Deputation Allowance Not Pensionable: Court Ruling on Bank Employees' Retirement Benefits.


25 April 2025 Recovery of Provident fund amount >> Workplace/ Professional Related  

A recent ruling by the court has addressed a significant question concerning the calculation of pension and retirement benefits for bank employees who were on deputation at the time of their superannuation. The central issue revolved around whether the deputation allowance, drawn by these employees while serving with a 'Loanee Bank', should be included when determining their pensionable emoluments by their 'Parent Bank'.

The cases brought before the court shared a common thread: each petitioner was on deputation with a specific bank until their retirement. These employees received a 15% extra salary as a deputation allowance. Furthermore, provident fund (PF) contributions were deducted on this additional allowance, with a portion being deposited by the Parent Bank into the employees' pension accounts. Based on this, the petitioners argued that their pension should be calculated considering these additional emoluments.


 

 
 
 

The circumstances leading to these deputations were also similar. The Government of India, Ministry of Finance, had advertised positions for Central Vigilance Officers (CVOs) in various public sector entities. The petitioners, working as General Managers in their respective Parent Banks, applied for these deputations through the government. Subsequently, under the Central Government's orders, they were deputed as CVOs until their superannuation, with their tenures extended upon request.

The core of the legal analysis rested on the interpretation of the service rules governing the Parent Banks. While the court acknowledged that the period of deputation is counted as qualifying service for pensionary benefits, the crucial point of contention was whether the deputation allowance should be considered part of the 'average emoluments' used for pension calculation.

The petitioners argued that the deduction of PF contributions on the deputation allowance, and the subsequent deposit of a portion into their pension accounts by the Parent Bank, indicated an intention to treat this allowance as part of their eligible salary for pension purposes.

However, the respondent Parent and Loanee Banks countered that the deputations were temporary assignments initiated at the employees' own request following a government advertisement. The 15% extra salary was specifically tied to the deputation period and would cease upon their return to the Parent Bank.

The court, in its analysis, referred to the pension regulations of one of the Parent Banks, the Bank of Baroda (Employees) Pension Regulations, 1995. These regulations define "Average Emoluments" as the average of the pay drawn by an employee during the last ten months of service with the "Bank," which is defined as the Parent Bank.

Furthermore, the court took cognizance of a clarificatory letter issued by the Government of India, Ministry of Finance, in 1998. This communication stated that according to the Central Civil Services (CCS) Pension Rules, the substantive pay an officer would have drawn in their Parent Bank, had they not been on deputation, should be used to calculate average emoluments, not the actual pay drawn in the higher scale at the Loanee Organization.

The court also examined several precedents. A ruling by the Punjab and Haryana High Court in Bhagwan Dass and Others V/s. State of Punjab and Another (2016) held that officiating on a higher post with additional responsibilities does not automatically grant the right to a higher pay scale for pension calculation unless a substantive promotion occurred. Similarly, in U.K. Walia V/s. Punjab National Bank, the same High Court ruled that the benefit of a higher grade received during deputation does not entitle an employee to an enhanced pension based on the last pay drawn, which should be calculated based on the salary in the Parent Bank.

The Supreme Court's observations in Umapati Choudhary V/s. State of Bihar and Others (1999) defined deputation as a consensual assignment, emphasizing its temporary nature. This supported the argument that the higher pay during deputation was linked to the specific assignment and not a permanent elevation in the employee's substantive role within the Parent Bank.

Based on the interpretation of the pension regulations, the government's clarification, and the judicial precedents, the court concluded that the deputation allowance drawn at the time of superannuation could not be reckoned for calculating pension and retirement benefits. The definition of 'average emoluments' clearly refers to the pay drawn in the Parent Bank. The court reasoned that a deputation with an allowance does not equate to a promotion, and superannuating while on deputation due to fortuitous circumstances or even extended tenures sought by the employees themselves does not alter this fundamental principle.

The court acknowledged the petitioners' argument regarding PF deductions on the deputation allowance. However, it cited the Supreme Court's ruling in EPFO V/s. Vivekananda Vidyamandir (2020), which clarified that only emoluments universally, necessarily, and ordinarily paid across the board constitute basic pay. While the Loanee Banks might have opted to deduct PF on the deputation allowance to avoid complications, this did not create a vested right for the petitioners to claim pension based on this enhanced salary. The court stated that any mistake made by the Loanee Bank in this regard would not establish a legal right for the petitioners.

Consequently, the court dismissed the writ petitions, upholding the Parent Banks' calculation of monthly pensions based on the substantive pay the employees would have drawn in their Parent Banks.

However, in a concluding directive, the court addressed the PF contributions made on the 15% deputation allowance. Recognizing that these contributions were made and potentially included in the pension accounts, the court ordered the Parent Banks to return all such accumulated amounts, along with statutory interest from the date of retirement, to the petitioners within 60 days. This directive aimed to ensure that the employees were not unduly disadvantaged by contributions made on an allowance that was not considered pensionable.

In essence, the ruling clarifies that while deputation service counts towards qualifying service for pension, the temporary allowance received during deputation does not become a permanent component of the employee's pensionable emoluments, which are determined by their substantive pay in the Parent Bank according to the applicable pension regulations.