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Rules Taking Away Vested Rights Of Employees Retrospectively Violate Articles 14 & 21 Of Constitution: The Punjab State Cooperative Agricultural Development Bank Ltd Vs The Registrar, Cooperative Societies And Others

Abhijeet Malik ,
  14 January 2022       Share Bookmark

Court :
The Supreme Court of India
Brief :

Citation :
CIVIL APPEAL NO(S). 297298 OF 2022 (Arising out of SLP(Civil) No(s). 19401941 of 2020)


11th January 2022


Justice Ajay Rastogi

Justice Abhay S. Oka


Appellants (s): The Punjab State Cooperative Agricultural Development Bank Ltd.

Respondent (s): The Registrar, Cooperative Societies And Others


In the present case, an appeal was filed in the Supreme Court, against the order of a division bench of High Court of Punjab and Haryana which held that any amendment to the rules that take away the vested rights of Employees retrospectively violates Articles 14 & 21 Of Constitution.


1. The appellants in the present case are the Punjab State Cooperative Agricultural Development Bank Ltd. (hereinafter being referred to as “the bank” for brevity). The Bank is a registered cooperative society. The main object of the Bank is to provide long-term loans to the farmers and protect them from the clutches of money lenders. The appeal has been preferred by the currently serving employees of the bank. The respondents are retired employees of the bank.

2. The service condition of the employees of the Bank is governed by Punjab State Cooperative Agricultural Land Mortgage Banks Service (Common Cadre) Rules, 1978 (hereinafter being referred to as the “1978 Rules” for brevity.) Before 1989, the employees of the appellant Bank were covered under the pension scheme of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as “the 1952 act” for brevity.) However, after 1989, on the recommendations of the Department of Finance, Punjab Government, the Bank introduced a new pension scheme on 1st April 1989. Therefore, the amendment was made in the 1978 Rules and Rule 15(ii) was introduced which authorized the Board of Directors of the Bank to formulate a pension scheme with the approval of the Registrar Cooperative Societies, Punjab.

3. Employees of the Bank continued to derive the benefit of the new pension scheme until 2010. However, when the appellant Bank found out that the scheme is unviable on account of financial constraints, the Board of Directors in its meeting dated 29.5.2010 reconsidered the matter about giving pension to the bank employees under the new scheme. The Bank vide its Resolution dated 17.9.2012 decided to discontinue the pension scheme and revert to the scheme under the 1952 act with a proposal of One Time Settlement for the employees. Hence, rule 15(ii) was subsequently deleted by an amendment with prior approval of Registrar, Cooperative Societies.

4. However, the Bank had stopped making payments of pension much before the amendment in terms of Rule 15(ii) of the Rules 1978, the employees approached the High Court under Article 226 of the Constitution by filing multiple writ petitions.

5. The learned Single Judge of the High Court held that the employees of the Bank were covered under the scheme which was applicable at the given time under the Act 1952 (before 1989). It is the Bank that accepted the proposal of the State Government and solicited options from the employees as to whether they wanted to opt for a pension scheme which became applicable after the amendment was made under the Rules 1978, noted by the Court. Hence, it could not be justified to circumvent the impact of the amended rule and thus create a situation which would have the effect of defeating the rights which are conferred upon the employees to seek pension under the new rules which became applicable from 1.4.1989, stated by the Court. Conclusively, the Court held that the employees are entitled to regular pension including revised rates of dearness allowance, to all the employees who opted for the new pension scheme.

6. When the matter eventually landed before the learned division bench, Rule 15(ii) of the Rules of 1978, was already deleted. The Court noted that before Rule 15(ii) was deleted on 11th March, the employees became members of the new pension scheme and were paid their regular pension for sufficient time; the same can’t be taken away retrospectively as it would be detrimental to their interest. The amendment had taken away the vested and accrued right of the employees to get pension and that too with the retrospective effect which would be violative of Article 14 of the Constitution. The Court held that the amendment dated 11th March 2014 which deleted Rule 15(ii) under Rules 1978 shall apply prospectively.

7. This judgment became the subject matter of appeal in the Supreme Court for the serving employees which stated that their right to get pension may be affected in the future due to the judgment of the Division Bench of the High Court.

8. Learned Counsel for the appellants submitted that the High Court failed to consider that any pension scheme framed by the bank is subject to the approval of the competent authority. However, even in the absence of approval by competent authority the retired employees were entitled to receive a pension until the scheme remained in operation, i.e., up to 31.10.2013. The employees are entitled to the pension but they have no right to claim how such pension is computed. The counsel for the appellants argued that “it is not the case of the respondents that they are not being paid pension” as it was paid up till 31.10.2013 under the 1989 scheme and thereafter they are entitled to statutory pension,Employees Pension Scheme 1995 read with the 1952 act. Hence, if the bank is complying with the statutory liability to grant pension under the 1952 act, the employees have no vested right to claim pension under the scheme introduced by the Bank after it stands withdrawn. Therefore, the order of the High Court to continue the bank pension scheme after it stood deleted is not sustainable in law and deserves to be interfered with by the Supreme Court.

9. Learned Counsel for the appellants further submitted that the 1989 scheme introduced by the bank became financially unviable and the number of retired employees is three times in comparison to the newly recruited employees after 1.1.2004. If the bank were to continue the scheme, contributions towards pension made by the serving employees will become futile as they will get nothing at the time of their retirement. The Counsel also submitted that the bank has earned a meagre profit in the later years and if the scheme were to continue, the bank will have no option left but to close down the institution.

10. The Crux of the matter according to the appellants is that the retirees are being paid their pension under the Bank pension scheme at the cost of the serving employees and it affects the interest of the serving employees which is being jeopardized.

11. Learned counsel for the respondents submitted that more than half of the respondents are in the age group of 73 to 80 years and one-third of the retired employees have already expired during the pendency of litigation. It is the Bank who had in its own volition introduced the scheme and the respondent employees have exercised their option to be governed by the said scheme and the employees have also foregone their Contributory Provident Fund. Hence, the rights which are conferred in favor of the respondent employees could not be snatched by the appellant in an arbitrary manner which violates Article 14 of the Constitution.

12. Learned counsel for the respondents further submitted that the “One Time Settlement scheme” was introduced to mitigate the problem due to the withdrawal of the pension scheme as an interim measure. Since there was no option left to the employees due to withdrawal of the 1989 scheme, they accepted the “One Time Settlement”. The Division Bench by its interim order made it clear that acceptance of one-time settlement shall be without prejudice to their legal rights, and in the given circumstances, what has been paid under One Time Settlement scheme to a few of the employees is always adjustable under the scheme to which they are entitled to under the law.


Constitution of India:

Article 14- Equality before law.

Article 21- Protection of life and personal liberty.


What is the concept of vested or accrued rights of an employee and in the present case whether such vested or accrued rights can be divested with retrospective effect by the rule-making authority?


1. The Court referred to the judgment of a constitution bench in the case of Chairman, Railway Board, and Others V. C.R. Rangadhamaiah and Others where the Supreme Court explained the jurisprudence of vested/accrued right in the service and particularly in respect of pension:

“an amendment having a retrospective operation which has the effect of taking away a benefit already available to the employee under the existing rule is arbitrary, discriminatory and violative of the rights guaranteed under Articles 14 and 16 of the Constitution.”

2. The Court held the employees who availed the benefit of pension under the scheme, their rights stood vested and accrued to them and any amendment to the contrary, which has been made with the retrospective operation to take away the right accrued to the retired employee under the existing rule certainly is not only violative of Article 14 but also of Article 21 of the Constitution. Reliance was placed by the Court on the judgment in the case of Bank of Baroda and Another V. G. Palani and Others and U.P. Raghavendra Acharya and Others. V. State of Karnataka and Others.

3. On the question of financial stress on the institution, the Court held that with the introduction of the pension scheme of 1989, it can be presumed that the competent authority was aware of the resources from where the funds are to be created for making payments to its retirees and merely because at a later point of time, it was unable to hold financial resources at its command to its retirees, it would not be justified to withdraw the scheme retrospectively detrimental to the interests of the employees who not only became a member of the scheme but received their pension regularly at least up to the year 2010. The Court further stated that non-availability of financial resources would not be a defense available to the appellant Bank in taking away the vested rights accrued to the employees that too when it is for their socioeconomic security.

4. Consequently, the Supreme Court upheld the order of the High Court and the appeal was dismissed.


The Court dismissed the appeal and gave concurrence to the judgement of the division bench of the High Court of Punjab and Haryana which declared the action of the appellant bank to revert to the old scheme as irrational and held that any amendment to the rules that take away the vested rights of Employees retrospectively violates Articles 14 & 21 Of Constitution.

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