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Monday, June 13, 2016

CH MAHADEVAN



The Supreme Court Bench headed by Justice Dipak Misra despite setting aside the three High Court judgments on 31/3/2016 had displayed empathy towards the LIC pensioners by remanding the cases to the Delhi HC for consideration of issues including constitutional validity of para 3A of Appendix IV at the same time providing relief to all pre-August 1997 retirees by way of directions to LIC to pay 40% of amount due to them as per para 3A of the Appendix within 6 weeks.

Para 3A of Appendix IV states, “In case of employees who have retired or died on or after the 1st day of August 1997, the dearness relief shall be payable for every rise or to be recoverable for every fall, as the case may be, of every 4 points over 1740 points in the quarterly Average Consumer Price Index for Industrial Workers in the series of 1960 = 100 Such increase or decrease in dearness relief for every said 4 points shall be at the rate of 0.23 per cent of the Basic Pension;”.

The basic  problem for pre-August 1997  retirees  arose  because the Appendix IV  of the LIC Pension Rules 1995 notified on 28/6/1995 brought in DR formulae  for  such pensioners which were discriminatory and anomalous in the sense that   the tapered DR formulae  for retirees  had the  upper and lower ends of  basic pension slabs  which were only 50% of the corresponding ends  of the DA formulae  applied on basic salary for in service employees  both  based on the wage revision effective from 1/8/1987 and  that effective from 1/8/1992.This resulted in a severe anomaly whereby  the pre-August 1997 retirees  drawing basic pension above 1250 out of those retired between 1/1/1986 and 31/7/1992(1/1/1986 and  31/3/1993 in case of Class I Officers) and retirees  drawing basic pension above 2400 out of those retired between 1/8/1992 and 31/7/1997(1/4/1993 and  31/7/1997 in case of Class I Officers)  were getting less DR than what they should have got  on the  basic pension which was already a reduced amount of 50% of the average emoluments for the last ten months of service (which was again less than  the last pay drawn in most cases)..Thus a serious anomaly has been persisting right from inception of the Pension Rules on account of which these pensioners have been suffering from   a cumulative deficit in their gross pension right from 1/11/1993 or the date of retirement whichever is later. In fact Jaipur Bench of the Rajasthan HC had taken note of this anomaly and allowed the petition for removal of the anomaly. However, neither LIC took cognizance of it nor was this serious anomaly agitated before the Supreme Court Bench effectively during the final hearings of the Civil Appeals.

However, as a silver lining in the cloud of setting aside the Civil Appeals, the SC Bench  came to the help of the pensioners  by remanding the cases to Delhi HC for fresh consideration simultaneously ordering 40% interim relief to be paid by LIC   as per  para 3A of the Appendix IV.


By now all of  us are aware  that LIC has applied para 3A only  taking 0.23%  stated therein leaving out the other component of  notional revision  of  basic pay in consonance with  that  done for employees on 1/8/1997.The reason why LIC’s method was  not as per para 3A was :
1.       The basic pension was merged  with an anomalous and inadequate DR whereas para 3A for in-service employees on 1/8/1997 was applied after revising their Basic Pay by merger of existing Basic Pay and DA with higher neutralization than for retirees and also adding weightage (of 11.25% on an average) on such merged total. It is not very difficult to see that simple merger of existing Basic Pension and existing DR was not envisaged in para 3A.

2.       LIC’s ad hoc decision to treat negative differences arising out of existing basic pension plus DR exceeding the revised basic pension plus DR as zeros is also not part of para 3A for the simple reason that while paying arrears to employees on wage revision, there would have been no such negative differences considering that after merger of a higher DA with basic pay weightage was also given to increase the basic pay.

From the above, it is clear that LIC has clearly not adhered to the Supreme Court direction of 31/3/2016 on payment of 40% IR.

Now I am  coming to the more substantive  issue arising out of the SC order directing payment of 40% IR as per para 3A. It is in regard to the relevance of our stern demand for upgradation of pension. The Jaipur Writ Petition pioneering the legal fight was filed in 1998 with the plea that there was DR anomaly on account of differential DR formulae for in service employees. The issue of up gradation came to be brought in later by the second Writ Petition No 654 filed in 2007.After the judgment was delivered by the Single Judge Bench on 12/1/2010, the legal developments thereafter veered around the implications and interpretation of the LIC Board Resolution dt 24/11/2001 and LIC in its own contrived  wisdom interpreted it in a particular manner  and started responding  to court directions accordingly. The rest  of the developments  upto 31/3/2016 culminating in the Supreme Court ‘s remanding of the cases to Delhi HC is history.

If  the DR anomaly only was to be removed ,there was neither a need  for LIC to adopt the merger of the anomalous DR  or even the correct DR ( as  per formula adopted for in-service employees) with the basic pension and  treat it as a revised pension, nor to adopt the  para 3A for revising the pension as at 1/8/1997 which the Supreme Court  was  gracious enough to direct LIC to do. If the  DR formula adopted for in service  employees  had been applied to pre-August 1997 retirees also, the  gross pension would have been more  than  that  arrived at as per LIC’s faulty method and even after merger of the correct DR as applicable to in-service employees. Fortunately ,Supreme Court  seems to have adopted a via media  path  by directing LIC to make interim payment  based  on partial(one-time) upgradation of pension as per para 3A of Appendix IV.It is quite another matter that LIC had its own interpretation of the Supreme Court order while  making payment of the 40% of interim relief to whomever  it found it possible to pay.

I give below the comparative figures of gross pension for two Class I retirees, one retired  before 1/4/1993 and another retired after 1/4/1993 but before 31/7/1997:

Period of retirement
Basic Pension
Gross Monthly Pension  for the month of March 2016
Based on existing DR formula
Based on LIC’s method followed for calculating  40% IR
Based on application of in-service DR formula 
Based on application of para 3A of Appendix IV  as per SC Order
1/1/1986 to 31/3/1993
2260
20486
21222
23247
26026
1/4/1993 to 31/7/1997
4255
20704
21918
22856
24754

The anomaly in LIC’s method is evident from the fact  that the para 3A  application  results in a higher gross pension for the first pensioner, whereas  the LIC’s  method  shows a reverse picture.Incidentally,the basic pension of 4255  for a Class I officer retired  after  1/4/1993 corresponds to a basic pension of 2130 of a pre-April 1993 retiree  as at 1/11/1993 which is less than that of the first pensioner above.

The above table clearly demonstrates the infirmity of the method followed by LIC which yields the lowest monthly gross pension. Now it  is not difficult to understand why so many pensioners in the lower pension brackets and family pensioners have drawn a blank on  the receipt of 40% IR from  LIC.

Now coming to the direction of the Supreme Court as per para 27 of the judgment, it is not difficult to see the subtle implications thereof. Although the directions are confined to only the target group of pre-August 1997 retirees, the principle emerging from application of para 3A of the Appendix IV has a subtle implication of upgradation of pension albeit for a specific purpose of payment of 40% IR.

When we consider the three Civil Appeals including the issue of upgradation of pension, there is no reason  why   post -July 1997 retirees  also could not  have a claim for payment of 40% IR  based on one-time upgradation of pension effective  from the  next wage revision date.( Of course it is interesting  to  note that  para 3A  indirectly  enables pre-August 1992 retirees  two-time upgradation  before calculation of 40% IR from 1/8/1997.Perhaps that is  as a result of similar disadvantages of DR anomaly suffered by them  as the post Aug 1992 retirees). Again, if upgradation is restricted to one-time, there will be inconsistency and further anomaly which points to the inevitability of upgradation of pension for all pensioners with every wage revision.
Considering the above aspects, I am of the view that the Supreme Court direction for payment of 40% IR   should be used in our arguments before the Delhi High Court besides other points made out so that a positive verdict can be clinched ultimately on upgradation of pension.

Greetings.

C H Mahadevan