13 May 2025 Civil Appeals >> Civil & Consumer Law  

The Supreme Court of India has delivered a significant judgment addressing the pension entitlements of employees from cooperative societies who were absorbed into the Madhya Pradesh State Electricity Board (MPSEB). The appeals challenged a Full Bench decision of the Madhya Pradesh High Court, which had previously held that these absorbed employees were not entitled to pension benefits similar to regular MPSEB employees but would be governed by their respective society's rules.

The core issue before the Supreme Court was twofold:

1. Whether the absorbed employees were entitled to pension from the MPSEB.
2. If so, whether their service period in the cooperative societies, prior to absorption, would be counted towards their qualifying service for pension calculation.

The history of the case dates back to 1995 when the financially distressed cooperative societies involved in electricity distribution were slated for merger with the MPSEB. The merger officially occurred in 2002, with absorption terms outlined in 2004. A key term stated that "Pension/gratuity will be payable to the employees absorbed in the Board as per the rules/regulations of the concerned society."

However, employee unions and individuals initiated legal challenges, arguing for equal treatment with MPSEB employees. A Single Judge and subsequently a Division Bench of the High Court ruled in favor of the employees, granting them pensionary benefits akin to regular MPSEB staff. This decision was even upheld by the Supreme Court in a prior instance.

Despite these earlier pronouncements, a subsequent reference to a Full Bench of the High Court led to a contradictory ruling, stating that the employees were not entitled to MPSEB's pension scheme. This necessitated the present appeals before the Supreme Court.

The Supreme Court, while acknowledging the complex and lengthy litigation, emphasized the principle of functional integration. Citing previous judgments, the Court reiterated that once employees are absorbed and their services are merged, their original identity ceases to exist, and they should be treated on par with other employees of the absorbing entity. Denying them pension benefits solely based on their previous employment with the societies, while performing the same duties as MPSEB employees, would amount to unjust discrimination.

Therefore, the Supreme Court allowed the appeals to the extent that all absorbed employees are entitled to pension from the MPSEB.

Regarding the second question, the Court examined the Madhya Pradesh Civil Services (Pension) Rules. It noted that "qualifying service" is defined as the period of pensionable service under the State Government, and service qualifies only if duties and pay are regulated by the Government. Consequently, the Court held that the period of service rendered in the cooperative societies prior to absorption cannot be counted towards qualifying service for pension. This is because such service was not under the State Government and was not governed by its rules.

In conclusion, the Supreme Court ruled that the appellants will be paid pension by the MPSEB, with effect from their respective dates of absorption. The MPSEB has been directed to implement these directions and pay all arrears of pension within four months.