') notified vide notification dated December 7, 1973 which came into
force on January 1, 1973. With regard to provisional pa)'ment of certain
allowances in conjunction with pay fixed under the 1973 Rules, the Railway D
Board by their letter dated January 21, 1974 intimated that the question of
revision of rules for regularisation of various allowances consequent upon
the introduction of the revised pay-scales under the 1973 Rules was under
the consideration of the Board and pending final decision thereon, the
Board had decided as under :
"(i) Treatment of Running' Allowance for various purposes in case
of Running Staff.
The existing quantum of Running allowance based on the
prevailing percentages laid down for various purposes with
reference to the pay of the Running Staff in Authorised Scales
of pay may be allowed to continue_."
Through letter of the Railway Board dated March 22, 1976 it was
intimated:
"1. The question of revision of rules regarding treatment of Running Allowance as pay for certain purposes consequent upon the
introduction of revised pay scales under Railway Services (Revised
Pay) Rules, 1973 has been under Consideration of this Ministry.
E
F
G
It has now been decided that the existing rules in this respect may H
70
SUPREME COURT REPORTS (1997] SUPP. 3 S.C.R.
A be modified as follows in the case of Running Staff drawing pay in revised
pay scales:
(i)
Pay for the purpose of passes and PTOs shall be pay plus
40% of pay.
B
(ii) Pay for the purpose of leave Salary, Medical attendance and
c
D
E
F
G
treatment, Educational Assistance and retirement benefits
shall be pay plus actual amount of running allowance drawn
subject to a maximum of 45% of pay.
(iii) Pay for purpose of fixation of pay in stationery posts, Compensatory (City) Allowances, House Rent Allowance and rent
for Railway quarters shall be pay plus 30% of pay.
2. These orders take effect from 1.4.1976.
3. The payments already allowed on provisional basis in terms of
para 2 of Railway Ministry's letter No. PCIII/73 RA dated
21.1.1974 for the period from 1.1.1973 to 31.3.1976 shall be treated
as final.
4. The above has the sanction of the President."
By letter of the Railway Board dated June 23, 1976 the direction
contained in the Jetter dated March 22, 1976 was modified and it was
intimated:
"2. In partial modification of the orders contained therein, the
Railway Ministry have decided, as a special case, that in the case
of Running Staff retiring between 1.1.1973 to 31.3.1976, pay for the
purposes of retirement benefits only shall be pay in revised scales
plus actual amount of running allowance drawn subject to a maximum of 45% of pay in revised pay scales.
3. The above has the sanction of the President."
By letter of the Railway Board dated July 17, 1981 the decisions
taken on the recommendations of the Committee on Running Allowances
were communicated. In the said letter it was stated :
H
"3.23. Reckoning of Running Allowance as Pay.
-C
-
CHAIRMAN, RAILWAY BOARD v. C.RRANGADHAMAIAH [S.C.AGRAWAL,J.]
·11
(i) For the specified purposes for which running allowance is A
reckoned as Pay at present, 30% of the basic pay of the running
staff concerned will be reckoned except as below :
(a) for the purpose of retirement benefits, 55% of basic pay will
be taken into account. This provision will be made applicable
retrospectively from 1.4.1979 so that those running staff who have B
already retired with effect from that date of afterwards will also
have their retirement benefits recalculated and re-settled."
(ii) x x x x x x x x x x x x x "
A Writ Petition (Writ Petition No. 915 of 1978) titled Dev Dutt c
Sharma & Ors. v. Union of India & Ors., was filed in the Delhi High Court
by employees who had been working as railway guards. Some of them had
retired from service while some had filed the Writ Petition in a representative capacity through the General Secretary of All India Guards
Council. In the said Writ Petition the petitioners challenged the validity of D
the order of the Railway Board as ·Contained in the letter dated March 22,
1976 whereby the quantum of percentage of the Running Allowance for
the purpose of retirement and other benefits was reduced from 75% as
prescribed in Rule 2544 to 45% with effect from January 1, 1973. After the
constitution of the Central Administrative Tribunal under the Administrative Tribunals Act, 1985, the said Writ Petition was transferred to the E
Principal Bench of the Central Administrative Tribunal (hereinafter
referred to as 'the Tribunal') and was registered as No. T-310of1985. The
said petition was allowed by the Tribunal by judgment dated August 6, 1986
and the order of the Railway Board dated March 22, 1976 was quashed on
the ground that under the Indian Railway Establishment Code which F
contains the statutory rules framed by the President under Article 309 of
the Constitution Running Allowance up to a maximum of 75%. of the pay
has to be taken into account for the purpose of calculating pecuniary
benefits and other entitlements and that the said right under the statutory
rules could not be taken away by order dated March 22, 1976 which was a
mere executive instruction and the fact that it was issued with the sanction G
and approval of the President did not give it a character of a statutory rule.
It was held that the said executive instruction cannot be accepted to be a
statutory amendment of the existing rules governing the Running Allowance.
No steps were taken by the Railway Administration to challenge the H
72
SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.
A correctness of the said judgment of the Tribunal and it has become final.
B
c
D
E
F
G
After the said decision of the Tribunal, the impugned notifications were
issued on December 5, 1988. Notification No. G.S.R. 1143 (E) is as
follows :
"G.S.R. 1143(E) : In exercise of the powers conferred by the
proviso to Article 309 of the Constitution, the President is pleased
to amend Rule 2544 of Indian Railway Establishment Code,
Volume II (Fifth Reprint) as in the Annexure.
This amendment will be effective from 01.01.1973.
ANNEX URE
RULE 2544
Sub:rule g(i) and g(ii) may be substituted by the following :
g(i) "For the purpose of calculation of average emoluments
actual amount of running allowance drawn by the railway
servant during the month limited to a maximum of 45% of
pay, in the revised Scales of Pay."
g(ii) "For the purpose of gratuity and/or death-cum- retirement
gratuity: the monthly average of running allowances drawn
during the 365 days of running duty immediately preceding
the date of quitting service limited to 45% of average pay
drawn during the same period, in the revised scales of pays."
Notification No. G.S.R. 1144(E) is as under :
"G.S.R. 1144(E) : In exercise of the powers conferred by the
proviso to Article 309 of the Constitution, the President is pleased
to amend Rule 2544 of the Indian Railway Establishment Code,
Volume II (Fifth reprint) as in the Annexure.
The amendment will be effective from 01.04.1979.
ANNE XU RE
H
RULE 2544
CHAIRMAN, RAILWAY BOARD v. CRRANGADHAMAIAH [S.CAGRAWAL,J.]
73
Sub-rule g(i) and g(ii) may be substituted by the following :
A
g(i) "For the purpose of calculation of average emolumentS : )5%
r ..
of basic average pay, in the revised scales of pay, drawn during
the period; "
g(ii) "For the purpose of gratuity and/or death-cum-retirement B
gratuity: 55% of basic average pay, in the revised scales of
pay, drawn during the period."
At the time when these notifications were issued OA. No. K-269 of
1988 filed by K.S. Srinivasan and others was pending before the Ernakulam c
Bench of the Tribunal. After the issuance of the said notifications the
petitioners in that matter amended the petition to assail the validity of the
said notifications in so far as they were given retrospective effect with effect
from January 1, 1973 and April 1, 1979 respectively. O.A. No. K-269 of
1988 was allowed by the Ernakulam Bench of the Tribunal by judgment
dated April 2, 1990 and the impugned notifications were quashed to the D
extent the amendments in Rule 2544 were given retrospective effect on the
view that the said amendments in the rule in so far as the same were given
retrospective effect were unjust, unreasonable and were violative of Article
14 of the Constitution. A review Application filed by the Union of India
against the said judgment of the Ernakulam Bench of the Tribunal was E
dismissed by order dated July 25, 1990. Special Leave Petition No. 10373
of 1990 has been filed by the Union of India against the said judgment of
the Ernakulam Bench of the Tribunal.
It appears that the Principal Bench of the Tribunal by its judgment
dated October 23, 1991 in O.A. No. 1572 of 1988 filed by C.L. Malik and F
others, took a contrary view on the question of validity of the impugned
notifications and held that the vested rights of the employees were not
affected by the amendment of the rules on the ground that total amount
~
of pension and retirement benefits they would have received before the
amendment were not reduced by the amended Rule. It seems that the G
earlier dicision of the Ernakulam Bench of the Tribunal in OA. No. K-269
,;-.
of 1988 was not brought to the notice of the Bench which decided 0.A.
No. 1572 of 1988. The said decision of the Principal Bench of the tribunal
~
was followed by the Ahmedabad Bench of the Tribunal in judgment dated
February 28, 1992 in O.A. Nos. 351-423 of 1988. The Ahmedabad Bench
of the Tribunal also did not notice the earlier judgment of the Ernakulam H
74
SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.
A Bench of the Tribunal. In view of the conflicting decisions of various
Benches of the Tribunal the matter was referred to the Full Bench of the
Tribunal. In its judgment dated December 16, 1993 in C.R. Rangadhamaiah
& Ors. v. Chainnan, Railway Board & Ors. and other connected matters,
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the Full Bench, agreeing with the view of the Ernakulam Bench of the .
B Tribunal, has held :
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(1) Under the Proviso to Article 309 of the Constitution, the
President has power to promulgate rules with retrospective effect.
This, however, is subject to the condition that the rules do not
offend any of the fundamental rights conferred by Part III of the
Constitution.
· (2) Pension is a valuable right which a government servant earns.
It is neither charity nor bounty. Government servant acquires right
to pension and other retirement benefits on the date he retires
from service. Deprivation of such a valuable vested right after
retirement is manifestly unreasonable, arbitrary and, therefore,
violative of Article 14 of the Constitution.
(3) By the revision of the pay scales the pay scales of the members
of the running staff were enhanced with effect from January 1,
1973. Under Rule 2544 the members of the running staff are
entitled to computation of their pay and retirement benefits by
taking into account the Running Allowance which they have been
receiving subject to a maximum of 75% of the pay and other
allowances.
(4) By notifications dated December 5, 1988, Rule 2544 was
amended prescribing the maximum at 45% from January 1, 1973
to April l, 1979 and 55% from April l, 1979 onwards. Those who
. retired from January 1, 1973 to December 4, 1988 were, in accordance with Rule 2544, as it then stood, entitled to take into account
Running Allowance in the matter of computation of pension and
retirement benefits upto the maximum of 75% of their pay and
other allowances. As their pay was revised with effect from January
1, 1973 the limit of 75% had to be worked out with reference to
the enhanced pay and other allowances that they hecame entitled
to receive in accordance with the 1973 Rules which came into effect
from January 1, 1973.
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CHAIRMAN, RAILWAY BOARD v. C.R.RANGADHAMAIAH (S.C.AGRAWAl..,J.)
75
(5) When the maximum was reduced from 75% to 45% upto April A
1, 1979 or at the rate of 55% from April 1, 1979, the vested rights
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of all those who retired between January 1, 1973 and December
4, 1988 in the matter of receiving pension and retirement benefits
were adversely affected.
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(6) Persons who retired between January 1, 1973 and December
4, 1988 had earned a right to computation of pension in accordance
with the statutory rules then in force. As by the time they retired,
revision of pay had come into force, it is the revised pay and the
Running Allowance subject to a maximum of 75% of the revised c
pay and allowances that was required to be taken into account.
(7) This right which accrued in their favour on their retirement
between January 1, 1973 and December 4, 1988 was sought to be
affected by amending the rules on December 5, 1988 with D
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retrospective effect reducing the maximum limit of running allowance that qualifies for pension,
(8) The Ernakulam Bench had rightly declared that the amended
provisions to the extent they have been given retrospective effect
as void a offending Article 14 of the constitution.
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On the basis of the said decision of the Full Bench of the Tribunal,
other Benches of the Tribunal at Bangalore, Hyderabad, Allahabad, Jabalpur, Jaipr, Madras and Ernakulam have passed orders giving relief on the
same grounds. These appeals and special leave petitions have been filed F
against the decision of the Full Bench and those other Benches of the
Tribunal. Some of these matters were placed before a Bench of three
learned Judges of the Court on March 28, 1995 on which date the following
order was passed.
"Two questions arise in the present case, viz., (i) what is the G
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concept of vested or accrued rights so far as the Government
servant is concerned and (ii) whether vested or accrued rights can
be taken away with retrospective effect by rules made under the
proviso to Article 309 or by an Act made under that Article, and
which of them and to what extent.
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SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.
We find that the Constitution Bench decisions in Roshan Lal
Tandon v. Union of India, [1968] 1 SCR 185, B.S. Vadera v. Union
of India, [1968) 3 SCR 5741 and State of Gujarat & Anr. v. Raman
Lal Keshav Lal Soni & Ors., [1983) 2 SCR 287 have been sought
to be explained by two three Judges Bench decision in Ex-Capt.
KC Arora & A/lT. v. State of Haryana & Ors., [1985] 3 SCR 6231
and K Negaraj & Ors. v. State of Andhra Pradesh & Anr. & Ors.,
(1985] 1 SCC 5231 in addition to the two-Judges Bench decision
in P.D. Agg01Wal & Ors. v. State of U.P. & Ors, [1987] 3 SCC 6221
and K Naryana & Ors. Etc. v. State of Kamataka & Ors. Etc., (1993)
Supp. 1SCC441. Prima facie, these explanations go counter to the
ratio of the said Constitution Bench decisions. It is not possible
for us sitting as three Judges Bench to resolve the said conflict. It
has, therefore, become necessary to refer the matter to a larger
Bench. We accordingly refer these appeals to a Bench of five
learned Judges."
This is how these matters have come up before this Bench.
Shri KN. Bhat, the learned Additional Solicitor General, has, in the
first place, urged that the orders dated March 22, 1976 and June 23, 1976.
were not in the r_ature of executive instructions, but were statutory rules
E made by the Railway Board in the exercise of its power under Rule 157 of
the Indian Railway Establishment Code and had the effect of amending
Rule 2544. This plea has been raised on behalf of the Union of India for
the first time in this Court. It was not put forward before the Tribunal in
No. T-310of1985 and the judgment of the Tribunal dated August 6, 1976
in the said case proceeds on the basis that the order dated March, 22,
F 1976 is in the nature of executive instructions and on that basis
the said order was struck down by the Tribunal for the reason that the
executive instructions could not amend or dilute statutory rules. The said
judgment of the Tribunal has become final. This plea was also not raised
before the Full Bench of the Tribunal. The question whether the Railway
G Board, while issuing the orders dated March 22, 1976 and June 23, 1976,
was exercising its power under Rule 157 of the Indian Railway Estab-
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lishment Code, is not a pure question of law. It cannot be decided in the
absence of relevant facts, Moreover, the impugned notifications d~ted
December 5, 1988, whereby Rule 2544 has been amended, proceed on the
basis that the orders dated March 22, 1976 and June 23, 1976 were in the
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nature of executive instructions. The following Explanation is appended
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CHAIRMAN, RAILWAY BOARD v. C.R.RANGADHAMAIAH [S.C.AGRAWAL,J.]
77
below notification G .S.R. 1143 (E) wherein it har been clearly stated :
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"Explanation :
The Rule 2544 of the Indian Railway Establishment Code,
Volume II (Fifth reprint) has been modified through administrative
instructions issued with the President's ·approval effective from B
1.1. 73. These instructions wr.re necessitated by the introduction of
the revised Scales of pay recommended by the Third Central Pay
Commission. The purpose of this amendment is to give statutory
force to the administrative instructions with effect from the same
date on which the instructions were issued." (emphasis supplied)
Similar Explanation is appended below notification G.S.R. 1144 (E).
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In view of the said statement in the Explanation appended below the
impugned notifications to the effect that Rule 2544 had earlier been
modified by administrative instructions and that the purpose of the amendments is to give statutory force to the administrative instructions the D
contention urged by the learned Additional Solicitor General that the
orders dated March 22, 1976 and June 23, 1976 were statutory rules cannot
be entertained.
The question which, therefore, needs to be examined is whether the
amendments made in Rule 2544 by the impugned notifications, to the E
extent they have been given effect from January 1, 1973 and April 1, 1979,
can be treated as a valid exercise of the power to make rules under the
Proviso to Article 309 of the Constitution.
On the basis of the decision of the Constitution Bench in Roshan Lal
Tandon v. Union of India, [1968] 1 SCR 185, the learned Additional F
Solicitor General has submitted that the relationship between the Government and its servants is not like an ordinary contract of service between a
master and servant, but is something in the nature of status. It is urged that
once appointed to a post or office, the government servant acquires a status
nd his right and obligations are no longer determined by consent of both G
parties, but by statute or statutory rules which may be framed and altered
unilaterally by Government and the government servant has no vested right
in regard to the terms of his service. The learned Additional Solicitor
General has further submitted that the rules made in exercise of the power
conferred on the President under the proviso to Article 309 of the Constitution have the same effect as an act of the Legislature and that such H
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SUPREME COURT REPORTS (1997] SUPP. 3 S.C.R.
A rules can be made to operate prospectively as well as retrospectively. In
support of the said submission reliance has been placed on the decision of
the Constitution Bench in B.S. Vadera v. Union of India & Ors., (1968] 3
SCR 575. The submission is that since a government servant has no vested
right in the terms and conditions of his service and the said terms can be
alter.ed with retrospective effect by the rules made under the Proviso to
B Article 309, the retrospective operation of a rule cannot be assailed on the
ground that it takes away a vested right of the government servant.
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It is no doubt true that once a person joins service under the
Government the relationship between him and the Government is in the
nature of status rather than contractual and the terms of his service while
he is in employment are governed by statute or statutory rules, which may
be unilaterally altered without the consent of the employees. It has been
so held by this Court in Roshan Lal Tandon (supra) and State of Jammu
& Kashmir v. Triloki Nath Khosa, (1974] 1 SCR at pp. 779, 780. It may,
however, be mentioned that in.Roshan Lal Tandon (supra) the petitioner
D was invoking his rights under the contract of service and the said contention was rejected by the Court with the observations :
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"We are therefore of the opinion that the petitioner has no vested
contractual right in regard to the terms of his service and that the
counsel for the petitioner has been unable to make good his
submission on this aspect of the case." (p. 196) (emphasis supplied)
In B.S. Vadera (supra) it has been held that the rules under the
proviso to Article 309 have effect subject to the provisions of the Act made
by the appropriate Legislature under the main part of Article 309, if the
appropriate Legislature has passed an Act under Article 309 and in the
absence of any Act of the appropriate Legislature on the matter the rules
made under the proviso to Article 309 are to have full effect both prospectively and retrospectively. Since the power of the appropriate legislature to
enact a law under Article 309 has to be exercised subject to the provisions
of the Constitution, the power to make rules under the Proviso to Article
G 309 has to be exercised subject to the provisions of the Constitution. The
Court has, therefore, said :
"Apart from the limitations, pointed out above, there is none other,
imposed by the proviso to Article 309, regarding the ambit of the
operation of such rules. In other words, the rules, unless they can
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be impeached on grounds such as breach of Part III, or any other
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CHAJR!v;,\N,RAILWAYBOARD v. C.R.RANGADHAMAIAH (S.C.AGRAWAL,J.]
79
constitutional provision, must be enforced, if made by the apA
propriate author'ty." (p. 585]
This means that even though the President in exercise of his power
under the Proviso to Article 309, can make rules which may have prospective or retrospective operation, the said rules may be open to challenge on
the ground of violation of the provisions of the Constitution, including the B
Fundamental Rights contained in Part III of the Constitution.
In Triloki Nath Khosa and Ors. (supra) rules had been framed
altering the criterion of eligibility for promotion from the post of Assistant
Engineer to the post of Executive Engineer and the same were challenged C
on the ground of retrospectivity by the Assistant Engineers who were in
service on the date of making of these rules: Rejecting the said contention,
this Court said :
"It is wrong to characterise the operation of a service rule as D
retrospective for the reason that it applies to existing employees.
A rule which classifies such employees for promotional purposes,
undoubtedly operates on those who entered service before the
framing of the rule but it operates in futuro, in the sense that it
governs the future right of promotion of those who are already in E
service. The judgment rules do not recall a promotion already
made or reduce a pay scale already granted. They provide for a
classification by prescribing a qualitative standard, the measure of
that standard being educational attainment. Whether a classification founded on such a consideration suffers from a discriminatory
vice is another matter which we will presently consider but surely, F
the rule cannot first be assumed to be retrospective and then be
struck down for the reason that it violates the guarantee of equal
opportunity by extending its arms over the past. If rules governing
conditions of service cannot ever operate to the prejudice of those
who are already in service, the age of superannuation should have G
remained immutable and schemes of compulsory retirement in
public interest ought to have foundered on the rock of retrospectivity. But such is not the implication of service rules nor is it their
true description to say that because they affect existing employees
they are retrospective." (p. 779)
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SUPREME COURT REPORTS (1997] SUPP. 3 S.C.R.
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It can, therefore, be said that a rule which operates in futuro so as
to govern future rights of those already in service cannot be assailed on the
ground of retrospectivity as being violative of Articles 14 and 16 of the
Constitution, but a rule which seeks to reverse from an anterior date a
benefit which has been granted or availed, e.g., promotion or pay scale, can
B be assailed as being violative of Articles 14 and 16 of the Constitution to
the extent it operates retrospectively.
In B.S. Yadav & Ors. Etc. v. State of Haryana & Ors. Etc., (1981] 1
SCR 1024, a Constitution Bench of this Court, while holding that the power
C exercised by the Governor under the Proviso to Article 309 partakes the
characteristics of the legislative, not executive, power and it is open to him
to give retrospective operation to the rules made under that provision, has
said that when the retrospective effect extends over a long period, the date
from which the rules are made to operate must be shown to bear, either
from the face of the rules or by extrinsic evidence, reasonable nexus with
D the provisions contained in the rules. (p. 1068)
In State of Gujarat & Anr. v. Raman Lal Keshav Lal Soni & Ors.,
[1983] 2 SCR 287, decided by a Constitution Bench of the Court, the
question was whether the status of ex- ministerial employees who had been
E allocated to the Panchayat service as Secretaries, Officers and Servants of
Gram and Nagar Panchayats under the Gujarat Panchayat Act, 1961 as
government servants could be extinguished by making retrospective
amendment of the said Act in 1978.