Thursday, March 02, 2017

Indian Banks Association crafted a Joint Note dated 27.04.2010 and got it signed by the national Level unions of employees/ associations of officers in banking industry for the purpose of allowing options for Pension Scheme to the left over employees in banks who could not opt for pension earlier when the Pension Regulations contained a clause for forfeiture of past services under regulation 22 (4) (b) and allowed options in the year 2010.

01.   In Union Bank of India, 3,106 retired employees and 14,473 employees on rolls were brought within the fold of Pension Scheme by allowing them to exercise options on or before 31.10.2010 in terms of the Joint Note and pension paid to the retired from 27.11.2009 and to others from the dates of their retirement.

02.   The last date for option in terms of the Pension Regulations notified on 29.09.1995 was 26.01.1996, (i.e. within 120 days of the notification) and regulation 3 in force does not empower the Bank to accept option from any employee/family of deceased employee after this date and to pay pension out of the Pension Funds created pursuant to the Pension Regulations.

03.   All  amounts paid as pension from 27.11.2009 to the retired including subsequent retirees out of the Pension Fund created pursuant to Pension Regulations constitute unlawful /unauthorized payments since the Pension Fund has provision to pay pension in accordance with the Pension Regulations only vide regulation 5 (2) of Pension Regulations and regulation 3 prohibits option after 26.01.1996. 

04.   Unless regulation 3 is amended suitably by extending the last date of option to 31.10.2010, the date fixed by the Bank in terms of the Joint Note or the options taken on the basis of the Joint Note are declared as options for the purpose of the Pension Regulations, the lacunae permeated will continue and the pension paid on the basis of the Joint Note out of Pension Funds on the basis of the Joint Note will remain unauthenticated.

05.   MOF permitted implementation of the Joint Note without amending the Pension Regulations by placing it for in each House of the Parliament for 30 days for obtaining their nod as soon as it was made on 27.04.2010. This was unwarranted as the document envisaged amendment to Pension Regulations and section 19 (4) of the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970/1980 mandates such compliance.  MOF was usurping the authority of the Legislature in doing so, destroying the equilibrium in the exercise of authority by the organs of democracy.

06.   MOF had in relation to RBI Pension Regulations in the context of writ petition No. 710/2009 of Bombay High Court ( Aravind Ganesh Karnik and Ors Vs. RBI and Union of India) issued a  communication viz. F No.16/1/58/2008/IR dated 23.10.2009  after consulting Law Ministry as infra:
Item No.5.1

“As pension Regulations are framed in exercise of statutory powers under RBI Act, these are statutory regulations. Any deviation/amendment of the provisions of the pension regulations without formally amending it after following the procedure prescribed under the RBI Act will not be permissible under the law.  No deviation/amendment of pension regulations can be made by administrative orders/instructions”

Item 5.4

“Any administrative order or instruction, which circumvents the provisions of the Regulations is unsustainable.  Further, Regulations have precedence over the administrative orders/instructions.

07.   It is strange that before the ink in the above communication dated 23.09.2009 got dried up, MOF issued its administrative order in July/ August, 2010 according permission to implement the Joint Note in Public Sector Banks without amending the Bank Employees’ Pension Regulations.

08.   The conclusions in the Joint Note prejudice what is done earlier under the relative regulations making it unfit to be laid in the Houses of the Parliament for amending the Pension Regulations especially in relation to regulation 52 (1), 5 (3), 7 and 11 as infra as mandated by section 19 (1) and (4) of the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970/1980 :

a)     Regulation 52 (1) mandates payment of pension from the day following the date of retirement whereas Joint Note stipulate such payment from 27.11.2009, overruling the statutory regulation.

b)     Regulation 5 (3) and 11 fixes the Banks as sole contributor to Pension Fund whereas Joint Note seeks to raise a contribution from the employee/retired employee to Pension Fund.

c)     Regulation 7 delineates the various components of Pension Fund which excludes a contribution by the employee that finds a place in the Joint Note.

Note: Though the Bank appear as contributor to Pension Fund, the real contributor is the employee himself as the contributions are his deferred wages, which banks were to pay previously as EPF contribution pursuant to EPF & Misc. Provisions Act, 1952

09.   It is also pertinent to state in this context that MOF on identifying that Bank Employees’ Pension Regulations was agreed to be on the premises of RBI Pension Regulations MOF had directed IBA vide communication F No. 4/8/4/95-IR dated 24.12.1997 to advise member banks to delete the forfeiture of service clause from regulation 22 (4) (b) and to give effect to it, the bank disregarded the direction of MOF and did not give effect to it by giving the mandatory option in the wake of the radical change in the terms of offer of Pension Scheme but merely amended the regulation, defeating its very purpose.  The amendment carried out in Union Bank of India was published among the target group only on 8th October, 2002, i.e. after 57 months of the MOF direction, that too without calling for options afresh then.  The option MOF intended to be given through its communication dated 24.12.1997 was the one given through the Joint Note on illegal and irrational terms.

10.   In the case of Union Bank of India, the Pension Fund has grown by Rs. 6,574.01 Crores during five years from 31.03.2011, The Bank levied unlawful contributions to the tune of Rs.134.33 Crores  ( Rs. 63.25 Crores by way of 56 percent of CPF paid on retirement from 3,106 retired employees and Rs.71.08 Crores by way of 2.8 times pay for November, 2007 from 14,473 employees on rolls) which can be repaid with compound interest within a maximum sum of Rs.300.00 Crores. The residue after footing the repayment is to the tune of Rs.6,274.01 Crores which can foot payment of arrears of pension to all the 3,106 employees to the tune of Rs.2.02 Crores per capita. The actual arrears per employee payable would be less than 30 percent of the available amount.  The annual pay out of benefits from the Pension Fund is less than 25 percent and the Pension Fund  can pay four times the present pension to all their pensioners with zero cost to it and to the government as pension is payable out of Pension Funds.

11.   The position relating to other banks is also similar and all banks can pay two to four times the present pension to all their pensioners.  But IBA continues to project a totally distorted picture of fund fielding constraints to pay pension/revision, ignoring the statutory obligation of banks to pay it.

12.   Non-payment and detention of the benefits is an offence to the pension statute, more so as Pension Fund is the deferred wages and money of the employees.

13.   IBA conveniently ignored all along that employees of Public Sector Banks are government employees as such banks are owned and run by the government and they are the people who translate all financial of the government into reality. Though they are to be paid out of the exchequer, the government does not have to pay them their wages and gratuity as they are appropriated against the income they generate in banks.  Though Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970/1980 guaranteed them fair wages and superannuation benefits under section 10 (7) by permitting banks to declare a dividend and retain surplus profits as reserves only after meeting such expenses, IBA torpedoed the Act by depriving the statutorily payable wages and pension for reasons best known to it.  The Bank employee who breaks his bones, working six days a week in a hectic mode from dawn to dusk is paid Rs.30 K to Rs.40 K lesser than similarly placed government employees who leisurely works for five days a week.

14.   Indian Banks’ Association, the architect of the Joint Note has proved itself beyond any doubt that it is totally unfit to frame regulations that are rational and have locus standi in terms of the substantive law.   In the name of making such bad wage pacts, this unregistered organisation siphons several crores of rupees from PSBs with the connivance of the key men of member banks when the entire process can be carried out in an impartial and unbiased manner by appointing a Pay Commission for Banks.    In case data on public money that has flown into the kitty of IBA for past ten years is collected, it can be seen that it is manifold the amount needed for engaging a Pay Commission for banks.
The Joint Note created turmoil in the country resulting in huge influx of writ petitions in the various High Courts across the country adding to the piles of petitions in courts, wasting the precious time of the judiciary and making public sector banks defend the petitions against the senior citizens at the cost of public money.  The action of IBA is disdainful as it is opposed to the National Litigation Policy which seeks to eschew “litigation for the sake of litigation” and “et the court decide” attitude.

By addressing this letter simultaneously to the Chairman IBA and to the CMD of Union Bank of India, I am requesting them to submit to the Hon’ble Ministers and the Member of Parliament if they have anything to refute its contents or to do the needful forthwith to take corrigendum measures forthwith to correct the mistakes done through the Joint Note that has no force of law, under intimation to me.   A request to the Hon’ble Prime Minister and to the Hon’ble Minister for Finance as also Law and Justice is also made to scan the anomalies, reach a consensus and do the appropriate so as to redeem righteousness in the matter at the earliest.
(Addressed to GOI, IBA,Chairman,UCO Bank and Shri MB Rajesh, MP)