Court’s Decision
In a significant ruling on the interpretation of pension rights under service regulations, the Supreme Court set aside the Patna High Court’s order which upheld a one-third reduction in the pension of a retired bank officer. The Court held that any reduction in pension under Regulation 33 of the Central Bank of India (Employees’) Pension Regulations, 1995, must be preceded by prior consultation with the Board of Directors, especially where the reduction is below full admissible pension. The Court emphasised:
“Pension is not a discretion of the employer but a valuable right to property and can be denied only through authority of law.”
The appeal was allowed and the reduction of pension ordered by the Field General Manager without Board consultation was quashed. The Court granted the Bank liberty to revisit the issue within two months after giving the appellant a hearing and seeking prior approval of the Board.
Facts
The appellant, while serving as Chief Manager (Scale IV) at the Dhanbad Branch of the Central Bank of India, was charged with misconduct for sanctioning loans in twelve accounts without proper income appraisal, KYC verification, or post-sanction inspections. The lapses allegedly exposed the bank to a potential financial loss of ₹3.26 crores. An inquiry was initiated, and despite his superannuation on 30 November 2014, proceedings were continued under Regulation 20(3)(iii) of the Central Bank of India (Officers’) Service Regulations, 1979.
The Inquiry Officer found the appellant guilty of misconduct unbecoming of a bank officer and exposing the bank to loss for personal gain. Based on this, the Disciplinary Authority (Deputy General Manager, Scale VI) imposed the penalty of compulsory retirement with effect from the date of superannuation. The appellant’s appeal to the Field General Manager (Scale VII), who was also the appellate authority, was rejected. Meanwhile, the Field General Manager approved a two-third pension as per recommendations from the Regional Manager (Scale IV).
When the appellant challenged this in the Patna High Court, the validity challenge to the Service Regulation was dropped, and the appellant confined his challenge to the reduction of his pension. The High Court upheld the reduction to two-thirds pension but directed the release of his gratuity.
Issues
- Whether Regulation 33(1) and 33(2) of the Central Bank of India (Employees’) Pension Regulations, 1995 are mutually exclusive or must be harmoniously construed?
- Whether reduction in pension under Regulation 33(1) by an authority superior to the disciplinary authority requires prior consultation with the Board of Directors?
- Whether denial of full pension without affording an opportunity of hearing and prior consultation violates constitutional safeguards?
Petitioner’s Arguments
The appellant argued that pension is a constitutional property right under Article 300A and cannot be curtailed except by authority of law. It was submitted that the High Court erred in holding that a compulsorily retired employee is not entitled to pension unless granted under Regulation 33(1). It was contended that Regulations 33(1) and 33(2) must be read harmoniously, implying a compulsorily retired employee is entitled to at least two-thirds pension, and that any reduction requires prior Board consultation.
Respondent’s Arguments
The Bank argued that the two clauses are mutually exclusive. Regulation 33(1) allows an authority superior to the disciplinary authority to grant between two-thirds and full pension, whereas Regulation 33(2) permits the competent authority to grant less than full pension, but only after Board consultation. It was claimed that since the Field General Manager is superior in rank, Board consultation was not required.
Analysis of the Law
The Court closely examined Regulation 33:
- Regulation 33(1): Allows a higher authority than the one imposing the penalty to award between two-thirds and full pension.
- Regulation 33(2): Mandates prior consultation with the Board of Directors when awarding less than full pension in exercise of original, appellate, or review powers.
The Court emphasised that restricting the term “competent authority” in clause (2) to only disciplinary authorities would render the reference to appellate or review authority otiose, violating the principle against rendering statutory language redundant. The Court held that both clauses must be read harmoniously and conjunctively.
Precedent Analysis
The Court relied on the decision in Indian Administrative Service (S.C.S.) Association, U.P. v. Union of India, (1993) Supp (1) SCC 730, to elucidate the concept of consultation. The judgment laid down that:
“When the offending action affects fundamental rights… consultation is mandatory and non-consultation renders the action ultra vires or invalid or void.”
The Court held that prior consultation with the Board of Directors is mandatory before curtailing pension, as it affects the fundamental right to property.
Court’s Reasoning
The Court rejected the Bank’s claim that the two clauses operate in distinct spheres. It held that permitting the Field General Manager to reduce pension without Board consultation simply because he acts under clause (1) — but also acts as the appellate authority under clause (2) — would permit circumvention of safeguards.
The Court noted the lack of procedural fairness: there was no hearing granted to the appellant before pension was reduced, and the quantum of loss (₹3.26 crore) was never substantiated by evidence or discussed by disciplinary authorities.
The Court clarified that:
“The word ‘may’ occurring in clause (1) does not give discretion to the superior authority to award pension less than two-thirds…”
Hence, Regulation 33(1) must be read to entitle a compulsorily retired employee to not less than two-thirds of full pension, unless he is otherwise ineligible. In all cases where less than full pension is granted, Regulation 33(2) must be followed.
Conclusion
The Supreme Court allowed the appeal, set aside the High Court’s decision and the order passed by the Field General Manager reducing the pension, and directed that if the Bank intends to reduce the pension, it must do so after granting a hearing and obtaining prior Board approval within two months. Failing this, the appellant would be entitled to full pension.
Implications
This judgment reaffirms the principle that pension is not a favour but a legal entitlement. It closes the loophole that allowed disciplinary or appellate authorities to reduce pension without Board scrutiny. It will impact disciplinary cases in public sector banks by enforcing procedural safeguards and ensures that penalties affecting constitutional rights like pension must follow strict statutory compliance.
Referred Cases
- Rao Shiv Bahadur Singh v. State of Uttar Pradesh, (1953) 2 SCC 111
– Applied to emphasise that no word in a statute should be rendered meaningless or otiose. - Indian Administrative Service (S.C.S.) Association v. Union of India, (1993) Supp (1) SCC 730
– Cited extensively to explain when consultation is mandatory, particularly when affecting fundamental rights.
FAQs
Q1. Can a public sector bank reduce the pension of a compulsorily retired employee without consulting the Board of Directors?
No. As per the Supreme Court, any reduction of full pension under Regulation 33 of the Pension Regulations must be preceded by prior consultation with the Board of Directors.
Q2. Is a compulsorily retired bank officer entitled to a minimum pension?
Yes. The officer is entitled to at least two-thirds of full pension unless ineligible for pension on the date of superannuation.
Q3. Does the Bank need to give a hearing before reducing pension?
Yes. The Court held that denial of pension without affording an opportunity of hearing and Board consultation violates constitutional safeguards under Article 300A.
