23 May 2025 Unpaid salary/bonus/gratuity >> Workplace/ Professional Related  

The Supreme Court of India recently overturned a Kerala High Court Division Bench judgment, affirming the Reserve Bank of India's (RBI) decision to set July 1, 2020, as the cut-off date for pension benefits for employees switching from the Contributory Provident Fund (CPF) Scheme to the Pension Scheme. This ruling came in the case of The Reserve Bank of India v/s M.T. Mani & Another, Civil Appeal No. 13962 of 2024, decided on May 23, 2025.

Background of the Case:

The case originated from a challenge by Respondent No. 1, M.T. Mani, a former RBI employee who retired in November 2014. He had been a member of the CPF Scheme since joining in 1981 and had, on four prior occasions (1990, 1992, 1995, and 2000), opted to remain with the CPF Scheme instead of switching to the Pension Scheme.

In 2020, the RBI, with the Government of India's approval, introduced a "last option" through Administration Circular No. 1 dated September 14, 2020, allowing existing CPF optees and former employees to switch to the Pension Regulations. This option required the refund of the RBI's CPF share with accrued interest and a 12% simple interest. Crucially, this circular, and subsequent detailed instructions dated September 18, 2020, explicitly stated that pension payments would be prospective from July 1, 2020, with no arrears for any period prior to this date.

Respondent No. 1 exercised this option, began receiving a monthly pension, but then sought to challenge the denial of arrears from his retirement date of November 30, 2014, along with 12% interest on those arrears. A Single Judge of the Kerala High Court dismissed his writ petition, noting that the Respondent had accepted the terms, including the non-grant of arrears. However, a Division Bench allowed his appeal, entitling him to pension benefits from his retirement date, deeming the denial of arrears discriminatory and arbitrary.

RBI's Arguments and Supreme Court's Analysis:

The RBI appealed to the Supreme Court, arguing that the Pension Scheme, as offered in 2020, clearly stipulated the cut-off date of July 1, 2020, for pension benefits. The RBI contended that Respondent No. 1, having voluntarily accepted the terms of the scheme, could not selectively reject unfavorable conditions.

The Supreme Court emphasized that each administrative circular regarding the pension options was independent, with terms and conditions, including interest rates on refunds and effective dates for benefits, varying based on applicable liability and financial implications. The Court noted a significant gap of 20 years since the last option in 2000, during which the Government had three times refused the RBI's proposals for another pension switch option. The financial burden and liability were highlighted as prominent considerations in the ultimate approval of the 2020 scheme.

Referencing prior judgments, the Supreme Court reiterated that fixing a cut-off date for scheme implementation is a policy decision that an employer is entitled to make, considering factors such as financial constraints, administrative exigencies, and economic conditions. The Court cited Mohammad Ali Imam and Others Vs. State of Bihar and Others and State of Tripura and Others Vs. Anjana Bhattacharjee and Others, which underscore judicial restraint in interfering with such policy decisions unless they lead to a "blatantly capricious or outrageous result". The Court also highlighted that "financial impact... can be the sole consideration while fixing a cut-off date".

Furthermore, the Supreme Court agreed with the RBI that the Respondent could not "approbate and reprobate" by accepting the beneficial terms of the scheme while rejecting the unfavorable ones, as the scheme was offered as a "package deal". The Court found no discrimination, constitutional, statutory, or common law violation in the RBI's policy.

Conclusion:

Ultimately, the Supreme Court concluded that the cut-off date fixed for pension benefits in the 2020 scheme was neither arbitrary, illegal, nor discriminatory. The Court set aside the Kerala High Court Division Bench judgment, thereby upholding the RBI's position and reinforcing the principle that policy decisions, especially those with financial implications, should not be interfered with by the judiciary unless demonstrably arbitrary.

Payment of Gratuity Act, 1972