# STATE OF H.P. & ORS v. RAJESH CHANDER SOOD ETC. ETC - **Citation:** [2016] 6 S.C.R. 851 - **Court:** Supreme Court of India - **Decided:** 2016-09-28 - **Case number:** Civil Appeal Nos. 9750-9819of2016 - **Bench:** Jagdish Singh Khehar, C. Nagappan - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-h-p-ors-v-rajesh-chander-sood-etc-etc-31573 - **Pages:** 105 ## Headnote Service law: Himachal Pradesh Government Corpora/e Sec/or E111ployees Pension (Fa111ily Pension, Co111mu1a1io11 of Pension and Gratuity) Scheme' 1999 - Pension scheme - Wilhdrawal of - Scheme of 1999 not financially viable - Repeal of 1999 Scheme vide Notification dated 02.12.2004 - Legalily of - Held: Notification dated 2.12.2004 is legal and constitulional - It cannot be said /hat the notification was unconstitutional, irrational, arbitrary or unreasonable - Scheme of 1999 created a contingent right in the employees of corporate bodies, who had opted for 'the 1999 Schenle ', i111111ediately on its having been introduced; all those, who were deemed to have opted; and all those appointed after the illlroduction of 'the 1999 Scheme' - There was no employer and employees relationship betlveen the State Government and employees -All the corporate bodies in which employees were/are engaged, are independent juristic entities - Thus, the claim raised by employees fm· pension, is not based on any right or obligation be/ween the parties - No right can· be stated to have been violated u/Arts. 14, 16, 21 and 300A - Further, the action of the State Government, was well within its authority and was based on due consideration - Repealing of the Scheme was a policy decision jailing in lhe realm of executive determinalion and 110 court has any role therein - Administrative law - Policy decision. Scheme of 1999 - Cut-off date postulated by Slate Government, whereby some of the employees governed by 1999 Scheme (/hose who had re/ired prior lo 2.12.2004) 11•ere entitled lo draw pension under the 1999 Scheme, whereas others, who had not retired by the time the repeal notification was issued on 2.12.2004, were deprived of such benefits - Justification of - Held: Cut-off date has been upheld for extending better and higher 851 A 8 c D E F G H 852 SUPREME COURT REPORTS [20f6] 6 S.C.R. A pensionary benefits, based on the financial health of the employer - Cut-off date can therefore, legitimately be prfi1·cribed for extending pensionary benefits, if the funds available cannot assuage the liability, to all the existing pensioners - Thus, it is well within the authority of the State Government, in exercise of its administrative B . powers, to fix a cut-off date, for continuing the right to receive pens.ion in some, and depriving some others. c D E F G H Scheme of 1999 - Right to pension under, whether a vested right - Held: As soon as the concerned employees came to be governed by 'the 1999 Scheme', a contingent right came to be vested in them, on the date when 'the 1999 Scheme' became operational, or to the direct entrants who entered service thereafter - Said contingent right created a right in the employees to claim pension, at the time of their retirement - Said right :would crystalise only upon the fulfillment of the postulated conditions, on having rendered, the postulated qualijj;ing service - However, once such a contingent right was created, every such employee, could not be prevented from fulfilling the postulated conditions, to claim pension. Principle of estoppel/promissory estoppel - Applicability of - When original position (the rights enjoyed by the employees, under the Employees Provident Fund Scheme, 1995) available before 'the 1999 Scheme' was given effect to, has actually been restored - Held: Principle of estoppel/promissory estoppel is not applicable. Constitution of India - Art. 21 - 1999 Scheme, whether violative of Art. 21 - Held: Employees' Provident Funds Scheme, 1995, was sought to be replaced, by 'the 1999 Scheme'- 1999 Scheme' was an effort at the behest of the State Government, to provide still better retiral benefits - 1999 Scheme' was not a measure, aimed at providing basic human rights - Thus, 'the 1999 Scheme' cannot be treated as irreversible - Repealing of 'the 1999 Scheme 'cannot be deemed to have in any manner, violated the. right of the employees, u/Art. 21 - After the repeal notification dated 2.12.2004, the ers ## Text _Characters 0–39,914 of 254,280. This is a partial read: ask again with offset=39914 for what follows._ [2016] 6 S.C.R. 851 STATE OF H.P. & ORS. v. RAJESH CHANDER SOOD ETC. ETC. (Civil Appeal Nos. 9750-9819of2016) SEPTEMBER 28, 2016 [JAGDISH SINGH KHEHAR AND C. NAGAPPAN, JJ.) Service law: Himachal Pradesh Government Corpora/e Sec/or E111ployees Pension (Fa111ily Pension, Co111mu1a1io11 of Pension and Gratuity) Scheme' 1999 - Pension scheme - Wilhdrawal of - Scheme of 1999 not financially viable - Repeal of 1999 Scheme vide Notification dated 02.12.2004 - Legalily of - Held: Notification dated 2.12.2004 is legal and constitulional - It cannot be said /hat the notification was unconstitutional, irrational, arbitrary or unreasonable - Scheme of 1999 created a contingent right in the employees of corporate bodies, who had opted for 'the 1999 Schenle ', i111111ediately on its having been introduced; all those, who were deemed to have opted; and all those appointed after the illlroduction of 'the 1999 Scheme' - There was no employer and employees relationship betlveen the State Government and employees -All the corporate bodies in which employees were/are engaged, are independent juristic entities - Thus, the claim raised by employees fm· pension, is not based on any right or obligation be/ween the parties - No right can· be stated to have been violated u/Arts. 14, 16, 21 and 300A - Further, the action of the State Government, was well within its authority and was based on due consideration - Repealing of the Scheme was a policy decision jailing in lhe realm of executive determinalion and 110 court has any role therein - Administrative law - Policy decision. Scheme of 1999 - Cut-off date postulated by Slate Government, whereby some of the employees governed by 1999 Scheme (/hose who had re/ired prior lo 2.12.2004) 11•ere entitled lo draw pension under the 1999 Scheme, whereas others, who had not retired by the time the repeal notification was issued on 2.12.2004, were deprived of such benefits - Justification of - Held: Cut-off date has been upheld for extending better and higher 851 A 8 c D E F G H 852 SUPREME COURT REPORTS [20f6] 6 S.C.R. A pensionary benefits, based on the financial health of the employer - Cut-off date can therefore, legitimately be prfi1·cribed for extending pensionary benefits, if the funds available cannot assuage the liability, to all the existing pensioners - Thus, it is well within the authority of the State Government, in exercise of its administrative B . powers, to fix a cut-off date, for continuing the right to receive pens.ion in some, and depriving some others. c D E F G H Scheme of 1999 - Right to pension under, whether a vested right - Held: As soon as the concerned employees came to be governed by 'the 1999 Scheme', a contingent right came to be vested in them, on the date when 'the 1999 Scheme' became operational, or to the direct entrants who entered service thereafter - Said contingent right created a right in the employees to claim pension, at the time of their retirement - Said right :would crystalise only upon the fulfillment of the postulated conditions, on having rendered, the postulated qualijj;ing service - However, once such a contingent right was created, every such employee, could not be prevented from fulfilling the postulated conditions, to claim pension. Principle of estoppel/promissory estoppel - Applicability of - When original position (the rights enjoyed by the employees, under the Employees Provident Fund Scheme, 1995) available before 'the 1999 Scheme' was given effect to, has actually been restored - Held: Principle of estoppel/promissory estoppel is not applicable. Constitution of India - Art. 21 - 1999 Scheme, whether violative of Art. 21 - Held: Employees' Provident Funds Scheme, 1995, was sought to be replaced, by 'the 1999 Scheme'- 1999 Scheme' was an effort at the behest of the State Government, to provide still better retiral benefits - 1999 Scheme' was not a measure, aimed at providing basic human rights - Thus, 'the 1999 Scheme' cannot be treated as irreversible - Repealing of 'the 1999 Scheme 'cannot be deemed to have in any manner, violated the. right of the employees, u/Art. 21 - After the repeal notification dated 2.12.2004, the erstwhile Scheme of 1995, has been restored to such of the employees, who were impacted by the said repeal notification. Allowing the appeals, the Court HELD: 1. 'The 'Himachal Pradesh Government Corporate Sector Employees Pension (J<'amily Pension, Commutation of STATE OF H. P. v. RAJESH CHANDER SOOD ETC: ETC. Pension and Gratuity) Scheme' 1999', created a contingent right in the respondent-employees. The respondent-employees comprise of all those employees of corporate bodies, who had opted for 'the 1999 Scheme', immediately on its having been introduced; all those, who were deemed to have opted for 'the \. 1999 ~heme' by not having exercised any option; and all those who were appointed after the introduction of 'the 1999 Scheme'. The claim whether any express right or obligation existed, between the respondent-employees and the State Government,, arises out of an obligation between an employer and his employees, where there is a quid pro quo - a trade off based on a relationship (as between, a';' employer and employee). However, it is concluded, that there was no such relationship between the State Government, and the respondent-employees. All the corporate bodies in which the respondent-employees were/are engaged, are independent juristic entities. It is therefore apparent, that the claim raised by the respondent-employees, is not based on any right or obligation between the parties. No right can be stated to have been violated, thereunder. The issue whether administrative review was permissible, after 'the 1999 Scheme' had become operational, has been answered in the affirmative. Thus, the exercise of such power, while issuing the repeal notification, was based on due considerati011. Therefore, the legality and constitutionality of the notification dated 2.12.2004 is upheld. (Para 71)(954-F-H; 955-A-C] 2.1 With effect from 1.4.1999, the employees who had opted for the Scheme' 1999' (or, who were deemed to have opted for ~the same) were no longer governed by the provisions of the Provident Fund Act (under which they had statutory protection, for th_e payment of provident fund). Consequent upon an exemption having been granted to the concerned corporate bodies by the competen! authority under the Provident Fund Act, the Employees Provident Funds Scheme, 1995, was replaced, by 'the 1999 Scheme'. All direct entrants after 1.4.1999, were also entitled to the rights and privileges of 'the 1999 Scheme'. Therefore, the submissions that no vested right accrued to the employees of the concerned corporate bodies, on the date when 'the 1999 Scheme' became operational (with effect from 1.4.1999), 853 A B c D E F G H 854 A B c D E F G H SUPREME COURT REPORTS [2016] 6 S.C.R. or to the direct entrants who entered service thereafter, cannot be accepted. As soon as the concerned employees came to be governed by 'the 1999 Scheme', a contingent right came to be vested in them. The said contingent right created a right in the employees to claim pension, at the time of their retirement. Undoubtedly, the said contingent right would crystalise only upon the fulfillment of the postulated conditions, expressed on behalf of the appellants (on having rendered, the postulated qualifying service). However, once such a contingent right was created, every employee in whom the said right was created, could not be prevented or forestalled, from fulfilling the postulated conditions, to claim pension. Any action pre-empting the right to pension, emerging out of the conscious option exercised by the employees, to be governed by 'the 1999 Scheme' (or to the direct entrants after the introduction of 'the 1999 Scheme'), most definitely did vest a right in the respondent-employees. [Para 49][936-H; 937A-E] 2.2 The right to receive pension, emerge from the very day, an employee enters a pensionable service. From that very date, the employee commences to accumulate qualifying service. His claim for pension would obviously crystalise, when he acquires the minimum prescribed qualifying service, and also, does not suffer a disqualification, disentitling him to a claim for pension. In view thereof, it is not possible to accept, that the rights of the concerned employees under 'the 1999 Scheme', can be stated to get vested, ortly on the date when a concerned employee would attain the age of superannuation, and satisfy all the pre-requisites for a claim towards pension. The submission that the cause of action to raise a claim for pension, would arise on the date when a concerned employee actually retires from service, is accepted. Any employee governed by a pension scheme, enrolls to earn qualifying service, immediately on his enrolment into the pensionable service. Every such employee must be deemed to have commenced to invest in his eventual claim for pension, from the very day he enters service. More so, in the instant case, by having expressly ,chosen to forego his rights, under the Employees' Provident Funds Scheme, 1995. [Paras 50, 51][937F-H; 938-A-C) STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 2.3 This Court has repeatedly upheld a cut-off date, for extending better and higher pensionary benefits, based on the financial health of the employer. A cut-off date can. therefore legitimately be prescribed for extending pensionary benefits, if the funds available cannot assuage the liability, to all the existing pensioners. Therefore, it is well within the authority of the State Government, in exercise of its administrative powers (which it exercised, by issuing the impugned repeal notification dated 2.12.2004) to fix a cut-off date, for continuing the right to receive pension in some, and depriving some others of the same. This right was unquestionably exercised by the State Government, in the *R.R. Verma case wherein this Court held that the Government was vested with the inherent power to review, and that the Government was free to alter its earlier administrative decisions and policy. This is what the State Government did in the instant case. [Para 54)(939-A-C] *R.R. Verma v. Union of India (1980) 3 SCC 402:1980 (3) SCR 478 - referred to. 2.4 It is equally true, that the power of administrative review can only be exercised, for a good and valid justification. Such justification besides being founded on reasonable consideration, should also not be violative of any legal right - statutory or constitutional, vested in the affected employees. [Para 55)(939D-E) 2.5 It is not as if the rights which had accrued to the respondent-employees onder the Employees' Provident Funds Scheme, 1995 (under which the respondent-employees were governed, prior to their being. gover~ed by 'the 1999 Scheme') have in ally manner been altered to their disadvantage. All that was taken away, and given up by the respondent-employees by way of foregoing the employer's contribution upto 31.3.1999 (including, the accrued interest thereon), by way of transfer to the corpus fund, was restored to the respondent-employees. AH the respondent-employees, who have been deprived of their pensionary claims by the repeal notification dated 2.12.2004, would be entitled to all the rights which_had accrued to·them, under the Employees' Provident Funds Scheme, 1995. It is therefore, not possible-to accept, that the respondent-employees 855 A B c D E F G 856 A B c D E F G H SUPREME COURT REPORTS [2016] 6 S.C.R. can be stated to have been made to irretrievably alter their position, to their detriment. Furthermore, all the corporate bodies (with which the respondent-employees, are engaged) are independent juristic entities. The mere fact, that the corporate bodies under reference, are fully controlled by the State Government, and the State Government is the ultimate authority to determine their conditions of service, under their Articles of Association, is inconsequential. Undoubtedly, the respondentemployees are not Government employees. The State Government, as a welfare measure, had ventured to honestly extend some post-retiral benefits to employees of such independent legal entities, on the mistaken belief, arising out of a miscalculation, that the same can be catered·to, out of available resources. This measure was adopted by the State Government, not in its capacity as the employer of the respondent-employees, but as a welfare measure. When it became apparent, that the I welfare measure extended by the State Government, could not be sustained as originally understood, ,the same was sought to be withdrawn. [Para 58)(941-C-H; 942-A) Mis. Bhagwati Vanaspati Traders v. Senior Superintendent of Post Offices, Meerut AIR 2015 SC 901:2014 (10 ) SCR 762 - referred to. 2.6 It is apparent from the factual position that the original action of the State Government was bonafide, and for the welfare of the respondent-employees. The State Government cannot be accused of having misrepresented to the respondent-employees in any manner. The provisions of 'the 1999 Scheme', clearly bring out, that the pension scheme would be self-financing, and would be administered from the corpus fund created out of the employer's contribution to their CPF account (alongwith the accrued interest thereon). When the said foundational basis for introducing the pension scheme, was found to be an incorrect determination/calculation, the same was withdrawn. In view thereof, it would not be possible to infer, that the State Government, induced the respondent-employees, to move to 'the 1999 Scheme'. Accordingly, it would not be possible to apply the principle of estoppel/promissory estoppel, to the facts of the instant case. [Para 5811945-E-G) . STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 2.7 The principle of estoppel/promissory estoppel, is not applicable in a situation, where the original position, which the individual enjoyed before altering his position (by opting; or deemingly opting - for being governed by 'the 1999 Scheme') can be restored. Since there is no dispute, that the original position (the rights enjoyed by the respondent-employees, under the Employees Provident Fund Scheme, 1995) available before 'the 1999 Scheme' was given effeet to, has actually been restored, the principle sought to be invoked on behalf of the respondentemployees, cannot augur in a favourable determination for them,. because it is not possible to conclude, that it would be unfair to restore them to their original position. In fact, in view of the financial incapacity to continue '.the 1999 Scheme', the only fair action would be to restore the gmployees, to the Employees Provident Funds Scheme, 1995. This has actually been done by the State Government. Thus, it is not possible in law, to apply the principle of estoppellpromissory estoppel, to the facts of the case. [Para 59][945-G-H; 947-A-C] Pratima Chowdhury v. Kalpana Mukherjee (2014) 4 SCC 196: 2014 (2) SCR.656 - referred to. 2.8. With the advice tendered by the Law Department it was decided, that 'the 1999 Scheme' should not be withdrawn retrospectively; that those who had commenced to draw pensionary benefits under 'the 1999 Scheme', would not be •. deprlved of the same; and that, 'the 1999 Scheme' should be withdrawn prospectively, for those whose right tc;> receive pensionary benefits had not atisen, as they had not yet retired from service. [Para 61)(947-F-H] 2.9. The calculations were projected at the behest of the r· State Government, to demonstrate the financial unviability of the scheme. The basis thereof, projected by the high level committee, admittedly constitutes tlie ration.ale for issuing the repeal notification dated 4.12.2004. The consideration at the hands of the State Government was conscious and pointed out and was supported by facts and figures. It is apparent, that O'ut of 17 corporations/boards who were invited to express their views on the issue, only 7 had actually done so. It is not the case of the respondent-employees, that any one of those who had expressed 857 ' A B c D E F H 858 A B c D. E F G H SUPREME COURT REPORTS [2016] 6 S.C.R. their views, contested the fact, that the pension scheme was not self-financing. Those who expressed their views, affirmed that the pension scheme could be salvaged only with Government support. The position projected by the State Government, therefore, cannot be considered to have been effectively rebutted. Financial calculations can not be made casually, on a generalized basis. In the absence of any authenticity, and that too with reference to all the 20 corporate entities specified in Schedule I of 'the 1999 Scheme', the projections made on behalf of the respondent-employees, cannot be accepted, as constituting a legitimate basis, for a favourable legal determination. Since the respondent-employees have not been able to demonstrate, that the foundational basis for withdrawing 'the 1999 Scheme', was not premised on any arbitrary consideration, or alternatively, was not founded on any irrelevant consideration, it cannot be accepted that the withdrawal of 'the 1999 Scheme', was not based on due consideration, or that, it was irrational or arbitrary or unreasonable. The action of the State Government, in allowing those who had alrl)ady started earning pensionary benefits under 'the 1999 Scheme', was based on a legitimate classification, acceptable in law. In view thereof, the action of the State Government cannot be described as arbitrary, and as such, violative of Article 14 of the Constitution of India. The understanding of the State Government (which had resulted in introducing 'the 1999 Scheme') on being found to be based on an incorrect calculation, with reference to the viability of the corpus fund (to operate 'the 1999 Scheme'), had to be administratively reviewed. And that, the State Government's determination in exercising its power of review, was well_ founded. [Para 63][948F-H; 949-A-F] 2.10. It is also not possible to accept, that imy Court has the jurisdiction to fasten a monetary liability on the State Government, as is the natural consequence, of the impugned order passed by the High Court, unless it emerges from the rights and liabilities canvassed in the lis itself. Budgetary allocations, are a matter of policy decisions. The State Government while promoting 'the 1999 Scheme', felt that the same would be selffinancing. The State Government, never intended to allocate STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. financial resources out of State funds, to run the pension scheme. The State Government could not have been burdened with the liability, which it never contemplated, in the first place. Moreover, it is the case of the respondent-employees themselves, that a similar pension scheme, floated for civil servants in the State, has also been withdrawn. The State Government demonstrated its incapacity, to provide the required financial resources. Thus, the High Court should not (as it could not) have transferred the financial liability to run 'the 1999 Scheme', to the State Government. Similar suggestions made by the concerned corporate bodies, cannot constitute a basis for fastening the residuary liability on the Government. [Para 64][949-F-H; 950A-C) 2.11 It is not possible to accept that the employees of corporate bodies, can demand as of right, to be similarly treated as Government employees. Whilst it can be stated that Government employees of the State ofHimachal Pradesh are civil servants, the same is not true for employees of corporate bodies. Corporate bodies arc independent entities, and their employees cannot claim parity with employees of the State Government. The State Government has a master-servant relationship with the civil servants of the State, whilst it has no such direct or indirect nexus with the employees of corporate bodies. The State Government may legitimately choose to extend different rights in terms of pay-scales an~ retiral benefits to civil servants. It may disagree, · to extend the i;ame benefits to employees of corporate bodies. The State Government would be, well within its right, to deny similar benefits to employees of corporate bodies, which are financially unviable, or if their activities have resulted in financial losses. It is common knowledge, that when pay-scales are periodically reviewed for civil servants, they do not automatically become applicable to employees of corporate bodies, which are wholly financed by the Government. And similarly, not even to employees of Government companies. Likewise, there cannot be parity with Government employees, in respect of allowances. So also, of retiral benefits. The claim for parity with Government employees is therefore wholly misconceived. Thus, it cannot be said that the action of the State Government was discriminatory. 859 A B c D E F G H 860 SUPREME COURT REPORTS [2016] 6 S.C.R. A [Para 66][950-G-H; 951-A-D) 2.12 The action of the State Government was not discriminatory since despite having revoked 'the 1999 Scheme' through the notification, the State Government had permitted such of the Government owned corporations in the State of Himachal B Pradesh, which were not suffering any losses, to promote their own pension schemes, and to extend pensionary benefits to their employees, on an individual basis, in the same/similar fashion as had been attempted by th~· State Government, through 'the 1999 Scheme'. [Para 67][951-D-E) c D E F G H 2.13. The employees of corporate bodies, who were extended the benefits of 'the 1999 Scheme' were not employees of the State Government. 'The 1999 Scheme' was, therefore, just a welfare scheme introduced by the State Government, with the object of ameliorating the financial condition of employees, who had rendered valuable service in State owned corporations. The sustenance of the organization itself, is of paramount importance. The claim of employees, who have been engaged by the organization, to run the activities of the organization, is of secondary importance. If an organization does not remain financially viable, the same cannot be required to remain functional, only for the reason that its employees, are not adversely impacted. When and how a decision to wind up an organization is to be taken, is a policy decision. The decision to wind up a corporation may be based on several factors, including the nature of activities rendered by it. In a given organization, sometimes small losses may be sufficient to order its closure, as its activities may have no vital bearing on the residents of the State. Where, an organization is raised to support activities on which a large number of people in the State are dependent, the same may have to be sustained, despite the fact that there are substantial losses. The situations are unlimited. Each situation bas to be regulated administratively, in terms of the policy of the· State Government. Whether a corporate body can no longer be sustained, ~ecause its activities are no longer workable, practicable, useable, or effective, either for the State itself, or for the welfare of the residents of the State, is for the State Government to decide. Similarly, when and how much, is to be STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. paid as wages (or allowances) to employees of an organization, is also a policy decision. So also, post-retiral benefits. All these issues fall in the realm of executive determination. No Court has any role therein. Thus, the conditions of service includ_ing wages, allowances and post-retiral benefits of employees of corporate bodies, will necessarily have to be determined administratively, on the basis of relevant factors. Financial viability, is an important factor, in such consideration. In the facts and circumstances of the instant case, it is not possible to accept, the submission on behalf of the res11ondent-employees, that the State Government should provide financial support for sustaining 'the 1999 Scheme', at least for such of the employees, who were engaged on or before the date of issuance of the repeal notification (4.12.2004). The respondent-employees have not been able to make out a case, that the notification dated 2.12.2004, repealing 'the 1999 Scheme', was in any manner, capricious, arbitrary, illegal or uninformed, and as such, the respondent-employees cannot be considered as being entitled, to any relief, through judicial process. [Para 68)[951-G-H; 952-A-H; 953-A-B) 2.14. A welfare scheme, may or may not aim at providing, the very basic rights to sustain human dignity. In situations where a scheme targets to alleviate basic human rights, the same may possibly constitute an irreversible position, as withdrawal of the same, would violate Article 21,of the Constitution. Not so, otherwise. The Employees' Provident Funds Scheme, 1995, sponsore